SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
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[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)
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(2))
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[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under Rule 14a-12
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Temecula Valley Bancorp Inc.
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Name of the Registrant as Specified In Its Charter
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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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[LOGO OF TEMECULA VALLEY BANCORP INC.]
Temecula, California
November 21, 2003
Dear Shareholder:
You are encouraged to vote for a proposal to approve an Agreement and Plan
of Merger which provides for a merger to change our company's state of
incorporation from Delaware to California and to effect a contemporaneous
two-for-one stock split. If you were the record holder of shares of our Common
Stock as of November 7, 2003, you are entitled to vote. With respect to the
reincorporation proposal, you may be entitled to assert dissenters rights under
California Law.
Our company will hold a special meeting of shareholders on Thursday,
December 18, 2003, at 3:00 p.m. The only item on the agenda for this meeting
will be consideration of the reincorporation proposal. This will be a brief,
business-only meeting, with no other matters to be discussed. Other than matters
directly relating to reincorporation proposal, our management will be making no
presentations at the special meeting, and most of the senior members of our
management will not be in attendance. We anticipate the actual meeting will take
no longer than 10 minutes.
Our Board of Directors has unanimously approved the reincorporation
proposal. Approval of the proposal by our shareholders will require the
affirmative vote of the holders of a majority of our outstanding Common Stock
entitled to vote at the special meeting.
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE REINCORPORATION
PROPOSAL. PLEASE READ THE ENCLOSED PROXY STATEMENT CAREFULLY BECAUSE IT CONTAINS
IMPORTANT INFORMATION FOR YOU TO CONSIDER WHEN DECIDING HOW TO VOTE.
Your vote is very important, regardless of the number of shares you own.
Whether or not you intend to attend the special meeting, please complete, date
and sign the enclosed proxy card and return it in the envelope provided. If your
shares are held in an account at a brokerage firm or bank, you must instruct the
brokerage firm or bank how to vote your shares.
On behalf of the Board of Directors, I would like to express our
appreciation for your continued interest in the affairs of our company. If you
have any questions, please contact us through our website at www.temvalbank.com
or write us at 27710 Jefferson Avenue, Suite A100, Temecula, CA 92590.
Sincerely,
---------------------------------
Stephen H. Wacknitz,
President/Chief Executive Officer
TEMECULA VALLEY BANCORP INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
DECEMBER 18, 2003
Dear Shareholder:
A special meeting of the shareholders of Temecula Valley Bancorp Inc. will
be held at Temecula Creek Inn, 44501 Rainbow Canyon Road, Temecula, California
on December 18, 2003 at 3:00 p.m. for the following purposes:
1. To consider a proposal to approve an Agreement and Plan of Merger which
provides for a merger to change our company's state of incorporation from
Delaware to California and to effect a contemporaneous two-for-one stock split
(approval of this proposal will constitute approval of the reincorporation
merger as well as the new California Restated Articles of Incorporation and the
new California Bylaws which, along with the Agreement and Plan of Merger, are
set forth as appendixes to the proxy statement enclosed with this notice).
Only shareholders of record at the close of business on November 7, 2003
are entitled to notice of, and to vote at, this special meeting. You are urged
to sign and return the enclosed proxy as promptly as possible, whether or not
you plan to attend the meeting in person. The enclosed proxy is solicited by our
Board of Directors. 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 undersigned Secretary of our company, or revoking all
previously signed and filed proxies and attending the meeting and voting in
person.
A list of shareholders entitled to vote at the meeting will be available
for inspection at our company's principal offices. Shareholders attending the
meeting whose shares are held in the name of a broker or other nominee should
bring with them a proxy or letter from that firm confirming their ownership of
shares.
BY ORDER OF THE BOARD OF DIRECTORS
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Donald A. Pitcher, Secretary
Temecula, California
November 21, 2003
TEMECULA VALLEY BANCORP INC.
27710 Jefferson Avenue, Suite A100
Temecula, California 92590
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
DECEMBER 18, 2003
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The Board of Directors of Temecula Valley Bancorp Inc., a Delaware
corporation, is furnishing you with this proxy statement in connection with its
solicitation of your proxy, in the form enclosed, for use at a special meeting
of shareholders to be held at Temecula Creek Inn, 44501 Rainbow Canyon Road,
Temecula, CA 92590 on Thursday, December 18, 2003 at 3:00 p.m., local time, for
the purposes set forth in the accompanying notice of special meeting of
shareholders.
We are mailing this proxy statement to you on or about November 21, 2003,
together with the accompanying proxy card.
We cordially invite you to attend the special meeting although we do not
believe attendance will be significant and no presentations are expected other
than to vote on the proposal set forth in the notice. Whether or not you plan to
attend, please complete, date and sign the proxy card and return it promptly in
the return envelope provided.
SUMMARY TERM SHEET
The following is only a summary of certain material information contained
in this document. You should carefully review this entire document along with
the attached appendices to understand the proposal fully.
o Time and Place of Special Meeting (See cover page, Notice of Special
Meeting of Shareholders): Thursday, December 18, 2003 at 3:00 p.m.,
local time, at Temecula Creek Inn, 44501 Rainbow Canyon Road,
Temecula, CA 92590.
o Record Date for the Meeting (See page 1): You can vote at the special
meeting if you owned Common Stock of our company at the close of
business on November 7, 2003.
o Record Date for the Stock Split (See page 1): The two-for-one stock
split will apply to those holders of our company's Common Stock of
record on December 18, 2003.
o Proposal to be Voted on (See page 3): We are proposing to change the
state of incorporation of our company from Delaware to California by
merging into a wholly-owned subsidiary of our company, incorporated in
California, and to effect a concurrent two-for-one split of our
company's Common Stock. We sometimes refer to this proposal as the
"reincorporation" or the "reincorporation proposal."
o Principal Reasons for the Reincorporation Proposal (See page 4): When
the reincorporation from Delaware to California becomes effective, our
company will no longer be required to pay franchise taxes in Delaware.
The reasons for the two-for-one stock split are to increase the number
of shares of Common Stock outstanding and to decrease the price per
share of the stock.
o Our Name in Connection with the Reincorporation (See page 4): Our name
will not change in connection with the reincorporation; we will
continue to be named "Temecula Valley Bancorp Inc." To distinguish
between our company as incorporated in Delaware and our company as
incorporated in California, we sometimes refer in this document to our
company before the reincorporation as "Temecula-Delaware" and after
the reincorporation as "Temecula-California."
o Effect of Approving the Reincorporation Proposal (See pages 4 to 6):
If the reincorporation proposal is approved and the reincorporation
merger is consummated, our company will be incorporated in California.
Additionally, each share of Common Stock of our company held of record
as of December 18, 2003 will automatically split into two shares of
Common Stock of Temecula-California. The reincorporation will not
change our name, headquarters, business, jobs, management, location of
any of our offices or facilities, number of employees, taxes payable
to the State of California, assets, liabilities or net worth. Our
current directors and officers will become the directors and
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officers of Temecula-California upon effectiveness of the
reincorporation. None of our subsidiaries will be changing their
respective states or jurisdictions of incorporation in connection with
the reincorporation proposal.
o Effect of Not Approving the Reincorporation Proposal (See page 7): If
the reincorporation proposal fails to obtain the vote required for
approval, the reincorporation merger will not be consummated, the
stock split will not be consummated, our company will continue to
operate as a corporation incorporated in Delaware and our company will
continue to pay franchise taxes both in California and Delaware.
o What You Will Receive in the Reincorporation Merger (See page 7): You
will not need to exchange your existing stock certificates for stock
certificates of Temecula-California. Each of your shares of
Temecula-Delaware Common Stock automatically will be converted into
two shares of Common Stock of Temecula-California if you are not a
dissenting shareholder. You will receive a certificate for the
additional shares shortly after the reincorporation becomes effective.
o Effect of the Reincorporation on the Trading of Your Shares of
Temecula-Delaware (See page 8): At the effective time of the
reincorporation merger, if you are not a dissenting shareholder, your
shares of Temecula-Delaware Common Stock will become an equivalent
number of shares of Common Stock of Temecula-California, multiplied by
two. The number of shares shown on your certificates will not change.
You will receive another certificate for the additional shares you
will own as a result of the stock split. All such shares will continue
to be traded in the over-the-counter market under the same symbol
"TMCV.OB."
o Recommendation of Our Board of Directors (See page 18): The Board of
Directors of Temecula-Delaware recommends that you vote "For" the
reincorporation proposal.
o Vote Required (See page 18): Approval of the reincorporation proposal
will require the affirmative vote of the holders of a majority of all
of the votes entitled to be cast by the holders of our company's
Common Stock. Approval of the reincorporation proposal will constitute
approval of the reincorporation merger, the two-for-one stock split,
the Agreement and Plan of Merger, the new California Restated Articles
of Incorporation and the new California Bylaws, set forth at Appendix
A, Exhibit 2.1 to Appendix A and Appendix B to this proxy statement.
o How to Vote Your Shares (See pages 1-2): Complete, date and sign the
enclosed proxy card and mail it in the enclosed return envelope as
soon as possible, so that your shares may be represented at the
special meeting. In order to assure that your vote is obtained, please
send us your completed, dated and signed proxy even if you currently
plan to attend the special meeting in person. You may also vote
telephonically by calling 1-888-426-7035 or through the internet at
www.proxyvoting.com/tmcv.
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o How to Revoke Your Proxy (See page 2): You may revoke your proxy
either by delivering to the Secretary of our company a signed notice
of revocation or a later dated and properly executed proxy, or by
attending the meeting and voting in person.
o Dissenters' Rights (See pages 15-18 and Appendix C): Holders of shares
of Temecula-Delaware Common Stock are entitled to dissenters' rights
under California law in connection with the reincorporation.
o Voting of Shares Held in "Street Name" (See page 2): Your broker will
not be permitted, without your instructions, to vote your shares held
in street name on the reincorporation proposal. You should, therefore,
be sure to provide your broker with instructions on how to vote your
shares.
o Tax Effects of the Reincorporation (See page 8): We believe that the
reincorporation will be tax-free to our shareholders and you will be
entitled to the same aggregate basis in the shares of
Temecula-California Common Stock as the aggregate basis you have in
Temecula-Delaware Common Stock. Everyone's tax situation is different
and you should consult with your personal tax advisor regarding the
tax effects of the reincorporation.
o Changes in Shareholder Rights (See pages 9-13): After completion of
the reincorporation merger, the rights of all shareholders will be
governed by California law and by our company's California Restated
Articles of Incorporation and Bylaws. The most significant changes in
shareholders' rights before and after the reincorporation are
discussed in detail in "Comparison of Shareholder Rights Before and
After the Reincorporation" on pages 9-13.
o Whom You Should Call with Questions: If you have further questions,
you may contact Linda Fowler, Senior Vice President at (909)506-1060
or contact us through our website at www.temvalbank.com.
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PROXY STATEMENT
Table of Contents
VOTING MATTERS....................................................................................................1
RECORD DATE FOR THE SPECIAL MEETING; SHARES OUTSTANDING AND VOTING RIGHTS;
RECORD DATE FOR TWO-FOR-ONE STOCK SPLIT........................................................................1
QUORUM AND VOTE REQUIRED.......................................................................................1
PROXIES AND VOTING PROCEDURES..................................................................................2
Internet and Telephonic Voting.................................................................................3
PROPOSAL 1........................................................................................................3
MERGER TO EFFECT THE COMPANY'S REINCORPORATION....................................................................3
IN CALIFORNIA AND A TWO-FOR-ONE STOCK SPLIT.......................................................................3
GENERAL........................................................................................................3
PRINCIPAL REASONS FOR THE REINCORPORATION AND STOCK SPLIT......................................................4
TEMECULA-CALIFORNIA............................................................................................5
THE AGREEMENT AND PLAN OF MERGER...............................................................................6
EFFECTIVE TIME.................................................................................................7
EFFECT OF NOT OBTAINING THE REQUIRED VOTE FOR APPROVAL.........................................................7
DISSENTERS' RIGHTS.............................................................................................7
NO SURRENDER OF STOCK CERTIFICATES.............................................................................7
MARKET FOR TEMECULA-DELAWARE COMMON STOCK......................................................................8
POSSIBLE DISADVANTAGES OF REINCORPORATION......................................................................8
CAPITALIZATION.................................................................................................8
FEDERAL INCOME TAX CONSEQUENCES................................................................................8
COMPARISON OF SHAREHOLDER RIGHTS BEFORE AND AFTER THE REINCORPORATION..........................................9
REGULATORY APPROVAL...........................................................................................14
STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL SHAREHOLDERS...................................14
RIGHTS OF DISSENTING SHAREHOLDERS.............................................................................15
VOTES REQUIRED................................................................................................18
RECOMMENDATION OF THE BOARD...................................................................................18
OTHER PROPOSED ACTIONS........................................................................................18
APPENDICES
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A. Agreement and Plan of Merger
Exhibit 2.1 to the Merger Agreement
Restated Articles of Incorporation of Temecula Valley Bancorp Inc.
B. Bylaws
C. California Corporations Code Section 1300-1313
VOTING MATTERS
RECORD DATE FOR THE SPECIAL MEETING; SHARES OUTSTANDING AND VOTING RIGHTS;
RECORD DATE FOR TWO-FOR-ONE STOCK SPLIT
Our Board of Directors has fixed the close of business on November 7, 2003
as the record date for the determination of holders of shares of
Temecula-Delaware Common Stock entitled to receive notice of and to vote at the
special meeting or any adjournments or postponements thereof. At the close of
business on the record date, our company had 4,065,957 shares of
Temecula-Delaware Common Stock that were outstanding and entitled to vote at the
special meeting held by 471 holders of record. An additional 980,329 shares of
Temecula-Delaware Common Stock are reserved for issuance under our employee and
director stock option plans as of the close of business on the record date, some
of which are subject to outstanding options. (See page 8).
Each share of Temecula-Delaware Common Stock outstanding as of the record
date is entitled to one vote. Approval of the reincorporation proposal will
constitute approval of the Agreement and Plan of Merger, the two-for-one stock
split, the reincorporation merger, and the Temecula-California Restated Articles
of Incorporation and Bylaws.
Our Board of Directors has fixed the close of business on December 18, 2003
as the record date for the two-for-one stock split. Thus, the shares held by
shareholders on the stock split record date will split on a two-for-one basis if
the reincorporation proposal is approved and consummated.
QUORUM AND VOTE REQUIRED
The presence, in person or by proxy, of the holders of a majority of the
shares of Common Stock of Temecula-Delaware outstanding as of the record date is
necessary to constitute a quorum. Abstentions and broker non-votes will be
considered present at the special meeting for the purpose of calculating a
quorum. If there are not sufficient votes in attendance at the meeting in person
or by proxy to constitute a quorum for approval of any matters to be voted upon
at the special meeting, the special meeting may be adjourned to permit further
solicitation of proxies in order to achieve a quorum.
An "abstention" is the voluntary act of not voting by a shareholder who is
present at a meeting and entitled to vote. "Broker non-votes" are shares of
voting stock held in record name by brokers and nominees for which: (i)
instructions have not been received from the beneficial owners or persons
entitled to vote; (ii) the broker or nominee does not have discretionary voting
power under applicable rules or the instrument under which it serves in such
capacity; or (iii) the record holder has indicated on the proxy or has executed
a proxy and otherwise notified us that it does not have authority to vote such
shares on that matter.
Approval of the reincorporation proposal and concurrent two-for-one stock
split will require the affirmative vote of the holders of a majority of all of
the votes entitled to be cast by the holders of Temecula-Delaware Common Stock.
You may vote in favor of, abstain, or vote against the reincorporation proposal
and concurrent two-for-one stock split. The
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reincorporation proposal will only be implemented if we obtain the required
shareholder vote. Abstentions and broker non-votes will be treated as shares
present and entitled to vote on the reincorporation proposal. Applying that
standard, abstention and broker non-votes will be counted as votes "against" the
proposal.
PROXIES AND VOTING PROCEDURES
All shares of Temecula-Delaware Common Stock represented by properly
executed proxies received prior to or at the special meeting, and not revoked,
will be voted in accordance with the instructions indicated in those proxies. If
no specific instructions are given on the proxy card with respect to the
matter(s) to be acted upon at the special meeting, shares of Temecula-Delaware
Common Stock represented by a properly executed proxy will be voted "FOR" the
reincorporation proposal and in accordance with the best judgment of the proxy
holders on all other matters that may properly come before the special meeting.
