<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________to _________________
Commission File Number 0-265520
--------
CALIFORNIA INDEPENDENT BANCORP
------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 68-0349947
---------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1227 BRIDGE ST., SUITE C, YUBA CITY, CALIFORNIA 95991
-----------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(530) 674-4444
--------------
(Registrant's telephone number, including area code)
N/A
---
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Outstanding at
Class September 30, 1999
----- ------------------
<S> <C>
Common stock, no par value 1,901,449 shares
</TABLE>
This report contains 74 pages. The Exhibit Index is on pages 24 & 25.
<PAGE>
PART I- FINANCIAL INFORMATION
<TABLE>
<S> <C>
ITEM 1
CALIFORNIA INDEPENDENT BANCORP AND
SUBSIDIARIES FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS 3
CONSOLIDATED STATEMENTS OF INCOME FOR THREE-MONTHS 4
CONSOLIDATED STATEMENTS OF INCOME FOR NINE-MONTHS 5
CONSOLIDATED STATEMENTS OF CASH FLOWS 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7-8
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9-23
ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 23
PART II- OTHER INFORMATION
ITEM 1
LEGAL PROCEEDINGS 24
ITEM 2
CHANGES IN SECURITIES AND USE OF PROCEEDS 24
ITEM 3
DEFAULTS UPON SENIOR SECURITIES 24
ITEM 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 24
ITEM 5
OTHER INFORMATION 24
ITEM 6
EXHIBITS AND REPORTS ON FORM 8K 24-25
SIGNATURES 26
</TABLE>
2
<PAGE>
PART I-FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CALIFORNIA INDEPENDENT BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
1999 1998 1998
-------------------- ----------------- -----------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 21,713,464 $ 30,900,727 $ 18,147,218
Federal funds sold - 12,100,000 -
-------------------- ----------------- -----------------
Cash and cash equivalents 21,713,464 43,000,727 18,147,218
Investment securities:
Held-to-maturity securities, at amortized cost
(fair value of $9,398,162, $9,202,780 and
$8,854,245 respectively) 9,434,194 9,106,029 8,757,696
Available-for-sale securities, at fair value 59,727,193 51,533,305 38,779,274
-------------------- ----------------- -----------------
Total investments 69,161,387 60,639,334 47,536,970
Loans and leases 141,344,716 150,919,757 163,405,025
Loans and leases held-for-sale 46,065,248 30,262,758 40,207,258
-------------------- ----------------- -----------------
Gross Loans 187,409,964 181,182,515 203,612,283
Less- allowance for loan and lease losses (6,633,727) (6,024,111) (5,525,484)
-------------------- ----------------- -----------------
Net Loans 180,776,237 175,158,404 198,086,799
Premises and equipment, net 7,554,387 7,848,799 7,903,487
Interest receivable 3,341,518 2,854,674 3,027,885
Other real estate owned 1,444,257 101,014 -
Other assets 9,393,954 5,709,653 5,024,579
-------------------- ----------------- -----------------
Total assets $ 293,385,204 $ 295,312,605 $ 279,726,938
==================== ================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 47,568,852 $ 66,008,029 $ 50,079,139
Interest-bearing 212,464,835 202,800,415 192,855,726
-------------------- ----------------- -----------------
Total deposits 260,033,687 268,808,444 242,934,865
Interest payable 1,390,681 1,622,659 1,592,831
Other liabilities 8,159,169 1,226,331 11,928,253
-------------------- ----------------- -----------------
Total liabilities 269,583,537 271,657,434 256,455,949
Shareholders' equity:
Common stock, no par value-
Authorized- 20,000,000 shares
Issued and outstanding - 1,901,449 shares
September 30, 1999, 1,744,580 shares
December 31, 1998 and 1,741,568 shares
September 30, 1998 17,875,958 15,561,767 15,508,038
Retained earnings 6,958,738 8,099,474 7,752,226
Debt guarantee of ESOP (40,000) (40,000) (80,000)
Accumulated other comprehensive (loss) income (993,029) 33,930 90,725
-------------------- ----------------- -----------------
Total shareholders' equity 23,801,667 23,655,171 23,270,989
-------------------- ----------------- -----------------
Total liabilities and shareholders' equity $ 293,385,204 $ 295,312,605 $ 279,726,938
==================== ================= =================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS
3
<PAGE>
CALIFORNIA INDEPENDENT BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE-MONTHS THREE-MONTHS
ENDED ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans and leases $ 4,811,495 $ 5,698,843
Interest on investment-
Taxable interest income 976,639 789,216
Nontaxable interest income 39,319 68,504
Interest on federal funds sold - -
----------------------------- -------------------------
Total interest income 5,827,453 6,556,563
----------------------------- -------------------------
INTEREST EXPENSE
Interest on deposits 2,105,734 2,057,416
Interest on other borrowings 138,570 310,898
----------------------------- -------------------------
Total interest expense 2,244,304 2,368,314
----------------------------- -------------------------
Net interest income 3,583,149 4,188,249
PROVISION FOR LOAN AND LEASE LOSSES (50,000) (754,000)
----------------------------- -------------------------
Net interest income after provision for
loan and lease losses 3,533,149 3,434,249
----------------------------- -------------------------
NONINTEREST INCOME
Service charges on deposit accounts 251,198 231,903
Lease commissions 435,109 465,404
Brokered loan fees 69,327 392,245
Other 404,761 468,336
----------------------------- -------------------------
Total noninterest income 1,160,395 1,557,888
----------------------------- -------------------------
NONINTEREST EXPENSE
Salaries and employee benefits 2,115,420 2,117,495
Occupancy expense 210,240 215,490
Furniture and equipment expense 345,454 374,274
Legal and professional fees 100,525 230,086
Other 1,316,804 972,395
----------------------------- -------------------------
Total noninterest expense 4,088,443 3,909,740
----------------------------- -------------------------
Income before provision for income taxes 605,101 1,082,397
PROVISION FOR INCOME TAXES 213,350 403,950
----------------------------- -------------------------
Net income $ 391,751 $ 678,447
============================= =========================
PER SHARE AMOUNTS
Basic earnings per share $ 0.21 $ 0.39
============================= =========================
Diluted earnings per share $ 0.18 $ 0.34
============================= =========================
Cash dividends per common share $ 0.11 $ 0.11
============================= =========================
Weighted Average Common Shares Outstanding 1,840,336 1,752,978
============================= =========================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESES CONSOLIDATED STATEMENTS
4
<PAGE>
CALIFORNIA INDEPENDENT BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
-------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans and leases $ 14,191,243 $ 15,640,165
Interest on investment-
Taxable interest income 2,844,201 2,570,036
Nontaxable interest income 125,622 233,337
Interest on federal funds sold 243,002 419,666
------------------------------- ---------------------------
Total interest income 17,404,068 18,863,204
------------------------------- ---------------------------
INTEREST EXPENSE
Interest on deposits 6,165,866 6,316,208
Interest on other borrowings 172,434 413,637
------------------------------- ---------------------------
Total interest expense 6,338,300 6,729,845
------------------------------- ---------------------------
Net interest income 11,065,768 12,133,359
PROVISION FOR LOAN AND LEASE LOSSES (850,000) (1,440,000)
------------------------------- ---------------------------
Net interest income after provision
for loan and lease losses 10,215,768 10,693,359
------------------------------- ---------------------------
NONINTEREST INCOME
Service charges on deposit accounts 710,324 691,516
Lease commissions 1,332,737 1,556,182
Brokered loan fees 202,531 1,003,593
Other 1,129,787 1,059,221
------------------------------- ---------------------------
Total noninterest income 3,375,379 4,310,512
------------------------------- ---------------------------
NONINTEREST EXPENSE
Salaries and employee benefits 6,163,308 6,187,689
Occupancy expense 613,809 587,084
Furniture and equipment expense 1,091,734 1,065,475
Legal and professional fees 318,743 719,893
Other 3,510,114 2,696,273
------------------------------- ---------------------------
Total noninterest expense 11,697,708 11,256,414
------------------------------- ---------------------------
Income before provision for income taxes 1,893,439 3,747,457
PROVISION FOR INCOME TAXES 678,150 1,405,800
------------------------------- ---------------------------
Net income $ 1,215,289 $ 2,341,657
=============================== ===========================
PER SHARE AMOUNTS
Basic earnings per share $ 0.68 $ 1.35
=============================== ===========================
Diluted earnings per share $ 0.59 $ 1.17
=============================== ===========================
Cash dividends per common share $ 0.33 $ 0.33
=============================== ===========================
Weighted Average Common Shares Outstanding 1,793,583 1,740,846
=============================== ===========================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESES CONSOLIDATED STATEMENTS
5
<PAGE>
CALIFORNIA INDEPENDENT BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
-------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,215,289 $ 2,341,657
Adjustments to reconcile net income to net cash provided
by operating activities-
Depreciation and amortization 821,608 838,793
Allowance for loan and lease losses 850,000 1,440,000
Write-down of other real estate owned 0 54,152
Provision for deferred taxes 1,463,042 75,213
(Increase) decrease in assets-
Interest receivable (486,844) (356,953)
Other assets (5,147,343) 1,167,178
Increase (decrease) in liabilities-
Interest payable (231,978) (221,366)
Fed Funds purchased, other borrowings and other liabilities 6,932,838 10,514,026
-------------------------------------------------
Net cash provided by operating activities 5,416,612 15,852,700
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in loans (8,124,613) (37,358,756)
Purchase of investments (31,202,983) (20,369,143)
Proceeds from maturity of HTM Securities 1,685,000 12,781,000
Proceeds from sales/maturity of AFS Securities 19,968,971 17,341,143
Proceeds from sales of other real estate owned 313,537 968,609
Purchases of premises and equipment (527,196) (564,480)
-------------------------------------------------
Net cash used for investing activities (17,887,284) (27,201,627)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) in noninterest bearing deposits (18,439,177) (12,145,212)
Net increase (decrease) in interest bearing deposits 9,664,420 (11,850,781)
Cash dividends (589,942) (545,523)
Stock options exercised 557,553 24,660
Cash paid in lieu of fractional shares (9,445) (12,046)
-------------------------------------------------
Net cash provided by (used in) financing activities (8,816,591) (24,528,902)
NET INCREASE (DECREASE) (21,287,263) (35,877,829)
-------------------------------------------------
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 43,000,727 54,025,047
-------------------------------------------------
-------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD 21,713,464 18,147,218
=================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS
6
<PAGE>
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the rules and regulations of the Securities
and Exchange Commission ("SEC"). In the opinion of management, the
unaudited consolidated financial statements contain all adjustments
which are necessary to present fairly the financial position of
California Independent Bancorp ("Company") and its subsidiaries at
September 30, 1999, December 31, 1998 and September 30, 1998, and the
results of its operations for the periods ended September 30, 1999 and
September 30,1998, respectively.
Certain information and footnote disclosures normally presented in
annual financial statements prepared in accordance with generally
accepted accounting principles have been omitted in accordance with SEC
rules or regulations. The results of operations for the period ended
September 30, 1999, are not necessarily indicative of the operating
results for the full year ending December 31, 1999. It is suggested
these financial statements be read in conjunction with the financial
statements and notes included in the Company's Annual Report for the
year ended December 31, 1998.
NOTE 2 - CONSOLIDATION
The consolidated financial statements include the accounts of the
Company, its wholly owned subsidiary Feather River State Bank ("Bank"),
and the Bank's wholly owned subsidiary E.P.I. Leasing Co., Inc.
All material intercompany accounts and transactions have been
eliminated in consolidation.
NOTE 3 - LOANS TO DIRECTORS
In the ordinary course of business, the Company makes loans to
directors of the Company, which on September 30, 1999, amounted to a
total of approximately $5,380,000.
NOTE 4 - COMMITMENTS & CONTINGENT LIABILITIES
In the normal course of business, there are various outstanding
commitments and contingent liabilities, such as commitments to extend
credit and letters of credit, which are not reflected in the financial
statements. Management does not anticipate any material loss as a
result of these transactions.
NOTE 5 - CASH AND STOCK DIVIDENDS
In February, May, August and November of 1998, and February, May and
August of 1999, the Company paid an eleven-cent per share cash
dividend.
On August 17, 1999, the Company's Board of Directors authorized and
declared a five-percent stock dividend for shareholders of record as of
August 31, 1999. The dividend was distributed on September 17, 1999,
and resulted in the issuance of 90,084 additional shares of common
stock.
NOTE 6 - EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings per Share." SFAS No., 128 establishes standards for computing
and presenting earnings per share ("EPS"). It replaced the presentation
of primary EPS with a presentation of basic EPS. It also required dual
presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures and required
reconciliation
7
<PAGE>
of the numerator and denominator of the basic EPS computation to the
numerator and denominator of the diluted EPS computation. The statement
is effective for financial statements issued for periods ending after
December 15, 1997, and requires restatement for all periods presented.
The implementation of this statement does not have a material effect on
the Company's reported financial position or net income.
Basic EPS excludes dilution and is computed by dividing income
available to the common shareholders by the weighted-average number of
common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if options or other contracts to
issue common stock were exercised or converted into common stock, or
resulted in the issuance of common stock that then shared the earnings
of the Company.
NOTE 7 - FINANCIAL ACCOUNTING PRONOUNCEMENTS
On January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." This statement establishes standards for the
reporting and display of comprehensive income and its components in the
financial statements. Comprehensive income refers to revenues,
expenses, gains, and losses that generally accepted accounting
principles recognize as changes in value to an enterprise but are
excluded from net income.
For the Company, comprehensive income includes net income and changes
in the fair value of its available-for-sale investment securities.
Total comprehensive income for the nine-months ended September 30, 1999
and September 30, 1998 was $222,260 and $2,432,382, respectively.
On January 1, 1998, the Company adopted SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information." This
statement establishes standards for reporting enterprise segments of a
company in the footnotes to the financial statements. The adoption of
the applicable provisions of SFAS No. 131 did not have a material
effect on the Company, as Management believes that the Company operates
only in one segment, the commercial banking segment.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments and
hedging activities. It requires recognition of all derivatives as
either assets or liabilities in the statement of financial condition
and the measurement of those instruments at fair value. Recognition of
changes in fair value will be recognized into income or as a component
of other comprehensive income depending upon the type of the derivative
and its related hedge, if any. SFAS No. 133 is effective for the
Company for all fiscal quarters of all fiscal years beginning after
June 15, 2000. The Company is in the process of determining the impact
of SFAS No. 133 on the Company's financial statements, which is not
expected to be material.
In October of 1998, FASB issued SFAS No. 134, which was effective the
first fiscal quarter after December 31, 1998. SFAS No. 134 amends SFAS
No. 65 to require entities engaged in mortgage banking activities to
classify their mortgage-backed securities, or other retained interests,
based upon their ability and intent to sell or hold those investments.
The intent of the statement is to conform the subsequent accounting for
securities retained after mortgage loan securitization with the
subsequent accounting for securities retained after the securitization
of other types of assets by mortgage banking entities. The adoption of
the applicable provisions of SFAS No. 134 did not have a material
effect on the Company.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
California Independent Bancorp ("CIB", and with its subsidiaries the "Company")
through its wholly owned subsidiary, Feather River State Bank (the "Bank"),
engages in a broad range of financial service activities. The Bank commenced
operations in 1977 as a California State commercial chartered bank. CIB was
formed in 1994 and, after receiving regulatory and shareholder approval, became
the holding company for the Bank in May 1995. In October 1996, the Bank acquired
E.P.I. Leasing Co., Inc. ("EPI"), and operates this equipment leasing company as
a subsidiary.
Certain statements in this Form 10-Q quarterly report include forward-looking
information within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Such statements are subject to the 'safe harbor' provisions created by those
sections. These forward-looking statements involve certain risks and
uncertainties that could cause actual results to differ materially from those in
the forward-looking statements. Such risks and uncertainties include, but are
not limited to, the following factors: competitive pressure in the banking
industry; changes in the interest rate environment; general economic conditions,
either nationally or regionally, that are less favorable than expected,
resulting in, among other things, a deterioration in credit quality and an
increase in the provision for possible loan losses; changes in the regulatory
environment; changes in business conditions; volatility of rate sensitive
deposits; operational risks including data processing system failures or fraud;
asset/liability matching risks and liquidity risks; the loss of key personnel;
and changes in the securities markets. In addition, such risks and uncertainties
include mortgage banking activities, merchant card processing and concentration
of lending activities.
The following sections discuss significant changes and trends in financial
condition, capital resources and liquidity of the Company from September 30,
1998 and December 31, 1998 to September 30, 1999. Additionally, the sections
discuss significant changes and trends in the Company's results of operations
for the three and nine-month periods ended September 30, 1999, compared to the
same period in 1998.
OVERVIEW OF CHANGES IN THE FINANCIAL STATEMENTS
The Company reported net income of $1,215,289 for the nine-month period ending
September 30, 1999 as compared to $2,341,657 for the same period ending
September 30, 1998. Net income for the three-month period ending September 30,
1999 and 1998 was $391,751 and $678,447, respectively. These 1999 figures
represent a 48.1% decline over the same nine-month period for 1998 and a 42.3%
decline over the prior year's third quarter figures. The decline in net income
is attributable to several factors including: lower loan volume and declining
interest rates resulted in marked decreases to interest and loan fee income; and
significant reductions to lease commissions and brokered loan fees earned during
the period. These declining factors were mitigated by a decrease in the
Allowance for Loan and Lease Losses. Each of these factors are discussed in
detail below in the "Results of Operations" section of this item.
Total assets at September 30, 1999 were $293,385,204. This figure represents a
slight decrease from $295,312,605 at December 31, 1998 and a 4.9% increase from
September 30, 1998 total assets of $279,726,938. Gross loans were $187,409,964
at September 30, 1999, a 3.4% increase from $181,182,515 at December 31, 1998
and 8.0% decrease from $203,612,283 at September 30, 1998. The increase from
September 30,1999 over December 31, 1998, represents the seasonal nature of the
Company's loan portfolio. Historically, the Company's agricultural loan demand
increases in the second and third quarters of the year. The Company's loan
balances begin to decrease, during the fourth quarter of the year and into the
first quarter of the next year, as payments are received from its agricultural
borrowers.
9
<PAGE>
The Company's investment portfolio at September 30,1999, was $69,161,387
compared to December 31, 1998 investments of $60,639,334 and $47,536,970 at
September 30, 1998. The increase in the investment portfolio from December 31,
1998 and September 30, 1998, to September 30, 1999, was due to the reallocation,
of loan proceeds received into investments rather than making new loans. Cash
and cash equivalents which consists of cash and due from banks and federal funds
sold, were $21,713,464 at September 30, 1999, $43,000,727 at December 31, 1998
and $18,147,218 as of September 30, 1998. The decrease in cash and cash
equivalents from December 31, 1998 to September 30, 1999, is a result of the
Company's shifting of funds to longer term, higher yielding investments and
funding the Company's seasonal loan demands.
Total deposits decreased from $268,808,444 at December 31, 1998, to $260,033,687
at September 30, 1999. The reduction in deposits is a reflection of normal
seasonal decreases in noninterest bearing deposits amounting to $18,439,177
offset by an increase of $9,664,420 in interest bearing deposits resulting in a
net decrease in total deposits of $8,774,757 or 3.3%.
The total loan-to-deposit ratios were 72.1%, 67.4% and 83.8% at September 30,
1999, December 31, 1998 and September 30, 1998.
LOANS
Due to the types of loans made, the Company sustains moderate variations in
outstanding loan totals. Specifically, certain seasonal variations are expected
to occur in the agricultural and construction loan portfolios. The table below
sets forth the composition of the Company's loan portfolio as of September 30,
1999, December 31, 1998 and September 30, 1998.
COMPOSITION OF THE LOAN PORTFOLIO
<TABLE>
<CAPTION>
- ------------------------------------------ ---------------------- ---------------------- ----------------------
Loan Category 9/30/99 12/31/98 9/30/98
- ------------------------------------------ ---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Commercial & Agricultural 81,487,164 71,784,483 87,643,752
Real Estate Construction 31,705,637 54,828,845 50,508,532
Real Estate Other 44,858,787 28,503,710 31,976,151
Lease Financing 26,115,495 23,313,399 30,907,222
Consumer 3,182,257 2,655,031 2,265,199
Other 60,624 97,047 311,427
- ------------------------------------------ ---------------------- ---------------------- ----------------------
TOTAL 187,409,964 181,182,515 203,612,283
- ------------------------------------------ ---------------------- ---------------------- ----------------------
</TABLE>
Total loans outstanding as of September 30, 1999 was $187,409,964 representing
an increase of $6,676,285 or 3.4% over December 31, 1998. In comparison to the
prior period ending September 30, 1998 total loans dropped $16,202,319 or 8.0%.
This reduction was centered in Commercial and Agricultural, Real Estate
Construction loans, and Lease Financing. Due to seasonal variations, the
comparison of the current period to like prior period provides the most
revealing trends occurring within the Company. The following discussion
regarding the decreases in loan volumes focuses on the period comparison of
September 30, 1998 to September 30, 1999 unless indicated otherwise.
Real Estate Construction declined by $18,802,895 or 37.2%. The Company extends
construction loans primarily to builders of single family houses. Loans are made
to individual borrowers and to real estate developers. It is believed that the
decrease in real estate construction loans can be accredited to a general
decrease in residential real estate activity in the bank's market area as a
direct result of an increase in interest rates.
Commercial and Agricultural loans fell $6,156,588 or 7.0% and Lease Financing
was lower by $4,791,727 or 15.5%. These reductions were primarily the result
of the Bank's tightening of its underwriting criteria and competitive
pressures in the agricultural lending area. Finally, loan totals in this
10
<PAGE>
category were reduced as a result of the satisfactory resolution of loan
workouts.
Increases in loan totals were realized in two loan categories, Real Estate Other
and Consumer. Real Estate Other experienced an increase of $12,882,636 or 40.3%.
This growth was primarily due to the Company's decision to increase its own
residential and agricultural real estate loan portfolio rather than package and
sell those loans to the marketplace. Another factor effecting the increase was
agricultural land refinances to obtain working capital.
Consumer loans were successfully increased $917,058 or 40.5% as a direct result
of a concerted sales effort. This loan category has been identified as a market
focus to improve loan portfolio diversification.
One additional factor influenced the Company's loan totals as of September
30, 1999. The Company's lease portfolio increased from $23,313,399 on
December 31, 1998 to $26,115,495 on September 30, 1999, representing an
increase of 12.0%. The Company originates commercial and industrial equipment
leases through the Bank's subsidiary, EPI. The Company, at times, elects to
combine its leases into groups or "pools" and sells the lease pools as part
of a portfolio management strategy. Fewer lease pool sales during the first
nine months of 1999 contributed to an increase in lease receivables as of
September 30, 1999 compared to December 31, 1998.
The Company lends primarily to small and medium sized businesses, small to large
sized farmers and consumers within its market area, which is comprised
principally of Sutter, Yuba, Colusa, and Yolo counties and secondarily Butte,
Glenn, Sacramento, Madera and Fresno counties. In addition, The Company
originates commercial and industrial equipment leases through its subsidiary EPI
located in Sacramento.
The Company actively pursues diversification of its loan portfolios. As a
result, both consumer and commercial business loans have been identified as
having the most growth potential. Direct marketing programs have had a positive
effect and implementation will continue.
The Company has chosen to close its Madera and Chico Loan Production offices as
well as reduce staff in the Bank's Yuba City real estate loan department. This
action was the result of a large decline in the real estate loan production
volume in these areas and was aimed at improving efficiency and maximizing
available resources.
