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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. __)
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x][X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
REDDING BANCORP
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the RegistrantRegistrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[REDDING BANCORP LOGO]
REDDING BANCORP
1951 CHURN CREEK ROAD
REDDING, CALIFORNIA 96002
March __, 1999April 2, 2001
Dear Shareholder:
We cordially invite you to attend this year's annual meeting in person.
The Annual Meeting of Shareholders of Redding Bancorp will be held at 5:00 p.m.
on April 20, 1999,May 15, 2001, in the lobby of Redding Bank of Commerce located at 1951 Churn
Creek Road, Redding, California, 96002.
The formal notice of the Annual Meeting and the Proxy Statement follows.
A copy of the Redding Bancorp 19982000 Annual Report to Shareholders is also
enclosed.
The Proxy Statement outlines the business to be conducted at the
meeting, which in addition toincludes the election of directors and the ratification of
Deloitte & Touche LLP as the Company's independent auditors, includes proposals
to amend and restate the Company's Articles of Incorporation.auditors. Your Board of
Directors has approved these proposals and we urge you to vote FOR them.
The full description of the proposals, the reasons for them and their
possible effectsIf you are outlined at length in the Proxy Statement. We urge youunable to read it carefully. Each proposal to amend and restate the Company's Articles of
Incorporation cannot be completed unless holders of a majority of the
outstanding shares vote in favor of it.
You are cordially invited to attend, this year's meeting in person.
However, a form of proxy and pre-addressed
envelope are enclosed for your convenience in voting by proxy. We urge you to
express your views by completing and returning your proxy whether or not you
plan to attend the meeting. This will ensure the voting of your shares if you
are unable to attend. If you do not indicate how you want to vote, your proxy
will be counted as a vote in favor of the proposals. If you fail to return your
proxy, you will in effect vote against the proposals. If you do attend the
meeting, you may withdraw your proxy and vote in person if you choose.
Sincerely,
RUSSELL L. DUCLOS
Russell L. Duclos
President and
Chief Executive Officer
Redding Bancorp
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[REDDING BANCORP LOGO]
REDDING BANCORP
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 20, 1999MAY 15, 2001
To the Shareholders of Redding Bancorp:
The Annual Meeting of Shareholders of Redding Bancorp, a California
corporation (the "Company"), will be held at 5:00 p.m. on Tuesday, April 20,
1999,May 15, 2001,
in the lobby of Redding Bank of Commerce located at 1951 Churn Creek Road,
Redding, California, 96002, for the following purposes:
1. ELECTION OF DIRECTORS.Election of Directors. Election of the following eightnine persons to the Board
of Directors to serve until the 20002002 Annual Meeting of Shareholders and
until their successors shall be elected and qualified:
Robert C. Anderson Kenneth R. Gifford, Jr. Michael C. Mayer
Russell L. Duclos Harry L. Grashoff, Jr.
Welton L. Carrel Eugene L. Nichols
John C. Fitzpatrick David H. Scott
2. AMENDMENT OF ARTICLES OF INCORPORATION CONCERNING AUTHORIZATION OF
PREFERRED STOCK. ApprovalRatification of the amendment and restatementAppointment of the Company's
Articles of Incorporation to authorize 2,000,000 shares of preferred stock.
3. AMENDMENT OF ARTICLES OF INCORPORATION CONCERNING SUPERMAJORITY VOTING AND
FAIR PRICE PROVISION. Approval of the amendment and restatement of the
Company's Articles of Incorporation to provide a supermajority voting and
fair price provision for certain business combinations.
4. AMENDMENT OF ARTICLES OF INCORPORATION CONCERNING ACTION BY WRITTEN CONSENT
OF SHAREHOLDERS. Approval of the amendment and restatement of the Company's
Articles of Incorporation to provide that shareholders may act by written
consent in lieu of a meeting only if the Board of Directors has previously
approved such action.
5. AMENDMENT OF ARTICLES OF INCORPORATION CONCERNING LIMITATION OF DIRECTOR
LIABILITY AND INDEMNIFICATION OF AGENTS. Approval of the amendment and
restatement of the Company's Articles of Incorporation to (i) limit the
liability of a director of the Company to the Company and its shareholders
for monetary damages for breach of the fiduciary duty of care to the
fullest extent permissible under California law and (ii) permit the Company
to indemnify its agents to the fullest extent permissible under California
law.
6. RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS.Independent Auditors. Ratification of the
appointment of Deloitte & Touche LLP as the Company's independent auditors
for the fiscal year ending December 31, 1999.
7. OTHER BUSINESS.2000.
3. Other Business. Transaction of such other business as may properly come
before the Annual Meeting and any adjournment or postponement thereof.
Shareholders of record as of the close of business on March 1, 1999,2001 are
entitled to notice of and to vote at the Annual Meeting and any adjournment
thereof. A complete list of shareholders entitled to vote will be available at
1951 Churn Creek Road, Redding, California, for ten days before the meeting.
WE URGE YOU TO MARK, SIGN AND DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY
AS POSSIBLE IN THE POSTAGE-PREPAID RETURN ENVELOPE SO THAT, WHETHER YOU INTEND
TO BE PRESENT AT THE ANNUAL MEETING OR NOT, YOUR SHARES CAN BE VOTED. PROXIES
WILL ALSO BE ACCEPTED BY TRANSMISSION OF A TELEGRAM, CABLEGRAM, TELECOPYFACSIMILE OR BY
ORAL TELEPHONIC TRANSMISSION PROVIDED SUCH TRANSMISSION CONTAINS SUFFICIENT
INFORMATION FROM WHICH IT CAN BE DETERMINED THAT THE TRANSMISSION WAS AUTHORIZED
BY THE SHAREHOLDER. THE TRANSFER AGENT'S TELECOPYFACSIMILE NUMBER IS (415) 989-5241.
RETURNING YOUR PROXY WILL NOT LIMIT YOUR RIGHTS TO ATTEND OR VOTE AT THE ANNUAL
MEETING.
By Order of the Board of Directors,
/s/ David H. Scott,
Secretary
Redding, California
March __, 1999April 2, 2001
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REDDING BANCORP
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Redding Bancorp, a California corporation, of proxies
in the accompanying form to be used at the Annual Meeting of Shareholders to be
held at 5:00 p.m. on Tuesday, April 20, 1999,May 15, 2001, at 1951 Churn Creek Road, Redding,
California and any adjournment or postponement thereof (the "Annual Meeting").
The Company's principal executive offices are located at 1951 Churn Creek Road,
Redding, California, 96002. Unless otherwise indicated, all references herein to
the "Company" refer to Redding Bancorp, a California corporation, and/or its
subsidiaries.
The shares represented by the proxies received in response to this
solicitation and not revoked will be voted at the Annual Meeting in accordance
with the instructions contained therein. A proxy may be revoked at any time
before it is exercised by filing with the Secretary of the Company a written
revocation or a duly executed proxy bearing a later date or by voting in person
at the Annual Meeting. If no choice is specified in a returned proxy, the shares
will be voted (i) FOR the election of the nominees for director listed in this
Proxy Statement (ii) FOR the approval of the proposal to amend and restate the
Company's Articles of Incorporation to authorize 2,000,000 shares of preferred
stock, (iii) FOR the approval of the proposal to amend and restate the Company's
Articles of Incorporation to provide a supermajority voting and fair price
provision for the approval of certain business combinations, (iv) FOR the
approval of the proposal to amend and restate the Company's Articles of
Incorporation to provide that shareholders may act by written consent in lieu of
a meeting only if the Board of Directors has previously approved such action,
(v) FOR the approval of the proposal to amend and restate the Company's Articles
of Incorporation to (A) limit the liability of a director of the Company to the
Company or its shareholders for monetary damages for breach of the fiduciary
duty of care to the fullest extent permissible under California law and (B)
permit the Company to indemnify its agents to the fullest extent permissible
under California law and (vi)(ii) FOR the ratification of the appointment of Deloitte &
Touche LLP as the Company's independent auditors for the fiscal year ending
December 31, 1999,2000, as described in the Notice of Annual Meeting and in this
Proxy Statement and, as to any other matter that may be properly brought before
the Annual Meeting, in accordance with the judgment of the proxy holders.
Shareholders of record at the close of business on March 1, 19992001 (the
"Record Date"), are entitled to notice of and to vote at the Annual Meeting. As
of the close of business on such date,the Record Date, the Company had 2,690,1032,884,181 shares of
Common Stock outstanding and entitled to vote. The presence in person or by
proxy of the holders of a majority of the Company's outstanding shares of Common
Stock ("Common Stock") constitutes a quorum for the transaction of business at
the Annual Meeting. Abstentions and broker "non-votes" are each included in the
determination of the number of shares present and voting for purposes of
determining the presence of a quorum. A broker "non-vote" occurs when the
nominee holding shares for a beneficial owner does not have discretionary voting
power with respect to that item and has not received instructions from the
beneficial owner. Abstentions will be included in the tabulations of the vote's
cast on proposals presented to the shareholders and therefore will have the
effect of a negative vote. Broker "non-votes" will not be counted for purposes
of determining the number of votes cast for a proposal.
Each holder of Common Stock is entitled to one vote for each share held
as of the Record Date, except that in the election of directors, under
California law, each shareholder may be eligible to exercise cumulative voting
rights and may be entitled to as many votes as shall equal the number of shares
of Common Stock held by such shareholder multiplied by the number of directors
to be elected, and such shareholder may cast all of such votes for a single
nominee or may distribute them among two or more nominees. No shareholder,
however, shall be entitled to cumulate votes (in other words, cast for any
candidate a number of votes greater than the number of shares of Common Stock
held by such shareholder multiplied by the number of directors to be elected)
unless the name(s) of the candidate(s) has (have) been placed in nomination
prior to the voting and a shareholder has given notice at the meeting of the
shareholder's intention to cumulate such shareholder's votes. If any one
shareholder has given notice, all shareholders may cumulate their votes for
candidates in nomination. The candidates receiving the highest number of
affirmative votes of shares entitled to be voted for them, up to the number of
directors to be elected by such shares, shall be elected.
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The expense of printing and mailing proxy materials will be borne by the
Company. In addition to the solicitation of proxies by mail, solicitation may be
made by certain directors,
officers and other employees of the Company may make solicitation by personal
interview, telephone or facsimile. No additional compensation will be paid to
such persons for such solicitation. The Company will reimburse brokerage firms
and others for their reasonable expenses in forwarding solicitation materials to
beneficial owners of the Company's Common Stock.
This Proxy Statement and the accompanying form of proxy are being mailed
to shareholders on or about March __, 1999.April 2, 2001.
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PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, it will be proposed to elect eightnine directors, each
to hold office until the next Annual Meeting and until successors shall be
elected and qualified. It is the intention of the proxy holders named in the
enclosed Proxy to vote such Proxies (except those containing contrary
instructions) for the eight nominees named below.
The Board does not anticipate that any of the nominees will be unable to
serve as a director, but if that should occur before the Annual Meeting, the
proxy holders reserve the right to substitute as nominee and vote for another
person of their choice in the place and stead of any nominee unable so to serve.
The proxy holders also reserve the right, if a shareholder properly exercises
his or her right to cumulate votes, to cumulate votes for the election of
directors and cast all of such votes for any one or more of the nominees, to the
exclusion of others, and in such order of preference as the proxy holders may
determine in their discretion, based upon the recommendation of the Board of
Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
EIGHTNINE NOMINEES FOR DIRECTOR.