The election inspectors appointed for the meeting, as well as our company's
transfer agent, will tabulate votes cast in person or by proxy at the special
meeting.
Each proxy should be completed, dated, signed and returned in the envelope
provided for that purpose. Proxies properly executed and returned in a timely
manner will be voted at the special meeting in accordance with the directions
noted in the proxy. Any shareholder giving a proxy has the power to revoke it
any time before it is voted, either by delivering to the Secretary of our
company a signed notice of revocation or a later dated and properly executed
proxy or by attending the special meeting and voting in person. Attendance at
the meeting will not in itself revoke a proxy. Any written notice of revocation
or subsequent proxy should be sent so as to be delivered to our executive
offices, Attention: Secretary, or hand delivered to the Secretary of our company
at the address of our executive offices, at or before the vote to be taken at
the special meeting. In order to assure that your vote is counted, please return
your properly completed, dated and executed proxy to us even if you currently
plan to attend the special meeting in person.
So far as our company's Board of Directors is aware, the proposals set
forth in the accompanying proxy card are the only matters to be acted upon at
the special meeting. If any other matters are properly brought before the
special meeting, including without limitation, a motion to adjourn the special
meeting to another time and/or place for the purpose of, among other things,
disseminating information regarding material developments relating to the
reincorporation proposal, or soliciting additional proxies in favor of approval
of the reincorporation proposal, the persons whose names appear on the
accompanying proxy card will vote the shares represented by such proxy upon such
matters in their discretion; provided, however, that if our company proposes to
adjourn the special meeting for the purpose of soliciting additional votes in
favor of the reincorporation proposal, and seeks a vote of shareholders on such
adjournment, no proxy that is voted against the last proposal set forth on the
proxy card (or on which a shareholder elects to abstain on such matter) will be
voted in favor of any adjournment for the purpose of soliciting additional
proxies if such proposal to adjourn is made by our company. Should the special
meeting be reconvened, all proxies will be voted in the same manner as they
would have been voted when the special meeting was originally convened, except
for proxies
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effectively revoked or withdrawn prior to the time proxies are voted at the
reconvened special meeting.
The Board of Directors of our company is sending you this proxy statement
in connection with its solicitation of proxies for use at the special meeting.
Certain directors, officers and employees of our company may solicit proxies by
mail, telephone, facsimile or in person.
Our company will pay for the costs of solicitation. Our 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. However, our
company reserves the right to hire special employees or paid solicitors to
assist in obtaining proxies if it appears necessary to do so in order to secure
a quorum.
Internet and Telephonic Voting
You may also vote telephonically by calling 1-888-426-7035 or through the
internet at www.proxyvoting.com/tmcv.
PROPOSAL 1
MERGER TO EFFECT THE COMPANY'S REINCORPORATION
IN CALIFORNIA AND A TWO-FOR-ONE STOCK SPLIT
GENERAL
For the reasons set forth below, we believe that it is in the best
interests of our company and our shareholders to change the state of
incorporation of our company from Delaware to California and with the change, to
effect a two-for-one stock split. With respect to the discussion of the
reincorporation proposal, our company as currently incorporated in Delaware will
be referred to as "Temecula-Delaware" and our company as reincorporated in
California (subject to approval by the shareholders at the special meeting) will
be referred to as "Temecula-California".
SHAREHOLDERS ARE URGED TO CAREFULLY READ THIS SECTION OF THIS PROXY
STATEMENT, INCLUDING THE RELATED APPENDICES, BEFORE VOTING ON THE PROPOSED
REINCORPORATION AND STOCK SPLIT.
On November 7, 2003 the Boards of both Temecula-Delaware and
Temecula-California unanimously approved the Agreement and Plan of Merger, and
subsequently, Temecula-Delaware, as the sole shareholder of the new California
subsidiary, Temecula-California, adopted the Agreement and Plan of Merger.
The reincorporation and the two-for-one stock split will be effected
pursuant to the Agreement and Plan of Merger dated as of November 7, 2003 by and
between Temecula-Delaware, and a California corporation named Temecula Merger
Corporation, a wholly-owned subsidiary of Temecula-Delaware, which at the
effective time of the reincorporation merger, will change its name to Temecula
Valley Bancorp Inc.
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PRINCIPAL REASONS FOR THE REINCORPORATION AND STOCK SPLIT
The principal reason for the proposed reincorporation is so that our
company will pay franchise taxes only in California. While incorporated in
Delaware and qualified to conduct business in California as a foreign
corporation, our company pays franchise taxes in both Delaware and California.
The principal reasons to effectuate the stock split in connection with the
proposed reincorporation merger are:
o To increase the number of shares of our company's Common Stock that
are outstanding and thereby increase the company's float; and
o To decrease the price per share of our company's Common Stock and
thereby potentially increase its liquidity.
The proposed reincorporation will only change the legal domicile of our
company and effect certain other changes of a technical legal nature, the most
significant of which are described in this proxy statement. There will be no
change in the name, business, management, jobs, employees, taxes payable in
California, fiscal year, assets, liabilities, net worth (other than the costs
incident to the reincorporation merger, which are immaterial) or location of the
principal office of our company or any other offices as a result of the
reincorporation. The directors and officers of Temecula-Delaware will become the
directors and officers of Temecula-California upon the effective time of the
reincorporation merger. See the table on pages 14 and 15 which lists our
directors and our most highly paid executive officers. None of our subsidiaries
will be changing their respective states or jurisdictions of incorporation in
connection with the reincorporation merger. There will be no new employment
agreements for executive officers or other direct or indirect interest of the
current directors or executive officers of our company in the reincorporation
merger as a result of the reincorporation.
The proposed Temecula-California Restated Articles of Incorporation and
Bylaws are attached hereto as Exhibit 2.1 to Appendix A and Appendix B,
respectively. At the effective time of the reincorporation merger, the name of
Temecula Merger Corporation, as reflected in such Appendices, will change to
Temecula Valley Bancorp Inc. As described below, the proposed reincorporation
includes the implementation of certain provisions in the California Restated
Articles of Incorporation and California Bylaws which alter the rights of
shareholders and the powers of management and which, in some cases, may diminish
shareholder participation in important corporate decisions. The proposed
reincorporation is not being proposed in response to any present attempt, known
to the Board of Directors, to acquire control of our company, to obtain
representation on the Board of Directors or to take significant corporate action
that would materially affect the governance of our company.
The proposed reincorporation, including the stock split, will be effected
by merging Temecula-Delaware into a new California corporation that is a
wholly-owned subsidiary of Temecula-Delaware. Upon completion of the
reincorporation merger, Temecula-Delaware, as a corporate entity, will cease to
exist and Temecula-California, the new California corporation, will succeed to
the assets and assume the liabilities of Temecula-Delaware and
4
will continue to operate the business of our company under its current name,
Temecula Valley Bancorp Inc. The stock split, which will be a function of the
reincorporation merger, will not take place unless and until the reincorporation
merger is approved by the shareholders of our company and consummated in
accordance with the Agreement and Plan of Merger, in substantially the form
attached to this proxy statement.
As provided by the Agreement and Plan of Merger, upon completion of the
reincorporation merger, each of the holders of Temecula-Delaware's Common Stock,
par value $0.001 per share, will own two validly issued, fully paid and
nonassessable shares of Temecula-California Common Stock, no par value per
share, for every one share of Temecula-Delaware Common Stock that they held
prior to the merger.
Under both Delaware and California law, and in accordance with the
Certificate of Incorporation of Temecula-Delaware, the affirmative vote of the
holders of a majority of the outstanding shares of Temecula-Delaware Common
Stock and Temecula-California Common Stock, is required for approval of the
Agreement and Plan of Merger and the other terms of the proposed
reincorporation. The proposed reincorporation has been approved by the members
of the Board of Directors of Temecula-Delaware, who unanimously recommend a vote
in favor of reincorporation proposal, and by the Board of Directors and the sole
shareholder of Temecula-California. If approved by the shareholders of
Temecula-Delaware, it is anticipated that the reincorporation merger will become
effective as soon as practicable following the special meeting. However, as
described in the Agreement and Plan of Merger, the reincorporation merger
(including the stock split) may be abandoned or the Agreement and Plan of Merger
may be amended by the Board of Directors of Temecula-Delaware and
Temecula-California (except that the principal terms may not be amended without
shareholder approval after shareholder approval has been obtained) and prior to
the effective date of the reincorporation merger if, in the opinion of such
Boards of Directors, circumstances arise which make it inadvisable to proceed
with the proposed reincorporation (including the stock split) under the terms of
the Agreement and Plan of Merger, as may be amended from time to time.
The discussion set forth in this proxy statement is qualified in its
entirety by reference to the Agreement and Plan of Merger, the California
Restated Articles of Incorporation and the California Bylaws, copies of which
are attached to this proxy statement as Appendix A, Exhibit 2.1 to Appendix A
and Appendix B, respectively.
TEMECULA-CALIFORNIA
Temecula-California, our wholly-owned subsidiary, was incorporated under
the California General Corporation Law on November 4, 2003 under the name
Temecula Merger Corporation, exclusively for the purpose of merging with
Temecula-Delaware. Its name will change to Temecula Valley Bancorp Inc. upon the
reincorporation merger becoming effective. The address and phone number of
Temecula-California's principal office are the same as those of
Temecula-Delaware. Prior to the reincorporation merger, Temecula-California will
have no material assets or liabilities and will not have carried on any
business.
Upon completion of the reincorporation merger, the rights of the
shareholders of Temecula-California will be governed by the California
5
General Corporation Law and the Restated Articles of Incorporation, as amended,
and the Bylaws of Temecula-California.
THE AGREEMENT AND PLAN OF MERGER
The Agreement and Plan of Merger set forth at Appendix A provides that
Temecula-Delaware will merge with and into Temecula-California, with
Temecula-California being the surviving corporation. Pursuant to the Agreement
and Plan of Merger, Temecula-California will assume all assets and liabilities
of Temecula-Delaware, including obligations under our outstanding indebtedness
and contracts. The existing members of our Board of Directors and our existing
officers will become the members of the Board of Directors and officers of
Temecula-California for identical terms of office. See pages 14 and 15 which
lists our directors, our Chief Executive Officer and our four highest
compensated officers. Our existing subsidiaries will become the subsidiaries of
Temecula-California.
At the effective time of the reincorporation merger, each outstanding share
of Temecula-Delaware, with respect to which dissenters' rights are not validly
perfected, automatically will be converted into two shares of Common Stock of
Temecula-California. You will not have to exchange your existing stock
certificates that represent Temecula-Delaware stock for stock certificates of
Temecula-California. However, after consummation of the reincorporation merger,
any shareholder desiring a new form of stock certificate may submit the existing
stock certificate to Temecula-California's transfer agent for cancellation, and
obtain a new California form of certificate. Additionally, if you do not perfect
your dissenters rights, you will receive a new certificate representing the new
shares you will receive as a result of the two-for-one stock split.
Pursuant to the reincorporation merger, Temecula-California will assume all
of Temecula-Delaware's obligations under the Temecula-Delaware 1996 Incentive
and Nonqualified Stock Option Plan (Employees) and the 1997 Nonqualified Stock
Option Plan (Directors) (collectively, the "company stock plans"). Each award of
shares under our company stock plans will be converted into an award of twice
the shares of Temecula-California on the same terms and conditions as in effect
immediately prior to the reincorporation, and each option to purchase shares of
Temecula-Delaware Common Stock under our company stock plans will be converted
into an option to purchase the same number of shares of Temecula-California
Common Stock (on a post split and price adjusted basis) on the same terms and
conditions as in effect immediately prior to the reincorporation. Options and
rights granted under our company stock plans in the future will be for shares of
Temecula-California Common Stock.
The Agreement and Plan of Merger was unanimously approved by the Board of
Directors of Temecula-Delaware and the Board of Directors of Temecula-California
and subsequently was approved by Temecula-Delaware, as the sole shareholder of
Temecula-California. Approval of the reincorporation proposal (which constitutes
approval of the two-for-one stock split, the reincorporation merger, the
Agreement and Plan of Merger, the California Restated Articles of Incorporation
and the California Bylaws) requires the affirmative vote of the holders of a
majority of all of the votes entitled to be cast by the holders of the Common
Stock of Temecula-Delaware.
6
EFFECTIVE TIME
If approved by the requisite vote of the holders of shares of
Temecula-Delaware, it is anticipated that the reincorporation through the merger
and two-for-one stock split will become effective at the time set forth in the
Agreement and Plan of Merger, to be filed with the Secretary of State of
California (together with the officers' certificates of each of
Temecula-Delaware and Temecula-California) in accordance with Section 1103 of
the California Corporations Code. However, the Agreement and Plan of Merger may
be terminated and abandoned by action of the Board of Directors of
Temecula-Delaware or Temecula-California at any time prior to the effective time
of the reincorporation merger, whether before or after the approval by holders
of shares of Common Stock of Temecula-Delaware, if the Board of Directors of
Temecula-Delaware or Temecula-California for any reason, in its sole judgment
and discretion, that the consummation of the reincorporation merger would be
inadvisable or not in the best interests of our company and its shareholders.
EFFECT OF NOT OBTAINING THE REQUIRED VOTE FOR APPROVAL
If the reincorporation proposal fails to obtain the requisite vote for
approval, the reincorporation merger will not be consummated, our company will
continue to be incorporated in Delaware, we will continue to pay franchise taxes
in Delaware and California, and the two-for-one stock split will not become
effective.
DISSENTERS' RIGHTS
The holders of Temecula-Delaware Common Stock will be entitled to
dissenters' rights. California law establishes the procedures to be followed and
failure to do so may result in the loss of all dissenters' rights. Please
carefully review "Rights of Dissenting Shareholders".
THE COMPANY HAS RESERVED THE RIGHT TO ABANDON THE REINCORPORATION IF IT
DECIDES THAT THE NUMBER OF SHAREHOLDERS EXERCISING DISSENTERS' RIGHTS
EXCEEDS AN AMOUNT IT DEEMS ACCEPTABLE IN ITS SOLE AND ABSOLUTE DISCRETION.
NO SURRENDER OF STOCK CERTIFICATES
The reincorporation merger and the stock split will occur on the effective
date without any further action on the part of our shareholders. After the
effective date, certificates that represented shares of Temecula-Delaware Common
Stock prior to the effective date will automatically be deemed to represent the
same number of shares of Temecula-California Common Stock after the effective
date. In addition, if you are not a dissenting shareholder, you will receive in
the mail in the near future a certificate that will represent the shares of
Temecula-California Common Stock you are entitled to receive as a result of the
two-for-one stock split. Thus, for example, if you own 100 shares of
Temecula-Delaware Common Stock as of December 18, 2003 and as of the effective
date, the certificates you hold will automatically represent 100 shares of
Temecula-California Common Stock, and in the near future, if you do not hold
dissenting shares, you will receive another certificate which will represent the
additional 100 shares of Temecula-California Common Stock you own as a result of
the two-for-one stock split.
7
As of November 7, 2003, the record date for determining the shareholders
entitled to notice of, and to vote, at the special meeting, there were an
aggregate of approximately 471 record holders of Temecula-Delaware Common Stock
outstanding. Our company does not anticipate that, as a result of the
reincorporation merger, the number of record holders of Temecula-California
Common Stock will change significantly from the number of record holders of
Temecula-Delaware Common Stock.
MARKET FOR TEMECULA-DELAWARE COMMON STOCK
Temecula-Delaware Common Stock is currently quoted on the over-the-counter
bulletin board. After the reincorporation merger, Temecula-California Common
Stock will be quoted on the over-the-counter bulletin board under the same
symbol "TMCV.OB" as the shares of Temecula-Delaware Common Stock are quoted.
There will be no interruption in the trading of our company's Common Stock as a
result of the reincorporation merger. As of October 22, 2003, the date the Board
of Directors of Temecula-Delaware resolved to undertake the proposed
reincorporation, the closing price of Temecula-Delaware Common Stock quoted on
the over-the-counter bulletin board was $19.75 per share.
POSSIBLE DISADVANTAGES OF REINCORPORATION
We believe that the proposed reincorporation, if implemented, will not
cause any material disadvantages to shareholders. Our company believes that the
proposed reincorporation will not affect any of our material contracts with any
third parties and that Temecula-Delaware's rights and obligations under such
material contractual arrangements will continue and be assumed by
Temecula-California.
