SCHEDULE 14A - INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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-11(c) or ss. 240.14a-12
Temecula Valley Bancorp Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
Donald A. Pitcher
Chief Financial Officer
Temecula Valley Bank, N.A.
27710 Jefferson Avenue, Suite A100
Temecula, CA 92590
- --------------------------------------------------------------------------------
(Name of Person(s) Filing proxy statement)
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:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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Important Notice Regarding Delivery of Security Holder Documents
Temecula Valley Bancorp
April 15, 2003
Dear Shareholder:
I am pleased to invite you to the Annual Meeting of Shareholders of
Temecula Valley Bancorp ("Company"). The meeting will be at 6:00 p.m. on
Tuesday, May 20, 2003 at the Company's principal office at 27710 Jefferson
Avenue, Suite A100, Temecula, CA 92590.
At the meeting, you and the other shareholders will be asked to approve the
election of six directors to the Company's Board of Directors. You will also
have the opportunity to hear what has happened in our business in the past year
and to ask questions. You will find additional information concerning the
Company and its operations, including its audited financial statements, in the
enclosed Annual Report for the year ended December 31, 2002.
I hope that you can join us on the 20th of May. Whether or not you plan to
attend, please sign and return your proxy card as soon as possible. Your opinion
and your vote are important to us. Voting by proxy will not prevent you from
voting in person if you attend the meeting, but it will ensure that your vote is
counted if you are unable to attend.
Sincerely,
/s/ Stephen H. Wacknitz
--------------------------------------
Stephen H. Wacknitz
President and Chief Executive Officer
Temecula Valley Bancorp
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 20, 2003
The 2003 Annual Meeting of Shareholders of Temecula Valley Bancorp Inc.
("Company") will be held at the Company's main office at 6:00 p.m. on Tuesday,
May 20, 2003 at 27710 Jefferson Avenue, Suite A100, Temecula, CA 92590, for the
following purposes:
1. To elect six directors to serve on the Board of Directors until
the 2004 Annual Meeting of Shareholders or until their successors
have been duly elected and qualified.
2. To transact any other business that properly comes before the
meeting or any adjournment of the meeting.
Shareholders owning common stock of the Company at the close of business on
the March 24, 2003 are entitled to vote at the meeting.
You are urged to sign and return the enclosed proxy as promptly as
possible, whether or not you attend the meeting in person. The enclosed proxy is
solicited by the Board of Directors of the Company. Any shareholder giving a
proxy may revoke it prior to the time it is voted by filing a written revocation
or duly executed proxy bearing a later date with the Secretary of the Company,
or revoking all previously signed and filed proxies and attending the meeting
and voting in person.
A copy of the Company's Annual Disclosure Statement is enclosed with this
notice. Additional copies may be obtained, without charge, by contacting Donald
A. Pitcher, Chief Financial Officer, 27710 Jefferson Avenue, Suite A100,
Temecula, CA 92590, (909) 694-9940.
By Order of the Board of Directors:
/s/ Donald A. Pitcher
-----------------------------------
Temecula, CA Donald A. Pitcher
April 15, 2003 Secretary
TABLE OF CONTENTS
ABOUT THE MEETING 1
STOCK OWNERSHIP 4
ITEM 1 - ELECTION OF DIRECTORS 6
EXECUTIVE COMPENSATION 11
SUMMARY COMPENSATION TABLE 11
SELECTION OF INDEPENDENT AUDITORS 15
COMPLIANCE WITH SECTION 16 OF THE 1934 ACT 16
OTHER MATTERS 16
ANNUAL DISCLOSURE STATEMENT 16
TEMECULA VALLEY BANCORP INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 20, 2003
INTRODUCTION
PROXY STATEMENT
The Board of Directors is soliciting proxies for this year's Annual Meeting
of Shareholders. This proxy statement contains important information for you to
consider when deciding how to vote on the matters brought before the meeting.
Please read it carefully.
The Board of Directors set March 24, 2003 as the record date for the
meeting (the "Record Date"). Shareholders who owned Temecula Valley Bancorp Inc.
("Company") common stock on that date are entitled to vote at the meeting, with
each share entitled to one vote. There were 3,797,611 shares of the Company's
common stock outstanding on the Record Date.
Voting materials, which include this proxy statement, a proxy card and the
2002 Annual Report are being mailed to shareholders on or about April 15, 2003.
ABOUT THE MEETING
Why am I receiving this proxy statement and proxy card?
You are receiving this proxy statement and proxy card because you own shares of
Company common stock as of the close of business on the Record Date. This proxy
statement describes issues on which we would like you to vote.
When you sign the proxy card you appoint Dr. Robert P. Beck and Mr. Richard W.
Wright as your representatives at the meeting. Dr. Beck and Mr. Wright will vote
your shares at the meeting as you have instructed on the proxy card. This way,
your shares will be voted even if you cannot attend the meeting.
Who is soliciting my proxy and who is paying the cost of solicitation?
The Board of Directors of the Company is sending you this proxy statement in
connection with its solicitation of proxies for use at the 2003 Annual Meeting.
Certain directors, officers and employees of the Company may solicit proxies by
mail, telephone, facsimile or in person.
The Company will pay for the costs of solicitation. The Company does not expect
to pay any compensation for the solicitation of proxies, except to brokers,
nominees and similar record holders for reasonable expenses in mailing proxy
materials to beneficial owners of Company common stock.
1
What am I voting on?
At the Annual Meeting you will be asked to vote on the election of six directors
to serve on the Board of Directors until the 2004 Annual Meeting of Shareholders
or until their successors have been duly qualified and elected.