Brief summaries of the background and business experience of each of the
nominees covering at least the last five years follow:
Robert C. Anderson, age 66,68, has served as Chairman of the Board of the
Company since the Company's incorporation in January 1982 and is a member of the
loan, marketing, executive compensation, asset/liability, audit, long range planning and
executive committees of the Board. Mr. Anderson is thehas retired as mayor of the City
of Redding and is a member of the Redding City Council.Redding.
Russell L. Duclos, age 59,62, has served as President, Chief Executive
Officer and a director of the CompanyRedding Bank of Commerce, a wholly owned
subsidiary of Redding Bancorp ("the Bank") since July 1997. On January 1, 2001,
Mr. Duclos was named President and Chief Executive Officer of the Company. From
1982 to July 1997, he served as Executive Vice President and Chief Credit
Officer of the Company.Bank. Mr. Duclos presently serves on the asset/liability,
executive, loan, marketing and long range planning committees of the Board of Directors.
Welton L. Carrel, age 61,63, has served as a director of the Company since
January 1982. Mr. Carrel is retired. From 1961 to 1989, he was President of
Western Business Equipment d.b.a. Carrel's Office Machines. Mr. Carrel is a
member of the audit, loan and marketingloan committees of the Board of Directors.
John C. Fitzpatrick, age 63,65, has been a director of the Company since
January 1982. Mr. Fitzpatrick has served as President and Chief Executive
Officer of Pepsi Cola Bottling Company of Northern California since 1986 and
Chief Executive Officer of Carbonated Industries since its inception in 1986.
From 1962 to 1985, Mr. Fitzpatrick was President and Chief Executive Officer of
McCall's Dairy Milk and Ice Cream. Mr. Fitzpatrick also serves as Secretary of
John Fitzpatrick & Sons, Inc., a company engaged in the real estate investment
business. Mr. Fitzpatrick serves as chairman of the long range planning
committee and is a member of the executive, executive compensation, marketing
and audit
committees of the Board of Directors.
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Kenneth R. Gifford, Jr., age 53,55, has served as a director of the Company
since January 1998. Mr. Gifford has been a director, President and Chief
Executive Officer of Gifford Construction, Inc. since 1972. Mr. Gifford serves
as chairman of the marketing committee and is a
member of the audit, executive compensation and long range planning committees
of the Board of Directors.
Harry L. Grashoff, Jr., age 63,65, and has served as a director of the
Company since January 1982. Mr. Grashoff is retired. From 1982 to July 1997, Mr.
Grashoff was President and Chief Executive Officer of the Company. Mr. Grashoff
serves as chairman of the loan committee and is a member of the executive, long
range planning, and asset/liability and marketing committees of the Board of Directors.
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Eugene L. Nichols, age 64,66, has been a director of the Company since
January 1982. He is a General Partner, President and Chief Executive Officer and
founding principal of Nichols, Melburg and Rossetto and Associates, an
architectural firm, a position he has held since 1981. Mr. Nichols serves on the
audit, and long range planning and marketing committees of the Board of Directors.
David H. Scott, age 55,57, has been a director of the Company since April
1997. He is Managing Partner of D. H. Scott & Company, a public accounting firm,
a position he has held since 1986. Mr. Scott serves as chairman of the audit and
asset/liability committees and is a member of the executive compensation and
loan committees of the Board of Directors.
Michael C. Mayer, age 44, has served as President, Chief Executive
Officer of the Bank and a director of the Company since January 2001. From April
1997 to January 1999, he served as Executive Vice President and Chief Credit
Officer of the Bank. From January 1999 to January 2001, he served as Executive
Vice President and Chief Operating Officer of the Bank. Prior to joining Redding
Bank of Commerce, Mr. Mayer was Executive Vice President and Chief Credit
Officer at another Northern California independent bank. Mr. Mayer presently
serves on the asset/liability, loan and long range planning committees of the
Board of Directors.
None of the directors were selected pursuant to arrangements or
understandings other than with the directors and shareholders of the Company
acting within their capacity as such. There are no family relationships between
any of the directors, and none of the directors serve as a director of any other
company which has a class of securities registered under, or subject to periodic
reporting requirements of, the Securities Exchange Act of 1934, as amended, or
any company registered as an investment company under the Investment Company Act
of 1940.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has a standing Loan Committee, Executive
Committee, Asset/Liability Committee, Marketing Committee, Long RangeLong-range Planning Committee, Executive
Compensation Committee and Audit Committee. The Board has not appointed a
Nominating Committee. The Executive Compensation Committee and Audit Committee
are comprised entirely of independent directors.
Executive Committee
The members of the Executive Committee during 19982000 were Robert C.
Anderson, Russell L. Duclos, John C. Fitzpatrick, Richard W. Green and Harry L. Grashoff, Jr. The
Executive Committee held 12 meetings during 1998.2000. The Executive Committee's
functions are to review and discuss all current and pending strategic actions of
the Company.
Loan Committee
The members of the Loan Committee during 19982000 were Robert C. Anderson,
Russell L. Duclos, Harry L. Grashoff, Jr., Richard W. Green, Charles E. Metro
andWelton L. Carrel, David H. Scott.Scott and
Michael C. Mayer. The Loan Committee held 52 meetings during 1998.2000. The Loan
Committee's functions are to establish credit policy, monitor portfolio quality,
review and approve credits, establish lending limits and monitor the Company's
reserve allowance.
Long RangeLong-range Planning Committee
The members of the Long RangeLong-range Planning Committee during 19982000 were Robert
C. Anderson, Russell L. Duclos, Welton L. Carrel, John C. Fitzpatrick, Richard W.
Green, Kenneth
R. Gifford, Jr., Harry L. Grashoff, Jr., Charles E. Metro and
Eugene L. Nichols.Nichols and Michael C. Mayer.
The Long RangeLong-range Planning Committee held three
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meetings during 1998.met in November 2000 and January 2001. The
Long RangeLong-range Planning Committee's functions are to establish short and long term
strategic goals for the Company and approve operating budgets.
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Asset/Liability Committee
The members of the Asset/Liability Committee during 19982000 were Robert C.
Anderson, Russell L. Duclos, Welton L. Carrel, Harry L. Grashoff, Jr. and, David H. Scott.Scott and Michael
C. Mayer. The Asset/Liability Committee held twothree meetings during 1998.2000. The
Asset/Liability Committee's functions are to establish investment policy,
monitor mix and maturity of the loan and investment portfolios and monitor
exposure to interest rate risk.
Executive Compensation Committee
The members of the Executive Compensation Committee during 19982000 were
Robert C. Anderson, John C. Fitzpatrick, Kenneth R. Gifford, Jr., Richard W. Green and David H.
Scott. The Executive Compensation Committee held five meetingsone meeting during 1998.2000. The
Executive Compensation Committee's functions are to administer the Company's
compensation programs and policies applicable to its executive officers. The
Executive Compensation Committee meets annually to review and reestablish the
salaries of the Company's executive officers, to propose adjustments to the
incentive compensation bonus program. The Executive Compensation Committee also
administers the Company's 1998 Stock Option Plan.
Marketing Committee
The members of the Marketing Committee during 1998 were Richard W. Green,
Robert C. Anderson, Russell L. Duclos, Welton L. Carrel, John C. Fitzpatrick,
Kenneth R. Gifford, Jr., Harry L. Grashoff, Jr. and Eugene L. Nichols. The
Marketing Committee held six meetings during 1998. The Marketing Committee's
functions are to develop the Company's marketing plan in accordance with the
Company's strategic plans and to approve the Company's marketing budget.
Audit Committee
The members of the Audit Committee during 19982000 were Robert C. Anderson,
Welton L. Carrel, John C. Fitzpatrick, Kenneth R. Gifford, Jr., Eugene L.
Nichols and David H. Scott. The Audit Committee held fivefour meetings during 1998.2000.
The Audit Committee's functions are to overseeassist the Company's relationship withBoard of Directors in
fulfilling its independent accounting firm, to reviewresponsibility for oversight of the recommendations of such
accounting firm, to determine whether the recommendationsquality and integrity of the
accounting, firm
are being implementedauditing, and to oversee the internal audit functionreporting practices of the Company. The membership of
the committee consists of at least three directors who are knowledgeable in
financial and accounting matters, including at least one member with accounting
or related financial management expertise. Each member is free of any
relationship that, in the opinion of the board, would interfere with his or her
individual exercise of independent judgement, and shall meet the director
independence requirements for serving on audit committees as set forth in the
corporate governance standards of the NASDAQ.
BOARD OF DIRECTORS MEETINGS
The Board of Directors held 12 meetings during the year ended December 31,
1998.2000. All directors
attended at least 95% of the aggregate number of meetings of the Board of
Directors and of the committees on which such directors serve.
DIRECTORS' COMPENSATION
Each outside director of the Company receives $850$900 for each Board of
Directors meeting attended, $500 for each meeting not attended, $250 for each
loan and audit committee meeting attended and $200 for eachall other committee
meetingmeetings attended. Committee chairmen are paid an additional $50 per meeting.
The Chairman of the Board is paid an additional $700 per month, regardless of
the number of meetings attended. Directors are also eligible to participate in
the 1998 Stock Option Plan, as determined by the Executive Compensation
Committee.
In April 1998, options to purchase shares of the Company's Common Stock
were granted to each of the Company's directors as follows: Robert C. Anderson:
45,00049,500 shares, Welton L. Carrel: 27,00029,700 shares, John C. Fitzpatrick: 37,50041,250
shares, Kenneth R. Gifford, Jr.: 18,00019,800 shares, Harry L. Grashoff, Jr.: 37,500
shares,
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Richard W. Green: 33,000 shares, Charles E. Metro: 27,00041,250
shares, Eugene L. Nichols: 25,50027,540 shares and David H. Scott: 19,50021,450 shares. The
options were granted at an exercise price of $9.07,$8.25, which represented 85% of the
fair market value of the Common Stock on the date of grant as determined by the
Board of
Directors.most recent sale activity posted on the over-the-counter bulletin board. The
options vest at the rate of 20% per year commencing on April 22, 1999.1998. Under the
terms of the 1998 Stock Option Plan, vesting of the options is accelerated in
the event of a change of control (as defined in the 1998 Stock Option Plan),
termination of employment by reason of death or disability, termination of
employment by the Company without cause or in the case of an
outside director, mandatory retirement.
On March 1, 1999, Richard W. Green
will retire, resulting in the vesting of 100% of his options as of that date.
See "Employment Agreements" for a description of the compensation
arrangement with Russell L. Duclos, an officer of the Company who is also a
director.-4-
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March __, 19991, 2001 by (i) each person
who is known by the Company to beneficially own more than five percent of the
Company's Common Stock, (ii) each of the Company's directors, (iii) each of the
Named Executive Officers (as defined on page 8) and (iv) all directors and
executive officers of the Company as a group.