CAPITALIZATION
The following table illustrates the principal effects of the
reincorporation merger and stock split on our Common Stock:
PRIOR TO AFTER
MERGER AND MERGER AND
STOCK SPLIT(1) STOCK SPLIT
----------- -----------
Number of Shares:
Common Stock:
Authorized 40,000,000 40,000,000
Outstanding 4,065,957 4,065,957
Reserved for issuance
pursuant to outstanding
Options 858,837 858,837
Available for future grants 121,492 121,492
- --------------------------------
(1) As of November 7, 2003
FEDERAL INCOME TAX CONSEQUENCES
It is anticipated that the reincorporation merger will be treated as a
tax-free reorganization under the Internal Revenue Code of 1986, as amended.
Accordingly, no gain or loss will be recognized by holders of
8
Temecula-Delaware Common Stock as a result of the consummation of the
reincorporation merger. Each holder of Temecula-Delaware Common Stock will have
the same tax basis in the Temecula-California Common Stock. Each shareholder's
holding period with respect to the Temecula-California Common Stock will include
the period during which he or she held the corresponding Temecula-Delaware
Common Stock. The foregoing is only a summary of the probable federal income tax
consequences and is not tax advice. No ruling from the Internal Revenue Service
and no opinion of counsel with respect to the tax consequences of the
reincorporation merger have been or will be sought by our company. You should
consult with your own tax advisor with respect to how you might be effected by
the reincorporation merger.
COMPARISON OF SHAREHOLDER RIGHTS BEFORE AND AFTER THE REINCORPORATION
Because of differences between the California General Corporation Law and
the Delaware General Corporation Law, as well as differences between our
company's charter and bylaws before and after the reincorporation, the
reincorporation will effect some changes in the rights of our company's
shareholders. PURSUANT TO SECTION 2115(b) OF THE CALIFORNIA GENERAL CORPORATION
LAW, MANY OF THE SIGNIFICANT CALIFORNIA LAWS ARE APPLICABLE TO THE COMPANY EVEN
AS A DELAWARE CORPORATION DUE TO THE FACT THAT ITS PRINCIPAL OPERATIONS AND A
MAJORITY OF ITS SHAREHOLDERS ARE IN CALIFORNIA. THUS, THE DISCUSSION BELOW
POINTS OUT THE EXTENT TO WHICH DELAWARE LAW APPLIES TO TEMECULA-DELAWARE AND
CONTRASTS THAT WITH APPLICABLE CALIFORNIA LAW. IT ALSO COVERS VOTING RIGHTS,
DIVIDENDS AND PREEMPTIVE RIGHTS EVEN THOUGH IN MOST INSTANCES, NO CHANGE WITH
RESPECT TO THESE MATTERS WILL TAKE PLACE AS A RESULT OF THE REINCORPORATION
MERGER.
The summary below is not intended to be relied upon as an exhaustive list
of all differences or a complete description of the differences or similarities,
and is qualified in its entirety by reference to Delaware law, California law,
the Delaware Certificate of Incorporation, the Delaware Bylaws, the California
Restated Articles of Incorporation and the California Bylaws.
- ------------------------------------------------------------------------------------------------------------------
TEMECULA-CALIFORNIA TEMECULA-DELAWARE
- ----------------------------------------------------- -------------------------------------------------------
PAR VALUE OF CAPITAL STOCK
California law does not require a corporation to Delaware law recognizes the concept of par value. As
establish a par value. The Temecula-California Common reflected in the Delaware Certificate of
Stock will not have an established par value, as Incorporation, Temecula-Delaware Common Stock has a
reflected in the California Restated Articles of stated par value per share of $0.001.
Incorporation. The change should have no material
impact on the shareholders.
9
ANNUAL MEETING
California law and the California Bylaws provide that In contrast, Delaware law and the Delaware Bylaws
the annual meeting of shareholders is to be held provide that the annual meeting of shareholders is to
within 15 months after our company held its most be held within 13 months after our company held
recent annual meeting of shareholders, to be set its most recent annual meeting of shareholders, to be
by resolution of the Board of Directors. established by resolution of the Board of the
Board of Directors.
VOTE REQUIRED FOR ELECTION OF DIRECTORS
No change. California law applies to the election of directors
for Temecula-Delaware and therefore, the candidates
receiving the highest number of affirmative votes of
shares entitled to vote up to the number of directors
to be elected are elected, and votes withheld have no
legal effect.
CUMULATIVE VOTING FOR DIRECTORS
Under cumulative voting, each share of stock entitled Although the Delaware Certificate of Incorporation
to vote in the election of directors has a number does not explicitly provide for cumulative voting, by
of votes equal to the number of directors to be elected. California law, the cumulative voting requirements
A shareholder may then cast all of his or her votes there under apply to Temecula-Delaware.
for a single candidate, or may allocate them among
as many candidates as such shareholder may choose.
California law requires cumulative voting in the
election of directors, except for certain larger
companies, if provided in the charter documents.
The Temecula-California Bylaws provide for cumulative
voting in the election of directors.
LIMITATIONS ON CALL OF SPECIAL MEETING AND
ACTION BY SHAREHOLDERS WITHOUT A MEETING
Consistent with California law, the California Bylaws The Delaware Bylaws are substantially the same as the
provide that a special meeting of shareholders may be California Bylaws except that they require that a
called by the Board of Directors, the Chairman of the shareholder own at least 20% of the votes at the
Board of Directors, the President or any holder of 10% meeting before such shareholder(s) can call for a
of all outstanding shares entitled to vote at such special meeting. Delaware law permits shareholders,
special meeting. unless specifically prohibited by the Certificate of
Incorporation, to take action without a meeting, if
California law permits shareholders, unless written consents are signed by the holders of
specifically prohibited by the Articles of outstanding stock having not less than the minimum
Incorporation, to take action without a meeting by the number of votes that would be necessary to authorize
written consent of the holders of at least the number or take such action at a meeting at which all shares
of shares necessary to authorize or take such action entitled to vote thereon were present and voted. The
at a meeting at which all shares entitled to vote Delaware Bylaws provide for shareholder action by
thereon were present and voted. The California Bylaws written consent.
provide for shareholder action by written consent.
10
NUMBER OF DIRECTORS
Under the California Bylaws, the range for the number of Consistent with Delaware law, the Delaware Bylaws provide
directors is from five to nine, with the exact number of that the number of directors of our company cannot be less
directors to be designated by the Board of Directors; than five or more than 25, with the fixed number to be
provided, however, that no such designation will be determined by the Board of Directors from time to time.
permitted if the effect would be the removal of any Currently there are six directors serving on the Board of
director prior to the expiration of his or her term. In Directors. Under Delaware law, if the number of directors
addition, California law provides that a Bylaw amendment were fixed in the certificate of incorporation, a change to
to change the range of the number of directors, or changing such a provision would require approval of the holders of a
from a variable to a fixed Board of Directors, may only majority of the outstanding shares entitled to vote on such
be adopted with the approval of a majority of the shares action unless a greater vote is required in the certificate.
of Common Stock outstanding and entitled to vote.
NOTICE OF ADJOURNMENTS AND OTHER ACTIONS
Consistent with California law, the California Bylaws The Delaware Bylaws and the Delaware law provide
for require that if a shareholder meeting is adjourned for notice in the case of adjournments that exceed
more than 45 days or, in which case a new record date 30-days or a new record date for the shareholders
is fixed, notice shall be given to record holders as meeting is set.
of the new record date.
DISSOLUTION
Under the California law shareholders representing 50% Temecula-Delaware is subject to the same voting
of the voting power can elect voluntary dissolution. requirement with respect to a dissolution of
Temecula-Delaware as is Temecula-California
but only if the Board of Directors of Temecula-Delaware
initially approves the dissolution of Temecula-Delaware.
If the Board of Directors does not approve such
dissolution, the shareholder vote required for
approving a dissolution of Temecula-Delaware
is a unanimous written consent of all shareholders
entitled to vote thereon.
11
BUSINESS COMBINATION/TENDER OFFER/INTERESTED PARTY PROPOSALS
Under California law, if a tender offer or written Section 203 of Delaware law provides for a three-year
proposal to acquire a corporation by a reorganization moratorium on certain business combinations with
or certain sales of assets is made to a corporation's "interested shareholders" (generally, persons who
shareholder by an Interested Party, defined below own, individually or with or through other persons,
(each an "Interested Party Proposal"), (i) an 15% or more of the corporation's outstanding voting
affirmative opinion in writing as to the fairness of stock).
the consideration to the shareholders of such
corporation must be delivered to shareholders of such
corporation (or, in the event that no shareholder
approval is required for the consummation of the
transaction, to the corporations board of directors)
and (ii) such shareholders must be (a) informed of
certain later tender offers or written proposals for a
reorganization or sale of assets made by other persons
and (b) afforded a reasonable opportunity to withdraw
any vote, consent or proxy previously given or shares
previously tendered in connection with the Interested
Party Proposal. "Interested Party" means a person who
is a party to the transaction and (x) directly or
indirectly controls the corporation that is the
subject of the tender offer or proposal; (y) is, or is
directly or indirectly controlled by an officer or
director of the subject corporation; or (z) is an
entity in which a material financial interest (as
defined in Section 310 of the California Code) is held
by any director or executive officer of the subject
corporation.
DERIVATIVE ACTIONS
Under California law, if a court finds that a Delaware laws for bringing derivative actions are
derivative action was brought without a reasonable substantially similar to those contained in the
basis, the court may require a plaintiff to furnish a California law, except that the Delaware law does not
bond to pay the defendant's reasonable expenses impose (i) the reasonable cause requirement or (ii)
attributable to the defense of such action, including the bond requirement.
attorney's fees in the event a plaintiff does not prevail
at trial.
12
FRANCHISE TAX
In California, our company will continue to pay Delaware law requires corporations to pay franchise
franchise tax. The obligation and the amounts are tax annually (current maximum is $165,000 a year).
unaffected by the reincorporation. After the reincorporation, Temecula-California will
no longer be subject to this tax.
PAYMENTS OF DIVIDENDS
California law permits the payment of dividends if, California law applies to Temecula-Delaware with
prior to the payment, the amount of the corporation's respect to the payment of dividends.
retained earnings equal or exceed the amount of the
proposed dividend. Additionally, dividends are
allowed if after the payment of the dividends, the
assets of the corporation (excluding goodwill and
other assets) would be at least 1.25 times its
liabilities (excluding deferred taxes and the like),
and the current assets of the corporation would be at
least equal to current liabilities, or, if the average
of the earnings of the corporation before taxes on
income and before interest expense for the two
preceding fiscal years was less than the average of
the interest expense of the corporation for those
fiscal years, at least equal to 1.25 times its current
liabilities. In addition, California law generally
provides that a corporation may redeem or repurchase
its shares only if the same insolvency tests are
satisfied.
PREEMPTIVE RIGHTS
Under the California Restated Articles of Under the Delaware Certificate of Incorporation there
Incorporation there are no preemptive rights for are no preemptive rights for shareholders of
shareholders of Temecula-California. Temecula-Delaware.
13
REGULATORY APPROVAL
To our company's knowledge, the required regulatory and governmental
approvals and filings necessary in connection with the consummation of the
reincorporation merger will be as follows: the receipt of a tax-clearance from
the California Franchise Tax Board because Temecula-Delaware is a foreign
corporation qualified to do business in California; the filing of the Agreement
and Plan of Merger (along with officers' certificates)with the California
Secretary of State; the filing of the Certificate of Merger with the Delaware
Secretary of State; and possibly, securities filings, qualifications or permits
in states where our shareholders reside.
STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL SHAREHOLDERS
The following table shows, as of November 7, 2003, the amount of
Temecula-Delaware Common Stock beneficially owned (unless otherwise indicated)
by (a) each director; (b) the Chief Executive Officer and the other four highest
paid executive officers of Temecula Valley Bank, N.A. ("Bank"), our company's
principal subsidiary; (c) each person known to Temecula-Delaware to be the
beneficial owner of more than 5% of its common stock; and (d) all of our
company's and the Bank's directors and executive officers(1) as a group. Except
as otherwise noted, our 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) 3.85%
Dr. Robert P. Beck, Director of Company 113,288 (5) 2.74%
and Bank
Brian D. Carlson, Executive Vice President/ 46,666 (6) 1.15%
SBA Manager of Bank
Neil M. Cleveland, Director of Company 76,500 (7) 1.85%
and Bank
The Ingold Family Trust/5% Shareholder 234,076 (8) 5.76%
of Company
Luther J. Mohr, Vice Chairman of the Board 217,924 (9) 5.20%
and Chief Operating Officer of Company and
Bank/5% Shareholder of Company
Thomas M. Shepherd, Executive Vice President/ 29,332 (10) 0.72%
Chief Credit Officer of Company
(continued)
14
Company
Shares Owned Percent
Name & Position(2) Beneficially (3) of Class
- ------------------ ---------------- --------
Stephen H. Wacknitz, President, Chief 349,885 (11) 8.22%
Executive Officer, Chairman of the Board of
Company and Bank/5% Shareholder of Company
Richard W. Wright, Director of Company 86,510 (12) 21.0%
and Bank
ALL DIRECTORS AND
EXECUTIVE OFFICERS (13 in number) 1,195,628 25.21%
(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, Chief Financial Officer and Executive Vice
Presidents. 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.
(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 stock options with 66,857 underlying shares that
are exercisable within 60 days of November 7, 2003.
(5) Includes as outstanding stock options with 73,478 underlying shares that
are exercisable within 60 days of November 7, 2003.
(6) Includes as outstanding stock options with 0 underlying shares that are
exercisable within 60 days of November 7, 2003.
(7) Includes as outstanding stock options with 65,500 underlying shares that
are exercisable within 60 days of November 7, 2003.
(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 November 7, 2003.
(10) Includes as outstanding stock options with 26,832 underlying shares that
are exercisable within 60 days of November 7, 2003.
(11) Includes as outstanding 4 stock options with 189,385 underlying shares that
are exercisable within 60 days of November 7, 2003.
(12) Includes as outstanding stock options with 57,500 underlying shares that
are exercisable within 60 days after November 7, 2003.
RIGHTS OF DISSENTING SHAREHOLDERS
Shareholders who do not vote in favor of the proposed reincorporation
either by voting against it or by abstaining from voting, are entitled to
certain rights under Chapter 13 of the California General Corporation Law.
Chapter 13 is reprinted in Appendix C to this proxy statement. Please note that
all references in Chapter 13 and in this section to a "shareholder" are to the
record holder (holder as of November 7, 2003) of dissenting shares.
15
A PERSON HAVING A BENEFICIAL INTEREST IN THE SHARES OF THE COMPANY WHICH
ARE HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A BROKER OR NOMINEE,
MUST ACT PROMPTLY TO CAUSE THE RECORD HOLDER TO FOLLOW IN A TIMELY AND PROPER
MANNER THE STEPS SET FORTH BELOW.
The following discussion is not a complete statement of the law relating to
dissenters' rights and is qualified in its entirety by Appendix C which is
incorporated herein by reference. This discussion and Appendix C should be
reviewed carefully by any shareholders who wish to exercise dissenters' rights,
or who wish to preserve the right to do so, since failure to comply with the
procedures set forth in Chapter 13 will result in the loss of dissenters'
rights.
When the reincorporation merger is completed, those shareholders who elect
to exercise their dissenters' rights and who properly and timely perfect such
rights, will be entitled to receive the "fair market value," in cash, of their
dissenting shares, which are shares held or record on the record date, pursuant
to Section 1300(a) of the California General Corporation Law, "fair market
value" would be determined as of October 30, 2003, the day before the first
announcement of the terms of the reincorporation merger, excluding any
appreciation caused by the reincorporation.
If the reincorporation merger is approved by the shareholders, our company
will, within ten days of the approval, mail a notice to the holders of record of
shares of Temecula-Delaware Common Stock which were not voted in favor of the
reincorporation merger or were voted against the reincorporation merger, stating
that the required shareholder approval of the reincorporation proposal was
obtained. The notice of approval will set forth the price determined by our
company to represent the "fair market value" of any dissenting shares, and will
set forth the procedures (which are also described below) to be followed by
dissenting shareholders who wish to pursue further their statutory rights. The
procedures include a timely written demand that must be made upon our company in
order to perfect the right to dissent. The notice of approval will include a
copy of Sections 1300 through 13113 of the California General Corporation Law.