During the third quarter of 1999, the Company continued to restructure and
strengthen its loan administration. Loan Administration is considered a critical
part of lending operations as this unit is charged with management and oversight
of the loan portfolio. The prior restructuring involved reassigning certain loan
management duties among existing staff members and hiring additional staff. The
Bank has hired a new CEO and an additional Loan Administrator with a strong
credit background. Loan Administration continues to resolve troubled loans with
a dedicated classified asset reduction team.
LOAN QUALITY
The Company places loans automatically on nonaccrual status when principal or
interest has been in default for 90 days or more. A manual override can be made
if the loan is well secured and in the process of collection. The Company also
places loans on non-accrual when payment in full of principal or interest is not
expected; or the financial condition of the borrower has significantly
deteriorated.
From a historical perspective, nonperforming loans escalated significantly
during the first half of 1997. The increase in nonperforming loans during that
period was attributable to increased risk exposure in a limited number of large
credit relationships. Since that time the Company has made a concerted effort to
reduce nonperforming loans. In 1997, management assembled an experienced group
of loan collectors to
11
<PAGE>
aggressively collect theses troubled loans and recover charged-off loans.
This approach has been successful in the reduction of troubled loans identified.
The table shown below summarizes the composition of non-performing loans as of
September 30, 1999, December 31, 1998 and September 30, 1998 ($ in 000's) as
well as the changes between the periods.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Amount Amount Amount Change Change Change
at At at from 9/99 from 9/99 from 12/98
9/30/99 12/31/98 9/30/98 over 12/98 over 9/98 over 9/98
----------------------------------------------------------------------------------
ACCRUING LOANS PAST DUE
90 DAYS OR MORE
- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial 0 6 0 -100.0% 0.0% 0.0%
Agricultural 0 0 0 0.00% 0.0% 0.0%
Real Estate 0 0 0 0.00% 0.0% 0.0%
Leases 2 0 41 0.00% -95.1% -100.0%
Consumer 0 0 1 0.00% -100.0% -100.0%
------------------------------------------------------------------------------------
TOTAL 2 6 42 -66.7% -95.2% -85.7%
------------------------------------------------------------------------------------
<CAPTION>
NONACCRUAL LOANS
- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial 1,454 829 1055 75.4% 37.8% -21.4%
Agricultural 4,542 1,755 2726 158.8% 66.6% -35.6%
Real Estate 1,727 1579 2525 9.4% -31.6% -37.5%
Leases 81 163 177 -50.3% -54.2% -7.9%
Consumer 1 0 -0- 0.0% 0.0% 0.0%
------------------------------------------------------------------------------------
TOTAL 7,805 4,326 6483 80.4% 20.4% -33.3%
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
TOTAL NONPERFORMING 7,807 4,332 6525 80.2% 19.6% -33.6%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
For the three-month period of September 30, 1998 to December 31, 1998, the
Company experienced a decrease in nonperforming loans of 33.6%. However, from
September 30, 1998 to September 30, 1999 total nonperfroming loans have risen by
19.6%, and since December 31, 1998 nonperfroming loans have edged up by
$3,475,000 or 80.2%. As a percentage of total loans, nonperfoming loans rose to
4.2% at September 30, 1999, as compared to 3.1% on December 31, 1998 and 3.2% on
September 30, 1998 loans.
This rise is due to the nonperformance of a large agricultural loan that
experienced repayment problems which resulted from weather related adversity,
labor issues and uncollectable receivables. A workout plan is in place and full
recovery is expected. This credit is more fully explained below.
All of the nonperforming loans listed in the table above are in the process of
collection. The Company devises specific loan resolution plans based upon the
circumstances surrounding the particular credit relationship. Plans are designed
to return the highest dollar amount to the Company in the shortest time while
reducing credit risk exposure. In terms of specific resolution plans, 35.0% of
these loans (approximately $2.7 million) have been restructured, 8.0% of the
loans (approximately $.6 million) are in the process of collateral liquidation,
and 57.0% of the loans (approximately $4.5 million) are currently in a workout
arrangement. Management projects additional progress toward the resolution of
these troubled loans during the fourth quarter of 1999. However, due to
particular factors surrounding specific nonperforming loans, management projects
that some of these credits will require several additional quarters to resolve.
12
<PAGE>
Several of the large nonperforming loans listed in the table have been partially
charged-off such that the book balance of the asset is now lower than the
estimated value of the supporting collateral. As a result of these actions and
the collection plans currently in place, management believes that the risk of
additional credit loss in the remaining nonperforming loans has been reduced.
The Company's nonperforming loans are concentrated in two credit relationships
that comprise 81.0% of the total. Both are large agricultural credit
relationships. The largest relationship comprises 49.0% of the total. This
borrower sustained financial difficulty stemming from a combination of adverse
weather, labor issues and, uncollectable receivables. The Company is adequately
collateralized and no loss is currently expected. The other relationship
represents 32.0% of the total. The debtor is currently in bankruptcy, which has
slowed progress toward ultimate loan resolution. Ongoing negotiations are
occurring in an attempt to restructure the credit. The loan has been charge down
to the tangible collateral position and additional loss is not expected. The
remaining 19.0% of the nonperforming loans are distributed among the commercial,
agricultural, real estate and lease portfolios The nonaccrual real estate and
lease categories actually sustained decreases from the same period
The Company's Allowance for Loan and Lease Losses ("ALLL") totals $6,633,727 or
3.5% of gross loans as of September 30, 1999. This amount is compared to
$6,024,111 or 3.3% of gross loans as of December 31, 1998 and $5,525,484 or 2.7%
as of September 30, 1998.
The Company uses the allowance method in providing for possible loan and lease
losses. Loan and lease losses are charged against the ALLL, and recoveries are
credited to the reserve. Additional provisions for possible loan and lease
losses also increase the ALLL. The provision is based upon past loan loss
experience and estimates of potential loan and lease losses which, in
management's judgment, deserves current recognition. The estimates are reviewed
regularly, and adjustments, as necessary, are charged to operations in the
period in which they become known. The provision is charged to operating
expense.
Management believes that the total ALLL is adequate to cover potential losses in
the loan and lease portfolio. While management uses available information to
access the adequacy of the ALLL, future additions to the reserve may be
necessary based on changes in economic conditions and other factors
13
<PAGE>
RESULTS OF OPERATIONS
Three and nine-months ended September 30, 1999
Compared with
Three and nine-months ended September 30, 1998
For the first three-quarters of 1999, the Company realized net income of
$1,215,289 resulting in diluted earnings of $0.59 per share. Net income for the
three-month period ending September 30, 1999 was $391,751 resulting in diluted
earnings of $0.18 per share. The net income for the three and nine-month periods
ending September 30, 1999 was less than the 1998 periods. The Company reported
net income in 1998 of $678,447 or $0.34 per share on a diluted basis for the
three-month period and $2,341,657 or $1.17 per share on a diluted basis for the
nine-month period, respectively. The decrease in 1999 net income over the same
period for 1998 was due to several factors.
The primary factor contributing to the decline in net income was a 7.7% decrease
in total interest income from the September 30, 1998 amount of $18,863,204 to
$17,404,068 at September 30, 1999. Total interest income of $5,827,453 for the
three-month period ending September 30, 1999 was also less than the 1998 total
interest income figure of $6,556,563 for the same three-month period, a decrease
of $729,110 or 11.1%.
Total interest income consists of interest and fees on loans and leases and
interest on investments. Interest and fees on loans and leases make up the
greatest portion of total interest income. Interest and fees on loans and leases
decreased in 1999 over the same periods ending September 30, 1998, by $887,348
or 15.6% for the three-month period and $1,448,922 or 9.3% for the nine-month
period. The decrease is attributable to a generally lower interest rate
environment and a moderately lower average outstanding loan portfolio balance
during the first nine months of 1999 compared to the same time period in 1998.
Another factor impacting the Company's net income was a significant reduction in
real estate brokered loan fee income earned during the period. The income from
brokered loan fees for the first nine-months of 1999, $202,531, fell by $801,062
or 79.8% in comparison to the first nine-months of 1998 figure of $1,003,593. A
comparison of the three-month period ending September 30, 1999 with the same
three-month period for 1998 provides similar results. Brokered loan fees during
the 1999 three-month period fell to $69,327 as compared to $392,245 earned
during the third quarter of 1998. The diminishment in brokered loan fee income
in 1999 can in part be traced to the Company's decision during the first half of
1999 to hold selected real estate loans in its portfolio instead of selling
those loans into secondary markets. The intent of this strategy was to diversify
the Company's loan portfolio and benefit from the long-term, higher yielding
interest income stream created by the real estate loans, instead of the one-time
brokerage fee earned from the loans' sale. In addition to the implementation of
the strategy, income generated from brokered loan fees has been adversely
impacted by staffing changes implemented at the Company's real estate loan
production offices, and a general slowing in the home refinance market which has
accompanied the increase in market interest rates.
A third factor which is reflected by the lower net income figure, is the
substantial decline in lease commissions. These commissions are earned on leases
generated by the Bank's subsidiary, EPI. For the three-month period ending
September 30, 1999 commissions of $435,109 were realized versus $465,404 for the
same period in 1998, representing a $30,295 or 6.5% decrease. The decrease for
the comparative nine-month figures is similar. For the nine-month period ended
September 30, 1999, lease commissions were $1,332,737 representing a 14.4%
decrease in commissions over the 1998 amount of $1,556,182. This decline is a
product of competitive pricing in the markets served by EPI, resulting in a
diminished volume in leases made.
Finally, the fourth factor which substantially contributed to the reduction in
net income for the three and nine-month periods ending September 30, 1999 over
the same period in 1998, was an increase in other noninterest expenses. This
increase amounted to $344,409 for the three-month period and $813,841 for the
nine-month period of September 30, 1999 over September 30, 1998.
14
<PAGE>
While the Company has attempted to recognize operating efficiencies and control
operating expenses, it continues to incur expenses related to the Year 2000
issues, its 1989 Stock Option Plan and the retention of a new CEO. In preparing
for the Year 2000, the Company has taken precautionary measures to ensure it is
technologically sound. The Company has expensed more than $128,000 during the
first nine months of 1999 in order to maintain its commitment to its Year 2000
readiness program. This amount is compared to approximately $200,000 for the
nine-month period ending September 30, 1998. Another significant increase to
noninterest expense includes an increase of $177,060 attributed to expenses
incurred under the Company's 1989 Stock Option Plan. Additionally, the Company
has incurred expenses of approximately $350,000, which are primarily associated
with the hiring of the new CEO, efforts to improve the quality of the loan
portfolio and refocusing the Bank towards its consumer and business lending
activities.
The impact these factors had on net income was somewhat mitigated by a decrease
in the contributions to loan and lease losses. These allocations totaled $50,000
for the three months ending September 30, 1999 as compared to $754,000 for the
like prior period ending September 30, 1998. The total contribution to the
provision totaled $850,000 for the nine-month period ending September 30, 1999
as compared to $1,440,000 for the prior nine-month period ending September 30,
1998.
Net interest income, the difference between interest earned on loans and
investments and the interest paid on deposits and other sources of funds, also
decreased in comparison to the prior year. Net interest income before provision
for loan and lease losses at September 30, 1999, was $3,583,149 for the
three-month period and $11,065,768 for the nine-month period, representing
decreases of 14.4% and 8.8% over the same periods ending September 30, 1998.
The Company's primary source of income is interest and fees on loans and leases.
The table below depicts average loans and yields for the three and nine-month
periods ending September 30, 1999 and 1998. As the table demonstrates, interest
and fees on loans and leases were adversely impacted by the declining average
balances and average yield of the loan portfolio.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Three-months Three-months Nine-months Nine-months
Ended Ended Ended Ended
September 30, 1999 September 30, 1998 September 30, 1999 September 30, 1998
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average loans $ 193,855,528 $ 209,008,122 $ 184,063,912 $ 188,413,011
Outstanding
Average yields 9.93% 10.91% 10.28% 11.07%
Amount of interest
& fees earned $ 4,811,495 $ 5,699,351 $ 14,191,243 $ 15,640,165
Average prime rate 8.10% 8.50% 8.03% 8.50%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Average loans outstanding have declined during the three and nine month
periods from September 30, 1998 to September 30, 1999. The three-month
average outstanding loans at September 30, 1999 were down $15,152,594 or 7.2%
from the same three-month period in 1998. The nine-month period ending
September 30, 1999 reflects a $4,349,099 or 2.3% decrease in average loans
outstanding over the prior nine-month period ending September 30, 1998. This
decline has adversely impacted the fees and interest earned on loans.
Additionally, the decline in average outstanding loans is reflective of the
increasing interest rate environment, tightening of the underwriting
standards and competitive pressures. Narrower margins are the result of
obtaining business under a more stringent credit underwriting process. This
has a direct trade off in risk that is not reflective in the yield
calculation. Both volume and rate are further impacted as a result of
competitive pressure to acquire and retain quality customers for the Company.
Another factor impacting the lower yields is the increase in nonaccrual
loans. Nonaccrual loans are discussed in greater detail in the Loan Quality
section of this report.
15
<PAGE>
The Company has experienced a reduction in total interest expense of 5.2% or
$124,010, for the three-months ending September 30, 1999 over 1998 and 5.8% or
$391,545 for the nine-month period. This is reflective of the Company's
decision to adjust the rates it pays on deposits to levels consistent with the
markets it serves, thereby resulting in a lower average interest rate paid on
its deposits. Average rates paid on deposits as of September 30, 1999 and 1998
were 3.24% and 3.36% for the three-month period and 3.15% and 3.34% for the
nine-month period, respectively.
Rates and amounts paid on average deposits, including noninterest-bearing
deposits for the three and nine-month periods ended September 30, 1999, compared
to the same periods in 1998, are set forth in the following table:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Three-months Three-months Nine-months Nine-months
Ended Ended ended Ended
September 30, 1999 September 30, 1998 September 30, 1999 September 30, 1998
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average deposits
Outstanding $ 260,007,340 $ 245,279,121 $ 260,787,716 $ 252,171,228
Average rates paid 3.24% 3.36% 3.10% 3.34%
Amount of interest
paid or accrued $ 2,105,730 $ 2,057,416 $ 6,165,866 $ 6,316,208
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The Company experienced a decrease in total noninterest income of $397,493 or
25.5% for the three-month period and $935,133 or 21.7% for the nine-month period
ended September 30, 1999, over the same periods in 1998. Total noninterest
income consists primarily of: service charges on deposit accounts, lease
commissions, brokered loan fees and other noninterest income.
Service charge income on deposit accounts, one of the primary components in
noninterest income, showed a slight increase between the three and nine-month
periods of 1999 over 1998. Income derived from service charges on deposit
accounts was $251,198 and $710,324 for the three and nine-month periods ending
September 30, 1999, as compared to $231,903 and $691,516 for the respective
three and nine-month periods for 1998.
The Company recognized a small increase of 3.9% in total noninterest expense
during the first nine months of 1999 over the same period in 1998. Total
noninterest expense stood at $4,088,443 and $3,909,740 for the three-month
periods and $11,697,708 and $11,256,414 for the nine-month periods ending
September 30, 1999 and 1998, respectively. Noninterest expenses consist of,
salaries and employee benefits, occupancy and furniture and equipment expense,
legal and professional fees and other miscellaneous expenses.
Salaries and employee benefits decreased during the three and nine-month periods
of 1999 over 1998. This reduction was due to continued centralization of
services, which created additional personnel efficiencies, thereby reducing the
growth in staffing expense.
Occupancy and furniture and equipment expenses increased by 3.2% and stood
jointly at $1,705,540 and $1,652,559 at September 30, 1999 and 1998,
respectively. This increase is in large part due to additional furniture and
equipment expenses associated with the upgrade of the Company's systems to
assure Year 2000 compliance.
Legal and professional fees declined 55.7% to $318,743 at September 30, 1999
from $719,893 at September 30, 1998. This decrease is associated with continued
progress towards the resolution of problem loans, and resulted in the reduction
of legal fees associated with the collection of such loans. Additionally, as
previously discussed, other noninterest expense, which consists of several other
expenses associated with the
16
<PAGE>
operations of the Company, increased 30.2%, and stood at $3,510,114 and
$2,696,273 at September 30, 1999 and September 30, 1998, respectively.
Applicable income taxes for the three and nine-month periods ended September 30,
1999, were $213,350 and $678,150 as compared to the September 30, 1998 amounts
of $403,950 and $1,405,800, respectively.
LIQUIDITY
During the first two quarters of each year the Bank experiences excess
liquidity. The seasonal agricultural loan demand of the Bank tends to
challenge the Bank's liquidity position beginning in the second quarter and
continues into the third quarter of each year. The Bank's liquid assets consist
of cash and due from banks, federal funds sold and investment securities with
maturities of one year or less (exclusive of pledged securities).
In order to fund its liquidity needs, the Bank has formal and informal
borrowing arrangements with the Federal Reserve Bank to meet unforeseen
deposit outflows or seasonal loan funding demands. During the fourth quarter
of 1998, the Bank also entered an agreement to borrow funds from the Federal
Home Loan Bank. Additionally, the Bank has an agreement with Lehman Brothers
for a standby short-term loan secured by U.S. Government and Agency
Obligations contained in the Bank's investment portfolio. As of September 30,
1999, the Bank had $5,770,000 outstanding on the Federal Reserve Bank line,
no balance outstanding on this line at December 31, 1998, and $10,896,000 on
September 30, 1998. The Bank did not utilize the Federal Home Loan Bank line
or Lehman Brothers loan during these periods.
RATE SENSITIVITY
Interest rate sensitivity is the relationship between market interest rates
and net interest income due to the repricing characteristics of assets and
liabilities. If more liabilities than assets reprice in a given period, a
liability sensitive position is created. If interest rates decline, a
liability sensitive position will benefit net income. Alternatively, where
assets reprice more quickly than liabilities in a given period, an asset
sensitive position, a decline in market rates will have an adverse effect on
net interest income.
The Company is subject to considerable competitive pressure to generate
deposits and loans at rates and terms prevailing in the Company's market
areas. However, management's objective is to maintain the stability of the
net interest margin in times of fluctuating interest rates by maintaining an
appropriate mix of interest rate sensitive assets and liabilities. Management
does not administer its interest rate sensitivity to maximize income based on
its prediction of interest rates, but rather to minimize interest rate risk
to the Company by stabilizing the Company's Net Interest Margin in all
interest rate environments.
The risks associated with commercial banking consist primarily of interest rate
risk and credit risk. The Company attempts to manage its interest rate risk by
making variable rate loans and by analyzing interest rate trends. The majority
of the Bank's loan portfolio consists of loans with variable interest rates.
Credit risk relates to the ability of borrowers to repay the principal and
interest on their loan in a timely manner. This risk is managed by adherence to
credit standards and, when appropriate, taking collateral to secure the
obligation.
Management has developed a matrix that calculates changes to the net interest
margin in both an increasing rate environment and a decreasing rate environment.
A 200 basis point (2%) shock rate is used for this calculation. The matrix
calculates a one-year Interest Rate Risk Ratio taking into consideration the
delays in the timing of repricing based on actual experience.
The one-year Interest Rate Risk ratios at September 30,1999, for a 200 basis
point increasing and decreasing
17
<PAGE>
rate environment were 16.9% and 17.0%, respectively.
CAPITAL RESOURCES
Total shareholders' equity as of September 30, 1999, increased by $146,496 to
$23,801,667 over December 31, 1998 total shareholders' equity of $23,655,171.
The September 30, 1999 higher figure represents a rise of $530,678 from
September 30, 1998's total of $23,270,989.
The Company is subject to capital adequacy guidelines issued by federal
regulators. These guidelines are intended to reflect the degree of risk
associated with both on- and off-balance sheet items.
Financial institutions are required to comply with a minimum ratio of qualifying
total capital to risk-weighted assets of 8%, at least half of which must be in
Tier 1 Capital. In addition, federal agencies have adopted a minimum leverage
ratio of Tier 1 Capital to total assets of 4%, which is intended to supplement
risk-based capital requirements and to ensure that all financial institutions
continue to maintain a minimum level of core capital.
As can be seen by the following tables, the Company exceeded all regulatory
capital ratios on September 30, 1999, and on December 31, 1998:
<TABLE>
<CAPTION>
RISK BASED CAPITAL RATIO
AS OF SEPTEMBER 30, 1999
- ---------------------------------------------------------------------------------------------------------------------
Company Bank
(Dollars in thousands) Amount Ratio Amount Ratio
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tier 1 Capital $ 24,602 10.15% $ 24,440 10.07%
Tier 1 Capital minimum
Requirement 9,695 4.00% 9,706 4.00%
-------------------------------------------------------------------------
Excess $ 14,907 6.15% $ 14,734 6.07%
=========================================================================
Total Capital 27,676 11.42% 27,518 11.34%
Total Capital minimum
Requirement 19,389 8.00% 19,412 8.00%
-------------------------------------------------------------------------
Excess $ 8,287 3.42% $ 8,106 3.34%
-------------------------------------------------------------------------
Risk-adjusted assets $ 242,367 $ 242,648
=========================================================================
LEVERAGE CAPITAL RATIO
Tier 1 Capital to quarterly $ 24,602 8.46% $ 24,440 8.40%
Average total assets
Minimum leverage requirement 11,637 4.00% 11,635 4.00%
-------------------------------------------------------------------------
Excess $ 12,965 4.46% $ 12,805 4.40%
=========================================================================
Total Quarterly average assets $ 290,919 $ 290,884
================== ==================
18
<PAGE>
<CAPTION>
RISK BASED CAPITAL RATIO
AS OF DECEMBER 31, 1998
- ---------------------------------------------------------------------------------------------------------------------
COMPANY BANK
(Dollars in thousands) Amount Ratio Amount Ratio
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tier 1 Capital $ 23,416 9.12% $ 23,260 9.06%
Tier 1 Capital minimum
Requirement 10,270 4.00% 9,779 4.00%
--------------------------------------------------------------------------
Excess $ 13,146 5.12% $ 13,481 5.06%
==========================================================================
Total Capital 26,660 10.38% 26,502 10.33%
Total Capital minimum
Requirement 20,540 8.00% 20,528 8.00%
--------------------------------------------------------------------------
Excess $ 6,120 2.38% $ 5,974 2.33%
--------------------------------------------------------------------------
Risk-adjusted assets $ 256,754 $ 256,604
==========================================================================
LEVERAGE CAPITAL RATIO
Tier 1 Capital to quarterly $ 23,416 8.20% $ 23,260 8.15%
Average total assets
Minimum leverage requirement 11,427 4.00% 11,605 4.00%
--------------------------------------------------------------------------
Excess $ 11,989 4.20% $ 11,655 4.15%
==========================================================================
Total Quarterly average assets $ 285,678 $ 285,463
==================== =================
</TABLE>
DIVIDENDS
Federal and State banking and corporate laws could limit the Bank's ability to
pay dividends to the Company. The Federal Reserve Board has issued a policy
statement that a bank holding company should not declare or pay a cash dividend
to its shareholders if the dividend would place undue pressure on the capital of
its subsidiary banks or if the dividend could be funded only through additional
borrowings or other arrangements that may adversely affect the financial
position of the holding company. In addition, a bank holding company may not
continue its existing rate of cash dividends on its common stock unless its net
income is sufficient to fully fund each dividend, and its prospective rate of
earnings retention is sufficient to fully fund each dividend and appears
consistent with its capital needs, asset quality and overall financial
condition. As a result of the Bank's disappointing 1998 financial performance
and continued concerns regarding the quality of the Bank's loan portfolio, the
Bank's Board of Directors has passed a resolution which requires the Bank to
seek the written approval of the Federal Deposit Insurance Corporation ("FDIC")
and California Department of Financial Institutions ("DFI") prior to the payment
of any cash dividends.