Number of Shares of
Common Stock # Percentage
Name and Address of Beneficial Owner Beneficially Owned(1) Percentof class
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Gilbert and Irene Goetz
P. O. Box 493130Goetz(2)
1330 Ala Moana Blvd. # 3106
Honolulu, HI 96814 ............................ 170,364 5.93%
Robert C. Anderson(3)
1960 Bechelli Lane
Redding, CA 96049....................... 150,240 5.58
Robert96002 ............................ 176,350 6.14%
John C. Anderson(2)
1951 Churn Creek RoadFitzpatrick(4)
P.O. Drawer 994206
Redding, CA 96002....................... 153,600 5.71
John C. Fitzpatrick(3)
1951 Churn Creek Road
Redding, CA 96002....................... 178,170 6.6296099 ............................ 220,416 7.67%
Harry L. Grashoff, Jr.(4)
1951 Churn Creek Road(5)
3162 Pinot Path
Redding, CA 96002....................... 149,720 5.5796001 ............................ 173,392 6.03%
Welton L. Carrel(5)...................... 82,440 3.06Carrel(6) ........................... 102,366 3.56%
Russell L. Duclos(6)..................... 23,082 *Duclos(7) .......................... 38,590 1.35%
Kenneth R. Gifford, Jr.(7)............... 28,457 1.06
Charles E. Metro(8)...................... 93,000 3.46(8) .................... 56,382 1.96%
Eugene L. Nichols(9)..................... 43,074 1.60 .......................... 51,308 1.79%
David H. Scott(10)....................... 14,400 ............................ 22,609 *
Michael C. Mayer(11) .......................... 19,050 *
Linda J. Miles(11)....................... 4,500 *
Michael C. Mayer(12)..................... 5,500Miles(12) ............................ 14,850 *
All directors and executive officers as a
group (11(10 persons)................ 775,943 28.8 ............................ 875,613 30.46%
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* LessIndicates less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with
respect to securities. Shares of Common Stock subject to options
currently exercisable or exercisable within 60 days of March 1, 1999,2001,
are deemed to be beneficially owned by the person holding such option
for the purpose of computing the percentage ownership of such person but
are not treated as outstanding for the purposes of computing the
percentage ownership of any other person. Except as indicated by
footnotes and subject to community -6-
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property laws, where applicable, the
persons named above have sole voting and investment power with respect
to all shares of Common Stock shown as beneficially owned by them.
(2) Includes 144,600170,364 shares held by the Irene and Gilbert Goetz Trust, of
which Mrs. Goetz is a co-trustee with Mr. Goetz and shares voting and
investment power with respect to such shares.
(3) Includes 146,650 shares held by the Anderson Family Revocable Living
Trust, of which Mr. Anderson is a co-trustee and shares voting and
investment power with respect to such shares, and 9,00029,700 shares issuable
to Mr. Anderson upon the exercise of options exercisable within 60 days
of March 1, 1999.
(3)2001.
(4) Includes 119,010130,911 shares held by Pepsi Cola Bottling Company of Northern
California,Carbonated Industries Inc., a California
limited partnership, ("Pepsi"), 51,66056,826 shares owned by the Pepsi Profit Sharing
Plan (the "Pepsi Plan") 7,929 shares held by the Elizabeth and 7,500John
Fitzpatrick Trust and 24,750 shares issuable to Mr. Fitzpatrick upon the
exercise of options exercisable within 60 days of March 1, 1999.2001. Mr.
Fitzpatrick is chief executive officer of Carbonated Industries, Inc.,
the general partner of Pepsi, and may be deemed to share voting and
investment power with respect to such shares. Mr. Fitzpatrick is a
participant in the Pepsi Profit Sharing Plan. Mr. Fitzpatrick disclaims
beneficial ownership of such shares except for those shares in which he
has a pecuniary interest.
(4)(5) Includes 129,720134,892 shares held jointly withby the Grashoff Family Revocable Trust of
which Mr. Grashoff's spouse, 5,640Grashoff and his wife
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9
are co-trustees, 6,204 shares held separately in his spouse's name,
7,546 held individually and 7,50024,750 shares issuable to Mr. Grashoff upon
the exercise of options exercisable within 60 days of March 1, 1999.
(5)2001.
(6) Includes 76,86084,546 shares held by the Carrel Family Living Trust of which
Mr. Carrel is a co-trustee and shares voting and investment power with
respect to such shares 180 shares held in Mr. Carrel's spouse's name for their
grandchildren and 5,40017,820 shares issuable to Mr. Carrel upon the
exercise of options exercisable within 60 days of March 1, 1999.
(6)2001.
(7) Includes 17,08218,790 shares held jointly withby the Duclos Family Trust of whom Mr.
Duclos' spouseDuclos and 6,000his wife are co-trustees, and 19,800 shares issuable to Mr.
Duclos upon the exercise of options exercisable within 60 days of March
1, 1999.
(7)2001.
(8) Includes 24,85741,862 shares held jointly with Mr. Gifford's spouse, 6,600
shares held by Gifford Construction, Inc. and 3,6003,960 shares issuable to
Mr. Gifford upon the exercise of options exercisable within 60 days of
March 1, 1999.
(8) Includes 47,250 shares held by the Charles E. Metro Investment Co. Profit
Sharing Plan, of which Mr. Metro is a trustee and shares voting and
investment power with respect to such shares, and 27,000 shares issuable to
Mr. Metro upon the exercise of options exercisable within 60 days of
March 1, 1999.2001.
(9) Includes 1,5001,650 shares held jointly with Mr. Nichols' spouse, 1,098 shares
held separately in his spouse's name38,438
individually and 5,10011,220 shares issuable to Mr. Nichols upon the exercise
of options exercisable within 60 days of March 1, 1999.2001.
(10) Includes 1,645 shares held by the David H. Scott Accountancy Corporation
401(k) Plan, of which Mr. Scott is a trustee and shares voting and
investment power with respect to such shares, 8,8559,739 shares held jointly with Mr. Scott's spouse and 3,90012,870
shares issuable to Mr. Scott upon the exercise of options exercisable
within 60 days of March 1, 1999.2001.
(11) Includes 4,200 shares held individually by Mr. Mayer and 14,850 shares
issuable to Mr. Mayer upon the exercise of options exercisable within 60
days of March 1, 2001.
(12) Consists of 4,50014,850 shares issuable to Ms. Miles upon the exercise of
options exercisable within 60 days of March 1, 1999.
(12) Includes 4,500 shares issuable to Mr. Mayer upon the exercise of options
exercisable within 60 days of March 1, 1999.
-7-2001.
-6-
10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain summary information concerning
compensation paid to the Company's Chief Executive Officer and two other
officers who were serving as executive officers on December 31, 1998,2000, and whose
aggregate salary and bonus exceeded $100,000 in fiscal 19982000 (the "Named
Executive Officers") and for each of the fiscal years ended December 31, 19971999
and 1996.1998.
SUMMARY COMPENSATION TABLE
Long-Term
CompensationLong term
Annual Compensation Awards
------------------------------ ------------compensation awards
---------------------------------- -----------------------
Securities
Underlying All Other
Other Underlying Compensa-
Name and Principal Position Year Salary ($Salary($) Bonus($) ($Other($)(3)(4) Options(#) tion($Compensation($)(4)(5)
- --------------------------- ---- ---------- --------- ------ ------------ ----------- ---------- ------------------
Russell L. Duclos 1998 $202,202(1)2000 $109,200(1) $ 47,421 $5,000 30,000 $3,37887,328 $ 5,000 $ 2,256
President and& Chief Executive 1997 $100,000(2)Officer 1999 $107,300(2) $ 99,720 $ 5,000 33,000 $ 3,457
of the Company 1998 $105,000(3) $ 80,000 $5,000$ 5,000 -- $2,342$ 3,378
Michael C. Mayer 2000 $ 88,400 $ 83,615 $ 5,000 $ 2,256
President & Chief Executive Officer 19961999 $ 77,50082,000 $ 62,500 $5,00080,428 $ 5,000 24,750 $ 3,985
of the Bank 1998 $ 80,000 $ 66,890 $ 5,000 -- $2,342$ 3,584
Linda J. Miles 19982000 $ 166,45988,400 $ 38,942 $5,000 22,500 $3,66083,615 $ 5,000 $ 2,256
Executive Vice President and 1997& 1999 $ 80,00085,000 $ 70,000 $5,000 -- $2,34281,886 $ 5,000 24,750 $ 4,029
Chief Financial Officer 1996 $ 72,500 $ 62,500 $5,000 -- $2,342
Michael C. Mayer(5) 1998 $ 146,89083,000 $ 38,246 $5,000 22,500 $3,584
Executive Vice President and 199783,459 $ 50,0005,000 -- $ 26,250 $5,000 -- $1,171
Chief Credit Officer3,660
- ---------------------
(1) Includes $37,638 deferred by Mr. Duclos pursuant to the Company's
Deferred Compensation Plan.
(2) Includes $20,000 deferred by Mr. Duclos pursuant to the Company's
Deferred Compensation Plan.
(3) Includes $64,265 deferred by Mr. Duclos pursuant to the Company's
Deferred Compensation Plan.
(2) Includes $15,400 deferred by Mr. Duclos pursuant to the Company's Deferred
Compensation Plan.
(3)(4) Represents an automobile for business use, for which the Company pays
all expenses, and membership expenses in connection with the use of a
private club for business purposes, particularly for the purpose of
entertaining the Bank's customers. The officers may have derived some
personal benefit from the use of such automobiles and membership. The
Company, after reasonable inquiry, believes that the value of any
personal benefit not directly related to job performance which is
derived from the personal use of such automobile and membership does not
exceed $5,000 per year in the aggregate for any single executive
officer.
(4)(5) Represents health insurance premiums paid by the Company.
(5) Mr. Mayer joinedRELATED PARTY TRANSACTIONS
Certain directors and officers of the CompanyBank and entities with which they are
associated are customers and have transactions with the Bank in April 1997.
-8-the ordinary
course of business. All loans and commitments included in such transactions are
made on substantially the same terms, including interest rates and collateral,
as those prevailing at the time for comparable transactions with other persons
and do not involve more than normal risk of collectibility or present other
unfavorable features.
-7-
11
STOCK OPTIONS
The following tables summarize option grants to the Named Executive Officers
during fiscal 1998, andtable summarizes the value of the options held by each such person at the end of
fiscal 1998.2000. No options were granted or exercised by the Named Executive
Officers during the fiscal year ended December 31, 1998.
OPTION GRANTS IN LAST FISCAL YEAR2000.
THE NAMED EXECUTIVE OFFICERS
Individual Grants Potential
----------------------------------------------------------------------------------------------------------- Realizable Value at
Number of Percentage of Assumed Annual Rates of
Securities Total Options Stock Price Appreciation
Underlying Granted to Exercise for Option Term(4)
Options Employees in Price Expiration -------------------------------- --------
Name Granted(#)(1) Fiscal Year ($/Sh)(2) Date(3) 5%($) 10%($)
- ---- ------------- ------------- --------- ---------- ---------- --------- ------------------- --------
Russell L. Duclos 30,000 21% 10.67....... 33,000 -% $ 9.70 04/22/08 $199,200 $508,200
Linda J. Miles 22,500 16% 10.67Michael C. Mayer ........ 24,750 -% $ 9.70 04/22/08 $149,400 $381,150
Michael C. Mayer 22,500 16% 10.67Linda J. Miles .......... 24,750 -% $ 9.70 04/22/08 $149,400 $381,150
- ----------------------
(1) The right to exercise these stock options vests on an annual basis over
a five-year period. Under the terms of the Company's stock plans, the
committee designated by the Board of Directors to administer such plans
retains the discretion, subject to certain limitations, to modify,
extend or renew outstanding options and to reprice outstanding options.
Options may be repriced by canceling outstanding options and reissuing
new options with an exercise price equal to the fair market value on the
date of reissue, which may be lower than the original exercise price of
such canceled options.
(2) The exercise price is equal to 100% of the fair market value on the date
of grant as determined by the Board of Directors.
(3) The options have a term of ten years, subject to earlier termination in
certain events related to termination of employment.
