SCHEDULE 14A - INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities and Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ ] Confidential, for use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-12
Temecula Valley Bancorp Inc.
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(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Securities and Exchange Act Rules
14a-6(i)(1) and 0-11.
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Securities and 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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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Securities
and Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date of
its filing.
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4) Date Filed:
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TEMECULA VALLEY BANCORP
April 19, 2005
Dear Shareholder:
I am pleased to invite you to the 2005 Annual Meeting of Shareholders of
Temecula Valley Bancorp Inc. We will hold the meeting at 6:00 p.m. on Tuesday,
May 24, 2005 at our main office located at 27710 Jefferson Avenue, Suite A100,
Temecula, California 92590.
This booklet contains the Notice of Annual Meeting and the Proxy Statement
and is accompanied by a proxy card. The Proxy Statement describes the business
that we will conduct at the meeting and provides information about Temecula
Valley Bancorp Inc. and its principal subsidiary, Temecula Valley Bank.
I hope that you can join us on the 24th of May. Whether or not you plan to
attend, please sign and return your proxy card as soon as possible. Your opinion
and your vote are important to us. Voting by proxy will not prevent you from
voting in person if you attend the meeting, but it will ensure that your vote is
counted if you are unable to attend. You may be eligible to vote electronically
over the Internet or by telephone by following the instructions on the proxy
card.
Sincerely,
/s/ Stephen H. Wacknitz
------------------------
Stephen H. Wacknitz
President and Chief Executive Officer
Chairman of the Board
TEMECULA VALLEY BANCORP
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 24, 2005
The 2005 Annual Meeting of Shareholders of Temecula Valley Bancorp Inc.
will be held at 27710 Jefferson Avenue, Suite A100, Temecula, California 92590
at 6:00 p.m. on Tuesday, May 24, 2005 for the following purposes:
1. To elect seven directors to serve on our Board of Directors until the
2006 Annual Meeting of Shareholders or until their successors have
been duly elected and qualified.
2. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
Shareholders of record of our common stock at the close of business on
March 28, 2005, the record date, are entitled to vote at the meeting.
Section 3.3 of our bylaws governs nominations for election of members of
our Board of Directors, as follows:
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.
You are urged to sign and return the enclosed proxy card as promptly as
possible, whether or not you attend the meeting in person. The enclosed proxy
card 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 card bearing a later date with our Secretary, or by 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 executive 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 other letter from that firm confirming their ownership of shares
as of the record date.
A copy of our annual report is enclosed with this notice. Additional copies
may be obtained, without charge, by contacting Donald A. Pitcher, our Chief
Financial Officer and Secretary, 27710 Jefferson Avenue, Suite A100, Temecula,
California 92590, (951) 694-9940.
By Order of the Board of Directors:
/s/ Donald A. Pitcher
---------------------
Temecula, California Donald A. Pitcher
April 19, 2005 Secretary
TABLE OF CONTENTS
INTRODUCTION 1
ABOUT THE MEETING 1
BENEFICIAL OWNERSHIP 5
PROPOSAL 1 - ELECTION OF DIRECTORS 7
INFORMATION ABOUT CORPORATE GOVERNANCE AND 9
OUR DIRECTORS AND EXECUTIVE OFFICERS 9
EXECUTIVE OFFICERS AND COMPENSATION 15
EQUITY COMPENSATION PLAN INFORMATION AS OF DECEMBER 31, 2004 21
COMMON STOCK PERFORMANCE CHART 25
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE 27
ADDITIONAL INFORMATION 28
OTHER MATTERS 28
ANNUAL REPORT 29
TEMECULA VALLEY BANCORP INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 24, 2005
INTRODUCTION
Our Board of Directors is soliciting proxies for this year's Annual Meeting
of Shareholders. This proxy statement contains important information for you to
consider when deciding how to vote on the matters brought before the meeting.
Please read it carefully.
Our Board of Directors set the close of business on March 28, 2005 as the
record date for the Annual Meeting. Shareholders who were the record holders of
Temecula Valley Bancorp Inc. common stock as of that date are entitled to vote
at the meeting, with each share entitled to one vote. There were 8,812,283
shares of our common stock outstanding on March 28, 2005, held of record by
approximately 442 registered shareholders.
Voting materials, which include this proxy statement, a proxy card and the
2004 Annual Report, are being mailed to shareholders on or about April 19, 2005.
ABOUT THE MEETING
Why am I receiving this proxy statement and proxy card?
You are receiving this proxy statement and proxy card because you owned
shares of our common stock as of the close of business on March 28, 2005. This
proxy statement describes issues on which we would like you to vote.
When you sign the proxy card, you appoint Dr. Robert P. Beck and Mr.
Richard W. Wright as your representatives at the meeting. Dr. Beck and Mr.
Wright, or their substitutes, will vote your shares at the Annual Meeting as you
have instructed on the proxy card. This way, your shares will be voted even if
you cannot attend the meeting.
Who is soliciting my proxy and who is paying the cost of solicitation?
Our Board of Directors is sending you this proxy statement in connection
with its solicitation of proxies for use at our 2005 Annual Meeting. Certain
directors, officers and employees of our Company may solicit proxies by mail,
telephone, facsimile or in person.
Temecula Valley Bancorp Inc. will pay for the costs of solicitation. We do
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 our common stock. However, we reserve
the right to hire special employees or paid solicitors to assist us in obtaining
proxies if we believe it is necessary to secure a quorum.
1
What am I voting on?
At the Annual Meeting you will be asked to vote on the re-election of our
existing seven directors to serve on our Board of Directors until the 2006
Annual Meeting of Shareholders or until their successors have been duly
qualified and elected.
Who is entitled to vote?
Only shareholders who were owners of record of our common stock as of the
close of business on March 28, 2005 are entitled to receive notice of the Annual
Meeting and to vote the shares that they held on that date at the meeting, or
any postponements or adjournments of the Annual Meeting.
How many votes do I have?
Each share of common stock entitles the holder of record to one vote on any
matter coming before the Annual Meeting. In voting for directors, however,
shares may be voted cumulatively as described below. On any matter other than
the 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, but if the shareholder fails to specify the number of
shares that the shareholder is voting affirmatively, then it will be
conclusively presumed that the shareholder's approving vote is with respect to
all shares that the shareholder is entitled to vote.
How do I vote?
You may vote your shares either in person at the Annual Meeting or by
proxy. At the Annual Meeting, you can obtain a ballot. To vote by proxy, you
should mark, date, sign and mail the enclosed proxy card in the prepaid envelope
provided. If your shares are registered in your own name and you attend the
meeting, you may deliver your completed proxy card in person. "Street name"
shareholders, that is, those shareholders whose shares are held in the name of
and through a broker or nominee, who wish to vote at the meeting will need to
obtain proxy materials from the institution that holds their shares or instruct
their broker or nominee how to vote.
You may be eligible to vote your shares electronically over the Internet or
by telephone. Please refer to the enclosed proxy card for additional information
and instructions.
Can I change my vote after I return my proxy card?
Yes. You may revoke your proxy and change your vote at any time before the
proxy is exercised at the meeting by filing with our Secretary at our main
office either a notice of revocation or another signed proxy card or ballot
bearing a later date. The powers of the proxy holders will be suspended if you
attend the meeting in person and so request, although attendance at the meeting
will not by itself revoke a previously granted proxy.
2
What are the Board of Directors' recommendations?
Unless you give other instructions on your proxy card, Dr. Beck and Mr.
Wright, as the persons named as proxy holders on the proxy card, will vote as
recommended by our Board of Directors. Our Board of Directors recommends a vote
FOR the election of all of the nominated directors listed in this proxy
statement.