SUPERVISION AND REGULATION
As a result of the Company's and Bank's disappointing 1998 financial
performance and continued concerns regarding the quality of the Bank's loan
portfolio, the Bank's Board of Directors passed a resolution to remedy the
concerns. The resolution requires the Bank to: have management acceptable to
the FDIC and DFI; continue with the diligent implementation of a previously
adopted plan to reduce the level of non-performing and problem loans,
continue with the diligent implementation of revised policies and procedures;
and seek prior approval of the FDIC and DFI before the payment of any cash
dividends.
19
<PAGE>
Additionally, the FDIC and Federal Reserve Bank of San Francisco ("FRB") have
notified the Bank and the Company that they have determined that the condition
of the Bank and the Company are such that prior approval of the regulatory
agencies is necessary before adding or replacing any member of the boards of
directors, employing any person as a senior executive officer, or changing the
responsibilities of any senior executive officer so that the individual would be
assuming a different senior executive officer position. Finally, due to the
Bank's condition, the FDIC is also restricting the Company's and the Bank's
ability to enter into any contracts to pay or make any golden parachute and
indemnification payments to institution-affiliated parties.
SEGMENT REPORTING
SFAS No. 131 establishes standards for public business enterprises' reporting of
information about operating segments in annual financial statements. The
Statement requires that the enterprise report selected information concerning
operating segments in interim financial reports issued to shareholders.
Additionally, the Statement establishes requirements for related disclosures
about products, services, geographic areas, and major customers.
SFAS No. 131 requires public business enterprises to report a measure of segment
profit or loss, certain specific revenue and expense items, and segment assets.
The Statement further requires reconciliation of total segment revenues, total
segment profit or loss, total segment assets, and other amounts disclosed for
segments to corresponding amounts in the enterprise's general purpose financial
statements. It requires that all public business enterprises report information
about the revenues derived from the enterprise's products or services (or groups
of similar products and services), about the countries in which the enterprise
earns revenues and holds assets, and about major customers regardless of whether
that information is used in making operating decisions. However, SFAS No. 131
does not require an enterprise to report information that is not prepared for
internal use if reporting it would be impracticable. SFAS No. 131 is effective
for financial statements for periods beginning after December 15, 1997.
The Company has adopted SFAS No. 131. The adoption of the applicable provisions
did not have a material effect on the Company, as management believes that the
Company operates only in one segment, the commercial banking segment.
SENIOR MANAGEMENT CHANGE
To further strengthen senior management of the Bank and Company, Larry D.
Hartwig has been appointed, with appropriate regulatory approval, to the
positions of President and Chief Executive Officer of the Company and Bank. Mr.
Hartwig brings to the Company and Bank more than thirty (30) years of experience
in the banking industry, having most recently served as President and Chief
Executive Officer of SC Bancorp and its wholly-owned subsidiary, Southern
California Bank.
Effective October 1, 1999, Carolyn Roth no longer serves as president of EPI,
the Bank's leasing subsidiary. Following the Bank's purchase of EPI in October
of 1996, EPI entered into an employment agreement with Ms. Roth which contained
an expiration date of September 30, 1999. Ms. Roth notified EPI's board of
directors prior to the expiration of the contract that she no longer desired to
be president of the company, and that she would only serve through the term of
her contract. Following an extensive search for a new President and CEO of EPI,
it has been announced that effective November 1, 1999, Robert L. Lambert will
succeed Ms. Roth as President and CEO of EPI. Mr. Lampert joins EPI after
serving as Executive Vice President Strategic Operations of the Commercial
Lending Division of The Money Store, and brings to the position a broad
knowledge of products and practices of the leasing industry.
YEAR 2000 COMPLIANCE
20
<PAGE>
The "Year 2000 issue" has generally been described as the inability of computers
systems, software, and other equipment using microprocessors to distinguish the
year 1900 from the year 2000. The Year 2000 issue poses significant risks for
all businesses, households, and governments and could result in system failures
and miscalculations causing disruptions in normal business and governmental
operations if action is not taken to fix the problem before the year 2000
arrives.
The impact of Year 2000 issues on the Company will depend not only on corrective
actions taken by the Company. The Company may also be impacted by the way in
which Year 2000 issues are addressed by governmental agencies, businesses and
other third parties that provide services or data to or receive services or data
from the Company, or whose financial condition or operational capability is
important to the Company.
COMPANY'S COMPLIANCE EFFORTS
The Company is currently engaged in a four-phase management program that
includes assessment, renovation, validation, and implementation. To ensure Year
2000 compliance, the Company has identified all major applications and systems
that may require modification. The Company's program includes all computer
systems, including PC and network hardware and software, and mainframe and
mainframe software. The program also covers all equipment and other systems
utilized in the Company and Bank's operations or on the premises from which the
Company and Bank operates. The Company is presently 99% complete with its
four-phase process and continues to stay abreast of all areas that may be
impacted by the Year 2000 date change. The Company is on schedule to meet all
internal deadlines set forth in the plan and "milestone dates" which have
been established by the FDIC.
In addition, the Bank continues to communicate with its large borrowers,
customers, and major vendors to determine the Bank's and/or the Company's
vulnerability to those third parties should they fail to resolve their Year 2000
issues. The responses being evaluated; however, there can be no guarantee that
the systems of other companies on which the Company's systems rely will be
converted on time, or that a failure to convert by another company, or a
conversion that is incompatible with the Company's systems, would not have a
materially adverse effect on the Company.
COMPLIANCE EXPENSES
The Company's program calls for the utilization of internal and external
resources to implement its Year 2000 project. The Company has completed
approximately 99% of its plan and believes there is adequate time remaining to
assess and correct any significant issues that may materialize. The purchase of
any necessary hardware and software will be capitalized in accordance with
normal policy. Personnel and all other costs related to the project are being
expensed as incurred. During the first three-quarters of 1999, the Company has
expended approximately $128,000 on its Year 2000 compliance efforts. Since the
program's inception, the Company has expended approximately $430,000 on these
efforts. Management estimates an additional expenditure of $47,000 will be
required to complete its program. The majority of these costs are expected to be
incurred during 1999 and are not expected to have a material impact on the
Company's cash flows, results of operations, or financial condition.
RISKS OF NON COMPLIANCE
The failure to address all Year 2000 issues could result in substantial
interruptions to the Company's normal business activities. These interruptions
could in turn, affect the financial condition as well as the business activities
of its customers. Through the efforts involved in its Year 2000 project, no
major interruptions are expected. However, due to the uncertainty involved in
the Year 2000 problem, not all of the effects of the century date change to the
organization can be absolutely determined. Although at this time it is not
possible to determine the extent of the adverse financial effects, with any
specificity, the Company is preparing
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contingency plans if disruptions occur. Given the Year 2000 project progress to
date and with successful implementation of the remaining phases of the project,
management believes that the Company is well positioned to significantly reduce
potential negative effects that may exist.
CONTINGENCY PLAN
A contingency plan has been developed and tested in order to structure a
methodology that would allow the Company to continue operations in the event the
Company, or its key suppliers, customers, or third party service providers will
not be Year 2000 compliant, and such noncompliance is expected to have a
material adverse impact on the Company's operations. The Company's contingency
plan mitigates risk by: (1) identifying and assuring that alternative key
suppliers and computer backup computers will be available; (2) providing
additional loan reserves in the event of customer loan repayment problems
attributed to Year 2000 issues; and (3) providing plans and procedures to assure
that the Bank has sufficient liquidity and currency available to allow customers
access to their funds even in the event of power or computer systems failure.
The Company's Corporate Disaster Recovery/Business Resumption Program contains
the full text of various Federal Financial Institutions Examination Council's
Interagency Policies on Contingency Planning for Financial Institutions. This
plan, working in an integrated manner with our existing Security Measures &
Controls Procedures and Data Processing Disaster Recovery Plan, should provide
protection and guidance for the Company and its employees during potential Year
2000 emergencies, and should allow the Company to continue to serve its
customers and the local community, despite the existence of such an emergency.
However, as with any plan, the commitment and assistance of all Bank personnel
will be required, regardless of position, to carry out and achieve success in
implementing the contingency plan.
CAUTIONARY STATEMENT FOR THE PURPOSES OF THE 'SAFE HARBOR' PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Company is including the following cautionary statement to take advantage of
the 'safe harbor' provisions of the PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995 for any forward-looking statement made by, or on behalf of, the Company.
The factors identified in this cautionary statement are important factors (but
not necessarily all important factors) that could cause actual results to differ
materially from those expressed in any forward-looking statement made by, or on
behalf of, the Company.
The dates on which the Company believes the Year 2000 Project will be completed
and implemented are based on management's best estimates, which were derived
using numerous assumptions of future events. Such assumptions include, but are
not limited to, the continued availability of certain financial resources,
third-party modification plans and other factors. However, there can be no
guarantee that these estimates will be achieved, or that there will not be a
delay in, or increased costs associated with the implementation of the Year 2000
Project. Specific factors that might cause differences between the estimates and
actual results include, but are not limited to, the availability and cost of
personnel trained in these areas, the ability to locate and correct all relevant
computer code, timely responses to and corrections by third-parties and
suppliers, the ability to implement interfaces between the new systems and the
systems not being replaced, and similar uncertainties. Due to the general
uncertainty inherent in the Year 2000 problem, resulting in part from the
uncertainty of the Year 2000 readiness of third-parties and the interconnection
of global businesses, the company cannot ensure its ability to timely and
cost-effectively resolve problems associated with the Year 2000 issue that may
affect its operations and business, or expose it to third-party liability.
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NEW ACCOUNTING PRONOUNCEMENTS
SFAS NO. 130 -"REPORTING COMPREHENSIVE INCOME"
For financial statements issued after December 31, 1997, the FASB mandates
compliance with SFAS No. 130, "Reporting Comprehensive Income." SFAS provides
guidance as to the presentation and display of comprehensive income and its
components in the financial statements. The statement defines "comprehensive
income" to include revenues, expenses, gains, and changes in equity from
transactions during the period. The Company has adopted SFAS No. 130, and does
not expect the statement to have a material impact on its financial statements.
SFAS NO. 133 - "ACCOUNTING FOR DERIVATIVE INSTRUMENTS
AND HEDGING ACTIVITIES"
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and for hedging activities. It
requires recognition of all derivatives as either assets or liabilities in the
statement of financial condition and the measurement of those instruments at
fair value. Recognition of changes in fair value will be recognized into income
or as a component of other comprehensive income depending upon the type of the
derivative and its related hedge, if any. SFAS No. 133 is effective for the
Company for all fiscal quarters of all fiscal years beginning after June 15,
2000. The Company is in the process of determining the impact of SFAS No. 133 on
the Company's financial statements, which is not expected to be material.
SFAS NO. 134 - "ACCOUNTING FOR MORTGAGE-BACKED SECURITIES
RETAINED AFTER THE SECURITIZATION OF MORTGAGE LOANS HELD FOR
SALE BY A MORTGAGE BANKING ENTERPRISE"
FASB issued SFAS No. 134 in October of 1998, to be effective the first fiscal
quarter after December 31, 1998. SFAS No. 134 amends SFAS No. 65 to require
entities engaged in mortgage banking activities to classify their
mortgage-backed securities, or other retained interests, based upon their
ability and intent to sell or hold those investments. The intent of the
statement is to conform the subsequent accounting for securities retained
after mortgage loan securitization with the subsequent accounting for
securities retained after the securitization of other types of assets by
mortgage banking entities. The adoption of the applicable provisions of SFAS
No. 134 did not have a material effect on the Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In management's opinion, the Company's market risk and interest rate risk
profiles are within reasonable tolerances at this time. (See Item 2. Management
Discussion and Analysis of Financial Condition and Results of Operations,
sections discussing "Liquidity" and "Rate Sensitivity" at page 17). No
significant changes to the market risk or interest rate risk of the Company have
occurred since June 30, 1999.
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PART II- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None reported
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
No changes.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted during the period.
ITEM 5. OTHER INFORMATION.
None reported.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K.
(a) Exhibits.
Exhibit No.
2.1 Plan of Reorganization and Merger Agreement dated January 30,
1995 by and between Feather River State Bank, FRSB Merger
Company and California Independent Bancorp. Filed as Exhibit
2.1 to the Company's General Form for Registration of
Securities on Form 10 (File No. 0-26552).*
3.1 Secretary's Compiled, Amended and Restated Articles of
Incorporation for California Independent Bancorp as of April
26, 1999. Filed as Exhibit 3.1 to the Company's Quarterly
Report filed on Form 10Q for the period ended March 31, 1999.*
3.2 Secretary's Compiled, Amended and Restated Bylaws of
California Independent Bancorp as of September 30, 1999.
10.20 Director Deferred Fee Agreement between Feather River State
Bank and David A. Offutt.
10.21 Employment Agreement between California Independent Bancorp,
Feather River State Bank and Larry D. Hartwig dated July 19,
1999.
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10.22 Nonqualified Stock Option Agreement between California
Independent Bancorp and Larry D. Hartwig dated July 19, 1999.
10.23 Executive Salary Continuation Agreement between Feather River
State Bank and Blaine C. Lauhon.
27 Financial Data Schedule
- ---------------
*Document incorporated herein by reference.
(b) Reports on Form 8K.
No reports on Form 8K were filed during the period.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized
California Independent Bancorp
Date: November 10, 1999 /S/ Larry D. Hartwig
------------------ --------------------
Larry D. Hartwig
President/CEO
Date: November 10, 1999 /S/ Annette Bertolini
------------------ ---------------------
Annette Bertolini
Chief Financial Officer
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SECRETARY'S COMPILED, AMENDED AND RESTATED
BYLAWS
OF
CALIFORNIA INDEPENDENT BANCORP
as of September 30, 1999
ARTICLE I
OFFICES
SECTION 1.1. PRINCIPAL OFFICE. The principal executive office of the corporation
is hereby located at such place as the board of directors (the "board") shall
determine. The board is hereby granted full power and authority to change said
principal executive office from one location to another.
SECTION 1.2. OTHER OFFICES. Other business offices may, at any time, be
established by the board at such other places as it deems appropriate.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 2.1. PLACE OF MEETINGS. Meetings of shareholders may be held at such
place within or outside the state of California designated by the board. In the
absence of any such designation, shareholders' meetings shall be held at the
principal executive office of the corporation.
SECTION 2.2. ANNUAL MEETING. The annual meeting of shareholders shall be held
for the election of directors on a date and at a time designated by the board.
The date so designated shall be within fifteen (15) months after the last annual
meeting. At such meeting, directors shall be elected, and any other proper
business within the power of the shareholders may be transacted.
SECTION 2.3. SPECIAL MEETINGS. Special meetings of the shareholders may be
called at any time by the board, the chairperson of the board, the president, or
by the holders of shares entitled to cast not less than ten percent (10%) of the
votes at such meeting. If a special meeting is called by any person or persons
other than the board, the request shall be in writing, specifying the time of
such meeting and the general nature of the business proposed to be transacted,
and shall be delivered personally or by registered mail to the chairperson of
the board, the president, any vice president or the secretary of the
corporation. The officer receiving the request shall cause notice to be promptly
given to the shareholders entitled to vote that a meeting will be held at a time
requested by the person or persons calling the meeting, not less than 35 nor
more than 60 days after receipt of the request. If the notice is not given
within 20 days after receipt of the request, the person or persons requesting
the meeting may give the notice. Nothing in this paragraph shall be construed as
limiting, fixing or affecting the time when a meeting of shareholders called by
action of the board may be held.
SECTION 2.4. NOTICE OF MEETINGS. Written notice, in accordance with Section 2.5
of this Article II, of each annual or special meeting of shareholders shall be
given not less than 10 nor more than 60 days before the date of the meeting to
each shareholder entitled to vote thereat. Such notice shall state the place,
date and hour of the meeting and (a) in the case of a special meeting, the
general nature of the business to be transacted, and no other business may be
transacted, or (b) in the case of the annual meeting, those matters which the
board, at the time of the mailing of the notice, intends to present for action
by the shareholders, but,
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subject to the provisions of applicable law, any proper matter may be
presented at the meeting for such action. The notice of any meeting at which
directors are to be elected shall include the names of nominees intended at
the time of the notice to be presented by the board for election.
If action is proposed to be taken at any meeting for approval of (a) a contract
or transaction in which a director has a direct or indirect financial interest,
pursuant to Section 310 of the California Corporations Code, as amended (the
"Code"), (b) an amendment of the articles of incorporation, pursuant to Section
902 of the Code, (c) a reorganization of the corporation, pursuant to Section
1201 of the Code, (d) a voluntary dissolution of the corporation, pursuant to
Section 1900 of the Code, or (e) a distribution in dissolution other than in
accordance with the rights of outstanding preferred shares, pursuant to Section
2007 of the Code, the notice shall also state the general nature of that
proposal.
SECTION 2.5. MANNER OF GIVING NOTICE. Notice of a shareholders' meeting shall be
given either personally or by first-class mail or telegraphic or other written
communication, charges prepaid, addressed to the shareholder at the address of
that shareholder appearing on the books of the corporation or given by the
shareholder to the corporation for the purpose of notice. If no such address
appears on the corporation's books or is given, notice shall be deemed to have
been given if sent to that shareholder by first-class mail or telegraphic or
other written communication to the corporation's principal executive office or
if published at least once in a newspaper of general circulation in the county
in which the principal executive office is located. Notice shall be deemed to
have been given at the time when delivered personally or deposited in the mail
or sent by telegram or other means of written communication. An affidavit of
mailing or other means of giving any notice in accordance with the above
provisions, executed by the secretary, assistant secretary or any transfer
agent, shall be prima facie evidence of the giving of the notice.
If any notice addressed to the shareholder at the address of such shareholder
appearing on the books of the corporation is returned to the corporation by the
United States Postal Service marked to indicate that the United States Postal
Service is unable to deliver the notice to the shareholder at such address, all
future notices shall be deemed to have been duly given without further mailing
if the same shall be available for the shareholder upon written demand of the
shareholder at the principal executive office of the corporation for a period of
one year from the date of the giving of the notice to all other shareholders.
SECTION 2.6. QUORUM. A majority of the shares entitled to vote, represented in
person or by proxy, shall constitute a quorum at any meeting of shareholders.
The shareholders present at a duly called or held meeting at which a quorum is
present may continue to transact business until adjournment notwithstanding the
withdrawal of enough shareholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least A majority of the shares
required to constitute a quorum.
SECTION 2.7. ADJOURNED MEETING AND NOTICE THEREOF. Any shareholders' meeting,
whether or not a quorum is present, may be adjourned from time to time by the
vote of a majority of the shares represented either in person or by proxy at the
meeting, but in the absence of a quorum (except as provided in Section 2.6 of
this Article II) no other business may be transacted at such meeting.
When any meeting of shareholders, either annual or special, is adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place are announced at the meeting at which the adjournment is taken.
However, when any shareholders' meeting is adjourned for more than 45 days from
the date set for the original meeting, or, if after adjournment a new record
date is fixed for the adjourned meeting, notice of the adjourned meeting shall
be given to each shareholder of record entitled to vote at the meeting. At any
adjourned meeting the corporation may transact any business which might have
been transacted at the original meeting.
SECTION 2.8. VOTING. The shareholders entitled to notice of any meeting or to
vote at any such meeting shall be only persons in whose name shares stand on the
stock records of the corporation on the record date
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determined in accordance with Section 2.9 of this Article II.
Voting of shares of the corporation shall in all cases be subject to the
provisions of Sections 700 through 711, inclusive, of the Code.
The shareholders' vote may be by voice or ballot; provided, however, that any
election for directors must be by ballot if demanded by any shareholder before
the voting has begun. On any matter other than election of directors, any
shareholder may vote part of the shares in favor of the proposal and refrain
from voting the remaining shares or vote them against the proposal (other than
the election of directors), but, if the shareholder fails to specify the number
of shares which the shareholder is voting affirmatively, it will be conclusively
presumed that the shareholder's approving vote is with respect to all shares
that the shareholder is entitled to vote. If a quorum is present, the
affirmative vote of the majority of the shares represented at the meeting and
entitled to vote on any matter (other than the election of directors) shall be
the act of the shareholders, unless the vote of a greater number or voting by
classes is required by the Code or by the articles of incorporation.
Pursuant to California Corporations Code sections 301.5 and 708, and any
successor statutes, so long as the corporation remains a 'Listed Corporation' as
defined under Corporations Code section 301.5 or any successor statutes, the
corporation does not permit cumulative voting for the election of directors.
However, in the event that the corporation should not qualify as a "Listed
Corporation" as defined under Corporations Code Section 301.5 or any successor
statute, and subject to the following sentence and the provisions of Section 708
of the Code, every shareholder entitled to vote at any election of directors may
cumulate such shareholder's votes and give one candidate a number of votes equal
to the number of directors to be elected multiplied by the number of votes to
which the shareholder's shares are entitled, or distribute the shareholder's
votes on the same principle among as many candidates as the shareholder thinks
fit. No shareholder shall be entitled to cumulate votes for any candidate or
candidates pursuant to the preceding sentence unless such candidate's or
candidates' names have been placed in nomination prior to the voting and the
shareholder has given notice at the meeting and prior to the voting of the
shareholder's intention to cumulate the shareholder's votes. If any one
shareholder has given such notice, all shareholders may cumulate their votes for
candidates in nomination.
In any election of directors, the candidates receiving the highest number of
affirmative votes of the shares entitled to be voted for them, up to the number
of directors to be elected, shall be elected. Votes against the director and
votes withheld shall have no legal effect.
SECTION 2.9. RECORD DATE. The board may fix, in advance, a record date for the
determination of the shareholders entitled to notice of any meeting or to vote
or to receive payment of any dividend or other distribution, or allotment of any
rights, or to exercise any rights in respect of any other lawful action. The
record date so fixed shall be not more than 60 days nor less than 10 days prior
to the date of the meeting nor more than 60 days prior to any other action. When
a record date is so fixed, only shareholders of record on that date are entitled
to notice of and to vote at the meeting or to receive the dividend,
distribution, or allotment of rights, or to exercise rights, as the case may be,
notwithstanding any transfer of shares on the books of the corporation after the
record date. A record date for a meeting of shareholders shall apply to any
adjournment of the meeting unless the board fixes a new record date for the
adjourned meeting. The board shall fix a new record date if the meeting is
adjourned for more than 45 days.
If no record date is fixed by the board, the record date for determining
shareholders entitled to notice of or to vote at a meeting of shareholders shall
be at the close of business on the business day next preceding the day on which
notice of the meeting is given or, if notice is waived, the close of business on
the business day next preceding the day on which the meeting is held. The record
date for determining shareholders for any purpose other than as set forth in
this Section 2.9 or Section 2.11 of this Article II shall be at the close of
business on the day on which the board adopts the resolution relating thereto,
or the sixtieth day prior to the
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date of such other action, whichever is later.
SECTION 2. 10. CONSENT OF ABSENTEES. The transactions of any meeting of
shareholders, however called and noticed, and wherever held, are as valid as
though had at a meeting duly held after regular call and notice, if a quorum is
present either in person or by proxy, and if, either before or after the
meeting, each of the persons entitled to vote, who was not present in person or
by proxy, signs a written waiver of notice, or a consent to the holding of the
meeting or an approval of the minutes thereof. All such waivers, consents or
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting. Attendance of a person at a meeting shall constitute a
waiver of notice of and presence at such meeting, except when the person
objects, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened and except that
attendance at a meeting is not a waiver of any right to object to the
consideration of matters required by the Code to be included in the notice but
not so included, if such objection is expressly made at the meeting. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of shareholders need be specified in any written waiver of notice, consent to
the holding of the meeting or approval of the minutes of the meeting, except
that if action is taken or proposed to be taken for approval of any of those
matters specified in the second paragraph of Section 2.4 of this Article II, the
waiver of notice, consent or approval shall state the general nature of the
proposal.
