SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14A-6(E)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-12
SERVICE 1st BANCORP
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
N/A
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies: N/A
2) Aggregate number of securities to which the transaction applies: N/A
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.): N/A
4) Proposed maximum aggregate value of transaction: N/A
5) Total fee paid:
[ ] 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: N/A
2) Form, Schedule or Registration Statement No.: N/A
3) Filing Party: N/A
4) Date Filed: N/A
SERVICE 1st BANCORP
2800 West March Lane, Suite 120
Stockton, California 95219
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 27, 2004
The Annual Meeting of Shareholders (the "Annual Meeting") of Service 1st
Bancorp (the "Company") will be held at the Stockton office of the Company's
subsidiary, Service 1st Bank (the "Bank"), 2800 West March Lane, Suite 120,
Stockton, California 95219, at 6:00 p.m. on May 27, 2004, for the purpose of
considering and voting upon the following matters:
1. Election of Directors. Electing the following twelve persons to the
Board of Directors to serve until the 2005 Annual Meeting of Shareholders and
until their successors are elected and qualified:
John O. Brooks Frances C. Mizuno Michael K. Repetto
Eugene C. Gini Richard R. Paulsen Anthony F. Souza
Bryan R. Hyzdu Gary A. Podesto Albert Van Veldhuizen
Robert D. Lawrence Toni Marie Raymus Donald L. Walters
2. Approval of the Service 1st Bancorp 2004 Stock Option Plan.
3. Ratification of the selection of Vavrinek, Trine, Day & Co., LLP as
independent public accountants for the year 2004.
4. Other Business. Transacting such other business as may properly come
before the Annual Meeting and any postponements or adjournments thereof.
All of the above matters are more fully described in the accompanying
Proxy Statement.
Article II, Section 7 of the Bylaws of Service 1st Bancorp provides for
the nomination of directors in the following manner:
"Nominations for Election to Board of Directors. 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 President by the later of: (i) the
close of business twenty-one (21) days prior to any meeting of
shareholders called for the election of directors; or (ii) seven (7) days
after the date of mailing of notice of the meeting of shareholders.
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.
Shareholder nominations shall be signed by the nominating shareholder and
by each nominee, and shall be accompanied by a written consent to be named
as a nominee for election as a director from each proposed nominee.
Nominations not made in accordance with 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 those shareholders of record at the close of business on April 9,
2004 (the "Record Date"), will be entitled to notice of and to vote at the
Annual Meeting.
IT IS VERY IMPORTANT THAT EVERY SHAREHOLDER VOTE. WE URGE YOU TO MARK,
SIGN, DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE, WHETHER OR NOT
YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON. IF YOU DO ATTEND THE ANNUAL
MEETING AND ELECT TO VOTE IN PERSON, YOU MAY DO SO. THE PROXY MAY BE REVOKED AT
ANY TIME PRIOR TO ITS EXERCISE.
By Order of the Board of Directors
Dated: April 28, 2004 /s/ JEAN STEBBINS
Stockton, California ----------------------------------
Jean Stebbins, Corporate Secretary
2
Mailed to Shareholders
on or about April 28, 2004
PROXY STATEMENT
FOR
THE ANNUAL MEETING OF SHAREHOLDERS
OF
SERVICE 1st BANCORP
MAY 27, 2004
INTRODUCTION
The Proxy Statement is furnished in connection with the solicitation of
Proxies for use at the 2004 Annual Meeting of Shareholders (the "Annual
Meeting") of Service 1st Bancorp (the "Company") to be held at 6:00 p.m. on May
27, 2004, at the Stockton office of the Company's subsidiary, Service 1st Bank
(the "Bank"), 2800 West March Lane, Suite 120, Stockton, California 95219, and
at any and all postponements or adjournments thereof.
Revocability of Proxies
Any person giving a proxy in the form accompanying this Proxy Statement
has the power to revoke that proxy prior to its exercise. The proxy may be
revoked prior to the Annual Meeting by delivering to the Secretary of the
Company either a written instrument revoking the proxy or a duly executed proxy
bearing a later date. The proxy may also be revoked by the shareholder by
attending and voting at the Annual Meeting. The proxy will be voted as directed
by the shareholder giving the proxy and if no directions are given on the proxy,
the proxy will be voted "FOR" the nominees of the Board of Directors as
described in this Proxy Statement, "FOR" approval of the 2004 Stock Option Plan,
"FOR" the ratification of the appointment of Vavrinek, Trine, Day & Co., LLP as
independent public accountants for the year 2004, and, at the proxy holders'
discretion, on such other matters, if any, which may come before the Annual
Meeting and any and all postponements or adjournments of the Annual Meeting.
Solicitation of Proxies
The solicitation of proxies is being made by the Board of Directors of the
Company. The expense of preparing, assembling, printing, and mailing this Proxy
Statement and the materials used in the solicitation of proxies for the Annual
Meeting will be borne by the Company. It is contemplated that proxies will be
solicited principally through the use of the mail, but officers, directors, and
employees of the Company and the Bank may solicit proxies personally or by
telephone, without receiving special compensation therefore. The Company will
reimburse banks, brokerage houses and other custodians, nominees and fiduciaries
for their reasonable expenses in forwarding the Proxy Statement to shareholders
whose stock in the Company is held of record by such entities. In addition, the
Company may use the services of individuals or companies it does not regularly
employ in connection with this solicitation of proxies, if management determines
it to be advisable.
3
Voting Securities; Record Date; Cumulative Voting
There were issued and outstanding 1,155,105 shares of the Company's common
stock on April 9, 2004, which has been fixed as the record date for the purpose
of determining shareholders entitled to notice of, and to vote at, the Annual
Meeting (the "Record Date"). On any matter submitted to the vote of the
shareholders, each holder of Company common stock will be entitled to one vote,
in person or by proxy, for each share of common stock he or she held of record
on the books of the Company as of the Record Date. Shares represented by proxies
that reflect abstentions are treated as shares present and entitled to vote for
purposes of determining a quorum, but have the same effect as a vote "AGAINST" a
proposal. "Broker non-votes" (shares held by brokers or nominees as to which
instructions have not been received from the beneficial owners or persons
entitled to vote and the broker or nominee does not have discretionary voting
power under applicable rules of the stock exchange or other self regulatory
organization of which the broker or nominee is a member) are treated as shares
present and entitled to vote for purposes of a quorum, but also have the same
effect as a vote "AGAINST" a proposal. In connection with the election of
directors, shares may be voted cumulatively if a shareholder present at the
Annual Meeting gives notice at the Annual Meeting, prior to the voting for
election of directors, of his or her intention to vote cumulatively. If any
shareholder of the Company gives such notice, then all shareholders eligible to
vote will be entitled to cumulate their shares in voting for election of
directors. Cumulative voting allows a shareholder to cast a number of shares
held in his or her name as of the Record Date multiplied by the number of
directors to be elected. These votes may be cast for any one nominee, or may be
distributed among as many nominees as the shareholder sees fit.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's bylaws provide that the number of directors of the Company
shall not be less than nine (9) nor more than seventeen (17) until changed by an
amendment to the bylaws adopted by the Company's shareholders. The bylaws
further provide that the exact number of directors is set at twelve (12) until
changed by a bylaw amendment duly adopted by the Company's shareholders or Board
of Directors.
The persons named below, all of whom are currently members of the Board of
Directors, will be nominated for election as directors at the Annual Meeting to
serve until the 2005 Annual Meeting of Shareholders and until their successors
are elected and qualified. Unless otherwise directed, votes will be cast by the
proxy holders in such a way to effect, if possible, the election of the twelve
(12) nominees named herein including, in the event of cumulative voting, the
authority of the proxy holders to cumulate votes represented by the shares
covered by proxies in the election of directors. The twelve (12) nominees for
director receiving the most votes will be elected as directors. In the event
that any of the nominees should be unable to serve as a director, it is intended
that the proxy will be voted for the election of such substitute nominee, if
any, as shall be designated by the Board of Directors. The Board of Directors
has no reason to believe that any of the nominees named below will be unable to
serve if elected.
4
The following table sets forth the names of and certain information, as of
April 9, 2004, concerning the persons nominated by the Board of Directors for
election as directors of the Company.
Year First
Name and Title Appointed Principal Occupation
Other Than Director Age Director (1) During the Past Five Years
- ------------------------------ --- ------------ -----------------------------------------------------
John O. Brooks, Chairman of 63 2000 Prior to joining the Bank on November 1, 2000, he
the Board and Chief was a Director and President and Chief Executive
Executive Officer of the Officer of Tracy Federal Savings Bank, Tracy,
Company; Chairman of the California, from 1998 to 2000, and Bay Area Bank,
Board of the Bank Redwood City, California, from 1992 to 1998.
Eugene C. Gini 66 1999 President and Chief Executive Officer of Collins
Electric Company, Inc., an electrical contracting
firm, Stockton, California, since 1987.
Bryan R. Hyzdu, President of 45 1999 Prior to joining the Bank on November 10, 1999, he
the Company; President and was a Regional Vice President and Central Valley
Chief Executive Officer of the Portfolio Manager with Union Bank of California,
Bank since 1992.
Robert D. Lawrence, M.D. 63 1999 Pathologist and owner of Delta Pathology Associates
Medical Group, Inc., Stockton, California, since
1973.
Frances C. Mizuno 47 1999 Civil Engineer and Assistant Executive Director of
the San Luis and Delta Mendota Water Authority,
Byron, California, since 1992.
Richard R. Paulsen 45 1999 Life insurance agent for New York Life Insurance
Company and a partner in Resource Management
Group, a securities and financial planning firm,
Stockton, California, since 1983.
Gary A. Podesto 62 1999 Mayor of the City of Stockton, since 1997.
Formerly, owner of Food 4 Less grocery stores,
Stockton and Lodi, California, from 1994 to 1997.
Toni Marie Raymus 47 1999 President of Destiny Homes, a custom home building
company, Manteca, California, since 1997. Vice
President of Raymus Development and Sales, Inc., a
developer of new homes, Manteca, California, since
1980.
Michael K. Repetto 42 1999 Chief Executive Officer of Tracy Material Recovery
Facility, a disposal and waste recycling company,
Tracy, California, since 1995. Co-owner and
Operations Manager of Tracy Delta Solid Waste
Management, a waste management company, Tracy,
California, since 1987.
Anthony F. Souza 63 1999 Owner of Souza Realty and Development, a real
estate sales, development and consulting company,
Tracy, California, since 1985.
5
Year First
Name and Title Appointed Principal Occupation
Other Than Director Age Director (1) During the Past Five Years
- ------------------------------ --- ------------ -----------------------------------------------------
Albert Van Veldhuizen 75 1999 Retired. Formerly, commercial real estate sales with
Pan Pacific Financial, a real estate income property
lender, Lodi, California, since 1994.
Donald L. Walters 48 1999 Managing member of Grower Direct Marketing, a
fresh produce sales and worldwide shipping
company, Stockton, California, since 1998.
President and Chief Executive Officer of Walters
Carpet One, Stockton, California, from 1982 until
1997 when the business was sold.
- ---------------
(1) The year indicated represents the year each director was first appointed
as a director of the Bank. The Company became the parent holding company
for the Bank effective June 26, 2003, at which time all directors named in
the chart above became directors of the Company.
None of the directors were selected pursuant to any arrangement or
understanding other than with the directors and officers of the Company acting
within their capacities as such. There are no family relationships between any
two or more of the directors, officers or persons nominated or chosen by the
Board of Directors to become a director or officer, except that Bryan R. Hyzdu
and Donald L. Walters are brothers-in-law. No director or officer of the Company
serves as a director of any company which has a class of securities registered
under, or which is subject to the periodic reporting requirements of, the
Securities Exchange Act of 1934, or of any company registered as an investment
company under the Investment Company Act of 1940.
None of the nominees were subject to any legal proceedings involving
violations of securities laws, convictions in a criminal proceeding (excluding
traffic violations and minor offenses) or had a petition under bankruptcy laws
filed against themselves or an affiliate within the last five years.
Security Ownership of Certain Beneficial Owners and Management
Management of the Company knows of no person who owns, beneficially or of
record, either individually or together with associates, 5 percent or more of
the outstanding shares of Company common stock, except as set forth in the table
below. The following table sets forth, as of April 9, 2004, the number and
percentage of shares of Company common stock beneficially owned, directly or
indirectly, by each of the Company's directors, principal shareholders, the
executive officers(1) named in the Summary Compensation Table, and the directors
and named executive officers as a group. In general, beneficial ownership
includes shares over which a director, principal shareholder, or executive
officer has sole or shared voting or investment power and shares which such
person has the right to acquire within 60 days of April 9, 2004. Unless
otherwise indicated, the persons listed below have sole voting and investment
powers respecting the shares beneficially owned.
6
Amount and Nature
Name and Address of of Beneficial Percent
Title of Class Beneficial Owner(2) Ownership of Class
- -------------------------- ---------------------- ----------------- --------
Common Stock, No Par Value John O. Brooks 31,500 (3) 2.67%
Common Stock, No Par Value Robert E. Bloch 17,136 (4) 1.46%
Common Stock, No Par Value Patrick Carman 14,290 (5) 1.23%
Common Stock, No Par Value Eugene C. Gini 34,558 (6) 2.98%
Common Stock, No Par Value Bryan R. Hyzdu 35,175 (7) 2.99%
Common Stock, No Par Value Robert D. Lawrence 34,084 (8) 2.94%
Common Stock, No Par Value Frances C. Mizuno 16,278 (9) 1.40%
Common Stock, No Par Value Richard R. Paulsen 16,800(10) 1.45%
Common Stock, No Par Value Gary A. Podesto 15,747(11) 1.36%
Common Stock, No Par Value Toni Marie Raymus 17,958(12) 1.55%
Common Stock, No Par Value Michael K. Repetto 15,750(13) 1.36%
Common Stock, No Par Value Anthony F. Souza 18,096(14) 1.56%
Common Stock, No Par Value Albert Van Veldhuizen 16,012(15) 1.38%
Common Stock, No Par Value Donald L. Walters 16,842(16) 1.45%
All directors and executive officers as a group (14 persons) 300,226(17) 23.43%
- ---------------
(1) As used in this Proxy Statement, the term "executive officer" of the
Company includes the Chief Executive Officer, President, Executive Vice
President and Chief Financial Officer, and Executive Vice President and
Chief Credit Officer of the Bank.
(2) The address for beneficial owners is c/o Service 1st Bancorp, 2800 West
March Lane, Suite 120, Stockton, California 95219.
(3) Mr. Brooks has shared voting and investment powers as to 5,250 shares.
Includes 26,250 shares subject to stock options exercisable within 60 days
of the Record Date.
(4) Mr. Bloch has shared voting and investment powers as to 1,386 shares.
Includes 15,750 shares subject to stock options exercisable within 60 days
of the Record Date.
(5) Mr. Carman has shared voting and investment powers as to 3,790 shares.
Includes 10,500 shares subject to stock options exercisable within 60 days
of the Record Date.
(6) Mr. Gini has shared voting and investment powers as to 29,308 shares.
Includes 5,250 shares subject to stock options exercisable within 60 days
of the Record Date.
(7) Mr. Hyzdu has shared voting and investment powers as to 14,175 shares.
Includes 21,000 shares subject to stock options exercisable within 60 days
of the Record Date.
(8) Dr. Lawrence has shared voting and investment powers as to 28,834 shares.
Includes 5,250 shares subject to stock options exercisable within 60 days
of the Record Date.
(9) Ms. Mizuno has shared voting and investment powers as to 11,028 shares.
