FIRST FINANCIAL BANCORP
701 South Ham Lane
Lodi, California 95242
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON
APRIL 24, 2001
TO EACH SHAREHOLDER OF
FIRST FINANCIAL BANCORP:
You are invited to attend the Annual Meeting of Shareholders of First
Financial Bancorp, a California corporation (the "Company"), which will be held
at the Company's executive offices, 701 South Ham Lane, Lodi, California 95242,
on Tuesday, April 24, 2001, at 5:30 p.m., Pacific Daylight Time, for the
following purposes:
1. To elect a Board of nine directors to serve until the next annual
meeting of shareholders or until their successors are elected and
qualified. The names of the nominees to be presented for election are
set forth in the accompanying Proxy Statement.
2. To transact such other business as may properly be brought before the
meeting or any adjournment or postponement thereof.
Section 2.05 of the Bylaws of the Company, as amended, provides as
follows:
"Nominations for election to the Board of Directors may be made
by the Board of Directors or by any shareholder entitled to vote
for the election of directors. Nominations, other than those made
by the Board of Directors, shall be made in writing and shall be
delivered or mailed, with first-class United States mail postage
prepaid, to the Secretary not less than 20 days nor more than 50
days prior to any meeting of shareholders called for the election
of directors; provided, however, that if less than 25 days'
notice of the meeting is given to the shareholders, such
nomination shall be mailed or delivered to the Secretary not
later than the close of business on the seventh day following the
day on which the notice of the meeting was mailed. Shareholder
nominations shall contain the following information: (a) the
name, age, business address and, if known, residence address of
each proposed nominee; (b) the principal occupation or employment
of each proposed nominee; (c) the total number of shares of
capital stock of the Corporation that are beneficially owned by
each proposed nominee and by the nominating shareholder; (d) the
name and residence address of the notifying shareholder; and (e)
any other information the Corporation must disclose regarding
director nominees in the Corporation's proxy solicitation.
Nominations not made in accordance with this Section may be
disregarded by the Chairman of the meeting, and if the Chairman
so instructs, the inspectors of election may disregard all votes
cast for each such nominee."
Only shareholders of record at the close of business on March 2, 2001,
are entitled to notice of, and to vote at, the meeting. In order to ensure your
representation, please complete, sign and date the enclosed proxy as promptly as
possible and return it in the enclosed envelope. If you attend the meeting and
wish to vote in person, your proxy will not be used.
By Order of the Board of Directors,
Leon Zimmerman
President and Chief Executive Officer
Lodi, California
March 26, 2001
FIRST FINANCIAL BANCORP
701 South Ham Lane
Lodi, California 95242
PROXY STATEMENT
MARCH 26, 2001
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of First Financial Bancorp, a California
corporation (the "Company"), for the annual meeting of shareholders of the
Company, to be held on Tuesday, April 24, 2001, at 5:30 p.m., Pacific Time, at
the Company's executive offices, 701 South Ham Lane, Lodi, California 95242, and
any adjournment or postponement thereof (the "Annual Meeting"). The purposes of
the meeting are set forth in the Notice of Annual Meeting of Shareholders to
which this Proxy Statement is attached. The Company anticipates mailing this
Proxy Statement and form of proxy to its shareholders on or about March 26,
2001.
The cost of this solicitation will be paid by the Company. The
solicitation of proxies will be made primarily by use of the mails. In addition,
directors, officers and regular employees of the Company may make solicitations
by telephone, facsimile or personal interviews, and may request banks, brokers,
fiduciaries and other persons holding stock in their names, or in the names of
their nominees, to forward proxies and proxy materials to their principals and
obtain authorization for the execution and return of such proxies to management.
The Company will reimburse such banks, brokers and fiduciaries for their
out-of-pocket expenses incurred in connection therewith.
A proxy for use at the Annual Meeting is enclosed. Any proxy given may
be revoked by a shareholder at any time before it is exercised by filing with
the Secretary of the Company a notice in writing revoking it or by duly
executing a proxy bearing a later date. Proxies may also be revoked by any
shareholder present at the Annual Meeting who expresses a desire to vote such
shares in person. Subject to such revocation, all proxies duly executed and
received prior to or at the time of the Annual Meeting will be voted in
accordance with the instructions on the proxy. If no specification is made,
proxies will be voted in the election of directors "FOR" the nominees of the
Board of Directors, and, at the proxyholders' discretion, on such other matters,
if any, which may come before the meeting (including any proposal to postpone or
adjourn the meeting).
OUTSTANDING SHARES AND VOTING RIGHTS
There were issued and outstanding 1,526,663 shares of the Company's
common stock, no par value (the "Common Stock"), on March 2, 2001, which has
been set as the record date (the "Record Date") for the purpose of determining
the shareholders entitled to notice of, and to vote at, the Annual Meeting.
The presence in person or by proxy of a majority of the shares entitled
to vote is necessary to constitute a quorum at the Annual Meeting. Abstentions
and broker non-votes will be counted for purposes of determining the presence or
absence of a quorum. "Broker non-votes" are shares held by brokers or nominees
who are present in person or represented by proxy, but which are not voted on a
particular matter because under applicable rules the broker cannot vote on the
matter in the absence of instructions from the beneficial owner. The effect of
abstentions and broker non-votes on the calculation of the required vote on
specific proposals to be brought before the Annual Meeting is discussed under
each proposal, where applicable.
On any matter submitted to a shareholder vote, each holder of Common
Stock will be entitled to one vote, in person or by proxy, for each share of
stock outstanding in the holder's name on the books of the Company as of the
Record Date. For the election of directors, each shareholder has cumulative
voting rights. Cumulative voting rights entitle each shareholder to cast that
number of votes which equals the
number of shares held by such shareholder, multiplied by the number of directors
to be elected. Each shareholder may cast all his or her votes for a single
candidate or may distribute his or her votes among any or all of the candidates
as he or she chooses. In order for a shareholder to cumulate votes, the
nominee's name must be placed in nomination prior to the voting and the
shareholder desiring to cumulate votes must give notice at the Annual Meeting
prior to the voting of the shareholder's intention to cumulate votes. If any
shareholder has given such notice, all shareholders may cumulate their votes.
The proxy holders are given discretionary authority under the terms of the proxy
to cumulate votes with respect to shares for which they hold a proxy.
PRINCIPAL SHAREHOLDERS
As of March 2, 2001, no individual known to the Company owned
beneficially or of record more than five percent (5%) of the outstanding shares
of its Common Stock, except as described below:
Title or Name and Address of Number of Shares Percentage
Class Principal Owner Beneficially Owned Owned
Common Weldon D. Schumacher 124,667 (1) 8.16%
Stock 1303 Rivergate Drive
Lodi, CA 95240
Common Raymond H. Coldani 96,768 (2) 6.34%
Stock 13199 N. Ray Road
Lodi, CA 95242
Common Leon J. Zimmerman 98,332 (3) 6.23%
Stock 701 S. Ham Lane
Lodi, CA 95242
Common Bank of Lodi, Employee 161,270 (4) 10.56%
Stock Stock Ownership Plan (ESOP)
701 South Ham Lane
Lodi, CA 95242
- -----------------------------------
<FN>
(1) Includes 3,070 shares owned by Dr. Schumacher's wife, 100,900 shares held
as community property and 567 shares subject to options that are
exercisable as of March 2, 2001, or become exercisable within 60 days
thereafter.