Under Section 1301(a) of the California General Corporation Law, the
statement in the notice of approval of the determination of the fair market
value of our company's Common Stock will constitute an offer by our company to
purchase from our shareholders any dissenting shares at the price stated,
assuming the reincorporation merger is completed. However, the determination by
our company of fair market value is not binding on our shareholders, and if a
dissenting shareholder chooses not to accept that offer, he or she has the right
during a period of six months following the mailing of the notice of approval to
commence a lawsuit to have the fair market value determined by a court. The fair
market value as determined by the court in those circumstances could be higher
or lower than the amount offered by our company in the notice of approval and
any such determination would be binding on both the dissenting shareholder(s)
involved in the lawsuit and our company, as applicable.
16
ANY HOLDER OF RECORD OF TEMECULA-DELAWARE COMMON STOCK WHO WISHES TO
EXERCISE DISSENTERS' RIGHTS, OR TO PRESERVE THE RIGHT TO DO SO, MUST MAKE A
WRITTEN DEMAND UPON THE COMPANY THAT THE COMPANY PAY THE SHAREHOLDER IN CASH THE
FAIR MARKET VALUE OF HIS OR HER DISSENTING SHARES, AS DEFINED ABOVE, ON OR
BEFORE THIRTY DAYS AFTER THE COMPANY MAILED NOTICE, AS PROVIDED ABOVE.
The demand by holders of our company's Common Stock should be sent to
Temecula Valley Bancorp Inc., Attention: Donald A. Pitcher, Chief Financial
Officer, 27710 Jefferson Avenue, Suite A100, Temecula, CA 92590. The written
demand must state the number of shares held of record by the shareholder, and
the number of shares which the shareholder demands that our company purchase for
cash, and must also contain a statement of the amount which the shareholder
claims to be the fair market value of the dissenting shares, as of October 30,
2003, the day before the announcement of the proposed reincorporation merger.
That statement will constitute an offer by the shareholder to sell his or her
dissenting shares to our company at that price. The certificates for shares
representing Temecula-Delaware Common Stock (which may be Bank shares that were
never exchanged from shares of our company) must also be included with the
written demand.
A written consent directing a vote against the proposed reincorporation
merger is not sufficient to meet the requirements for a written demand. THE
WRITTEN DEMAND AND THE DISSENTING SHAREHOLDER'S SHARE CERTIFICATE(S) MUST BE
RECEIVED BY THE COMPANY WITHIN 30 DAYS AFTER THE DATE ON WHICH THE COMPANY'S
FIRST NOTICE OF APPROVAL WAS MAILED TO THE SHAREHOLDER. The certificate(s) will
be stamped or endorsed with a statement that the shares are dissenting shares
and returned to the dissenting shareholder.
IN ADDITION, THOSE SHAREHOLDERS MAY NOT HAVE VOTED IN FAVOR OF APPROVAL OF
THE PROPOSED REINCORPORATION, EITHER IN PERSON OR BY PROXY. If the shareholder
votes in favor of approval of the proposed reincorporation, or if our company
does not receive the shareholder's written demand within 30 days after our
company's notice of approval was mailed to the shareholder, or if the
shareholder otherwise fails to comply in a timely manner with the procedures of
Chapter 13 as described herein or contained in Appendix C, that shareholder
shall be bound by the terms of the reincorporation, and will lose the right to
receive the fair market value of his or her shares in cash.
Dissenting shares may lose their status as such if any of the following
occurs: the proposed reincorporation is abandoned; the shares are transferred
before being submitted to our company for endorsement; the shareholder withdraws
his or her demand with the consent of our company in the absence of an agreement
between the shareholder, and our company as to the price of his or her shares;
or, the shareholder fails to file suit against our company or otherwise fails to
become a party to the suit within six months following the mailing of our
company's first notice of approval.
Our company will pay the fair market value of dissenting shares at the
later of 30 days following an agreement as to the amount to be paid, or within
30 days after all statutory and contractual conditions to the reincorporation
are satisfied; provided, that in the event that the payment cannot be made due
to the provisions set forth in Title 12 of the United States Code pertaining to
restrictions on the payment or declaration of dividends by national banks, or
California General Corporation Law Section 500 and following sections, dealing
with restrictions on a corporation's ability to distribute funds or assets to a
shareholder, then those shareholders holding dissenting shares shall become
creditors of our company and their claims will be payable as soon as permissible
under those provisions.
17
The foregoing summarizes certain provisions of Chapter 13 of the California
General Corporation Law, but shareholders of our company considering the
exercise of their rights under those sections should read in full Chapter 13,
which is reproduced in Appendix C and should consult their own legal advisors.
The receipt of cash payment for dissenting shares will result in recognition of
gain or loss for federal income tax purposes by the dissenting shareholders.
Please consult your own tax advisors with respect to your personal tax issues in
all these matters.
OUR COMPANY HAS RESERVED THE RIGHT TO ABANDON THE REINCORPORATION IF IT
DECIDES THAT THE NUMBER OF SHAREHOLDERS EXERCISING DISSENTERS' RIGHTS EXCEEDS AN
AMOUNT OUR COMPANY DEEMS ACCEPTABLE IN OUR SOLE AND ABSOLUTE DISCRETION.
VOTES REQUIRED
The reincorporation proposal, which includes the concurrent two-for-one
stock split, must be approved by the affirmative vote of a majority of the
outstanding shares of the Temecula-Delaware Common Stock.
RECOMMENDATION OF THE BOARD
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF PROPOSAL 1 IN SUPPORT OF THE
REINCORPORATION (INCLUDING APPROVAL OF THE STOCK SPLIT AND APPROVAL OF THE
TEMECULA-CALIFORNIA RESTATED ARTICLES OF INCORPORATION AND BYLAWS AND THE
AGREEMENT AND PLAN OF MERGER).
OTHER PROPOSED ACTIONS
The Board is not aware of any other business that will come before the
special meeting, but if any such matters are properly presented, the proxies
solicited hereby will be voted in accordance with the best judgment of the
persons holding the proxies. All shares represented by duly executed proxies
will be voted at the special meeting.
By Order of the Board of Directors,
- -------------------------------------
Stephen H. Wacknitz
President and Chief Executive Officer
18
APPENDIX A TO THE PROXY STATEMENT
AGREEMENT AND PLAN OF MERGER
OF
TEMECULA MERGER CORPORATION
(A CALIFORNIA CORPORATION)
AND
TEMECULA VALLEY BANCORP INC.
(A DELAWARE CORPORATION)
This Agreement and Plan of Merger ("Merger Agreement") dated as of November
7, 2003, is made by and between Temecula Merger Corporation, a California
corporation ("Temecula-California") and Temecula Valley Bancorp Inc., a Delaware
corporation ("Temecula-Delaware" and together with Temecula-California, the
"Constituent Corporations").
RECITALS
A. Temecula-Delaware desires to merge with and into Temecula-California, a
California corporation that is a wholly-owned subsidiary of Temecula-Delaware,
and Temecula-California desires to merge with Temecula-Delaware, all upon the
terms and subject to the conditions of this Merger Agreement (the "Proposed
Merger").
B. Temecula-California is a corporation duly organized and existing under
the California General Corporation Law (the "CGCL"). Temecula-California has
authorized capital of 40,000,000 shares of Common Stock, no par value
("Temecula-California Common Stock"). As of the date hereof, one share of
Temecula-California Stock is issued and outstanding, which is held by
Temecula-Delaware.
C. Temecula-Delaware is a corporation duly organized and existing under the
Delaware General Corporation Law (the "DGCL"). Temecula-Delaware has authorized
capital of 40,000,000 shares, consisting of 40,000,000 shares of Common Stock,
par value $0.001 per share ("Temecula-Delaware Common Stock"). As of the date
hereof, 4,065,957 shares of Temecula-Delaware Common Stock are issued and
outstanding.
D. The Board of Directors of Temecula-Delaware has determined by unanimous
vote that, for the purpose of effecting the reincorporation of Temecula-Delaware
in the State of California, it is advisable and in the best interest of
Temecula-Delaware and its shareholders that it ratify, confirm and approve the
Proposed Merger, pursuant to which it will merge with and into
Temecula-California upon the terms and conditions herein provided.
E. The respective Boards of Directors of Temecula-California and
Temecula-Delaware have authorized and approved this Merger Agreement and have
directed that this Merger Agreement be submitted to a vote of their respective
shareholders and executed by the undersigned officers.
F. The sole shareholder of Temecula-California has approved this Merger
Agreement.
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G. This Merger Agreement is a Plan of Reorganization under Section 368 of
the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
agreements and covenants set forth herein, and other good and valuable
consideration, the Constituent Corporations agree as follows:
ARTICLE I
MERGER
1.1 MERGER. In accordance with the provisions of this Merger Agreement, the
DGCL and the CGCL, Temecula-Delaware shall be merged with and into
Temecula-California (the "Merger"), the separate existence of Temecula-Delaware
shall cease, and Temecula-California shall survive the Merger and shall continue
to be governed by the CGCL. Temecula-California shall be, and is herein
sometimes referred to as, the "Surviving Corporation." The name of the surviving
corporation shall be Temecula Valley Bancorp Inc.
1.2 FILING AND EFFECTIVENESS. The Merger shall become effective when this
Merger Agreement along with properly executed Officers' Certificates meeting the
requirements of the CGCL shall have been filed with the Secretary of State of
the State of California.
The date and time when the Merger shall become effective, as aforesaid, is
herein called the "Effective Date."
1.3 EFFECT OF MERGER. Upon the Effective Date of the Merger, the separate
existence of Temecula-Delaware shall cease, and Temecula-California, as the
Surviving Corporation, (i) shall continue to possess all of
Temecula-California's assets, rights, powers and property as constituted
immediately prior to the Effective Date of the Merger; (ii) shall be subject to
all actions previously taken by its and Temecula-Delaware's Board of Directors;
(iii) shall succeed, without other transfer, to all of the assets, rights,
powers and property of Temecula-Delaware including, without limitation, all
patents, trademarks, licenses, registrations, and all other intellectual
properties however defined; (iv) shall continue to be subject to all of
Temecula-California's debts, liabilities and obligations as constituted
immediately prior to the Effective Date of the Merger, (v) shall succeed,
without other transfer, to all of the debts, liabilities and obligations of
Temecula-Delaware in the same manner as if Temecula-California had itself
incurred them, all as more fully provided under the applicable provisions of the
CGCL and the DGCL, and (vi) shall continue to operate the business of
Temecula-Delaware under its current name, Temecula Valley Bancorp Inc., as
provided in Article II below.
ARTICLE II
CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 ARTICLES OF INCORPORATION. The Articles of Incorporation of
Temecula-California as in effect immediately prior to the Effective Date of the
Merger are restated as of the Effective Date as provided in Exhibit 2.1 to this
Merger Agreement.
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2.2 BYLAWS. The Bylaws of Temecula-California as in effect immediately
prior to the Effective Date of the Merger shall continue in full force and
effect as the Bylaws of the Surviving Corporation until duly amended in
accordance with the provisions thereof and applicable law.
2.3 DIRECTORS AND OFFICERS. The directors and officers of Temecula-Delaware
immediately prior to the Effective Date of the Merger shall be the directors and
officers of the Surviving Corporation until their successors shall have been
duly elected and qualified or until as otherwise provided by law, the Restated
Articles of Incorporation of the Surviving Corporation or the Bylaws of the
Surviving Corporation.
ARTICLE III
MANNER OF CONVERSION OF STOCK
3.1 STOCK CONVERSION. Upon the Effective Date of the Merger, each share of
Temecula-Delaware Common Stock issued and outstanding immediately prior thereto
shall, by virtue of the Merger, and without any action by the Constituent
Corporations, the holder of such shares, or any other person, be deemed to
represent the right to receive two fully paid and nonassessable shares of the
corresponding Temecula-California Common Stock.
3.2 TEMECULA-DELAWARE EMPLOYEE BENEFITS AND STOCK OPTION PLANS.
(a) Upon the Effective Date of the Merger, the Surviving Corporation
shall assume and continue the employee benefits and stock option plans of
Temecula-Delaware. Each outstanding and unexercised option or other right to
purchase a security convertible into Temecula-Delaware Common Stock shall become
an option or right to purchase a security convertible into the Surviving
Corporation's Common Stock on the basis of two shares of the Surviving
Corporation's Common Stock for each share of Temecula-Delaware Common Stock
issuable pursuant to any such option, upon the same terms and subject to the
same conditions and subject to appropriate adjustments to the exercise price due
to the stock split.
(b) A number of shares of the Surviving Corporation's Common Stock shall
be reserved for issuance upon the exercise of options, equal to twice the number
of shares of Temecula-Delaware Common Stock so reserved immediately prior to the
Effective Date of the Merger.
3.3 CANCELLATION OF STOCK. Upon the Effective Date of the Merger, the one
share of Temecula-California Common Stock presently issued and outstanding shall
be canceled without consideration without consideration and returned to the
status of authorized but unissued shares and no shares of Common Stock or other
securities of the Surviving Corporation will be issued in respect thereof.
3.4 NO EXCHANGE OF CERTIFICATES REQUIRED.
(a) After the Effective Date of the Merger, each holder of an
outstanding certificate representing shares of Temecula-Delaware Common Stock
may, but is not required to, surrender the same for cancellation without
consideration to the Transfer Agent, U.S. Stock Transfer, and each such holder
shall be entitled to receive in exchange therefor a certificate or certificates
representing the number of shares of corresponding Temecula-California Stock
into which the surrendered shares were converted without giving effect to the
two-for-one stock split. A separate certificate shall be issued for the
additional shares to be issued as a result of the two-for-one stock split. Until
so surrendered, each outstanding certificate theretofore representing shares of
Temecula-Delaware Common Stock shall be deemed for all purposes to represent the
number of corresponding shares of whole Temecula-California Common Stock into
which such shares of Temecula-Delaware Common Stock were converted in the Merger
without giving effect to the two-for-one stock split.
A-3
(b) The registered owner on the books and records of the Surviving
Corporation or the Transfer Agent of any such outstanding certificate shall,
until such certificate shall have been surrendered for transfer or conversion or
otherwise accounted for to the Surviving Corporation or the Transfer Agent, have
and be entitled to exercise any voting and other rights with respect to and to
receive dividends and other distributions upon the shares of Temecula-California
Stock represented by such outstanding certificate as provided above.
(c) Each certificate representing Temecula-California Stock so issued in
the Merger shall bear the same legends, if any, with respect to restrictions on
transferability as the certificates of corresponding stock of Temecula-Delaware
so converted and given in exchange therefore, unless otherwise determined by the
Board of Directors of the Surviving Corporation in compliance with applicable
laws. As applicable, the time period during which a shareholder has held the
Temecula-Delaware Common Stock shall be included in the time period during which
such shareholder actually holds the Temecula-California Common Stock received in
exchange for Temecula-Delaware Common Stock for the purposes of determining the
term of the restrictive period applicable to the Temecula-California Common
Stock.
(d) If any certificate for shares of Temecula-California Stock is to be
issued in a name other than that in which the certificate surrendered in
exchange therefore is registered, it shall be a condition of issuance thereof
that the certificate so surrendered shall be properly endorsed and otherwise be
in proper form for transfer, that such transfer otherwise be proper and the
person requesting such transfer pay to Temecula-California or the Transfer Agent
any transfer or other taxes payable by reason of the issuance of such new
certificate in a name other than that of the registered holder of the
certificate surrendered or establish to the satisfaction of Temecula-California
that such tax has been paid or is not payable.
3.5 DISSENTERS' RIGHTS. Notwithstanding anything to the contrary contained
in this Article III, each outstanding share of Temecula-Delaware Common Stock as
to which a written demand for purchase is made in accordance with Section 1301
of the CGCL, stating that the record holder demands that his or her shares be
purchased for cash for their fair market value, and which is not voted in favor
of the Merger, shall not be converted into shares of Temecula-California Common
Stock unless and until the holder shall have failed to perfect or shall have
effectively withdrawn or lost his right to payment of the fair market value of
his shares of Temecula-Delaware Common Stock under Sections 1300 to 1313,
inclusive, of the CGCL, at which time such shares of Temecula-Delaware Common
Stock shall be converted into shares of Temecula-California Common Stock in the
same manner as provided for other outstanding shares of Temecula-Delaware Common
Stock in this Article III.