(4) The five percentfive-percent and ten percent assumed rates of appreciation are
suggested by the rules of the Securities and Exchange Commission and do
not represent the Company's estimate or projection of the future price
of the Common Stock
price.Stock. No assurance can be given that any of the values
reflected in the table will be achieved.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Securities Underlying Value of
Unexercised Unexercised
Options at In-the-Money Options at
December 31, 1998(#)2000(#) December 31, 1998($2000($)(1)
---------------------------- ---------------------------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
Russell L. Duclos -- 30,000 -- $204,900........ 13,200 19,800 $ 63,360 $ 95,040
Linda J. Miles -- 22,500 -- $153,675........... 9,900 14,850 $ 47,520 $ 71,280
Michael C. Mayer -- 22,500 -- $153,675......... 9,900 14,850 $ 47,520 $ 71,280
- ------------
(1) Based on the fair market value of the Company's Common Stock at December
31, 19982000 of $17.50$14.50 per share less the applicable exercise price per
share. The fair market value of the Company's Common Stock at December
31, 19982000 was determined based on the basis of the last reported sale of the Company's
Common Stock in 1998,2000, which occurred on December 1, 1998.
-9-29, 2000.
-8-
12
1998 STOCK OPTION PLAN
On February 17, 1998, the Board of Directors adopted the 1998 Stock Option
Plan (the "Plan"), which was approved by the Company's shareholders on April 21,
1998. The Plan provides for awards in the form of options (which may constitute
incentive stock options ("Incentive Options") under Section 422(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), or nonstatutory stock
options ("NSOs")) to key personnel of the Company, including the directors of
the Company or any subsidiary. The Plan is not qualified under section 401(a) of
the Code or subject to the provisions of the Employee Retirement Income Security
Act of 1974, as amended. The Plan provides that Incentive Options under the Plan
may not be granted at less than 100% of fair market value of the Company's
Common Stock on the date of the grant, which means the recipient receives no
benefit unless the Company's Common Stock price increases over the option term.
Under the terms of the Plan, NSOs may not be granted at less than 85% of the
fair market value of the Common Stock on the date of the grant. The purpose of
the Plan is to promote the long-term success of the Company and the creation of
shareholder value by (i) encouraging key personnel to focus on critical long
range objectives, (ii) increasing the ability of the Company to attract and
retain key personnel and (iii) linking key personnel directly to shareholder
interests through increased stock ownership. A total of 540,000 shares of the
Company's Common Stock are available for grant under the Plan. If an option
granted under the Plan expires, is canceled, forfeited or terminates without
having been fully exercised, the unpurchased shares which were subject to that
option again become available for the grant of additional options under the
Plan.
The Plan is administered by the Executive Compensation Committee of the
Board of Directors. Subject to the terms of the Plan, the Executive Compensation
Committee determines the number of options in the award as well as the vesting
and all other conditions. The Plan provides that all options under the Plan
shall vest at a rate of at least 20% per year from the date of the grant.
Vesting may be accelerated in the event of an optionee's death, disability, or
retirement, or in the event of a change in control (as defined in the 1998 Stock
Option Plan). As of March __, 1999, the Company had outstanding options to
purchase an aggregate of 411,000 shares of the Company's Common Stock at
exercises prices ranging from $9.07 to $10.67 per share or a weighted average
exercise price per share of $9.62.
DIRECTORS DEFERRED COMPENSATION PLAN
Effective January 1993, the Board of Directors adopted the Directors
Deferred Compensation Plan (the "Deferred Compensation Plan") pursuant to which
each director of the Company may elect to defer all or any part of the
compensation to which such director would be entitled as a director such as
director's fees or committee fees. An election to defer compensation continues
in effect until revoked and deferred compensation, together with interest
thereon, is payable to the director or his or her beneficiary within 30 days
after the date of death or resignation unless the director has designated an
optional installment method of payment over a period of up to ten years.
Pursuant to the Deferred Compensation Plan, each director may designate one or
more beneficiaries to receive amounts due such director upon such director's
death. Interest on amounts deferred is credited on a monthly basis and
compounded at a rate equal to one half percent above the Company's reference
rate in effect on July 1 of each year. If the Company changes the method of
computing its reference rate, then the Deferred Compensation Plan provides that
the Company's reference rate will be replaced by the prime rate published in the
West Coast edition of the Wall Street Journal. The Deferred Compensation Plan
may be terminated by the Company at any time with respect to compensation earned
on or after the termination date.
PENSION AND LONG-TERM INCENTIVE PLANS
The Board of Directors of the Company adopted an Incentive Profit Sharing
Plan in July 1983, which will remain in effect until terminated by the Board of
Directors. The Incentive Profit Sharing Plan provides that bonuses are computed
on the Company's profits after a 20% return to shareholders, before taxes, less
any gain on investment securities plus any loss on investment securities sold.
The bonus is paid on the first day of each calendar quarter as to 70% of the
bonus earned for the previous calendar quarter. Upon receipt of the audited
-10-
13
annual statement, the incentive bonus is adjusted and the remainder of the bonus
earned, if any, is paid to the recipients thereof.
The participants in the Incentive Profit Sharing Plan are the Company's
President and Chief Executive Officer, Russell L. Duclos, as to three and five
hundredths percent of the profits as defined above; Michael C. Mayer, Executive
Vice President and Chief Credit Officer, as to two and forty-five hundredths
percent of such profits; and Linda J. Miles, Executive Vice President and Chief
Financial Officer as to two and fifty-five hundredths percent of such profits.
The remainder of the Company's employees may receive up to 12% of the profits at
the discretion of the President of the Company.
EMPLOYMENT AGREEMENTS
In June 1997, the Company entered into an employment agreement with Russell
L. Duclos, the President and Chief Executive Officer of the Company. The
agreement may be terminated by either the Company or Mr. Duclos, with or without
cause or notice. Unless sooner terminated, the agreement shall automatically
terminate on June 30, 2000. Pursuant to the agreement, Mr. Duclos' initial base
salary was $100,000 per year and is reviewed and adjusted annually. The
agreement also provides that Mr. Duclos shall be eligible to receive profit
sharing compensation pursuant to the Company's Incentive Profit Sharing Plan.
The Company has further agreed to provide Mr. Duclos with the following
additional benefits: (i) an automobile and payment of all necessary and
customary expenses therefor, (ii) a proprietary membership and monthly dues in
the Riverview Country Club for use by Mr. Duclos for business development and
(iii) an annual paid vacation of four weeks. In the event Mr. Duclos is
terminated by the Company for a reason other than cause, the Company is
obligated to pay Mr. Duclos an amount equal to twice his then annual base
salary, which amount is required to be paid over a period of one year.
INDEMNIFICATION MATTERS
The Company's bylaws provide for indemnification of the Company's directors,
officers, employees and other agents of the Company to the extent and under the
circumstances permitted by the California General Corporation Law. The Company's
bylaws also provide that the Company shall have the power to purchase and
maintain insurance covering its directors, officers and employees against any
liability asserted against any of them and incurred by any of them, whether or
not the Company would have the power to indemnify them against such liability
under the provisions of applicable law or the provisions of the Company's
bylaws.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
Company pursuant to provisions in the Company's bylaws, the Company has been
informed that, in the opinion of the Securities and Exchange Commission (the
"SEC"), such indemnification is against public policy as expressed in the
Securities Act of 1933, and is therefore unenforceable.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers and
persons who own more than ten percent of a registered class of the Company's
equity securities to file with the SEC initial reports of ownership and reports
of changes of ownership of Common Stock and other equity securities of the
Company. Officers, directors and greater than ten percent shareholdersBased upon a review of such reports, the Company became subject to the requirements of Section 16(a) and the SEC
regulations thereunder on February 2, 1999, the effective date of the Company's
Registration Statement on Form 10 under the Exchange Act. Accordingly, no
director, officer or beneficial owner of more than ten percent of the Company's
Common Stock wasbelieves that all
reports required to file reports pursuant toby Section 16(a) of the Exchange Act in 1998.
-11-
14to be filed by its
executive officers and directors during the last fiscal year were filed on time.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Executive Compensation Committee of the Board of Directors consists of
fivefour directors, none of whom is an officer or employee of the Company.
-9-
13
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Company's compensation programs and policies applicable to its executive
officers are administered by the Executive Compensation Committee of the Board
of Directors. The Executive Compensation Committee is made up entirely of
nonemployee directors. The members of the Executive Compensation Committee are
Robert C. Anderson, John C. Fitzpatrick, David H. Scott and Kenneth R. Gifford,
Jr. Richard W. Green, a member of the Executive Compensation Committee
in 1998, will retire as a director of the Company effective March 1, 1999.
Compensation Philosophy and Policies
The Company's compensation programs and policies are designed to enhance
shareholder value by aligning the financial interests of the executive officers
of the Company with those of the Company's shareholders. The Executive
Compensation Committee meets annually to review the salaries of executive
officers, to reestablish the base salary, to propose adjustments to the
incentive compensation portion and to establish a discretionary bonus plan if
all performance objectives are met.
The Company's philosophy for granting stock options is based on the
principles of encouraging key employees to remain with the Company and to
encourage ownership thereby providing them with a long-term interest in the
Company's overall performance. Income arising under the 1998 Stock Option Plan
currently does not qualify as performance-based compensation. The Company
intends to retain the flexibility necessary to provide total cash compensation
in line with competitors' practices,practice, the Company's compensation philosophy and
the Company's best interests, including compensation that may not be deductible.
Components of Executive Officer Compensation
There are four primary components of executive compensation: base salary,
incentive bonus, discretionary bonus and options granted under the 1998 Stock
Option Plan.
Base SalarySalary. The annual base salaries of executive officers are reviewed by
the Executive Compensation Committee, taking into consideration the level of
peer group salaries, the overall performance of the Company, the performance of
the portfolio and department under the executive officer's management control
and the individual executive officer's contribution and performance.
The base salary for the Chief Executive Officer for 19982000 was determined by
(i) examining the Company's performance against its preset goals, (ii) comparing
the Company's performance against its peer group competitors, (iii) evaluating
the effectiveness and performance of the Chief Executive Officer and (iv)
comparing the base salary of the Chief Executive Officer to that of other chief
executive officers in the Company's peer group. The total compensation received
by the Company's Chief Executive Officer is detailed in the Summary Compensation
Table.
Incentive Bonus PlanPlan. The Company's Incentive Bonus Plan (the "Bonus Plan")
is a cash-based incentive bonus program. The Bonus Plan provides that bonuses
are computed on the Company's profit after a 20% return to shareholders,on prior years equity,
before income taxes, less any gain on investments securities sold and plus any
losses on investment securities sold. The cash incentive is paid the first week
of each calendar quarter as to 70% of the incentive earned for the previous
calendar quarter. The Company onremaining 30% holdback is paid upon verification and
completion of its audited annual financial statement makes an adjustment of the
incentive bonuses upon receipt. Upon receipt of the statement, the incentive
bonus is adjusted, and the remainder of the bonus, if any, is paid to the
recipients thereof.statements. The Company's President &
Chief Executive -12-
15
Officer earns three and five hundredths percent2.21% of the profits as defined above, the
Company's Executive Vice President and Chief Credit Officer earns two and
forty-five hundredths percent1.85% of the
profits, and the Company's Executive Vice President and Chief Financial Officer
earns two and fifty-five hundredths
percent1.85% of the profits.