(2) Includes 17,714 shares owned by Mr. Coldani's wife and 59,599 shares held
as joint tenants with spouse.
(3) Includes 8,137 shares owned by Mr. Zimmerman's wife, 16,174 shares held in
trust by Mr. Zimmerman and his wife, 10,472 shares owned in Bank of Lodi
Employee Stock Ownership Plan and First Financial Bancorp 401k Profit
Sharing Plan, and 51,056 shares subject to options that are exercisable as
of March 2, 2001, or become exercisable within 60 days thereafter.
(4) Shares of Common Stock beneficially owned by the ESOP are allocated on an
annual basis among ESOP participants. The Board of Directors of the Company
has authority to appoint Trustees of the ESOP. The Trustees possess
authority to manage all of the assets of the ESOP. As of the Record Date,
Messrs. Ben Goehring, Angelo Anagnos and Steve Coldani served as Trustees
and Administrative Committee members of the ESOP.
</FN>
2
PROPOSAL NO. 1
ELECTION OF DIRECTORS OF THE COMPANY
The Bylaws provide that the Company's Board of Directors shall consist
of not less than eight nor more than fifteen directors, the exact number to be
determined by the Board from time to time. The authorized number of directors to
be elected at the Annual Meeting is nine. The term of office for each director
extends until the next annual meeting and until his or her successor, as set by
the Board, is elected and qualified.
Shares represented by properly executed proxies will be voted, if
authority to do so is not withheld, for the election of the nine nominees named
below, subject to the proxyholders' discretionary power to cumulate votes. Votes
withheld and broker non-votes as to one or more or all nominees have no legal
effect, although such votes will be counted as shares that are present for
purposes of determining the presence of a quorum. The nine nominees receiving
the highest number of affirmative votes of the shares entitled to be voted for
them shall be elected as directors. Instructions on the proxy to withhold
authority to vote for one or more of the nominees will result in such nominees
receiving fewer affirmative votes. If any of the Board of Directors' nominees is
unable or declines to serve as a director at the time of the Annual Meeting, the
proxy will be voted for any nominee who shall be designated by the present Board
of Directors to fill the vacancy.
The following table sets forth certain information with respect to
those persons nominated by the Board of Directors of the Company for election as
directors, as well as all directors and executive officers as a group. All of
the shares shown in the following table are owned both of record and
beneficially except as indicated in the notes to the table. There is no family
relationship between any of the directors or executive officers. The Company has
only one class of shares, Common Stock, outstanding.
3
Common Stock Beneficially
Owned as of March 2, 2001
-------------------------
Number of
Name Age Position with Company Shares Percent
---- --- --------------------- --------- -------
Incumbent Nominees;
Benjamin R. Goehring (a,b,c,d,e) 69 Chairman of the Board 39,975(1) 2.61%
of Directors
Weldon D. Schumacher (a,b,d,e) 65 Vice Chairman of the 124,667(2) 8.16%
Board of Directors
Angelo J. Anagnos (b,c,d) 66 Director 30,482(3) 1.99%
Steven M. Coldani (c) 47 Director 26,955(4) 1.76%
David M. Philipp (b) 38 Director 38,885(5) 2.54%
Leon J. Zimmerman (a,c,d) 58 Director, President and 98,332(6) 6.23%
Chief Executive Officer
Robert H. Daneke 47 Director, Executive 7,024(7) 0.46%
Vice President and
Chief Credit Officer
New Nominees:
Robert H. Miller III 56 Director 1,154(8) 0.08%
Kevin Van Steenberge 43 Director 3,284(9) 0.22%
All directors and executive officers 403,593(10) 24.75%
as a group (11 persons)
<FN>
- -------------------------------
(a) Member of the Executive Committee
(b) Member of the Audit Committee
(c) Member of the Loan and Investment Committee
(d) Member of the Marketing Committee
(e) Member of the Compensation and Stock Option Committee
- -------------------------------
</FN>
(1) Includes 12,175 shares owned by Mr. Goehring's wife, 996 shares owned by
Mr. Goehring in joint tenancy with his children, and 6,870 shares subject
to options that are exercisable as of March 2, 2001 or become exercisable
within 60 days thereafter.
(2) Includes 3,070 shares owned by Dr. Schumacher's wife, 100,900 shares held
as community property and 567 shares subject to options that are
exercisable as of March 2, 2001 or become exercisable within 60 days
thereafter.
(3) Includes 8,345 shares owned by Mr. Anagnos' wife and 6,870 shares subject
to options that are exercisable as of March 2, 2001 or become exercisable
within 60 days thereafter.
(4) Includes 6,900 shares held as community property or joint tenants by Mr.
Coldani and his wife, 2,448 shares held as custodian for minor children,
and 3,300 shares subject to options that are exercisable as of March 2,
2001 or become exercisable within 60 days thereafter.
4
(5) Includes 1,226 shares owned by Mr. Philipp's wife, 106 shares held as
custodian for minor children, and 3,300 shares subject to options that
are exercisable as of March 2, 2001 or become exercisable within 60 days
thereafter.
(6) Includes 8,137 shares owned by Mr. Zimmerman's wife, 16,174 shares held
in trust by Mr. Zimmerman and his wife, 10,472 shares owned in the Bank
of Lodi Employee Stock Ownership Plan and First Financial Bancorp 401k
Profit Sharing Plan, and 51,056 shares subject to options that are
exercisable as of March 2, 2001, or become exercisable within 60 days
thereafter.
(7) 625 shares are held in joint tenancy with spouse; 364 shares are owned in
the Bank of Lodi Employee Stock Ownership Plan and First Financial
Bancorp 401k Profit Sharing Plan; and 6,035 shares subject to options
that are exercisable as of March 2, 2001, or become exercisable within 60
days thereafter.
(8) Shares are held in joint tenancy with spouse.
(9) Shares are held in Family Trust.
(10) Officers included in this total are the President and Chief Executive
Officer; the Executive Vice President and Chief Credit Officer; Senior
Vice President and Chief Financial Officer; and the Senior Vice President
and Operations Administrator--in each case of the Company and the Bank.
Shares include 82,801 shares subject to options that are exercisable as
of March 2, 2001 or become exercisable within 60 days thereafter.
The following is a brief description of the business experience of each
nominee.