A-4
ARTICLE IV
GENERAL
4.1 COVENANTS OF TEMECULA-CALIFORNIA. From time to time, as and when
required by Temecula-California or by its successors or assigns, there shall be
executed and delivered on behalf of Temecula-Delaware such deeds and other
instruments, and there shall be taken or caused to be taken by it such further
and other actions, as shall be appropriate or necessary in order to vest or
perfect in or conform of record or otherwise by Temecula-California the title to
and possession of all the property, interests, assets, rights, privileges,
immunities, powers, franchises and authority of Temecula-Delaware and otherwise
to carry out the purposes of this Merger Agreement.
4.2 ABANDONMENT. At any time before the Effective Date of the Merger, this
Merger Agreement may be terminated and the Merger may be abandoned for any
reason whatsoever by the Board of Directors of either of the Constituent
Corporations, or by both, notwithstanding the approval of this Merger Agreement
by the shareholders of either of the Constituent Corporations, or by both.
4.3 AMENDMENT. The Boards of Directors of the Constituent Corporations may
amend this Merger Agreement at any time prior to the Effective Date; provided,
however, that an amendment made subsequent to the adoption of this Merger
Agreement by the shareholders of either of the Constituent Corporations shall
not without the requisite shareholder approval (a) alter or change the amount or
kind of shares, securities, cash, property and/or rights to be received in
exchange for or on conversion of all or any of the shares of any class or series
thereof of such Constituent Corporation, (b) alter or change any term of the
Restated Articles of Incorporation of the Surviving Corporation to be effective
immediately after the Merger, or (c) alter or change any of the terms and
conditions of this Merger Agreement if such alteration or change would adversely
affect the holders of any class or series thereof of such Constituent
Corporation.
4.4 GOVERNING LAW. This Merger Agreement shall in all respects be
construed, interpreted and enforced in accordance with the laws of the State of
California and, so far as applicable, the merger provisions of the DGCL.
4.5 COUNTERPART. To facilitate the filing and recording of this Merger
Agreement, the same may be executed in any number of counterparts, each of which
shall be deemed to be an original and all of which together shall constitute one
and the same instrument.
[SIGNATURES ON FOLLOWING PAGE]
A-5
IN WITNESS WHEREOF, this Merger Agreement having first been approved by the
resolutions of the Boards of Directors of Temecula-California, a California
corporation, and Temecula-Delaware, a Delaware corporation, is hereby executed
on behalf of each of such two corporations and attested by their respective
officers thereunto duly authorized as of the date first above written.
TEMECULA VALLEY BANCORP INC.,
a Delaware corporation
By: /s/ Stephen H. Wacknitz
-------------------------------
Stephen H. Wacknitz
Chief Executive Officer and
President
By: /s/ Donald A. Pitcher
-------------------------------
Donald A. Pitcher
Secretary
TEMECULA MERGER COPRORATION,
a California corporation
By: /s/ Stephen H. Wacknitz
-------------------------------
Stephen H. Wacknitz
Chief Executive Officer and
President
By: /s/ Donald A. Pitcher
-------------------------------
Donald A. Pitcher
Secretary
A-6
EXHBIT 2.1 TO THE MERGER AGREEMENT
RESTATED ARTICLES OF INCORPORATION
OF
TEMECULA VALLEY BANCORP INC.
ARTICLE I
NAME: The name of the Corporation is Temecula Valley
Bancorp Inc.
ARTICLE II
PURPOSE: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be
organized under the General Corporation Law of
California other than the banking business, the trust
company business or the practice of a profession
permitted to be incorporated by the California
Corporations Code.
ARTICLE III
AUTHORIZED
STOCK: The Corporation is authorized to issue only one class
of stock, designated as Common Stock, and the total
number of shares which the Corporation is authorized
to issue is forty million (40,000,000).
ARTICLE IV
DIRECTOR
LIABILITY: The liability of the directors of the Corporation for
monetary damages shall be eliminated to the fullest
extent permissible under California law.
ARTICLE V
INDEMNI-
FICATION: This Corporation is authorized to provide
indemnification of agents (as defined in Section 317
of the California Corporations Code) to the fullest
extent permissible under California law. Any
amendment, repeal or modification of the provisions
of this Article shall not adversely affect any right
or protection of an agent of the Corporation existing
at the time of such amendment, repeal or
modification.
A-7
ARTICLE VI
AGENT FOR
SERVICE OF
PROCESS: The name and address in the State of California of
this corporation's initial agent for service of
process is:
Stephanie E. Allen
2040 Main Street, 14th Floor
Irvine, CA 92614
A-8
APPENDIX B TO THE PROXY STATEMENT
BYLAWS
OF
TEMECULA MERGER CORPORATION
ARTICLE I
OFFICES
SECTION 1.1. PRINCIPAL OFFICE. The principal executive office
of the corporation is hereby located at such place as the board of directors
(the "board") shall determine. The board is hereby granted full power and
authority to change said principal executive office from one location to
another.
SECTION 1.2. OTHER OFFICES. Other business offices may, at
any time, be established by the board at such other places as it deems
appropriate.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 2.1. PLACE OF MEETINGS. Meetings of shareholders may
be held at such place within or outside the state of California designated by
the board. In the absence of any such designation, shareholders' meetings shall
be held at the principal executive office of the corporation.
SECTION 2.2. ANNUAL MEETING. The annual meeting of
shareholders shall be held for the election of directors on a date and at a time
designated by the board. The date so designated shall be within fifteen (15)
months after the last annual meeting. At such meeting, directors shall be
elected, and any other proper business within the power of the shareholders may
be transacted.
SECTION 2.3. SPECIAL MEETINGS. Special meetings of the
shareholders may be called at any time by the board, the chairperson of the
board, the president, or by the holders of shares entitled to cast not less than
ten percent (10%) of the votes at such meeting. If a special meeting is called
by any person or persons other than the board, the request shall be in writing,
specifying the time of such meeting and the general nature of the business
proposed to be transacted, and shall be delivered personally or by registered
mail to the chairperson of the board, the president, any vice president or the
secretary of the corporation. The officer receiving the request shall cause
notice to be promptly given to the shareholders entitled to vote that a meeting
will be held at a time requested by the person or persons calling the meeting,
not less than 35 nor more than 60 days after receipt of the request. If the
notice is not given within 20 days after receipt of the request, the person or
persons requesting the meeting may give the notice. Nothing in this paragraph
shall be construed as limiting, fixing or affecting the time when a meeting of
shareholders called by action of the board may be held.
B-1
SECTION 2.4. NOTICE OF MEETINGS. Written notice, in accordance
with Section 2.5 of this Article II, of each annual or special meeting of
shareholders shall be given not less than 10 nor more than 60 days before the
date of the meeting to each shareholder entitled to vote thereat. Such notice
shall state the place, date and hour of the meeting and (a) in the case of a
special meeting, the general nature of the business to be transacted, and no
other business may be transacted, or (b) in the case of the annual meeting,
those matters which the board, at the time of the mailing of the notice, intends
to present for action by the shareholders, but, subject to the provisions of
applicable law, any proper matter may be presented at the meeting for such
action. The notice of any meeting at which directors are to be elected shall
include the names of nominees intended at the time of the notice to be presented
by the board for election.
If action is proposed to be taken at any meeting for approval
of (a) a contract or transaction in which a director has a direct or indirect
financial interest, pursuant to Section 310 of the California Corporations Code,
as amended (the "Code"), (b) an amendment of the articles of incorporation,
pursuant to Section 902 of the Code, (c) a reorganization of the corporation,
pursuant to Section 1201 of the Code, (d) a voluntary dissolution of the
corporation, pursuant to Section 1900 of the Code, or (e) a distribution in
dissolution other than in accordance with the rights of outstanding preferred
shares, pursuant to Section 2007 of the Code, the notice shall also state the
general nature of that proposal.
SECTION 2.5. MANNER OF GIVING NOTICE. Notice of a
shareholders' meeting shall be given either personally or by first-class mail or
telegraphic or other written communication, charges prepaid, addressed to the
shareholder at the address of that shareholder appearing on the books of the
corporation or given by the shareholder to the corporation for the purpose of
notice. If no such address appears on the corporation's books or is given,
notice shall be deemed to have been given if sent to that shareholder by
first-class mail or telegraphic or other written communication to the
corporation's principal executive office or if published at least once in a
newspaper of general circulation in the county in which the principal executive
office is located. Notice shall be deemed to have been given at the time when
delivered personally or deposited in the mail or sent by telegram or other means
of written communication. An affidavit of mailing or other means of giving any
notice in accordance with the above provisions, executed by the secretary,
assistant secretary or any transfer agent, shall be prima facie evidence of the
giving of the notice.
If any notice addressed to the shareholder at the address of
such shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the shareholder
at such address, all future notices shall be deemed to have been duly given
without further mailing if the same shall be available for the shareholder upon
written demand of the shareholder at the principal executive office of the
corporation for a period of one year from the date of the giving of the notice
to all other shareholders.
SECTION 2.6. QUORUM. A majority of the shares entitled to
vote, represented in person or by proxy, shall constitute a quorum at any
meeting of shareholders but in no event, shall a quorum consist of less than
one-third of the shares entitled to vote at the meeting.. The shareholders
present at a duly called or held meeting at which a quorum is present may
continue to transact business until adjournment notwithstanding the withdrawal
of enough shareholders to leave less than a quorum, if any action taken (other
than adjournment) is approved by at least a majority of the shares required to
constitute a quorum.
B-2
SECTION 2.7. ADJOURNED MEETING AND NOTICE THEREOF. Any
shareholders' meeting, whether or not a quorum is present, may be adjourned from
time to time by the vote of a majority of the shares represented either in
person or by proxy at the meeting, but in the absence of a quorum (except as
provided in Section 2.6 of this Article II) no other business may be transacted
at such meeting.
When any meeting of shareholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place are announced at the meeting at which the
adjournment is taken. However, when any shareholders' meeting is adjourned for
more than 45 days from the date set for the original meeting, or, if after
adjournment a new record date is fixed for the adjourned meeting, notice of the
adjourned meeting shall be given to each shareholder of record entitled to vote
at the meeting. At any adjourned meeting the corporation may transact any
business which might have been transacted at the original meeting.
SECTION 2.8. VOTING. The shareholders entitled to notice of
any meeting or to vote at any such meeting shall be only persons in whose name
shares stand on the stock records of the corporation on the record date
determined in accordance with Section 2.9 of this Article II.
Voting of shares of the corporation shall in all cases be
subject to the provisions of Sections 700 through 711, inclusive, of the Code.
The shareholders' vote may be by voice or ballot; provided,
however, that any election for directors must be by ballot if demanded by any
shareholder before the voting has begun. On any matter other than election of
directors, any shareholder may vote part of the shares in favor of the proposal
and refrain from voting the remaining shares or vote them against the proposal
(other than the election of directors), but, if the shareholder fails to specify
the number of shares which the shareholder is voting affirmatively, it will be
conclusively presumed that the shareholder's approving vote is with respect to
all shares that the shareholder is entitled to vote. If a quorum is present, the
affirmative vote of the majority of the shares represented at the meeting and
entitled to vote on any matter (other than the election of directors) shall be
the act of the shareholders, unless the vote of a greater number or voting by
classes is required by the Code or by the articles of incorporation.
Subject to the following sentence and the provisions of
Section 708 of the Code, every shareholder entitled to vote at any election of
directors may cumulate such shareholder's votes and give one candidate a number
of votes equal to the number of directors to be elected multiplied by the number
of votes to which the shareholder's shares are entitled, or distribute the
shareholder's votes on the same principle among as many candidates as the
shareholder thinks fit. No shareholder shall be entitled to cumulate votes for
any candidate or candidates pursuant to the preceding sentence unless such
candidate's or candidates' names have been placed in nomination prior to the
voting and the shareholder has given notice at the meeting and prior to the
voting of the shareholder's intention to cumulate the shareholder's votes. If
any one shareholder has given such notice, all shareholders may cumulate their
votes for candidates in nomination.
B-3
No shareholder shall be entitled to cumulative votes if the
provisions of Section 301.5 of the Code allow the corporation to dispense with
cumulative voting.
In any election of directors, the candidates receiving the
highest number of affirmative votes of the shares entitled to be voted for them,
up to the number of directors to be elected, shall be elected. Votes against the
director and votes withheld shall have no legal effect.
SECTION 2.9. RECORD DATE. The board may fix, in advance, a
record date for the determination of the shareholders entitled to notice of any
meeting or to vote or to receive payment of any dividend or other distribution,
or allotment of any rights, or to exercise any rights in respect of any other
lawful action. The record date so fixed shall be not more than 60 days nor less
than 10 days prior to the date of the meeting nor more than 60 days prior to any
other action. When a record date is so fixed, only shareholders of record on
that date are entitled to notice of and to vote at the meeting or to receive the
dividend, distribution, or allotment of rights, or to exercise rights, as the
case may be, notwithstanding any transfer of shares on the books of the
corporation after the record date. A record date for a meeting of shareholders
shall apply to any adjournment of the meeting unless the board fixes a new
record date for the adjourned meeting. The board shall fix a new record date if
the meeting is adjourned for more than 45 days.
If no record date is fixed by the board, the record date for
determining shareholders entitled to notice of or to vote at a meeting of
shareholders shall be at the close of business on the business day next
preceding the day on which notice of the meeting is given or, if notice is
waived, the close of business on the business day next preceding the day on
which the meeting is held. The record date for determining shareholders for any
purpose other than as set forth in this Section 2.9 or Section 2.11 of this
Article II shall be at the close of business on the day on which the board
adopts the resolution relating thereto, or the sixtieth day prior to the date of
such other action, whichever is later.
SECTION 2.10. CONSENT OF ABSENTEES. The transactions of any
meeting of shareholders, however called and noticed, and wherever held, are as
valid as though had at a meeting duly held after regular call and notice, if a
quorum is present either in person or by proxy, and if, either before or after
the meeting, each of the persons entitled to vote, who was not present in person
or by proxy, signs a written waiver of notice, or a consent to the holding of
the meeting or an approval of the minutes thereof. All such waivers, consents or
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting. Attendance of a person at a meeting shall constitute a
waiver of notice of and presence at such meeting, except when the person
objects, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened and except that
attendance at a meeting is not a waiver of any right to object to the
consideration of matters required by the Code to be included in the notice but
not so included, if such objection is expressly made at the meeting. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of shareholders need be specified in any written waiver of notice, consent to
the holding of the meeting or approval of the minutes of the meeting, except
that if action is taken or proposed to be taken for approval of any of those
matters specified in the second paragraph of Section 2.4 of this Article II, the
waiver of notice, consent or approval shall state the general nature of the
proposal.
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SECTION 2.11. ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
Subject to Section 603 of the Code, any action which may be taken at any annual
or special meeting of shareholders may be taken without a meeting and without
prior notice if a consent in writing, setting forth the action so taken, is
signed by the holders of the outstanding shares, or their proxies, having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted. All such consents shall be filed with the secretary of the
corporation and shall be maintained in the corporate records; provided, however,
that (1) unless the consents of all shareholders entitled to vote have been
solicited in writing, notice of any shareholder approval without a meeting by
less than unanimous consent shall be given, as provided by Section 603(b) of the
Code, and (2) in the case of election of directors, such a consent shall be
effective only if signed by the holders of all outstanding shares entitled to
vote for the election of directors; provided, however, that subject to
applicable law, a director may be elected at any time to fill a vacancy on the
board that has not been filled by the directors, by the written consent of the
holders of a majority of the outstanding shares entitled to vote for the
election of directors. Any written consent may be revoked by a writing received
by the secretary of the corporation prior to the time that written consents of
the number of shares required to authorize the proposed action have been filed
with the secretary.
Unless a record date for voting purposes be fixed as provided
in Section 2.9 of this Article II, the record date for determining shareholders
entitled to give consent pursuant to this Section 2.11, when no prior action by
the board has been taken, shall be the day on which the first written consent is
given.