If any other matters are considered at the meeting, Dr. Beck and Mr. Wright
will vote as recommended by the Board of Directors. If the Board of Directors
does not give a recommendation, Dr. Beck and Mr. Wright will have discretion to
vote as they think best.
Will my shares be voted if I do not sign and return my proxy card?
If your shares are registered in your name and you do not return your proxy
card or do not vote in person at the Annual Meeting, your shares will not be
voted.
If your shares are held in street name and you do not submit voting
instructions to your broker, your broker may vote your shares at this meeting on
the election of directors.
How many shares must be present to hold the Annual Meeting?
A majority of our outstanding shares of common stock as of March 28, 2005
(a quorum) must be present at the Annual Meeting in order to hold the meeting
and conduct business. Shares are counted as present at the meeting if a
shareholder is present and votes in person at the meeting or has properly
submitted a proxy card. As of March 28, 2005, the record date for the Annual
Meeting, 8,812,283 shares of our common stock were outstanding and eligible to
vote.
What vote is required to elect directors?
The seven director nominees who receive the highest number of FOR votes
will be elected. You may vote FOR all or some of the nominees or WITHHOLD
AUTHORITY for all or some of the nominees.
Each shareholder may be entitled to exercise cumulative voting rights in
connection with the election of directors. In such case, each shareholder would
be entitled to as many votes as equals the number of shares of common stock held
by such shareholder multiplied by the number of directors to be elected, and
such shareholder could cast all of such votes for a single nominee or could
distribute them among two or more nominees. For example, if you own 10 shares of
common stock of our Company and 7 directors are being elected, you have 70 votes
- - you can cast all of them for one nominee, or split them among two or more
nominees if you so choose. No shareholder, however, shall be entitled to
cumulate votes (that is, cast for any one or more nominees a number of votes
greater than the number of shares of common stock of our Company held by such
shareholder) unless the name(s) of the nominee(s) has (have) been placed in
nomination prior to the commencement of the voting and a shareholder has given
notice at the meeting prior to the voting of the intention to cumulate votes.
3
If any shareholder has given notice to cumulate votes, all shareholders may
cumulate their votes for nominees, in which event votes represented by proxies
delivered pursuant to this proxy statement may be cumulated, in the discretion
of the proxy holders, in accordance with the recommendation of the Board of
Directors. Discretionary authority to cumulate votes in that event is,
therefore, solicited in this proxy statement. The person or persons holding the
proxies solicited by our Board of Directors will exercise their cumulative
voting rights, at their discretion, to vote the shares covered by the proxies
they hold in such a way as to ensure the election of as many of the seven
nominees of the Board of Directors as they deem possible. This discretion and
authority of the proxy holders may be withheld by checking the box on the proxy
card marked "withhold authority for all nominees." However, such an instruction
will also deny the proxy holders the authority to vote for any or all of the
nominees of the Board of Directors, even if cumulative voting is not called for
at the Annual Meeting.
You may choose to withhold from the proxy holders the authority to vote for
any of the individual candidates nominated by our Board of Directors by marking
the appropriate box on the proxy card and filling in the circle next to the
names of the disfavored candidates as they appear on the proxy card. In that
event, the proxy holders will not cast any of your votes for candidates whose
names have been indicated by filling in the circle, whether or not cumulative
voting is called for at the Annual Meeting. However, the proxy holders will
retain the authority to vote for the candidates nominated by the Board of
Directors whose names have not been struck out or otherwise indicated as
disfavored by filling in the circle and for any candidates who may be properly
nominated at the Annual Meeting. If you wish to specify the manner in which your
votes are allocated in the event of cumulative voting, you must appear and vote
in person at the Annual Meeting. Ballots will be available at the Annual Meeting
for shareholders who desire to vote in person.
How can I make a nomination?
Nominations made other than by the Board of Directors may be made by
notification in writing delivered or mailed to our principal offices in
accordance with Section 3.3 of our bylaws, as specified in the Notice of Annual
Meeting we distributed with this proxy statement.
Can I vote on other matters?
We have not received timely notice of any shareholder proposals to be
considered at the Annual Meeting, and our Board of Directors does not know of
any other matters to be brought before the Annual Meeting. However, subject to
the provisions of applicable law, any proper matter may be presented at the
meeting for action. The proxy holders will use their discretion in voting on any
such matters. You may vote on such matters only by attending the Annual Meeting
and voting in person.
4
When are proposals for the 2006 Annual Meeting due?
Proposals by our shareholders to transact business at our 2006 Annual
Meeting must be delivered to our Secretary at our principal offices no later
than: (i) December 20, 2005, unless the date for the 2006 Annual Meeting is more
than 30 days from May 24, 2006, in which case the deadline is a reasonable time
before we begin to print and mail proxy materials; or (ii) a reasonable time
before we mail our proxy materials next year. In addition to these advance
notice requirements, there are other requirements that a shareholder must meet
in order to have a proposal included in our proxy statement under the rules of
the Securities and Exchange Commission ("SEC").
Notice of intention to make nominations for the Board of Directors must be
made in writing pursuant to the requirements of Section 3.3 of our bylaws and
delivered or mailed to our President by the later of the close of business 21
days prior to any meeting of shareholders called for the election of directors
or 10 days after the date of mailing of notice of the meeting to shareholders.
BENEFICIAL OWNERSHIP
Are there any beneficial owners of more than 5% of our outstanding stock?
Currently, to our knowledge, two shareholders beneficially own more than 5%
of outstanding shares of our common stock. They are listed in the table below.
How much stock do our directors and executive officers beneficially own?
The following table shows, as of March 28, 2005, the amount of our common
stock beneficially owned (unless otherwise indicated) by (a) each director and
director nominee; (b) each of the current executive officers of our Company and
Temecula Valley Bank, N.A. ("Bank") named in the Summary Compensation Table
below; (c) each person known to us to be the beneficial owner of more than 5% of
our common stock; and (d) all of our and the Bank's directors, director
nominees, and executive officers(1) as a group.
Except as otherwise noted, we believe 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.
Percentages are based on 8,812,283 shares of common stock outstanding as of the
date of the table.
5
Common
Shares Owned Percent
Name & Position(2) Beneficially (3) of Class
- ------------------ ---------------- --------
Dr. Steven W. Aichle, Nominee/Director, Company/Bank 316,152 (4) 3.57%
James W. Andrews, EVP/Real Estate Manager/Bank 26,664 (5) 0.30%
Dr. Robert P. Beck, Nominee/Director, Company/Bank 230,576 (6) 2.63%
Neil M. Cleveland, Nominee/Director, Company/Bank 171,402 (7) 1.93%
George Cossolias, Nominee/Director, Company/Bank 10,502 (8) 0.12%
Thomas P. Ivory, EVP/East County Reg. Mgr., Bank 49,332 (9) 0.56%
Luther J. Mohr, Nominee/Vice COB/COO, Company/Bank / 468,350 (10) 5.23%
5% Shareholder
Stephen H. Wacknitz, Nominee/President/CEO/COB, Bank 752,721 (11) 8.35%
Company/5% Shareholder
Scott J. Word, EVP/SLO, Bank 77,932 (12) 0.92%
Richard W. Wright, Nominee/Director, Company/Bank 191,020 (13) 2.15%
ALL DIRECTORS AND
EXECUTIVE OFFICERS (13 in number) 2,561,485 25.85%
(1) As used throughout the proxy statement, the term "Executive Officer"
means the Bank's President/Chief Executive Officer, Chief Operating
Officer, Chief Credit Officer, Senior Loan Officer, Executive Vice
Presidents, SBA Department Manager, East County Regional Manager and
Chief Financial Officer. An officer who does not participate in major
policy-making functions is not included in the definition of the term
"Executive Officer."