BENJAMIN R. GOEHRING was appointed Chairman of the Board of Directors of
the Bank in February, 1996 and Chairman of the Board of Directors of the Company
in April, 1996. He is President of T&G Technologies, Inc., Chairman of the Board
of BioWaste Tech., Inc., and was formerly the President and principal
shareholder of Goehring Meat, Inc., a meat processing concern headquartered in
Lodi, California, prior to its sale to Victor Fine Foods in 1988. He holds a
Bachelor of Science degree from the University of California. He is a member of
many civic, fraternal and professional organizations, and also serves on the
board of directors for the National Meat Association, the Mokelumne River
School, and several environmental companies.
WELDON D. SCHUMACHER, M.D., D.A.B.F.P. was appointed Vice Chairman of the
Board of the Bank and the Company in April, 1996. Dr. Schumacher has been
engaged in the private practice of medicine in Lodi, California, since 1968. He
holds a Bachelor of Arts degree from Loma Linda University, Loma Linda,
California, and a Doctor of Medicine degree from Loma Linda University School of
Medicine. Dr. Schumacher is active in a number of civic and professional
organizations, including the San Joaquin County Medical Society, California
Medical Association, American Medical Association, American Academy of Family
Physicians and the Lodi District Chamber of Commerce.
ANGELO J. ANAGNOS is an active investor and an owner/manager of various
real estate holdings. He owned Sunwest Liquors and Delicatessen in Lodi,
California from 1983 to 1998. He was also the previous owner of Payless Market
and Liquors in Lodi, California from 1957 to 1983. Mr. Anagnos is a member of a
number of fraternal and professional organizations including Lodi Elks Club,
Lodi Eagles, Order of Ahepa, and the Lodi Hellenic Society.
STEVEN M. COLDANI is a real estate broker and farmer. He is President of
Coldani Realty Inc. in Lodi, California and co-owner of Graeagle Associates,
Realtors in Graeagle, California. He holds a Bachelor of Science degree from the
University of the Pacific School of Business. He is a director of Lodi Memorial
Hospital Foundation, Inc., a member of the Lodi and Plumas County Boards of
Realtors, San Joaquin County Farm Bureau, and the California Asparagus
Commission. Mr. Coldani is also a past president of the Lodi Board of Realtors
and a past director of the California Association of Realtors.
5
DAVID M. PHILIPP is a financial management consultant and investor. Mr.
Philipp is a CPA and served as the Chief Financial Officer for First Financial
Bancorp and the Bank from April, 1992 to April, 1999. Prior to joining the
Company and the Bank, he was the Budget Director and Financial Analyst for a
national retailer from 1990 to 1992 and he was with KPMG, LLP from 1986 to 1990.
Mr. Philipp lives with his wife and two sons in El Dorado Hills, California.
LEON J. ZIMMERMAN joined the Company in April 1990. He was promoted from
Executive Vice President and Chief Credit Officer of Bank of Lodi to President
and CEO in August 1994. Mr. Zimmerman became President and CEO of the Company
effective August 1995. He lives in Lodi with his wife and has resided and worked
in the San Joaquin/Sacramento Valley since 1960, serving in various banking
capacities since 1962. Mr. Zimmerman serves on many community boards and
committees, including the Lodi Police Chaplaincy Association, San Joaquin County
Education Foundation, Chamber of Commerce - Agribusiness Committee and LEED -
Sacramento Steering Committee. He is a member of Lodi Rotary Club, Sutter Club -
Sacramento, World Trade Club - San Francisco, Independent Order of Odd Fellows,
Lodi Grape Festival and Harvest Fair and several other community groups.
ROBERT H. DANEKE joined the Company in December, 1999 bringing on board
23 years of banking experience. Prior to joining the Company, Mr. Daneke was
employed at Clovis Community Bank for the past eight years and was promoted to
Senior Vice President/Senior Credit Officer in 1997. In addition, his career has
included: seven years with the Correspondent Bank Division of Community Bank in
Redwood City and seven years with Bank of America Corporate Banking Group. Mr.
Daneke holds a B.B.A. Degree in Finance from the University of Iowa. He is also
a graduate of Pacific Coast Banking School at the University of Washington and
the California Intermediate Banking School at the University of San Diego. He
has been President and Chairman of the Board for the Clovis District Chamber of
Commerce and has served on the Board of Directors for both the Clovis Kiwanis
Club and the Sequoia Council of Boy Scouts of America. He currently is a member
of the Lodi Chapter of Independent Order of Odd Fellows, participates in the
Leadership Lodi program and serves on Lodi Unified School District's Budget
Advisory Committee. Mr. Daneke resides in Lodi with his wife and two children.
ROBERT H. MILLER III is the Implementation Group Manager for
International Business Systems in Folsom, California. He retired in 1997 from
IBM Corporation after 31 years where he served in various management positions.
Mr. Miller graduated from Golden Gate University with a Bachelor of Business
Administration degree. He served in the United States Air Force Reserves from
1966 through 1972. Mr. Miller is a member of the Folsom Chamber of Commerce,
Folsom Historical Society, California State Railroad Museum, Folsom-El
Dorado-Sacramento Historical Railroad Society, and a member and past president
of the Rotary Club of Folsom. Mr. Miller resides in Folsom with his wife Candy.
KEVIN VAN STEENBERGE has worked for Lodi Iron Works since 1979 and has
served as President since December, 1999. Mr. Van Steenberge holds a Bachelor of
Arts degree in Economics from the University of Southern California. He is a
member of the American Foundrymen's Society, Steel Founders Association and
California Cast Metals Association. He currently serves as a member of the Board
of directors of the Metal Casting Stormwater Monitoring Group and the Micke
Grove Zoological Society. Mr. Van Steenberge resides in Lodi with his wife Lori
and two daughters.
6
Committees of the Board of Directors
In order to facilitate the handling of various functions of the Board of
Directors, the Board has appointed several standing committees, including an
Executive Committee, an Audit Committee, a Loan and Investment Committee, a
Marketing Committee, and a Compensation and Stock Option Committee. The regular
meetings of the Loan and Investment, Audit and Marketing Committees are held
jointly each month. The Board of Directors of the Bank has similar committees.
Membership of these committees is the same for the Company and the Bank. The
members of such committees are set forth above in the table under "ELECTION OF
DIRECTORS OF THE COMPANY."
The Board of Directors has not established a nominating committee or
similar committee. The Board of Directors has approved the nominees listed above
as candidates for election as directors. Nominees for election to the Board of
Directors may also be nominated by shareholders, pursuant to the procedures set
forth in the Company's Bylaws and in the Notice of Annual Meeting of
Shareholders to which this Proxy Statement is attached.
The Executive Committee meets from time to time as necessary and, while
the Board is not in session, possesses all the powers and may exercise all the
duties of the Board of Directors in the management of the business of the
Company which may, by law, be delegated to it by the Board of Directors. During
2000, Mr. Goehring served as Chairman of the Executive committee.