Includes 5,250 shares subject to stock options exercisable within 60 days
of the Record Date.
(10) Mr. Paulsen has shared voting and investment powers as to 11,550 shares.
Includes 5,250 shares subject to stock options exercisable within 60 days
of the Record Date.
(11) Mr. Podesto has shared voting and investment powers as to 10,497 shares.
Includes 5,250 shares subject to stock options exercisable within 60 days
of the Record Date.
(12) Ms. Raymus has shared voting and investment powers as to 12,708 shares.
Includes 5,250 shares subject to stock options exercisable within 60 days
of the Record Date.
(13) Mr. Repetto has shared voting and investment powers as to 10,500 shares.
Includes 5,250 shares subject to stock options exercisable within 60 days
of the Record Date.
(14) Mr. Souza has shared voting and investment powers as to 12,846 shares.
Includes 5,250 shares subject to stock options exercisable within 60 days
of the Record Date.
(15) Mr. Van Veldhuizen has shared voting and investment powers as to 10,762
shares. Includes 5,250 shares subject to stock options exercisable within
60 days of the Record Date.
(16) Mr. Walters has shared voting and investment powers as to 11,592 shares.
Includes 5,250 shares subject to stock options exercisable within 60 days
of the Record Date.
(17) Includes 126,000 shares subject to stock options exercisable within 60
days of the Record Date.
7
The Board of Directors and Committees
The Company's Board of Directors held 10 meetings and the Bank Board of
Directors held 13 meetings during 2003. In addition to meeting as a group to
review the Company's business, members of the Board of Directors served on
certain standing committees. During 2003, no director attended less than 75% of
the aggregate of the number of meetings held by the Board of Directors and of
all committee meetings on which such director served.
The Executive Committee held 4 meetings during 2003. The Executive
Committee consists of Directors Brooks, Gini, Paulsen, Souza and Walters. The
Executive Committee reviews compensation and employee benefit plans and
determines the compensation of the Company's executive officers.
The Audit Committee held 4 meetings in 2003. The Audit Committee consists
of Directors, Podesto, Raymus, Repetto and Van Veldhuizen. The Audit Committee
generally recommends the appointment of and oversees the Company's independent
public accountants, monitors and reviews all audit and examining reports,
financial and accounting organization and financial planning, reporting and
internal controls. Each member of the audit committee is "independent" as
defined under applicable rules promulgated by the Securities and Exchange
Commission pursuant to the Sarbanes-Oxley Act of 2002. Director Van Veldhuizen
has been designated by the Board of Directors as an "audit committee financial
expert" as defined under applicable rules promulgated by the Securities and
Exchange Commission pursuant to the Sarbanes-Oxley Act of 2002.
In addition, each other member of the audit committee is "financially
literate" as defined under Nasdaq Listing Rules and qualified to review the
Company's financial statements. See the audit committee report hereafter in this
Proxy Statement for additional information regarding the functions of the Audit
Committee.
The Board of Directors has not established a nominating committee. The
full Board of Directors performs the functions of a nominating committee with
responsibility for considering appropriate candidates as directors. The Board of
Directors believes that the participation of the full Board of Directors in
considering candidates is efficient in view of the size of the Board of
Directors. Candidates are selected by a majority of directors who are
"independent" as defined under applicable rules promulgated by the Securities
and Exchange Commission pursuant to the Sarbanes-Oxley Act of 2002, and in
accordance with a Nominating Charter adopted by a majority of such independent
directors. The Nominating Charter includes a policy for consideration of
candidates proposed by shareholders. Any recommendations by shareholders will be
evaluated by the Board of Directors in the same manner as any other
recommendation and in each case in accordance with the Nominating Charter.
Shareholders that desire to recommend candidates for
8
consideration by the Company's Board of Directors should mail or deliver written
recommendations to the Company addressed as follows: Board of Directors, Service
1st Bancorp, 2800 West March Lane, Suite 120, Stockton, CA 95219. Each
recommendation should include biographical information indicating the background
and experience of the candidate that qualifies the candidate for consideration
as a director for evaluation by the Board of Directors. In addition to minimum
standards of "independence" for non-employee directors and financial literacy,
the Board of Directors considers various other criteria including the
candidate's experience and expertise, financial resources, ability to devote the
time and effort necessary to fulfill the responsibilities of a director and
involvement in community activities in the market areas served by the Company
and the Bank that may enhance the reputation of the Company and the Bank. The
Company and the Bank operate in a highly regulated industry and are subject to
the supervision, regulation and periodic examination by state and federal
banking regulatory authorities including the Board of Governors of the Federal
Reserve System, California Commissioner of Financial Institutions and Federal
Deposit Insurance Company. Directors of the Company and the Bank are subject to
certain rules and regulations and potential liabilities not otherwise applicable
to directors of non-banking organizations. Consequently, evaluation of
candidates by the Company's Board of Directors may include more extensive
inquiries into personal background information including confirmation of the
accuracy and completeness of background information by (a) requiring candidates
to complete questionnaires to elicit information of the type required to be
disclosed by the Company in reports filed with the Securities and Exchange
Commission, or such state and federal banking regulatory authorities, (b)
conducting background investigations by qualified independent organizations
experienced in conducting criminal and civil investigatory reviews, and (c) such
other personal and financial reviews and analyses as the Board of Directors may
deem appropriate in connection with the consideration of candidates.
Shareholders who wish to nominate a candidate for election to the Company's
Board of Directors, as opposed to recommending a potential nominee for
consideration by the Board of Directors, are required to comply with the advance
notice and any other requirements of the Company's bylaws, applicable laws and
regulations. The Board of Directors may elect to use third parties in the future
to identify or evaluate candidates for consideration by the Board of Directors.
The Nominating Charter adopted by the Board of Directors is attached to this
Proxy Statement as Appendix A.
The Funds Management Committee held 12 meetings during 2003. The Funds
Management Committee consists of Directors Brooks, Hyzdu, Lawrence, Mizuno and
Raymus. The Funds Management Committee is responsible for managing the Bank's
assets and liabilities so as to preserve the necessary liquidity, maximize net
interest margin over time, and control interest rate risk. This involves
overseeing deposit and loan pricing, establishing targeted asset and liability
mix ratios, and formulating appropriate plans to ensure adequate capital for
continued growth. The Funds Management Committee must establish and continually
review Bank policies to ensure these goals.
The Loan Committee held 36 meetings during 2003. The Loan Committee
consists of Directors Brooks, Gini, Hyzdu, Souza and Van Veldhuizen. The Loan
Committee is responsible for overseeing all of the Bank's lending functions.
This includes establishing and ongoing review of the Bank's lending policies,
making decisions on loans which exceed established lending limits for Bank
personnel, reviewing loans approved within the lending authorities of the Bank
personnel, reviewing problem and "Watch List" loans and the follow-up on
established actions plans to correct identified deficiencies, reviewing past due
loans and action plans to cure the payment defaults, and monitoring
concentration risk within the Bank's loan portfolio.
9
A majority of the members of the Board of Directors, each of whom is
"independent" as defined under applicable rules promulgated by the Securities
and Exchange Commission pursuant to the Sarbanes-Oxley Act of 2002, has
established procedures for receipt and delivery of shareholder communications
addressed to the Board of Directors. Any such shareholder communications,
including communications by employees of the Company solely in their capacity as
shareholders, should be mailed or delivered to the Company addressed as follows:
Board of Directors, Service 1st Bancorp, 2800 West March Lane, Suite 120,
Stockton, CA 95219.
The Company encourages members of its Board of Directors to attend the
Company's Annual Meeting of Shareholders each year. All of the directors, except
Directors Podesto and Walters, attended the Company's Annual Meeting of
Shareholders held in 2003.
10
AUDIT COMMITTEE REPORT
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS OR FUTURE FILINGS UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
EXCHANGE ACT OF 1934 THAT MIGHT INCORPORATE THIS PROXY STATEMENT OR FUTURE
FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, IN WHOLE OR IN PART, THE
FOLLOWING REPORT SHALL NOT BE DEEMED TO BE INCORPORATED BY REFERENCE INTO ANY
SUCH FILING.
The Audit Committee consists of the following members of the Company's
Board of Directors: Gary A. Podesto, Toni Marie Raymus, Michael K. Repetto, and
Al Van Veldhuizen. Each such member of the Committee is "independent" as defined
under applicable rules promulgated by the Securities and Exchange Commission
pursuant to the Sarbanes-Oxley Act of 2002.
The Committee operates under a written charter adopted by the Board of
Directors which, among other matters, delineates the responsibilities of the
Committee. The Committee's responsibilities include responsibility for the
appointment, compensation, retention and oversight of the work of the Company's
independent public accountants engaged (including resolution of disagreements
between management and the independent public accountants regarding financial
reporting) for the purpose of preparing or issuing an audit report or performing
other audit, review or attest services for the Company. The Company's
independent public accountants report directly to the Committee. The Audit
Committee Charter is attached to this Proxy Statement as Appendix B.
The Committee has reviewed and discussed the audited financial statements
of the Company for the fiscal year ended December 31, 2003 with management and
Vavrinek, Trine, Day & Co., LLP, the Company's independent public accountants.
The Committee has also discussed with Vavrinek, Trine, Day & Co., LLP, the
matters required to be discussed by Statement on Auditing Standards No. 61
(Codification of Statements on Auditing Standards) as may be modified or
supplemented. The Committee has also received the letter from Vavrinek, Trine,
Day & Co., LLP required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees) as may be modified or
supplemented, and the Committee has discussed the independence of Vavrinek,
Trine, Day & Co., LLP with that firm.
Based on the Committee's review and discussions noted above, the Committee
recommended to the Board of Directors that the Company's audited financial
statements be included in the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 2003, for filing with the Securities and Exchange
Commission.
/s/ GARY PODESTO /s/ TONI MARIE RAYMUS /s/ MICHAEL K. REPETTO /s/ AL VAN VELDHUIZEN
- ---------------- --------------------- ---------------------- ---------------------
Gary Podesto Toni Marie Raymus Michael K. Repetto Al Van Veldhuizen
11
Executive Officers
The following table sets forth as of April 9, 2004, information concerning
executive officers of the Company, excluding John O. Brooks, Chief Executive
Officer, and Bryan R. Hyzdu, President, as to whom the same information has been
previously disclosed above in connection with their nomination for election as
directors of the Company.
Executive Officer Principal Occupation
Name and Title Age Since During the Past Five Years
- ------------------------ --- ----------------- ----------------------------------------------------
Patrick Carman, 54 2000 Prior to joining the Bank on August 7, 2000, he held
Executive Vice positions as Senior Vice President and Senior Credit
President and Chief Officer from 1999 to 2000, Credit Administrator
Credit Officer of the from 1998 to 1999, and as SBA portfolio manager
Bank from 1995 to 1998, at East County Bank, Antioch,
California.
Robert E. Bloch, 56 2001 Prior to joining the Bank on March 26, 2001, he was
Executive Vice Executive Vice President and Chief Financial Officer
President and Chief for Mission Community Bank, N.A., San Luis
Financial Officer of the Obispo, California, from 1999 to 2001, and
Company and the Bank Executive Vice President and Chief Financial Officer
of Heritage Oaks Bank, Paso Robles, California,
from 1992 to 1999.
- ---------------
(1) The year indicated represents the year each executive officer became an
executive officer of the Bank. The Company became the parent holding
company for the Bank effective June 26, 2003, at which time each of the
executive officers named in the chart above became executive officers of
the Company.
12
Executive Compensation
The following table shows the compensation paid to the Company's executive
officers for the three fiscal years ended December 31, 2003.
Summary Compensation Table
- ---------------------------------------------------------------------------------------------------------------------------------
Long Term Compensation
-------------------------------------
Annual Compensation Awards Payouts
- ------------------------------------------------------------------------ -------------------------- -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- --------------------- ----- -------- -------- ------------ ----------- ----------- ------- ------------
Other Securities
Annual Restricted Underlying LTIP All Other
Name and Principal Salary Bonus Compensation Stock Options/ Payouts Compensation
Position Year ($)(1) ($)(2) ($)(3) Award(s)($) SARs (#)(4) ($) ($)(5)
- ---------------------------------------------------------------------------------------------------------------------------------
John O. Brooks, (6) 2003 $128,523 $ 412 -0- $ 6,000
Chief Executive ---------------------------------------------------------------------------------------------------------
Officer 2002 $121,800 $ 12,166 -0- $ 6,000
---------------------------------------------------------------------------------------------------------
2001 $120,000 -0- -0- $ 1,000
- ---------------------------------------------------------------------------------------------------------------------------------
Bryan R. Hyzdu, (7) 2003 $117,150 $ 189 -0- $ 13,142
President ---------------------------------------------------------------------------------------------------------
2002 $111,650 $ 21,152 -0- $ 9,542
---------------------------------------------------------------------------------------------------------
2001 $110,000 -0- -0- $ 9,542
- ---------------------------------------------------------------------------------------------------------------------------------
Robert E. Bloch, (8) 2003 $101,528 $ 233 -0- $ 4,800
Executive Vice ---------------------------------------------------------------------------------------------------------
President and Chief 2002 $ 96,425 $ 9,631 -0- $ 4,800
Financial Officer ---------------------------------------------------------------------------------------------------------
2001 $ 73,077 $ 5,000 15,750 $ 3,600
- ---------------------------------------------------------------------------------------------------------------------------------
Patrick Carman, (9) 2003 $ 93,750 $ 226 -0- $ 4,800
Executive Vice ---------------------------------------------------------------------------------------------------------
President and Chief 2002 $ 87,500 $ 8,740 -0- $ 4,800
Credit Officer of the ---------------------------------------------------------------------------------------------------------
Bank 2001 $ 85,000 -0- -0- $ 4,800
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------
(1) Amounts shown include cash and non-cash compensation earned and received
by executive officers as well as amounts earned but deferred at the
election of those officers under the 401(k) Plan.
(2) Amounts shown as bonus payments were earned or accrued during the year
indicated and paid in the immediately following year, except that the
bonus payments in 2003 to each executive officer were accrued in 2003 and
paid in 2003 to cover taxes applicable to bank-owned life insurance
policies on the lives of the executives in connection with the
post-retirement benefit agreements for the executive officers described
hereafter in this Proxy Statement under the heading "Employment Contracts
and Termination of Employment and Change-in-Control Arrangements." Mr.
Bloch's bonus shown in 2001 was included in his employment offer letter
dated February 26, 2001 and paid in 2002.
(3) No executive officer received perquisites or other personal benefits in
excess of the lesser of $50,000 or 10% of each such officer's total annual
salary and bonus during 2003, 2002 and 2001.
(4) Amounts shown represent the number of shares granted in the year
indicated. 15,000 incentive options were granted at a price of $9.50 to
Mr. Bloch in the year indicated under the 1999 Stock Option Plan (the
"1999 Plan"). The number of options and grant price have been adjusted for
the 5 percent stock dividend issued to shareholders of record on March 10,
2004, resulting in the number of incentive options set forth in the year
indicated and an adjusted grant price of $9.05. Under the 1999 Plan,
options were permitted to
13
be granted to non-employee directors, officers and employees of Service
1st Bank. Options granted under the 1999 Plan were either incentive
options or nonstatutory options, however, only nonstatutory options were
permitted to be granted to non-employee directors. Options granted became
exercisable in accordance with a vesting schedule established at the time
of grant. Vesting could not extend beyond ten years from the date of
grant. The Company assumed the 1999 Plan in connection with the
reorganization whereby the Bank became a wholly-owned subsidiary of the
Company. Upon a change in control of the Company, options under the 1999
Plan become fully vested and exercisable, or may be assumed or equivalent
options may be substituted by a successor corporation. Options are
adjusted to protect against dilution in the event of certain changes in
the Company's capitalization, including stock splits and stock dividends.