Who is entitled to vote?
Only shareholders who owned Company common stock as of the close of business on
the Record Date are entitled to receive notice of the Annual Meeting and to vote
the shares that they held on that date at the meeting, or any postponement or
adjournment of the meeting.
How do I vote?
You may vote your shares either in person at the Annual Meeting or by proxy. To
vote by proxy, you should mark, date, sign and mail the enclosed proxy card in
the prepaid envelope provided. If your shares are registered in your own name
and you attend the meeting, you may deliver your completed proxy card in person.
"Street name" shareholders, that is, those shareholders whose shares are held in
the name of and through a broker or nominee, who wish to vote at the meeting
will need to obtain proxy materials from the institution that holds their
shares.
Voting of shares registered in the name of a broker or bank.
Most beneficial owners whose stock is held in street name receive instructions
for granting proxies from their banks, brokers or other agents, rather than a
proxy card.
A number of brokers and banks are participating in a program provided through
ADP Investor Communication Services that offers the means to grant proxies to
vote shares over the telephone and the internet. If your shares are held in an
account with a broker or bank participating in the ADP Investor Communication
Services program, you may grant a proxy to vote those shares telephonically by
calling the telephone number shown on the instruction form received from your
broker or bank, or via the internet at ADP Investor Communication Services' web
site at http://www.proxyvote.com.
General information for all shares voted via the internet.
We must receive votes submitted via the internet by 11:59 p.m. Eastern Time on
May 19, 2003.
Can I change my vote after I return my proxy card?
Yes. You may revoke your proxy and change your vote at any time before the proxy
is exercised at the meeting by filing with the Company's Secretary either a
notice of revocation or another signed proxy or ballot bearing a later date. The
powers of the proxy holders will be suspended if you attend the meeting in
person and so request, although attendance at the meeting will not by itself
revoke a previously granted proxy.
2
What are the Board of Director's recommendations?
Unless you give other instructions on your proxy card, Dr. Beck and Mr. Wright,
as the persons named as proxy holders on the proxy card, will vote as
recommended by the Board of Directors. The Board of Directors recommends a vote
FOR the election of the nominated directors listed in this proxy statement.
If any other matters are considered at the meeting, Dr. Beck and Mr. Wright will
vote as recommended by the Board of Directors. If the Board of Directors does
not give a recommendation, Dr. Beck and Mr. Wright will have discretion to vote
as they think best.
Will my shares be voted if I do not sign and return my proxy card?
If your shares are registered in your name and you do not return your proxy card
or do not vote in person at the Annual Meeting, your shares will not be voted.
If your shares are held in street name and you do not submit voting instructions
to your broker, your broker may vote your shares at this meeting on the election
of directors.
How many votes are needed to hold the Annual Meeting?
A majority of the Company's outstanding shares as of the Record Date (a quorum)
must be present at the Annual Meeting in order to hold the meeting and conduct
business. Shares are counted as present at the meeting if a shareholder is
present and votes in person at the meeting or has properly submitted a proxy
card. As of the Record Date for the Annual Meeting, 3,797,611 shares of Company
common stock were outstanding and eligible to vote.
What vote is required to elect directors?
The six director nominees who receive the highest number of FOR votes will be
elected. You may vote FOR all or some of the nominees or WITHHOLD AUTHORITY for
all or some of the nominees. Votes withheld are counted as "no" votes for the
individual director. Due to the application of Section 2115 of the California
Corporations Code, each shareholder may be eligible to exercise cumulative
voting rights in connection with the election of directors. In such case, each
shareholder would be entitled to as many votes as equals the number of shares of
common stock held by such shareholder multiplied by the number of directors to
be elected, and such shareholder could cast all of such votes for a single
nominee or could distribute them among two or more nominees. For example, if you
own 10 shares of common stock of the Company and 11 directors are being elected,
you have 110 votes - you can cast all of them for one nominee, or two or more
nominees if you so choose. No shareholder, however, shall be entitled to
cumulate votes (i.e., cast for any one or more nominees a number of votes
greater than the number of shares of common stock of the Company held by such
shareholder) unless the name(s) of the nominee(s) has (have) been placed in
nomination prior to the commencement of the voting. Nominations made other than
by the Board of Directors may be made by notification in writing delivered or
mailed to the principal offices of the Company in accordance with Section 1.7 of
the Company's Bylaws. If any shareholder has given such notice to cumulate
votes, all shareholders may cumulate their votes for nominees, in which event
votes represented by proxies delivered pursuant to this proxy statement may be
cumulated, in the discretion of the proxy holders, in accordance with the
recommendation of the Board of Directors. Discretionary authority to cumulate
votes in such event is, therefore, solicited in this proxy statement.
3
Can I vote on other matters?
The Company has not received timely notice of any shareholder proposals to be
considered at the Annual Meeting, and the Board of Directors does not know of
any other matters to be brought before the Annual Meeting.
When are proposals for the 2004 Annual Meeting due?
Proposals by shareholders to transact business at the Company's 2004 Annual
Meeting must be delivered to the Company's Secretary no later than December 19,
2003. In addition to these advance notice requirements, there are other
requirements that a shareholder must meet in order to have a proposal included
in the Company's Proxy Statement under the rules of the Securities and Exchange
Commission ("SEC").