The Audit Committee is empowered to (i) meet with the independent
auditors of the Company and review the scope of the annual audit, any open
questions as to the choice of acceptable accounting principles to be applied and
all other matters relating to the auditors' relationship with the Company, (ii)
advise and assist the Board in evaluating the auditors' performance, including
the scope and adequacy of the auditors' examination, (iii) nominate, with the
approval of the Board, the firm of independent auditors to be submitted to the
shareholders of the Company for ratification at the annual meeting thereof, if
such submission is deemed desirable by the Board, (iv) review the Company's
annual financial statements and discuss such statements with the auditors prior
to their release, (v) receive and consider the auditors' comments and
suggestions as to the internal audit and control procedures, adequacy of staff
and other matters, (vi) perform such other functions and undertake such
investigations relating to the financial accounting aspects of the Company as
the Board may direct, and (vii) retain and consult with counsel or other experts
as the Committee may consider necessary or appropriate in the discharge of its
duties. The functions of the Committee are limited to the foregoing and do not
include normal management functions concerning accounting or auditing practices.
The Audit Committee met twelve times during 2000 on a joint basis with the Loan
and Investment and Marketing Committees. The Board of directors has adopted a
charter for the Audit committee which is attached as Appendix A to this Proxy
Statement. Mr. Schumacher served as Chairman of the Audit Committee during 2000.
Messrs. Schumacher, Goehring and Anagnos meet the independence requirements of
NASDAQ. Mr. Philipp was employed by the Company and the Bank within the past
three years and therefore does not meet the independence requirements of NASDAQ.
Based upon Mr. Philipp's background and experience in financial reporting and
the banking industry, the Board of Directors deemed it to be in the best
interest of the Company to allow Mr. Philipp to serve as a member of the Audit
Committee.
The Loan and Investment Committee is authorized and empowered to (i)
establish investment and loan policies, (ii) establish individual investment and
loan limits, (iii) supervise and administer the investment and loan function,
(iv) undertake such other functions as the Board may from time to time direct.
The Loan and Investment Committee met twelve times on a joint basis with the
Audit and Compliance Committee and eighteen times on a separate basis during
2000. Mr. Katzakian served as Chairman of the Loan and Investment Committee
during 2000. Mr. Katzakian is retiring as a director as of the 2001 annual
meeting.
The Marketing Committee is empowered to oversee and guide the efforts of
the Company with respect to (i) cultivating and promoting the Company's position
within the community, (ii) the marketing of products and services, and (iii) the
discharge of responsibilities with respect to the Community Reinvestment Act.
The Marketing Committee met four times during 2000. Mr. Goehring served as
Chairman of the Marketing Committee during 2000.
The Compensation and Stock Option Committee is authorized and empowered
to investigate and recommend to the Board (i) the compensation to be paid to
executive officers of the Company and the Bank, (ii) the amount of any bonus
under the terms of any contract of employment between the Company or
7
the Bank and any executive officer, (iii) employee benefit plans deemed
appropriate for the employees of the Company and the Bank, (iv) supervise the
administration of any such employee benefit plans adopted by the Company and the
Bank and (v) undertake such other investigations and perform such other
functions as the Board may from time to time direct. Mr. Goehring served as
Chairman of the Compensation and Stock Option Committee during 2000.
The Board of Directors of the Bank held twelve regular meetings and four
special meetings during 2000. The Board of Directors of the Company held twelve
regular meetings and one special meeting during 2000. No director attended fewer
than 75% of the total number of meetings of the Boards and the committees on
which he served during 2000.
Compensation of Directors
During 2000, fees totaling $148,800 were paid to the Directors for
attending meetings of the Bank's Board of Directors and the Company's Board of
Directors, respectively. The Chairman of the Board received an annual retainer
of $26,400. Directors Schumacher and Katzakian who served as chairman of the
Audit Committee and the Loan and Investment Committee, respectively, each
received an annual retainer of $25,200. The remaining directors received an
annual retainer of $24,000.
The Directors have also received options to purchase shares of the
Company's Common Stock pursuant to the automatic grant features of the 1991
Director Stock Option Plan. For more information, see the discussion of the 1991
Director Stock Option Plan under "Change in Control Arrangements--1991 Stock
Option Plans" herein.
Effective April 3, 1998, the Company and the Bank established a director
emeritus program (the "Director Emeritus Program") for retired members of the
Board of Directors. Any Director who has served continuously for at least ten
years as a Director of the Company or the Bank prior to retirement is eligible
to be granted the status of "Director Emeritus" under the Director Emeritus
Program. A Director Emeritus is required to (a) represent the goodwill of the
Company and the Bank in the community, (b) promote the continued profitability
of the Company and the Bank, (c) maintain communication and meet periodically
with the President and the Chairman, (d) provide consultation in his field of
expertise, and (e) comply with the Company's policies applicable to the
activities of a Director Emeritus. A Director Emeritus does not have the status
of a Director of the Company or the Bank and is not entitled to attend or vote
at any meetings of the Board of Directors or committees of the Board of
Directors. The term of any Director Emeritus is three years. No fees or other
compensation will be paid to a Director Emeritus, although any such person with
a Director Supplemental Compensation Agreement will be eligible for annual
payments totaling $7,500 during each of the first three years of service as a
Director Emeritus (for more information regarding such payments, see the
discussion of Director Supplemental Compensation Agreements under "Supplemental
Compensation Agreements" below).
During 1998, each member of the Board of Directors became entitled to
certain fringe benefits, payable upon death, disability or retirement and upon
early termination of service as a Director due to a change in control or certain
other events other than voluntary resignation, pursuant to the terms of
individual Director Supplemental Compensation Agreements and Life Insurance
Endorsement Method Split Dollar Plan Agreements signed with the Bank. Said
Agreements were made effective as of April 3, 1998, the premium date of
single-premium life insurance policies purchased by the Bank on the lives of
certain executive officers and directors. For more information, see the
discussion of Director Supplemental Compensation Agreements under "Supplemental
Compensation Agreements" below.
The Company maintains a salary continuation plan (see "Salary
Supplemental Compensation Agreements" on page 10) for its executive officers,
certain senior officers and its directors. As of December 31, 2000, the
Company's non-employee directors were credited with $74,000 in accrued benefits
under the directors' salary continuation plan. The Company allocated $25,000 to
the Salary Continuation Plan in 2000 on behalf of its non-employee directors.
8
EXECUTIVE COMPENSATION
Stock Options - Option Grants in the Last Fiscal Year
The following table sets forth information concerning the grant of stock
options to Leon J. Zimmerman, President and Chief Executive Officer of the
Company; Robert Daneke, Executive Vice President & Chief Credit Officer; and
Allen Christenson, Senior Vice President & Chief Financial Officer of the
Company and the Bank during the calendar year ended December 31, 2000.