All options granted to the named executive officers are incentive stock
options and have an exercise price equal to the fair market value of the
Bank's common stock on the date of grant. No options were granted from and
after June 26, 2003, the Effective Date of the reorganization described
above and future grants of options thereunder were terminated, in
accordance with the permit issued by the California Commissioner of
Corporations to authorize the exchange of shares of common stock of the
Company for the outstanding shares of common stock of the Bank in the
reorganization. See also, "Proposal No. 2, Approval of the Service 1st
Bancorp 2004 Stock Option Plan" hereafter in this Proxy Statement
regarding the Company's proposed new stock option plan.
(5) Amounts shown for each named executive officer include any life/disability
insurance premiums and automobile allowance, for the year indicated. The
Company has a 401(k) Plan which was adopted in 2000. Generally, all
Company employees are eligible to participate in the 401(k) Plan.
Participating employees may defer a portion of their compensation in the
401(k) Plan and the Company, at its option, may make matching
contributions on participant's deferrals. No matching contributions were
made to the 401(k) Plan in the years 2003, 2002 and 2001.
(6) Mr. Brook's employment commenced November 1, 2000. Mr. Brooks voluntarily
reduced his salary during 2003, 2002 and 2001, from $150,000 as provided
under the terms of his employment agreement to the amounts indicated in
the table, to reflect the comparable reduction in his availability due to
illness.
(7) Mr. Hyzdu's bonus in 2002 includes a $10,000 bonus under his severance
agreement dated November 1, 2002, which replaced his expired prior
employment agreement.
(8) Mr. Bloch's employment commenced March 26, 2001.
(9) Mr. Carman's employment commenced August 7, 2000.
(10) No stock options were granted to the named executive officers during 2003,
2002 or 2001 as indicated in the table, except for stock options granted
to Mr. Bloch in 2001.
Aggregated Option/SAR Exercises and FY-End Option/SAR Values
The following table sets forth, with respect to the executive officers
named in the Summary Compensation Table, information concerning options
exercised during 2003 under the Company's 1999 Stock Option Plan and Fiscal
Year-End Values(1).
(a) (b) (c) (d) (e)
- -----------------------------------------------------------------------------------------------------------------------
Number of
Securities
Underlying Unexercised Value of Unexercised In-the-
Shares Options/SARs at Money Options/SARs at FY-
Acquired on Value FY-End (#) End ($)
Name Exercise (#) Realized ($) Exercisable/Unexercisable(2) Exercisable/Unexercisable(3)
- -----------------------------------------------------------------------------------------------------------------------
John O. Brooks -0- $-0- 26,250/-0- $131,250/$-0-
- -----------------------------------------------------------------------------------------------------------------------
Bryan R. Hyzdu -0- $-0- 21,000/-0- $105,000/$-0-
- -----------------------------------------------------------------------------------------------------------------------
Robert E. Bloch -0- $-0- 15,750/-0- $86,153/$-0-
- -----------------------------------------------------------------------------------------------------------------------
Patrick Carman -0- $-0- 10,500/-0- $52,500/$-0-
- -----------------------------------------------------------------------------------------------------------------------
- ---------------
(1) The aggregate value has been determined based upon the fair market v alue
of the Company's common stock, at year-end, minus the exercise price.
14
(2) The numbers in column (d) have been adjusted for the 5 percent stock
dividend issued to shareholders of record on March 10, 2004.
(3) The values in column (e) are based on exercise prices of $9.05 for Mr.
Bloch and $9.52 for Messrs. Brooks, Hyzdu and Carman. The fair market
value per share of the Company's common stock at the fiscal year-end was
$14.52, adjusted for the 5 percent stock dividend issued to shareholders
of record on March 10, 2004.
EQUITY COMPENSATION PLAN INFORMATION
The chart below lists information regarding Company common stock issuable
upon the exercise of stock options, the weighted average exercise price of those
options and the number of shares available for issuance under the 1999 Stock
Option Plan at year-end 2003, which have not been adjusted for the 5 percent
stock dividend issued to shareholders of record on March 10, 2004. The Company
has no other equity compensation plan and there are no warrants or other rights
outstanding that would result in the issuance of shares of Company common stock.
- ------------------------------------------------------------------------------------------------------------
Number of securities
remaining available for
future issuance under
Number of securities to Weighted-average equity compensation
be issued upon exercise exercise price of plans (excluding
of outstanding options, outstanding options, securities reflected in
Plan Category warrants and rights warrants and rights column (a))
(a) (b) (c)
- ------------------------------------------------------------------------------------------------------------
Equity compensation
plans approved by 171,000 $ 9.91 -0-
security holders
- ------------------------------------------------------------------------------------------------------------
Equity compensation
plans not approved by -0- -0- -0-
security holders
- ------------------------------------------------------------------------------------------------------------
Total 171,000 $ 9.91 -0-
- ------------------------------------------------------------------------------------------------------------
Director Compensation
Non-employee members of the Board of Directors of the Company were paid
$500 as a retainer fee for each meeting of the Board of Directors of the Company
and the Bank held during 2003. The committee chairman of the Company's Audit and
Executive Committees, and the Bank's Funds Management, Loan and Technology
Committees, each received $150 and the committee members each received $100 per
committee meeting of the Company and the Bank attended. The total amount of fees
paid to all directors as a group as retainer fees and for attendance at Board of
Director and committee meetings of the Company and the Bank was $37,800 in 2003.
The Company's 1999 Stock Option Plan was adopted by the Board of Directors
of the Bank on November 15, 1999, and approved by shareholders at the 1999
Annual Meeting of Shareholders of the Bank held on May 11, 2000 (the "1999
Plan"). The Company assumed the 1999 Plan and further option grants were
terminated in connection with the reorganization whereby the Bank became a
wholly-owned subsidiary of the Company effective June 26, 2003. The 1999 Plan
set aside 240,000 shares of no par value common stock of the Company for the
grant of incentive and nonstatutory stock options to key, full-time salaried
employees and officers of the Company, and to the non-employee directors of the
Company. Only nonstatutory options could be granted to non-employee directors
under the 1999 Plan. The Company's non-employee directors were granted
nonstatutory options under the 1999 Plan to acquire 5,000 shares each of
15
the Company's common stock on the date of adoption of the 1999 Plan, at a grant
price of $10.00 per share, which reflected the fair market value of the
Company's common stock on such date. The option grants were made subject to the
approval of the 1999 Plan by the shareholders of the Company. Nonstatutory stock
options granted to outside directors under the 1999 Stock Option Plan generally
vest at the rate of 33 1/3 percent per year. As of April 9, 2004, there were
52,500 shares reserved for issuance upon exercise of nonstatutory stock options
previously granted to the outside directors as a group under the 1999 Stock
Option Plan at an exercise price of $9.52 (adjusted for the 5 percent stock
dividend issued to shareholders of record on March 10, 2004). See footnote
number 4 to the Summary Compensation Table for further information regarding the
1999 Plan.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
The Bank and John O. Brooks entered into an employment agreement dated
November 1, 2000, which was assumed by the Company. Mr. Brooks currently serves
as the Chairman of the Board of Directors and Chief Executive Officer of the
Company and Chairman of the Board of Directors of the Bank. The employment
agreement is for a three (3) year term, subject to termination rights of the
Company and Mr. Brooks. The employment agreement includes (i) an annual base
salary of one hundred fifty thousand dollars ($150,000), subject to annual
adjustment during the term in the discretion of the Board of Directors; (ii) an
annual bonus payment based upon his achievement of various financial and the
Company stock performance goals established by the Board of Directors, which
payment is to be distributed from a bonus pool limited to ten percent (10%) of
the increase in net profits over budget goals for a given year established by
the Board of Directors; (iii) a grant of incentive stock options to purchase
twenty-five thousand (25,000) shares of the Company's common stock under the
1999 Stock Option Plan; (iv) an automobile allowance of five hundred dollars
($500) per month; (v) four (4) weeks annual vacation; (vi) group life, health
and disability insurance benefits; (vii) reimbursement of business expenses
incurred on behalf of the Company; (viii) severance payments upon termination
without cause equal to six (6) months base salary and payable within thirty (30)
days of termination; and (ix) severance payments upon the occurrence of certain
events including termination of employment within eighteen (18) months following
a change-in- control equal to one (1) year of base salary and payable within
thirty (30) days of such event.
The Bank and Bryan R. Hyzdu entered into a severance agreement dated
November 1, 2002, which was assumed by the Company and which replaced an expired
employment agreement dated January 7, 1999. Mr. Hyzdu currently serves as the
President of the Company and President and Chief Executive Officer of the Bank.
The term of the severance agreement commences November 1, 2002 and continues
until terminated by the Company or Mr. Hyzdu in accordance with its provisions.
The severance agreement includes (i) an annual base salary of one hundred
thirteen thousand dollars ($113,300), subject to annual adjustment increase
during the term in the discretion of the chief executive officer and/or the
Board of Directors; (ii) an annual bonus payment in an amount to be determined
in the discretion of the Board of Directors based upon the Company's
profitability and implementation of strategic plans; (iii) a non-recurring bonus
payment of ten thousand dollars ($10,000); (iv) an automobile allowance of seven
hundred fifty dollars ($750) per month; (v) four (4) weeks annual vacation; (vi)
group life, health and disability insurance benefits; (vii) reimbursement of
business expenses incurred on behalf of the Company; (viii) severance payments
upon termination without cause equal to six (6) months base salary; and (ix)
severance payments upon the occurrence of certain events including termination
of employment following events constituting a change-in-control equal to six (6)
months of base salary.
16
The Bank and Robert E. Bloch signed an offer of employment letter dated
February 26, 2001, which was assumed by the Company. Mr. Bloch currently serves
as Executive Vice President and Chief Financial Officer of the Company and the
Bank. The letter included (i) an annual base salary of ninety-five thousand
dollars ($95,000) per year; (ii) a bonus payment of five thousand dollars
($5,000) payable one year following commencement of employment; (iii) a grant of
stock options to purchase fifteen thousand (15,000) shares of the Company's
common stock under the 1999 Stock Option Plan; (iv) an auto allowance of four
hundred dollars ($400) per month; (v) moving expense allowance of three thousand
dollars ($3,000); (vi) four (4) weeks annual vacation; and (vii) group life and
medical insurance benefits.
The Bank and Patrick Carman signed an offer of employment letter dated May
26, 2000. Mr. Carman currently serves as Executive Vice President and Chief
Credit Officer of the Bank. The letter included (i) an annual base salary of
eighty-five thousand dollars ($85,000) per year; (ii) a bonus payment up to a
maximum of twelve thousand seven hundred fifty dollars ($12,750) based on an
assessment of overall performance; (iii) a grant of stock options to purchase
ten thousand (10,000) shares of the Company's common stock under the 1999 Stock
Option Plan; (iv) four (4) weeks annual vacation; (v) group life and medical
insurance benefits; and (vi) severance payments upon termination without cause
equal to six (6) months base salary for a termination occurring within eighteen
(18) months of the date of his commencement of employment with the Company or
within twelve (12) months of the date of the commencement of employment of Mr.
John Brooks, whichever event occurs first.
Recognizing the importance of building and retaining a competent
management team, additional agreements were entered into effective as of
September 10, 2003, to provide post-retirement benefits to John O. Brooks,
Bryan R. Hyzdu, Robert E. Bloch and Patrick Carman. The terms of the agreements
include the amounts each employee will receive upon the occurrence of certain
specified events, including normal retirement on or after a specified age. A
lump-sum premium payment of approximately two million one hundred ninety-four
thousand dollars $2,194,000) was paid to acquire insurance policies on the lives
of John O. Brooks, Bryan R. Hyzdu, Robert E. Bloch and Patrick Carman as a
funding mechanism in connection with the agreements. The Bank is the owner and
beneficiary of the policies and is entitled to the increase in cash surrender
value represented by the policies. The increase in cash surrender value is
accrued monthly and reflected in the Company's consolidated financial statements
as a category under "Other income." The Bank pays a bonus payment each year to
the named executive officers to satisfy taxes applicable to each named executive
officer as reflected in the Summary Compensation Table. The agreements generally
provide for annual retirement benefit payments upon attainment of normal
retirement age of sixty-six (66) of forty thousand dollars ($40,000) to John O.
Brooks, seventy-five thousand dollars ($75,000) to Bryan R. Hyzdu, forty
thousand dollars ($40,000) to Robert E. Bloch, and fifty thousand dollars
($50,000) to Patrick Carman. The annual retirement benefit amount is payable in
equal monthly installments over a fifteen (15) year period. In the event of an
employee's death, all remaining amounts due are anticipated to be paid to the
employee's designated beneficiary over the remaining payout period. Other events
which may alter when payment of the annual retirement benefit is to begin, or
the amount which is to be paid, include: (a) disability prior to normal
retirement or early termination other than for cause, death, disability or a
change of control, in which cases the employee shall be entitled to a lesser
benefit payment amount based upon an accrual balance representing the liability
accrued to satisfy the benefit payments due to the employee; and (b) termination
within a specified period following a change of control, in which case the
employee is entitled to receive the normal retirement benefit payment described
above in equal monthly installments for fifteen (15) years beginning in the
month following the employee's normal retirement age.
17
Change of Control
Management is not aware of an arrangement which may, at a subsequent date,
result in a change of control of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and ten percent or more shareholders
of the Company's equity securities, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes of ownership of
the Company's equity securities. Officers, directors and ten percent or more
shareholders are required by Securities and Exchange Commission regulation to
furnish the Company with copies of all Section 16(a) forms they file. To the
Company's knowledge, based solely on review of the copies of such reports
furnished to the Company and written representations that no other reports were
required, during the fiscal year ended December 31, 2003, all Section 16(a)
filing requirements applicable to its executive officers, directors and
beneficial owners of ten percent or more of the Company's equity securities
appear to have been met.
Code of Ethics
The Board of Directors has adopted a "code of ethics" as defined under
applicable rules promulgated by the Securities and Exchange Commission pursuant
to the Sarbanes-Oxley Act of 2002. The code of ethics requires that the
Company's directors, officers (including the principal executive, financial and
accounting officers, or controller and persons performing similar functions) and
employees conduct business in accordance with the highest ethical standards and
in compliance with all laws, rules and regulations applicable to the Company.
The code of ethics is intended to supplement the provisions of any other
personnel policies of the Company or codes of conduct which may establish
additional standards of ethical behavior applicable to the Company's directors,
officers and employees. The code of ethics was filed as Exhibit 14.1 to the
Company's Annual Report on Form 10-KSB for the year ended December 31, 2003, and
may be accessed through the Company's website by following the instructions for
accessing reports filed with the Securities and Exchange Commission hereafter in
this Proxy Statement under the heading "Website Access."
Certain Relationships and Related Transactions
There have been no transactions, or series of similar transactions, during
2003 and 2002, or any currently proposed transaction, or series of similar
transactions, to which the Company or the Bank was or is to be a party, in which
the amount involved exceeded or will exceed $60,000 and in which any director of
the Company or the Bank, executive officer of the Company or the Bank, any
shareholder owning of record or beneficially 5% or more of the Company's common
stock, or any member of the immediate family of any of the foregoing persons,
had, or will have, a direct or indirect material interest.