Pursuant to Section 1.7 of the Company's Bylaws, in order for other business to
be properly brought before a meeting by a shareholder, the shareholder must have
given timely notice thereof in writing to the Secretary of the Company and must
have been a shareholder of record at the time such notice is given. To be
timely, a shareholder's notice shall be received at the principal executive
offices of the Company not less than 120 calendar days in advance of the date
that the Company's proxy statement was released to shareholders in connection
with the previous year's annual meeting of shareholders, except that if no
annual meeting was held in the previous year or the date of the annual meeting
has been changed by more than 30 calendar days from the date contemplated at the
time of the previous year's proxy statement, or in the event of a special
meeting, notice by the shareholder to be timely must be received not later than
the close of business on the tenth day following the day on which such notice of
the date of the meeting was made or such public disclosure was made. The
Chairman of the meeting shall, if the factors warrant, determine and declare to
the meeting that business was not properly brought before the meeting in
accordance with the foregoing procedure and such business shall not be
transacted.
STOCK OWNERSHIP
Are there any owners of more than 5% of the Company's stock?
Currently, to the Company's knowledge, three shareholders beneficially own more
than 5% of outstanding shares of the Company's common stock. They are listed in
the table below.
4
How much stock does the Company's directors and executive officers own?
The following table shows, as of March 24, 2003, the amount of the Company's
common stock beneficially owned (unless otherwise indicated) by (a) each
director and director nominee; (b) the executive officers of Temecula Valley
Bank, N.A. ("Bank") named in the Summary Compensation Table below; (c) each
person known to the Company to be the beneficial owner of more than 5% of its
common stock; and (d) all of the Company's and the Bank's directors and
executive officers(1) as a group. Except as otherwise noted, the Company
believes that the beneficial owners of the shares listed below, based on
information furnished by such owners, have or share with a spouse voting and
investment power with respect to the shares. All share numbers and prices have
been adjusted for applicable stock splits.
Company
Shares Owned Percent
Name & Position(2) Beneficially (3) of Class
- ------------------ ---------------- --------
Dr. Steven W. Aichle, Director of Company and Bank 159,101 (4) 4.11%
Dr. Robert P. Beck, Director of Company and Bank 113,288 (5) 2.93%
Brian D. Carlson, Executive Vice President/SBA 46,666 (6) 1.22%
Manager of Bank
Neil M. Cleveland, Director of Company and Bank 76,500 (7) 1.98%
The Ingold Family Trust/5% Shareholder of Company 244,078 (8) 6.43%
Luther J. Mohr, Vice Chairman of the Board and 217,924 (9) 5.55%
Chief Operating Officer of Company and Bank/
5% Shareholder of Company
Michael R. Peters, Former Executive Vice President/ 44,275 (10) 1.16%
North County Regional Manager of Bank
Thomas M. Shepherd, Executive Vice President/ 27,666 (11) 0.72%
Chief Credit Officer of Bank
Stephen H. Wacknitz, President, Chief Executive 335,500 (12) 8.45%
Officer, Chairman of the Board of Company and Bank/
5% Shareholder of Company
Richard W. Wright, Director of Company and Bank 88,510 (13) 2.29%
ALL DIRECTORS AND
EXECUTIVE OFFICERS (13 in number) 1,459,932 32.45%
(1) As used throughout the proxy statement, the term "Executive Officer" means
the Bank's President/Chief Executive Officer, Chief Operating Officer,
Chief Credit Officer, Senior Loan Officer, Executive Vice Presidents, SBA
Department Manager, East County Regional Manager and Chief Financial
Officer. An officer who does not participate in major policy-making
functions is not included in the definition of the term "Executive
Officer."
(2) Unless otherwise indicated in the footnotes, the business address for each
listed person is 27710 Jefferson Avenue, Suite A100, Temecula, CA 92590.
5
(3) For purposes of this table, a person is deemed to be the "beneficial owner"
of any shares that such person has the right to acquire within 60 days. For
purposes of computing the percentage of outstanding shares held by each
person named above on a given date, any security that such person has the
right to acquire within 60 days is deemed to be outstanding, but is not
deemed to be outstanding for the purpose of computing the percentage
ownership of any other person.
(4) Includes as outstanding 5,344 warrants and stock options with 66,857
underlying shares that are exercisable within 60 days of the Record Date.
(5) Includes as outstanding stock options with 73,478 underlying shares that
are exercisable within 60 days of the Record Date.
(6) Includes as outstanding 4,000 warrants and stock options with 26,666
underlying shares that are exercisable within 60 days of the Record Date.
(7) Includes as outstanding 1,000 warrants and stock options with 65,500
underlying shares that are exercisable within 60 days of the record date.
(8) The business address of the Ingold Family Limited Partnership is C/O Robert
Hegardt, Trustee, Morgan Stanley Dean Witter, 1615 So. Mission Rd.,
Fallbrook, CA 92028.
(9) Includes as outstanding stock options with 126,050 underlying shares that
are exercisable within 60 days of the Record Date.
(10) Includes as outstanding stock options with 3,500 underlying shares that are
exercisable within 60 days of the Record Date. Mr. Peters resigned all of
his positions with the Bank on February 18, 2003.
(11) Includes as outstanding 500 warrants and stock options with 25,166
underlying shares that are exercisable within 60 days of the Record Date..
(12) Includes as outstanding stock options with 175,000 underlying shares that
are exercisable within 60 days of the Record Date.
(13) Includes as outstanding outstanding stock options with 62,500 underlying
shares that are exercisable within 60 days after the Record Date.
ITEM 1 - ELECTION OF DIRECTORS
How many directors are nominated?