Number of % of Total Potential Realizable Value at
Securities Options Assumed Annual Rates of
Underlying Granted to Exercise Stock Price Appreciation
Options Employees In Price Expiration for Option Term (3)
Granted (1) Fiscal Year $ /sh (2) Date 5% ($) 10% ($)
----------- ------------ -------- ----- ------- -------
Leon J. Zimmerman 24,000 49.9% $9.365 5/24/2010 $141,350 $358,210
Robert H. Daneke 8,000 16.6% 9.365 5/24/2010 47,117 119,403
Allen R. Christenson 5,000 10.4% 9.365 5/24/2010 29,448 74,627
- ----------------------------
<FN>
(1) The material terms of all option grants to named officers during 2000 are
as follows: (i) all options are incentive stock options; (ii) all options
have an exercise price equal to the fair market value on the date of grant;
(iii) all options have a ten-year term and become exercisable as follows:
20% at date of issuance and 20% per year for the subsequent four years; and
(iv) all options terminate on the earlier of ten years after the date of
grant; twelve months from termination for death or disability; three months
from termination of employment for reasons other than death, disability or
cause; or thirty days following employee's receipt of notice of termination
of employment for cause.
(2) Exercise Price is determined by the average closing bid and ask prices
on the date of grant.
(3) The dollar gains under these columns result from calculations required by
the Securities and Exchange Commission's rules and are not intended to
forecast future price appreciation of the Common Stock of the Company. It
is important to note that options have value to the listed executives only
if the stock price increases above the exercise price shown in the table
during the effective option period. In order for the listed executives to
realize the potential values set forth in the 5% and 10% columns in the
table, the price per share of the Company's Common Stock would be
approximately $15.25 and $24.29, respectively, as of the expiration of the
options granted on May 25, 2000.
</FN>
Aggregated Option Exercises in 2000 and Fiscal Year-end Option Values
The following table sets forth information pertaining to options
exercised during the last fiscal year and unexercised options as of the end of
the last fiscal year for Leon J. Zimmerman, President and Chief Executive
Officer; Robert Daneke, Executive Vice President and Chief Credit Officer; and
Allen Christenson, Senior Vice President and Chief Financial officer of the
Company and the Bank:
Number of Value Realized Securities Underlying Value of Unrealized
Shares (Market Price at Number of Unexercised in-the-money
Acquired Exercise Less Options at FY-End Options at FY-End
on Exercise Exercise Price) Exercisable Unexercisable Exercisable Unexercisable
----------- -------------- ----------- ------------- ----------- -------------
Leon J. Zimmerman:
7,214 $ 25,759 46,256 19,200 $ 147,281 $7,296
Robert Daneke:
500 1,094 4,435 11,440 1,756 4,472
Allen Christenson:
- - 3,100 7,150 (3,145) (3,768)
9
Summary Compensation Table
The following table sets forth, for each of the last three fiscal years,
the compensation of the Chief Executive Officer of the Company and the two
highest paid executive officers of the Company who received salary and incentive
compensation in excess of $100,000 for the year ended December 31, 2000.
Long-Term Compensation
Annual Compensation Awards Payouts
------------------- ------ -------
Restricted
Other Annual Stock LTIP All Other
Year Salary (1) Bonus Compensation (2) Award(s) Options Payouts Compensation (3)
---- ---------- ------ ---------------- -------- ------- ------- ----------------
Leon J. Zimmerman:
2000 $ 155,000 $ 38,000 -- -- 24,000 -- $ 6,406
1999 147,000 4,000 -- -- -- -- 9,953
1998 140,000 22,531 -- -- -- -- 7,924
Robert H. Daneke:
2000 102,600 2,000 -- -- 8,000 -- 4,361
1999 7,384 -- -- -- 8,375 -- --
Allen R. Christenson:
2000 94,000 7,000 -- -- 5,000 -- 3,447
1999 39,166 -- -- -- 5,250 -- --
- ----------------------------
<FN>
(1) Amounts shown for each year include compensation earned and received as
well as amounts earned but deferred at the officer's election.
(2) Mr. Zimmerman, Mr. Daneke, and Mr. Christenson did not receive perquisites
or other personal benefits in excess of the lesser of $50,000 or 10% of his
total annual salary and bonus during 2000, 1999 and 1998.
(3) All other compensation includes contributions to the Bank of Lodi Employee
Stock Ownership Plan (see description herein below) and matching
contributions to the Company's 401(k) Profit Sharing Plan. All other
compensation does not include the value of certain benefits payable
pursuant to the Executive Supplemental Compensation Agreements and Life
Insurance Endorsement Method Split Dollar Plan Agreements, entered into
between the Bank and the officers upon death, retirement or termination of
employment without cause (for more information, see the discussion of
Executive Supplemental Compensation Agreements under "Supplemental
Compensation Agreements" hereinbelow).
</FN>
10
Employment Agreements
Leon J. Zimmerman, President and Chief Executive Officer of the Company
and the Bank, entered into an Employment Agreement with the Company, effective
September 30, 1998, for a one year term ending April 30, 1999, subject to
automatic extensions for additional one-year periods and also subject to certain
early termination provisions. The Agreement provides for a base salary of
$140,000 per annum, with increases effective on the 1st of January each year,
commencing with January 1, 1999, at the sole discretion of the Board of
Directors based upon a review of his performance during the previous year and
competitive factors. Such salary includes Mr. Zimmerman's service on the Board
of Directors of the Company and the Bank. The Agreement also provides that Mr.
Zimmerman shall participate in any officer bonus plan and he is entitled to the
same group insurance plans and other benefits made available to employees
generally, plus the use of an automobile. The Company may immediately terminate
the Agreement if the termination is for cause. The Company may also terminate
the Agreement without cause by giving Mr. Zimmerman thirty (30) days written
notice. In the event the Company terminates Mr. Zimmerman's employment without
cause, Mr. Zimmerman will be entitled to receive as severance compensation an
amount equal to twelve months' salary. Upon a change in control, or if Mr.
Zimmerman is terminated after a change in control or he voluntarily terminates
his employment within two years after a change in control in response to a
constructive termination, Mr. Zimmerman will be entitled to receive as severance
compensation an amount equal to two times his average annual compensation for
the two years immediately preceding the change in control. For purposes of the
Agreement, "change in control" means a change in control of the Company of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A (or in response to any similar item on any
similar schedule or form) promulgated under the Securities Exchange Act. A
"constructive termination" is defined by the Agreement to include a material
reduction in base salary, a material change in responsibilities, or a
requirement to relocate.
The Company has employment agreements with three other executive
officers, including Robert H. Daneke and Allen R. Christenson. Except for the
salaries and service on the board of directors (Mr. Christenson does not serve
on the Board of Directors), the terms of each agreement currently in force are
substantially identical. The term of each agreement is one year and is extended
automatically for one year each January 1 unless either party gives written
notice to the contrary. In addition to their salaries, each employee is entitled
to various fringe benefits and a discretionary bonus. All employees are entitled
to disability benefits under prescribed circumstances.