Some of the directors and officers of the Company and the companies with
which those directors and officers are associated are customers of, and have had
banking transactions with the Company, through the Bank, in the ordinary course
of the Company's business during the last two years, and the Company expects to
have banking transactions with such persons in the future. In the opinion of the
Company's management, all loans and commitments to lend in such transactions
were made in compliance with applicable laws and on substantially the same
terms, including interest rates and collateral, as those prevailing for
comparable transactions with other persons of similar creditworthiness and did
not involve more than a normal risk of collectibility or present other
18
unfavorable features. Loans to executive officers of the Company and the Bank
are subject to limitations as to amount and purposes prescribed in part by the
Federal Reserve Act, as amended, and the regulations of the Federal Deposit
Insurance Corporation.
19
PROPOSAL NO. 2
2004 STOCK OPTION PLAN
Introduction
Shareholders are being asked to approve the Service 1st Bancorp
("Company") 2004 Stock Option Plan (the "2004 Plan"). On February 19, 2004, the
Board of Directors of the Company adopted the 2004 Plan. The Board of Directors
has authorized 169,000 shares of Company common stock to be reserved for
issuance upon exercise of options to be granted under the 2004 Plan. The 2004
Plan provides for the grant of incentive stock options ("Incentive Options") and
nonstatutory stock options ("Nonstatutory Options"). The terms and provisions of
the 2004 Plan are summarized below, which summary is qualified in its entirety
by reference to the 2004 Plan, a copy of which is attached as Appendix C to this
Proxy Statement.
The terms of the 2004 Plan are substantially similar to the terms of the
Company's 1999 Stock Option Plan (the "1999 Plan"), which terminated on June 26,
2003. At the time of termination of the 1999 Plan, 171,000 shares of common
stock were reserved for issuance upon exercise of options outstanding under the
1999 Plan.
No options have been granted under the 2004 Plan since its adoption by the
Board of Directors. Continuance of the 2004 Plan is subject to approval by the
shareholders of the Company within twelve (12) months after the date the 2004
Plan was adopted by the Board of Directors.
Purpose
The Board of Directors has adopted the 2004 Plan in order to attract and
retain the best available personnel for positions of substantial responsibility
and to promote the success of the Company's business. The Board of Directors
believes that the 2004 Plan will help the Company attract and retain individuals
who are primarily responsible for the management and growth of the Company's
business and who thereby advance the interests of the Company and its
shareholders.
Shares Subject to the 2004 Plan
The aggregate number of shares available for issuance pursuant to the
exercise of options granted under the 2004 Plan may not exceed 169,000 shares of
the Company's Common Stock. Should any option granted under the 2004 Plan expire
or become unexercisable for any reason without having been exercised in full,
the shares subject to the portion of the option not so exercised will become
available for subsequent option grants.
Administration
The 2004 Plan will be administered by the Board of Directors of the
Company or a Stock Option Committee appointed by the Board of Directors
("Committee"). The Committee must be composed of at least three (3) non-employee
directors. Non-employee directors are eligible to
20
receive option grants under the 2004 Plan. To date, the Board of Directors has
not delegated administration of the 2004 Plan to a Committee.
The Board of Directors or Committee will have full authority, subject to
the provisions of the 2004 Plan, to determine the eligible individuals who are
to receive options under the 2004 Plan, the number of shares to be covered by
each granted option, the date or dates upon which the option is to become
exercisable and the maximum term for which the option is to remain outstanding.
The Board of Directors or Committee will also have the authority to determine
whether the granted option is to be an Incentive Option (under the federal tax
laws) or a Nonstatutory Option and to establish the rules and regulations for
proper administration of the 2004 Plan. The Board of Directors or Committee also
has the authority to cancel outstanding options granted under the 2004 Plan,
with the consent of the optionee, and to issue replacement options for such
canceled options.
Eligibility
Options granted under the 2004 Plan may be granted to officers, employees
and directors of the Company or its subsidiary, Service 1st Bank, or their
affiliates which may be created in the future. Officers, including officers who
are also directors of the Company, and employees will be eligible for the grant
of Incentive Options and Nonstatutory Options. Non-employee directors of the
Company will be eligible for the grant of Nonstatutory Options only. Currently,
there are approximately 20 officers (including 4 executive officers), 10
employees and 11 non-employee directors of the Company and Bank who would be
eligible for option grants under the 2004 Plan. The terms of the 2004 Plan do
not specify nor do they require the Board of Directors or the Committee to
designate the number of shares allocated for the grant of options among
officers, directors, or employees eligible for grants under the 2004 Plan.
Exercise Price and Exercisability
The Board of Directors or Committee has the authority to determine the
term of each option granted under the 2004 Plan; provided, however, that the
maximum period during which any option may remain exercisable may not exceed ten
years. In addition, each option must vest at the rate of at least 20 percent per
year over the five years from the date of grant. Options issued under the 2004
Plan may either be immediately exercisable for the full number of shares
purchasable thereunder or may become exercisable in cumulative increments over a
period of months or years as determined by the Board of Directors or Committee.
The exercise price of both Incentive Options and Nonstatutory Options
granted under the 2004 Plan may not be less than 100% of the fair market value
of the Company's common stock on the date of grant. The exercise price may be
paid in cash or in shares of Company common stock valued at its per share fair
market value on the exercise date. Options may also be exercised through a
same-day sale program, pursuant to which a designated brokerage firm would
effect an immediate sale of the shares purchased under the option and pay over
to the Company, out of the sales proceeds available on the settlement date,
sufficient funds to cover the exercise price for the purchased shares plus
applicable withholding taxes. For purposes of establishing the exercise price
and for all other valuation purposes under the 2004 Plan, the per share fair
market value of
21
Company common stock on any relevant date will be determined by the Board of
Directors or Committee in the good faith exercise of its discretion. In the
exercise of its discretion, the Board of Directors or Committee will consider a
number of relevant factors in determining fair market value including, but not
limited to, the reported prices at which the shares of Company common stock are
traded. On April 9, 2004, based on information available to management of the
Company as of April 8, 2004, the fair market value was estimated to be
approximately $14.00 per share of Company common stock.
Shareholder Rights and Transferability of Options
No optionee is to have any shareholder rights with respect to his or her
option shares until such optionee has exercised the option, paid the exercise
price and been issued a stock certificate for the purchased shares. Options are
not assignable or transferable other than by will or by the laws of inheritance,
and with respect to Nonstatutory Options, pursuant to qualified domestic
relations orders. During the optionee's lifetime, Incentive Options may be
exercised only by the optionee.
Termination of Employment or Directorship
If an optionee ceases to be employed by the Company or any of its
affiliates for any reason other than cause, as defined under the 2004 Plan,
disability or death, or if a non-employee optionee ceases to be a director or
consultant for any reason other than disability or death, the optionee may,
within three (3) months after the date of termination of status as an employee,
director or consultant, as the case may be, exercise his or her option to the
extent the optionee was entitled to exercise the option at the date of such
termination; provided that the date of exercise is in no event after the
expiration of the term of the option. To the extent that the option is not
exercised within such three-month time period, the option will terminate. If an
employee's termination of employment is for cause, as described in the 2004
Plan, the optionee may, within thirty (30) days after the date of termination of
employment, exercise his or her option to the extent the optionee was entitled
to exercise the option at the date of such termination, provided that the date
of exercise is in no event after the expiration of the term of the option.
In the event an optionee's employment is terminated due to the optionee's
disability or death, or if a non-employee optionee ceases to be a director or
consultant due to such optionee's disability or death, the optionee, or the
optionee's estate, as applicable, may, within twelve (12) months following the
date of termination of employment or the termination of status as a director or
consultant, as the case may be, exercise the option to the extent the option was
exercisable at the date of such termination; provided that the date of exercise
is in no event after the expiration of the term of the option. If the option is
not exercised within such twelve-month period, the option will terminate.
Adjustment Upon Changes in Capitalization or Other Corporate Event
The number of shares of Company common stock reserved for issuance under
the 2004 Plan, the number of shares of common stock covered by each outstanding
option and the exercise price as to outstanding options shall be proportionately
adjusted for any increase or decrease in
22
the number of issued shares of common stock resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Company's common stock, or any other increase or decrease in the number of
issued shares of common stock effected without receipt of consideration by the
Company. Upon the occurrence of certain events including, without limitation,
the dissolution, liquidation or sale of the Company, or a merger or
consolidation in which the Company is not the surviving entity, outstanding
options will become exercisable in full, including the unvested portion thereof,
in accordance with the provisions of the 2004 Plan prior to the consummation of
such event.
Amendment and Termination of the 2004 Plan
The 2004 Plan became effective upon its adoption by the Board of
Directors. Subject to shareholder approval of the 2004 Plan within twelve (12)
months after the date the 2004 Plan was adopted by the Board of Directors, the
2004 Plan will continue in effect for a term of ten (10) years unless sooner
terminated by the Board of Directors. The Board of Directors may amend, from
time to time, or terminate the 2004 Plan as the Board of Directors deems
advisable. No such amendment or termination will affect outstanding options
without the consent of the affected optionees.
The Board of Directors may not, without the approval of the Company's
shareholders (to the extent such shareholder approval is required by applicable
law), amend the 2004 Plan in a manner which would, among other matters, (i)
materially increase the benefits accruing to participants under the 2004 Plan,
(ii) materially increase the number of shares which may be issued under the 2004
Plan, or (iii) materially modify the requirements as to eligibility for
participation in the 2004 Plan.
Summary of Federal Tax Consequences
The following is only a brief summary of the effect of federal income
taxation on an optionee under the 2004 Plan. Options granted under the 2004 Plan
may be either Incentive Options which satisfy the requirements of Section 422 of
the Internal Revenue Code or Nonstatutory Options which do not meet such
requirements. The federal income tax treatment for the two types of options
differs as follows:
Incentive Options. No taxable income is recognized by an optionee at the
-----------------
time of the option grant, and no taxable income is generally recognized at the
time the option is exercised. However, the excess of the fair market value of
the common stock received upon the exercise of an Incentive Option over the
exercise price is includable in the employee' s alternative minimum taxable
income ("AMTI") and may be subject to the alternative minimum tax ("AMT"). For
AMT purposes only, the basis of the common stock received upon exercise of an
Incentive Option is increased by the amount of such excess.
An optionee will recognize taxable income in the year in which the
purchased shares acquired upon exercise of an Incentive Option are sold or
otherwise disposed. For federal tax purposes, dispositions are divided into two
categories: (i) qualifying and (ii) disqualifying. An optionee will make a
qualifying disposition of the purchased shares if the sale or disposition is
23
made more than two years after the grant date of the option and more than one
year after the exercise date. If an optionee fails to satisfy either of these
two holding periods prior to sale or disposition, then a disqualifying
disposition of the purchased shares will result.
Upon a qualifying disposition, an optionee will recognize long-term
capital gain or loss in an amount equal to the difference between the amount
realized upon the sale or other disposition of the purchased shares and the
exercise price paid for the shares except that for AMT purposes, the gain or
loss would be the difference between the amount realized upon the sale or other
disposition of the purchased shares and the employee's basis increased as
described above. If there is a disqualifying disposition of the shares, then the
optionee will generally recognize ordinary income to the extent of the lesser of
the difference between the exercise price and (i) the fair market value of the
common stock on the date of exercise, or (ii) the amount realized on such
disqualifying disposition. Any additional gain recognized upon the disposition
will be capital gain. If the amount realized is less than the exercise price,
the optionee will, in general, recognize a capital loss. If the optionee makes a
disqualifying disposition of the purchased shares, then the Company will be
entitled to an income tax deduction, for the taxable year in which such
disposition occurs, to the extent the optionee recognizes ordinary income. In no
other instance will the Company be allowed a deduction with respect to the
optionee's disposition of the purchased shares.
Nonstatutory Options. No taxable income is recognized by an optionee upon
--------------------
the grant of a Nonstatutory Option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of purchased shares on the date of exercise over
the exercise price paid for such shares, and the optionee will be required to
satisfy the tax withholding requirements applicable to such income. Upon a
subsequent sale of the purchased shares, the optionee will generally recognize
either a capital gain or a capital loss depending on the holding period prior to
sale and whether the amount realized is more or less than the fair market value
on the date of exercise. The Company will be entitled to a business expense
deduction equal to the amount of ordinary income recognized by the optionee with
respect to an exercised Nonstatutory Option. The deduction will in general be
allowed for the taxable year of the Company in which ordinary income is
recognized by the optionee in connection with the acquisition of the option
shares.
New Plan Benefits
No stock options have been granted to eligible participants under the 2004
Plan. If the 2004 Plan is approved by shareholders, future grants of stock
options under the 2004 Plan, if any, would be made in compliance with the
provisions of the 2004 Plan; however, no amounts or benefits are currently
determinable respecting future grants thereunder. See the full text of the 2004
Plan, a copy of which is attached as Appendix C to this Proxy Statement.
Vote Required
Adoption of the 2004 Plan is subject to approval by the Company's
shareholders. The affirmative vote of the holders of a majority of the shares of
Company common stock present in person or represented by proxy and entitled to
vote at the Annual Meeting is required to approve the adoption of the 2004 Plan
provided that the number of affirmative votes equals at least a
24
majority of the shares constituting the required quorum. Abstentions will be
counted for purposes of determining the number of shares entitled to vote on the
proposal and will have the effect of a vote against the proposal. Although any
shares which may be treated as broker non-votes with respect to Proposal No. 2
will be counted to determine the presence or absence of a quorum, they will not
be counted in determining the number of shares entitled to vote on Proposal No.
2.
The Board of Directors recommends a vote "FOR" Proposal No. 2.
25
PROPOSAL NO. 3
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Vavrinek, Trine, Day & Co., LLP, certified public
accountants, served the Company and the Bank as independent public accountants
and auditors in connection with various services described below for the 2003
and 2002 fiscal years at the direction of the Audit Committee of the Company.
Vavrinek, Trine, Day & Co., LLP has no interests, financial or otherwise, in the
Company. The services rendered by Vavrinek, Trine, Day & Co., LLP during the
2003 and 2002 fiscal years were audit services, consultation in connection with
various accounting matters and preparation of tax returns.
The table below summarizes the services rendered to the Company by
Vavrinek, Trine, Day & Co., LLP, during the 2003 and 2002 fiscal years.
- --------------------------------------------------------------------------------
Category of Services Fiscal Year 2003 Fiscal Year 2002
- --------------------------------------------------------------------------------
Audit Fees (1) $ 29,500 $ 26,000
- --------------------------------------------------------------------------------
Audit-Related Fees (2) 1,750 -0-
- --------------------------------------------------------------------------------
Tax Fees (3) 3,000 3,000
- --------------------------------------------------------------------------------
All Other Fees -0- -0-
- --------------------------------------------------------------------------------
Total Accounting Fees $ 34,250 $ 29,000
- --------------------------------------------------------------------------------
- ---------------
(1) Audit fees consisted of services rendered by Vavrinek, Trine, Day & Co.,
LLP for the audit of the financial statements included in the Company's
annual report on Form 10-KSB for the year ended December 31, 2003 and the
Bank's annual report on Form 10-KSB for the year ended December 31, 2002,
and for reviews of the financial statements included in the Company's and
Bank's quarterly reports on Form 10-QSB during the fiscal years 2003 and
2002.
(2) In 2003, audit-related fees consisted of general assistance in formation
of the Company.
(3) Tax fees consisted primarily of assistance relating to tax compliance and
reporting for years 2003 and 2002.