The Company's Bylaws provide that the number of directors to be elected by the
shareholders will be at least five and not more than 25. Under the Bylaws, the
Board of Directors has authority to decide the exact number of directors to be
elected within these limits. The Company's Board of Directors has fixed the
number of directors to be elected at the Annual Meeting at six and has nominated
the persons listed on the following page for election as directors to serve
until the 2004 Annual Meeting or until their successors are elected.
What happens if a nominee refuses or is unable to stand for election?
The Board of Directors may reduce the number of seats on the Board of Directors
or designate a replacement nominee. If the Board of Directors designates a
substitute, shares represented by proxy will be voted FOR the substitute
nominee. The Board of Directors presently has no knowledge that any of the
nominees will refuse or be unable to serve.
Who are the nominees?
Information regarding each of the nominees is provided below, including each
nominee's name and age, principal occupation during the past five years, and the
year first elected as a director of the Bank and the Company. All of the
nominees are presently directors of the Company and the Bank.
6
Year First
Elected to
Bank/Com-
Name / Age pany Board Business Experience During Past Five Years and Other Information
- ----------------------- ---------- ----------------------------------------------------------------
Steven W. Aichle 1996/2002 Business and civic leader in the community and surrounding communities
59 of the Bank for the last 23 years; Founded Avocado Animal Hospital, Fallbrook,
1974 and continues as owner/veterinarian; Owner/Founder of Fallbrook Fine Art
Gallery since 1985.
Robert P. Beck 1996/2002 Opened his practice in 1970 as the first dentist in Temecula, California;
58 Has been involved in the Chamber of Commerce and civic affairs throughout his
years in Temecula.
Neil M. Cleveland 1996/2002 Involved in the brokerage, development, management and consulting
51 business relative to commercial and industrial real estate; Co-owner of Rancho
Land Associates since 1980.
Luther J. Mohr 1996/2002 Chief Operating Officer of the Bank since 1996; Senior Vice President and
67 Administrative Officer at Fallbrook National Bank, Fallbrook, California from
May 1990 to December 1995; at various times Senior Vice President, Area
Administrator, and Corporate Services Manager for Torrey Pines Bank, Solana
Beach, California from January 1981 to April 1990; Vice President/Manager of
the Fallbrook office from September 1977 to December 1980, with Rancho Santa
Fe Savings and Loan.
Stephen H. Wacknitz 1996/2002 President/Chief Executive Officer of the Bank since 1996; President/Chief
63 Executive Officer at Fallbrook National Bank, Fallbrook, California, from April
1984 to October 1995; Senior Vice President and the Senior Loan Officer from
April 1982 to March 1984 at Rancho Vista National Bank; Vice President and
Manager from September 1977 to April 1982, employed by Grossmont Bank.
Richard W. Wright 1996/2002 Since 1994, self-employed manager of real estate investments. From 1989
74 to 1994, insurance inspector for P.E. McKinney, Inc., Reseda, California.
From 1987 to 1989, an insurance agent with Glen-Fed Insurance. From 1986 to
1987, insurance agent for Western Financial Savings Bank and Great American
Wilshire Federal Savings and Loan. From 1964 to 1986, Vice President of Los
Angeles Federal Savings and President of the Insurance Brokerage of Los Angeles
Federal Savings.
Has the Board of Directors established an audit, nominating or compensation
committee or any other committees that might perform the functions of those
committees?
The named committees of the Board of Directors and committees of the Board of
Directors that may perform functions of the named committees include the Loan
Committee of the Bank, the Executive Committee of the Bank, the Audit Committee
of the Bank and the Company and the Stock Option Committee of the Company.
Loan Committee. The Loan Committee meets at least once a month, as determined by
the Bank's Board of Directors, to discuss loan policy issues and to review loans
made during the previous month, past due loans, internal month-end loan reports
and any other loan related issues. The Loan Committee members are Steven W.
Aichle, Robert P. Beck, Neil M. Cleveland, Luther J. Mohr and Stephen H.
Wacknitz (Chairman). There were 12 Loan Committee meetings in 2002.
7
Executive Committee. The Executive Committee may exercise all of the authority
of the Board of Directors during the intervals between meetings of the Bank's
Board of Directors, except that the Committee does not have the authority to:
(1) approve any action which, under law, the Articles of Association or Bylaws
also requires shareholder approval; (2) fill vacancies on the Board of Directors
or any committee of the Board of Directors; (3) fix director compensation for
serving on the Board of Directors or any committee; (4) adopt, amend or repeal
the Bylaws of Bank; (5) amend or repeal any resolution of the Board of Directors
that by its express terms is not so amendable or repealable; (6) make a
distribution to shareholders of Bank, except at a rate or amount or within a
range determined by the Board of Directors; (7) appoint any other committees of
the Board of Directors or members of such committees; (8) authorize or approve
the issuance or sale or contract for sale of shares; or (9) determine rights and
preferences with regard to any class or series of shares. Current members of the
Executive Committee are: Steven W. Aichle, Neil M. Cleveland, Luther J. Mohr and
Stephen H. Wacknitz (Chairman). There were no meetings of the Executive
Committee in 2002.