SECTION 2.12. PROXIES. Every person entitled to vote shares or
execute written consents has the right to do so either in person or by one or
more persons authorized by a written proxy executed and dated by such
shareholder and filed with the secretary of the corporation prior to the
convening of any meeting of the shareholders at which any such proxy is to be
used or prior to the use of such written consent. A validly executed proxy which
does not state that it is irrevocable continues in full force and effect unless:
(1) revoked by the person executing it prior to the vote pursuant thereto, by a
writing delivered to the corporation stating that the proxy is revoked or by a
subsequent proxy executed by the person executing the prior proxy and presented
to the meeting, or as to any meeting of shareholders, by attendance at such
meeting and voting in person by the person executing the proxy; or (2) written
notice of the death or incapacity of the maker of the proxy is received by the
corporation before the vote pursuant thereto is counted; provided, however, that
no proxy shall be valid after the expiration of 11 months from the date of its
execution unless otherwise provided in the proxy.
SECTION 2.13. INSPECTORS OF ELECTION. In advance of any
meeting of shareholders, the board may appoint any persons other than nominees
for office as inspectors of election to act at such meeting and any adjournment
thereof. If no inspectors of election are so appointed, or if any persons so
appointed fail to appear or refuse to act, the chairperson of any such meeting
may, and on the request of any shareholder or shareholder's proxy shall, appoint
inspectors of election at the meeting. The number of inspectors shall be either
one (1) or three (3). If inspectors are appointed at a meeting on the request of
one or more shareholders or proxies, the holders of a majority of shares or
their proxies present shall determine whether one (1) or three (3) inspectors
are to be appointed.
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The duties of such inspectors shall be as prescribed by
Section 707(b) of the Code and shall include: determining the number of shares
outstanding and the voting power of each; determining the shares represented at
the meeting; determining the existence of a quorum; determining the
authenticity, validity and the effect of proxies; receiving votes, ballots or
consents; hearing and determining all challenges and questions in any way
arising in connection with the right to vote; counting and tabulating all votes
or consents; determining when the polls shall close; determining the result; and
doing such acts as may be proper to conduct the election or vote with fairness
to all shareholders. If there are three inspectors of election, the decision,
act or certificate of a majority is effective in all respects as the decision,
act or certificate of all.
SECTION 2.14. CONDUCT OF MEETINGS. The president shall preside
at all meetings of the shareholders and shall conduct each such meeting in a
businesslike and fair manner, but shall not be obligated to follow any
technical, formal or parliamentary rules or principles of procedure. The
presiding officer's rulings on procedural matters shall be conclusive and
binding on all shareholders, unless at the time of ruling a request for a vote
is made to the shareholders entitled to vote and represented in person or by
proxy at the meeting, in which case the decision of a majority of such shares
shall be conclusive and binding on all shareholders. Without limiting the
generality of the foregoing, the presiding officer shall have all the powers
usually vested in the presiding officer of a meeting of shareholders.
ARTICLE III
DIRECTORS
SECTION 3.1. POWERS. Subject to the provisions of the Code and
any limitations in the articles of incorporation and these bylaws relating to
actions required to be approved by the shareholders or by the outstanding
shares, the business and affairs of the corporation shall be managed and all
corporate powers shall be exercised by or under the direction of the board. The
board may delegate the management of the day-to-day operations of the business
of the corporation to a management company or other person provided that the
business and affairs of the corporation shall be managed and all corporate
powers shall be exercised under the ultimate direction of the board. Without
prejudice to such general powers, but subject to the same limitations, it is
hereby expressly declared that the board shall have the following powers in
addition to the other powers enumerated in these bylaws:
(a) to select and remove all the other officers, agents and employees
of the corporation, prescribe any qualifications, powers and
duties for them that are consistent with law, the articles of
incorporation or these bylaws, fix their compensation, and
require from them security for faithful service;
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(b) to conduct, manage and control the affairs and business of the
corporation and to make such rules and regulations therefor not
inconsistent with law, the articles of incorporation or these
bylaws, as they may deem best;
(c) to adopt, make and use a corporate seal, to prescribe the forms
of certificates of stock, and to alter the form of such seal and
of such certificates from time to time as in their judgment they
may deem best;
(d) to authorize the issuance of shares of stock of the corporation
from time to time, upon such terms and for such consideration as
may be lawful;
(e) to borrow money and incur indebtedness for the purposes of the
corporation, and to cause to be executed and delivered therefor,
in the corporate name, promissory and capital notes, bonds,
debentures, deeds of trust, mortgages, pledges, hypothecations or
other evidences of debt and securities therefor and any
agreements pertaining thereto;
(f) to prescribe the manner in which and the person or persons by
whom any or all of the checks, drafts, notes, contracts and other
corporate instruments shall be executed;
(g) to appoint and designate, by resolution adopted by a majority of
the authorized number of directors, one or more committees, each
consisting of two or more directors, including the appointment of
alternate members of any committee who may replace any absent
member at any meeting of the committee; and
(h) generally, to do and perform every act or thing whatever that may
pertain to or be authorized by the board of directors of a
corporation incorporated under the laws of this state.
SECTION 3.2. NUMBER AND QUALIFICATION OF DIRECTORS. The
authorized number of directors of the corporation shall not be less than five
(5) nor more than nine (9) until changed by an amendment of the articles of
incorporation or by a bylaw amending this Section 3.2 duly adopted by the vote
or written consent of holders of a majority of the outstanding shares entitled
to vote. The exact number of directors shall be fixed from time to time, within
the range specified in the articles of incorporation or in this Section 3.2: (i)
by a resolution duly adopted by the board; (ii) by a bylaw or amendment thereof
duly adopted by the vote of a majority of the shares entitled to vote
represented at a duly held meeting at which a quorum is present, or by the
written consent of the holders of a majority of the outstanding shares entitled
to vote; or (iii) by approval of the shareholders (as defined in Section 153 of
the Code).
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SECTION 3.3. NOMINATIONS OF DIRECTORS. Nominations for
election of members of the board may be made by the board or by any holder of
any outstanding class of capital stock of the corporation entitled to vote for
the election of directors. Notice of intention to make any nominations (other
than for persons named in the notice of the meeting called for the election of
directors) shall be made in writing and shall be delivered or mailed to the
president of the corporation by the later of: (i) the close of business
twenty-one (21) days prior to any meeting of shareholders called for the
election of directors; or (ii) ten (10) days after the date of mailing of notice
of the meeting to shareholders. Such notification shall contain the following
information to the extent known to the notifying shareholder: (a) the name and
address of each proposed nominee; (b) the principal occupation of each proposed
nominee; (c) the number of shares of capital stock of the corporation owned by
each proposed nominee; (d) the name and residence address of the notifying
shareholder; (e) the number of shares of capital stock of the corporation owned
by the notifying shareholder; (f) the number of shares of capital stock of any
bank, bank holding company, savings and loan association or other depository
institution owned beneficially by the nominee or by the notifying shareholder
and the identities and locations of any such institutions; and (g) whether the
proposed nominee has ever been convicted of or pleaded nolo contendere to any
criminal offense involving dishonesty or breach of trust, filed a petition in
bankruptcy or been adjudged bankrupt. The notification shall be signed by the
nominating shareholder and by each nominee, and shall be accompanied by a
written consent to be named as a nominee for election as a director from each
proposed nominee. Nominations not made in accordance with these procedures shall
be disregarded by the chairperson of the meeting, and upon his or her
instructions, the inspectors of election shall disregard all votes cast for each
such nominee. The foregoing requirements do not apply to the nomination of a
person to replace a proposed nominee who has become unable to serve as a
director between the last day for giving notice in accordance with this
paragraph and the date of election of directors if the procedure called for in
this paragraph was followed with respect to the nomination of the proposed
nominee.
A copy of the preceding paragraph shall be set forth in the
notice to shareholders of any meeting at which directors are to be elected.
SECTION 3.4. ELECTION AND TERM OF OFFICE. The directors shall
be elected at each annual meeting of shareholders, but if any annual meeting is
not held or the directors are not elected thereat, the directors may be elected
at any special meeting of shareholders held for that purpose. Each director
shall hold office until the next annual meeting and until a successor has been
elected and qualified.
SECTION 3.5. VACANCIES. Vacancies on the board, except for a
vacancy created by the removal of a director, may be filled by a majority of the
remaining directors, though less than a quorum, or by a sole remaining director,
and each director so elected shall hold office until the next annual meeting and
until such director's successor has been elected and qualified. A vacancy on the
board created by the removal of a director may only be filled by the vote of a
majority of the shares entitled to vote represented at a duly held meeting at
which a quorum is present, or by the written consent of the holders of all of
the outstanding shares.
The shareholders may elect a director or directors at any time
to fill any vacancy or vacancies not filled by the directors. Any such election
by written consent other than to fill a vacancy created by removal requires the
consent of a majority of the outstanding shares entitled to vote.
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Any director may resign effective upon giving written notice
to the chairperson of the board, the president, secretary, or the board, unless
the notice specifies a later time for the effectiveness of such resignation. If
the board accepts the resignation of a director tendered to take effect at a
future time, the board or the shareholders shall have power to elect a successor
to take office when the resignation is to become effective.
A vacancy or vacancies on the board shall be deemed to exist
in case of the death, resignation or removal of any director, or if the
authorized number of directors is increased, or if the shareholders fail, at any
annual or special meeting of shareholders at which any director or directors are
elected, to elect the full authorized number of directors to be voted for at
that meeting.
The board may declare vacant the office of a director who has
been declared of unsound mind by an order of court or convicted of a felony.
No reduction of the authorized number of directors shall have
the effect of removing any director prior to the expiration of the director's
term of office.
SECTION 3.6. PLACE OF MEETINGS. Regular or special meetings of
the board shall be held at any place within or outside the state of California
which has been designated in the notice of meeting or if there is no notice, at
the principal executive office of the corporation, or at a place designated by
resolution of the board or by the written consent of the board. Any regular or
special meeting is valid wherever held if held upon written consent of all
members of the board given either before or after the meeting and filed with the
secretary of the corporation.
SECTION 3.7. REGULAR MEETINGS. Immediately following each
annual meeting of shareholders, the board shall hold a regular meeting for the
purpose of organization, any desired election of officers and the transaction of
other business. Notice of this meeting shall not be required.
Other regular meetings of the board shall be held at any place
within the State of California which has been designated from time to time by
resolution of the board or by written consent of all members of the board. In
the absence of such designation, regular meetings shall be held at the principal
executive office of the corporation. Special meetings of the board may be held
either at a place so designated, within the State of California, or at the
principal executive office. Call and notice of all regular meetings of the board
are hereby dispensed with.
SECTION 3.8. SPECIAL MEETINGS. Special meetings of the board
for any purpose or purposes may be called at any time by the chairperson of the
board, the president, any vice president, the secretary or by any two directors.
Special meetings of the board shall be held upon four days'
written notice by mail or 48 hours' notice delivered personally or by telephone,
telegraph, telex or other similar means of communication. Any such notice shall
be addressed or delivered to each director at the director's address as shown
upon the records of the corporation or as given to the corporation by the
director for purposes of notice or, if such address is not shown on such records
or is not readily ascertainable, at the place in which the meetings of the
directors are regularly held. Such notice may, but need not, specify the purpose
of the meeting, or the place if the meeting is to be held at the principal
executive office of the corporation.
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Notice by mail shall be deemed to have been given at the time
a written notice is deposited in the United States mails, postage prepaid. Any
other written notice shall be deemed to have been given at the time it is
personally delivered to the recipient or is delivered to a common carrier for
transmission, or actually transmitted by the person giving the notice by
electronic means or by facsimile transmission, to the recipient. Oral notice
shall be deemed to have been given at the time it is communicated, in person or
by telephone or wireless, to the recipient or to a person at the office of the
recipient whom the person giving the notice has reason to believe will promptly
communicate it to the recipient.
SECTION 3.9. QUORUM. A majority of the authorized number of
directors constitutes a quorum of the board for the transaction of business,
except to adjourn as hereinafter provided. Every act or decision done or made by
a majority of the directors present at a meeting duly held at which a quorum is
present shall be regarded as the act of the board, unless a greater number be
required by the articles of incorporation and subject to the provisions of
Section 310 of the Code (as to approval of contracts or transactions in which a
director has a direct or indirect material financial interest) and Section
317(e) of the Code (as to indemnification of directors). A meeting at which a
quorum is initially present may continue to transact business notwithstanding
the withdrawal of directors, if any action taken is approved by at least a
majority of the required quorum for such meeting.
SECTION 3.10. PARTICIPATION IN MEETINGS BY CONFERENCE
TELEPHONE. Members of the board may participate in a meeting through use of a
conference telephone or similar communications equipment, so long as all members
participating in such meeting can hear one another. Participation in a meeting
pursuant to this Section 3.10 constitutes presence in person at such meeting.
SECTION 3.11. WAIVER OF NOTICE. Notice of a meeting need not
be given to any director who signs a waiver of notice or a consent to holding
the meeting or an approval of the minutes of the meeting, whether before or
after the meeting, or who attends the meeting without protesting, before the
meeting or at its commencement, the lack of notice to such director. All such
waivers, consents or approvals shall be filed with the corporate records or made
a part of the minutes of the meeting.
SECTION 3.12. ADJOURNMENT. A majority of the directors
present, whether or not a quorum is present, may adjourn any directors' meeting
to another time and place. Notice of the time and place of holding an adjourned
meeting need not be given, unless the meeting is adjourned for more than
twenty-four hours, in which case notice of the time and place shall be given
before the time of the adjourned meeting to the directors who were not present
at the time of the adjournment.
SECTION 3.13. ACTION WITHOUT MEETING. Any action required or
permitted to be taken by the board may be taken without a meeting if all members
of the board shall individually or collectively consent in writing to such
action. Such written consent or consents shall be filed with the minutes of the
proceedings of the board. Such action by written consent shall have the same
effect as a unanimous vote of the board.
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SECTION 3.14. FEES AND COMPENSATION. Directors and members of
committees may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined by the board. This
Section 3.14 shall not be construed to preclude any director from serving the
corporation in any other capacity as an officer, agent, employee or otherwise,
and receiving compensation for those services.
SECTION 3.15. RIGHTS OF INSPECTION. Every director of the
corporation shall have the absolute right at any reasonable time to inspect and
copy all books, records and documents of every kind and to inspect the physical
properties of the corporation and also of its subsidiary corporations, domestic
or foreign. Such inspection by a director may be made in person or by agent or
attorney, and the right of inspection includes the right to copy and make
extracts.
SECTION 3.16. REMOVAL OF DIRECTOR WITHOUT CAUSE. Any or all of
the directors of the corporation may be removed without cause if the removal is
approved by the outstanding shares, subject to the following:
(a) Except if the corporation has a classified board, no director may
be removed (unless the entire board is removed) when the votes
cast against removal, or not consenting in writing to the
removal, would be sufficient to elect the director if voted
cumulatively at an election at which the same total number of
votes were cast (or, if the action is taken by written consent,
all shares entitled to vote were voted) and the entire number of
directors authorized at the time of the director's most recent
election were then being elected.
(b) When by the provisions of the articles the holders of the shares
of any class or series, voting as a class or series, are entitled
to elect one or more directors, any director so elected may be
removed only by the applicable vote of the holders of the shares
of that class or series.
(c) When the corporation has a classified board, a director may not
be removed if the votes cast against removal of the director, or
not consenting in writing to the removal, would be sufficient to
elect the director if voted cumulatively (without regard to
whether shares may otherwise be voted cumulatively) at an
election at which the same total number of votes were cast (or,
if the action is taken by written consent, all shares entitled to
vote were voted) and either the number of directors elected at
the most recent annual meeting of shareholders, or if greater,
the number of directors for whom removal is being sought, were
then being elected.
SECTION 3.17. REMOVAL OF DIRECTORS BY SHAREHOLDER'S SUIT. The
superior court of the proper county may, at the suit of the shareholders holding
at least 10 percent of the number of outstanding shares of any class, remove
from office any director in case of fraudulent or dishonest acts or gross abuse
of authority or discretion with reference to the corporation and may bar from
reelection any director so removed for a period prescribed by the court. The
corporation shall be made a party to such action.
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ARTICLE IV
OFFICERS
SECTION 4.1. OFFICERS. The officers of the corporation shall
be a president, a secretary and a chief financial officer. The corporation may
also have, at the discretion of the board, a chairperson of the board, a vice
chairperson of the board, one or more vice presidents, one or more assistant
secretaries, one or more assistant financial officers and such other officers as
may be elected or appointed in accordance with the provisions of Section 4.3 of
this Article IV. One person may hold two or more offices, except those of
president and secretary.