(2) The business or mailing 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 163,714 underlying shares
that are exercisable within 60 days of the date of the table.
(5) Includes as outstanding stock options with 26,664 underlying shares
that are exercisable within 60 days after the date of this table.
(6) Includes as outstanding stock options with 30,085 underlying shares
that are exercisable within 60 days of the date of the table.
(7) Includes as outstanding stock options with 144,000 underlying shares
that are exercisable within 60 days of the date of the table.
(8) Includes as outstanding stock options with 6,578 underlying shares
that are exercisable within 60 days after the date of this table
(9) Includes as outstanding stock options with 5,332 underlying shares
that are exercisable within 60 days of the date of the table.
(10) Includes as outstanding stock options with 210,000 underlying shares
that are exercisable within 60 days of the date of the table.
(11) Includes as outstanding stock options with 262,551 underlying shares
that are exercisable within 60 days of the date of the table.
(12) Includes as outstanding stock options with 48,332 underlying shares
that are exercisable within 60 days of the date of the table.
(13) Includes as outstanding stock options with 129,000 underlying shares
that are exercisable within 60 days after the date of the table.
6
PROPOSAL 1 - ELECTION OF DIRECTORS
How many directors are nominated?
Our bylaws provide that the number of directors to be elected by the
shareholders will be at least five and not more than nine. Under our bylaws, our
Board of Directors has authority to decide the exact number of directors to be
elected within these limits. Our Board has fixed the number of directors to be
elected at the Annual Meeting at seven and has nominated the persons listed on
the following page for election as directors to serve until the 2006 Annual
Meeting or until their successors are elected.
What happens if a nominee refuses or is unable to stand for election?
The Board of Directors may reduce the number of seats on the Board or
designate a replacement nominee. If the Board of Directors designates a
substitute, shares represented by proxy will be voted FOR the substitute nominee
unless the proxy withholds authority to vote for all nominees listed. The Board
of Directors presently has no knowledge that any of the nominees will refuse or
be unable to serve.
Who are the nominees?
Information regarding each of the nominees is provided below, including
each nominee's name and age, principal occupation during the past five years,
and the year first elected as a director of the Bank and our Company. All of the
nominees are presently directors of our Company and the Bank. Mr. Cossolias
joined our Bank and Company Boards in 2004. Mr. Cossolias was initially
nominated to the Boards by all other Board members of both entities and, at that
time, he filled a vacancy created by Board action which increased the size of
both Boards.
7
Year First
Elected to
Bank/Com-
Name / Age pany Board Business Experience During Past Five Years and Other Information
---------- ---------- ----------------------------------------------------------------
Steven W. Aichle 1996/2002 Business and civic leader in the community and surrounding communities of
the Bank for the last 23 years; Founded
61 Avocado Animal Hospital, Fallbrook, 1974 and continues as
owner/veterinarian; Owner/Founder of Fallbrook Fine Art Gallery since
1985.
Robert P. Beck 1996/2002 Opened his practice in 1970 as the first dentist in Temecula, California;
has been involved in the Chamber of Commerce
60 and civic affairs throughout his years in Temecula.
Neil M. Cleveland 1996/2002 Involved in the brokerage, development, management and consulting
business relative to commercial and industrial
53 real estate; Co-owner of Rancho Land Associates since 1980.
George Cossolias 2004/2004 Certified Public Accountant with own practice since 1964. Member of
American Institute of Certified Public Accountants
69 since 1972. Member, Society of California Accountants since 1985 and
served as its president of local chapter and as lieutenant governor for
Southern California district. Expertise in taxation and estate/trust
execution. Mr. Cossolias is a trustee of the following funds: Sycuan
Funds, Wireless Fund and Blue Chip Investor Funds.
Luther J. Mohr 1996/2002 Chief Operating Officer of the Bank from 1996 to 2005; Senior Vice
President and Administrative Officer at Fallbrook National
69 Bank, Fallbrook, California from May 1990 to December 1995; at various
times Senior Vice President, Area Administrator, and Corporate Services
Manager for Torrey Pines Bank, Solana Beach, California from January 1981
to April 1990; Vice President/ Manager of the Fallbrook office from
September 1977 to December 1980, with Rancho Santa Fe Savings and Loan.
Stephen H. Wacknitz 1996/2002 President/Chief Executive Officer of the Bank since 1996; President/Chief
Executive Officer at Fallbrook National Bank,
65 Fallbrook, California, from April 1984 to October 1995; Senior Vice
President and the Senior Loan Officer from April 1982 to March 1984 at
Rancho Vista National Bank; Vice President and Manager from September
1977 to April 1982, employed by Grossmont Bank.
Richard W. Wright 1996/2002 Since 1994, self-employed manager of real estate investments. From 1989
to 1994, insurance inspector for P.E. McKinney,
76 Inc., Reseda, California. From 1987 to 1989, an insurance
agent with Glen-Fed Insurance. From 1986 to 1987, insurance agent for
Western Financial Savings Bank and Great American Wilshire Federal
Savings and Loan. From 1964 to 1986, Vice President of Los Angeles
Federal Savings and President of the Insurance Brokerage of Los Angeles
Federal Savings.
8
INFORMATION ABOUT CORPORATE GOVERNANCE AND
OUR DIRECTORS AND EXECUTIVE OFFICERS
Our Board of Directors
The Board of both our Company and the Bank oversees our business and
monitors the performance of management. In accordance with corporate governance
principles, the Board does not involve itself in day-to-day operations. The
directors keep themselves informed through, among other things, discussions with
the Chief Executive Officer (who is also a Board member) other key executives
and our principal advisors (legal counsel, outside auditors and other
consultants), by reading reports and other materials that we send them and by
participating in Board and committee meetings. The Board of Directors of our
Company and the Bank met 13 times in person during 2004; the Bank's Board
participated in telephone approvals, followed by ratification of such action at
subsequent Bank Board meetings on 8 occasions. Each director attended at least
75% of the total number of meetings of the Board of Directors and committees on
which he served of both our Company and the Bank.
Shareholder Communications to Our Board
Our shareholders can communicate with our Board of Directors by mailing or
delivering any such communication to our Board in care of our Chairman of the
Board as follows: Board of Directors, Attn: Stephen H. Wacknitz, Temecula Valley
Bancorp Inc., 27710 Jefferson Avenue, Suite A100, Temecula, California 92590.
Any such communication should state the number of shares owned by the
shareholder.
Attendance at Shareholders Meetings
It is our policy to have all our Board members attend our shareholders
meetings. Last year, all of our directors attended the 2004 annual meeting.
Committees
The Board has appointed an Executive Committee, a Stock Option Committee
and an Audit Committee, among others. The full Board performs the nomination and
compensation functions as well as the stock option tasks that such committees
might otherwise perform.
Functions of Nomination Committee Performed by the Board
The Board does not have a standing nominating committee or a committee
performing similar functions because the full Board has historically performed
these functions. All Board members participate in the nominating process, and
they include: Steven W. Aichle, Robert P. Beck, Neil M. Cleveland, George
Cossolias, Luther J. Mohr, Stephen H. Wacknitz and Richard W. Wright. Of the
foregoing directors, all of the members meet the independence standards in
accordance with the NASDAQ corporate governance listing standards, except Mr.