Audit Committee. The Audit Committee of the Bank and the Company reviews and
approves the services of the independent auditors, reviews the plan, scope and
audit results of the internal auditors and the independent auditors, and reviews
the reports of bank regulatory authorities. The Audit Committee also has
oversight with respect to financial reporting, including the annual and other
reports to the SEC, the Office of the Comptroller of the Currency ("OCC") and
the annual report to the shareholders. The Audit Committee has reviewed and
discussed the audited financial statements with Bank and Company management and
has discussed with the independent auditors the matters required to be discussed
by SAS 61. The Audit Committee has received the written disclosures and the
letter from the independent accountants required by Independence Standards Board
Standard No. 1 (Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees), and has discussed with the independent
accountant, the independent accountant's independence. Based upon the foregoing,
the Audit Committee recommended to the Board of Directors that the audited
financial statements be included in Bank's Annual Report on Form 10-KSB for 2002
for filing with the SEC. In December 1996, the Audit Committee adopted a written
charter, which is reviewed annually, most recently in May 2002. A copy of the
charter is attached. Current members of the Audit Committee, none of whom are
officers or employees of the Bank or the Company, are: Steven W. Aichle, Robert
P. Beck (Chairman) and Richard W. Wright. All members of Bank's Audit Committee
are independent, as defined by applicable rules of the National Association of
Securities Dealers. A financial expert does not serve on the Audit Committee.
The independent accountants assist the Audit Committee, as needed. There were
nine meetings of the Audit Committee during 2002.
Stock Option Committee. The Stock Option Committee administers the Company's
stock option plans, according to the terms of the plans, including but not
limited to, identification of stock option recipients and specification of stock
option terms. The Stock Option Committee members are Neil M. Cleveland
(Chairman) and Richard W. Wright. The Stock Option Committee did not meet in
2002. All matters that normally would come before that committee were performed
by the full Board of Directors of the Bank, and after the reorganization in
which the Bank became a wholly-owned subsidiary of the Company.
8
In 2002, the Board of Directors did not have a Nominating or Compensation
Committee. The entire Board of Directors of the Bank and the Company performed
the Nominating and Compensation Committee's customary functions.
How often did the Board of Directors meet during 2002?
The Board of Directors met 12 times during 2002. Each director attended at least
75% of the total number of meetings of the Board of Directors and committees on
which he served.
How are directors compensated?
Prior to 2003, the Company did not pay directors compensation for their service
as directors. In January 2003, each director of the Bank was paid a one-time
payment of $10,000.00. Starting February 2003, each Bank director began
receiving $1,000.00 per regular meeting, with one excused absence per year. Each
director of the Company was granted non-qualified stock options to purchase
shares (as adjusted for applicable stock dividends and splits) of the Company's
common stock as follows:
Exercise Price
Per Share (85%
Each of Market Value
Year # of Shares on Date of Grant
---- ----------- ----------------
All Directors 1997 20,000 $ 2.875
All Directors 1998 20,000 $ 4.675
All Directors 1999 20,000 $ 6.80
All Directors 2000 10,000 $ 5.525
All Directors 2001 10,000 $ 5.23
These options vest (i.e. become exercisable) at the date of grant. The
options may be exercised for a period of ten years after they vest.
9
Who are the executive officers of Bank that are not also directors of the Bank?
First Year
Name / Age Employed Business Experience During Past Five Years and Other Information
- ----------------------- -------- ----------------------------------------------------------------
James W. Andrews 2002 Executive Vice President, Real Estate Manager of the Bank since 2002;
53 Business Bank of California, San Bernardino, California as Executive
Vice President/Chief Credit Officer from 1996 to 2002; Executive Vice
President/Chief Credit Officer at International Savings Bank from 1992
to 1995. From 1987 to 1991 was Vice President/Assistant Portfolio
Quality Manager, Senior Vice President/Chief Internal Asset Review
Officer and Executive Vice President/Chief Credit Officer at Great
American Bank. Various other banking positions from 1972 to 1987.
Brian D. Carlson 2001 Executive Vice President/SBA Department Manager at the Bank since
44 January 2001; Senior Vice President/SBA General Manager at Imperial
Bank, Los Angeles, California from 1999 to 2001; Senior Vice
President/SBA Manager at Sierra West Bank, Truckee, California
from 1995 to 1999; Vice President/SBA Division Manager at Regency Bank,
Fresno, California from 1991 to 1995; with other banks beginning in
1983 in various positions, principally in SBA related capacities.
Thomas P. Ivory 2001 Executive Vice President/East County Regional Manager at the Bank since
49 January 2001; Senior Vice President/Regional Manager at Scripps Bank,
El Cajon, California from 1992 to 2001; Senior Vice President at
Grossmont Bank, El Cajon, California from 1983 to 1991; various other
banking positions beginning in 1974.
Donald A. Pitcher 1996 Chief Financial Officer/Secretary of the Bank since 1996; Vice
53 President/Controller and Acting Chief Financial Officer/Secretary at
Fallbrook National Bank, Fallbrook, California from May 1990 to March
1996; Vice President/Controller from October 1988 to May 1990 at Torrey
Pines Bank, Solana Beach, California; Various other banking positions
beginning in 1972.
Scott J. Word 1996 Senior Loan Officer of the Bank since 1996; North County Bank,
48 Escondido, California as Senior Vice President/Riverside County Business
Banking Manager from 1994 to September 1996, Senior Vice President/Riverside
County Regional Manager from 1992 to 1994, Vice President and Manager from
1985 to 1992, and Vice President and Manager from 1980 to 1984.
Are there any family relationships between any director or executive officer of
the Bank?
None.
10
EXECUTIVE COMPENSATION
The following section describes the compensation that Bank pays its Chief
Executive Officer and the next four most highly compensated executive officers
(the "Named Executives"). This section includes a detailed table showing
compensation of the Named Executives for the last three years and information
about stock options and other benefits.