The Audit Committee approved each professional service rendered by
Vavrinek, Trine, Day & Co., LLP during the 2003 and 2002 fiscal years and
considered whether the provision of such services is compatible with Vavrinek,
Trine, Day & Co., LLP maintaining its independence. The approval of such
professional services included pre-approval of all audit and permissible
non-audit services provided by Vavrinek, Trine, Day & Co., LLP. These services
included audit, tax and other services described above. The Audit Committee
Charter attached as Appendix B includes a policy of pre-approval of all services
provided by the Company's independent public accountants. The Audit Committee
approved one hundred percent (100%) of all such professional services provided
by Vavrinek, Trine, Day & Co., LLP during the 2003 and 2002 fiscal years.
It is anticipated that one or more representatives of Vavrinek, Trine, Day
& Co., LLP will be present at the Annual Meeting and will be able to make a
statement if they so desire and answer appropriate questions.
The Board of Directors has selected Vavrinek, Trine, Day & Co., LLP to
serve as the Company's independent public accountants for the year 2004. The
ratification of the appointment
26
of Vavrinek, Trine, Day & Co., LLP as the Company's independent public
accountants requires the affirmative vote of the holders of a majority of the
shares of Company common stock present in person or represented by proxy and
entitled to vote at the Annual Meeting.
The Board of Directors recommends a vote "FOR" Proposal No. 3.
27
ANNUAL REPORT ON FORM 10-KSB
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH SHAREHOLDER SOLICITED BY
THIS PROXY STATEMENT A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2003, REQUIRED TO BE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, UPON WRITTEN REQUEST TO SERVICE 1ST BANCORP,
2800 W. MARCH LANE, SUITE 120, STOCKTON, CALIFORNIA 95219, ATTENTION: JEAN
STEBBINS, CORPORATE SECRETARY. EACH REQUEST MUST SET FORTH A GOOD FAITH
REPRESENTATION THAT AS OF THE RECORD DATE, THE PERSON MAKING THE REQUEST WAS A
BENEFICIAL OWNER OF COMPANY COMMON STOCK AND ENTITLED TO VOTE AT THE ANNUAL
MEETING.
WEBSITE ACCESS
Information regarding the Company and the Bank may be obtained from the
Company's website at www.service1stbank.com. Copies of the Company's annual
report on Form 10-KSB, quarterly reports on Form 10-QSB, current reports on Form
8-K, and Section 16 reports by Company insiders, including exhibits and
amendments thereto, are available free of charge on the Company's website as
soon as they are published by the Securities and Exchange Commission through a
link to the Edgar reporting system maintained by the Securities and Exchange
Commission. To access Company filings, select the "Go to Service 1st Bancorp"
menu item on the Company website, then select either "Click here to view Service
1st Bancorp SEC Filings," followed by selecting "Continue to view SEC Filings"
to view or download copies of reports including Form 10-KSB, 10-QSB or 8-K, or
select "Click here to view Section 16 Reports," followed by selecting "Continue
to view Section 16 Reports," to view or download reports on Forms 3, 4 or 5 of
insider transactions in Company securities.
ANNUAL REPORT
The Annual Report to Shareholders for the year ended December 31, 2003, is
being mailed concurrently with this Proxy Statement to all shareholders of
record as of April 9, 2004.
SHAREHOLDERS' PROPOSALS
Next year's Annual Meeting of Shareholders is currently scheduled to be
held on May 19, 2005. Any shareholder desiring to submit a proposal for action
at the 2005 Annual Meeting of Shareholders which is desired to be presented in
the Company's proxy statement with respect to the 2005 Annual Meeting of
Shareholders, should mail the proposal by certified mail return receipt
requested, to the Company, 2800 W. March Lane, Suite 120, Stockton, California
95219, Attention: Jean Stebbins, Corporate Secretary. All such proposals must be
received by the Company not later than December 22, 2004. Matters pertaining to
such proposals, including the number and length thereof, eligibility of persons
entitled to have such proposals included, and other aspects, are regulated by
the Securities Exchange Act of 1934, as amended. Management of the Company will
have discretionary authority to vote proxies obtained by it in connection with
any shareholder proposal not submitted on or before December 22, 2004.
28
OTHER MATTERS
Management is not aware of any other matters to come before the Annual
Meeting. If any other matter not mentioned in this Proxy Statement is brought
before the Annual Meeting, the persons named in the enclosed form of proxy will
have discretionary authority to vote all proxies with respect thereto in
accordance with the recommendations of management.
By Order of the Board of Directors
Dated: April 28, 2004 /s/ JEAN STEBBINS
Stockton, California ----------------------------------
Jean Stebbins, Corporate Secretary
29
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APPENDIX A
SERVICE 1ST BANCORP
NOMINATING CHARTER
I. Purpose
The purpose of the Nominating Charter is to establish a written charter
concerning the process of identifying, evaluating and nominating
candidates, including candidates proposed by shareholders, for election to
the Board of Directors.
II. Board Functioning as Nominating Committee
The Board of Directors performs the functions of a nominating committee
with responsibility for considering appropriate candidates as directors.
The Board of Directors believes that the participation of the full Board
of Directors in considering candidates is an efficient process in view of
the size of the Board of Directors.
Candidates proposed as nominees for election to the Company's Board of
Directors shall be evaluated and selected by the "independent" members of
the Board of Directors. Director independence shall be determined in
accordance with applicable rules of the Securities and Exchange Commission
and, as and if applicable, the Nasdaq Listing Rules.
III. Nomination Process and Criteria
1. Candidates shall be evaluated based on the criteria established by
the Board of Directors. Minimum criteria for non-employee candidates
includes "independence" and "financial literacy," as defined under
applicable rules promulgated by the Securities and Exchange
Commission pursuant to the Sarbanes-Oxley Act of 2002, and, as and
if applicable, Nasdaq Listing Rules. Additional criteria may include
(a) satisfactory results of any background investigation, (b)
experience and expertise, (c) financial resources, (d) ability to
devote the time and effort necessary to fulfill the responsibilities
of a director, (e) involvement in community activities in the market
areas served by the Company and its subsidiary, Service 1st Bank,
that may enhance the reputation of the Company and the Bank, and (f)
such other criteria as the Board of Directors may determine to be
relevant. The Company and the Bank operate in a highly regulated
industry and are subject to the supervision, regulation and periodic
examination by state and federal banking regulatory authorities
including the Board of Governors of the Federal Reserve System,
California Commissioner of Financial Institutions and Federal
Deposit Insurance Corporation. Directors of the Company and the Bank
are subject to certain rules and regulations and potential
liabilities not otherwise applicable to directors of non-banking
organizations. Consequently, the Board of Directors may choose to
include more extensive inquiries into personal background
information including confirmation of the accuracy and completeness
of background information by (a) requiring candidates to complete
questionnaires to elicit information of the type required to be
disclosed by the Company in reports filed with the Securities and
Exchange Commission,
A-1
state and federal banking regulatory authorities, or other
governmental authorities having jurisdiction over the Company and
the Bank, (b) conducting background investigations by qualified
independent organizations experienced in conducting criminal and
civil investigatory reviews, and (c) such other personal and
financial reviews and analyses as the Board of Directors may deem
appropriate in connection with the consideration of candidates.
2. Any recommendations by shareholders will be evaluated by the Board
of Directors in the same manner as any other recommendation and in
each case in accordance with the Nominating Charter. Shareholders
that desire to recommend candidates for consideration by the
Company's Board of Directors should mail or deliver written
recommendations to the Company addressed as follows: Board of
Directors, Service 1st Bancorp, 2800 West March Lane, Suite 120,
Stockton, CA 95219. Each recommendation should include biographical
information indicating the background and experience of the
candidate that qualifies the candidate for consideration as a
director for evaluation by the Board of Directors. Shareholders who
wish to nominate a candidate for election to the Company's Board of
Directors, as opposed to recommending a potential nominee for
consideration by the Board of Directors, are required to comply with
the advance notice and any other requirements of the Company's
bylaws or applicable laws and regulations.
3. Any candidate nominated for election to the Board of Directors must
receive a majority of votes in favor of nomination from independent
members of the Board of Directors. Directors who are not independent
shall not vote, but may be present during the voting.
4. Each candidate shall be required to meet with the Board of
Directors.
5. Each existing member of the Board of Directors whose term is ending
must be evaluated for nomination to be re-elected. This review will
include review of attendance, participation, continuing education,
investment in shares, business development and community
involvement. In lieu of the information required to be provided by
new candidates for election to the Board of Directors described
above in paragraph 3, the Board of Directors may rely upon the
information contained in the most recent annual Directors and
Officers Questionnaire completed by the existing member of the Board
of Directors, subject to such updated information as the Board of
Directors may deem appropriate. Such existing members of the Board
of Directors must receive a majority of votes in favor of nomination
from the other independent directors.
6. The Board of Directors may also elect to use organizations in the
future to identify or evaluate candidates for consideration by the
Board of Directors.
IV. Annual Nominations
The Board of Directors shall evaluate and select nominees for election (a)
annually prior to distribution of the Company's proxy solicitation
materials and (b) at such other times as may be appropriate to fill
vacancies in accordance with the Company's bylaws.
A-2
V. Conflicts
Any conflicts between the provisions of this Charter and the provisions of
the Company's bylaws shall be resolved in favor of the bylaw provisions
and nothing contained herein shall be construed as an amendment of the
Company's bylaws.
A-3
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APPENDIX B
SERVICE 1ST BANCORP
AUDIT COMMITTEE CHARTER
PURPOSE
The Audit Committee ("Committee") is appointed by the Board of Directors
to assist the Board of Directors, among other matters, in monitoring the
following:
1. The integrity of the Company's financial statements, financial
reporting processes and internal controls regarding finance, accounting,
regulatory and legal compliance;
2. The independence, qualifications and performance of the Company's
independent public accountants;
3. The performance of the Company's internal auditors;
4. Communications among the independent public accountants, management,
internal auditors, and the Board of Directors; and
5. Procedures for the receipt, retention and treatment of complaints
received by the Company regarding accounting, internal accounting controls or
auditing matters, including procedures for the confidential, anonymous
submission by the Company's employees of concerns regarding questionable
accounting or auditing matters.
COMMITTEE MEMBERSHIP
The Committee shall be comprised of at least three directors. Each member
of the Committee shall have the following attributes, subject to permissible
exceptions:
1. Independence, as defined in applicable rules promulgated by the
Securities and Exchange Commission pursuant to the Sarbanes-Oxley Act of 2002,
and, as and if applicable, the Nasdaq Listing Rules, including that a member
shall not have participated in the preparation of the financial statements of
the Company or any current subsidiary of the Company at any time during the past
three years; and
2. The ability to read and understand fundamental financial statements,
including the Company's balance sheet, income statement, and cash flow
statement.
At least one member of the Committee shall be an "Audit Committee
Financial Expert" as defined in the rules promulgated by the Securities and
Exchange Commission, or in the event that no member of the Committee qualifies
as an Audit Committee Financial Expert, at least one member of the Committee
shall be "financially sophisticated" as defined in the Nasdaq Listing Rules. The
members of the Committee shall be appointed by the Board of Directors and serve
at the pleasure of the Board of Directors.
B-1
MEETINGS
The Committee shall meet as often as it determines necessary, but not less
frequently than quarterly each fiscal year. The Committee shall meet
periodically with the Company's management, independent public accountants,
internal auditor, and, as applicable, its compliance officer.
The Committee may request any officer or employee of the Company, or the
Company's counsel, or independent public accountants, or internal auditors, or
compliance officer, to attend a meeting of the Committee or to meet with any
members of, or advisors to, the Committee.
COMMITTEE AUTHORITY AND RESPONSIBILITIES
The Committee, in its capacity as a committee of the Board of Directors,
shall be directly responsible for the appointment of the independent public
accountants (subject, if applicable, to shareholder ratification) and for the
retention, compensation and oversight of the work of the independent public
accountants (including resolution of disagreements between management and the
independent public accountants regarding financial reporting) for the purpose of
preparing or issuing an audit report or performing other audit, review or attest
services for the Company. The independent public accountant shall report
directly to the Committee.
The Committee shall pre-approve all audit services and permissible
non-audit services to be performed for the Company by the independent public
accountants, subject to any permitted exceptions for pre-approval of non-audit
services pursuant to rules and regulations of the Securities and Exchange
Commission and/or, as applicable, Nasdaq.
The Committee shall have the authority, to the extent it deems necessary
or appropriate, to retain independent legal, accounting or other advisors. The
Company shall provide for appropriate funding, as determined by the Committee,
for payment of compensation to the independent public accountants for the
purpose of preparing or issuing an audit report or performing other audit,
review or attest services and to any other advisors employed by the Committee.
The Committee shall establish procedures for the receipt, retention, and
treatment of complaints received by the Company regarding accounting, internal
accounting controls or auditing matters, including procedures for the
confidential, anonymous submission by the Company's employees of concerns
regarding questionable accounting or auditing matters.
The Committee shall make regular reports to the Board of Directors. The
Committee shall review and reassess the adequacy of this Charter annually and
recommend any proposed changes to the Board of Directors for approval.
The Committee, to the extent required by applicable rules or regulations
of the Securities and Exchange Commission and/or, as applicable, Nasdaq, or as
the Committee deems necessary or appropriate, shall perform the following:
1. Financial Statement and Disclosure Matters
B-2
(a) Review with management and the independent public accountants
the annual audited financial statements, including disclosures made in the
Company's Annual Report on Form 10-KSB or 10-K, as applicable.
(b) Review with management, the independent public accountants,
the internal auditors and Company counsel any certification provided by
management related to the Company's financial statements. Review with
management, the independent public accountants, and the internal auditors
management's assertion regarding the design effectiveness and operation
efficiency of the Company's internal control over financial reporting and
compliance with the applicable laws and regulations.
(c) Review with management and the independent public accountants
significant financial reporting issues and judgments made in connection with the
preparation of the Company's financial statements, including any significant
changes in the Company's selection or application of accounting principles, any
material issues as to the adequacy of the Company's internal controls and any
actions taken or adopted in light of material control deficiencies.
(d) Review a report by the independent public accountants
concerning (i) all critical accounting policies and practices to be used; (ii)
alternative treatments of financial information within GAAP that have been
discussed with management, ramifications of the use of such alternative
disclosures and treatments, and the treatment preferred by the independent
public accountants; and (iii) any other material written communications between
the independent public accountants and the Company's management.
(e) Review with management and the independent public accountants
the effect of regulatory and accounting initiatives as well as off-balance sheet
structures on the Company's financial statements.
(f) Review with management the Company's major financial risk
exposures and the actions management has taken to monitor and control such
exposures, including the Company's risk assessment and risk management policies.
(g) Review with the independent public accountants (i) the matters
required to be discussed by the Statement on Auditing Standards No. 61
(Codification of Statements on Auditing Standards), as modified or supplemented;
(ii) the letter from the independent public accountants required by Independence
Standards Board Standard No. 1 (Independence Discussions with Audit Committees),
as modified or supplemented, and the independence of the independent public
accountants related thereto; and (iii) matters relating to the conduct of the
audit, including any difficulties encountered in the course of the audit work,
any restrictions on the scope of activities or access to requested information,
and any significant disagreements with management.
(h) Review disclosures made to the Committee by the Company's
Chief Executive Officer and Chief Financial Officer during their certification
about any significant deficiencies in the design or operation of internal
controls or material weaknesses therein and any fraud involving management or
other employees who have a significant role in the Company's internal controls.
2. Independent Public Accountant Oversight
B-3
(a) Review the length of time the lead and concurring partner of
the independent public accountants' team has been engaged to audit the Company.