Wacknitz and Mr. Mohr, each of whom is an employee of our Company. The Board in
the capacity of the nomination function has not adopted a charter. The Board
follows the following parameters (adopted by Board resolution) with regard to
the consideration of any director candidates recommended by our shareholders and
believes it is appropriate to address each such situation on a case-by-case
basis. The Board will consider candidates recommended by our shareholders, and
will do so as soon as practical, generally at the next scheduled Board meeting,
upon a written submission of a name, along with the background information about
the person with a description of why the person would be beneficial to us and
our shareholders in the manner described above under "Shareholder Communications
to Our Board." The minimum qualifications, qualities and skills that the Board
believes must be met for any director candidate (including those that may be
nominated by the board) are as follows: 1) community banking board experience or
comparable experience; 2) understanding of financial matters, including the
capability of reading and understanding a financial statement; and 3) an ability
to support us through expertise, business development or as otherwise
determined. The Board has not established a process for identifying and
evaluating nominees for director, including nominees recommended by our
shareholders. It is anticipated that any nominee, whether suggested by one of
our shareholders or by a member of our Board, will receive the same
consideration, so long as the recommending shareholders represent at least five
percent of our outstanding voting securities and such securities have been held
for at least one year prior to the time of such nomination. In the event, a
nomination is made by holders of less than five persons or holders that have
held our securities for less than a year, the Board is under no obligation to
consider the proposed candidate but it may do so, in its sole discretion.
9
Executive Committee
The Executive Committee may exercise all of the authority of the Board of
Directors during the intervals between meetings of the Bank's Board of
Directors, except that the Executive Committee does not have the authority to:
(1) approve any action which, under law, the Articles of Incorporation or Bylaws
also requires shareholder approval; (2) fill vacancies on the Board of Directors
or any committee of the Board of Directors; (3) fix director compensation for
serving on the Board of Directors or any committee; (4) adopt, amend or repeal
the Bylaws of the Bank; (5) amend or repeal any resolution of the Board of
Directors that by its express terms is not so amendable or repealable; (6) make
a distribution to shareholders of Bank, except at a rate or amount or within a
range determined by the Board of Directors; (7) appoint any other committees of
the Board of Directors or members of such committees; (8) authorize or approve
the issuance or sale or contract for sale of shares; or (9) determine rights and
preferences with regard to any class or series of shares. Current members of the
Executive Committee are: Steven W. Aichle, Neil M. Cleveland, Luther J. Mohr and
Stephen H. Wacknitz (Chairman). There were no meetings of the Executive
Committee in 2004.
Stock Option Committee
The Stock Option Committee is responsible for administering our stock
option plans, according to the terms of the plans, including but not limited to,
identification of stock option recipients and specification of stock option
terms. The Stock Option Committee members are Neil M. Cleveland (Chairman) and
Richard W. Wright. The Stock Option Committee did not meet in 2004. All matters
that would normally come before that committee were performed by the full Board
of Directors of our Company.
10
Audit Committee
The responsibilities of the Audit Committee are described in the Report of
the Audit Committee set forth below. Current members of the Audit Committee,
none of whom are officers or employees of our Bank or Company, are: Steven W.
Aichle, Robert P. Beck, George Cossolias (Chairman) and Richard W. Wright. Our
Board of Directors has determined that George Cossolias qualifies as an "audit
committee financial expert" as that term is used in the rules and regulations of
the SEC. There were 5 meetings of the Audit Committee during 2004.
Report of the Audit Committee
The Audit Committee is composed of four members of our Board of Directors
who meet the independence standards in accordance with the Nasdaq corporate
governance listing standards and the rules and regulations of the SEC, except
that a company owned by Dr. Aichle receives $1,000 per annum for services
provided to the Bank. The Audit Committee recommends to the Board the selection
and retention of our independent registered public accounting firm, and assists
the Board in its oversight of the integrity of our financial statements. The
Audit Committee oversees the performance of the independent registered public
accounting firm in their conduct of the audit. The Audit Committee operates
under a written charter prepared by the Audit Committee and adopted by the
Board. The Audit Committee reviews and assesses the adequacy of its charter on
an annual basis. The charter was filed as an appendix to our definitive proxy
statement for our 2004 annual meeting.
The Audit Committee has met with representatives of management, legal
counsel and the independent registered public accounting firm to further its
understanding of applicable laws, rules and regulations.
The Audit Committee members are not professional financial institutions
auditors, and their functions are not intended to duplicate or to certify the
activities of management or the independent registered public accounting firm.
In performing its functions, the Audit Committee acts only in an oversight
capacity and necessarily relies on the work and assurances of our management,
which has the primary responsibility for financial statements and reports, and
of the independent registered public accounting firm, who, in their report,
express an opinion on the conformity of our annual financial statements to
generally accepted accounting principles. In fulfilling its oversight
responsibilities, the Audit Committee reviewed the audited consolidated
financial statements and discussed such statements with management and the
independent registered public accounting firm.
11
Management represented to the Audit Committee that our consolidated
financial statements were prepared in accordance with generally accepted
accounting principles. The Audit Committee discussed with the independent
auditor matters required to be discussed by Statement on Auditing Standards No.
61 (Communication with Audit Committees) as amended, including the auditor's
judgment about the quality as well as the acceptability of our accounting
principles, as applied in our financial reporting.
Our independent registered public accounting firm also provided to the
Audit Committee the written disclosures and the letter from the independent
registered public accounting firm required by the Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees). The Audit
Committee discussed with the independent registered public accounting firm the
firm's independence.
Based on the Audit Committee's above review of the audited financial
statements and discussion with management and the independent registered public
accounting firm, the Audit Committee's review of the representations of
management and the report of the independent registered public accounting firm
to the Audit Committee, the Audit Committee recommended that the Board of
Directors include the audited consolidated financial statements in our annual
report on Form 10-K for the year ended December 31, 2004, for filing with the
SEC. The Audit Committee also has approved the selection of our independent
registered public accounting firm.
Respectfully submitted by the members of the Audit Committee:
Steven W. Aichle Robert P. Beck George Cossolias Richard W. Wright
(Chairman)
Board's Report on Executive Compensation
Set forth below is a report of our Board of Directors addressing the
compensation policies for 2004 applicable to our executive officers.
The Compensation Report
Decisions regarding the compensation of our executive officers, including
those related to stock options, are considered by the full Board of Directors.
Since the Board of Directors is responsible for setting the compensation of our
executive officers, including that of the Chief Executive Officer/ President and
the Chief Operating Officer, Mr. Wacknitz and Mr. Mohr do not participate in the
discussions and decisions of the Board relating to their respective performance
or compensation.
Compensation Policies. Our executive compensation policies and specific
executive compensation programs are adopted and administered in accordance with
the principal goal of maximizing return on shareholders' equity. The Board
believes that this performance goal, and the long-term interests of our
shareholders, are best achieved by attracting and retaining management of high
quality, and that such management will require commensurate compensation. The
Board believes that our executive officer compensation policies are consistent
with this policy.
12
In addition, the Board believes that, while our compensation programs
should reflect the philosophy that executive compensation levels be linked to
our performance, such compensation programs should also be competitive and
consistent with those provided to others holding positions of similar
responsibility in the banking and financial services industry. Our compensation
plans are designed to assist us in attracting and retaining qualified executive
officers critical to our long-term success, while enhancing their incentives to
perform to their maximum capability of increasing profitability and maximizing
shareholder value.
In setting annual compensation levels for executive officers, the Board
reviewed and analyzed the following factors:
o the responsibilities of the position,
o the performance of the individual and his or her general experience and
qualifications,
o the overall financial performance (including return on equity, return on
assets and achievement of the profit plan) of our Company for the previous
year and the contributions to such performance by the individual or his or
her department,
o the officer's total compensation during the previous year,
o compensation levels paid by comparable companies in the financial services
industry,
o the officer's length of service with our Company, and
o the officer's effectiveness in dealing with external and internal
relationships.