Long Term Compensation
Annual Compensation ---------------------------------
Awards Payouts
- ----------------------------------------------------------------------- ---------------------------------
Restricted Securities All
Name and Other Annual Stock Underlying LTIP Other
Principal Salary Bonus Compensation Award(s) Options/SARs Payouts Compensation
Position Year ($) ($) ($)(1) ($) (#) ($) ($)
- ------------------------------------------------------------------------------------------------------------------------
Stephen H. Wacknitz, 2002 $205,000 $244,902 (2) $28,317 (7) $0 0 $0 $13,803 (10)
Chief Executive 2001 185,000 110,021 (2) 20,456 (7) $0 55,000 $0 23,429 (10)
Officer And President 2000 160,000 44,588 (2) 19,663 (7) $0 45,000 $0 10,962 (10)
- ------------------------------------------------------------------------------------------------------------------------
Brian D. Carlson 2002 $150,878 $563,232 (3) $ 4,668 (8) $0 0 $0 $ 0
EVP/SBA Manager 2001 129,909 224,210 (3) 3,316 (8) $0 40,000 $0 $ 0
- ------------------------------------------------------------------------------------------------------------------------
Luther J. Mohr 2002 $ 92,250 $122,45 (4) $ 8,153 (9) $0 0 $0 $ 7,655 (11)
Chief Operating Officer 2001 82,500 153,701 (4) 5,350 (9) $0 33,950 $0 0
2000 79,667 21,763 (4) 7,252 (9) $0 30,000 $0 0
- ------------------------------------------------------------------------------------------------------------------------
Michael R. Peters 2002 $145,000 $ 25,000 (5) $ 2,492 (8) $0 5,000 $0 $ 0
EVP/North County 2001 133,333 20,000 (5) 2,380 (8) $0 0 $0 $ 0
Regional Manager 2000 123,333 60,552 (5) 2,200 (8) $0 23,500 $0 $ 0
- ------------------------------------------------------------------------------------------------------------------------
Thomas M. Shepherd 2002 $140,000 $ 20,000 (6) $ 3,829 (8) $0 0 $0 $ 0
EVP/Chief Credit 2001 127,580 17,090 (6) 3,171 (8) $0 0 $0 $ 0
Officer 2000 118,336 7,000 (6) 2,400 (8) $0 0 $0 $ 0
========================================================================================================================
(1) Prerequisites and other personal benefits, securities or property unless
the aggregate amount of such compensation is the lesser of $50,000 or 10%
of the total of annual salary and bonus is reported in the salary/bonus
columns.
(2) $44,588 bonus accrued in 1999, paid in 2000, $110,021 bonus accrued in
2000, paid in 2001, $244,902 bonus accrued in 2001, paid in 2002, and
$608,200 bonus accrued in 2002, paid in 2003.
(3) $224,210 commission paid in 2001, and $563,232 commissions paid in 2002.
(4) $21,763 bonus accrued in 1999 paid in 2000, $53,701 bonus accrued in 2000,
paid in 2001, $122,451 bonus accrued in 2001, paid in 2002 and $304,100
bonus accrued in 2002 and paid in 2003.
(5) $30,552 commissions accrued in 1999, paid in 2000, $30,000 for commission
paid in 2000, $20,000 in commission for 2001 paid in 2001 and $25,000 in
commissions for 2002, paid in 2002. Mr. Peters resigned all positions with
the Bank on February 18, 2003.
(6) $7,000 bonus accrued in 1999, paid in 2000, $17,090 bonus accrued in 2000,
paid in 2001,$20,000 bonus accrued in 2001, paid in 2002, and $30,000 bonus
accrued in 2002, paid in 2003.
(7) For 2000 includes non-cash compensation of $3,530 for Bank car usage,
$8,383 for long-term disability premiums and $7,750 for life insurance
premiums for 2001. Includes non-cash compensation of $4,323 for Bank car
usage, $8,383 for long term disability premium and $7,750 for life
insurance premiums. For 2002 includes non-cash compensation of $8,827 for
Bank car usage, $11,740 for long term disability premiums and $7,750 for
life insurance premiums
(8) Non-cash compensation for Bank car usage.
(9) For 2000, includes non-cash compensation of $3,285 for Bank car usage and
$3,967 for life insurance premiums. For 2001 includes non-cash compensation
of $1,383 for Bank car usage and $3,967 for life insurance premiums For
2002 includes non-cash compensation of $4,186 for Bank car usage and $3,967
for life insurance premiums.
(10) $10,962 unused vacation pay accrued in 1999, paid in 2000. $7,853 unused
vacation pay accrued in 2000, paid in 2001 and $15,576 unused vacation pay
for 2001, paid in 2001, $13,803 unused vacation pay for 2002 paid in 2002.
(11) $7,655 unused vacation pay for 2002 paid in 2002. Option Grants in 2002
11
The following two tables summarize grants to and exercises of options to
purchase common stock of the Company during 2002 by the Named Executives, and
with respect to option grants, the per share exercise price, the expiration date
of the options and the grant date value of options held by such persons at
December 31, 2002. The second table also provides information concerning the
total number of securities underlying unexercised options and the aggregate
dollar value of in-the-money unexercised options. The Bank did not reprice any
options during 2002 or any prior year, and did not provide to executive's stock
appreciation rights ("SARs").