SECTION2.11. ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Subject to Section 603
of the Code, any action which may be taken at any annual or special meeting of
shareholders may be taken without a meeting and without prior notice if a
consent in writing, setting forth the action so taken, is signed by the holders
of the outstanding shares, or their proxies, having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted. All
such consents shall be filed with the secretary of the corporation and shall be
maintained in the corporate records; provided, however, that (1) unless the
consents of all shareholders entitled to vote have been solicited in writing,
notice of any shareholder approval without a meeting by less than unanimous
consent shall be given, as provided by Section 603(b) of the Code, and (2) in
the case of election of directors, such a consent shall be effective only if
signed by the holders of all outstanding shares entitled to vote for the
election of directors; provided, however, that subject to applicable law, a
director may be elected at any time to fill a vacancy on the board that has not
been filled by the directors, by the written consent of the holders of a
majority of the outstanding shares entitled to vote for the election of
directors. Any written consent may be revoked by a writing received by the
secretary of the corporation prior to the time that written consents of the
number of shares required to authorize the proposed action have been filed with
the secretary.
Unless a record date for voting purposes be fixed as provided in Section 2.9 of
this Article II, the record date for determining shareholders entitled to give
consent pursuant to this Section 2.11, when no prior action by the board has
been taken, shall be the day on which the first written consent is given.
SECTION 2.12. PROXIES. Every person entitled to vote shares or execute written
consents has the right to do so either in person or by one or more persons
authorized by a written proxy executed and dated by such shareholder and filed
with the secretary of the corporation prior to the convening of any meeting of
the shareholders at which any such proxy is to be used or prior to the use of
such written consent. A validly executed proxy which does not state that it is
irrevocable continues in full force and effect unless: (1) revoked by the person
executing it prior to the vote pursuant thereto, by a writing delivered to the
corporation stating that the proxy is revoked or by a subsequent proxy executed
by the person executing the prior proxy and presented to the meeting, or as to
any meeting of shareholders, by attendance at such meeting and voting in person
by the person executing the proxy; or (2) written notice of the death or
incapacity of the maker of the proxy is received by the corporation before the
vote pursuant thereto is counted; provided, however, that no proxy shall be
valid after the expiration of 11 months from the date of its execution unless
otherwise provided in the proxy.
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SECTION 2.13. INSPECTORS OF ELECTION. In advance of any meeting of shareholders,
the board may appoint any persons other than nominees for office as inspectors
of election to act at such meeting and any adjournment thereof. If no inspectors
of election are so appointed, or if any persons so appointed fail to appear or
refuse to act, the chairperson of any such meeting may, and on the request of
any shareholder or shareholder's proxy shall, appoint inspectors of election at
the meeting. The number of inspectors shall be either one (1) or three (3). If
inspectors are appointed at a meeting on the request of one or more shareholders
or proxies, the holders of a majority of shares or their proxies present shall
determine whether one (1) or three (3) inspectors are to be appointed.
The duties of such inspectors shall be as prescribed by Section 707(b) of the
Code and shall include: determining the number of shares outstanding and the
voting power of each; determining the shares represented at the meeting;
determining the existence of a quorum; determining the authenticity, validity
and the effect of proxies; receiving votes, ballots or consents; hearing and
determining all challenges and questions in any way arising in connection with
the right to vote; counting and tabulating all votes or consents; determining
when the polls shall close; determining the result; and doing such acts as may
be proper to conduct the election or vote with fairness to all shareholders. If
there are three inspectors of election, the decision, act or certificate of a
majority is effective in all respects as the decision, act or certificate of
all.
SECTION 2.14. CONDUCT OF MEETINGS. The president shall preside at all meetings
of the shareholders and shall conduct each such meeting in a businesslike and
fair manner, but shall not be obligated to follow any technical, formal or
parliamentary rules or principles of procedure. The presiding officer's rulings
on procedural matters shall be conclusive and binding on all shareholders,
unless at the time of ruling a request for a vote is made to the shareholders
entitled to vote and represented in person or by proxy at the meeting, in which
case the decision of a majority of such shares shall be conclusive and binding
on all shareholders. Without limiting the generality of the foregoing, the
presiding officer shall have all the powers usually vested in the presiding
officer of a meeting of shareholders.
ARTICLE III
DIRECTORS
SECTION 3.1. POWERS. Subject to the provisions of the Code and any limitations
in the articles of incorporation and these bylaws relating to actions required
to be approved by the shareholders or by the outstanding shares, the business
and affairs of the corporation shall be managed and all corporate powers shall
be exercised by or under the direction of the board. The board may delegate the
management of the day-to-day operations of the business of the corporation to a
management company or other person provided that the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised under
the ultimate direction of the board. Without prejudice to such general powers,
but subject to the same limitations, it is hereby expressly declared that the
board shall have the following powers in addition to the other powers enumerated
in these bylaws:
(a) to select and remove all the other officers, agents and employees
of the corporation, prescribe any qualifications, powers and duties for
them that are consistent with law, the articles of incorporation or
these bylaws, fix their compensation, and require from them security
for faithful service;
(b) to conduct, manage and control the affairs and business of the
corporation and to make such rules and regulations therefor not
inconsistent with law, the articles of incorporation or these bylaws, as
they may deem best;
(c) to adopt, make and use a corporate seal, to prescribe the forms of
certificates of stock, and to alter
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the form of such seal and of such certificates from time to time as in
their judgment they may deem best;
(d) to authorize the issuance of shares of stock of the corporation from
time to time, upon such terms and for such consideration as may be
lawful;
(e) to borrow money and incur indebtedness for the purposes of the
corporation, and to cause to be executed and delivered therefor, in the
corporate name, promissory and capital notes, bonds, debentures, deeds
of trust, mortgages, pledges, hypothecations or other evidences of debt
and securities therefor and any agreements pertaining thereto;
(f) to prescribe the manner in which and the person or persons by whom any
or all of the checks, drafts, notes, contracts and other corporate
instruments shall be executed;
(g) to appoint and designate, by resolution adopted by a majority of the
authorized number of directors, one or more committees, each consisting
of two or more directors, including the appointment of alternate members
of any committee who may replace any absent member at any meeting of the
committee; and
(h) generally, to do and perform every act or thing whatever that may
pertain to or be authorized by the board of directors of a corporation
incorporated under the laws of this state.
SECTION 3.2. NUMBER AND QUALIFICATION OF DIRECTORS. The authorized number of
directors of the corporation shall not be less than seven (7) nor more than
thirteen (13) until changed by an amendment of the articles of incorporation or
by a bylaw amending this Section 3.2 duly adopted by the vote or written consent
of holders of a majority of the outstanding shares entitled to vote. The exact
number within said range shall be fixed by amendment to this Section 3.2 of
these by-laws adopted by the board of directors and unless and until so amended
the exact number of directors is hereby fixed at eleven (11).
SECTION 3.3. NOMINATIONS OF DIRECTORS. Nominations for election of members of
the board may be made by the board or by any holder of any outstanding class of
capital stock of the corporation entitled to vote for the election of directors.
Notice of intention to make any nominations (other than for persons named in the
notice of the meeting called for the election of directors) shall be made in
writing and shall be delivered or mailed to the president of the corporation by
the later of: (i) the close of business twenty-one (21) days prior to any
meeting of shareholders called for the election of directors; or (ii) ten (10)
days after the date of mailing of notice of the meeting to shareholders. Such
notification shall contain the following information to the extent known to the
notifying shareholder: (a) the name and address of each proposed nominee; (b)
the principal occupation of each proposed nominee; (c) the number of shares of
capital stock of the corporation owned by each proposed nominee; (d) the name
and residence address of the notifying shareholder; (e) the number of shares of
capital stock of the corporation owned by the notifying shareholder; (f) the
number of shares of capital stock of any bank, bank holding company, savings and
loan association or other depository institution owned beneficially by the
nominee or by the notifying shareholder and the identities and locations of any
such institutions; and (g) whether the proposed nominee has ever been convicted
of or pleaded nolo contendere to any criminal offense involving dishonesty or
breach of trust, filed a petition in bankruptcy or been adjudged bankrupt. The
notification shall be signed by the nominating shareholder and by each nominee,
and shall be accompanied by a written consent to be named as a nominee for
election as a director from each proposed nominee. Nominations not made in
accordance with these procedures shall be disregarded by the chairperson of the
meeting, and upon his or her instructions, the inspectors of election shall
disregard all votes cast for each such nominee. The foregoing requirements do
not apply to the nomination of a person to replace a proposed nominee who has
become unable to serve as a director between the last day for giving notice in
accordance with this paragraph and the date of election of directors if the
procedure called for in this paragraph was followed with respect to the
nomination of the proposed nominee.
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A copy of the preceding paragraph shall be set forth in the notice to
shareholders of any meeting at which directors are to be elected.
SECTION 3.4. ELECTION AND TERM OF OFFICE. The directors shall be elected at each
annual meeting of shareholders, but if any annual meeting is not held or the
directors are not elected thereat, the directors may be elected at any special
meeting of shareholders held for that purpose. Each director shall hold office
until the next annual meeting and until a successor has been elected and
qualified.
SECTION 3.5. VACANCIES. Vacancies on the board, except for a vacancy created by
the removal of a director, may be filled by a majority of the remaining
directors, though less than a quorum, or by a sole remaining director, and each
director so elected shall hold office until the next annual meeting and until
such director's successor has been elected and qualified. A vacancy on the board
created by the removal of a director may only be filled by the vote of a
majority of the shares entitled to vote represented at a duly held meeting at
which a quorum is present, or by the written consent of the holders of all of
the outstanding shares.
The shareholders may elect a director or directors at any time to fill any
vacancy or vacancies not filled by the directors. Any such election by written
consent other than to fill a vacancy created by removal requires the consent of
a majority of the outstanding shares entitled to vote.
Any director may resign effective upon giving written notice to the chairperson
of the board, the president, secretary, or the board, unless the notice
specifies a later time for the effectiveness of such resignation. If the board
accepts the resignation of a director tendered to take effect at a future time,
the board or the shareholders shall have power to elect a successor to take
office when the resignation is to become effective.
A vacancy or vacancies on the board shall be deemed to exist in case of the
death, resignation or removal of any director, or if the authorized number of
directors is increased, or if the shareholders fail, at any annual or special
meeting of shareholders at which any director or directors are elected, to elect
the full authorized number of directors to be voted for at that meeting.
The board may declare vacant the office of a director who has been declared of
unsound mind by an order of court or convicted of a felony.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of the director's term of office.
SECTION 3.6. PLACE OF MEETINGS. Regular or special meetings of the board shall
be held at any place within or outside the state of California which has been
designated in the notice of meeting or if there is no notice, at the principal
executive office of the corporation, or at a place designated by resolution of
the board or by the written consent of the board. Any regular or special meeting
is valid wherever held if held upon written consent of all members of the board
given either before or after the meeting and filed with the secretary of the
corporation.
SECTION 3.7. REGULAR MEETINGS. Immediately following each annual meeting of
shareholders, the board shall hold a regular meeting for the purpose of
organization, any desired election of officers and the transaction of other
business. Notice of this meeting shall not be required.
Other regular meetings of the board shall be held without notice either on the
Tuesday immediately before the second Wednesday of each month at the hour of
4:00 p.m., or at such different date and time as the board may from time to time
fix by resolution; provided, however, should said day fall upon a legal holiday
observed by the corporation at its principal executive office, then said meeting
shall be held at the same time and place
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on the next succeeding full business day of the corporation. Call and notice
of all regular meetings of the board are hereby dispensed with.
SECTION 3.8. SPECIAL MEETINGS. Special meetings of the board for any purpose or
purposes may be called at any time by the chairperson of the board, the
president, any vice president, the secretary or by any two directors.
Special meetings of the board shall be held upon four days' written notice by
mail or 48 hours, notice delivered personally or by telephone, telegraph, telex
or other similar means of communication. Any such notice shall be addressed or
delivered to each director at the director's address as shown upon the records
of the corporation or as given to the corporation by the director for purposes
of notice or, if such address is not shown on such records or is not readily
ascertainable, at the place in which the meetings of the directors are regularly
held. Such notice may, but need not, specify the purpose of the meeting, or the
place if the meeting is to be held at the principal executive office of the
corporation.
Notice by mail shall be deemed to have been given at the time a written notice
is deposited in the United States mails, postage prepaid. Any other written
notice shall be deemed to have been given at the time it is personally delivered
to the recipient or is delivered to a common carrier for transmission, or
actually transmitted by the person giving the notice by electronic means or by
facsimile transmission, to the recipient. Oral notice shall be deemed to have
been given at the time it is communicated, in person or by telephone or
wireless, to the recipient or to a person at the office of the recipient whom
the person giving the notice has reason to believe will promptly communicate it
to the recipient.
SECTION 3.9. QUORUM. A majority of the authorized number of directors
constitutes a quorum of the board for the transaction of business, except to
adjourn as hereinafter provided. Every act or decision done or made by a
majority of the directors present at a meeting duly held at which a quorum is
present shall be regarded as the act of the board, unless a greater number be
required by the articles of incorporation and subject to the provisions of
Section 310 of the Code (as to approval of contracts or transactions in which a
director has a direct or indirect material financial interest) and Section
317(e) of the Code (as to indemnification of directors). A meeting at which a
quorum is initially present may continue to transact business notwithstanding
the withdrawal of directors, if any action taken is approved by at least a
majority of the required quorum for such meeting.
SECTION 3.10. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE. Members of the
board may participate in a meeting through use of a conference telephone or
similar communications equipment, so long as all members participating in such
meeting can hear one another. Participation in a meeting pursuant to this
Section 3.10 constitutes presence in person at such meeting.
SECTION 3.11. WAIVER OF NOTICE. Notice of a meeting need not be given to any
director who signs a waiver of notice or a consent to holding the meeting or an
approval of the minutes of the meeting, whether before or after the meeting, or
who attends the meeting without protesting, before the meeting or at its
commencement, the lack of notice to such director. All such waivers, consents or
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
SECTION 3.12. ADJOURNMENT. A majority of the directors present, whether or not a
quorum is present, may adjourn any directors, meeting to another time and place.
Notice of the time and place of holding an adjourned meeting need not be given,
unless the meeting is adjourned for more than twenty-four hours, in which case
notice of the time and place shall be given before the time of the adjourned
meeting to the directors who were not present at the time of the adjournment.
SECTION 3.13. ACTION WITHOUT MEETING. Any action required or permitted to be
taken by the board may
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be taken without a meeting if all members of the board shall individually or
collectively consent in writing to such action. Such written consent or
consents shall be filed with the minutes of the proceedings of the board.
Such action by written consent shall have the same effect as a unanimous vote
of the board.
SECTION 3.14. FEES AND COMPENSATION. Directors and members of committees may
receive such compensation, if any, for their services, and such reimbursement
for expenses, as may be fixed or determined by the board. This Section 3.14
shall not be construed to preclude any director from serving the corporation in
any other capacity as an officer, agent, employee or otherwise, and receiving
compensation for those services.
SECTION 3.15. RIGHTS OF INSPECTION. Every director of the corporation shall
have the absolute right at any reasonable time to inspect and copy all books,
records and documents of every kind and to inspect the physical properties of
the corporation and also of its subsidiary corporations, domestic or foreign.
Such inspection by a director may be made in person or by agent or attorney, and
the right of inspection includes the right to copy and make extracts.
SECTION 3.16. REMOVAL OF DIRECTOR WITHOUT CAUSE. Any or all of the directors of
the corporation may be removed without cause if the removal is approved by the
outstanding shares, subject to the following:
(a) Except if the corporation has a classified board, no director may be
removed (unless the entire board is removed) when the votes cast against
removal, or not consenting in writing to the removal, would be sufficient
to elect the director if voted cumulatively at an election at which the
same total number of votes were cast (or, if the action is taken by
written consent, all shares entitled to vote were voted) and the entire
number of directors authorized at the time of the director's most recent
election were then being elected.
(b) When by the provisions of the articles the holders of the shares of any
class or series, voting as a class or series, are entitled to elect one
or more directors, any director so elected may be removed only by the
applicable vote of the holders of the shares of that class or series.
(c) When the corporation has a classified board, a director may not be
removed if the votes cast against removal of the director, or not
consenting in writing to the removal, would be sufficient to elect the
director if voted cumulatively (without regard to whether shares may
otherwise be voted cumulatively) at an election at which the same total
number of votes were cast (or, if the action is taken by written consent,
all shares entitled to vote were voted) and either the number of
directors elected at the most recent annual meeting of shareholders, or
if greater, the number of directors for whom removal is being sought,
were then being elected.
SECTION 3.17. REMOVAL OF DIRECTORS BY SHAREHOLDER'S SUIT. The superior court of
the proper county may, at the suit of the shareholders holding at least 10
percent of the number of outstanding shares of any class, remove from office any
director in case of fraudulent or dishonest acts or gross abuse of authority or
discretion with reference to the corporation and may bar from reelection any
director so removed for a period prescribed by the court. The corporation shall
be made a party to such action.
ARTICLE IV
OFFICERS
SECTION 4.1. OFFICERS. The officers of the corporation shall be a president,
a secretary and a chief financial officer. The corporation may also have, at
the discretion of the board, a chairperson of the board, a vice chairperson
of the board, one or more vice presidents, one or more assistant secretaries,
one or more
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assistant financial officers and such other officers as may be elected or
appointed in accordance with the provisions of Section 4.3 of this Article
IV. One person may hold two or more offices, except those of president and
secretary.
SECTION 4.2. APPOINTMENT. The officers of the corporation, except such officers
as may be appointed in accordance with the provisions of Section 4.3 or Section
4.5 of this Article IV, shall be chosen by, and shall serve at the pleasure of,
the board, and shall hold their respective offices until their resignation,
removal or other disqualification from service, or until their respective
successors shall be appointed, subject to the rights, if any, of an officer
under any contract of employment.
SECTION 4.3. SUBORDINATE OFFICERS. The board may appoint, or may empower the
president to appoint, such other officers as the business of the corporation may
require, each to hold office for such period, have such authority and perform
such duties as are provided in these bylaws or as the board may from time to
time determine.
SECTION 4.4. REMOVAL AND RESIGNATION. Subject to the rights, if any, of an
officer under any contract of employment, any officer may be removed, either
with or without cause, by the board at any time, or, except in the case of an
officer chosen by the board, by any officer upon whom such power of removal may
be conferred by the board.
Any officer may resign at any time by giving written notice to the corporation
without prejudice to the rights, if any, of the corporation under any contract
to which the officer is a party. Any such resignation shall take effect at the
date of the receipt of such notice or at any later time specified therein; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
SECTION 4.5. VACANCIES. A vacancy in any office because of death, resignation,
removal, disqualification or any other cause shall be filled in the manner
prescribed in these bylaws for regular appointment to such office.
SECTION 4.6. CHAIRPERSON. The chairperson of the board, if there shall be such
an officer, shall, if present, preside at all meetings of the board and exercise
and perform such other powers and duties as may be assigned from time to time by
the board.
SECTION 4.7. VICE CHAIRPERSON. The vice chairperson of the board, if there shall
be such an officer, shall, in the absence of the chairperson of the board,
preside at all meetings of the board and exercise and perform such other powers
and duties as may be assigned from time to time by the board.
SECTION 4.8. PRESIDENT. Subject to such powers, if any, as may be given by the
board to the chairperson of the board, if there shall be such an officer, the
president is the general manager and chief executive officer of the corporation
and has, subject to the control of the board, general supervision, direction and
control of the business and affairs of the corporation. The president shall
preside at all meetings of the shareholders and in the absence of both the
chairperson of the board and the vice chairperson, or if there be none, at all
meetings of the board. The president has the general powers and duties of
management usually vested in the office of president and chief executive officer
of a corporation and such other powers and duties as may be prescribed by the
board.
SECTION 4.9. VICE PRESIDENT. In the absence or disability of the president, the
vice presidents in order of their rank as fixed by the board or, if not ranked,
the vice president designated by the board, shall perform all the duties of the
president and, when so acting, shall have all the powers of, and be subject to
all the restrictions upon, the president. The vice presidents shall have such
other powers and perform such other duties as from time to time may be
prescribed for them respectively by the bylaws, the board, the president
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or the chairperson of the board.
SECTION 4.10. SECRETARY. The secretary shall keep or cause to be kept, at the
principal executive office or such other place as the board may order, a book of
minutes of all meetings of shareholders, the board and its committees, with the
time and place of holding, whether regular or special, and, if special, how
authorized, the notice or waivers of notice thereof given, the names of those
present at the board and committee meetings, the number of shares present or
represented at shareholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, a copy of the bylaws of the
corporation at the principal executive office or business office in accordance
with Section 213 of the Code. The secretary shall keep, or cause to be kept, at
the principal executive office or at the office of the corporation's transfer
agent or registrar, if one is appointed, a record of its shareholders, or a
duplicate record of its shareholders, giving the names and addresses of all
shareholders and the number and class of shares held by each.
The secretary shall give, or cause to be given, notice of all the meetings of
the shareholders, of the board and of any committees thereof required by these
bylaws or by law to be given, shall keep the seal of the corporation in safe
custody, and shall have such other powers and perform such other duties as may
be prescribed by the board.
SECTION 4.11. ASSISTANT SECRETARY. The assistant secretary or the assistant
secretaries, in the order of their seniority, shall, in the absence or
disability of the secretary, or in the event of such officer's refusal to act,
perform the duties and exercise the powers of the secretary and shall have such
additional powers and discharge such duties as may be assigned from time to time
by the president or by the board.
SECTION 4.12. CHIEF FINANCIAL OFFICER. The chief financial officer shall keep
and maintain, or cause to be kept and maintained, adequate and correct books and
records of the properties and financial and business transactions of the
corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, retained earnings and shares, and shall
send or cause to be sent to the shareholders of the corporation such financial
statements and reports that by law or these bylaws are required to be sent to
them. The books of account shall at all times be open to inspection by any
director of the corporation.
The chief financial officer shall deposit all monies and other valuables in the
name and to the credit of the corporation with such depositories as may be
designated by the board. The chief financial officer shall disburse the funds of
the corporation as may be ordered by the board, shall render to the president
and directors, whenever they request it, an account of all transactions engaged
in as chief financial officer and of the financial condition of the corporation,
and shall have such other powers and perform such other duties as may be
prescribed by the board.
SECTION 4.13. ASSISTANT FINANCIAL OFFICER. The assistant financial officer or
the assistant financial officers, in the order of their seniority, shall, in the
absence or disability of the chief financial officer, or in the event of such
officer's refusal to act, perform the duties and exercise the powers of the
chief financial officer, and shall have such additional powers and discharge
such duties as may be assigned from time to time by the president or by the
board.
SECTION 4.14. SALARIES. The salaries of the officers shall be fixed from time to
time by the board and no officer shall be prevented from receiving such salary
by reason of the fact that such officer is also a director of the corporation.
SECTION 4.15. OFFICERS HOLDING MORE THAN ONE OFFICE. Any two or more offices,
except those of president and secretary, may be held by the same person, but no
officer shall execute, acknowledge or verify any instrument in more than one
capacity.
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SECTION 4.16. INABILITY TO ACT. In the case of absence or inability to act of
any officer of the corporation and of any person herein authorized to act in his
or her place, the board may from time to time delegate the powers or duties of
such officer to any other officer, or any director or other person whom it may
select.