(b) On an annual basis, the Committee shall review and discuss
with the independent public accountants (i) all relationships they have with the
Company that could impair the independent public accountant's independence; (ii)
the independent public accountant's internal quality control procedures; and
(iii) any material issues raised by the most recent internal quality control
review or peer review of the independent public accountant's firm or by any
inquiry or investigation by governmental or professional authorities, within the
preceding five years, respecting one or more independent audits carried out by
the independent public accountant's firm, and the steps taken to deal with those
issues.
(c) Ensure the rotation of the lead audit partner of the
independent public accountants having primary responsibility for the Company's
audit and the audit partner responsible for reviewing the audit to the extent
required by applicable law or regulation.
(d) Prohibit, to the extent required by applicable law or
regulation, the hiring of any employee of the independent public accountants who
was engaged on the Company's account and who would be employed by the Company in
a financial reporting oversight role.
(e) Meet with the independent public accountants prior to the
Company's audit to discuss the planning and staffing of the audit.
3. Internal Audit Oversight
(a) Approve the appointment and replacement of the independent
firm of internal auditors; including the independence and authority of the
auditors' reporting obligations.
(b) Review significant reports to management prepared by the
auditors and management's responses.
(c) Review with the auditors and management the auditors'
responsibilities, budget and staffing and any recommended changes in the planned
scope of the internal audit.
(d) Review the audit scope and audit staffing plan and discuss the
completeness of coverage and effective use of audit resources with both the
auditors and the independent public accountants.
(e) Review with the auditors a progress report on the internal
audit plan and any significant changes with explanations for any changes from
the original plan.
(f) Receive confirmation from both the auditors and the
independent public accountants that no limitations have been placed on the scope
or nature of their audit process or procedures.
4. Compliance and Internal Control Oversight
(a) Review reports and disclosures of insider and affiliated party
transactions.
B-4
(b) Review with management and the independent public accountants
any correspondence with regulators or governmental agencies and any published
reports which raise material issues regarding the Company's internal controls,
financial statements or accounting policies.
(c) Review legal matters that may have a material impact on the
financial statements or the Company's compliance policies with the Company's
counsel.
(d) Review the adequacy and effectiveness of the Company's
internal controls and security matters with management, the auditors and the
independent public accountants.
B-5
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APPENDIX C
SERVICE 1ST BANCORP 2004 STOCK OPTION PLAN
1. PURPOSE
The purpose of this Service 1st Bancorp 2004 Stock Option Plan (the "2004
Plan") is to provide a method whereby those key employees, directors and
consultants of Service 1st Bancorp and its affiliates (collectively referred to
as the "Company"), who are primarily responsible for the management and growth
of the Company's business and who are presently making and are expected to make
substantial contributions to the Company's future management and growth, may be
offered incentives in addition to those presently available, and may be
stimulated by increased personal involvement in the fortunes and success of the
Company to continue in its service, thereby advancing the interests of the
Company and its shareholders.
The word "affiliate," as used in the 2004 Plan, means any bank or
corporation in any unbroken chain of banks or corporations beginning or ending
with the Company, if at the time of the granting of an option, each such bank or
corporation other than the last in that chain owns stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other banks or corporations in the chain.
2. ADMINISTRATION
The following provisions shall govern the administration of the 2004 Plan:
(a) The 2004 Plan shall be administered by the Board of Directors (the
"Board") or a committee ("Committee") of the Board duly appointed by the Board
and consisting of such number of directors who are "non-employee directors"
within the meaning of Rule 16b-3 as promulgated by the Securities and Exchange
Commission ("SEC") under Section 16(b) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), as such rule may be amended from time to time
and as interpreted by the SEC ("Rule 16b-3"), and as may be required to comply
with Rule 16b-3. The Board of Directors may from time to time remove members
from or add members to the Committee. Vacancies on the Committee, however
caused, shall be filled by the Board of Directors. The Board of Directors may
designate a Chairman and Vice-Chairman of the Committee from among the members
of the Committee.
(b) Acts of the Board or Committee (i) at a meeting, held at a time and
place and in accordance with rules adopted by the Board or Committee, at which a
quorum of the Board or Committee is present and acting, or (ii) reduced to and
approved in writing by all members of the Board or Committee, shall be the valid
acts of the Board or Committee.
C-1
(c) The grant of options under the 2004 Plan shall be affected by
execution of instruments in writing in a form approved by the Board or
Committee. Subject to the express terms and conditions of the 2004 Plan, the
Board or Committee shall have full power to construe the 2004 Plan and the terms
of any option granted under the 2004 Plan, to prescribe, amend and rescind rules
and regulations relating to the 2004 Plan or such options and to make all other
determinations necessary or advisable for the 2004 Plan's administration,
including, without limitation, the power to (i) determine which persons meet the
requirements of Section 3 hereof for selection as participants in the 2004 Plan;
(ii) determine to whom of the eligible persons, if any, options shall be granted
under the 2004 Plan; (iii) establish the terms and conditions required or
permitted to be included in every option agreement or any amendments thereto,
including whether options to be granted shall be "incentive stock options," as
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"IRC") or nonstatutory stock options not described in Section 422; (iv) specify
the number of shares to be covered by each option; (v) determine the fair market
value of shares of the Company's common stock for any purpose under the 2004
Plan; (vi) grant options in exchange for cancellation of options granted earlier
under the 2004 Plan at different exercise prices; (vii) take appropriate action
to amend any option under the 2004 Plan, provided that no such action may be
taken without the written consent of the affected optionee; and (viii) make all
other determinations deemed necessary or advisable for administering the 2004
Plan. The Board's or Committee's determination on the foregoing matters shall be
conclusive.
3. ELIGIBILITY
The persons who shall be eligible to receive the grant of options under
this 2004 Plan shall be those key employees, directors and officers of the
Company (including officers who may also be directors of the Company), persons
who became employees of the Company within thirty days of the date of grant of
an option, and independent contractor consultants of the Company who render bona
fide services to the Company other than in connection with the offer or sale of
securities in a capital raising transaction (individually a "Consultant" and
collectively "Consultants").
4. THE SHARES
The shares of stock subject to options authorized to be granted under the
2004 Plan shall consist of one hundred sixty-nine thousand (169,000) shares of
the Company's no par value common stock which are acquired by exercise of such
options (the "Shares"), or the number and kind of shares of stock or other
securities which shall be substituted for such Shares or to which such Shares
shall be adjusted as provided in Section 7 hereof. Upon the expiration or
termination for any reason of an outstanding option under the 2004 Plan which
has not been exercised in full, all unissued Shares thereunder shall again
become available for the grant of options under the 2004 Plan. Shares of the
Company's common stock which are (i) delivered by
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an optionee in payment of the exercise price of an option pursuant to Section
6(a), or (ii) delivered by an optionee, or withheld by the Company from the
shares otherwise due upon exercise of a nonstatutory stock option, in
satisfaction of applicable withholding taxes as permitted by Section 6(c), shall
again become available for the grant of options under the 2004 Plan only to
those eligible participants who are not subject to Section 16 of the Exchange
Act.
5. OPTION GRANTS
Options, in the discretion of the Board or Committee, may be granted at
any time prior to the termination of the 2004 Plan to persons included among the
eligible classes of persons specified in Section 3. Options granted by the Board
or Committee shall be subject to the following terms and conditions:
(a) Grant of Options
Options granted to employees pursuant to the 2004 Plan may be either
incentive stock options or nonstatutory stock options. If the aggregate fair
market value of the shares issuable upon exercise of incentive stock options
which are exercisable for the first time during any one calendar year under all
incentive stock options held by an optionee exceeds $100,000 (determined at the
time of the grant of the options), such options shall be treated as nonstatutory
stock options to the extent of such excess. Options granted to directors who are
"non-employee directors" within the meaning of Rule 16b-3 as promulgated by the
SEC under Section 16(b) of the Exchange Act, as such rule may be amended from
time to time and as interpreted by the SEC, and to Consultants, shall be
nonstatutory stock options.
(b) Option Price
The purchase price under each option shall not be less than one
hundred percent of the fair market value of the Shares subject thereto on the
date the option is granted; provided, however, that the purchase price of an
option granted to an individual who owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
shall not be less than one hundred ten percent (110%) of the fair market value
of the Shares subject thereto on the date the option is granted. For any
purposes under this 2004 Plan, "fair market value per share" shall mean, where
there is a public market for the Company's common stock, the mean of the bid and
asked prices (or the closing price if listed on a stock exchange or the Nasdaq
National Market) of the Company's common stock for the date of grant, as
reported in the Wall Street Journal (or, if not so reported, as otherwise
reported by the Nasdaq Stock Market or the National Quotation Bureau). If such
information is not available for the date of grant, then such information for
the last preceding date for which such information is available shall be
considered as the fair market value.
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(c) Duration of Options
Each option shall be for a term determined by the Board or
Committee; provided, however, that the term of any option may not exceed ten
(10) years and, provided further, that the term of any incentive stock option
granted to an individual who owns stock possessing more than ten percent (10%)
of the total combined voting power of all classes of stock of the Company shall
not exceed five (5) years. Each option shall vest in such manner and at such
time as the Board or Committee shall determine and the Board or Committee may
accelerate the time of exercise of any option; provided, however, that no option
shall vest for exercise at a rate of less than twenty percent (20%) per year
during the five (5) year period following the date of grant of an option.
(d) Termination of Director, Employment or Consultant Status
Upon the termination of an optionee's status as an employee or
Consultant or member of the Board, the optionee's rights to exercise an option
then held shall be only as follows:
DEATH OR DISABILITY: If an optionee's employment or consulting
relationship or service on the Board is terminated by death or disability,
such optionee or such optionee's qualified representative (in the event of
the optionee's mental disability) or the optionee's estate (in the event
of optionee's death) shall have the right for a period of twelve (12)
months (or such longer period as the Board or Committee may determine at
the date of grant or during the term of the option) following the date of
such death or disability to exercise the option to the extent the optionee
was entitled to exercise such option on the date of the optionee's death
or disability; provided the actual date of exercise is in no event after
the expiration of the term of the option. To the extent the option is not
exercised within such period the option will terminate. An optionee's
"estate" shall mean the optionee's legal representative or any person who
acquires the right to exercise an option by reason of the optionee's
death.
CAUSE: If by determination of the Board or Committee, an optionee's
employment or consulting relationship is terminated (1) because such
optionee has committed an act of embezzlement, fraud, dishonesty, breach
of fiduciary duty to the Company, or deliberately disregarded the rules of
the Company which resulted in loss, damage or injury to the Company, or
(2) because the optionee has made any unauthorized disclosure of any of
the secrets or confidential information of the Company, induced any client
or customer of the Company to break any contract with the Company or
induced any principal for whom the Company acts as agent to terminate such
agency relations, or engaged in any conduct which constitutes unfair
competition with the Company, or (3) if an optionee (including an optionee
who is a director) is removed from any office of the Company or from the
Company's Board by any bank regulatory agency, the optionee
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shall have the right for a period of thirty (30) days to exercise the
option to the extent the option was exercisable on the date of
termination; provided that the date of exercise is in no event after the
expiration of the term of the option. To the extent the option is not
exercised within such period the option will terminate. In making any
determination pursuant to this paragraph, the Board or Committee shall act
fairly and shall give the optionee whose employment or consulting status
has been terminated an opportunity to appear and be heard at a hearing
before the full Board or Committee and present evidence on the optionee's
behalf. For the purpose of this paragraph, termination of employment or
consulting status shall be deemed to occur when the Company dispatches
notice or advice to the optionee that the optionee's employment or
consulting status is terminated, and not at the time of optionee's receipt
thereof.
OTHER REASONS: If an optionee's employment or consulting
relationship or service on the Board is terminated for any reason other
than those mentioned above under "Death or Disability" and "Cause," the
optionee may, within three (3) months (or such longer period as the Board
or Committee may determine at the date of grant or during the term of the
option) following such termination, exercise the option to the extent such
option was exercisable on the date of termination of the optionee's
employment or consulting or director status; provided the date of exercise
is in no event after the expiration of the term of the option and provided
further that any option which is exercised more than three (3) months
following termination shall be treated as a nonstatutory option whether or
not it was designated as such at the time it was granted. To the extent
the option is not exercised within such period the option will terminate.
6. TERMS AND CONDITIONS APPLICABLE TO ALL OPTIONS
The following terms and conditions shall apply to all options granted
pursuant to the 2004 Plan:
(a) Exercise of Options
To the extent the right to purchase Shares has vested under an
optionee's stock option agreement, options may be exercised from time to time by
delivering payment therefor in cash, certified check, official bank check, or
the equivalent thereof acceptable to the Company, together with written notice
to the Secretary of the Company, identifying the option or part thereof being
exercised and specifying the number of Shares for which payment is being
tendered. In addition, an option may also be exercised by (1) the delivery and
surrender of shares of Company common stock which have been owned by the
optionee for at least six (6) months or such other period as the Board or
Committee may require and have an aggregate fair market value on the date of
surrender equal to the exercise price; or (2) by delivery to the
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Company of an exercise notice instructing the Company to deliver the
certificates for the Shares purchased to a designated brokerage firm and a copy
of irrevocable instructions delivered to the brokerage firm to sell the Shares
acquired upon exercise of the option and to deliver to the Company from the sale
proceeds sufficient cash to pay the exercise price and any applicable
withholding taxes arising as a result of the exercise.
The Company shall deliver to the optionee as soon as reasonably
practicable following the Company's receipt of payment of the purchase price in
conformity with the exercise procedures described above, without transfer or
issue tax to the optionee (or other person entitled to exercise the option), at
the principal office of the Company, or such other place as shall be mutually
acceptable, a certificate or certificates for such Shares dated the date the
options were validly exercised; provided, however, that the time of such
delivery may be postponed by the Company for such period as may be required for
it with reasonable diligence to comply with any requirements of law.
(b) Transferability of Options and Shares
Each option shall be transferable only by will or the laws of
descent and distribution or as may otherwise be permitted under Rule 16b-3 or
Section 422 of the IRC and shall be exercisable during the optionee's lifetime
only by the optionee, or in the event of disability, the optionee's qualified
representative. In addition, in order for Shares acquired upon exercise of
incentive stock options to receive the tax treatment afforded such Shares, the
Shares may not be disposed of within two (2) years from the date of the option
grant nor within one (1) year after the date of transfer of such Shares to the
optionee.
(c) Withholding
The Company shall have the right to condition the issuance of Shares
in connection with the exercise of an option upon payment by the optionee of any
applicable taxes required to be withheld under federal, state or local tax laws
or regulations in connection with such exercise. An optionee may elect to pay
any such tax by (1) requesting the Company to withhold a sufficient number of
Shares from the total number of Shares issuable upon exercise of the option, or
(2) delivering a sufficient number of shares of Company common stock which have
been held by the optionee for at least six (6) months (or such other period as
the Board or Committee may require) to the Company. The value of shares withheld
or delivered for such purpose shall be the fair market value of such shares on
the date the exercise becomes taxable as determined by the Board or Committee.
Such an election is subject to approval or disapproval by the Board or
Committee, and if the optionee is subject to Section 16 of the Exchange Act, the
timing of the election must satisfy the requirements of Rule 16b-3.
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(d) Other Terms and Conditions
Options may also contain such other provisions, which shall not be
inconsistent with any of the foregoing terms, as the Board or Committee shall
deem appropriate. No option, however, nor anything contained in the 2004 Plan,
shall confer upon any optionee any right to continued employment, consulting or
director status with the Company, nor limit in any way the right of the Company
to terminate an optionee's employment or consulting status at any time.