INDIVIDUAL OPTION GRANTS IN THE LAST FISCAL YEAR (2002)
- ----------------------------------------------------------------------------------------------------------------------
Number % of Total % of Total Exercise
Of Securities Options/SARs Options/SARs or Base Market Price
Underlying Granted Under Granted Under Price on Date of
Option/SARs Employee Plan in Director Plan in ($/Sh) Grant Expiration
Name Granted (#) Fiscal Year 2002 Fiscal Year 2002 $ ($) Date
- -------------------- --------------- ------------------- ------------------ ----------- -------------- ---------------
Michael R. Peters 5,000 10.00% - $11.05 $11.05 06/26/2012
==================== =============== =================== ================== =========== ============== ===============
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES (2001)
==================== ======================================== ========================================================
Exercised Shares Unexercised Shares
- -------------------- ---------------------------------------- --------------------------------------------------------
Shares Acquired on Value Realized Shares Shares $ Value $ Value
Name Exercise (#) ($000) Vested Unvested Vested(1) Unvested(1)
- -------------------- -------------------- ------------------- ------------ ------------ -------------- ---------------
Brian D. Carlson - - 13,333 26,667 $ 95,331 $ 190,669
- -------------------- -------------------- ------------------- ---------- ------------ -------------- ---------------
Luther J. Mohr - - 118,987 7,063 $ 875,405 $ 41,759
- -------------------- -------------------- ------------------- ---------- ------------ -------------- ---------------
Michael R. Peters - - 15,664 12,836 $ 96,334 $ 56,192
- -------------------- -------------------- ------------------- ---------- ------------ -------------- ---------------
Thomas M. Shepherd - - 23,998 4,502 $ 119,338 $ 26,187
- -------------------- -------------------- ------------------- ---------- ------------ -------------- ---------------
Stephen H. Wacknitz - - 157,285 42,715 $1,164,431 $ 270,521
==================== ==================== =================== ========== ============ ============== ===============
(1) Calculated based on the excess of the fair market value on December 31,
2002 of the common stock ($12.65) as reported in the Electronic Bulletin
Board run by NASDAQ over the option exercise price.
12
Retirement Benefits
The Board of Directors approved Salary Continuation Agreements ("Agreements")
for certain executives of the Bank. The Agreements are intended to encourage key
employees of the Bank to continue their employment with the Bank and to
encourage other qualified key employees to join and/or remain in the employ of
the Bank, when entering such Agreements is deemed appropriate for the Bank. The
Agreements in effect at December 31, 2002 for the Named Executives are as
follows:
Estimated
Duration
Age on Retire Benefit of Estimated SCP SCP Single Surrender
Executive Record -ment per Benefit Total Accrual Accrual Premium Value Death
Officers Date Age year (yrs) Benefit 2002 Balance Aggregate 12/31/02 Benefits
-------- ---- ------ ---- --------- --------- ---- ------- --------- ---------- --------
Brian D. Carlson 44 65 25,000 15 375,000 3,106 3,363 150,000 159,136 441,401
Luther J. Mohr 67 70 80,000 10 800,000 69,952 198,657 480,000 605,000 968,770
Michael R. Peters 53 65 25,000 15 375,000 8,645 23,884 180,000 207,818 490,676
Thomas M. Shepherd 48 65 20,000 15 300,000 3,990 11,025 115,000 133,011 363,702
Stephen H. Wacknitz 63 65 125,000 15 1,875,000 159,220 452,816 1,935,000 2,149,446 3,839,918
Total 244,913 689,745 2,860,000 3,254,411 6,104,467
The Bank carries in total a cash surrender value asset of $3,983,183 with a
single premium aggregate of $3,513,000 and a SCP accrual liability of $731,166
as of December 31, 2002.
Executive Employment Agreements
The Bank entered into an employment agreement with Mr. Stephen H. Wacknitz
("Wacknitz Agreement") effective September 16, 2001. Under the five year
Wacknitz Agreement, the initial annual base salary is $200,000, which may be
increased in the discretion of the Board of Directors. In addition, the Wacknitz
Agreement provides for six weeks vacation, the use of a Bank-owned and
maintained automobile, group medical benefits, term life insurance benefits
equal to at least $250,000, long-term disability benefits equal to at least
$120,000 per year before age 65 and $10,000 per month paid by the Bank in the
event disability payments are not made by an insurer. After age 65, in the event
of disability, Mr. Wacknitz will receive from the Bank the difference between
the amount received from the insurer and $15,000. Further, Mr. Wacknitz is
entitled to receive a bonus of 7.5% of profits before taxes and the bonus
accrual of the Bank if certain performance standards are met. If terminated
without cause, or Mr. Wacknitz terminates for good reason, Mr. Wacknitz will be
entitled to receive the greater of one year salary plus bonus as though a full
year had lapsed or two years of salary.
The Bank entered into an employment agreement with Mr. Luther J. Mohr ("Mohr
Agreement") effective September 16, 2001. Under the five year Mohr Agreement,
the initial annual base salary is $90,000, which may be increased in the
discretion of the Board of Directors. In addition, the Mohr Agreement provides
for 1.5 vacation days for each month in which Mr. Mohr works, the use of a
Bank-owned and maintained automobile, group medical benefits, term life
insurance benefits equal to at least $150,000. In the event of disability, Mr.
Mohr will receive from the Bank the difference between the amount received from
the insurer and $10,000. Further, Mr. Mohr is entitled to receive a bonus of
3.75% of profits before taxes and the bonus accrual of the Bank if certain
performance standards are met. If terminated without cause, or Mr. Mohr
terminates for good reason, Mr. Mohr will be entitled to receive the greater of
one year salary plus bonus as though a full year had lapsed or two years of
salary.