ARTICLE V
INDEMNIFICATION
SECTION 5.1. DEFINITIONS. For use in this Article V, certain terms are defined
as follows:
(a) "Agent": A director, officer, employee or agent of the corporation or a
person who is or was serving at the request of the corporation as a
director, officer, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust, or other enterprise
(including service with respect to employee benefit plans and service
on creditors, committees with respect to any proceeding under the
Bankruptcy Code, assignment for the benefit of creditors or other
liquidation of assets of a debtor of the corporation), or a person who
was a director, officer, employee or agent of a foreign or domestic
corporation which was a predecessor corporation of the corporation or
of another enterprise at the request of the predecessor corporation.
(b) "Loss": All expenses, liabilities, and losses including attorneys,
fees, judgments, fines, ERISA excise taxes and penalties, amounts paid
or to be paid in settlement, any interest, assessments, or other
charges imposed thereon, and any federal, state, local, or foreign
taxes imposed on any Agent as a result of the actual or deemed receipt
of any payments under this Article.
(c) "Proceeding": Any threatened, pending or completed action, suit or
proceeding including any and all appeals, whether civil, criminal,
administrative or investigative.
SECTION 5.2. RIGHT TO INDEMNIFICATION. Each person who was or is a party or is
threatened to be made a party to or is involved (as a party, witness or
otherwise) in any Proceeding, by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was an Agent, is entitled
to indemnification. Agent shall be indemnified and held harmless by the
corporation to the fullest extent authorized by law. The right to
indemnification conferred in this Article V shall be a contract right. It is the
corporation's intention that these bylaws provide indemnification in excess of
that expressly permitted by Section 317 of the Code, as authorized by the
corporation's articles of incorporation.
SECTION 5.3. AUTHORITY TO ADVANCE EXPENSES. The right to indemnification
provided in Section 5.2 of these bylaws shall include the right to be paid, in
advance of a Proceeding's final disposition, expenses incurred in defending that
Proceeding, PROVIDED, HOWEVER, that if required by the California General
Corporation Law, as amended, the payment of expenses in advance of the final
disposition of the Proceeding shall be made only upon delivery to the
corporation of an undertaking by or on behalf of the Agent to repay such amount
if it shall ultimately be determined that he or she is not entitled to be
indemnified by the corporation as authorized under this Article V or otherwise.
The Agent's obligation to reimburse the corporation for advances shall be
unsecured and no interest shall be charged thereon.
SECTION 5.4. RIGHT OF CLAIMANT TO BRING SUIT. If a claim under Section 5.2 or
5.3 of these bylaws is not paid in full by the corporation within thirty (30)
days after a written claim has been received by the corporation, the claimant
may at any time thereafter bring suit against the corporation to recover the
unpaid amount of the claim and, if successful in whole or in part, the claimant
shall be entitled to be paid also the expenses (including attorneys' fees) of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending a
Proceeding in advance of its
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final disposition) that the claimant has not met the standards of conduct
that make it permissible under the California General Corporation Law for the
corporation to indemnify the claimant for the amount claimed. The burden of
proving such a defense shall be on the corporation. Neither the failure of
the corporation (including its board of directors, independent legal counsel,
or its shareholders) to have made a determination prior to the commencement
of such action that the indemnification of the claimant is proper under the
circumstances because he or she has met the applicable standard of conduct
set forth in the California General Corporation Law, nor an actual determination
by the corporation (including its board of directors, independent legal counsel,
or its shareholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that claimant
has not already met the applicable standard of conduct.
SECTION 5.5. PROVISIONS NONEXCLUSIVE. The rights conferred on any person by this
Article V shall not be exclusive of any other rights that such person may have
or hereafter acquire under any statute, provision of the articles of
incorporation, agreement, vote of shareholders or disinterested directors, or
otherwise, both as to action in an official capacity and as to action in another
capacity while holding such office. To the extent that any provision of the
articles of incorporation, agreement, or vote of the shareholders or
disinterested directors is inconsistent with these bylaws, the provision,
agreement, or vote shall take precedence.
SECTION 5.6. AUTHORITY TO INSURE. The corporation may purchase and maintain
insurance to protect itself and any Agent against any Loss asserted against or
incurred by such person, whether or not the corporation would have the power to
indemnify the Agent against such Loss under applicable law or the provisions of
this Article V. If the corporation owns all or a portion of the shares of the
company issuing the insurance policy, the company and/or the policy must meet
one of the two sets of conditions set forth in Section 317 of the Code.
SECTION 5.7. SURVIVAL OF RIGHTS. The rights provided by this Article V shall
continue as to a person who has ceased to be an Agent and shall inure to the
benefit of the heirs, executors, and administrators of such person.
SECTION 5.8. SETTLEMENT OF CLAIMS. The corporation shall not be liable to
indemnify any Agent under this Article V: (a) for any amounts paid in settlement
of any action or claim effected without the corporation's written consent, which
consent shall not be unreasonably withheld; or (b) for any judicial award, if
the corporation was not given a reasonable and timely opportunity, at its
expense, to participate in the defense of such action.
SECTION 5.9. EFFECT OF AMENDMENT. Any amendment, repeal or modification of this
Article V shall not adversely affect any right or protection of any Agent
existing at the time of such amendment, repeal or modification.
SECTION 5.10. SUBROGATION. Upon payment under this Article V, the corporation
shall be subrogated to the extent of such payment to all of the rights of
recovery of the Agent, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the execution
of such documents necessary to enable the corporation effectively to bring suit
to enforce such rights.
SECTION 5.11. NO DUPLICATION OF PAYMENTS. The corporation shall not be liable
under this Article V to make any payment in connection with any claim made
against the Agent to the extent the Agent has otherwise actually received
payment (under any insurance policy, agreement, vote or otherwise) of the
amounts otherwise indemnifiable hereunder.
ARTICLE VI
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OTHER PROVISIONS
SECTION 6.1. INSPECTION OF CORPORATE RECORDS.
(a) A shareholder or shareholders of the corporation holding at least five
percent (5%) in the aggregate of the outstanding voting shares of the
corporation or who hold at least one percent (1%) of the outstanding
voting shares and have filed a Schedule 14B with the United States
Securities and Exchange Commission relating to the election of
directors of the corporation shall have an absolute right to do either
or both of the following:
(i) inspect and copy the record of shareholders, names and
addresses and shareholdings during usual business hours upon
five business days, prior written demand upon the corporation;
or
(ii) obtain from the transfer agent, if any, for the corporation,
upon written demand and upon the tender of its usual charges
for such a list (the amount of which charges shall be stated
to the shareholder by the transfer agent upon request), a list
of the shareholders' names and addresses who are entitled to
vote for the election of directors and their shareholdings, as
of the most recent record date for which it has been compiled,
or as of a date specified by the shareholder subsequent to the
date of demand. The corporation shall have a responsibility to
cause the transfer agent to comply with this Section 6.1;
(b) The record of shareholders shall also be open to inspection and copying
by any shareholder or holder of a voting trust certificate at any time
during usual business hours upon written demand on the corporation, for
a purpose reasonably related to such holder's interest as a shareholder
or holder of a voting trust certificate. A written demand for such
inspection shall be accompanied by a statement in reasonable detail of
the purpose of the inspection.
(c) The accounting books and records and minutes of proceedings of
the shareholders and the board and committees of the board
shall be open to inspection upon written demand on the
corporation by any shareholder or holder of a voting trust
certificate at any reasonable time during usual business
hours, for a purpose reasonably related to such holder's
interest as a shareholder or as a holder of such voting trust
certificate. The right of inspection created by this Section
6.1(c) shall extend to the records of each subsidiary of the
corporation. A written demand for such inspection shall be
accompanied by a statement in reasonable detail of the purpose
of the inspection.
(d) Any inspection and copying under this Section 6.1 may be made
in person or by agent or attorney.
SECTION 6.2. INSPECTION OF BYLAWS. The corporation shall keep at its principal
executive office in California the original or a copy of these bylaws as amended
to date, which shall be open to inspection by shareholders at all reasonable
times during office hours.
SECTION 6.3. EXECUTION OF DOCUMENTS, CONTRACTS. Subject to the provisions of
applicable law, any note, mortgage, evidence of indebtedness, contract, share
certificate, initial transaction statement or written statement, conveyance or
other instrument in writing and any assignment or endorsement thereof executed
or entered into between the corporation and any other person, when signed by the
chairperson of the board, the president or any vice president and the secretary,
any assistant secretary, the chief financial officer or any assistant financial
officer of the corporation, or when stamped with a facsimile signature of such
appropriate officers in the case of share certificates, shall be valid and
binding upon the corporation in the absence of actual knowledge on the part of
the other person that the signing officers did not have authority to execute
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the same. Any such instruments may be signed by any other person or persons and
in such manner as from time to time shall be determined by the board, and unless
so authorized by the board, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or amount.
SECTION 6.4. CERTIFICATES OF STOCK. Every holder of shares of the corporation
shall be entitled to have a certificate signed in the name of the corporation by
the chairperson or the vice chairperson of the board or the president or a vice
president and by the, secretary or an assistant secretary or the chief financial
officer or an assistant financial officer, certifying the number of shares and
the class or series of shares owned by the shareholder. The signatures on the
certificates may be facsimile signatures. If any officer, transfer agent or
registrar who has signed a certificate or whose facsimile signature has been
placed upon the certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if such person were an officer, transfer
agent or registrar at the date of issue.
Except as provided in this Section 6.4, no new certificate for shares shall be
issued in lieu of an old certificate unless the latter is surrendered and
cancelled at the same time. The board may, however, in case any certificate for
shares is alleged to have been lost, stolen or destroyed, authorize the issuance
of a new certificate in lieu thereof, and the corporation may require that the
corporation be given a bond or other adequate security sufficient to indemnify
it against any claim that may be made against it (including any expense or
liability) on account of the alleged loss, theft or destruction of such
certificate or the issuance of such new certificate.
Prior to the due presentment for registration of transfer in the stock transfer
book of the corporation, the registered owner shall be treated as the person
exclusively entitled to vote, to receive notifications and otherwise to exercise
all the rights and powers of an owner, except as expressly provided otherwise by
the laws of the state of California.
SECTION 6.5. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The president or
any other officer or officers authorized by the board or the president are each
authorized to vote, represent and exercise on behalf of the corporation all
rights incident to any and all shares or other securities of any other
corporation or corporations standing in the name of the corporation. The
authority herein granted may be exercised either by any such officer in person
or by any other person authorized to do so by proxy or power of attorney duly
executed by said officer.
SECTION 6.6. SEAL. The corporate seal of the corporation shall consist of two
concentric circles, between which shall be the name of the corporation, and in
the center shall be inscribed the word "Incorporated" and the date of its
incorporation.
SECTION 6.7. FISCAL YEAR. The fiscal year of the corporation shall begin on the
first day of January and end on the 31st day of December of each year.
SECTION 6.8. CONSTRUCTION AND DEFINITIONS. Unless the context otherwise
requires, the general provisions, rules of construction and definitions
contained in the Code and the California General Corporation Law shall govern
the construction of these bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a, natural
person.
SECTION 6.9. BYLAW PROVISIONS CONTRARY TO OR INCONSISTENT WITH PROVISIONS OF
LAW. Any article, section, subsection, subdivision, sentence, clause or phrase
of these bylaws which, upon being construed in the manner provided in this
Section 6.9. shall be contrary to or inconsistent with any applicable provision
of the Code or other applicable laws of the State of California or of the United
States shall not apply so long
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as said provisions of law shall remain in effect, but such result shall not
affect the validity or applicability of any other portions of these bylaws,
it being hereby declared that these bylaws would have been adopted and each
article, section, subsection, subdivision, sentence, clause or phrase thereof,
irrespective of the fact that any one or more articles, sections, subsections,
subdivisions, sentences, clauses or phrases is or are illegal.
ARTICLE VII
AMENDMENTS
SECTION 7.1. AMENDMENT BY SHAREHOLDERS. New bylaws may be adopted or these
bylaws may be amended or repealed by the vote or written consent of holders of a
majority of the outstanding shares entitled to vote; provided, however, that if
the articles of incorporation of the corporation set forth the number of
authorized directors of the corporation, the authorized number of directors may
be changed only by an amendment of the articles of incorporation and provided
also that a bylaw reducing the fixed number or the minimum number of directors
to a number less than five cannot be adopted if the votes cast against adoption
at a meeting, or the shares not consenting in the case of action by written
consent, are equal to more than 16 2/3 percent of the outstanding shares
entitled to vote.
SECTION 7.2. AMENDMENT BY DIRECTORS. Subject to the rights of the shareholders
as provided in Section 7.1 of this Article VII, bylaws, other than a bylaw
specifying or changing a fixed number of directors or the maximum or minimum
number or changing from a fixed to a variable board or vice versa, may be
adopted, amended or repealed by the board.
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FEATHER RIVER STATE BANK
DIRECTOR DEFERRED FEE AGREEMENT
This Agreement is made this____________, by and between Feather River
State Bank, a state chartered commercial bank, located in Yuba City, California,
(the "Bank"), and David A. Offutt (the "Director").
INTRODUCTION
To encourage the Director to remain a member of the board of directors,
the Bank is willing to provide to the Director a deferred fee opportunity. The
Bank will pay the Director's benefits from the Bank's general assets.
AGREEMENT
The Director and the Bank agree as follows:
Article 1
Definitions
Whenever used in this Agreement, the following words and phrases shall
have the meanings specified:
1.1 "Anniversary Date" means December 31 of each year.
1.2 "Change in Control" shall mean (i) the sale, transfer or other
exchange of the voting securities of either the Bank or its parent holding
company California Independent Bancorp ("CIB') which would result in the
ownership or control (as defined by section 7(j)(8)(B) of the Change in Bank
Control Act of 1978) by any individual or entity of 25% or more of any class of
voting security of the Bank or CIB; (ii) any transaction which results in the
Bank or CIB being merged or consolidated with another financial institution or
corporation that results in less than 75% of resultant bank or corporation's
outstanding voting securities being owned in the aggregate by the former
shareholders of the Bank or CIB; (iii) any transaction which results in the Bank
or CIB substantially selling all of its assets to another financial institution
or corporation which is not a wholly owned subsidiary or corporate affiliate of
the Bank or CIB; or (iv) during any period of twenty-four (24) consecutive
months, at least a majority of the board of directors of either the Bank or CIB
ceases to consist of the same individuals who have served continuously on the
respective Board since the beginning of such period or whose election, or
nomination for election by the respective shareholders, were approved by a vote
of at least two-thirds of the directors then still in office who have served
continuously on the respective Board since the beginning of the period.
1.3 "Code" means the Internal Revenue Code of 1986, as amended,
including any successor provisions.
1.4 "Deferral Account" means the Bank's accounting of the Director's
accumulated Deferrals plus accrued interest.
1.5 "Deferrals" means the amount of the Director's Fees which the
Director elects to defer according to this Agreement.
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1.6 "Disability" shall mean the Director's inability to perform the
duties and responsibilities of his position in a normal and regular manner, due
to mental or physical illness or injury for a period of ninety (90) consecutive
days, or fifty percent (50%) or more of the normal working days during a period
of one hundred and eighty (180) consecutive days. The determination of the
Director's disability shall be made in the sole discretion of the Bank's board
of directors, with the Director ineligible to participate in the determination.
If requested by the board of directors, to assist with the board of director's
ability to make a determination, Director will submit to such physical or mental
evaluations and tests as the board of directors deems appropriate.
1.7 "Effective Date" means April 1, 1999.
1.8. "Election Form" means the form attached as Exhibit 1.
1.9 "Fees" means the total fees payable to the Director during a Plan
Year.
1.10 "Normal Retirement Age" means the Director's 66 birthday.
1.11 "Normal Retirement Date" means the later of the Normal Retirement
Age or Termination of Service.
1.12 "Plan Year" means the calendar year.
1.13 "Termination of Service" means the Director ceases to be a member
of the Bank or CIB's board of directors for any reason whatsoever other than by
reason of a leave of absence which is approved by the Bank or CIB. For purposes
of this Agreement, if there is a dispute over the Director's status or the date
of the Director's Termination of Service, the Bank shall have the sole and
absolute right to decide the dispute.
Article 2
Deferral Election
2.1 INITIAL ELECTION. The Director shall make an initial deferral
election under this Agreement by filing with the Bank a signed Election Form
within thirty (30) days after the Effective Date of this Agreement. The Election
Form shall set forth the amount of Fees to be deferred and shall be effective to
defer only Fees earned after the date the Election Form is received by the Bank.
2.2 ELECTION CHANGES
2.2.1 GENERALLY. The Director may modify the amount of Fees to
be deferred annually by filing a new Election Form with the Bank prior to the
beginning of the Plan Year in which the Fees are to be deferred. The modified
deferral election shall not be effective until the calendar year following the
year in which the subsequent Election Form is received and approved by the Bank.
2.2.2 HARDSHIP. If an unforeseeable financial emergency
arising from the death of a family member, divorce, sickness, injury,
catastrophe, or similar event outside the control of the Director occurs, the
Director, by written instructions to the Bank, may reduce future deferrals under
this Agreement.
Article 3
Deferral Account
3.1 ESTABLISHING AND CREDITING. The Bank establish a Deferral Account
on its books for the Director and shall credit to the Deferral Account for the
following amounts:
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3.1.1 DEFERRALS. The Fees deferred by the Director as of
the time the Fees would have otherwise been paid to the Director.
3.1.2 INTEREST. On each Anniversary Date and immediately prior
to the payment of any benefits, but only until commencement of the benefit
payments under this Agreement, interest is to be accrued on the account balance
and compounded at an annual rate on each anniversary of the date of this
Agreement and immediately prior to the payment of any benefits at an annual rate
equal to the "Prime Rate" as published in the West Coast edition of the WALL
STREET JOURNAL.
3.2 STATEMENT OF ACCOUNTS. The Bank shall provide to the Director,
within one hundred twenty (120) days after each Anniversary Date, a statement
setting forth the Deferral Account balance.
3.3 ACCOUNTING DEVICE ONLY. The Deferral Account is solely a device for
measuring amounts to be paid under this Agreement. The Deferral Account is not a
trust fund of any kind. The Director is a general unsecured creditor of the Bank
for the payment of benefits. The benefits represent the mere Bank promise to pay
such benefits. The Director's rights are not subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment, or garnishment by the Director's creditors.
Article 4
Lifetime Benefits
4.1 NORMAL RETIREMENT BENEFIT. Upon the Normal Retirement Date, the
Bank shall pay to the Director the benefit described in this section 4.1 in lieu
of any other benefit under this Agreement.
4.1.1 AMOUNT OF BENEFIT. The benefit under this section
4.1 is the Deferral Account balance at the Director's Normal Retirement Date.
4.1.2 PAYMENT OF BENEFIT. The Bank shall pay the benefit to
the Director in 180 equal monthly installments commencing on the first day of
the month following the Director's Normal Retirement Date. The Bank shall
continue to credit interest under section 3.1.2 on the remaining account balance
during any applicable installment period.
4.2 EARLY RETIREMENT BENEFIT. Upon Termination of Service prior to the
Normal Retirement Age for reasons other than death, Change of Control,
termination for cause, or Disability, the Bank shall pay to the Director the
benefit described in this section 4.2 in lieu of any other benefit under this
Agreement.
4.2.1 AMOUNT OF BENEFIT. The benefit under this section
4.2 is the Deferral Account balance at the Director's Termination of Service.
4.2.2 PAYMENT OF BENEFIT. The Bank shall pay the benefit to
the Director in 180 equal monthly installments commencing on the first day of
the month following the Director's Normal Retirement Age. The Bank shall
continue to credit interest under section 3.1.2 on the remaining account balance
during any applicable installment period.
4.3 DISABILITY BENEFIT. If the Director terminates service as a
Director due to Disability prior to Normal Retirement Age, the Bank shall pay to
the Director the benefit described in this section 4.3 in lieu of any other
benefit under this Agreement.
4.3.1 AMOUNT OF BENEFIT. The benefit under this section
4.3 is the Deferral Account balance at the Director's Termination of Service.
4.3.2 PAYMENT OF BENEFIT. The Bank shall pay the benefit to
the Director in 180 equal
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monthly installments commencing on the first day of the month following the
Director's Termination of Service. The Bank shall continue to credit interest
under section 3.1.2 on the remaining account balance during any applicable
installment period.
4.4 CHANGE OF CONTROL BENEFIT. Upon a Change of Control, the
Bank shall pay to the Director the benefit described in this section 4.4 in lieu
of any other benefit under this Agreement.
4.4.1 AMOUNT OF BENEFIT. The benefit under this section
4.4 shall be the Deferral Account balance on the Director's Termination of
Service.
4.4.2 PAYMENT OF BENEFIT. The Bank shall pay the benefit
to the Director in a lump sum within 90 days after the Director's Termination of
Service.
4.5 HARDSHIP DISTRIBUTION. Upon the board of directors' determination
(following petition by the Director) that the Director has suffered an
unforeseeable financial emergency as described in section 2.2.2, the Bank shall
distribute to the Director all or a portion of the Deferral Account balance as
determined as appropriate by the Bank, but in no event shall the distribution be
greater than the Bank believes is necessary to relieve the financial hardship.
Article 5
Death Benefits
5.1 DEATH DURING ACTIVE SERVICE. If the Director dies while in the
active service of the Bank, the Bank shall pay to the Director's beneficiary the
benefit described in this section 5.1 in lieu of any other benefit under this
Agreement.
5.1.1 AMOUNT OF BENEFIT. The benefit under section 5.1 is
the greater of the Deferral Account balance at the date of the Director's death
or $333,213.
5.1.2 PAYMENT OF BENEFIT. The Bank shall pay the benefit to
the beneficiary in 180 equal monthly installments commencing on the first day of
the month following the Director's death. The Bank shall continue to credit
interest under section 3.1.2 on the remaining account balance during any
applicable installment period.
5.2 DEATH DURING BENEFIT PERIOD. If the Director dies after benefit
payments have commenced under this Agreement but before receiving all such
payments, the Bank shall pay the remaining benefits to the Director's
beneficiary at the same time and in the same amounts they would have been paid
to the Director had the Director survived.
5.3 DEATH AFTER TERMINATION OF SERVICE BUT BEFORE BENEFIT PAYMENTS
COMMENCE. If the Director is entitled to benefit payments under this Agreement,
but dies prior to the commencement of said benefit payments, the Bank shall pay
the benefit payments to the Director's beneficiary that the Director was
entitled to prior to death except that the benefit payments shall commence on
the first day of the month following the date of the Director's death.
Article 6
Beneficiaries
6.1 BENEFICIARY DESIGNATIONS. The Director shall designate a
beneficiary by filing a written designation with the Bank. The Director may
revoke or modify the designation at any time by filing a new designation.
However, designations will only be effective if signed by the Director and
accepted by the Bank
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during the Director's lifetime. The Director's beneficiary designation shall
be deemed automatically revoked if the beneficiary predeceases the Director
or if the Director names a spouse as beneficiary and the marriage is
subsequently dissolved. If the Director dies without a valid beneficiary
designation, all payments shall be made to the Director's estate.
6.2 FACILITY OF PAYMENT. If a benefit is payable to a minor, to a
person declared incompetent, or to a person incapable of handling the
disposition of his or her property, the Bank may pay such benefit to the
guardian, legal representative, or person having the care or custody of such
minor, incompetent person, or incapable person. The Bank may require proof of
incompetence, minority, or guardianship as it may deem appropriate prior to
distribution of the benefit. Such distribution shall completely discharge the
Bank from all liability with respect to such benefit.