Discretionary BonusBonus. Each year the Executive Compensation Committee
establishes a discretionary bonus plan for the Company's three highest rankinghighest-ranking
executive officers. The bonus is paid if the Company meets certain preset
goals.financial goals set forth in the Company's strategic plan.
-10-
14
For 1998,2000, the Company's financial goals included a shareholder return of at
least 18%, net income of at least $4,500,000 and a return on assets of at least
one and ninety hundredths percent. Because the goals were met for 2000, Russell
L. Duclos was awarded a discretionary bonus of $25,000, and Michael C. Mayer and
Linda J. Miles and
Michael C. Mayer each were awarded $20,000.
Stock OptionsOptions. Under the Company's compensation philosophy, ownership of the
Company's Common Stock is a key element of executive compensation. The grant of
a stock option is intended to retain and motivate key executives and to provide
a direct link with the interest of the shareholders of the Company. In general,
stock option grants are determined based on (i) prior award levels, (ii) total
awards received to date by the individual executives, (iii) the total stock
award to be made and the executive's percentage participation in that award,
(iv) the executive's direct ownership of Company Common Stock, (v) the number of
options vested and nonvested and (vi) the options outstanding as a percentage of
total shares outstanding. In April 1998, theThe Company's executive officers receivedwere not awarded
stock options in amounts which are set forth in the Summary Compensation Table.2000.
Respectfully submitted,
Robert C. Anderson
John C. Fitzpatrick
David H. Scott
Kenneth R. Gifford, Jr.
-11-
15
REPORT OF THE AUDIT COMMITTEE
In accordance with its written charter adopted by the Board of Directors
("Board"), the Audit Committee of the Board ("Committee") assists the board in
fulfilling its responsibility for oversight of the quality and integrity of the
accounting, auditing, and reporting practices of the Company and other such
duties as directed by the board. The membership of the committee consists of at
least three directors who are generally knowledgeable in financial and auditing
matters, including at least one member with accounting or related financial
management expertise. Each member of the committee is free of any relationship
that, in the opinion of the board, would interfere with his or her individual
exercise of independent judgement, and meet the director independence
requirements for serving on audit committees as set forth in the corporate
governance standards of the NASDAQ.
During the current year, the Committee met three times. The Chairman of the
Committee reviewed the financial information contained in each of the quarterly
press announcements with the CFO and independent auditors prior to public
release.
In discharging its oversight responsibility with respect to the Audit
process, the Committee obtained from the independent auditors (the Company
considers all outside auditing consultants as "Independent auditors") a formal
written statement describing all relationships between the auditors and the
Company that might bear on the auditors' independence consistent with
Independence Standards Board Standard No. 1, "Independence Discussions with
Audit Committees," discussed with the auditors any relationships that may impact
their objectivity and independence and satisfied itself as to the auditor's
independence. The Committee also discussed with management and the independent
auditors the quality and adequacy of Redding Bancorp's internal controls and the
internal audit function's organization, responsibilities, budget and staffing.
The Committee reviewed with the independent auditors their audit plans, audit
scope and identification of audit risks.
The Committee discussed and reviewed with the independent auditors all
communications required by generally accepted auditing standards, including
those described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees," and discussed and reviewed the results of
the independent auditors audit of the financial statements. The Committee also
discussed the results of the internal audit examinations.
The Committee reviewed the audited financial statements of Redding Bancorp
as of and for the year ended December 31, 2000, with management and the
independent auditors. Management has the responsibility for the preparation of
Redding Bancorp's financial statements and the independent auditors have the
responsibility for the audit of those statements.
Based on the above-mentioned review and discussions with management and the
independent auditors, the Committee recommended to the Board that Redding
Bancorp's audited financial statements be included in its annual Report on Form
10-K for the year ended December 31, 2000, for filing with the Securities and
Exchange Commission.
PRINCIPAL ACCOUNTING FIRM FEES
Audit Fees
The aggregate fees billed by Deloitte & Touche LLP, the member firms of Deloitte
Touche Tohmatsu, and their respective affiliates (collectively, "Deloitte") for
professional services rendered for the audit of the Company's annual financial
statements for the fiscal year ended December 31, 2000 and for the reviews of
the financial statements included in the Company's Quarterly Reports on Form
10-Q for that fiscal year were $93,500.
Financial Information Systems Design and Implementation Fees
Deloitte did not render any professional services for information technology
services relating to financial information systems design and implementation for
the fiscal year ended December 31, 2000.
-12-
16
All Other Fees
The aggregate fees billed by Deloitte for services rendered to the Company,
other than the services described above under "Audit Fees" and "Financial
Information Systems Design and Implementation Fees", for the fiscal year ended
December 31, 2000 were $32,431.
The audit committee has considered whether the provision of non-audit services
is compatible with maintaining the principal accountant's independence.
Respectfully submitted,
David H. Scott, Chairman of the Audit Committee
Robert C. Anderson
John C. Fitzpatrick
Welton L. Carrel
Kenneth R. Gifford, Jr.
Eugene L. Nichols
-13-
17
STOCK PRICE PERFORMANCE GRAPH
The following graph compares the Company's cumulative total return to
shareholders during the past five years with that of the Standard & Poor's 500
Composite Stock Index (the "S&P") and the SNL Securities <$250M Bank Asset-Size
Index (the "SNL Securities Index"). The stock price performance shown on the
following graph is not necessarily indicative of future performance of the
Company's Common Stock.
[PERFORMANCE GRAPH]
16
INTRODUCTION TO PROPOSALS 2, 3, 4 AND 5
The Board of Directors has unanimously determined that certain amendments
to
PERIOD ENDING
-------------------------------------------------------------
Index 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
- ---------------------------------------------------------------------------------------
Redding Bancorp 100.00 92.11 94.92 162.75 210.05 151.18
S&P 500 100.00 122.86 163.86 210.64 254.97 231.74
SNL <$250M Bank Index 100.00 126.34 206.17 195.98 172.09 170.38
STOCK PERFORMANCE GRAPH(1)
SNL SECURITIES LC (C)2001 (804) 977-1600
(1) Assumes $100 invested on December 31, 1994, in the Company's ArticlesCommon Stock,
the S&P and the SNL Securities Index. Assumes reinvestment of Incorporation are advisable and voted to recommend
them todividends. Source:
SNL Securities (share prices for the Company's shareholders. The amendments are set forth in the Restated
Articles of Incorporation attached to this Proxy Statement as Annex I (the
"Restated Articles") and are being submitted in the form of four separate
proposals discussed in detail below under the captions "Amendment of Articles of
Incorporation Concerning Authorization of Preferred Stock," "Amendment of
Articles of Incorporation Concerning Supermajority Voting and Fair Price
Provision," "Amendment of Articles of Incorporation Concerning Action By Written
Consent of Shareholders" and "Amendment of Articles of Incorporation Concerning
Limitation of Director Liability and Indemnification of Agents." Each proposal
must be approved by holders of a majority of the outstanding shares of Common Stock of the Company. Shareholders are urgedwas furnished to read the materials that follow
carefully.
In general, the Board of Directors has noted an increase in merger and
acquisition activity in the financial services industry, including regional and
community banks and bank holding companies in the State of California, and the
evolution in recent years of certain tactics in corporate control contests and
other business transactions. These tactics include accumulation of a substantial
block of stock as a prelude to an attempted takeover or proxy fight, or a
partial tender offer followed by a second step business combination involving
less favorable consideration than was offered in the partial tender offer. The
Board of Directors believes such tactics and other tactics such as proxy fights,
hostile tender offers and "greenmail," in takeover situations are highly
disruptive to a corporation and often contrary to the overall best interests of
its shareholders, and can result in dissimilar and unfair treatment of
shareholders. These tactics also could severely curtail the ability of
management and the Board of Directors to weigh carefully and objectively any
takeover proposals which may be receivedSNL
Securities by the Company or any alternative to
help ensure that all shareholders realize the full value of their investment.
The amendments to the Articles of Incorporation described in proposals 2, 3
and 4 of this Proxy Statement are being submitted for shareholder approval to
strengthen the Company's position against the use of these takeover tactics. The
proposed amendments are designed to help prevent a sudden change in control of
the Company and help assure that any transaction serves the best interests of
all shareholders through arm's-length negotiations with the Company's Board of
Directors. The amendments are intended to encourage persons seeking to acquire
control of the Company to initiate such efforts through negotiations with the
Company's Board of Directors. The Board of Directors believes that the
amendments will help give it the time necessary to evaluate unsolicited offers,
as well as appropriate alternatives, in a manner which assures fair treatment of
the Company's shareholders. The amendments are also intended to increase the
bargaining leverage of the Board of Directors, on behalf of the Company, in any
negotiations concerning a potential change of control of the Company.
Accordingly, the Board of Directors believes that the amendments to the
Company's Articles of Incorporation discussed in proposals 2, 3 and 4 are in the
best interests of the Company's shareholders.
The submission of the amendments described in proposals 2, 3 and 4 for
shareholder approval is not being made in response to any specific effort of
which the Board of Directors is aware to accumulate the Company's securities or
obtain control of the Company.
None of the proposed amendments will impede a takeover that is approved by
the directors of the Company who are unaffiliated with any substantial
shareholder who is involved in the takeover attempt. Proposals 2, 3 and 4,
however, will have the overall effect of making it more difficult to acquire and
exercise control of the Company and may discourage takeover attempts which are
not supported by the Board of Directors. The amendments will give management
more control over the acceptance or rejection of business combination offers and
could protect incumbent directors by making more difficult or discouraging proxy
contests, the assumption of control by a substantial shareholder or other
takeover attempts not supported by the Board of Directors. If adopted, the
amendments could also have the effect of discouraging a third party from making
a tender offer or otherwise attempting to obtain control of the Company even
though such attempt might be beneficial to the Company's shareholders.Company).
-14- 17
The Board of Directors does not believe that the Articles of Incorporation
or the bylaws of the Company currently contain any provisions which should be
viewed as anti-takeover devices, except for recent amendments to the Company's
bylaws described below, which added provisions relating to shareholder proposals
and the nomination of candidates for director. The Board of Directors has no
present intention of soliciting a shareholder vote on any proposals, other than
those described in this Proxy Statement, relating to a possible business
combination involving the Company.
On February 16, 1999, the Board of Directors approved amendments to the
Company's bylaws to add provisions relating to the establishment of agendas for
annual shareholder meetings and the nomination of candidates for director. New
Section 3A of Article II of the Company's bylaws provides the guidelines for
properly bringing business before any annual meeting of shareholders. The
provision provides that for business to be properly brought before a meeting by
a shareholder, the shareholder must have given timely notice thereof in writing
to the Secretary of the Company. To be timely, a shareholder's notice must be
delivered to the executive offices of the Company not less than 70 or more than
90 days prior to the first anniversary date of the preceding year's annual
meeting unless the date of the annual meeting is advanced by more than 20 days
or delayed by more than 70 days, in which case the notice may be delivered not
earlier than 90 days prior to the meeting and not later than the later of 70
days prior to the meeting or ten days following the date on which public
announcement of the date of such meeting is made. The provision also requires
that the notice contain certain detailed information as to the matter the
shareholder proposes, as described in the new provision.
New Section 3A of Article III of the Company's bylaws provides that
director nominations, other than those made by the Board of Directors, shall be
made by notification in writing delivered or mailed to the President of the
Company not less than 30 days or more than 60 days prior to any meeting of
shareholders called for election of directors. The provision also requires that
the notice contain certain information about the proposed nominee. A copy of the
new provisions of the bylaws may be obtained upon request of the Corporate
Secretary of the Company at the Company's principal offices.