Supplemental Compensation Agreements
During 2000, the Bank converted its existing nonqualified executive
officer and director defined contribution retirement and death benefit plan to a
defined benefit plan ("Plan"). The Plan is unsecured and unfunded and there are
no Plan assets. The Bank has purchased insurance on the lives of the executive
officers and certain directors who participate in the Plan and intends to use
the cash values of those policies ($10,032,000 and $8,674,000 at December 31,
2000 and 1999, respectively) to pay the retirement obligations that accrue
pursuant to the Plan. The Bank also entered into a Life Insurance Endorsement
Method Split Dollar Plan Agreement with the executive officers and directors in
order to provide for the division of death proceeds of such policies as between
the Bank and the designated beneficiary(ies). The Company's total accrued
pension obligation was $456,000 and $169,000 as of December 31, 2000 and 1999,
respectively.
The Officer Plan provides for the payment of certain benefits upon
retirement (age 62 or older) or early retirement (prior to attaining age 62),
upon death or disability prior to retirement, or in the event employment is
terminated prior to retirement. If the employment of the executive officer is
terminated prior to the officer attaining age 62, other than by reason of death,
disability or retirement, then the entitlement of the executive officer to the
benefits specified in his agreement will depend on whether the officer is
terminated (i) without cause, or on account of or after a change in control of
the Bank, in which case the designated benefits will be payable, or (ii) with
cause, or by voluntary resignation of the officer prior to 100 percent vesting
of his benefits, in which case all rights and benefits will be forfeited. The
formula by which benefits are determined for the officers who participate in the
Plan is based on a combination of the individual's position within the Bank,
their age at the time when their retirement benefits become fully vested, and
the amount of their benefits available under the previous plan.
11
The Director Plan provides for the payment of certain benefits,
commencing after the expiration of the initial three year period as Director
Emeritus following retirement from the Board of Directors of the Bank, and
continuing until the Director's death. During service as Director Emeritus, he
will also be entitled to receive certain payments during the three-year period
commencing on his retirement date from the Board of Directors. The Director Plan
provides for the payment of certain benefits in the event the Director becomes
disabled while serving on the Board of Directors of the Bank, which benefits
will continue until the Director's death, and certain other benefits in the
event the service of the Director is terminated, other than by reason of death,
disability or retirement, prior to age 65, which benefits depend on whether his
service is terminated (i) without cause, or on account of or after a change in
control of the Bank, in which case the designated benefits will be payable, or
(ii) with cause, or by voluntary resignation of the Director prior to 100
percent vesting of his benefits, in which case all rights and benefits will be
forfeited. All current directors are fully vested in these benefits.
The benefits are defined in each Director agreement. Upon a Director's
retirement, and assuming that he serves as a Director Emeritus, the Bank will
pay to the Director the sum of $7,500 per year for the first three years of such
service. In any event, commencing on the third anniversary of the Director's
retirement, the Bank will pay to the Director the sum of $7,500 per year,
continuing until the Director's death.
Transactions with Management
During 2000, certain directors and officers of the Company and the Bank
had loans outstanding with the Bank. Such loans were made in the ordinary course
of business on substantially the same terms, including interest rate and
collateral, as those prevailing at the time for comparable transactions with
other persons, and did not involve more than the normal risk of collectibility
or present other unfavorable features.
There are no existing or proposed material interests or transactions
between the Company and any of its executive officers or directors.
Change in Control Arrangements
Employment Contract. Upon a change in control, or if an executive officer
is terminated after a change in control or he voluntarily terminates his
employment within two years after a change in control in response to a
constructive termination, the officer will be entitled to receive as severance
compensation an amount equal to two times his average annual compensation for
the two years immediately preceding the change in control. For purposes of the
Agreement, "change in control" means a change in control of the Company of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A (or in response to any similar item on any
similar schedule or form) promulgated under the Securities Exchange Act. A
"constructive termination" is defined by the Agreement to include a material
reduction in base salary, a material change in responsibilities, or a
requirement to relocate.
1991 Stock Option Plans. On February 19, 1991, the Board of Directors
adopted (i) the First Financial Bancorp 1991 Employee Stock Option Plan (the
"Employee Stock Option Plan"), under which officers and key full-time salaried
employees of the Company and its subsidiaries may be granted options to purchase
shares of the Company's Common Stock; and (ii) the First Financial Bancorp 1991
Director Stock Option Plan (the "Director Stock Option Plan"), under which
members of the Board of Directors are granted options to purchase shares of the
Company's Common Stock. At the 1991 Annual Meeting, the shareholders approved
the adoption of the Employee Stock Option Plan and the Director Stock Option
Plan (collectively referred to as the "1991 Stock Option Plans"). The 1991 Stock
Option Plans are intended to further the growth, development and financial
success of the Company and its subsidiaries by providing additional incentives
to members of the Board of Directors, officers and key employees, and by
assisting them in acquiring shares of the Company's Common Stock, which will
allow them to benefit directly from the Company's growth, development and
financial success. The Director Stock Option Plan was amended at the 1995 annual
meeting of shareholders in respect of the timing of option grants. Section 5(a)
of the Director Stock Option Plan, as amended, provides that, on May 1, 1995,
each person who is an eligible Board member and who has continuously served on
the Board since June 18, 1991, shall be granted an option to purchase 3,150
shares of Common Stock. Accordingly, on May 1, 1995, each of the Directors of
12
the Company (including six of the nominees described in this Proxy Statement)
was granted a nonstatutory option for 3,150 shares of Common Stock.
The Board of Directors of the Company adopted a new, 1997 Stock Option
Plan and the shareholders approved such Plan at the annual meeting held on April
22, 1997. No additional option grants will be made under the 1991 Stock Option
Plans after such date. Such discontinuance will not adversely affect any stock
option previously granted and outstanding under the 1991 Stock Option Plans.
1997 Stock Option Plan. On March 20, 1997, the Board of Directors adopted
the First Financial Bancorp 1997 Stock Option Plan (the "1997 Stock Option
Plan"), under which directors, officers and key full-time salaried employees of
the Company and its subsidiaries and any consultant to the Company and its
subsidiaries who is not a member of the Board of Directors may be granted
options to purchase shares of the Company's Common Stock. At the 1997 Annual
Meeting, the shareholders approved the adoption of the 1997 Stock Option Plan.
The 1997 Stock Option Plan is intended to further the growth, development and
financial success of the Company and its subsidiaries by providing additional
incentives to members of the Board of Directors, officers and key employees and
consultants.
Change in Control. In the event of a sale, dissolution or liquidation of
the Company or a merger or consolidation in which the Company is not the
surviving or resulting corporation, the Board has the power to cause the
termination of options which are then outstanding under the Company's 1991 Stock
Option Plans if the surviving or resulting corporation does not agree to assume
all outstanding options under such plans; provided, however that in such event
the optionees shall have the right prior to such sale, liquidation, dissolution,
merger or consolidation to notification thereof as soon as practicable and,
thereafter until three days prior to the effectiveness of such sale,
dissolution, liquidation, merger or consolidation, to exercise the option
without regard to the vesting provisions. This right is conditioned upon the
execution of a definitive agreement of merger or consolidation or final plan of
sale, liquidation, or dissolution. Under the 1997 Stock Option Plan, in the
event of a change in control of the Company, the outstanding options will be
subject to the terms of the agreement of merger or reorganization. Such an
agreement may provide for the assumption of outstanding options, for payment of
a cash settlement or for acceleration of exercisability, in all cases without
the consent of the optionees.