Article 7
General Limitations
7.1 TERMINATION FOR CAUSE. Notwithstanding any provision of this
Agreement to the contrary, the Bank shall not pay any benefit under this
Agreement that is attributable to the Bank match credited under section 3.1.2 of
this Agreement and the interest earned on the Deferral Account if the Bank
terminates the Director's Service for:
(a) gross negligence or gross neglect of duties to the Bank;
(b) commission of a felony or of a gross misdemeanor involving
moral turpitude in connection with the Director's service to the Bank; or
(c) fraud, disloyalty, dishonesty, or willful violation of any
law or significant Bank policy committed in connection with the Director's
Service and resulting in an adverse effect on the Bank.
(d) the willful or habitual breach of Director's duties;
(e) theft or conversion by Director;
(f) unauthorized disclosure or other use of the Bank or CIB's
trade secrets, customer lists or confidential information;
(g) habitual misuse of alcohol or any nonprescribed drug or
intoxicant;
(h) the willful engaging by Director in conduct which is
demonstrably and materially injurious to the Bank or CIB, monetarily or
otherwise;
(i) willful or negligent violation of any law (other than
minor traffic violations or similar offenses), rule, regulation,
cease-and-desist order or any other regulatory order or agreement Bank or CIB
enters into with their banking regulatory agencies.
In addition, the Bank reserves the right to terminate this Agreement "for cause"
in the event that actions are affected by any regulatory agency having
jurisdiction to remove or suspend Director from office, whether or not such
actions have become final.
7.2 SUICIDE OR MISSTATEMENT. The Bank shall not pay any death benefit
under this Agreement exceeding the Deferral Account if the Director commits
suicide or if the Director has made any material misstatement of fact on any
application for life insurance purchased by the Bank.
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7.3 EXCESS PARACHUTE PAYMENT. Notwithstanding any provision of this
Agreement to the contrary, the Bank shall not pay any benefit under this
Agreement to the extent the benefit would create an excise tax under the excess
parachute rules of section 280G of the Code.
Article 8
Claims and Review Procedures
8.1 CLAIMS PROCEDURE. The Bank shall notify any person or entity that
makes a claim in accordance with the terms of this Agreement (the "Claimant") in
writing, within 90 days of Claimant's written application for benefits, of his
or her eligibility or non-eligibility for benefits under the Agreement. If the
Bank determines that the Claimant is not eligible for benefits or full benefits,
the notice shall set forth (1) the specific reasons for such denial, (2) a
specific reference to the provisions of the Agreement on which the denial is
based, (3) a description of any additional information or material necessary for
the Claimant to perfect his or her claim, and a description of why it is needed,
and (4) an explanation of the Agreement's claims review procedure and other
appropriate information as to the steps to be taken if the Claimant wishes to
have the claim reviewed. If the Bank determines that there are special
circumstances requiring additional time to make a decision, the Bank shall
notify the Claimant of the special circumstances and the date by which a
decision is expected to be made, and may extend the time for up to an additional
90 days.
8.2 REVIEW PROCEDURE. If the Claimant is determined by the Bank not to
be eligible for benefits, or if the Claimant believes that he or she is entitled
to greater or different benefits, the Claimant shall have the opportunity to
have such claim reviewed by the Bank by filing a petition for review with the
Bank within 60 days after receipt of the notice issued by the Bank. Said
petition shall state the specific reasons which the Claimant believes entitle
him or her to benefits or to greater or different benefits. Within 60 days after
receipt by the Bank of the petition, the Bank shall afford the Claimant (and
counsel, if any) an opportunity to present his or her position to the Bank
orally or in writing, and the Claimant (or counsel) shall have the right to
review the pertinent documents. The Bank shall notify the Claimant of its
decision in writing within the 60-day period, stating specifically the basis of
its decision, written in a manner calculated to be understood by the Claimant
and the specific provisions of the Agreement on which the decision is based. If,
because of the need for a hearing, the 60-day period is not sufficient, the
decision may be deferred for up to another 60 days at the election of the Bank,
but notice of this deferral shall be given to the Claimant.
Article 9
Amendments and Termination
This Agreement may be amended or terminated only by a written agreement
signed by the Bank and the Director. Notwithstanding the previous sentence in
this Article 9, the Bank may amend or terminate this Agreement at any time if,
pursuant to legislative, judicial, or regulatory action, continuation of the
Agreement would (i) cause benefits to be taxable to the Director prior to actual
receipt, or (ii) result in significant financial penalties or other
significantly detrimental ramifications to the Bank (other than the financial
impact of paying the benefits).
Article 10
Miscellaneous
10.1 BINDING EFFECT. This Agreement shall bind the Director and the
Bank, and their beneficiaries, survivors, executors, administrators, and
transferees.
10.2 NO CONTRACT OF EMPLOYMENT. This Agreement shall not be construed
or deemed to be a contract for the employment of Director. No provision of this
Agreement shall be interpreted to restrict the
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Bank in any manner from removing or causing the removal of the Director,
refusing to nominate the Director to a position on the board of directors, or
from complying with any regulatory or court order or other directive which
requires the Director's removal."
10.3 NON-TRANSFERABILITY. Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached, or encumbered in any manner by any
party without the prior written consent of the other parties. Any assignment
contrary to the provisions of this Agreement shall be deemed a default under the
Agreement, allowing the nondefaulting parties to exercise all remedies available
under law.
10.4 TAX WITHHOLDING. The Bank shall withhold any taxes that are
required to be withheld from the benefits provided under this Agreement.
10.5 CHOICE OF LAW, JURISDICTION, VENUE. This Agreement is drawn to be
effective in the State of California, and shall be construed in accordance with
California law, excluding its conflict of laws rules. The exclusive jurisdiction
and venue of any legal action by either party or arbitration under this
Agreement shall be the County of Sutter, California."
10.6 UNFUNDED ARRANGEMENT. The Director and the Director's beneficiary
are general unsecured creditors of the Bank for the payment of benefits under
this Agreement. The benefits represent the mere promise by the Bank to pay such
benefits. The rights to benefits are not subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors. Any insurance on the Director's life is a general
asset of the Bank to which the Director and the Director's beneficiary have no
preferred or secured claim.
10.7 REORGANIZATION. The Bank shall not merge or consolidate into or
with another company, or reorganize, or sell substantially all of its assets to
another company, firm, or person unless such succeeding or continuing company,
firm, or person agrees to assume and discharge the obligations of the Bank under
this Agreement.
10.8 ENTIRE AGREEMENT. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto with respect
to the subject matter of this Agreement and contains all of the covenants and
agreements between the parties with respect to such matter in any manner
whatsoever. Each party to this Agreement acknowledges that no representations,
inducements, promises or agreements, orally or otherwise, have been made by any
party, or anyone acting on behalf of any party, which are not embodied herein,
and that no other agreement, statement or promise not contained in this
Agreement shall be valid and binding. Any modification of this Agreement will be
effective only if it is in writing signed by the party to be charged.
10.9 ADMINISTRATION. The Bank shall have powers which are necessary to
administer this Agreement, including, but not limited to:
(a) interpreting the provisions of the Agreement;
(b) establishing and revising the method of accounting
for the Agreement;
(c) maintaining a record of benefit payments; and
(d) establishing rules and prescribing any forms
necessary or desirable to administer the Agreement.
10.10 NAMED FIDUCIARY. The Bank shall be the named fiduciary and plan
administrator under the
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Agreement. The named fiduciary may delegate to others certain aspects of the
management and operation responsibilities of the plan, including the
employment of advisors and the delegation of ministerial duties to qualified
individuals.
10.11 NOTICES. Any notice under this Agreement shall be in writing, and
any written notice or other document shall be deemed to have been duly given (i)
on the date of personal service on the parties, (ii) on the third business day
after mailing, if the document is mailed by registered or certified mail, (iii)
one day after being sent by professional or overnight courier or messenger
service guaranteeing one-day delivery, with receipt confirmed by the courier, or
(iv) on the date of transmission if sent by telegram, telex, telecopy or other
means of electronic transmission resulting in written copies, with receipt
confirmed. Any such notice shall be delivered or addressed to the parties at the
addresses set forth below or at the most recent address specified by the
addressee through written notice under this provision. Failure to give notice in
accordance with any of the foregoing methods shall not defeat the effectiveness
of notice actually received by the addressee.
10.12 RESOLUTION OF DISPUTES AND WAIVER OF JURY TRIAL.
(a) DEFINITION OF DISPUTES. Any and all claims or
controversies arising out of, relating to, or pertaining to this Agreement,
("Dispute") shall be resolved as provided in this paragraph. The parties agree
that no party shall have the right to sue any other party regarding a dispute
except as provided in this paragraph. The parties further agree, to the fullest
extent permitted by law, that each party waives any right to a trial by jury in
any action, proceeding or counterclaim of any kind arising out of, relating to,
or pertaining to this Agreement.
(b) BINDING ARBITRATION. Any dispute between the parties shall
be submitted to, and be conclusively determined by, binding arbitration in
accordance with this paragraph. The provisions of this paragraph shall not
preclude any party from seeking injunctive or other provisional or equitable
relief in order to preserve the status quo of the parties pending resolution of
the dispute, and the filing of an action seeking injunctive or other provisional
relief shall not be construed as a waiver of that party's arbitration rights.
Any party seeking such relief, must immediately file a motion for preliminary
injunction and following a determination of the motion, the action shall be
stayed pending completion of the arbitration.
(c) SELECTION OF ARBITRATOR(S). The parties shall endeavor in
good faith to select a single arbitrator. If they fail to do so within ten (10)
days of the notice demanding arbitration, each party shall have an additional
period of ten (10) days in which to appoint an arbitrator and those arbitrators
within ten (10 ) days shall select an additional arbitrator. If any party fails
to appoint an arbitrator or if the arbitrators initially selected by the parties
fail to appoint an additional arbitrator within the time specified herein, any
party may apply to have an arbitrator appointed for the party who has failed to
appoint, or to have the additional arbitrator appointed in accordance with
California Code of Civil Procedure section 1281.6.
(d) LOCATION OF ARBITRATION. Any arbitration hearing shall be
conducted in Sutter County, California.
(e) APPLICABLE LAW. The law applicable to the arbitration of
any dispute shall be the law of the State of California, excluding its conflicts
of law rules, its rules of civil procedure (unless otherwise incorporated in
this paragraph) and its laws of evidence.
(f) ARBITRATION PROCEDURES. Except as otherwise provided in
this paragraph, the arbitration shall be governed by the following:
(i) The parties shall submit to the arbitration all
written, documentary or other evidence and oral testimony as is reasonably
necessary for a proper resolution of the dispute.
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Copies of all written submittals shall be provided to the arbitrator(s) and
all parties. Neither party shall be entitled to conduct discovery and the
discovery provisions in California Civil Code of Procedure sections 1283.1
and 1283.05 are waived. The arbitrator(s) shall conduct such hearings as they
consider necessary, may require the submission of briefs or points and
authorities and may submit written questions to the parties. The parties
shall respond to such questions in writing. If a question is addressed to an
individual or fewer than all parties, copies of the question and the answer
thereto shall be served on the other parties.
(ii) The hearing, any relevant evidence may be
presented by any party, and the formal rules of evidence applicable to
judicial proceedings shall not govern. Evidence may be admitted or excluded
in the sole discretion of the arbitrator(s). Except as provided above, the
arbitration procedures set forth in the California Arbitration Act (Code Civ.
Proc., Sections 1282 ET SEQ.) shall apply to the arbitration.
(iii) The arbitration shall proceed with due dispatch
and a decision shall be rendered within sixty (60) days after the appointment
of the final arbitrator. Such decision shall be in such written form that a
judgment may be entered on it in any court of competent jurisdiction in the
State of California. Any decision of the arbitrators shall be subject to the
limitations set forth in paragraph 10.12(g).
(g) LIMITATION ON SCOPE OF ARBITRATORS' AWARD OR DECISION. The
arbitrators' decision shall pertain and be limited to the claims submitted to
the arbitrators in the demand for arbitration. In no event shall the
arbitrator(s)' award include any component of punitive or exemplary damages. The
arbitrators award may be reviewed by the appropriate superior and appellate
courts for errors in law. Such errors in law would not include the
arbitrator(s)' rulings concerning procedural or evidentiary matters, but may
only be a review of errors in application of the substantive law at issue in the
dispute.
(h) COSTS OF ARBITRATION. Each party shall pay the costs of
the arbitrator chosen by it and the losing party shall bear all other costs of
arbitration.
(i) ACKNOWLEDGMENT OF CONSENT TO ARBITRATION. NOTICE: BY
EXECUTING THIS AGREEMENT YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE
MATTERS INCLUDED IN THE "ARBITRATION" PROVISION DECIDED BY NEUTRAL ARBITRATION
AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS
TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY EXECUTING THIS
AGREEMENT, YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL UNLESS
SUCH RIGHTS ARE SPECIFICALLY INCLUDED IN THE "ARBITRATION" PROVISION. IF YOU
REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE
COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL
PROCEDURE. YOUR EXECUTION OF THIS AGREEMENT INDICATING YOUR AGREEMENT TO THIS
ARBITRATION PROVISION IS VOLUNTARY.
BY INITIALING IN THE SPACE BELOW, YOU ARE INDICATING THAT YOU HAVE READ
AND UNDERSTOOD THE FOREGOING AND UNDERSTAND THAT BY EXECUTING THIS AGREEMENT YOU
AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THIS ARBITRATION
PROVISION TO NEUTRAL ARBITRATION.
INITIALS OF THE BANK'S AUTHORIZED REPRESENTATIVE:
-------
INITIALS OF DIRECTOR:
-------
10.13 ACTIONS CONTRARY TO LAW. Nothing contained in this Agreement
shall be construed to require the commission of any act contrary to law, and
whenever there is any conflict between any provision of this
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Agreement and any statute, law, ordinance, or regulation, contrary to which
the parties have no legal right to contract, then the latter shall prevail;
but in such event, the provisions of this Agreement so affected shall be
curtailed and limited only to the extent necessary to bring it within legal
requirements.
10.14 ATTORNEYS' FEES; PREJUDGMENT INTEREST. If the services of an
attorney are required by any party to secure the performance of this Agreement
or otherwise upon the breach or default of another party to this Agreement, or
if any judicial remedy or arbitration is necessary to enforce or interpret any
provision of this Agreement or the rights and duties of any person in relation
thereto, the prevailing party shall be entitled to reasonable attorneys' fees,
costs and other expenses, in addition to any other relief to which such party
may be entitled. Any award of damages following judicial remedy or arbitration
as a result of the breach of this Agreement or any of its provisions shall
include an award of prejudgment interest from the date of the breach at the
maximum amount of interest allowed by law. If the services of an attorney are
required by any party to secure the performance of this Agreement or otherwise
upon the breach or default of another party to this Agreement, or if any
judicial remedy or arbitration is necessary to enforce or interpret any
provision of this Agreement or the rights and duties of any person in relation
thereto, the prevailing party shall be entitled to reasonable attorneys' fees,
costs and other expenses, in addition to any other relief to which such party
may be entitled. Any award of damages following judicial remedy or arbitration
as a result of the breach of this Agreement or any of its provisions shall
include an award of prejudgment interest from the date of the breach at the
maximum amount of interest allowed by law.
10.15 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
10.16 AMENDMENT. The provisions of this Agreement may be modified at
any time by agreement of the parties. Any such agreement hereafter made shall be
ineffective to modify this Agreement in any respect unless in writing and signed
by the parties against whom enforcement of the modification or discharge is
sought.
10.17 WAIVER. Any of the terms or conditions of this Agreement may be
waived at any time by the party entitled to the benefit thereof, but no such
waiver shall affect or impair the right of the waiving party to require
observance, performance or satisfaction either of that term or condition as it
applies on a subsequent occasion or of any other term or condition.
10.18 SEVERABILITY. If any provision of this Agreement is held by a
court of competent jurisdiction to be invalid or unenforceable, the remainder of
the Agreement which can be given effect without the invalid provision shall
continue in full force and effect and shall in no way be impaired or
invalidated.
10.19 CAPTIONS. All paragraph captions are for reference only and shall
not be considered in construing this Agreement.
10.20 AMBIGUITIES. The Agreement has been negotiated at arm's length
between persons sophisticated and knowledgeable in the matters dealt with
herein. Each party has cooperated and participated in the drafting and
preparation of this Agreement. Any rule of law, including, without limitation,
Civil Code Section 1654, or legal decision that would require interpretation of
any ambiguities in this Agreement against the drafting party is not applicable
and is waived. The provisions of this Agreement shall be interpreted in a
reasonable manner to effect the purpose of the parties. In the interpretation of
this Agreement or any of its terms, both parties shall be construed to be
equally responsible for the drafting and preparation of the same.
10
<PAGE>
IN WITNESS WHEREOF, the Director and a duly authorized Bank officer
have signed this Agreement.
Address: ______________________________________
______________________________________
DIRECTOR:
By:_______________________________________
Name:_____________________________________
Address:__________________________________
__________________________________
BANK:
Feather River State Bank
By:_______________________________________
Title:____________________________________
Name:_____________________________________
Address:__________________________________
Its:______________________________________
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EXHIBIT 1
TO
FEATHER RIVER STATE BANK
DIRECTOR DEFERRED FEE AGREEMENT
Deferral Election
I elect to defer my Fees received under this Agreement with the Bank as follows:
Amount of Deferral Duration
[Initial and Complete One] [Initial One]
___ I elect to defer 100% of my ___ One Year only
Fees.
___ For ______
___ I elect to defer $________ [Insert number]
of my Fees. Years
Until Termination
___ I elect not to defer any of of Service
my Fees.
___ Until __________,
(date)
_______________
I understand that I may change the amount and duration of my deferrals by filing
a new election form with the Bank provided, however, that any subsequent
election will not be effective until the calendar year following the year in
which the new election is received by the Bank.
Signature ___________________________
Date ___________________________
Accepted by the Bank this ________ day of __________________ 1999.
By:___________________________________
Title:_________________________________
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Beneficiary Designation
FEATHER RIVER STATE BANK
DIRECTOR DEFERRED AGREEMENT
I designate the following as beneficiary of benefits under the Director Deferred
Fee Agreement payable following my death:
Primary:_______________________________________________________________________
_______________________________________________________________________________
Contingent:____________________________________________________________________
_______________________________________________________________________________
NOTE: To name a trust as beneficiary, please provide the name of the
trustee(s) and the exact name and date of the trust agreement.
I understand that I may change these beneficiary designations by filing a new
written designation with the Bank. I further understand that the designations
will be automatically revoked if the beneficiary predeceases me, or, if I have
named my spouse as beneficiary and our marriage is subsequently dissolved.
Signature _________________________________
Date _________________________________
Accepted by the Bank this _________ day of ___________________ 1999.
By:_________________________________________
Title:_______________________________________
13
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "AGREEMENT") is made this 19th
day of July, 1999 between California Independent Bancorp ("BANCORP") and Feather
River State Bank ("BANK") (collectively referred to as the "COMPANY"), on one
hand, and Larry D. Hartwig (the "EXECUTIVE"), on the other hand.
WHEREAS, the parties hereto wish to enter into an employment
agreement to employ the Executive as the President and Chief Executive Officer
of the Company and to set forth certain additional agreements between the
Executive and the Company;
NOW, THEREFORE, in consideration of the mutual covenants and
representations contained herein, the parties hereto agree as follows:
Term.
The Company will employ the Executive, and the Executive will
serve the Company, under the terms of this Agreement for an initial term of
three (3) years (the "Initial Term"), commencing on the date hereof (the
"Effective Date"). Effective as of the expiration of the Initial Term and as of
each anniversary date thereof, the term of this Agreement shall be extended for
an additional one-year period unless, not later than forty-five days prior to
each such respective date, either party hereto shall have given notice to the
other that the term shall not be so extended. Notwithstanding the foregoing, the
Executive's employment hereunder may be earlier terminated, as provided in
Section 4 hereof. The term of this Agreement, as in effect from time to time in
accordance with the foregoing, shall be referred to herein as the "Term". The
period of time between the Effective Date and the termination of the Executive's
employment hereunder shall be referred to herein as the "Employment Period."
Employment.
Positions and Reporting. The Company hereby employs the Executive for the
Employment Period as its Chief Executive Officer and President. During the
Employment Period, the Executive shall report directly to the Board of Directors
of Bank and Bancorp (the "Board").
Authority and Duties. The Executive shall exercise such authority, perform such
executive duties and functions and discharge such responsibilities as are
reasonably associated with the Executive's positions, commensurate with the
authority vested in the Executive pursuant to this Agreement and consistent with
the bylaws of the Company. During the Employment Period, the Executive shall
devote full business time, skill and efforts to the business of the Company.
Notwithstanding the foregoing, the Executive may (i) make and manage personal
business investments of his choice and serve in any capacity with any civic,
educational or charitable organization, or any trade association, without
seeking or obtaining approval by the Board, provided such activities and service
do not materially interfere or conflict with the performance of his duties
hereunder and (ii) with the approval of the Board, serve on the boards of
directors of other corporations.
Bank and Bancorp shall make Executive a director of Bank,
Bancorp and any subsidiaries of Bank and Bancorp contemporaneously with the
execution of this Agreement. As Bank and Bancorp desire that Executive continue
to serve as a director, each shall use its reasonable best efforts to cause
Executive to be elected a director at any meeting of the Boards or of the
shareholders held for the purpose of electing directors during the Term, and
shall use their reasonable best efforts to insure that Executive remains a
director of each subsidiary, including such subsidiaries as may from time to
time come into existence after the date hereof. The Executive shall not be
entitled to receive any additional compensation (excluding the payment or
reimbursement of any expenses incurred by the Executive) for his services as a
director of any of the above entities.
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Compensation and Benefits.
Salary. During the Employment Period, the Company shall pay to the Executive, as
compensation for the performance of his duties and obligations under this
Agreement, a base salary at the rate of $180,000 per annum, payable in arrears
not less frequently than monthly in accordance with the normal payroll practices
of the Company (the "Base Salary"). Such Base Salary shall be subject to review
each year for possible increase by the Board in its sole discretion, but shall
in no event be decreased from the levels set forth above during the Initial
Term, or from its then-existing level during the Employment Period.
Notwithstanding that the Initial Term of this Agreement commences as of July 19,
1999, the first consideration of an increase in base salary shall occur before
the end of calendar year 1999 for possible implementation as of January 1, 2000.
Annual Bonus. The Executive shall earn bonus amounts in the form of cash and
stock awards based upon the satisfaction of performance criteria that will be
established by the Board of Directors of the Company in its discretion and upon
negotiation with the Executive at the beginning of each year, subject to the
approval of the Board. Performance criteria will include corporate performance
goals consistent with the Company's business plan for the year, as established
by the Company's management and subject to the review and approval of the Board
of Directors. The final determinations as to the actual corporate and individual
performance against the pre-established goals and objectives shall be made by
the Board of Directors in its sole discretion. The amount of the bonus shall be
based upon a stair step formula, where the bonus for achieving 100% of the
performance goals would be a payment of 30% of the Executive's annual base
salary (the "Target") (e.g. the Company would pay the Executive 50% of the
Target for 90% achievement of the performance goals and 110% of the Target for
108% of the performance goals). Executive's bonus shall be paid in one lump sum
to Executive at such time as other executive bonuses are paid.
Other Benefits. During the Employment Period, the Executive shall receive such
life insurance, disability insurance, pension, health insurance, holiday,
vacation and sick pay benefits and other benefits which the Company extends, as
a matter of policy, to its executive employees and, except as otherwise provided
herein, shall be entitled to participate in all deferred compensation and other
incentive plans of the Company, including the Feather River State Bank Employee
Stock Ownership Plan, on the same basis as other like employees of the Company.