Our Board believes that the base compensation of the executive officers is
competitive with compensation levels paid by comparable companies in the
financial services industry.
Long-Term Compensation Programs. While our Board establishes salary and
bonus levels based on the above described criteria, our Board also believes that
encouraging equity ownership by executive officers further aligns the interests
of the officers with the performance objectives of our shareholders and enhances
our ability to attract and retain highly qualified personnel on a basis
competitive with industry practices. Stock options we granted pursuant to our
Company's two existing stock option plans help achieve this objective and
provide additional compensation to the officers to the extent that the price of
our common stock increases over its fair market value on the date of option
grant.
13
Stock options have been granted to each of the executive officers and to
other officers and key employees. Through such plans, there will be an
additional direct relationship between our performance and benefits to plan
participants.
Through these various compensation programs, our Board believes that we
further our objectives of attracting, retaining and motivating the best
qualified executive officers, which ultimately will serve to increase our
profitability and maximize shareholder value.
Compensation of Chief Executive Officer. The base salary of our Chief
Executive Officer was determined primarily by the terms of his employment
agreement dated October 1, 2003 that became effective January 1, 2003 (see
"Executive Employment Agreements"). The agreement provides for a base salary,
subject to annual adjustments by the Board of Directors, and for a 7.5% annual
bonus based upon our pre-tax income. In addition, the Chief Executive Officer's
compensation for 2004 was based on his progress in achieving our strategic
objectives and demonstrated leadership ability.
Respectfully submitted by the members of our Board of Directors:
Steven W. Aichle Robert P. Beck Neil M. Cleveland
George Cossolias Luther J. Mohr Stephen H. Wacknitz
Richard W. Wright
Compensation Committee Interlocks and Insider Participation
Messrs. Wacknitz and Mohr are members of the Board of Directors and are
current or former officers of our Company. Mr. Mohr retired from his officer
positions on April 1, 2005. As noted above, Messrs. Wacknitz and Mohr do not
participate in discussions of the Board relating to their respective performance
or compensation. None of the other members of the Board serves or has served as
an officer or employee of our Company or the Bank. All members of the Board have
engaged in loan transactions with the Bank except Mr. Wacknitz and Mr. Mohr. All
such loans were made in the ordinary course of business of the Bank. No other
relationship required to be reported under the rules promulgated by the SEC
exists with respect to the Board members acting in lieu of a Compensation
Committee.
Lack of Incorporation of Certain Information
The Report of the Audit Committee, the Board's Report on Executive
Compensation, the Common Stock Performance Chart and the assertion of
independence of audit committee members, reported to you in this Proxy
Statement, are not deemed incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act of 1933 or under the Securities and Exchange Act of 1934, except
to the extent that we specifically incorporate that information by reference,
and are not otherwise deemed filed under those acts.
14
How are directors compensated?
Prior to 2003, we did not pay directors compensation for their service as
directors. In January 2003, each director of the Bank was paid a one-time
payment of $10,000. Starting in February 2003, each Bank director began
receiving $1,000 per regular meeting. Beginning with the second meeting missed,
in any calendar year, the fee is not paid. In February 2005, the $1,000 amount
was increased to $1,500. Each director who was then serving on the Bank's Board
was granted non-qualified stock options to purchase shares (as adjusted for
applicable stock dividends and splits) of our common stock over the last three
years as follows:
Exercise Price
Per Share (85%
of Market Value
Year # of Shares on Date of Grant)
---- ----------- -----------------
All Directors 2002 0 N/A
All Directors 2003 20,000 $ 9.35
All Directors* 2004 10,000 $12.96
George Cossolias* 2004 6,578 $12.96
These options vested and became exercisable at the date of grant. The
options may be exercised for a period of ten years after they vested. Options
granted under our Company's 2004 Stock Incentive Plan are subject to earlier
termination if Board service terminates.
* Mr. Cossolias joined the Board as a Director in July 2004.
EXECUTIVE OFFICERS AND COMPENSATION
Who are the executive officers of the Bank and our Company that are not
also directors of the Bank and our Company?
15
First Year
Name / Age Employed Business Experience During Past Five Years and Other Information
---------- -------- ----------------------------------------------------------------
James W. Andrews 2002 Executive Vice President, Real Estate Manager of the Bank since
55 2002; Business Bank of California, San Bernardino, California as Executive
Vice President/Chief Credit Officer from 1996 to 2002; Executive Vice
President/Chief Credit Officer at International Savings Bank from 1992 to
1995. From 1987 to 1991 was Vice President/Assistant Portfolio Quality
Manager, Senior Vice President/Chief Internal Asset Review Officer and
Executive Vice President/Chief Credit Officer at Great American Bank.
Various other banking positions from 1972 to 1987.
Jack Brittain, Jr. 2005 Executive Vice President/Coachella Valley Regional Manager of
56 the Bank since January 2005. Executive Vice President/Chief Credit Officer,
Valley Independent Bank, El Centro, California from 1988 to 2004.
President, Bank Development Group, San Diego, California from 1987 to
1988. Vice President/Credit Administrator, Bank of Commerce, San Diego,
California from 1984 to 1987. Vice President/Construction Loan Officer,
Commercial Center Bank, Santa Ana, California from 1982 to 1984. Various
other banking positions beginning in 1974.
Thomas P. Ivory 2001 Executive Vice President/East County Regional Manager at the
51 Bank since January 2001; Senior Vice President/Regional Manager at Scripps
Bank, El Cajon, California from 1992 to 2001; Senior Vice President at
Grossmont Bank, El Cajon, California from 1983 to 1991; various other
banking positions beginning in 1974.
William H. McGaughey 2004 Executive Vice President/Chief Operating Officer of the Bank
48 since November 2004. Senior Vice President/Secondary Marketing Manager,
Bank of the West, Truckee, California from 1999 to 2004. Senior Vice
President/Treasurer, Sierra West Bank, Truckee, California from 1994 to
1999. Executive Vice President/ Chief Financial Officer, Truckee River
Bank, Truckee, California in 1994. Executive Vice President/Chief Operating
Officer, Truckee River Bank, Truckee, California from 1991 to 1994. Various
other banking, auditing and CPA positions beginning in 1979.
Donald A. Pitcher 1996 Chief Financial Officer/Secretary of the Bank since 1996; Vice
55 President/Controller and Acting Chief Financial Officer/Secretary at
Fallbrook National Bank, Fallbrook, California from May 1990 to March 1996;
Vice President/Controller from October 1988 to May 1990 at Torrey Pines
Bank, Solana Beach, California; Various other banking positions beginning in
1972.
16
First Year
Name / Age Employed Business Experience During Past Five Years and Other Information
---------- -------- ----------------------------------------------------------------
Donald L. Schempp 2005 Executive Vice President/North San Diego County Regional
56 Manager of the Bank since January 2005. President/North County Community
Banking, First National Bank, San Diego, California from 2002 to 2004.
President/Chief Executive Officer, Capital Bank of North County, Carlsbad,
California from 1990 to 2002. President, First National Bank of North
County, Carlsbad, California from 1984 to 1990. Executive Vice
President/Corporate Banking, Southwest Bank, Vista, California from 1974 to
1984. Various other banking positions beginning in 1970.
Thomas M. Shepherd 1998 Chief Credit Officer of the Bank since 1998, Senior Vice
50 President-Branch Manager at California State Bank, Newport Beach,
California from August 1994 to September 1998; Senior Vice President-Loan
Administrator at Commerce Bank, Newport Beach, California from 1993 to
1994; Senior Vice President at Preferred Bank, Los Angeles, California from
1992 to 1993; Corporate Senior Vice President at Metrobank, Torrance,
California from 1984 to 1991.