SECTION 4.2. APPOINTMENT. The officers of the corporation,
except such officers as may be appointed in accordance with the provisions of
Section 4.3 or Section 4.5 of this Article IV, shall be chosen by, and shall
serve at the pleasure of, the board, and shall hold their respective offices
until their resignation, removal or other disqualification from service, or
until their respective successors shall be appointed, subject to the rights, if
any, of an officer under any contract of employment.
SECTION 4.3. SUBORDINATE OFFICERS. The board may appoint, or
may empower the president to appoint, such other officers as the business of the
corporation may require, each to hold office for such period, have such
authority and perform such duties as are provided in these bylaws or as the
board may from time to time determine.
SECTION 4.4. REMOVAL AND RESIGNATION. Subject to the rights,
if any, of an officer under any contract of employment, any officer may be
removed, either with or without cause, by the board at any time, or, except in
the case of an officer chosen by the board, by any officer upon whom such power
of removal may be conferred by the board.
Any officer may resign at any time by giving written notice to
the corporation without prejudice to the rights, if any, of the corporation
under any contract to which the officer is a party. Any such resignation shall
take effect at the date of the receipt of such notice or at any later time
specified therein; and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
SECTION 4.5. VACANCIES. A vacancy in any office because of
death, resignation, removal, disqualification or any other cause shall be filled
in the manner prescribed in these bylaws for regular appointment to such office.
SECTION 4.6. CHAIRPERSON. The chairperson of the board, if
there shall be such an officer, shall, if present, preside at all meetings of
the board and exercise and perform such other powers and duties as may be
assigned from time to time by the board.
SECTION 4.7. VICE CHAIRPERSON. The vice chairperson of the
board, if there shall be such an officer, shall, in the absence of the
chairperson of the board, preside at all meetings of the board and exercise and
perform such other powers and duties as may be assigned from time to time by the
board.
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SECTION 4.8. PRESIDENT. Subject to such powers, if any, as may
be given by the board to the chairperson of the board, if there shall be such an
officer, the president is the general manager and chief executive officer of the
corporation and has, subject to the control of the board, general supervision,
direction and control of the business and affairs of the corporation. The
president shall preside at all meetings of the shareholders and in the absence
of both the chairperson of the board and the vice chairperson, or if there be
none, at all meetings of the board. The president has the general powers and
duties of management usually vested in the office of president and chief
executive officer of a corporation and such other powers and duties as may be
prescribed by the board.
SECTION 4.9. VICE PRESIDENT. In the absence or disability of
the president, the vice presidents in order of their rank as fixed by the board
or, if not ranked, the vice president designated by the board, shall perform all
the duties of the president and, when so acting, shall have all the powers of,
and be subject to all the restrictions upon, the president. The vice presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the bylaws, the board, the president
or the chairperson of the board.
SECTION 4.10. SECRETARY. The secretary shall keep or cause to
be kept, at the principal executive office or such other place as the board may
order, a book of minutes of all meetings of shareholders, the board and its
committees, with the time and place of holding, whether regular or special, and,
if special, how authorized, the notice or waivers of notice thereof given, the
names of those present at the board and committee meetings, the number of shares
present or represented at shareholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, a copy of the
bylaws of the corporation at the principal executive office or business office
in accordance with Section 213 of the Code. The secretary shall keep, or cause
to be kept, at the principal executive office or at the office of the
corporation's transfer agent or registrar, if one is appointed, a record of its
shareholders, or a duplicate record of its shareholders, giving the names and
addresses of all shareholders and the number and class of shares held by each.
The secretary shall give, or cause to be given, notice of all
the meetings of the shareholders, of the board and of any committees thereof
required by these bylaws or by law to be given, shall keep the seal of the
corporation in safe custody, and shall have such other powers and perform such
other duties as may be prescribed by the board.
SECTION 4.11. ASSISTANT SECRETARY. The assistant secretary or
the assistant secretaries, in the order of their seniority, shall, in the
absence or disability of the secretary, or in the event of such officer's
refusal to act, perform the duties and exercise the powers of the secretary and
shall have such additional powers and discharge such duties as may be assigned
from time to time by the president or by the board.
SECTION 4.12. CHIEF FINANCIAL OFFICER. The chief financial
officer shall keep and maintain, or cause to be kept and maintained, adequate
and correct books and records of the properties and financial and business
transactions of the corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, retained earnings and shares,
and shall send or cause to be sent to the shareholders of the corporation such
financial statements and reports that by law or these bylaws are required to be
sent to them. The books of account shall at all times be open to inspection by
any director of the corporation.
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The chief financial officer shall deposit all monies and other
valuables in the name and to the credit of the corporation with such
depositories as may be designated by the board. The chief financial officer
shall disburse the funds of the corporation as may be ordered by the board,
shall render to the president and directors, whenever they request it, an
account of all transactions engaged in as chief financial officer and of the
financial condition of the corporation, and shall have such other powers and
perform such other duties as may be prescribed by the board.
SECTION 4.13. ASSISTANT FINANCIAL OFFICER. The assistant
financial officer or the assistant financial officers, in the order of their
seniority, shall, in the absence or disability of the chief financial officer,
or in the event of such officer's refusal to act, perform the duties and
exercise the powers of the chief financial officer, and shall have such
additional powers and discharge such duties as may be assigned from time to time
by the president or by the board.
SECTION 4.14. SALARIES. The salaries of the officers shall be
fixed from time to time by the board and no officer shall be prevented from
receiving such salary by reason of the fact that such officer is also a director
of the corporation.
SECTION 4.15. OFFICERS HOLDING MORE THAN ONE OFFICE. Any two
or more offices, except those of president and secretary, may be held by the
same person, but no officer shall execute, acknowledge or verify any instrument
in more than one capacity.
SECTION 4.16. INABILITY TO ACT. In the case of absence or
inability to act of any officer of the corporation and of any person herein
authorized to act in his or her place, the board may from time to time delegate
the powers or duties of such officer to any other officer, or any director or
other person whom it may select.
ARTICLE V
INDEMNIFICATION
SECTION 5.1. DEFINITIONS. For use in this Article V, certain
terms are defined as follows:
(a) "Agent": A director, officer, employee or agent of the
corporation or a person who is or was serving at the request of
the corporation as a director, officer, employee or agent of
another foreign or domestic corporation, partnership, joint
venture, trust, or other enterprise (including service with
respect to employee benefit plans and service on creditors'
committees with respect to any proceeding under the Bankruptcy
Code, assignment for the benefit of creditors or other
liquidation of assets of a debtor of the corporation), or a
person who was a director, officer, employee or agent of a
foreign or domestic corporation which was a predecessor
corporation of the corporation or of another enterprise at the
request of the predecessor corporation.
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(b) "Loss": All expenses, liabilities, and losses including
attorneys' fees, judgments, fines, ERISA excise taxes and
penalties, amounts paid or to be paid in settlement, any
interest, assessments, or other charges imposed thereon, and any
federal, state, local, or foreign taxes imposed on any Agent as a
result of the actual or deemed receipt of any payments under this
Article.
(c) "Proceeding": Any threatened, pending or completed action, suit
or proceeding including any and all appeals, whether civil,
criminal, administrative or investigative.
SECTION 5.2. RIGHT TO INDEMNIFICATION. Each person who was or
is a party or is threatened to be made a party to or is involved (as a party,
witness or otherwise) in any Proceeding, by reason of the fact that he or she,
or a person of whom he or she is the legal representative, is or was an Agent,
is entitled to indemnification. Agent shall be indemnified and held harmless by
the corporation to the fullest extent authorized by law. The right to
indemnification conferred in this Article V shall be a contract right. It is the
corporation's intention that these bylaws provide indemnification in excess of
that expressly permitted by Section 317 of the Code, as authorized by the
corporation's articles of incorporation.
SECTION 5.3. AUTHORITY TO ADVANCE EXPENSES. The right to
indemnification provided in Section 5.2 of these bylaws shall include the right
to be paid, in advance of a Proceeding's final disposition, expenses incurred in
defending that Proceeding, provided, however, that if required by the California
General Corporation Law, as amended, the payment of expenses in advance of the
final disposition of the Proceeding shall be made only upon delivery to the
corporation of an undertaking by or on behalf of the Agent to repay such amount
if it shall ultimately be determined that he or she is not entitled to be
indemnified by the corporation as authorized under this Article V or otherwise.
The Agent's obligation to reimburse the corporation for advances shall be
unsecured and no interest shall be charged thereon.
SECTION 5.4. RIGHT OF CLAIMANT TO BRING SUIT. If a claim under
Section 5.2 or 5.3 of these bylaws is not paid in full by the corporation within
thirty (30) days after a written claim has been received by the corporation, the
claimant may at any time there-after bring suit against the corporation to
recover the unpaid amount of the claim and, if successful in whole or in part,
the claimant shall be entitled to be paid also the expenses (including
attorneys' fees) of prosecuting such claim. It shall be a defense to any such
action (other than an action brought to enforce a claim for expenses incurred in
defending a Proceeding in advance of its final disposition) that the claimant
has not met the standards of conduct that make it permissible under the
California General Corporation Law for the corporation to indemnify the claimant
for the amount claimed. The burden of proving such a defense shall be on the
corporation. Neither the failure of the corporation (including its board of
directors, independent legal counsel, or its shareholders) to have made a
determination prior to the commencement of such action that the indemnification
of the claimant is proper under the circumstances because he or she has met the
applicable standard of conduct set forth in the California General Corporation
Law, nor an actual determination by the corporation (including its board of
directors, independent legal counsel, or its shareholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that claimant has not already met the applicable standard
of conduct.
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SECTION 5.5. PROVISIONS NONEXCLUSIVE. The rights conferred on
any person by this Article V shall not be exclusive of any other rights that
such person may have or hereafter acquire under any statute, provision of the
articles of incorporation, agreement, vote of shareholders or disinterested
directors, or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office. To the extent that any
provision of the articles of incorporation, agreement, or vote of the
shareholders or disinterested directors is inconsistent with these bylaws, the
provision, agreement, or vote shall take precedence.
SECTION 5.6. AUTHORITY TO INSURE. The corporation may purchase
and maintain insurance to protect itself and any Agent against any Loss asserted
against or incurred by such person, whether or not the corporation would have
the power to indemnify the Agent against such Loss under applicable law or the
provisions of this Article V. If the corporation owns all or a portion of the
shares of the company issuing the insurance policy, the company and/or the
policy must meet one of the two sets of conditions set forth in Section 317 of
the Code.
SECTION 5.7. SURVIVAL OF RIGHTS. The rights provided by this
Article V shall continue as to a person who has ceased to be an Agent and shall
inure to the benefit of the heirs, executors, and administrators of such person.
SECTION 5.8. SETTLEMENT OF CLAIMS. The corporation shall not
be liable to indemnify any Agent under this Article V: (a) for any amounts paid
in settlement of any action or claim effected without the corporation's written
consent, which consent shall not be unreasonably withheld; or (b) for any
judicial award, if the corporation was not given a reasonable and timely
opportunity, at its expense, to participate in the defense of such action.
SECTION 5.9. EFFECT OF AMENDMENT. Any amendment, repeal or
modification of this Article V shall not adversely affect any right or
protection of any Agent existing at the time of such amendment, repeal or
modification.
SECTION 5.10. SUBROGATION. Upon payment under this Article V,
the corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of the Agent, who shall execute all papers required and shall
do everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable the corporation effectively to
bring suit to enforce such rights.
SECTION 5.11. NO DUPLICATION OF PAYMENTS. The corporation
shall not be liable under this Article V to make any payment in connection with
any claim made against the Agent to the extent the Agent has otherwise actually
received payment (under any insurance policy, agreement, vote or otherwise) of
the amounts otherwise indemnifiable hereunder.
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ARTICLE VI
OTHER PROVISIONS
SECTION 6.1. INSPECTION OF CORPORATE RECORDS.
(a) A shareholder or shareholders of the corporation holding at least
five percent (5%) in the aggregate of the outstanding voting
shares of the corporation or who hold at least one percent (1%)
of the outstanding voting shares and have filed a Schedule 14B
with the United States Securities and Exchange Commission
relating to the election of directors of the corporation shall
have an absolute right to do either or both of the following:
(i) inspect and copy the record of shareholders' names and
addresses and shareholdings during usual business hours upon
five business days' prior written demand upon the
corporation; or
(ii) obtain from the transfer agent, if any, for the corporation,
upon written demand and upon the tender of its usual charges
for such a list (the amount of which charges shall be stated
to the shareholder by the transfer agent upon request), a
list of the shareholders' names and addresses who are
entitled to vote for the election of directors and their
shareholdings, as of the most recent record date for which
it has been compiled, or as of a date specified by the
shareholder subsequent to the date of demand. The
corporation shall have a responsibility to cause the
transfer agent to comply with this Section 6.1;
(b) The record of shareholders shall also be open to inspection and
copying by any shareholder or holder of a voting trust
certificate at any time during usual business hours upon written
demand on the corporation, for a purpose reasonably related to
such holder's interest as a shareholder or holder of a voting
trust certificate. A written demand for such inspection shall be
accompanied by a statement in reasonable detail of the purpose of
the inspection.
(c) The accounting books and records and minutes of proceedings of
the shareholders and the board and committees of the board shall
be open to inspection upon written demand on the corporation by
any shareholder or holder of a voting trust certificate at any
reasonable time during usual business hours, for a purpose
reasonably related to such holder's interest as a shareholder or
as a holder of such voting trust certificate. The right of
inspection created by this Section 6.1(c) shall extend to the
records of each subsidiary of the corporation. A written demand
for such inspection shall be accompanied by a statement in
reasonable detail of the purpose of the inspection.
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(d) Any inspection and copying under this Section 6.1 may be made in
person or by agent or attorney.
SECTION 6.2. INSPECTION OF BYLAWS. The corporation shall keep
at its principal executive office in California the original or a copy of these
bylaws as amended to date, which shall be open to inspection by shareholders at
all reasonable times during office hours.
SECTION 6.3. EXECUTION OF DOCUMENTS, CONTRACTS. Subject to the
provisions of applicable law, any note, mortgage, evidence of indebtedness,
contract, share certificate, initial transaction statement or written statement,
conveyance or other instrument in writing and any assignment or endorsement
thereof executed or entered into between the corporation and any other person,
when signed by the chairperson of the board, the president or any vice president
and the secretary, any assistant secretary, the chief financial officer or any
assistant financial officer of the corporation, or when stamped with a facsimile
signature of such appropriate officers in the case of share certificates, shall
be valid and binding upon the corporation in the absence of actual knowledge on
the part of the other person that the signing officers did not have authority to
execute the same. Any such instruments may be signed by any other person or
persons and in such manner as from time to time shall be determined by the
board, and unless so authorized by the board, no officer, agent or employee
shall have any power or authority to bind the corporation by any contract or
engagement or to pledge its credit or to render it liable for any purpose or
amount.
SECTION 6.4. CERTIFICATES OF STOCK. Every holder of shares of
the corporation shall be entitled to have a certificate signed in the name of
the corporation by the chairperson or the vice chairperson of the board or the
president or a vice president and by the secretary or an assistant secretary or
the chief financial officer or an assistant financial officer, certifying the
number of shares and the class or series of shares owned by the shareholder. The
signatures on the certificates may be facsimile signatures. If any officer,
transfer agent or registrar who has signed a certificate or whose facsimile
signature has been placed upon the certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the corporation with the same effect as if such person were an
officer, transfer agent or registrar at the date of issue.
Except as provided in this Section 6.4, no new certificate for
shares shall be issued in lieu of an old certificate unless the latter is
surrendered and canceled at the same time. The board may, however, in case any
certificate for shares is alleged to have been lost, stolen or destroyed,
authorize the issuance of a new certificate in lieu thereof, and the corporation
may require that the corporation be given a bond or other adequate security
sufficient to indemnify it against any claim that may be made against it
(including any expense or liability) on account of the alleged loss, theft or
destruction of such certificate or the issuance of such new certificate.
Prior to the due presentment for registration of transfer in
the stock transfer book of the corporation, the registered owner shall be
treated as the person exclusively entitled to vote, to receive notifications and
otherwise to exercise all the rights and powers of an owner, except as expressly
provided otherwise by the laws of the state of California.