Without limiting the generality of the foregoing, the Executive shall be
entitled to four (4) weeks vacation during each year of the Employment Period,
which shall be scheduled in the Executive's discretion, subject to and taking
into account applicable banking laws and regulations. Unused vacation may be
accrued up to a maximum of six (6) weeks of unused vacation, and thereafter the
Executive shall cease to accrue vacation thereafter until used.
Insurance Policies. The Company shall maintain for Executive a separate term
life insurance policy (such policy to be designated by the Executive) in the
amount of at least $400,000 on the life of the Executive, over and above the
standard group insurance benefits provided by the Company to be maintained in
force during the Term of the Agreement, the beneficiary of which shall be
designated by the Executive. The Company acknowledges that such term life
insurance policy is currently owned by the Executive and shall continue to be
owned by the Executive during and after the Executive's employment hereunder. In
addition, the Company shall maintain for the Executive during the Term of the
Agreement a separate non-cancelable disability insurance, it being understood
and agreed that such policy shall have terms and conditions, and be issued by an
insurer, satisfactory to the Executive.
Business Expenses. During the Employment Period, the Company shall promptly
reimburse the Executive for all documented reasonable business expenses incurred
by the Executive in the performance of his duties under this Agreement, in
accordance with the Company's policies and standards of similar or comparable
companies.
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<PAGE>
Car Allowance. The Company shall provide the Executive with a purchased or
leased automobile or pay to Executive as an automobile allowance the sum of $700
per month during the Employment Period, and, in addition, the Company shall pay
all reasonable operating expenses with regard to such automobile and shall
procure and maintain in force at Company's expense an insurance policy on such
automobile which shall include collision, comprehensive medical payments and
liability coverage with the limits mutually agreed to by the Company and the
Executive.
Club Membership. The Company shall provide the use of a country club membership
to the Executive for the promotion of the Company's business. The Company shall
be responsible for all costs related to such membership to the extent such costs
are business related (without regard, however, to whether such costs are
deductible for income tax purposes). If the Company is incapable of holding such
membership in corporate name, the Company shall provide to the Executive funds
necessary to acquire such membership. Executive shall be entitled to use of such
membership during the Term of this Agreement. During the Term of this Agreement,
Executive shall be entitled to purchase such membership interest from the
Company at a purchase price equal to the then fair market value of such
membership.
Moving Expenses. The Company shall pay to Executive all out of pocket moving
costs, including temporary living expenses for a period of up to 120 days and
any expenses incurred by the Executive in connection with the sale of his
principal residence, in connection with Executive's relocation to a location in
closer proximity to the Company.
Stock Options. Concurrently with the execution of this Agreement, the Company
and Executive will enter into a Stock Option Agreement, which shall be in the
form of Exhibit A attached hereto (subject to such changes as the parties shall
agree to after good faith negotiations during the thirty-day period immediately
following the execution hereof), pursuant to which the Company shall grant to
the Employee the option to purchase up to 90,000 shares of common stock of
Bancorp on the terms and conditions set forth therein. The Stock Option
Agreement shall provide that the per-share exercise price of such stock options
shall be the closing price per share of Bancorp's common stock on the applicable
vesting date. The Stock Option Agreement shall further provide that such stock
options shall vest and become exercisable in the following increments and at the
following times: (i) 55.555555% of the options (entitling the Executive to
purchase 50,000 shares of Bancorp's common stock) shall vest and become
exercisable upon execution of this Agreement; (ii) 22.222222% of the options
(entitling the Executive to purchase 20,000 shares of Bancorp's common stock)
shall vest and become exercisable on the day immediately preceding the first
anniversary of the date of this Agreement; and (iii) 22.222222% of the options
(entitling the Executive to purchase 20,000 shares of Bancorp's common stock)
shall vest and become exercisable on the day immediately preceding the second
anniversary of the date of this Agreement. Additionally, the Board of Directors
shall annually consider the grant to Executive of additional amounts of stock
options; provided, however, that this Agreement shall not obligate the Company
to issue any options to the Executive except as set forth in Exhibit A.
Salary Continuation. The Company and Executive shall enter into a Salary
Continuation Agreement which shall provide that if Executive continues to be
employed by the Company at least until he reaches age 65, upon retirement the
Executive will receive an annual payment of $75,000 per year for 15 years
following such retirement. The Executive will be vested for the accrual amount
each year and will become vested in the amount of each additional year's accrual
until he becomes 100% vested. The Executive shall be entitled to the entire
amount vested upon the termination of this Agreement. In the event of a Change
of Control, the Executive will become fully vested and, if the Agreement is
terminated within 12 months of the Change of Control, the Executive will be
entitled to the full amount of the Salary Continuation Agreement.
Termination of Employment.
Termination for Cause. The Company may terminate the Executive's employment
hereunder for cause.
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For purposes of this Agreement and subject to the Executive's opportunity to
cure as provided in Section 4(c) hereof, the Company shall have "cause" to
terminate the Executive's employment hereunder if Executive shall commit any
of the following:
the Executive has willfully and materially breached a material
provision of this Agreement, and, if such breach is curable, it has not been
cured or reasonably commenced being cured within 30 days after written notice
from the Company;
the Executive is convicted of or pleads guilty to a felony involving
financial misconduct or moral turpitude.
Termination for Good Reason. The Executive shall have the right at any time to
terminate his employment with the Company for any reason. For purposes of this
Agreement and subject to the Company's opportunity to cure as provided in
Section 4(c) hereof, the Executive shall have "good reason" to terminate his
employment hereunder if such termination shall be the result of:
a diminution during the Employment Period in the Executive's title, duties
or responsibilities as set forth in Section 2 hereof;
a breach by the Company of the compensation and benefits provisions set
forth in Section 3 hereof;
a material breach by the Company of any material terms of this Agreement; or
a Change of Control (as defined); provided, however, it shall only
constitute "good reason" if the Executive terminates this Agreement within 12
months of the Change in Control; or
the relocation of the Executive's principal place of employment to any
location more than 50 miles from the Company's present principal place of
business.
Notice and Opportunity to Cure. Notwithstanding the foregoing, it shall be a
condition precedent to the Company's right to terminate the Executive's
employment for "cause" and the Executive's right to terminate his employment for
"good reason" that (1) the party seeking the termination shall first have given
the other party written notice stating with specificity the reason for the
termination ("breach") and (2) if such breach is susceptible of cure or remedy,
a period of 30 days from and after the giving of such notice shall have elapsed
without the breaching party having effectively cured or remedied such breach
during such 30-day period, unless such breach cannot be cured or remedied within
30 days, in which case the period for remedy or cure shall be extended for a
reasonable time (not to exceed 30 days) provided the breaching party has made
and continues to make a diligent effort to effect such remedy or cure.
Termination Upon Death or Permanent and Total Disability. The Employment Period
shall be terminated by the death of the Executive. The Employment Period may be
terminated by the Company if the Executive shall be subject to a "permanent
disability" as such term is defined in the disability insurance purchased by the
Company pursuant to Section 3(d) ("Disability"). If the Employment Period is
terminated by reason of Disability of the Executive, the Company shall give
30-days' advance written notice to that effect to the Executive.
Definition of Change in Control. A "Change in Control" shall be deemed to have
taken place if:
there shall be consummated any consolidation or merger of the Company
in which the Company is not the continuing or surviving corporation or pursuant
to which shares of the Company's capital stock are converted into cash,
securities or other property (other than a consolidation or merger of the
Company in which the holders of the Company's voting stock immediately prior to
the consolidation or merger shall, upon consummation of the consolidation or
merger, own at least 50% of the voting stock) or any sale, lease, exchange or
other transfer (in one transaction or a series of transactions contemplated or
arranged by any party as a single plan) of all or substantially all of the
assets of the Company; or
any person (as such term is used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) shall, after
the date hereof, become the beneficial owner (as defined in Rules 13d-3 and
13d-5 under the Exchange Act), directly or indirectly, of
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securities of the Company representing 30% or more of the voting power of all
of the then outstanding securities of the Company having the right under
ordinary circumstances to vote in an election of the Board (including, without
limitation, any securities of the Company that any such person has the right to
acquire pursuant to any agreement, or upon exercise of conversion rights,
warrants or options, or otherwise, shall be deemed beneficially owned by such
person); or
individuals who as of the date hereof constitute the entire Board and
any new directors whose election by the Company's shareholders, or whose
nomination for election by the Company's board, shall have been approved by a
vote of at least a majority of the directors then in office who either were
directors at the date hereof or whose election or nomination for election shall
have been so approved (the "Continuing Directors") shall cease for any reason to
constitute a majority of the members of the Board.
Consequences of Termination.
Termination Without Cause or for Good Reason. In the event of termination of the
Executive's employment hereunder by the Company without "cause" (other than upon
death or Disability) or by the Executive for "good reason" (each as defined in
Section 4 hereof), the Executive shall be entitled to the following severance
pay and benefits:
Severance Pay - a lump sum amount equal to twenty-four (24) months of
the Executive's annual Base Salary; provided, however, in the event the
Agreement is terminated either by the Company or the Executive following a
Change in Control, the Executive shall be entitled to receive two and one half
(2 1/2) times the highest annual compensation amount paid to the Executive
within the three years preceding the Change in Control;
Club and Car Allowance - continuation of the monthly car allowance and
club membership and related expenses set forth in Section 3 for a period of
twelve consecutive calendar months commencing on the first month following the
effective date of termination, including any period of time between the
effective date of termination and the first day of the first calendar month
following such effective date; and
Benefits Continuation - continuation for 30 months (the "Severance
Period") of coverage under the group medical care, disability and life insurance
benefit plans or arrangements in which the Executive is participating at the
time of termination with the Company continuing to pay its share of premiums and
associated costs as if Executive continued in the employ of the Company;
provided, however, that the Company's obligation to provide such coverages shall
be terminated if the Executive obtains comparable substitute coverage from
another employer at any time during the Severance Period. The Executive shall be
entitled, at the expiration of the Severance Period, to elect continued medical
coverage in accordance with Section 4980B of the Internal Revenue Code of 1986,
as amended (or any successor provision thereto) (the "Code"). In addition, the
Executive shall be entitled to continued coverage under the Company's medical
benefit plans pursuant to the terms of COBRA, provided that for the Severance
Period, such coverage will be at no cost to the Executive.
Termination Upon Disability. In the event of termination of the Executive's
employment hereunder by the Company on account of Disability, the Executive
shall be entitled to the following severance pay and benefits:
Severance Pay - severance payments in the form of continuation of the
Executive's Base Salary as in effect immediately prior to such termination for a
period of 6 months following the first date of Disability; and
Benefits Continuation - the same benefits as provided in Section
5(a)(ii) and (iii) above, to be provided during the Employment Period while the
Executive is suffering from Disability and for a period of 6 months following
the effective date of termination of employment by reason of Disability.
Termination Upon Death. In the event of termination of the Executive's
employment hereunder on account of the Executive's death, the Executive's heirs,
estate or personal representatives under law, as applicable, shall be entitled
to the payment of the Executive's Base Salary as in effect immediately prior to
death for a period of not less than two calendar months in addition to the
payment of benefits pursuant to the Executive's life insurance policies, as
provided for in Section 3(c) and (d) above. The Executive's beneficiary or
estate shall not be required to remit to the Company any payments received
pursuant to
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any life insurance policy purchased pursuant to Section 3(c) above.
Accrued Rights. Notwithstanding the foregoing provisions of this Section 5, in
the event of termination of the Executive's employment hereunder for any reason,
the Executive shall be entitled to payment of any unpaid portion of his Base
Salary through the effective date of termination, and payment of any accrued but
unpaid rights solely in accordance with the terms of any incentive bonus or
employee benefit plan or program of the Company.
Conditions to Severance Benefits. (i) The Company shall have the right to seek
repayment of the severance payments and benefits provided by this Section 5 in
the event that the Executive fails to honor in accordance with their terms the
provisions of Section 6 hereof. For purposes only of this Section, Executive
shall be treated as having failed to honor the provisions of Section 6 hereof
only upon the vote of two-thirds of the Board following notice of the alleged
failure by the Company to the Executive, an opportunity for the Executive to
cure the alleged failure for a period of 30 days from the date of such notice
and the Executive's opportunity to be heard on the issue by the Board.
Confidentiality. The Executive agrees that he will not at any time
during the Employment Period or at any time thereafter for any reason, in any
fashion, form or manner, either directly or indirectly, divulge, disclose or
communicate to any person, firm, corporation or other business entity, in any
manner whatsoever, any confidential information or trade secrets concerning the
business of the Company, including, without limiting the generality of the
foregoing, the techniques, methods or systems of its operation or management,
any information regarding its financial matters, or any other material
information concerning the business of the Company (including customer lists),
its manner of operation, its plans or other material data (the "Business"). The
provisions of this Section 6 shall not apply to (i) information disclosed in the
performance of the Executive's duties to the Company based on his good faith
belief that such a disclosure is in the best interests of Company; (ii)
information that is, at the time of the disclosure, public knowledge; (iii)
information disseminated by the Company to third parties in the ordinary course
of business; (iv) information lawfully received by the Executive from a third
party who, based upon inquiry by the Executive, is not bound by a confidential
relationship to the Company; or (v) information disclosed under a requirement of
law or as directed by applicable legal authority having jurisdiction over the
Executive.
Breach of Restrictive Covenants. The parties agree that a breach or
violation of Section 6 hereof will result in immediate and irreparable injury
and harm to the innocent party, and that such innocent party shall have, in
addition to any and all remedies of law and other consequences under this
Agreement, the right to seek an injunction, specific performance or other
equitable relief to prevent the violation of the obligations hereunder.
Notice. For the purposes of this Agreement, notices, demands and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or (unless otherwise
specified) mailed by United States certified or registered mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Company, to:
California Independent Bancorp
1227 Bridge Street, Suite C
Yuba City, CA 95991
Attn: Chairman of the Board of Directors
of California Independent Bancorp
If to the Executive, to:
Larry D. Hartwig
3603 E. Mandeville Place
Orange, California 92867
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or to such other respective addresses as the parties hereto shall designate to
the other by like notice, provided that notice of a change of address shall be
effective only upon receipt thereof.
Arbitration. Except as provided in Section 7 hereof, any dispute or
controversy arising under or in connection with this Agreement shall be settled
exclusively by arbitration in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
Waiver of Breach. Any waiver of any breach of this Agreement shall not
be construed to be a continuing waiver or consent to any subsequent breach on
the part either of the Executive or of the Company.
Non-Assignment; Successors. Neither party hereto may assign his or its
rights or delegate his or its duties under this Agreement without the prior
written consent of the other party; provided, however, that: (i) this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
the Company upon any sale of all or substantially all of the Company's assets,
or upon any merger, consolidation or reorganization of the Company with or into
any other corporation, all as though such successors and assigns of the Company
and their respective successors and assigns were the Company; and (ii) this
Agreement shall inure to the benefit of and be binding upon the heirs, assigns
or designees of the Executive to the extent of any payments due to them
hereunder. As used in this Agreement, the term "Company" shall be deemed to
refer to any such successor or assign of the Company referred to in the
preceding sentence.
Withholding of Taxes. All payments required to be made by the Company
to the Executive under this Agreement shall be subject to the withholding of
such amounts, if any, relating to tax, and other payroll deductions as the
Company may reasonably determine it should withhold pursuant to any applicable
law or regulation.
Excise Tax Provision. Notwithstanding anything elsewhere in this
Agreement to the contrary, if any of the payments or benefits provided for in
this Agreement, together with any other payments or benefits which the Executive
has the right to receive from the Company (or its affiliated companies), would
constitute a "parachute payment" as defined in Section 280G(b)(2) of the
Internal Revenue Code of 1986, as amended (the "Code"), the parties agrees that
the payments or benefits provided to the Executive pursuant to this Agreement
shall be reduced (in each case, in such manner as the Executive in his sole
discretion shall determine) so that the present value of the total amount
received by the Executive that would constitute a "parachute payment" will be
one dollar ($1.00) less than three (3) times the Executive's base amount (as
defined in Section 280G of the Code) and so that no portion of the payments or
benefits received by the Executive would be subject to the excise tax imposed by
Section 4999 of the Code.
Indemnification. To the fullest extent permitted by law, the Company
shall pay as and when incurred all expenses, including legal and attorney costs,
incurred by, or shall satisfy as and when entered or levied a judgement or fine
rendered or levied against, Executive in an action brought by a third party
against Executive (whether or not the Company is joined as a party defendant) to
impose a liability or penalty on Executive for an act alleged to have been
committed by Executive while an officer of the Company; provided, that Executive
was acting in good faith, within what Executive reasonably believed to be the
scope of Executive's employment or authority and for a purpose which the
Executive reasonably believed to be in the best interests of the Company or the
Company's shareholders, and in the case of a criminal proceeding, that the
Executive had no reasonable cause to believe that Executive's conduct was
unlawful. Payments authorized hereunder include amounts paid and expenses
incurred in settling any such action or threatened action. All rights hereunder
are limited by any applicable state or Federal laws.
Severability. To the extent any provision of this Agreement or portion
thereof shall be invalid or unenforceable, it shall be considered deleted
therefrom (but only for so long as such provision or portion thereof shall be
invalid or unenforceable) and the remainder of such provision and of this
Agreement shall be unaffected and shall continue in full force and effect.
Payment. All amounts payable by the Company to the Executive under this
Agreement shall be paid promptly on the dates required for such payment in this
Agreement without notice or demand. Any salary, benefits or other amounts paid
or to be paid to Executive or provided to or in respect of the Executive
pursuant to this Agreement shall not be reduced by amounts owing from Executive
to the
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Company.
Expenses. The Company shall pay or reimburse the Executive for all
legal fees and expenses incurred by him in the drafting, review and negotiation
of this Agreement.
Authority. Each of the parties hereto hereby represents that each has
taken all actions necessary in order to execute and deliver this Agreement.
Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
Governing Law. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of California, without giving
effect to the choice of law principles thereof.
Entire Agreement. This Agreement constitutes the entire agreement by
the Company and the Executive with respect to the subject matter hereof and
supersedes any and all prior agreements or understandings between the Executive
and the Company with respect to the subject matter hereof, whether written or
oral. This Agreement may be amended or modified only by a written instrument
executed by the Executive and the Company.
* * *
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CALIFORNIA INDEPENDENT BANCORP
By: ____________________________
Name: ____________________________
Title: ____________________________
FEATHER RIVER STATE BANK
By: ____________________________
Name: ____________________________
Title: ____________________________
-------------------------------------
Larry D. Hartwig
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EXHIBIT A
FORM OF STOCK OPTION AGREEMENT
California Independent Bancorp
1996 Stock Option Plan
NONQUALIFIED STOCK OPTION AGREEMENT
Stock Option Agreement (the "Agreement"), dated as of July 19,
1999 (the "Date of Grant") between California Independent Bancorp (the
"Corporation"), and Larry Hartwig (the "Optionee"), an employee of the
Corporation. This Agreement is pursuant to the terms of the Corporation's 1996
Stock Option Plan (the "Plan"). The applicable terms of the Plan are
incorporated herein by reference, including the definition of terms contained in
the Plan.
1. Stock Option Award. The Corporation grants to the
Optionee, on the terms and conditions hereinafter set forth, an Option
with respect to 90,000 shares of the Corporation's Common Stock (the
"Option Shares"). The Option is not intended to qualify as an
Incentive Stock Option under section 422 of the Code, and shall be
treated as a Nonqualified Stock Option under the Plan.
Exercise Price. The exercise price per share of the Option Shares shall
be equal to the fair market value of the Common Stock as of the applicable
vesting date.
Vesting of Stock Option. Subject to Section 5 hereof, the Option Shares
shall become vested and exercisable in installments based on the passage of time
according to the following vesting schedule:
<TABLE>
<CAPTION>
VESTING DATE NUMBER OF SHARES
------------ ----------------
<S> <C>
July 19, 1999 50,000
July 18, 2000 20,000
July 18, 2001 20,000
</TABLE>
Notwithstanding the foregoing, but subject to Section 5
hereof, all Option Shares shall become fully and immediately vested and
exercisable: (i) upon a determination by the Compensation Committee of the
Corporation's Board of Directors (the "Committee") to grant additional options
to the Optionee; (ii) upon a termination of the Optionee's employment by the
Corporation made by the Optionee for "good reason" or by the Corporation without
"cause" (as such terms are defined in the Optionee's Employment Agreement); or
(iii) upon the death or permanent and total disability (within the meaning of
section 22(e)(3) of the Code) of the Optionee.
Option Term. Option Shares that become exercisable pursuant to Section
3 hereof may be purchased at any time during the Option Term. For purposes
hereof, the "Option Term" shall commence on the Date of Grant and shall expire
on the tenth anniversary thereof, unless earlier terminated upon the Optionee's
termination from service as an employee as provided in Section 5 hereof. Upon
the expiration of the Option Term, any unexercised Option Shares shall be
cancelled and shall be of no further force or effect.
Termination of Service. If Optionee's service as an employee of the
Corporation is terminated for any reason prior to the occurrence of any
otherwise applicable vesting date or event provided in Section 3 hereof, the
Optionee shall (i) forfeit his interest in any Option Shares that have not yet
become vested, which shall be cancelled and be of no further force or effect,
and (ii) retain the right to exercise any Option Shares that have previously
become vested until the expiration of 180 days after the effective date of such
termination of service or, in the event such
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termination of service is as a result of death or permanent and total
disability (within the meaning of section 22(e)(3) of the Code), until the
expiration of one year after the date of termination.
Procedure for Exercise. The Option may be exercised, in whole or part
(for the purchase of whole shares only), by delivery of a written notice (the
"Notice"), along with payment in full of the Option Price, from the Optionee to
the Secretary of the Corporation at the Corporation's principal office, which
Notice shall: (i) state the number of Option Shares being exercised; (ii) state
the method of payment for the Option Shares and tax withholding pursuant to
Section 7 hereof; (iii) include any representation of the Optionee required
pursuant to Section 8 hereof; (iv) in the event that the Option shall be
exercised by any person other than the Optionee pursuant to Section 11 hereof,
include appropriate proof of the right of such person to exercise the Option;
and (v) comply with such further requirements consistent with the Plan as the
Committee may from time to time prescribe.
Payment of Exercise Price and Tax Withholding. Payment of the Option
Price shall be made (i) in cash or by cash equivalent, (ii) in Common Stock that
has been held by the Optionee for at least 6 months, valued at the Fair Market
Value of such shares on the date of exercise, (iii) by a delivery of a notice
that the Optionee has placed a market sell order (or similar instruction) with a
broker with respect to shares of Common Stock then issuable upon exercise of the
Option, and that the broker has been directed to pay a sufficient portion of the
net proceeds of the sale to the Corporation in satisfaction of the Option Price
(conditioned upon the payment of such net proceeds), or (iv) by a combination of
the methods described above. In addition and at the time of exercise, as a
condition of delivery of the Option Shares, the Optionee shall remit to the
Corporation all required federal, state and local withholding tax amounts in any
manner permitted for the payment of the exercise price as provided above.
Investment Representation. Upon the exercise of the Option at a time
when there is not in effect a registration statement under the Securities Act of
1933 relating to the Option Shares, the Optionee hereby represents and warrants,
and by virtue of such exercise shall be deemed to represent and warrant, to the
Corporation that the Option Shares shall be acquired for investment and not with
a view to the distribution thereof, and not with any present intention of
distributing the same, and the Optionee shall provide the Corporation with such
further representations and warranties as the Corporation may require in order
to ensure compliance with applicable federal and state securities, blue sky and
other laws. No Option Shares shall be purchased upon the exercise of the Option
unless and until the Corporation and/or the Optionee shall have complied with
all applicable federal or state registration, listing and/or qualification
requirements and all other requirements of law or of any regulatory agencies
having jurisdiction, unless the Committee has received evidence satisfactory to
it that a prospective Optionee may acquire such shares pursuant to an exemption
from registration under the applicable securities laws. Any determination in
this connection by the Committee shall be final, binding, and conclusive. The
Corporation reserves the right to legend any certificate for shares of Common
Stock, conditioning sales of such shares upon compliance with applicable federal
and state securities laws and regulations.