The recent bylaw amendments will provide the Company with the necessary
time and information to adequately review and respond to shareholder proposals
and nominees to be presented for consideration at an annual meeting.
Accordingly, the Board of Directors believes the recent amendments to the
Company's bylaws are in the best interests of the Company and its shareholders.
However, the new provisions may be viewed as having the effect of making it more
difficult for another person or entity to present their proposals to other
shareholders for action, including action to obtain control of the Company, or
to replace members of the Company's Board of Directors.
The amendments to the Articles of Incorporation described in proposal 5 of
this Proxy Statement are being submitted for shareholder approval to strengthen
the Company's ability to recruit and retain qualified persons as directors and
officers of the Company. As such, proposal 5 reflects that the financial
services industry is very competitive and the Company's ability to successfully
compete depends on, among other things, the Company's ability to attract and
retain qualified personnel.
The amendments described in proposals 2, 3, 4 and 5 are contained in the
Restated Articles set forth in Annex I to this Proxy Statement, in substantially
the form in which they will take effect if approved by the shareholders. The
following descriptions of the amendments are qualified by reference to Annex I.
In addition, if the amendments are approved by the shareholders, any necessary
conforming amendments will be made to the Company's bylaws.
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18
PROPOSAL 2
AMENDMENT OF ARTICLES OF INCORPORATION CONCERNING AUTHORIZATION OF
PREFERRED STOCK
Proposed Article III of the Restated Articles authorizes 2,000,000 shares
of Preferred Stock. The Board believes that it is in the best interests of the
Company and its shareholders to authorize 2,000,000 shares of Preferred Stock,
which may be issued in one or more classes or series and which shall have such
rights, preferences, privileges and restrictions as determined by the Board of
Directors.
The Board of Directors recommends adoption of Proposal 2 in order to
provide the Company with additional flexibility in terms of capital structure
and would permit the Board to react without further shareholder approval to the
Company's capital needs or to acquisitions or other strategic opportunities
which may arise in the future. Issuance of shares of preferred stock may
discourage or make more difficult or expensive certain mergers, tender offers or
other purchases of the Company's Common Stock.
The majority of publicly traded companies has authorized one or more
classes of Preferred Stock. Preferred Stock is generally defined to mean any
class of equity securities which has a dividend and/or liquidation preference
over common stock. Pursuant to the Restated Articles, the rights, preferences,
privileges and restrictions of any Preferred Stock shall be determined by the
Board of Directors. As a result, in the event that the Restated Articles are
adopted by shareholders, the Board of Directors of the Company may establish
classes or series of Preferred Stock that have certain dividend and/or
liquidation preferences over the Company's Common Stock.
Significant amounts of authorized but unissued shares of Preferred Stock
could discourage potential takeover attempts not approved by the Board of
Directors and could eliminate the possibility that the Company's shareholders
might realize a premium of the kind which may result from actual or rumored
takeover attempts. Issuance by the Company of shares of Preferred Stock in the
future, due to future mergers, acquisitions or public or private offerings
thereof, may also result in the dilution of voting rights of existing
shareholders.
The Company does not at the present time have any plan or intention to
issue shares of such Preferred Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL 2 TO AMEND AND
RESTATE THE COMPANY'S ARTICLES OF INCORPORATION TO AUTHORIZE 2,000,000 SHARES OF
PREFERRED STOCK.
PROPOSAL 3
AMENDMENT OF ARTICLES OF INCORPORATION CONCERNING SUPERMAJORITY VOTING
AND FAIR PRICE PROVISION
Proposed Article VI of the Restated Articles contains a "Supermajority
Voting and Fair Price" provision to both encourage potential acquirers to
negotiate with the Company and to protect shareholders from being unfairly
treated in mergers or other business combinations with persons who own a
substantial amount of the Company's stock. The Supermajority Voting and Fair
Price provision applies to mergers and certain other types of business
combinations with persons holding 20% or more of the shares held by voting stock
of the Company (an "Interested Stockholder"). The provision does not apply at
all, however, to the classic bank merger in which the other party is not an
Interested Stockholder and the transaction is brought to and approved by the
Board of Directors at the outset.
In general, the Supermajority Voting and Fair Price provision requires, in
a merger or certain other business combinations involving an Interested
Stockholder, (1) that 66 2/3% of the shares held by shareholders who are
independent of the Interested Stockholder be voted for the business combination,
(2) that each shareholder who is independent of the Interested Stockholder
receive at least a specified amount for his or her
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19
shares and (3) that certain other requirements are met. The provision also
requires that any amendment or repeal to the Supermajority Voting and Fair Price
provision shall require the approval of the holders of shares representing at
least 66 2/3% of the combined voting power of the outstanding shares of capital
stock of the Company entitled to vote, voting together as a single class.
The Supermajority Voting and Fair Price provision is designed to encourage
potential acquirers to negotiate at arm's length with the Board of Directors. In
the absence of such negotiations, this provision seeks to ensure that any
multi-step attempt to take over the Company will be made on terms offering
similar treatment to all shareholders. In the past, there have been takeovers of
publicly held companies accomplished by the purchase of blocks of stock in open
market purchases or otherwise at a price above prevailing market prices,
followed by a second step, merger or other transaction in which the shares
acquired are purchased for less than the value paid in the first step.
The Supermajority Voting and Fair Price provision will not apply to an
otherwise covered business combination in certain circumstances. First, if the
business combination is approved by 66 2/3% of the "Disinterested Directors,"
the supermajority voting and fair price rules do not apply. For purposes of the
provision, a Disinterested Director is defined to include a member of the Board
of Directors who is not affiliated with the Interested Stockholder and who was a
member of the Board of Directors prior to the time the Interested Stockholder
became an Interested Stockholder and a successor director who is recommended by
a majority of Disinterested Directors. Second, the supermajority voting and fair
price rules do not apply if there is pending against any subsidiary of the
Company any proceeding or other action by the Federal Deposit Insurance
Corporation pursuant to Section 1818(a) or 1823(c) of Title 12 of the United
States Code or there is outstanding against any subsidiary any order of the
Superintendent of Banks pursuant to Financial Code Section 662, Sections
3100-3132 or Sections 3180-3187. Further, the provision does not apply at all to
the classic bank merger in which the other party is not an Interested
Stockholder and the transaction is brought to and approved by the Board of
Directors at the outset. Where the Supermajority Voting and Fair Price provision
does not apply, a simple shareholders' majority is required to approve the
business combination.
Where the Supermajority Voting and Fair Price rules apply, the requirements
in addition to the 66 2/3% approval of shares held by other than the Interested
Stockholder include: (a) the consideration to be received in the business
combination is in cash or in the same form as the Interested Stockholder has
paid for the largest number of shares acquired by such Interested Stockholder;
(b) the per share consideration to be received by holders of outstanding stock
in the business combination (other than the Interested Stockholder) is at least
equal to the highest of (i) the highest per share price paid by such Interested
Stockholder in acquiring the Company's stock of the same class in the two years
prior to the announcement of the business combination, or in the transaction in
which it became an Interested Stockholder, if within two years of the date of
first public announcement of the proposal, (ii) the fair market value per share
on the announcement date or on the date on which the Interested Stockholder
became an Interested Stockholder if within two years of the first public
announcement of the proposal, or (iii) as to shares other than common stock, the
highest preference per share to which the holder of such shares is entitled upon
a liquidation of the Company; and (c) after becoming an Interested Stockholder
and prior to the consummation of such business combination (i) such Interested
Stockholder must not have become the beneficial owner of any additional shares
of the voting stock of the Company, except as part of the transaction which
results in such shareholder becoming an Interested Stockholder, within the two
year period prior to consummation of the business combination, (ii) such
Interested Stockholder must not have received the benefit, directly or
indirectly (except proportionately as a shareholder), of any loans, advances,
guarantees, pledges or other financial assistance or tax credits provided by the
Company, and (iii) except as approved by a 66 2/3% majority of the directors who
are Disinterested Directors, there shall have been (A) no failure to declare and
pay at the regular date therefore any full dividends on any preferred stock or
(B) no reduction in the annual rate of dividends paid on Common Stock, and there
shall have been (C) an increase in the annual rate of dividends necessary to
reflect certain reclassification and recapitalization.
The Supermajority Voting and Fair Price provision will not prevent a merger
or similar transaction following a tender offer in which all shareholders
receive substantially the same price for their shares and
-17-
20
where either 66 2/3% of the shares have been voted for the merger or 66 2/3% of
the Disinterested Directors have approved and a majority of the shareholders
have also approved the transaction. Except for the restrictions on the specified
business combinations, the Supermajority Voting and Fair Price provision will
not prevent a holder of a controlling interest from exercising control over the
Company or prevent such a holder from increasing his or her share ownership. The
existence of the Supermajority Voting and Fair Price provision may, however,
tend to encourage persons seeking control of the Company to negotiate terms of a
proposed merger or similar transactions with the Company's Board of Directors.
The Board of Directors recognizes that not all two-tiered tender offers or
other two-step transactions are intended to pressure shareholders into hasty
decisions or to discriminate among shareholders. However, taking all factors
into consideration, the Board believes that it is appropriate to take action to
reduce the possibility to two-tiered transactions which are unfair.
While the Board believes the Supermajority Voting and Fair Price provision
is in the best interest of the Company's shareholders, there are several
possible negative considerations. The effect of the Supermajority Voting and
Fair Price provision may be to deter a future takeover attempt which the Board
has not approved, but which a majority of the shareholders may deem to be in
their best interests or in which shareholders may receive a premium for their
shares over the then market value. The adoption of the Supermajority Voting and
Fair Price provision also may make it more difficult to obtain shareholder
approval of transactions covered by the provision, such as mergers or other
business combinations with persons who are Interested Stockholders, even if
approved by a majority, but less than 66 2/3% of the Disinterested Directors and
favored by a majority of the shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL 3 TO AMEND AND
RESTATE THE COMPANY'S ARTICLES OF INCORPORATION TO PROVIDE A SUPERMAJORITY
VOTING AND FAIR PRICE PROVISION.
PROPOSAL 4
AMENDMENT OF ARTICLES OF INCORPORATION CONCERNING ACTION BY WRITTEN
CONSENT OF SHAREHOLDERS
Proposed Article VII of the Restated Articles provides that shareholders
may not use the written consent procedure to take shareholder action without a
meeting unless the action has been approved by the Board of Directors.
Under the California General Corporation Law, unless otherwise provided in
a corporation's articles of incorporation, 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 written consent setting forth the action so taken is
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize such action at a meeting of
the shareholders at which all shares entitled to vote thereon were present and
voted. The Company's Articles of Incorporation do not presently contain any
provision affecting the ability of shareholders of Company to act by written
consent.
Proposed Article VII would permit shareholders of the Company to act by
written consent only if the Board of Directors had previously approved the
action which would prevent any shareholders of the Company from using the
written consent procedure to take shareholder action without advising or
consulting with all other shareholders. Proposed Article VII also provides that
any amendment or repeal to proposed Article VII shall require the approval of
the holders of shares representing at least 66 2/3% of the combined voting power
of the outstanding shares of capital stock of the Company entitled to vote,
voting together as a single class.