Employee Stock Ownership Plan
Effective January 1, 1992, the Company and the Bank established the Bank
of Lodi Employee Stock Ownership Plan. The plan covers all employees, age 21 or
older, beginning with the first plan year in which the employee completes at
least 1,000 hours of service. The Bank's annual contributions to the plan are
made in cash and are at the discretion of the Board of Directors based upon a
review of the Company's consolidated profitability. Contributions to the plan
are invested primarily in the common stock of the Company and are allocated to
participants on the basis of salary in the year of allocation. Benefits become
20% vested after the third year of credited service, with an additional 20%
vesting each year thereafter until 100% vested after seven years. The amount of
contributions for the benefit of Mr. Zimmerman, Mr. Daneke and Mr. Christenson
is included in the Summary Cash Compensation table in the column entitled "All
Other Compensation."
Profit Sharing Plan
Effective January 1, 1997, the Company established the First Financial
Bancorp 401(k) Profit Sharing Plan. The plan covers all employees, age 18 or
older, beginning with the first plan year in which the employee completes at
least 1,000 hours of service. The plan is intended to supplement income upon
retirement; the actual retirement benefit for each employee will depend on the
amount in the employee's plan account balance at the time of retirement. For
each plan year, participating employees may elect to have a portion of their
compensation contributed to the plan, and the Company or the Bank may, at its
discretion, make matching or other contributions. Company and Bank contributions
to the plan for the benefit of employees become 20% vested after the second year
of service, with an additional 20% vesting each year thereafter until 100%
vested after six years. The amount of contributions for the benefit of Mr.
Zimmerman, Mr. Daneke and Mr. Christenson is included in the Summary Cash
Compensation table in the column entitled "All Other Compensation."
13
Section 16 (a) Beneficial Ownership Reporting
The Company's Directors, executive officers and beneficial owners of more
than 10% of its Common Stock are required under Section 16(a) of the Securities
and Exchange Act of 1934, as amended, to file reports of ownership and changes
in ownership with the Securities and Exchange Commission. Copies of those
reports must also be furnished to the Company.
Based solely on a review of reports furnished to the Company and written
representations that no other reports were required, the Company believes that
during fiscal 2000, no person who was a Director, executive officer or greater
than 10% beneficial owner of the Company's Common Stock failed to file on a
timely basis any reports required by Section 16(a).
REPORT OF THE AUDIT COMMITTEE
The Audit Committee has reviewed and discussed the audited financial
statements with management of the Company. As required by SAS 61, the Audit
Committee has discussed required matters with KPMG LLP, the independent
auditors. The Audit Committee has received the written disclosures and the
letter from KPMG LLP which is required by the Independence Standards Board
Standard No. 1 and has discussed with the independent auditors the auditors'
independence. Based on the review and discussions above, the Audit Committee has
recommended to the Board that the audited financial statements be included in
the Company's Annual Report on Form 10-K for the latest fiscal year for filing
with the Securities and Exchange Commission. The Audit Committee has adopted a
written charter which is included in this proxy statement as Appendix A.
Audit Committee members: Weldon D. Schumacher, Chairman
Benjamin R. Goehring
Angelo J. Anagnos
David M. Philipp
Principal Accounting Firm Fees
The following table sets forth the aggregate fees billed to the
Company for the fiscal year ended December 31, 2000 by the Company's principal
accounting firm, KPMG LLP:
Audit Fees $ 84,000
Financial Information Systems Design and Implementation Fees --
All Other Fees (a,b) 10,400
----------
$ 94,400
(a) Includes fees for tax consulting and other non-audit services.
(b) The Audit Committee has considered whether the provision of these non-audit
services is compatible with maintaining the principal accountant's
independence.
14
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected KPMG LLP as the Company's certified
public accountants for 2000. KPMG LLP audited the financial statements of the
Company for the year ended December 31, 2000. KPMG LLP has no interest,
financial or otherwise, in the Company. The services rendered by KPMG LLP during
the 2000 fiscal year were audit services and included consultation in connection
with various accounting, tax reporting, strategic planning, and compensation
matters. The Audit Committee of the Board of Directors of the Company approved
each professional service rendered by KPMG LLP during the 2000 fiscal year, and
the possible effect of each such service on the independence of that firm was
considered by the Audit Committee of the Board of Directors before such service
was rendered.
A representative of KPMG LLP is expected to be present at the Annual
Meeting and will have an opportunity to make a statement and to respond to
appropriate questions.
ANNUAL REPORT
The annual report of the Company containing audited financial statements
for the fiscal year ended December 31, 2000, has been combined with the required
information of the Annual Report on Form 10-K. The Company's combined Annual
Report on Form 10-K for the year ended December 31, 2000, as filed with the SEC
under the Securities Exchange Act of 1934, accompanies this Proxy Statement.
SHAREHOLDERS' PROPOSALS FOR 2002 ANNUAL MEETING;
DISCRETIONARY VOTING
Any proposal of a shareholder intended to be presented at the Company's
2002 Annual Meeting must be received by the Company no later than November 30,
2001 for inclusion in the Proxy Statement and form of proxy for that meeting and
must meet the requirements of the SEC's proxy rules. Any such proposal should be
directed to the attention of the President, First Financial Bancorp, 701 South
Ham Lane, Lodi, California 95242. The proxy holders may vote in their discretion
all proxies solicited for the company's 2002 Annual Meeting on any matter raised
at that meeting of which the Company did not have notice by at least February
18, 2002.
15
OTHER MATTERS
The Board of Directors of the Company knows of no other matters which
will be brought before the Meeting, but if such matters are properly presented,
proxies solicited hereby relating to the Meeting will be voted in accordance
with the judgment of the persons holding such proxies. All shares represented by
duly executed proxies will be voted at the Meeting.
You are urged to sign, date and return the enclosed proxy in the envelope
provided. No further postage is required if the envelope is mailed from within
the United States. If you subsequently decide to attend the Annual Meeting and
wish to vote your shares in person, you may do so. Your cooperation in giving
this matter your prompt attention is appreciated.
By Order of the Board of Directors,
Leon J. Zimmerman
President and Chief Executive Officer
Lodi, California
March 26, 2001
16
APPENDIX A
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
INTRODUCTION
The Board of Directors recognizes that the Company's management is
responsible for preparing the Company's financial statements and that
independent auditors are responsible for auditing those financial statements. In
fulfilling these responsibilities, management and the independent auditors are
ultimately accountable to the Audit Committee and the Board of Directors.
Nothing in this Charter should be construed to imply that the Audit
Committee is required to provide or does provide any assurance or certification
as to the Company's financial statements or as to its compliance with laws,
rules or regulations. In order to fulfill its oversight responsibility, the
Audit Committee must be capable of conducting free and open discussions with
management, independent auditors, employees and others regarding the quality of
the financial statements and the system of internal controls.