No Rights as Stockholder or Employee.
The Optionee shall not have any privileges of a stockholder of the Corporation
with respect to any Option Shares subject to (but not acquired upon valid
exercise of) the Option, nor shall the Corporation have any obligation to issue
any dividends or otherwise afford any rights to which shares of Common Stock are
entitled with respect to any such Option Shares, until the date of the issuance
to the Optionee of a stock certificate evidencing such shares.
NOTHING IN THIS AGREEMENT OR THE OPTION SHALL CONFER UPON THE OPTIONEE ANY RIGHT
TO CONTINUE AS AN EMPLOYEE OF THE CORPORATION OR TO INTERFERE IN ANY WAY WITH
THE RIGHT OF THE CORPORATION TO TERMINATE THE OPTIONEE'S EMPLOYMENT AT ANY TIME.
Adjustments. If at any time while the Option is outstanding, the number
of outstanding shares of
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<PAGE>
Common Stock is changed by reason of a reorganization, recapitalization,
stock split or any similar events, the number and kind of Option Shares
and/or the exercise price of such shares shall be adjusted accordingly.
Restriction on Transfer of Options. The Option may not be transferred,
pledged, assigned, hypothecated or otherwise disposed of in any way by the
Optionee, except by (i) will or by the laws of descent and distribution or (ii)
to a "family member" (as defined below), provided that such transfer is made for
estate planning, tax planning, donative purposes or pursuant to a domestic
relations order, and no consideration (other than nominal consideration) is
received by the Optionee. In the event an Optionee becomes legally
incapacitated, his Option shall be exercisable by his legal guardian, committee
or legal representative. If the Optionee dies, the Option shall thereafter be
exercisable by the Optionee's executors or administrators. The Option shall not
be subject to execution, attachment or similar process. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of the Option
contrary to the provisions hereof, and the levy of any execution, attachment or
similar process upon the Option, shall be null and void and without effect.
For purposes hereof, a "family member" shall mean any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling,
niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, including adoptive relationships, any person
sharing the employee's household (other than a tenant or employee), a trust in
which these persons have more than fifty percent of the beneficial interest, a
foundation in which these persons (or the employee) control the management of
assets, and any other entity in which these persons (or the employee) own more
than fifty percent of the voting interests.
Notices. Any notice hereunder by the Optionee shall be given to the
Corporation in writing and such notice shall be deemed duly given only upon
receipt thereof at the Corporation's office at 1227 Bridge Street, Suite C, Yuba
City, CA 95991, or at such other address as the Corporation may designate by
notice to the Optionee. Any notice hereunder by the Corporation shall be given
to the Optionee in writing and such notice shall be deemed duly given only upon
receipt thereof at such address as the Optionee may have on file with the
Corporation.
Construction. The construction of this Agreement is vested in the
Committee, and the Committee's construction shall be final and conclusive.
Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of California, without giving effect to
the choice of law principles thereof.
CALIFORNIA INDEPENDENT BANCORP
By: _______________________________
Name:
Title:
OPTIONEE:
_____________________________________
Larry D. Hartwig
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<PAGE>
EXECUTIVE SALARY CONTINUATION AGREEMENT
THIS EXECUTIVE SALARY CONTINUATION AGREEMENT ("Agreement") is made and entered
into this ___ day of ___, 1999 by and between FEATHER RIVER STATE BANK, a
California banking corporation ("Bank") , and BLAINE LAUHON (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive is employed by the Bank as its Senior Vice
President; and Chief Lending Officer
WHEREAS, the experience of the Executive, his knowledge of the affairs
of the Bank, and his reputation and contacts in the banking
industry are so valuable that assurance of his continued
service is essential for the future growth and profitability
of the Bank and it is in the best interests of the Bank to
arrange terms of continued employment for the Executive so as
to reasonably assure his remaining in the Bank's employment
during his lifetime or until the age of retirement; and
WHEREAS, it is the desire of the Bank -that the Executive's services be
retained as herein provided; and
WHEREAS, the Executive is willing to continue in the employ of the Bank
provided the Bank agrees to pay the Executive or his beneficiaries certain
benefits in accordance with the terms and conditions hereinafter set forth;
SENIOR VICE PRESIDENT; and CHIEF LENDING OFFICER
NOW, THEREFORE, in consideration of the services to be performed in the
future as well as the mutual promises and covenants herein contained, it is
hereby agreed as follows:
ARTICLE 1.
1.1. BENEFICIARY. The term Beneficiary shall mean the person or
persons whom the Executive shall designate in writing to receive the benefits
provided hereunder.
1.2. DISABILITY. The term disability shall mean the inability of the
Executive to perform the duties and responsibilities of his position with the
Bank in a normal and regular, manner, due to mental or physical illness or
injury, for a period of ninety (90) consecutive days, or for fifty percent
(50%) or more of the normal working days during a period of one hundred
eighty (180) consecutive days. Determination of the Executive's disability
shall be made by the Bank's Board of Directors, which determination shall be
made in its sole discretion and shall be final and conclusive on all parties
hereto. In the event Executive is also a director of the Bank, the Executive
shall be ineligible to participate in such disability determination.
Executive shall, if requested by the Bank's Board of Directors, submit to a
mental or physical examination to assist the Board of Directors in making its
determination of disability hereunder.
1.3. NAMED FIDUCIARY AND PLAN ADMINISTRATOR. The Bank Fiduciary and
Plan Administrator of this plan shall be the Bank.
1.4. CHANGE OF CONTROL. A "Change of Control" shall be deemed to
have occurred if (i) a tender offer shall be made and consummated for the
ownership of 25% or more of the outstanding voting securities of the Bank;
(ii) the Bank shall be merged or consolidated with another bank or
corporation and as a result of, such merger or consolidation less than 75% of
the outstanding voting securities of the surviving or resulting bank or
corporation shall be owned in the aggregate by the former shareholders of the
Bank, other than affiliates (within the meaning of the Securities Exchange
Act of 1934) of any party to such merger or consolidation, as the same shall
have existed immediately prior to such merger or consolidation; (iii) the
Bank shall sell substantially all of its assets to another bank or
corporation which is not a wholly-owned subsidiary; or (iv) a person, within
the meaning of Section 3 (a) (9) or of Section 13 (d)
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(3) (as in effect on the date hereof) of the Securities Exchange Act of 1934,
shall require 25% or more of the outstanding voting securities of the Bank
(whether directly, indirectly, beneficially or of record). For purposes
hereof, ownership of voting securities shall take into account and shall
include ownership as determined by applying the provisions of Rule 13d- 3 (d)
(1) (i) (as in effect on the date hereof) pursuant to the Securities Exchange
Act of 1934.
ARTICLE 2.
2.1. EMPLOYMENT. The Bank agrees to employ the Executive in such
capacity as the Bank may determine from time to time. The Executive shall
continue in the employ of the Bank in such capacity and with such duties and
responsibilities as may be assigned to him, and with such compensation as may be
determined from time to time by the Board of Directors of the Bank.
2.2. FULL EFFORTS. Executive shall devote his full business time and
efforts to the business and affairs of the Bank or the successor to the Bank by
which Executive is then employed pursuant to this Agreement; provided, however,
this provision shall not preclude Executive, with prior approval of the Bank,
from serving as a director or member of a committee of any other organization
involving no conflict of interests with the interests of the Bank, from engaging
in charitable and community activities, and from managing his personal
investments, provided that such activities do not interfere with the regular
performance of his duties and responsibilities to the Bank.
2.3. FRINGE BENEFITS. The salary continuation benefits provided by this
Agreement are granted by the Bank as a fringe benefit to the Executive and are
not part of any salary reduction plan or any arrangement deferring a bonus or a
salary increase. The Executive has no option to take any current payment or
bonus in lieu of these salary continuation benefits.
ARTICLE 3.
3.1. RETIREMENT. If the Executive shall continue in the employment of
the Bank until he attains the age of he may retire from active daily employment
as of the first day of the month next following attainment of age FIFTY-FIVE
(55) or upon such later date as may be mutually agreed upon by the Executive and
the Bank ("Retirement Date").
3.2. PAYMENT. The Bank agrees that upon such Retirement Date it will
pay to the Executive the annual sum of FORTY THOUSAND Dollars ($40.000.00)
payable monthly on the first day of each month following such Retirement Date
for a period of one hundred eighty (180) months; subject to the conditions and
limitations set forth in this Agreement. The FORTY THOUSAND Dollars ($40,000.00)
annual payment amount may be adjusted as of the first year in which it is to be
paid to reflect changes in the federally determined cost-of-living index and may
be adjusted annually for each payment year thereafter to reflect further changes
in said federally determined cost-of-living index. However, the Bank is not
obligated hereunder to make any such adjustment.
3.3. DEATH AFTER RETIREMENT. The Bank agrees that if the Executive dies
after the Retirement Date but shall die before receiving the full amount of
monthly payments to which he is entitled under this Agreement, the Bank will
continue to make such monthly payments to the Executive's designated Beneficiary
for the remaining period. If a valid Beneficiary Designation is not in effect,
the payments shall be made to the Executive's surviving spouse or, if none, said
payments shall be made to the duly qualified personal representative, executor
or administrator of Executive's estate.
ARTICLE 4.
4.1. DEATH PRIOR TO RETIREMENT. In the event the Executive should die
while employed by the Bank at any time after the date of this Agreement but
prior to his Retirement Date, the Bank shall pay a sum equal to the Net
Insurance Coverage for the appropriate Plan Year set forth in Schedule A
(Participant Balance Sheet and Policy Data) to the Executive's designated
Beneficiary in equal monthly installments for a period of one hundred eighty
(180) months. If a valid Beneficiary Designation is not in effect, the payments
shall be made to the Executive's surviving spouse or, if none, said payments
shall be
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made to the duly qualified personal representative, executor or administrator
of Executive's estate. The said monthly payments shall begin the first day of
the month following the month of the death of the Executive. Provided,
however, that anything hereinabove to the contrary notwithstanding, no death
benefit shall be payable hereunder if it is determined that the Executive's
death was caused by suicide.
4.2. DISABILITY PRIOR TO RETIREMENT. In the event the Executive should
become disabled while actively employed by the Bank at any time after the date
of this Agreement but prior to his Retirement Date, the Executive shall be
considered to be one hundred percent (100%) vested in the amount set forth in
Schedule A attached hereto and made a part hereof, under Accrued Salary
continuation Liability for the appropriate Plan Year. Said amount shall be paid
to the Executive in a lump sum within three (3) months of the determination of
disability. Said payment shall be in lieu of any other retirement or death
benefit under this Agreement.
ARTICLE 5.
5.1. TERMINATION OF EMPLOYMENT. The Bank reserves the right to
terminate the employment of the Executive at any time prior to retirement. In
the event that the employment of the Executive shall terminate prior to the
Executive's Retirement Date, other, than by reasons of Executive's disability or
death, then this Agreement shall terminate upon the date of such termination of
employment. Provided, however, that the Executive shall be entitled to the
benefits described below under the following circumstances:
a. If the Executive has been employed by the Bank for a period of at
least four (4) continuous years from and after the date this Agreement
was entered into, the Executive will be considered to be vested in
thirty percent (30%) of the amount set out in Schedule A attached hereto
and made a part hereof under Accrued Salary Continuation Liability for
the appropriate Plan Year and shall become vested in an additional ten
percent (10%) of said amount for each succeeding year thereafter until
Executive becomes one hundred percent (100%) vested. If the Executive
has been employed by the Bank for a period of less than four (4)
continuous years from and after the date of this Agreement, the
Executive shall not be considered to be vested in any benefit hereunder
and shall be entitled to no benefits under this Agreement. If the
Executive's employment is terminated under the provisions of this
Section 5.1., the Bank will pay the Executive's vested amount upon such
terms and conditions and upon Executive's attainment of age
b. Anything hereinabove to the contrary notwithstanding, if the
Executive is not fully vested in the amount set forth in Schedule A
under Accrued Salary Continuation Liability, he will become fully vested
in said amount in the event of a Change of Control of the Bank and
Executive shall be entitled to the full amount set forth in Schedule A,
for the appropriate Plan Year, upon the terms and conditions hereof.
If termination of employment thereafter occurs under this Section 5.1.
ARTICLE 6.
6.1. TERMINATION OF AGREEMENT BY REASON OF CHANGE IN LAW. The Bank is
entering into this Agreement upon the assumption that certain existing tax laws
will continue in effect in substantially their current form. In the event of any
changes in such federal laws which materially affect this Agreement, the Bank
shall have an option to terminate or modify this Agreement. Provided, however,
that the Executive shall be entitled to at least the same amount as he would
have been entitled to under Section 4.2. relating to disability. The payment of
said amount shall be made upon such terms and conditions and at such time as the
Corporation shall determine, but in no event commencing later than the
Executive's Retirement Date.
ARTICLE 7.
7.1. NONASSIGNABLE. Neither the Executive, his spouse, nor any other
beneficiary under this Agreement shall have any power or right to transfer,
assign, anticipate, hypothecate, mortgage, commute, modify, or otherwise
encumber in advance any of the benefits payable hereunder, nor shall any of said
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benefits be subject to seizure for the payment of any debts, judgments, alimony
or separate maintenance, owed by the Executive or his beneficiary or any of
them, or be transferable by operation of law in the event of bankruptcy,
insolvency or otherwise.
ARTICLE 8.
8.1. CLAIMS PROCEDURE. The Bank shall make all determinations as to
rights to benefits under this Agreement. Any decision by the Bank denying a
claim by the Executive or his beneficiary for benefits under this Agreement
shall be stated in writing and delivered or mailed to the Executive or such
beneficiary. Such decision shall set forth the specific reasons for the denial,
written to the best of the Bank's ability in a manner calculated to be
understood without legal or actuarial counsel. In addition, the Bank shall
provide a reasonable opportunity to the Executive or such beneficiary for full
and fair review of the decision denying such claim.
ARTICLE 9.
9.l. UNSECURED GENERAL CREDITOR. The Executive's rights are limited to
the right to receive payments as provided in this Agreement and the Executive's
position with respect thereto is that of a general unsecured creditor of the
Bank.
ARTICLE 10.
10.1. Reorganization. The Bank shall not voluntarily engage in a
change of Control of the Bank unless and until such succeeding
or continuing corporation, firm or person agrees to assume and
discharge the obligations of the Bank under this Agreement.
Upon the occurrence of such event, the term "Bank" as used in
this Agreement shall be deemed to refer to such successor or
survivor corporation, firm or person.
ARTICLE 11.
11.1. NOT A CONTRACT OF EMPLOYMENT. This Agreement shall not be deemed
to constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Executive, or
restrict the right of the Executive to terminate his employment.
ARTICLE 12.
12-1. LIQUIDATED DAMAGES. The parties hereto, before entering into this
Agreement, have been concerned with the fact that substantial damages will be
suffered by Executive in the event that the Bank shall fail to perform according
to this Agreement. In the event of nonperformance by the Bank, Executive shall
be entitled to liquidated damages of $5,000.00 for each payment due hereunder
which is not made by the Bank within thirty (30) days of the date such payment
was scheduled to have been made. This provision shall not be applicable in the
event that such nonpayment is the result of prohibition of such payment by law,
regulation or order of a banking regulatory agency.
ARTICLE 13.
13.1. SUCCESSORS AND ASSIGNS; ASSIGNMENT. The rights and Obligations of
this Agreement shall be binding upon and inure to the benefit of the successors,
assigns, heirs and personal representatives of the parties hereto. Executive may
not assign this Agreement or any of Executive's rights hereunder except with the
prior written consent of the Bank.
13.2. SEVERABILITY. If any provision of this Agreement, as applied to
either party or to any circumstances, is judged by a court to be void or
unenforceable, in whole or in part, the same shall in no way affect any other
provision of this Agreement, the application of such provision in any other
circumstances, or the validity or enforceability of this Agreement.
13.3. APPLICABLE LAW; JURISDICTION AND VENUE. This Agreement and all
matters or issues
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collateral hereto shall be governed by the laws of the State of California
applicable to contracts performed entirely therein. Executive and Bank each
consent to the jurisdiction of, and any action concerning this Agreement
shall be brought and tried in, the United States District Court for the
Eastern District of California or the superior or municipal Court for the
County of Sutter.
13.4. WAIVER. A waiver by either party of any of the terms or
conditions of this Agreement in any one instance shall not be deemed or
construed to be a waiver of such terms or conditions for the future, or of any
subsequent breach thereof. All remedies, rights, undertakings, obligations, and
agreements contained in this Agreement shall be cumulative, and none of them
shall be in limitation of any other remedy, right, undertaking, obligation or
agreement of either party.
13.5. ATTORNEYS' FEES. If any legal action or other proceeding is
brought for the enforcement of this Agreement, or because of an alleged dispute,
breach, default, or misrepresentation in connection with any of the provisions
of this Agreement, the successful or prevailing party or parties shall be
entitled to recover reasonable attorneys' fees and other costs incurred in that
action or proceeding, in addition to any other relief to which it or they may be
entitled.
13.6. HEADINGS. The headings in this Agreement are for convenience only
and shall not in any manner affect the interpretation or construction of the
Agreement or any of its provisions.
13.7. NOTICE. Any notice or other communication to be given under this
Agreement shall be in writing and shall be deemed to have been duly given on the
date of service if personally served, or if mailed, upon deposit in the United
States mail, first class postage prepaid, express or certified, return receipt
requested, and properly addressed to the parties as follows: if to Executive at
his last address shown in the Bank's records; if to Bank
Feather River State Bank
P.O. Box
929002
Yuba City, CA 95992
Attention: President
Either party may designate a new address f or purpose of this Section 13.7. by
giving the other notice of the new address as provided herein.
IN WITNESS WHEREOF, the Bank has caused this Agreement to be duly
executed by its proper officer and the Executive has hereunto set his hand at
Yuba City, California, the day and year first above written.
FEATHER RIVER STATE BANK
By: ___________________________________
ANNETTE BERTOLINI
Its: SENIOR VICE PRESIDENT/CFO
EXECUTIVE:_____________________________
BLAINE LAUHON
5
<PAGE>
BENEFICIARY DESIGNATION NOTICE
To the Plan Administrator of the Feather River State Bank Executive Salary
Continuation Agreement:
Pursuant to the Provisions of my Executive Salary Continuation Agreement with
the Bank permitting the designation of a beneficiary or beneficiaries by a
participant, I hereby designate the following persons and entities as primary
and secondary beneficiaries of any benefit under said Agreement payable by
reason of my death:
Primary Beneficiary:
Name Address Relationship
Secondary (Contingent) Beneficiary:
Name Address Relationship
THE RIGHT TO REVOKE OR CHANGE ANY BENEFICIARY DESIGNATION IS HEREBY RESERVED.
ALL PRIOR DESIGNATIONS, IF ANY, OF BENEFICIARIES AND SECONDARY BENEFICIARIES ARE
HEREBY REVOKED.
The Plan Administrator shall pay all sums pay able under the Agreement by reason
of my death to the Primary Beneficiary, if he or she survives me, and if no
Primary Beneficiary shall survive me, then to the Secondary Beneficiary, and if
no named beneficiary survives me, then the Plan Administrator shall pay all
amounts in accordance with the terms of the Executive Salary Continuation
Agreement. In the event that a named beneficiary survives me and dies prior to
receiving the entire benefit payable under said Agreement, then and in that
event the remaining unpaid benefit, payable according to the terms of the
Agreement, shall be payable to the personal representatives of the estate of
said deceased beneficiary, who survive me, but die prior to receiving the total
benefit.
6
<PAGE>
<TABLE>
<CAPTION>
Date of Designation
- -------------------------------------------------------------------------------------------------
SCHEDULE A (BLAINE LAUHON)
- -------------------------------------------------------------------------------------------------
PARTICIPANT'S BALANCE SHEET AND POLICY DATA
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
END OF ACCRUED SALARY PERCENT NET INSURANCE
PLAN YEAR CONTINUATION VESTING COVERAGE
LIABILITY
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 $ 9,045.00 -0- $ 610,457.00
- -------------------------------------------------------------------------------------------------
2 18,842 -0- 612,786
- -------------------------------------------------------------------------------------------------
3 29,451 -0- 614,891
- -------------------------------------------------------------------------------------------------
4 40,940 30.00% 616,809
- -------------------------------------------------------------------------------------------------
5 53,384 40.00% 618,482
- -------------------------------------------------------------------------------------------------
6 66,860 50.00% 619,957
- -------------------------------------------------------------------------------------------------
7 81,455 60.00% 621,214
- -------------------------------------------------------------------------------------------------
8 97,261 70.00% 622,189
- -------------------------------------------------------------------------------------------------
9 114,379 80.00% 622,888
- -------------------------------------------------------------------------------------------------
10 132,918 90.00% 623,259
- -------------------------------------------------------------------------------------------------
11 152,995 100.00% 626,276
- -------------------------------------------------------------------------------------------------
12 174,739 100.00% 628,883
- -------------------------------------------------------------------------------------------------
13 198,288 100.00% 631,092
- -------------------------------------------------------------------------------------------------
14 223,791 100.00% 632,831
- -------------------------------------------------------------------------------------------------
15 251,411 100.00% 634,172
- -------------------------------------------------------------------------------------------------
16 281,323 100.00% 635,098
- -------------------------------------------------------------------------------------------------
17- 313,718 100.00% 635,598
- -------------------------------------------------------------------------------------------------
18 348,802 100.00% 635,751
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
SCHEDULE A DEFERRED SALARY CONT PLAN
- -------------------------------------------------------------------------------------------------
</TABLE>
7
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 21,700,132
<INT-BEARING-DEPOSITS> 13,332
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 59,727,193
<INVESTMENTS-CARRYING> 9,434,194
<INVESTMENTS-MARKET> 9,398,162
<LOANS> 187,409,964
<ALLOWANCE> 6,633,727
<TOTAL-ASSETS> 293,385,204
<DEPOSITS> 260,033,687
<SHORT-TERM> 5,770,000
<LIABILITIES-OTHER> 3,779,850
<LONG-TERM> 0
0
0
<COMMON> 17,875,958
<OTHER-SE> 5,925,709
<TOTAL-LIABILITIES-AND-EQUITY> 293,385,204
<INTEREST-LOAN> 14,191,243
<INTEREST-INVEST> 3,009,823
<INTEREST-OTHER> 243,002
<INTEREST-TOTAL> 17,404,068
<INTEREST-DEPOSIT> 6,165,866
<INTEREST-EXPENSE> 6,338,300
<INTEREST-INCOME-NET> 11,065,768
<LOAN-LOSSES> 850,000
<SECURITIES-GAINS> 14,147
<EXPENSE-OTHER> 11,683,561
<INCOME-PRETAX> 1,893,439
<INCOME-PRE-EXTRAORDINARY> 1,893,439
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,215,289
<EPS-BASIC> 0.68
<EPS-DILUTED> 0.59
<YIELD-ACTUAL> 9.04
<LOANS-NON> 7,805,000
<LOANS-PAST> 2,000
<LOANS-TROUBLED> 2,825,691
<LOANS-PROBLEM> 10,931,375
<ALLOWANCE-OPEN> 6,024,111
<CHARGE-OFFS> 998,651
<RECOVERIES> 758,267
<ALLOWANCE-CLOSE> 6,633,727
<ALLOWANCE-DOMESTIC> 6,633,727
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