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SECTION 6.5. REPRESENTATION OF SHARES OF OTHER CORPORATIONS.
The president or any other officer or officers authorized by the board or the
president are each authorized to vote, represent and exercise on behalf of the
corporation all rights incident to any and all shares or other securities of any
other corporation or corporations standing in the name of the corporation. The
authority herein granted may be exercised either by any such officer in person
or by any other person authorized to do so by proxy or power of attorney duly
executed by said officer.
SECTION 6.6. SEAL. If the corporation desires to obtain a
corporate seal, such corporate seal of the corporation shall consist of two
concentric circles, between which shall be the name of the corporation, and in
the center shall be inscribed the word "Incorporated" and the date of its
incorporation.
SECTION 6.7. FISCAL YEAR. The fiscal year of the corporation
shall begin on the first day of January and end on the 31st day of December of
each year.
SECTION 6.8. CONSTRUCTION AND DEFINITIONS. Unless the context
otherwise requires, the general provisions, rules of construction and
definitions contained in the Code and the California General Corporation Law
shall govern the construction of these bylaws. Without limiting the generality
of this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.
SECTION 6.9. BYLAW PROVISIONS CONTRARY TO OR INCONSISTENT WITH
PROVISIONS OF LAW. Any article, section, subsection, subdivision, sentence,
clause or phrase of these bylaws which, upon being construed in the manner
provided in this Section 6.9, shall be contrary to or inconsistent with any
applicable provision of the Code or other applicable laws of the state of
California or of the United States shall not apply so long as said provisions of
law shall remain in effect, but such result shall not affect the validity or
applicability of any other portions of these bylaws, it being hereby declared
that these bylaws would have been adopted and each article, section, subsection,
subdivision, sentence, clause or phrase thereof, irrespective of the fact that
any one or more articles, sections, subsections, subdivisions, sentences,
clauses or phrases is or are illegal.
ARTICLE VII
AMENDMENTS
SECTION 7.1. AMENDMENT BY SHAREHOLDERS. New bylaws may be
adopted or these bylaws may be amended or repealed by the vote or written
consent of holders of a majority of the outstanding shares entitled to vote;
provided, however, that if the articles of incorporation of the corporation set
forth the number of authorized directors of the corporation, the authorized
number of directors may be changed only by an amendment of the articles of
incorporation and provided also that a bylaw reducing the fixed number or the
minimum number of directors to a number less than five cannot be adopted if the
votes cast against adoption at a meeting, or the shares not consenting in the
case of action by written consent, are equal to more than 16 2/3 percent of the
outstanding shares entitled to vote.
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SECTION 7.2. AMENDMENT BY DIRECTORS. Subject to the rights of
the shareholders as provided in Section 7.1 of this Article VII, bylaws, other
than a bylaw specifying or changing a fixed number of directors or the maximum
or minimum number or changing from a fixed to a variable board or vice versa,
may be adopted, amended or repealed by the board.
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CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
1. That I am the duly elected and acting secretary of Temecula Merger
Corporation, a California corporation; and
2. That the foregoing Bylaws, comprising 20 pages, constitute the Bylaws of
Temecula Merger Corporation as duly adopted by action of the board of directors
of Temecula Merger Corporation duly taken on November 7, 2003.
/s/ Donald A. Pitcher
--------------------------------------------
Donald A. Pitcher
Secretary
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APPENDIX C TO THE PROXY STATEMENT
CALIFORNIA CORPORATIONS CODE SECTION 1300-1313
SECTION 1300. RIGHT TO REQUIRE PURCHASE - "DISSENTING SHARES" AND
"DISSENTING SHAREHOLDER" DEFINED.
(a) If the approval of the outstanding shares (Section 152) of a
corporation is required for a reorganization under subdivisions (a) and (b) or
subdivision (e) or (f) of Section 1201, each shareholder of the corporation
entitled to vote on the transaction and each shareholder of a subsidiary
corporation in a short-form merger may, by complying with this chapter, require
the corporation in which the shareholder holds shares to purchase for cash at
their fair market value the shares owned by the shareholder which are dissenting
shares as defined in subdivision (b). The fair market value shall be determined
as of the day before the first announcement of the terms of the proposed
reorganization or short-form merger, excluding any appreciation or depreciation
in consequence of the proposed action, but adjusted for any stock split, reverse
stock split, or share dividend which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which come
within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or
short-form merger either (A) listed on any national securities exchange
certified by the Commissioner of Corporations under subdivision (o) of Section
25100 or (B) listed on the national Market System of the NASDAQ Stock Market,
and the notice of the meeting of shareholders to act upon the reorganization
summarizes this section and Sections 1301, 1302, 1303 and 1304; provided,
however, that this provision does not apply to any shares with respect to which
there exists any restriction on transfer imposed by the corporation or by any
law or regulation; and provided, further, that this provision does not apply to
any class of shares described in subparagraph (A) or (B) if demands for payment
are filed with respect to 5 percent or more of the outstanding shares of that
class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not voted in
favor of the reorganization or, (B) if described in subparagraph (A) or (B) of
paragraph (1) (without regard to the provisos in that paragraph), were voted
against the reorganization, or which were held of record on the effective date
of a short-form merger; provided, however, that subparagraph (A) rather than
subparagraph (B) of this paragraph applies in any case where the approval
required by Section 1201 is sought by written consent rather than at a meeting.
(3) Which the dissenting shareholder has demanded that the corporation
purchase at their fair market value, in accordance with Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement, in
accordance with Section 1302.
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(c) As used in this chapter, "dissenting shareholder" means the
recordholder of dissenting shares and includes a transferee of record.
SECTION 1301. DEMAND FOR PURCHASE.
(a) If, in the case of a reorganization, any shareholders of a corporation
have a right under Section 1300, subject to compliance with paragraphs (3) and
(4) of subdivision (b) thereof, to require the corporation to purchase their
shares for cash, such corporation shall mail to each such shareholder a notice
of the approval of the reorganization by its outstanding shares (Section 152)
within 10 days after the date of such approval, accompanied by a copy of
Sections 1300, 1302, 1303, 1304 and this section, a statement of the price
determined by the corporation to represent the fair market value of the
dissenting shares, and a brief description of the procedure to be followed if
the shareholder desires to exercise the shareholder's right under such sections.
The statement of price constitutes an offer by the corporation to purchase at
the price stated any dissenting shares as defined in subdivision (b) of Section
1300, unless they lose their status as dissenting shares under Section 1309.
(b) Any shareholder who has a right to require the corporation to purchase
the shareholder's shares for cash under Section 1300, subject to compliance with
paragraphs (3) and (4) of subdivision (b) thereof, and who desires the
corporation to purchase such shares shall make written demand upon the
corporation for the purchase of such shares and payment to the shareholder in
cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of
record by the shareholder which the shareholder demands that the corporation
purchase and shall contain a statement of what such shareholder claims to be the
fair market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market value
constitutes an offer by the shareholder to sell the shares at such price.
SECTION 1302. ENDORSEMENT OF SHARES.
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder, the shareholder shall submit to the corporation at
its principal office or at the office of any transfer agent thereof, (a) if the
shares are certificated securities, the shareholder's certificates representing
any shares which the shareholder demands that the corporation purchase, to be
stamped or endorsed with a statement that the shares are dissenting shares or to
be exchanged for certificates of appropriate denomination so stamped or endorsed
or (b) if the shares are uncertificated securities, written notice of the number
of shares which the shareholder demands that the corporation purchase. Upon
subsequent transfers of the dissenting shares on the books of the corporation,
the new certificates, initial transaction statement, and other written
statements issued therefor shall bear a like statement, together with the name
of the original dissenting holder of the shares.
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SECTION 1303. AGREED PRICE - TIME FOR PAYMENT.
(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the fair
market value of any dissenting shares as between the corporation and the holders
thereof shall be filed with the secretary of the corporation.
(b) Subject to the provisions of Section 1306, payment of the fair market
value of dissenting shares shall be made within 30 days after the amount thereof
has been agreed or within 30 days after any statutory or contractual conditions
to the reorganization are satisfied, whichever is later, and in the case of
certificated securities, subject to surrender of the certificates therefor,
unless provided otherwise by agreement.
SECTION 1304. DISSENTER'S ACTION TO REINFORCE PAYMENT.
(a) If the corporation denies that the shares are dissenting shares, or the
corporation and the shareholder fail to agree upon the fair market value of the
shares, then the shareholder demanding purchase of such shares as dissenting
shares or any interested corporation, within six months after the date on which
notice of the approval by the outstanding shares (Section 152) or notice
pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, but
not thereafter, may file a complaint in the superior court of the proper county
praying the court to determine whether the shares are dissenting shares or the
fair market value of the dissenting shares or both or may intervene in any
action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be joined
as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues. If
the status of the shares as dissenting shares is in issue, the court shall first
determine that issue. If the fair market value of the dissenting shares is in
issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares.
SECTION 1305. APPRAISERS' REPORT - PAYMENT - COSTS.
(a) If the court appoints an appraiser or appraisers, they shall proceed
forthwith to determine the fair market value per share. Within the time fixed by
the court, the appraisers, or a majority of them, shall make and file a report
in the office of the clerk of the court. Thereupon, on the motion of any party,
the report shall be submitted to the court and considered on such evidence as
the court considers relevant. If the court finds the report reasonable, the
court may confirm it.
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(b) If a majority of the appraisers appointed fail to make and file a
report within 10 days from the date of their appointment or within such further
time as may be allowed by the court or the report is not confirmed by the court,
the court shall determine the fair market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be rendered
against the corporation for payment of an amount equal to the fair market value
of each dissenting share multiplied by the number of dissenting shares which any
dissenting shareholder who is a party, or who has intervened, is entitled to
require the corporation to purchase, with interest thereon at the legal rate
from the date on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for the
shares described in the judgment. Any party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301 and 1302 if the value awarded by the court for the shares is more than 125
percent of the price offered by the corporation under subdivision (a) of Section
1301).
SECTION 1306. DISSENTING SHAREHOLDER'S STATUS AS CREDITOR.
To the extent that the provisions of Chapter 5 prevent the payment to any
holders of dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together with interest at
the legal rate on judgments until the date of payment, but subordinate to all
other creditors in any liquidation proceeding, such debt to be payable when
permissible under the provisions of Chapter 5.
SECTION 1307. DIVIDENDS PAID AS CREDIT AGAINST PAYMENT
Cash dividends declared and paid by the corporation upon the dissenting
shares after the date of approval of the reorganization by the outstanding
shares (Section 152) and prior to payment for the shares by the corporation
shall be credited against the total amount to be paid by the corporation
therefor.
SECTION 1308. CONTINUING RIGHTS AND PRIVILEGES OF DISSENTING SHAREHOLDERS.
Except as expressly limited in this chapter, holders of dissenting shares
continue to have all the rights and privileges incident to their shares, until
the fair market value of their shares is agreed upon or determined. A dissenting
shareholder may not withdraw a demand for payment unless the corporation
consents thereto.
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SECTION 1309. TERMINATION OF DISSENTING SHAREHOLDER STATUS.
Dissenting shares lose their status as dissenting shares and the holders
thereof cease to be dissenting shareholders and cease to be entitled to require
the corporation to purchase their shares upon the happening of any of the
following:
(a) The corporation abandons the reorganization. Upon abandonment of the
reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this chapter all
necessary expenses incurred in such proceedings and reasonable attorneys' fees.
(b) The shares are transferred prior to their submission for endorsement in
accordance with Section 1302 or are surrendered for conversion into shares of
another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon the
status of the shares as dissenting shares or upon the purchase price of the
shares, and neither files a complaint or intervenes in a pending action as
provided in Section 1304, within six months after the date on which notice of
the approval by the outstanding shares or notice pursuant to subdivision (i) of
Section 1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
SECTION 1310. SUSPENSION OF PROCEEDINGS FOR PAYMENT PENDING LITIGATION.
If litigation is instituted to test the sufficiency or regularity of the
votes of the shareholders in authorizing a reorganization, any proceedings under
Sections 1304 and 1305 shall be suspended until final determination of such
litigation.
SECTION 1311. EXEMPT SHARES.
This chapter, except Section 1312, does not apply to classes of shares
whose terms and provisions specifically set forth the amount to be paid in
respect to such shares in the event of a reorganization or merger.
SECTION 1312. ATTACKING VALIDITY OF REORGANIZATION OR MERGER.
(a) No shareholder of a corporation who has a right under this chapter to
demand payment of cash for the shares held by the shareholder shall have any
right at law or in equity to attack the validity of the reorganization or
short-form merger, or to have the reorganization or short-form merger set aside
or rescinded, except in an action to test whether the number of shares required
to authorize or approve the reorganization have been legally voted in favor
thereof; but any holder of shares of a class whose terms and provisions
specifically set forth the amount to be paid in respect to them in the event of
a reorganization or short-form merger is entitled to payment in accordance with
those terms and provisions or, if the principal terms of the reorganization are
approved pursuant to subdivision (b) of Section 1202, is entitled to payment in
accordance with the terms and provisions of the approved reorganization.
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(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
apply to any shareholder of such party who has not demanded payment of cash for
such shareholder's shares pursuant to this chapter; but if the shareholder
institutes any action to attack the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded, the shareholder shall not thereafter have any right to demand payment
of cash for the shareholder's shares pursuant to this chapter. The court in any
action attacking the validity of the reorganization or short-form merger or to
have the reorganization or short-form merger set aside or rescinded shall not
restrain or enjoin the consummation of the transaction except upon 10 days'
prior notice to the corporation and upon a determination by the court that
clearly no other remedy will adequately protect the complaining shareholder or
the class of shareholders of which such shareholder is a member.
(c) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger or to have the
reorganization or short-form merger set aside or rescinded, (1) a party to a
reorganization or short-form merger which controls another party to the
reorganization or short-form merger shall have the burden of proving that the
transaction is just and reasonable as to the shareholders of the controlled
party, and (2) a person who controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and reasonable as
to the shareholders of any party so controlled.
SECTION 1313. CONVERSION DEEMED TO CONSTITUTE REORGANIZATION FOR PURPOSES
OF CHAPTER.
A conversion pursuant to Chapter 11.5 (commencing with Section 1150) shall
be deemed to constitute a reorganization for purposes of applying the provisions
of this chapter, in accordance with and to the extent provided in Section 1159.
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PROXY
TEMECULA VALLEY BANCORP INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Temecula Valley Bancorp Inc., a Delaware
corporation (the "Company") hereby acknowledges receipt of the Proxy Statement
and the Notice of the Special Meeting of Shareholders to be held on Thursday,
December 18, 2003 at 3:00 a.m., local time, at Temecula Creek Inn, 44501 Rainbow
Canyon Road, Temecula, CA 92590 ("special Meeting") and hereby further revokes
all previous proxies and appoints Dr. Steven W. Aichle, Dr. Robert P. Beck and
Richard W. Wright, and any of them individually, as proxies of the undersigned
to appear, attend and vote all of the shares of common stock of the Company
standing in the name of the undersigned on the record date at the Special
Meeting and any adjournments or postponements thereof, with the same effect as
if the undersigned were present and voting the shares.
The Board of Directors of the Company recommends a vote "FOR" Proposal 1.
Please mark your vote in blue or black ink as shown here [X].
1. Approval of the Agreement and Plan of Merger pursuant to which a merger
would occur to effect a change in the Company's state of incorporation from
Delaware to California and with the change, to effect a contemporaneous
two-for-one stock split of the Company's Common Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS YOU HAVE INDICATED
ABOVE. IF NO INDICATION HAS BEEN MADE, THE SHARES REPRESENTED BY THIS PROXY WILL
BE VOTED "FOR" PROPOSAL 1. THE PERSONS NAMED AS PROXY WILL USE THEIR DISCRETION
WITH RESPECT TO ANY MATTER.
Sign exactly as your name appears on your share certificate. When signing
as attorney, executor, administrator, trustee or guardian, please give full
title. If more than one trustee, all should sign. All joint owners should sign.
If a corporation, sign in full corporation name by president or other authorized
officer. If a partnership, sign in partnership name by authorized person.
Persons signing in a fiduciary capacity should indicate their full title in such
capacity.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE. THIS PROXY IS REVOCABLE AT ANY TIME BEFORE IT IS EXERCISED.
Dated: , 2003
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Signature
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