7. ADJUSTMENT OF, AND CHANGES IN, THE SHARES
(a) Changes in Capitalization
In the event the shares of common stock of the Company, as presently
constituted, shall be changed into or exchanged for a different number or kind
of shares of stock or other securities of the Company or of another corporation
(whether by reason of reorganization, merger, consolidation, recapitalization,
reclassification, stock split, reverse stock split, combination of shares, or
otherwise), or if the number of shares of common stock of the Company shall be
increased through the payment of a stock dividend, there shall be substituted
for or added to each Share of common stock of the Company theretofore
appropriated or thereafter subject or which may become subject to an option
under the 2004 Plan, the number and kind of shares of stock or other securities
into which each outstanding share of common stock of the Company shall be so
changed, or for which each Share shall be exchanged, or to which each such Share
shall be entitled, as the case may be. In addition, appropriate adjustment shall
be made in the number and kind of Shares as to which outstanding options, or
portions thereof then unexercised, shall be exercisable, so that any optionee's
proportionate interest in the Company by reason of his or her rights under
unexercised portions of such options shall be maintained as before the
occurrence of such event. Such adjustment in outstanding options shall be made
without change in the total price of the unexercised portion of the option, and
with a corresponding adjustment in the option price per share.
(b) Dissolution, Liquidation, Sale or Merger
In the event of a proposed (i) dissolution or liquidation of the
Company; (ii) reorganization, merger, or consolidation of the Company, with the
result that (A) the Company is not the surviving corporation, or (B) the Company
becomes a subsidiary of another corporation, which shall be deemed to have
occurred if another corporation shall own, directly or indirectly, eighty
percent (80%) or more of the aggregate voting power of all outstanding equity
securities of the Company; or (iii) sale of substantially all the assets of the
Company to another corporation; or (iv) sale of the equity securities of the
Company representing eighty percent
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(80%) or more of the aggregate voting power of all outstanding equity securities
of the Company to any person or entity, or any group of persons and/or entities
acting in concert, then in those events, the Company will deliver to each
optionee written notification of the event not less than thirty (30) days prior
to the occurrence or consummation of the event notifying the optionee of the
event and the optionee's right to exercise all options granted under the 2004
Plan, whether or not vested under the 2004 Plan or applicable stock option
agreement. The notification will confirm that all outstanding options granted
under the 2004 Plan will completely vest and become immediately exercisable for
a period of ten (10) days commencing on the date of the notification to each
optionee. Notwithstanding the foregoing, such vesting and right of exercise will
be conditional upon (i) the execution by all parties required for the event to
be legally enforceable by or against the Company of a final plan, definitive
agreement, or comparable document used to effectuate the event, (ii) receipt of
all required approvals and consents including, without limitation, any required
approvals of shareholders and applicable governmental authorities, and (iii)
satisfaction of all other conditions to consummation of any such event as may be
contained in the final plan, definitive agreement or comparable document. Upon
occurrence or consummation of the event, all outstanding options and the 2004
Plan will terminate; provided, however, that any outstanding options not
exercised as of the occurrence of the event will not terminate if a successor
corporation assumes the outstanding options or substitutes for the options, new
options covering shares of the successor corporation's stock with appropriate
adjustments as to the number, kind and prices of shares, and substantially on
the same terms as the outstanding options.
(c) Notice of Adjustments; Fractional Shares
To the extent the adjustments specified in paragraphs (a) and (b)
above relate to stock or securities of the Company, such adjustments shall be
made by the Board or Committee, whose determination in that respect shall be
final, binding and conclusive. No right to purchase fractional shares shall
result from any adjustment in options pursuant to this Section 7. In case of
any such adjustment, the shares subject to the option shall be rounded down to
the nearest whole share. Notice of any adjustment shall be given by the Company
to each holder of an option which is so adjusted, and such adjustment (whether
or not such notice is given) shall be effective and binding for all purposes of
the 2004 Plan.
Any issue by the Company of shares of stock of any class, or
securities convertible into shares of any class, shall not affect the number or
price of shares of common stock subject to the option, and no adjustment by
reason thereof shall be made. The grant of an option pursuant to the 2004 Plan
shall not affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure or to merge or to consolidate or to dissolve, liquidate or
sell, or transfer all or any part of its business or assets.
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8. AMENDMENT, EFFECTIVENESS AND TERMINATION OF THE PLAN
The Board or Committee shall have complete power and authority to
terminate or amend the 2004 Plan; provided, however, that the Board or Committee
shall not, without the approval of the shareholders of the Company, amend the
2004 Plan in a manner that requires shareholder approval for continued
compliance with the terms of Rule 16b-3 as promulgated or amended under the
Exchange Act, Section 422 of the IRC, any successor rules, or other regulatory
authority. Except as provided in Section 8, no termination, modification or
amendment of the 2004 Plan may adversely affect the rights of an optionee to
whom an option was previously granted under the 2004 Plan, without the consent
of such optionee. Any consent required by the preceding sentence may be obtained
in any manner deemed appropriate by the Board or Committee.
The 2004 Plan shall become effective upon adoption by the Board, subject
to the approval by the shareholders of the Company within twelve (12) months
following such adoption.
The 2004 Plan, unless sooner terminated, shall terminate on February 5,
2014, ten (10) years from the date the 2004 Plan was originally adopted by the
Board. An option may not be granted under the 2004 Plan after the 2004 Plan is
terminated.
9. INFORMATION TO OPTIONEES
The Company shall provide to each optionee, during the period for which he
or she has one or more outstanding options, copies of all annual reports and all
other information which is provided to shareholders of the Company. To the
extent permissible under applicable laws, rules or regulations, the Company
shall not be required to provide such information to key employees, officers or
directors of the Company whose duties in connection with the Company assure
their access to equivalent information.
10. PRIVILEGES OF STOCK OWNERSHIP; SECURITIES LAW COMPLIANCE
No optionee shall be entitled to the privileges of stock ownership as to
any Shares not actually issued and delivered to the optionee. The exercise of
any option under the 2004 Plan shall be conditioned upon the qualification and
registration of the Shares with, as applicable, the Commissioner of Corporations
of the State of California under the California Corporate Securities Law of
1968, as amended, and the SEC under the Securities Act of 1933, as amended,
unless in the opinion of counsel to the Company such qualification or
registration is not necessary. The Company shall diligently endeavor to comply
with all securities laws applicable to the 2004 Plan.
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11. NOTICE OF SALE
An optionee shall give the Company notice of any sale or other disposition
of any Shares acquired upon exercise of an incentive stock option, not more than
five (5) days after such sale or disposition.
12. INDEMNIFICATION
To the extent permitted by applicable law in effect from time to time, no
member of the Board or Committee or the Board or Committee itself shall be
liable for any action or omission of any other member of the Board or Committee
or the Board or Committee itself nor for any act or omission on the member's own
part, excepting only the member's own willful misconduct or gross negligence.
The Company shall pay expenses incurred by, and satisfy a judgment or fine
rendered or levied against, a present or former member of the Board or Committee
in any action against such person (whether or not the Company is joined as a
party defendant) to impose liability or a penalty on such person for an act
alleged to have been committed by the Company or by such person while a member
of the Board or Committee arising with respect to the 2004 Plan or
administration thereof or out of membership on the Board or Committee, or all or
any combination of the preceding; provided the member of the Board or Committee
was acting in good faith, within what such member of the Board or Committee
reasonably believed to have been the scope of his or her position or authority
and for a purpose which he or she reasonably believed to be in the best
interests of the Company or its shareholders. Payments authorized hereunder
include amounts paid and expenses incurred in settling any such action or
threatened action. In the event of any conflict or inconsistency between the
provisions of this section and the indemnification provisions applicable to a
member of the Board or Committee under applicable law, the articles of
incorporation and bylaws of the Company, or any indemnification agreement
between the Company and such member of the Board or Committee, the conflict or
inconsistency shall be resolved in favor of the provisions of such applicable
law, articles of incorporation and bylaws or indemnification agreement. The
provisions of this section shall apply to the estate, executor, administrator,
heirs, legatees or devisees of a member of the Board or Committee, and the term
"person" as used in this section shall include the estate, executor,
administrator, heirs, legatees or devisees of such person.
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SERVICE 1ST BANCORP 2004 STOCK OPTION PLAN
SAMPLE FORM OF
INCENTIVE STOCK OPTION AGREEMENT
Date of Grant: ______________
Service 1st Bancorp, a California corporation (the "Company"), has granted
to (the "Optionee"), an option (the "Option") to purchase a total of
____________(_______) shares of Company common stock ("Common Stock"), at the
price determined as provided herein, and in all respects subject to the terms,
definitions and provisions of the Service 1st Bancorp 2004 Stock Option Plan
(the "2004 Plan"). This Agreement describes certain, but not all, of the terms
and provisions contained in the 2004 Plan. In the event of any conflict or
inconsistency between the terms of this Agreement and those of the 2004 Plan,
the terms and provisions of the 2004 Plan shall control. The terms defined in
the 2004 Plan shall have the same defined meanings herein.
1. NATURE OF THE OPTION
This Option is intended to qualify as an Incentive Stock Option as defined
in Section 422 of the Internal Revenue Code of 1986, as amended ("IRC").
2. EXERCISE PRICE
The exercise price is ______________($________) for each share of Common
Stock, which price is not less than the fair market value per share of the
Common Stock on the date of grant.
3. EXERCISE OF OPTION
This Option shall be exercisable during its term in accordance with the
provisions of the 2004 Plan and as follows:
(a) Right to Exercise
-----------------
This Option shall vest cumulatively from the date of grant of the Option,
exercisable during a period of __________ months after the date of grant as
follows:
(i) This Option may be exercised immediately to the extent of not
more than ____ percent (__%) of the Common Stock.
(ii) Upon or after the expiration of _________ (__) months from
the date of grant, this Option may be exercised to the extent of an
additional ____ percent (__%) of the Common Stock.
(iii) Upon or after the expiration of _________ (__) months from
the date of grant, this Option may be exercised to the extent of an
additional ____ percent (__%) of the Common Stock.
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(iv) Upon or after the expiration of _________ (__) months from
the date of grant, this Option may be exercised to the extent of an
additional ____ percent (__%) of the Common Stock.
(v) Upon or after the expiration of _________ (__) months from
the date of grant, this Option may be exercised to the extent of an
additional ____ percent (__%) of the Common Stock.
(vi) This Option may not be exercised for less than ten (10)
shares nor for a fraction of a share.
(vii) In the event of the Optionee's death, disability or other
termination of employment, the exercisability of the Option is
governed by Sections 5, 6, 7 and 8 below.
(b) Method of Exercise
------------------
(i) This Option shall be exercisable by written notice which
shall state the election to exercise the Option, the number of
shares in respect of which the Option is being exercised, and such
other representations and agreements as may be required by the
Company pursuant to the provisions of the 2004 Plan. Such written
notice shall be signed by the Optionee and shall be delivered in
person or by certified mail to the Secretary of the Company
accompanied by payment of the exercise price, as applicable.
(ii) No Shares will be issued pursuant to the exercise of an
Option unless such issuance and such exercise shall comply with all
relevant provisions of law and the requirements of any stock
exchange or inter-dealer quotation system upon which the Shares may
then be listed or quoted. Assuming such compliance, the Shares shall
be considered transferred to the Optionee on the date on which the
Option is exercised with respect to such Shares. An Optionee shall
have no rights as a shareholder of the Company with respect to any
Shares until the issuance of a stock certificate to the Optionee for
such Shares.
4. METHOD OF PAYMENT
Payment of the exercise price shall be by cash, certified check, official
bank check, or by the delivery of previously owned shares of the Company's
Common Stock held for the requisite period specified in the 2004 Plan to avoid a
charge to the Company's reported earnings and with a fair market value on the
date of surrender equal to the exercise price. In addition, the Option may be
exercised by delivery to the Company of (i) a copy of irrevocable written
instructions provided by the Optionee to a designated brokerage firm to effect
the immediate sale of the purchased Shares and remit to the Company, out of the
sale proceeds available on the settlement date, sufficient funds to cover the
aggregate exercise price payable for the purchased Shares plus all applicable
federal, state and local income and employment taxes required to be withheld by
the Company by reason of such purchase and (ii) written instructions to the
Company to deliver the certificates for the purchased Shares directly to such
brokerage firm in order to complete the sale transaction.
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5. TERMINATION OF STATUS AS AN EMPLOYEE FOR ANY REASON OTHER THAN CAUSE
If the Optionee ceases to serve as an employee, the Optionee may, but only
within three (3) months after the date the Optionee ceases to be an employee of
the Company, exercise this Option to the extent that the Option was vested as of
the date of such termination; provided that in no event is the date of exercise
beyond expiration of the Option. To the extent that the Option was not vested as
of the date of such termination, or if the Optionee does not exercise this
Option within the time specified herein, the Option shall terminate.
6. TERMINATION OF STATUS AS AN EMPLOYEE FOR CAUSE
If the Optionee's status as an employee is terminated for Cause, as
provided in Section 5(d) of the 2004 Plan, this Option shall terminate on the
thirtieth (30th) day after the date of termination of employment. "Cause" may
consist of an act of embezzlement; fraud; dishonesty; breach of fiduciary duty
to the Company; deliberate disregard of the rules of the Company which results
in loss, damage or injury to the Company; the unauthorized disclosure of any of
the secrets or confidential information of the Company; the inducement of any
client or customer of the Company to break any contract with the Company or the
inducement of any principal for whom the Company acts as agent to terminate such
agency relations; engagement in any conduct which constitutes unfair competition
with the Company; or the removal of the Optionee from any office of the Company
by any bank regulatory agency.
7. DISABILITY OF OPTIONEE
Notwithstanding the provisions of Section 5 above, if the Optionee is
unable to continue employment with the Company as a result of disability (as
defined below), the Optionee may, within twelve (12) months from the date of
termination of employment, exercise the Option to the extent the Option was
vested as of the date of such termination; provided that in no event is the date
of exercise beyond expiration of the Option; and, provided further, that, in
certain situations, an exercise after three (3) months following such
termination may preclude favorable tax treatment normally accorded incentive
stock options (i.e., the Option will be taxed as a nonstatutory stock option).
To the extent that the Option was not vested as of the date of termination, or
if the Optionee does not exercise such Option within the time specified herein,
the Option shall terminate. For purposes of this provision, "disability" shall
mean the inability of the Optionee to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment and shall
be determined by the Board of Directors or the Committee on the basis of such
medical evidence as the Board of Directors or the Committee deems warranted
under the circumstances.
8. DEATH OF OPTIONEE
In the event of the death of the Optionee while the Optionee is an
employee of the Company or during the three (3) month period referred to in
Section 5 above, the Option may be exercised, at any time within twelve (12)
months following the date of death, by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent the Option was vested as of the date of death; provided that in no
event is the date of exercise beyond expiration of the Option.
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9. NON-TRANSFERABILITY OF OPTION
This Option may not be transferred in any manner otherwise than by will or
by the laws of descent or distribution or as permitted under the 2004 Plan, and
may be exercised during the Optionee's lifetime only by the Optionee. The terms
of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
10. TERM OF OPTION
Subject to earlier termination as provided in the 2004 Plan, this Option
shall terminate ______ (__) years from the date of grant of this Option, and may
be exercised during such term only in accordance with the 2004 Plan and the
terms of this Option.