Gerald W. Van Dyke 2003 Executive Vice President /North County Regional Manager of the
62 Bank since March 2003; Senior Vice President/Regional Manager at Rancho
Santa Fe National Bank, Escondido, California from 1991 to 2003; Senior
Vice President/Manager at First National Bank, San Diego, California from
1983 to 1991. Various other banking positions, up to Vice President, at
Security Pacific Bank in San Diego County, California from 1966 to 1983.
Scott J. Word 1996 Senior Loan Officer of the Bank since 1996; North County Bank,
50 Escondido, California as Senior Vice President/Riverside County Business
Banking Manager from 1994 to September 1996, Senior Vice
President/Riverside County Regional Manager from 1992 to 1994, Vice
President and Manager from 1985 to 1992, and Vice President and Manager
from 1980 to 1984.
Are there any family relationships between any directors and any executive
officers of our Company or the Bank?
No.
17
SUMMARY COMPENSATION TABLE
The following section describes the compensation that Bank pays its Chief
Executive Officer and the next four most highly compensated executive officers
who received an annual salary and bonus of more than $100,000 during 2004 (the
"Named Executives"). This section includes a detailed table showing compensation
of the Named Executives for the last three years and information about stock
options and other benefits.
- ----------------------------------------------------------------------------------------------------------------------------
Long Term Compensation
Annual Compensation ----------------------------------
Awards Payouts
Restricted Securities All
Name and Other Annual Stock Underlying LTIP Other
Principal Salary Bonus Compensation Award(s) Options/SARs Payouts Compensation
Position Year ($) ($) ($)(1) ($) (#) ($) ($)
- ----------------------------------------------------------------------------------------------------------------------------
Stephen H. Wacknitz, 2004 $275,000 $1,172,000 (1) $29,642 (6) $0 50,000 $0 $47,615 (11)
Chief Executive 2003 230,000 608,200 (1) 21,016 (6) $0 20,000 $0 23,076 (11)
Officer 2002 205,000 244,902 (1) 28,317 (6) $0 0 $0 13,803 (11)
and President
- ----------------------------------------------------------------------------------------------------------------------------
Luther J. Mohr 2004 $112,500 $586,000 (2) $11,850 (7) $0 30,000 $0 $19,924 (12)
Chief Operating 2003 99,750 304,100 (2) 7,553 (7) $0 20,000 $0 7,403 (12)
Officer 2002 92,250 122,451 (2) 8,153 (7) $0 0 $0 7,655
- ----------------------------------------------------------------------------------------------------------------------------
James W. Andrews 2004 $165,833 $ 50,000 (3) $3,515 (8) $0 15,000 $0 $0
EVP/Real Estate 2003 155,833 20,000 (3) 2,740 (8) $0 $0 0
Manager 2002 87,500 0 (3) 1,614 (8) $0 $0 0
- ----------------------------------------------------------------------------------------------------------------------------
Thomas P. Ivory 2004 $167,500 $104,765 (4) $2,431 (9) $0 15,000 $0 $0
EVP/East County 2003 144,167 72,146 (4) 2,264 (9) $0 10,000 $0 0
Regional Manager 2002 102,492 32,881 (4) 3,445 (9) $0 6,000 $0 0
- ----------------------------------------------------------------------------------------------------------------------------
Scott J. Word 2004 $165,000 $ 50,000 (5) $1,279 (10) $0 10,000 $0 $0
EVP/Senior Lending 2003 153,000 35,000 (5) 1,592 (10) $0 10,000 $0 0
Officer 2002 138,500 20,000 (5) 2,162 (10) $0 0 $0 0
============================================================================================================================
(1) $244,902 bonus accrued in 2001, paid in 2002; $608,200 bonus accrued in
2002, paid in 2003; $1,172,000 bonus accrued in 2003, paid in 2004;
$1,598,000 bonus accrued in 2004, paid in 2005.
(2) $122,451 bonus accrued in 2001, paid in 2002; $304,100 bonus accrued in
2002, paid in 2003; $586,000 bonus accrued in 2003, paid in 2004; $799,000
bonus accrued in 2004, paid in 2005.
(3) $20,000 bonus accrued in 2002, paid in 2003; $50,000 bonus accrued in 2003,
paid in 2004; $100,000 bonus accrued in 2004, paid in 2005.
(4) $32,881 commission paid in 2002; $72,146 commission paid in 2003; $104,765
commission paid in 2004; $43,995 commission accrued in 2004, paid in 2005.
(5) $20,000 bonus accrued in 2001, paid in 2002; $35,000 bonus accrued in 2002,
paid in 2003; $50,000 bonus accrued in 2003, paid in 2004; $100,000 bonus
accrued in 2004, paid in 2005.
(6) For 2002, includes non-cash compensation of $8,827 for bank car usage,
$11,740 for long term disability premiums and $7,750 for life insurance
premiums. For 2003, includes non-cash compensation of $4,386 for bank car
usage, $8,820 for long term disability premiums and $7,750 for life
insurance premiums. For 2004, includes non-cash compensation of $6,955 for
split dollar agreement, $6,057 for bank car usage, $8,880 for long term
disability premiums and $7,750 for life insurance premiums.
(7) For 2002, includes non-cash compensation of $4,186 for bank car usage and
$3,967 for life insurance premiums. For 2003, includes non-cash
compensation of $3,586 for bank car usage and $3,967 for life insurance
premiums. For 2004, includes non-cash compensation of $3,174 for split
dollar agreement, $4,709 for bank car usage and $3,967 for life insurance
premiums.
(8) Non-cash compensation for bank car usage.
(9) For 2002 and 2003, non-cash compensation for bank car usage. For 2004,
includes $2,038 for non-cash compensation for bank car usage, $393 for
non-cash split dollar agreement.
(10) For 2002 and 2003 non-cash compensation for bank car usage; For 2004 $343
for non-cash split dollar and $936 non-cash for bank car usage.
18
(11) For 2002, $7,655 unused vacation pay, paid in 2002; For 2003, $7,403 unused
vacation pay, paid in 2003; For 2004, $34,615 unused vacation pay paid in
2004; $13,000 paid in 2004 for Director's fees.
(12) For 2002, $13,803 unused vacation pay, paid in 2002; For 2003, $23,076
unused vacation pay, paid in 2003, For 2004, $6,924 unused vacation pay,
paid in 2004; $13,000 paid in 2004 for Director's fees.
Option Grants and Exercises in 2004
The following two tables summarize grants to and exercises of options to
purchase shares of our common stock during 2004 by the Named Executives, and
with respect to option grants, the per share exercise price, the expiration date
of the options and the grant date value of options held by such persons at
December 31, 2004. The second table also provides information concerning the
total number of securities underlying unexercised options and the aggregate
dollar value of in-the-money unexercised options. An option is in-the-money if
the fair market value for the underlying securities exceeds the exercise price
of the option. We did not reprice any options during 2004 or any prior year, and
did not provide to executives stock appreciation rights.
This information includes hypothetical potential gains from stock options
granted in 2004. These hypothetical gains are based entirely on assumed annual
growth rates of 0%, 5% and 10% in the value of our common stock price over the
ten-year life of the stock options granted in 2004. These assumed rates of
growth were selected by the SEC for illustrative purposes only and are not
intended to predict future stock prices, which will depend upon market
conditions and our future performance and prospects.