I. AUDIT COMMITTEE PURPOSE
The Audit Committee is appointed by the Board of Directors to assist the
Board in fulfilling its oversight responsibilities. The Audit Committee's
primary duties and responsibilities are to:
- Monitor the integrity of the Company's financial reporting process and
systems of internal controls regarding finance, accounting, and legal
compliance
- Monitor the independence and performance of the Company's independent
auditors and internal auditing department
- Provide an avenue of communication among the independent auditors,
management, the internal auditing department, and the Board of Directors
- Review areas of potential significant financial risk to the Company.
The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities and it has direct access to the
independent auditors as well as anyone in the organization. The Audit Committee
has the ability to retain, at the Company's expense, special legal, accounting,
or other consultants or experts it deems necessary in the performance of its
duties.
Prior to the beginning of each fiscal year, the Chairman shall draft a
proposed schedule of the Committee's activities for the coming year, and the
times at which such activities shall occur, including preliminary agendas for
each proposed meeting of the Committee, which shall be submitted to the
Committee for its review and approval, with such changes as the Committee shall
determine to be appropriate.
II. AUDIT COMMITTEE COMPOSITION AND MEETINGS
The Audit Committee shall be comprised of not less than three (3) nor
more than six (6) directors as determined by the Board, each of whom shall be
"independent directors," free from any relationship that would interfere with
the exercise of his or her independent judgment. For purposes of determining
independence, the following criteria shall be applied:
"Independent director" means a person other than an officer or employee
of the Company or its subsidiaries or any other individual having a relationship
which, in the opinion of the Company's Board of Directors, would interfere with
the exercise of independent judgment in carrying out the responsibilities of a
director. The following persons shall not be considered independent:
(a) director who is employed by the Company or any of its affiliates
for the current year or any of the past three years;
(b) director who accepts any compensation from the Company or any of
its affiliates in excess of $60,000 during the previous fiscal year, other than
compensation for board service, benefits under a tax-qualified retirement plan,
or non-discretionary compensation;
(c) director who is a member of the immediate family of an individual
who is, or has been in any of the past three years, employed by the Company or
any of its affiliates as an executive officer. Immediate family includes a
person's spouse, parents, children, siblings, mother-in-law, father-in-law,
brother-in-law, sister-in-law, son-in-law, daughter-in-law, and anyone who
resides in such person's home;
(d) director who is a partner in, or a controlling shareholder or an
executive officer of, any for-profit business organization to which the Company
made, or from which the Company received, payments (other than those arising
solely from investments in the Company's securities) that exceed 5% of the
Company's or business organization's consolidated gross revenues for that year,
or $200,000, whichever is more, in any of the past three years;
(e) director who is employed as an executive of another entity where
any of the Company's executives serve on that entity's compensation committee.
All members of the Committee shall have a basic understanding of finance
and accounting and be able to read and understand fundamental financial
statements, and at least one member of the Committee shall have accounting or
related financial management expertise and the regulatory requirements of the
Company's industry.
Audit Committee members shall be appointed by the Board on recommendation
of the Executive Committee. The Audit Committee shall meet at least four times
annually, or more frequently as circumstances dictate. The Audit Committee Chair
shall prepare and/or approve an agenda in advance of each meeting. The Audit
Committee should meet privately in executive session at least annually with
management (suggested time to be following the presentation of the annual audit
report or at the time the audit engagement letter is presented for approval),
the independent auditors and as a Committee to discuss any matters that the
Committee or each of these groups believe should be discussed.
III. AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES
Review Procedures
A. Review and reassess the adequacy of this Charter, and any provisions of
the Company's by-laws which refer to the Audit Committee, at least
annually and propose to the Board of Directors necessary or appropriate
revisions. Submit the Charter to the Board of Directors for approval
and have the document published at least every three years in
accordance with SEC regulations.
B. Review the Company's annual audited financial statements prior to
filing or distribution. Review should include discussion with
management and independent auditors of significant issues regarding
accounting principles, practices, and judgments. If the Committee finds
the annual financial statements acceptable, to recommend to the Board
of Directors that they be included in the Company's annual report on
Form 10-K or 10-KSB.
C. In consultation with the management and the independent auditors
consider the integrity of the Company's financial reporting processes
and controls. Discuss significant financial risk exposures and the
steps management has taken to monitor, control and report such
exposures. Review significant findings prepared by the independent
auditors together with management's responses.
D. Review with financial management and the independent auditors the
Company's quarterly financial results prior to the release of earnings
and/or the Company's quarterly financial statements prior to filing or
distribution. Discuss any significant changes to the Company's
accounting principles and any items required to be communicated by the
independent auditors in accordance with SAS 61 (see Independent
Auditors' section, item E). The Chair of the Committee, or his or her
designee, may represent the entire Audit Committee for purposes of this
review.
E. Review prior to publication or filing and approve such other Company
financial information, including appropriate regulatory filings and
releases that include financial information, as the Committee deems
desirable.
Independent Auditors
A. The independent auditors are ultimately accountable to the Audit
Committee and the Board of Directors. The Audit Committee shall review
the independence and performance of the auditors and annually recommend
to the Board of Directors the appointment of the independent auditors
and approve and recommend to the Board any discharge of auditors when
circumstances warrant.
B. Approve the fees and other compensation to be paid to the independent
auditors.
C. On an annual basis, the Committee should review and discuss with the
independent auditors all significant relationships they have with the
Company that could impair the auditors' independence.
D. Review the independent auditors' audit plan - including scope,
staffing, locations, reliance upon management and internal audit and
general audit approach.
E. Prior to releasing year-end earnings, discuss the results of the audit
with the independent auditors. Discuss certain matters required to be
communicated to Audit Committees in accordance with AICPA SAS 61.
F. Consider the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applies in
its financial reporting.
G. Review the budget, plan, changes in plan, activities and qualifications
of external auditors as needed.
H. Annually require the auditors to confirm in writing their understanding
of the fact that they are ultimately accountable to the Board of
Directors of the Company and its Audit Committee.
I. On at least an annual basis, review with the Company's counsel any
legal matters that could have a significant impact on the
organization's financial statements.
Other Audit Committee Responsibilities
A. Annually prepare a report to shareholders as required by the Securities
and Exchange Commission to be included in the Company's annual proxy
statement.
B. Perform any other activities consistent with this Charter, the
Company's By-laws and governing law, as the Committee or the Board
deems necessary or appropriate.
C. Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.
General
A. Annually review policies and procedures as well as audit results
associated with directors' and officers' expense accounts and
perquisites. Annually review a summary of directors' and officers'
related party transactions and potential conflicts of interest.
B. The Board of Directors reserves all authority permitted under the rules
of the Commission and any exchange or market on or through which the
Company's securities may hereafter be traded or listed for trading in
connection with any matter referred to in this Charter, including but
not limited to the determination of independence of Audit Committee
members.