11. EARLY DISPOSITION OF STOCK
The Optionee understands that if the Optionee disposes of any shares
received under this Option within two (2) years after the date of this Agreement
or within one (1) year after such shares were transferred to the Optionee, the
Optionee will be treated for federal income tax purposes as having received
ordinary income at the time of such disposition in an amount generally measured
by the difference between the exercise price and the lower of the fair market
value of the shares at the date of the exercise or the fair market value of the
shares at the date of disposition. The Optionee agrees to notify the Company in
writing within five (5) days after the date of any disposition of the Shares
acquired by exercise of this Option. The Optionee understands that if the
Optionee disposes of such shares at any time after the expiration of such two
(2) year and one (1) year holding periods, any gain on such sale will be taxed
as long-term capital gain.
12. QUALIFICATION AS AN INCENTIVE STOCK OPTION
The Optionee understands that the Option is intended to qualify as an
"incentive stock option" within the meaning of Section 422 of the IRC. The
Optionee understands, further, that the exercise price for the shares subject to
this Option has been determined in accordance with the 2004 Plan at a price not
less than 100% (or, if the Optionee owned at the time of grant more than 10% of
the voting securities of the Company, 110%) of the fair market value of the
shares at the time of grant. The Company believes that the methodology by which
the fair market value was determined at such time represented a good faith
attempt, as defined in the IRC and the regulations thereunder, at reaching an
accurate appraisal of the fair market value of the shares. The Optionee
understands and acknowledges, however, that the Company shall not be responsible
for any additional tax liability incurred by the Optionee in the event that the
Internal Revenue Service were to determine that the Option does not qualify as
an incentive stock option, for any reason, including a determination that the
valuation did not represent a good faith attempt to value the shares.
C-14
SERVICE 1ST BANCORP
Dated: __________________ By: ____________________________________
________________________________________
[TYPE OR PRINT NAME/TITLE]
The Optionee hereby agrees to accept as binding, conclusive and final all
decisions or interpretations of the Board of Directors or the Committee upon any
questions arising under the 2004 Plan.
OPTIONEE
Dated: __________________ ________________________________________
________________________________________
[TYPE OR PRINT NAME]
C-15
SERVICE 1ST BANCORP 2004 STOCK OPTION PLAN
SAMPLE FORM OF
NONSTATUTORY STOCK OPTION AGREEMENT
Date of Grant: ___________________
Service 1st Bancorp, a California corporation (the "Company"), has granted
to (the "Optionee"), an option (the "Option") to purchase a total of
____________(_______) shares of Company common stock ("Common Stock"), at the
price determined as provided herein, and in all respects subject to the terms,
definitions and provisions of the Service 1st Bancorp 2004 Stock Option Plan
(the "2004 Plan"). This Agreement describes certain, but not all, of the terms
and provisions contained in the 2004 Plan. In the event of any conflict or
inconsistency between the terms of this Agreement and those of the 2004 Plan,
the terms and provisions of the 2004 Plan shall control. The terms defined in
the 2004 Plan shall have the same defined meanings herein.
1. NATURE OF THE OPTION
This Option is intended by the Company and the Optionee to be a
nonstatutory stock option and does not qualify for any special tax benefits to
the Optionee. This Option is not an Incentive Stock Option within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended ("IRC").
2. EXERCISE PRICE
The exercise price is ______________($________) for each share of Common
Stock, which price is not less than the fair market value per share of the
Common Stock on the date of grant.
3. EXERCISE OF OPTION
This Option shall be exercisable during its term in accordance with the
provisions of the 2004 Plan and as follows:
(a) Right to Exercise
-----------------
This Option shall vest cumulatively from the date of grant of the Option,
exercisable during a period of __________ months after the date of grant as
follows:
(i) This Option may be exercised immediately to the extent of not
more than ____ percent (__%) of the Common Stock.
(ii) Upon or after the expiration of _________ (__) months from
the date of grant, this Option may be exercised to the extent of an
additional ____ percent (__%) of the Common Stock.
(iii) Upon or after the expiration of _________ (__) months from
the date of grant, this Option may be exercised to the extent of an
additional ____ percent (__%) of the Common Stock.
C-16
(iv) Upon or after the expiration of _________ (__) months from
the date of grant, this Option may be exercised to the extent of an
additional ____ percent (__%) of the Common Stock.
(v) Upon or after the expiration of _________ (__) months from
the date of grant, this Option may be exercised to the extent of an
additional ____ percent (__%) of the Common Stock.
(vi) This Option may not be exercised for less than ten (10)
shares nor for a fraction of a share.
(vii) In the event of the Optionee's death, disability or other
termination of employment, the exercisability of the Option is
governed by Sections 5, 6, 7 and 8 below.
(c) Method of Exercise
------------------
(i) This Option shall be exercisable by written notice which
shall state the election to exercise the Option, the number of
shares in respect of which the Option is being exercised, and such
other representations and agreements as may be required by the
Company pursuant to the provisions of the 2004 Plan. Such written
notice shall be signed by the Optionee and shall be delivered in
person or by certified mail to the Secretary of the Company
accompanied by payment of the exercise price, as applicable.
(ii) No Shares will be issued pursuant to the exercise of an
Option unless such issuance and such exercise shall comply with all
relevant provisions of law and the requirements of any stock
exchange or inter-dealer quotation system upon which the Shares may
then be listed or quoted. Assuming such compliance, the Shares shall
be considered transferred to the Optionee on the date on which the
Option is exercised with respect to such Shares. An Optionee shall
have no rights as a shareholder of the Company with respect to any
Shares until the issuance of a stock certificate to the Optionee for
such Shares.
4. METHOD OF PAYMENT
Payment of the exercise price shall be by cash, certified check, official
bank check, or by the delivery of previously owned shares of the Company's
Common Stock held for the requisite period specified in the 2004 Plan to avoid a
charge to the Company's reported earnings and with a fair market value on the
date of surrender equal to the exercise price. In addition, the Option may be
exercised by delivery to the Company of (i) a copy of irrevocable written
instructions provided by the Optionee to a designated brokerage firm to effect
the immediate sale of the purchased Shares and remit to the Company, out of the
sale proceeds available on the settlement date, sufficient funds to cover the
aggregate exercise price payable for the purchased Shares plus all applicable
federal, state and local income and employment taxes required to be withheld by
the Company by reason of such purchase and (ii) written instructions to the
Company to deliver the certificates for the purchased Shares directly to such
brokerage firm in order to complete the sale transaction.
C-17
5. TERMINATION OF STATUS AS AN EMPLOYEE, CONSULTANT OR DIRECTOR FOR ANY
REASON OTHER THAN CAUSE
If the Optionee ceases to serve as an employee, Consultant or director,
the Optionee may, but only within three (3) months after the date the Optionee
ceases to be an employee, Consultant or director of the Company, exercise this
Option to the extent that the Option was vested as of the date of such
termination; provided that in no event is the date of exercise beyond expiration
of the Option. To the extent that the Option was not vested as of the date of
such termination, or if the Optionee does not exercise this Option within the
time specified herein, the Option shall terminate.
6. TERMINATION OF STATUS AS AN EMPLOYEE OR CONSULTANT FOR CAUSE; REMOVAL FROM
BOARD OF DIRECTORS
If the Optionee's status as an employee or Consultant is terminated for
Cause, as provided in Section 5(d) of the 2004 Plan, this Option shall terminate
on the thirtieth (30th) day after the date of termination of employment or
consulting. "Cause" may consist of an act of embezzlement; fraud; dishonesty;
breach of fiduciary duty to the Company; deliberate disregard of the rules of
the Company which results in loss, damage or injury to the Company; the
unauthorized disclosure of any of the secrets or confidential information of the
Company; the inducement of any client or customer of the Company to break any
contract with the Company or the inducement of any principal for whom the
Company acts as agent to terminate such agency relations; engagement in any
conduct which constitutes unfair competition with the Company; or the removal of
the Optionee from any office of the Company by any bank regulatory agency.
If an Optionee's status as a director of the Company is terminated because
the Optionee is removed from the Board of Directors by any bank regulatory
agency, this Option shall terminate on the thirtieth (30th) day after such
removal.
7. DISABILITY OF OPTIONEE
Notwithstanding the provisions of Section 5 above, if the Optionee is
unable to continue employment, consulting or service as a director with the
Company as a result of disability (as defined below), the Optionee may, within
twelve (12) months from the date of termination of employment, consulting or
membership on the Board of Directors (or such longer period as the Board of
Directors or Committee determines), exercise the Option to the extent the Option
was vested as of the date of such termination; provided that in no event is the
date of exercise beyond expiration of the Option. To the extent that the Option
was not vested as of the date of termination, or if the Optionee does not
exercise such Option within the time specified herein, the Option shall
terminate. For purposes of this provision, "disability" shall mean the inability
of the Optionee to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment and shall be determined by
the Board of Directors or the Committee on the basis of such medical evidence as
the Board of Directors or the Committee deems warranted under the circumstances.
C-18
8. DEATH OF OPTIONEE
In the event of the death of the Optionee while the Optionee is an
employee, Consultant or director of the Company or during the three (3) month
period referred to in Section 5 above, the Option may be exercised, at any time
within twelve (12) months following the date of death (or such longer period as
the Board of Directors or Committee determines), by the Optionee's estate or by
a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent the Option was vested as of the date of
death; provided that in no event is the date of exercise beyond expiration of
the Option.
9. NON-TRANSFERABILITY OF OPTION
This Option may not be transferred in any manner otherwise than by will or
by the laws of descent or distribution or as permitted under the 2004 Plan, and
may be exercised during the Optionee's lifetime only be the Optionee. The terms
of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
10. TERM OF OPTION
Subject to earlier termination as provided in the 2004 Plan, this Option
shall terminate ______ (__) years from the date of grant of this Option, and may
be exercised during such term only in accordance with the 2004 Plan and the
terms of this Option.
11. TAXATION UPON EXERCISE OF OPTION
The Optionee understands that upon exercise of this Option, the Optionee
will generally recognize income for tax purposes in an amount equal to the
excess of the then fair market value of the Shares over the exercise price. The
Company will be required to withhold tax from the Optionee's current
compensation with respect to such income; to the extent that the Optionee's
current compensation is insufficient to satisfy the withholding tax liability,
the Company may require the Optionee to make a cash payment to cover such
liability as a condition of exercise of this Option. The Optionee may elect to
pay such tax by (i) requesting the Company to withhold a sufficient number of
shares from the Shares otherwise due upon exercise or (ii) by delivering a
sufficient number of shares of the Company's Common Stock which have been
previously held by the Optionee for such period of time as the Board of
Directors or the Committee may require. The aggregate value of the shares
withheld or delivered, as determined by the Board of Directors or the Committee,
must be sufficient to satisfy all such applicable taxes, except as otherwise
permitted by the Board of Directors or the Committee. If the Optionee is subject
to Section 16 of the Securities Exchange Act of 1934, as amended, the Optionee's
election must be made in compliance with rules and procedures established by the
Board of Directors or the Committee.
C-19
SERVICE 1ST BANCORP
Dated: __________________ By: ____________________________________
________________________________________
[TYPE OR PRINT NAME/TITLE]
The Optionee hereby agrees to accept as binding, conclusive and final all
decisions or interpretations of the Board of Directors or the Committee upon any
questions arising under the 2004 Plan.
OPTIONEE
Dated: __________________ ________________________________________
________________________________________
[TYPE OR PRINT NAME]
C-20
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SERVICE 1st BANCORP
^ FOLD AND DETACH HERE ^
- ------------------------------------------------------------------------------------------------------------------------------------
PLEASE SIGN AND DATE BELOW |
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED | Please Detach Here
SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" ELECTION OF ALL THE DIRECTORS |
NOMINATED AND NAMED IN THE PROXY STATEMENT, "FOR" APPROVAL OF THE 2004 STOCK OPTION PLAN AND "FOR" | You Must Detach This
RATIFICATION OF THE SELECTION OF VAVRINEK, TRINE, DAY & CO., LLP, AS INDEPENDENT PUBLIC | Portion of the Proxy
ACCOUNTANTS FOR THE YEAR 2004. IF ANY OTHER BUSINESS IS PRESENTED AT THE ANNUAL MEETING OR ANY | Card Before Returning
POSTPONEMENTS OR ADJOURNMENTS OF THE ANNUAL MEETING, THIS PROXY CONFERS AUTHORITY TO AND SHALL BE | in the Enclosed Envelope
VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF MANAGEMENT. |
(Please date this Proxy and sign your name exactly as it appears on your stock certificates. |
Executors, administrators, trustees, etc., should give their full title. If a corporation, please |
sign full corporate name by the president or other authorized officer. If a partnership, please |
sign in partnership name by an authorized person. All joint owners should sign.) |
|
[ ] I DO EXPECT TO ATTEND THE ANNUAL MEETING [ ] I DO NOT EXPECT TO ATTEND THE ANNUAL MEETING |
|
|
---------------------------------------- -------------------------------------------- |
(Number of Shares) (Date) |
|
|
---------------------------------------- -------------------------------------------- |
(Please Print Your Name) (Signature of Shareholder) |
|
|
---------------------------------------- -------------------------------------------- |
(Please Print Your Name) (Signature of Shareholder) |
|
THIS PROXY IS SOLICITED ON BEHALF OF THE |
BOARD OF DIRECTORS AND MAY BE REVOKED PRIOR |
TO ITS EXERCISE BY FILING WITH THE SECRETARY |
OF THE COMPANY A DULY EXECUTED PROXY BEARING |
A LATER DATE OR AN INSTRUMENT REVOKING THIS |
PROXY OR BY ATTENDING THE MEETING AND VOTING |
IN PERSON |
|
- ------------------------------------------------------------------------------------------------------------------------------------
| PROXY
| SERVICE 1ST BANCORP
| THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The undersigned hereby appoints Messrs. Robert
| D. Lawrence, Gary A. Podesto and Michael K. Repetto as proxies with full power of substitution, to
| represent, vote and act with respect to all shares of common stock of Service 1st Bancorp (the "Company")
| which the undersigned would be entitled to vote at the Annual Meeting of Shareholders to be held at 6:00
| p.m. on May 27, 2004, at the Stockton office of the Company's subsidiary, Service 1st Bank, 2800 West March
| Lane, Suite 120, Stockton, California, 95219, or any postponements or adjournments of the Annual Meeting,
| with all the powers the undersigned would possess if personally present, including authority to cumulate
| votes represented by the shares covered by this proxy in the election of directors, as follows:
|
| 1. Election of the twelve (12) persons named below as directors.
| John O. Brooks Frances C. Mizuno Michael K. Repetto
| Eugene C. Gini Richard R. Paulsen Anthony F. Souza
| Bryan R. Hyzdu Gary A. Podesto Albert Van Veldhuizen
| Robert D. Lawrence Toni Marie Raymus Donald L. Walters
|
| [ ] FOR ALL NOMINEES LISTED ABOVE [ ] WITHHOLD AUTHORITY
| (except as marked to the contrary below) (to vote for all nominees listed above)
| (INSTRUCTION: To withhold authority to vote for any individual nominee or nominees write the nominee name or
| names on the space provided below)
|
|-------------------------------------------------------------------------------------------------------------
|
| 2. Approval of the 2004 Stock Option Plan.
|
| [ ] FOR [ ] AGAINST [ ] ABSTAIN
|
| 3. Ratification of the selection of Vavrinek, Trine, Day & Co., LLP as independent public accountants for
| the year 2004.
|
| [ ] FOR [ ] AGAINST [ ] ABSTAIN
|
| 4. In their discretion, the proxies are authorized to vote upon such other business as may properly come
| before the annual meeting and any and all postponements or adjournments of the annual meeting.