19
INDIVIDUAL OPTION GRANTS IN THE LAST FISCAL YEAR (2004)*
% of % of
Total ISO Total
Options NSO Potential Realizable Value
Number Granted Options Exercise Market
of Under Granted or Base Price
Securities Plan in Under Price on Date
Underlying Fiscal Plan in ($/Sh) of Grant
Name Option Year Fiscal ($/Sh)
Granted (#) 2004 Year Expiration
2004 0% ($)** 5% ($)*** 10% Date
($)****
- ----------------- ------------ ---------- --------- ---------- --------- --------- ---------- ---------- -------------
Stephen H. 10,000 --- 15.02% $12.96 $15.25 $22,875 $118,781 $265,921 07/06/2014
Wacknitz 40,000 16.99% $15.25 $15.25 $ 0 $383,625 $972,183 07/06/2014
- ----------------- ------------ ---------- --------- ---------- --------- --------- ---------- ---------- -------------
10,000 --- 15.02% $12.96 $15.25 $22,875 $118,781 $265,921 07/06/2014
Luther J. Mohr 20,000 8.49% $15.25 $15.25 $ 0 $191,813 $486,091 07/06/2014
- ----------------- ------------ ---------- --------- ---------- --------- --------- ---------- ---------- -------------
James W. Andrews 15,000 6.37% --- $15.25 $15.25 0 $143,860 $364,569 07/06/2014
- ----------------- ------------ ---------- --------- ---------- --------- --------- ---------- ---------- -------------
Thomas P. Ivory 15,000 6.37% --- $15.25 $15.25 0 $143,860 $364,569 07/06/2014
- ----------------- ------------ ---------- --------- ---------- --------- --------- ---------- ---------- -------------
Scott J. Word 10,000 4.25% --- $15.25 $15.25 0 $ 95,906 $243,046 07/06/2014
================= ============ ========== ========= ========== ========= ========= ========== ========== =============
* Based on NSO options to purchase 66,578 shares of common stock under the
plan during 2004 and ISO options to purchase 235,500 shares of common stock
under the plan during 2004.
** Presents the potential realizable value of option, assuming the market
price of the underlying security appreciates in value from the date of
grant to the end of the option at the annualized rate of 0%.
*** Presents the potential realizable value of option, assuming the market
price of the underlying security appreciates in value from the date of
grant to the end of the option at the annualized rate of 5%.
**** Presents the potential realizable value of option, assuming the market
price of the underlying security appreciates in value from the date of
grant to the end of the option at the annualized rate of 10%.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES (2004)
========================= ================================== ================================================================
Exercised Shares Unexercised Shares
- ------------------------- ---------------------------------- ----------------------------------------------------------------
Shares Acquired Value # of # of Value of Value of
on Exercise (#) Realized Securities Securities Unexercised Unexercised
Name Underlying Underlying In-the-Money In-the-Money
Unexercised Unexercised Options at Options at
Options at Options at Year End Year End 2004
Year End 2004 Year End 2004 2004 ($) ($)
Exercisable Unexercisable Exercisable(1) Unexercisable
(1)
- ------------------------- ------------------ --------------- ---------------- ---------------- -------------- ---------------
James W. Andrews 0 $ 0 26,664 28,336 $ 323,968 $ 199,532
- ------------------------- ------------------ --------------- ---------------- ---------------- -------------- ---------------
Luther J. Mohr 62,100 $ 923,706 220,000 20,000 $3,041,074 $ 50,000
- ------------------------- ------------------ --------------- ---------------- ---------------- -------------- ---------------
Thomas P. Ivory 44,000 $ 651,300 3,332 23,668 $ 22,491 $ 108,159
- ------------------------- ------------------ --------------- ---------------- ---------------- -------------- ---------------
Scott J. Word 0 $ 0 72,332 16,668 $1,111,990 $ 70,010
- ------------------------- ------------------ --------------- ---------------- ---------------- -------------- ---------------
Stephen H. Wacknitz 169,170 $ 2,506,967 239,600 61,230 $3,410,800 $ 403,061
========================= ================== =============== ================ ================ ============== ===============
(1) Calculated based on the excess of the fair market value on December 31,
2004 of the common stock ($17.75) as reported on the OTC Bulletin Board
over the option exercise price.
20
EQUITY COMPENSATION PLAN INFORMATION AS OF DECEMBER 31, 2004
Number of securities to Weighted average exercise
be issued upon exercise price of outstanding Number of securities
of outstanding options, options, warrants and rights remaining available
Plan Category warrants and rights for future issuance
- --------------------------- --------------------------- ------------------------------ ----------------------
(a) (b) (c)
Equity compensation plans
approved by security
holders 1,579,723 $6.09 460,246
Equity compensation plans
not approved by security
holders 0 0 0
--------- ---------- ---------
Total 1,579,723 $6.09 460,246
========= ========== =========
Retirement Benefits
Our Board of Directors approved Salary Continuation Agreements
("Agreements") for certain executives of the Bank. The Agreements are intended
to encourage key employees of the Bank to continue their employment with the
Bank and to encourage other qualified key employees to join and/or remain in the
employ of the Bank, when entering such Agreements is deemed appropriate for the
Bank. The Agreements in effect at December 31, 2004 for the Named Executives are
as follows:
Age Retirement Benefit Estimated Estimated Single
Executive on Age per Duration of Total Accrual Accrual Premium Value Death
Officers Record year Benefit Benefit 2004 Balance Aggregate Benefits
Date (yrs) 12/31/04
S. H. Wacknitz 65 70 $ 75,000 20 $1,500,000 $ 126,627 $ 126,627 $3,572,000 $3,639,000 $6,300,000
S. H. Wacknitz 65 65 $125,000 20 $2,500,000 $ 631,954 $1,461,236 $1,935,000 $2,321,485 $3,897,208
T. Ivory * 51 N/A N/A N/A N/A $ 0 $ 0 $ 398,000 $ 471,032 $1,150,816
L. J. Mohr 69 70 $ 90,000 10 $ 900,000 $ 248,892 $ 592,599 $1,080,000 $1,299,901 $1,991,285
S. J. Word 50 65 $ 60,000 15 $ 900,000 $ 22,468 $ 37,655 $ 385,000 $ 423,060 $1,092,194
Total
Participants (6) $9,600,000 $1,084,646 $2,347,052 $8,637,000 $9,593,824 $18,062,540
* Mr. Ivory does not have a Salary Continuation Plan, however he has a Salary
Deferral Plan.
Executive Employment Agreements
The Bank entered into an employment agreement with Mr. Wacknitz ("Wacknitz
Agreement") on October 1, 2003 that became effective as of January 1, 2003.
Under the evergreen Wacknitz Agreement, the initial annual base salary is
$210,000, which may be increased in the discretion of our Board of Directors. In
addition, the Wacknitz Agreement provides for six weeks of vacation, the use of
a Bank-owned and maintained automobile, group medical benefits, term life
insurance benefits equal to at least $250,000, long-term disability benefits
equal to at least $120,000 per year before age 65 and $10,000 per month paid by
the Bank in the event disability payments are not made by an insurer. After age
65, in the event of disability, Mr. Wacknitz will receive from the Bank the
difference between the amount received from the insurer and $15,000 per month.
Further, Mr. Wacknitz is entitled to receive a bonus of 7.5% of profits before
taxes and bonus accrual of the Bank if certain performance standards are met. If
terminated without cause, or if Mr. Wacknitz terminates for good reason, Mr.
Wacknitz will be entitled to receive the greater of one year of salary plus
bonus as though a full year had lapsed or two years of salary.