13
The Bank entered into an employment agreement with Mr. Brian D. Carlson
("Carlson Agreement") effective on January 29, 2001. Under the four year Carlson
Agreement, the initial annual base salary is $150,000. In addition, Mr. Carlson
can earn a bonus (the "Bonus") equal to thirty basis points of the total
original principal amount of funded 7A and 504 SBA loans as well as
construction, conventional and business & industry loans processed through
Bank's SBA Department, as reasonably determined by the Bank. Also, the Carlson
Agreement provides for four weeks vacation, the use of a Bank-owned and
maintained automobile and group medical benefits. Under the Carlson Agreement,
Mr. Carlson is entitled to participate in the Bank's 401(K) Plan and is eligible
to participate in the Bank's Senior Management Retirement Program. At or about
the time the Carlson Agreement became effective, Mr. Carlson received an option
to purchase 40,000 shares of the Company's common stock in accordance with the
terms of the Company's employee stock option plan. If terminated without cause,
Mr. Carlson will be entitled to receive the lesser of six months of base salary
or the base salary for the remainder of the term of the Carlson Agreement.
Transactions with Management
The Bank has entered and intends to enter into, in the future, banking
transactions in the ordinary course of its business with directors, executive
officers and shareholders known to the Bank who own of record or beneficially
more than 5% of the Bank's common stock and their associates. These transactions
are intended to be: (a) on substantially the same terms, including interest
rates, collateral and repayment terms, as those prevailing at the same time for
comparable transactions with others; (b) made in the ordinary course of
business; and (c) entered into with no more than the normal risk of collection
and lacking other unfavorable features. The aggregate balance outstanding on
December 31, 2002 of all loans and extensions of credit to directors and
executive officers of the Bank, together with their associates, was $1,010,745,
equal to approximately 5.15% of the Company's shareholder's equity.
14
SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected the firm of Vavrinek, Trine, Day & Co., LLP
("Vavrinek") as the Company's independent auditors for the 2003 fiscal year.
Representatives of Vavrinek are not expected to be present at the Annual
Meeting. The appointment was recommended by the Audit Committee. The firm of
Vavrinek and its predecessor has audited the accounts of the Bank since 1996 and
the Company since mid-2002. Vavrinek is considered well qualified. Audit
services include the annual audit examination, limited reviews of unaudited
quarterly financial data and assistance in filings with various regulatory
authorities and aid with the Annual Report to Shareholders and discussions
regarding accounting principles and practices followed by the Bank and the
Company in preparing its financial statements.
Audit Fees
The aggregate fees billed by Vavrinek for professional services rendered for the
audit of the Company's annual financial statements for fiscal year 2002 and
audit of the Bank's annual financial statements for fiscal year 2001 and the
reviews of the financial statements included in the Company's and the Bank's
Form 10-QSB for such fiscal years were $41,000 and $36,000, respectively.
Audit-Related Fees
Vavrinek's fees for services rendered to the company for fiscal year 2002 and to
the Bank for fiscal year 2001 were $500 and $1,700, respectively. The 2002 fees
were review fees in connection with the Company formation. The 2001 fees were
review fees in connection with the Company review of a Bank stock offering. The
fees were approved by the Audit Committee by board authorization in connection
with the audit function.
Tax Fees and All Other Fees
There were no Vavrinek fees for services rendered to the Company for 2002 or
2001 (for the Bank only).
In evaluating whether to appoint Vavrinek to perform the audit of the Company's
financial statements for the year ending December 31, 2002, the Audit Committee
considered whether the provision of non-audit services by Vavrinek in 2002 was
compatible with their independence from the Company. None of the time devoted by
Vavrinek on its engagement to audit our financial statements for the year ended
December 31, 2002 is attributable to work performed by persons other than
Vavrinek employees.
15
COMPLIANCE WITH SECTION 16 OF THE 1934 ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and holders of more than 10% of a registered class
of the Company's equity securities to file with the SEC reports of ownership and
changes in ownership of any equity securities of the Bank. Officers, directors
and greater than 10% shareholders are required by SEC regulation to furnish the
Bank with copies of all Section 16(a) forms they file. Based solely on its
review of the copies of such forms received by it, or written representations
from certain reporting persons that all required forms were filed, the Company
believes that, during 2002, all Section 16 filing requirements were complied
with that are applicable to its officers and directors except that Thomas P.
Ivory, an executive officer, inadvertently failed to report the sale of a
warrant to purchase 2,500 shares of Company common stock on September 30, 2002,
for which the required report was filed on October 16, 2002.
OTHER MATTERS
The Board of Directors has no knowledge of any other matter that may come before
the meeting, and does not intend to present any other matters. However, if any
other matters shall come before the meeting or any adjournment thereof
(including the election of any one or more substitutes for any of the foregoing
nominees who are unable to, or for good reason will not, serve on the Board of
Directors), the persons named as proxies will have the discretion and authority
to vote the shares represented by a Proxy in accordance with their best
judgment.
ANNUAL DISCLOSURE STATEMENT
The Company has enclosed with this proxy statement its Annual Report for the
fiscal year ended 2002 along with the opinion of Vavrinek, Trine, Day & Co.,
LLP, the independent auditors engaged by the Company.
Upon written request by any person entitled to vote at the meeting, addressed to
Donald A. Pitcher, Secretary of the Company, at 27710 Jefferson Avenue, Suite
A100, Temecula, CA 92590, we will provide, without charge, a copy of the
Company's 2002 Annual Report on Form 10-KSB, including the financial statements
and the schedule thereto filed with the SEC pursuant to the Securities Exchange
Act of 1934.
By Order of the Board of Directors
/s/ Donald A. Pitcher
-----------------------------------------
Donald A. Pitcher
Secretary
Temecula, CA
April 15, 2003
16