The Board of Directors recommends adoption of this proposed amendment in
order to assure that all shareholders of the Company entitled to vote on a
proposed corporate action have the opportunity to participate in determining if
such action is appropriate through the normal meeting process, except in cases
where the Board of Directors has approved such action. The Board of Directors
believes that it is inappropriate for shareholders to take corporate action
without notice to all other shareholders, even if a majority of the
-18-
21
shareholders favors such action. It is felt that the orderly process which is
normally used when actions are proposed at meetings is preferable to the consent
procedure, unless the Board of Directors has approved such action. In this way,
all shareholders are given an opportunity to consider proposals and, if
appropriate, to inform other shareholders of their views. Additionally,
management is provided with an opportunity to review and respond to proposed
actions. The proposed amendment would not limit the existing right of
shareholders to call a special meeting of shareholders.
Proposed Article VII may be viewed as having the effect of discouraging an
attempt by another person or entity to gain control of the Company or take
action which might facilitate gaining control of the Company, after the
acquisition of a substantial percentage of the shares of the Company's
outstanding stock. The effect of the proposed amendment would be to encourage
any person intending such a takeover to negotiate with the Board of Directors
rather than to take unilateral action without notice to the Board of Directors
or other shareholders. The Board of Directors believes that such an orderly
procedure is in the best interests of the Company and its shareholders. However,
the proposed amendment could limit shareholders' approval of certain types of
transactions that might be proposed whether or not such transactions were
favored by a majority of the shareholders, and could enhance the ability of
officers and directors to retain their positions by precluding changes in
control through the written consent procedure.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL 4 TO AMEND AND
RESTATE THE COMPANY'S ARTICLES OF INCORPORATION TO PROVIDE THAT SHAREHOLDERS MAY
ACT BY WRITTEN CONSENT IN LIEU OF A MEETING ONLY IF THE BOARD OF DIRECTORS HAS
PREVIOUSLY APPROVED SUCH ACTION.
PROPOSAL 5
AMENDMENT OF ARTICLES OF INCORPORATION CONCERNING LIMITATION OF
DIRECTOR LIABILITY AND INDEMNIFICATION OF AGENTS
Proposed Article IV of the Restated Articles would limit the liability of a
director of the Company to the Company or its shareholders for monetary damages
for breach of the fiduciary duty of care to the fullest extent permissible under
California law. Proposed Article V of the Restated Articles would permit the
Company to indemnify its agents to the fullest extent permissible under
California law. Although the Company's bylaws currently provide for
indemnification of the Company's agents, proposed Article V would permit the
Company to provide broader indemnification than specifically provided under the
provisions of the California General Corporation Law (the "CGCL").
A corporation's power to limit the liability of its directors for monetary
damages is provided in Section 309 of the CGCL. Section 309 provides that a
director must perform his or her duties in good faith and in a manner that such
person believes to be in the best interests of the corporation and its
shareholders and with such care, including reasonable inquiry, as an ordinarily
prudent person in a similar position would use under similar circumstances.
Section 309 further provides that the liability of a director for monetary
damages may be eliminated or limited in a corporation's articles of
incorporation.
Proposed Article IV would eliminate the liability of a director of the
Company to the Company or its shareholders for monetary damages for breach of a
director's fiduciary duty of care, except in certain cases for which liability
cannot be eliminated under California law. Under California law, a director's
liability cannot be eliminated for (i) acts or omissions that involve
intentional misconduct or a knowing and culpable violation of law, (ii) acts or
omissions that a director believes to be contrary to the best interests of the
corporation or its shareholders or that involve the absence of good faith, (iii)
any transaction from which a director derived an improper personal benefit, (iv)
acts or omissions showing a reckless disregard for the director's duty to the
corporation and its shareholders in which the director was aware of a risk of
serious injury to the corporation, (v) acts or omissions that constitute an
unexcused pattern of inattention amounting to an abdication of the director's
duty to the corporation or its shareholders, (vi) failure to comply with the
director's duty to disclose the director's material financial interest in a
transaction of the corporation, (vii) making an unauthorized distribution or
loan to the corporation's shareholders and (viii) acts or omissions as an
officer notwithstanding that the officer is also a director or that the
director's negligent actions have been ratified by the corporation's
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22
directors. Further, proposed Article IV would not eliminate the liability of any
director for acts that occurred prior to the effectiveness of proposed Article
IV.
In recent years, investigations, claims, actions, suits or other
proceedings (including derivative actions) seeking to impose liability on, or
involving as witnesses, directors and officers of corporations have become
increasingly common. Such proceedings are typically extremely expensive
regardless of the eventual outcome. In view of the costs and uncertainties of
litigation in general, it is often prudent to settle proceedings in which claims
against a director or officer are made. Settlement amounts, even if immaterial
to the corporation involved and minor compared to the enormous amounts
frequently claimed, often exceed the financial resources of most individuals.
Even in proceedings in which a director or officer is not named as a defendant,
such individual may incur substantial expenses or attorneys' fees if he or she
in called as a witness or becomes involved in the proceeding in any other way.
As a result, an individual may conclude that potential exposure to the costs and
risks of proceedings in which he or she may become involved may exceed any
benefit to him from serving as a director or officer of a corporation. This is
particularly true for directors who are not also employees.
In addition, obtaining director and officer liability insurance, which
protects directors and officers from personal losses resulting from proceedings
involving them by reason of their service as directors and officers, is becoming
increasingly difficult and expensive. Coverage under director and officer
liability insurance is no longer routinely offered by a variety of insurers at a
reasonable cost and is frequently subject to severely restrictive terms.
Competition in the financial services industry is intense and the Company's
ability to compete effectively depends, in part, on its ability to attract and
retain qualified persons for officer and director positions. While the Company
has not experienced any problems to date in recruiting or retaining qualified
persons as directors or officers, the Board of Directors believes that adoption
of proposed Articles IV and V will enable the Company to continue to attract and
retain qualified persons for director and officer positions. Moreover, current
management may feel more confident relying on indemnity based on an indemnity
agreement, as would be permissible under proposed Article V, rather than merely
relying on a bylaw provision providing for the Company's ability to indemnify
its agents. Accordingly, the Board of Directors has determined that the proposed
amendments are in the best interests of the Company and its shareholders.
The Company is not aware of any pending or threatened claims against any
director or officer for breach of such person's fiduciary duties, and there have
been no such claims in the history of the Company. However, if for any reason
director and officer liability insurance coverage is not obtained or available,
the provision permitting broader indemnification could require the Company in
the future to pay the costs of legal defense and judgments arising out of
injuries to third parties caused by the acts of its officers or directors.
Further, the provision limiting director liability for monetary damages will
preclude the Company and its shareholders from recovering monetary damages
against directors for negligence and other acts not specifically excluded under
Section 204 of the CGCL.
A corporation's power to indemnify its agents (including directors,
officers and employees) is established by Section 317 of the CGCL. California
law permits indemnification of expenses incurred in derivative or third-party
actions, except that with respect to derivative actions (i) no indemnification
may be made without court approval when a person is adjudged liable to the
corporation in the performance of that person's duty to the corporation and its
shareholders, unless a court determines such person is fairly and reasonably
entitled to indemnity for expenses, and then such indemnification may be made
only to the extent that such court shall determine and (ii) no indemnification
may be made without court approval in respect of amounts paid or expenses
incurred in settling or otherwise disposing of a threatened or pending action or
amounts incurred in defending a pending action which is settled or otherwise
disposed of without court approval. The indemnification permitted by Section 317
is only applicable to acts of agents taken in good faith and believed to be in
the best interests of the corporation and its shareholders, as determined by a
majority vote of a disinterested quorum of the directors, independent legal
counsel (if a quorum of independent directors is not obtainable), a majority
vote of a quorum of the shareholders (excluding shares owned by the indemnified
-20-
23
party), or the court handling the action. California law requires
indemnification when the individual has successfully defended the action on the
merits.
Section 204 of the CGCL provides that a corporation may include in its
articles of incorporation provisions which extend the scope of indemnification
expressly permitted by Section 317, subject to certain limitations. The most
significant effect of a corporation's articles of incorporation permitting
indemnification in excess of the express limits set by Section 317 for breach of
duty to the corporation or its shareholders is to authorize a corporation to
enter into indemnity agreements with its agents, including officers and
directors.
Proposed Article V would permit the Company to indemnify its agents in
excess of that expressly provided under Section 317 of the CGCL. However,
Article V would not permit the Company to indemnify any agent for any acts,
omissions or transactions from which a director may not be relieved of liability
as discussed above under "Limitation of Personal Liability of Directors," as to
circumstances under which indemnification is expressly prohibited by Section 317
as discussed above.
The Board of Directors recommends adoption of proposal 5 in order to enable
the Company to continue to recruit and retain qualified persons for director and
officer positions. However, if for any reason director and officer liability
insurance coverage is not obtained or available, proposed Articles IV and V
permitting the limitation of director liability and broader indemnification,
respectively, could require the Company in the future to pay the costs of legal
defense and judgments arising out of injuries to third parties caused by the
acts of its directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL 5 TO AMEND AND
RESTATE THE COMPANY'S ARTICLES OF INCORPORATION (i) TO LIMIT THE LIABILITY OF A
DIRECTOR OF THE COMPANY TO THE COMPANY AND ITS SHAREHOLDERS FOR MONETARY DAMAGES
FOR BREACH OF A DIRECTOR'S FIDUCIARY DUTY OF CARE TO THE FULLEST EXTENT
PERMISSIBLE UNDER CALIFORNIA LAW AND (ii) TO PROVIDE FOR THE ABILITY OF THE
COMPANY TO INDEMNIFY ITS AGENTS TO THE FULLEST EXTENT PERMISSIBLE UNDER
CALIFORNIA LAW.
PROPOSAL 6
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
Upon the recommendation of the Audit Committee, the Board of Directors has
appointed the firm of Deloitte & Touche LLP as the Company's independent
auditors for the fiscal year ending December 31, 1999,2000, subject to ratification
by the shareholders. Representatives of Deloitte & Touche LLP are not expected
to be present at the Company's Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF DELOITTE &
TOUCHE LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
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24AUDITORS FOR THE YEAR ENDED DECEMBER 31,
2000.
REQUIREMENTS, INCLUDING DEADLINES, FOR SUBMISSION OF PROPOSALS,
NOMINATION OF DIRECTORS AND OTHER SHAREHOLDER BUSINESS
Under the Rules of the SEC, if a shareholder wants to include a proposal in
the Company's Proxy Statement and form of proxy for presentation at the
Company's 20002002 Annual Meeting of Shareholders, the proposal must be received by
the Company at its principal executive offices by November 21, 1999.20, 2001.
Under the Company's bylaws, as permitted by the SEC, certain procedures are
provided which a shareholder must follow to nominate persons for election as
directors or to introduce an item of business at an annual meeting of
shareholders.
Nomination of directors must be made by notification in writing delivered or
mailed to the President of the Company at the Company's principal executive
offices not less than 30 days or more than 60 days prior to any meeting of
shareholders called for election of directors. The Company's annual meeting of
shareholders is generally held on the third Tuesday of April. If the Company's
20002002 Annual Meeting of shareholdersShareholders is held on schedule, the Company must
receive notice of any nomination no earlier than February 18, 2000,20, 2002, and no later
than March 19, 2000.20, 2002. The Chairman of the meeting may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing procedures.
If the Chairman of the meeting acknowledges the nomination of a person not made
in compliance with the foregoing procedures, the persons named as proxies in the
proxy materials relating to that meeting will use their discretion in voting the
proxies when the nomination is made at the meeting.
Notice of any business item proposed to be brought before an annual meeting
by a shareholder must be received by the Secretary of the Company not less than
70 days or more than 90 days prior tobefore the annual meeting. If the Company's 20002002
Annual Meeting of Shareholders is held on schedule, the Company must receive
notice of any proposed business item no earlier than January 19, 200020, 2002, and no
later than February 8, 2000.7, 2002. If the Company does not receive timely notice, the
Company's bylaws preclude consideration of the business item at the annual
meeting.
The Company's bylaws also provide that notices regarding nomination of
directors must contain certain information about the director nominee. With
respect to notice of a proposed item of business, the bylaws provide that the
notice must include a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at the meeting and
certain information regarding the shareholder giving the notice. Shareholders
may obtain a copy of the Company's bylaws by sending a written request to the
Secretary of the Company at the Company's principal executive offices.
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19
OTHER BUSINESS
The Company knows of no other business that will be presented at the Annual
Meeting. If any other business is properly brought before the Annual Meeting, it
is intended that proxies in the enclosed form will be voted in accordance with
the judgment of the persons voting the proxies.
Whether or not you intend to be present at the Annual Meeting, we request
you to return your signed proxy promptly.
By Order of the Board of Directors,
DAVID H. SCOTT
David H. Scott, Secretary
Redding, California
March __, 1999
-22-April 2, 2001
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2520
APPENDIX A
AUDIT COMMITTEE CHARTER
To comply with the fiduciary responsibility in protecting the assets of the bank
for its customers and shareholders, the Board of Directors believes that it is
prudent to adopt a sound and extensive audit committee charter.
Role and Independence
The audit committee of the Board of Directors assists the board in fulfilling
its responsibility for oversight of the quality and integrity of the accounting,
auditing, and reporting practices of the Company and other such duties as
directed by the board. The membership of the committee shall consist of at least
three directors who are generally knowledgeable in financial and auditing
matters, including at least one member with accounting or related financial
management expertise. Each member shall be free of any relationship that, in the
opinion of the board, would interfere with his or her individual exercise of
independent judgement, and shall meet the director independence requirements for
serving on audit committees as set forth in the corporate governance standards
of the NASDAQ.
The committee is expected to maintain free and open communication (including
private executive sessions at least annually) with the independent accountants,
the internal auditors and the management of the Company. In discharging this
oversight role, the committee is empowered to investigate any matter brought to
its attention, with the full power to retain counsel or other experts for this
purpose.
The Board of Directors shall appoint one member of the audit committee as
chairperson. This person plays a pivotal role in audit committee effectiveness.
He or she will be responsible for the leadership of the committee, including
preparing the agenda, presiding over meetings, making committee assignments, and
reporting to the Board of Directors. The chairperson will also maintain regular
liaison with the President, Chief Operating Officer, Chief Financial Officer,
and the lead independent audit partner.
Responsibilities
The audit committee's primary responsibilities include:
- - Recommending to the board the independent accountant to be selected or
retained to audit the financial statements of the Company. In doing so, the
committee will request from the auditor a written affirmation that the
auditor is in fact independent, discuss with the auditor any relationships
that may impact the auditor's independence, and recommend to the board any
actions necessary to oversee the auditor's independence.
- - Overseeing the independent auditor relationship by discussing with the
auditor the nature and rigor of the audit process, receiving and reviewing
audit reports, and providing the auditor full access to the committee (and
the board) to report on any and all appropriate matters.
- - Providing guidance and oversight to the internal audit activities of the
Company, including reviewing the organization, plans and results of such
activities.
- - Reviewing the audited financial statements and discussing them with
management and the independent auditor. These discussions shall include
consideration of the quality of the Company's accounting principles as
applied in its financial reporting, including review of estimates, reserves
and accruals, review of judgmental areas, review of recorded audit
adjustments and any other inquiries as may be appropriate.
- - Reviewing with management the quarterly financial information filed in the
Company's Form 10-Q. This review may be performed by telephone in a joint
conference call with the Chairman of the Audit Committee and the Chief
Financial Officer.
- - Discussing with management the internal auditors and the external auditors
the quality and adequacy of the Company's internal controls.
- - Discussing with management the status of pending litigation, taxation
matters and other areas of oversight to the legal and compliance area as may
be appropriate.
- - Reporting audit committee activities to the full board and issuing annually
a report to be included in the proxy statement (including oversight
conclusions) for submission to shareholders.
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It is the policy of the Board of Directors that a system of internal controls be
maintained sufficient to provide reasonable assurance that assets are
safeguarded, transactions are properly authorized and recorded, and reasonable,
detailed records are maintained which accurately reflect the financial
activities.
To monitor the effectiveness of the system of internal controls, the Board of
Directors established an audit and review policy as follows:
AUDIT AND REVIEW - CERTIFIED PUBLIC ACCOUNTING FIRM
It is the policy of the Board of Directors to engage a qualified certified
public accounting firm to conduct a full audit of financial statements at least
once annually. This will constitute the annual "Director examination". Credit
quality reviews are scheduled annually to support the audit and may be performed
by parties other than the certified public accounting firm selected to conduct
the financial statement audit.
AUDIT AND REVIEW - IN HOUSE
The Board of Directors recognizes that it is not necessary or economically
feasible for the Bank to employ a full time internal auditor. However, the Audit
committee may elect to have an outside independent auditor perform audits of
policies and procedures and an outside auditor to perform an independent loan
review for compliance, documentation and appropriate grading.
Although outside consultants, these auditors will be considered our "In-house"
auditors. The audit committee will outline the scope of the audits on an annual
basis, and will communicate the scope with the auditors. The Director's Audit
Committee shall consult with and have the Company's Certified Public Accountants
review the scope and work papers of the in-house auditors, and make a
recommendation to the Board of Directors as to the need to employ a full time
internal auditor.
EXAMINATION AND REVIEW - REGULATORY AGENCIES
It is the policy of the Board of Directors that results from examinations and
audits conducted by Regulatory Agencies such as the Department of Financial
Institutions, Federal Reserve Board and the FDIC are fully disclosed to the
Board of Directors. Further, it is Board policy that at least one representative
from the Directors audit committee will be included in the exit review conducted
by regulatory personnel with the management of the Company.
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REDDING BANCORP
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned acknowledges receipt of a copy of the Notice of Annual
Meeting of Shareholders of Redding Bancorp and the accompanying Proxy Statement
dated March __, 1999,10,2000 and revoking any proxy heretofore given, hereby
constitute(s) and appoint(s) Robert C. Anderson and Russell L. Duclos, and each
of them each
with full power of substitution, as attorney and proxy of the
undersigned, to attend the 2001 Annual Meeting of the Shareholders of Redding
Bancorp to be held at 5:00 p.m.00p.m. on April 20, 1999,May 15, 2001, in the lobby of Redding Bank of
Commerce located at 1951 Churn Creek Road, Redding, California, and any
adjournment or postponement thereof, and to vote the number of shares the
undersigned would be entitled to vote if personally present as indicated below:
THE BOARDon the
reverse.
(Continued, and to be marked, dated and signed, on the other side)
Fold and Detach Here
- --------------------------------------------------------------------------------
This proxy when properly executed will be voted in the manner, directed by the
undersigned shareholder. If no direction is made, this proxy will be voted for
all nominees listed under Item 1 and in favor of Item 2.
The Board of Directors recommends a vote FOR Items 1 through 2, below.
1. ELECTION OF DIRECTORS RECOMMENDS A "FOR" VOTE ON EACH OF ITEMS 1 THROUGH 6,
BELOW.
1. ELECTION OF DIRECTORS |_| FOR all nominees listed below. |_| WITHHOLD AUTHORITY
(except as indicated to the contrary to vote for ALL nominees
below) listed below.
[ ] For all nominees listed to the
left (except as marked to the
contrary
Nominees: 01 Robert C. Anderson [ ] WITHHOLD AUTHORITY to vote for
all nominees listed to the left
02 Russell L. Duclos, 03 Kenneth R. Gifford, Jr., Russell L. Duclos,
04 Harry L. Grashoff, Jr., 05 Welton L. Carrel
06 Eugene L. Nichols, 07 John C. Fitzpatrick, and08 David H. Scott,
and 09 Michael C. Mayer
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
CROSS OUT THAT NOMINEE'S NAME LISTED ABOVE.To withhold authority to vote for any individual nominee, cross
out that nominee's name listed above.)
2. AMENDMENT OF ARTICLES OF INCORPORATION TO AUTHORIZE PREFERRED STOCK
|_| FOR |_| AGAINST |_| ABSTAIN
3. AMENDMENT OF ARTICLES OF INCORPORATION TO INCLUDE SUPERMAJORITY AND FAIR
PRICE PROVISION
|_| FOR |_| AGAINST |_| ABSTAIN
4. AMENDMENT OF ARTICLES OF INCORPORATION CONCERNING ACTION BY WRITTEN
CONSENT OF SHAREHOLDERS
|_| FOR |_| AGAINST |_| ABSTAIN
5. AMENDMENT OF ARTICLES OF INCORPORATION CONCERNING LIMITATION OF DIRECTOR
LIABILITY AND INDEMNIFICATION OF AGENTS
|_| FOR |_| AGAINST |_| ABSTAIN
6. RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE, LLP AS THE COMPANY'S
INDEPENDENT AUDITORS. |_| FOR |_| AGAINST |_| ABSTAIN
7.[ ] For [ ] Against [ ] Abstain
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting and any adjournment or
postponement thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL NOMINEES LISTED UNDER ITEM 1 AND IN FAVOR OF ITEMS 2, 3, 4,
5 AND 6.
Please sign exactly as the name appears
herein. When sharesShares are held by joint
tenants, both should sign. When signing
as attorney, executor, administrator,
trusteePLEASE MARK, SIGN, DATE AND RETURN Trustee or guardian, please give full
THE PROXY PROMPTLY USING THE title as such. If a corporation, please
ENCLOSED ENVELOPE. sign in full corporate name byBy President
or other authorized officer. If a
partnership,partner- Ship please sign in partnership
name by authorized person.
----------------------------------------
Signature
----------------------------------------
Signature
Date: ,2001
------------------------------
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Fold and Detach Here and Read the Reverse Side
Vote by telephone
Quick ** Easy ** Immediate
YOUR VOTE IS IMPORTANT! -- YOU CAN VOTE IN ONE OF TWO WAYS:
1. TO VOTE BY PHONE: Call toll-free 1-800-840-1208 on a touch-tone telephone
24-hours a day 7 days a week.
There is NO CHARGE to you for this call. - --------------------------------------------------------------------------------
SignatureHave your proxy card in hand.
You will be asked to enter a Control Number, which is located in the box in the
lower right hand corner of this form.
OPTION 1: To vote as the Board of Directors recommends on ALL proposals,
press 1.
OPTION 2: If you choose to vote on each Proposal separately, press 0. You
will hear these instructions:
Proposal 1 - --------------------------------------------------------------------------------
Signature
Date _________________________________________________________, 1999To vote FOR ALL Nominees, Press 1; to WITHHOLD FOR ALL nominees,
press 9, to WITHHOLD FOR AN INDIVIDUAL nominee, press 0 and listed to the
instructions
Proposal 2 - To vote FOR, press 1; AGAINST, press 9, ABSTAIN, Press 0 and listen
to the instructions.
WHEN ASKED, PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE. CONFIRM BY PRESSING 1.
The instructions are the same for all remaining proposals.
OR
2. VOTE BY PROXY: Mark, sign and date your proxy card and return promptly in the
enclosed envelope.
NOTE: If you vote by telephone, THERE IS NO NEED TO MAIL BACK your Proxy Card.
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