21
Mr. Wacknitz also entered into two salary continuation agreements with the
Bank. The first is dated January 28, 2004. The second (an amended and restated
agreement) is dated September 30, 2004. Benefits under both plans are contingent
upon a multitude of factors including the applicable vesting schedule, the
reason for termination (retirement as opposed to a change of control, for
example) and the timing of the event giving rise to the payment, which payment
can be, in some instances, a one time lump sum payment at present value (except
that in the case of a change in control, the payment would be at the fully
vested value) or payments over a period of years. It is anticipated that a third
salary continuation agreement will be entered into subject to documentation and
successful completion of a physical examination. Refer to the chart on page 22
under the caption "Retirement Benefits" which addresses the plans currently in
place and the anticipated benefits, based upon certain projections.
Mr. Wacknitz also has entered into an Executive Deferred Compensation
Agreement with the Bank dated September 30, 2004. This Agreement allows Mr.
Wacknitz to defer income, and then have that deferred amount paid to him, at
retirement (age 70) or termination of employment. The deferred amount earns 10%
per annum interest, compounded monthly. As of March 28, 2005, interest earned on
amounts deferred is $775.
Mr. Wacknitz also has entered into a Split Dollar Agreement with the Bank
dated September 30, 2004. This agreement provides that Mr. Wacknitz and the Bank
split a death benefit of the single premium life insurance premiums. The death
benefit for Mr. Wacknitz is the remaining SCP Benefit according to a vesting
schedule.
The Bank entered into an employment agreement with Mr. Mohr ("Mohr
Agreement") on October 1, 2003 that became effective as of January 1, 2003.
Under the evergreen Mohr Agreement, the initial annual base salary is $94,500,
which may be increased in the discretion of the Board of Directors. In addition,
the Mohr Agreement provides for 1.5 vacation days for each month in which Mr.
Mohr works, the use of a Bank-owned and maintained automobile, group medical
benefits, term life insurance benefits equal to at least $150,000. In the event
of disability, Mr. Mohr will receive from the Bank the difference between the
amounts received from the insurer and $10,000 per month. Further, Mr. Mohr is
entitled to receive a bonus of 3.75% of profits before taxes and bonus accrual
of the Bank if certain performance standards are met. If terminated without
cause, or Mr. Mohr terminates for good reason, Mr. Mohr will be entitled to
receive the greater of one year of salary plus bonus as though a full year had
lapsed or two years of salary.
22
Mr. Mohr also entered into a salary continuation agreement (amended and
restated) with the Bank dated January 28, 2004. Benefits under the plan are
contingent upon a multitude of factors including the vesting schedule, the
reason for termination (retirement as opposed to a change of control, for
example) and the timing of the event giving rise to the payment, which can be,
in some instances, a one time lump sum payment at present value (except in the
case of a change in control, the payment would be at the fully vested value) or
payments over a period of years. Refer to the chart on page 22 under the caption
"Retirement Benefits" which addresses the plan and the anticipated benefits,
based upon certain projections.
Mr. Mohr also has entered into a Split Dollar Agreement with the Bank dated
September 30, 2004. This agreement provides that Mr. Mohr and the Bank split a
death benefit of the single premium life insurance premiums. The death benefit
for Mr. Mohr is the remaining SCP Benefit according to a vesting schedule.
The Bank entered into an employment agreement with Mr. Word ("Word
Agreement") effective on April 1, 2003. Under the evergreen Word Agreement, the
initial annual base salary is $150,000. In addition, the Word Agreement provides
for four weeks of vacation, the use of a Bank-owned and maintained automobile,
group medical benefits, participation in the Bank's 401 Plan and eligibility to
participate in the Bank's senior management retirement programs, as determined
from time to time. Discretionary bonuses may be awarded by our Board of
Directors. If terminated without cause, Mr. Word is entitled to receive three
months' salary.
Mr. Word also entered into a salary continuation agreement with the Bank
dated September 30, 2004. Benefits under the plan are contingent upon a
multitude of factors including the vesting schedule, the reason for termination
(retirement as opposed to a change of control, for example) and the timing of
the event giving rise to the payment, which can be, in some instances, a one
time lump sum payment at present value or payments over a period of years. Refer
to the chart on page 22 under the caption "Retirement Benefits" which addresses
the plan and the anticipated benefits, based upon certain projections.
Mr. Word also has entered into a Split Dollar Agreement with the Bank dated
September 30, 2004. This agreement provides that Mr. Word and the Bank split a
death benefit of the single premium life insurance premiums. The death benefit
for Mr. Word is the remaining SCP Benefit according to a vesting schedule.
The Bank entered into an employment agreement with Mr. Ivory ("Ivory
Agreement") effective on January 24, 2003. Under the evergreen Ivory Agreement,
the initial annual base salary is $160,000, which may be increased in the
discretion of our Board of Directors. In addition, the Ivory Agreement provides
for four weeks of vacation, the use of a Bank-owned and maintained automobile,
group medical benefits, participation in the Bank's 401 Plan and eligibility to
participate in the Bank's senior management retirement programs, as determined
from time to time. Further, Mr. Ivory is entitled to receive 7.5 basis points of
total loan production generated out of the El Cajon office (excluding lines of
credit), plus 2.5% of annual after-tax profits of the El Cajon office. If
terminated without cause, Mr. Ivory is entitled to receive three months' salary.
23
Mr. Ivory also has entered into an Executive Deferred Compensation
Agreement with the Bank dated April 1, 2001. This Agreement allows Mr. Ivory to
defer $40,000 per year of income, and then have that deferred amount paid to
him, at retirement (age 57) or termination of employment. The deferred amount
earns 10% per annum interest, compounded monthly. As of March 28, 2005, interest
earned on amounts deferred is $35,749.
Mr. Ivory also has entered into a Split Dollar Agreement with the Bank
dated September 30, 2004. This agreement provides that Mr. Ivory and the Bank
split a death benefit according to a vesting schedule.
The Bank entered into an employment agreement with Mr. Andrews effective on
June 1, 2002, with an amendment in November 2002 ("Andrews Agreement"). Under
the evergreen Andrews Agreement, the initial annual base salary is $150,000. In
addition, the Andrews Agreement provides for four weeks of vacation, the use of
a Bank-owned and maintained automobile, group medical benefits, participation in
the Bank's 401 Plan, the grant of 20,000 options to purchase our Company's
common stock and the payment by the Bank of $40,000 for a golf club membership,
subject to reimbursement to the Bank in certain instances. The Bank pays up to
$500 per month in monthly dues for the membership. If terminated without cause,
Mr. Andrews is entitled to receive six months' salary.
24
CERTAIN RELATIONSHIPS AND OTHER TRANSACTIONS
Transactions with Management and Others
There have been no transactions, or series of similar transactions, during
2004, or any currently proposed transaction, or series of similar transactions,
to which our Company or the Bank was or is to be a party, in which the amount
involved exceeded or will exceed $60,000 and in which any director (or nominee
for director) of our Company, executive officer of our Company or the Bank, any
shareholder owning of record or beneficially 5% or more of our common stock, or
any member of the immediate family of any of the foregoing persons, had, or will
have, a direct or indirect material interest except as described above under the
headings "INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS," "EXECUTIVE
OFFICERS AND COMPENSATION" AND "Summary Compensation Table."
Indebtedness of Management
The Bank has had, and expects in the future to have banking transactions in
the ordinary course of its business with many of the Bank's and our Company's
directors and officers and their associates, including transactions with
corporations of which such persons are directors, officers or controlling
shareholders may be involved, on substantially the same terms (including
interest rates and collateral) as those prevailing for comparable transactions
with others. Management believes that in 2004 such banking transactions were
entered into and made in the ordinary course of business and did not involve
more than the normal risk of collectibility or present other unfavorable
features. Loans to executive officers of the Bank and our Company are subject to
limitations as to amount and purposes prescribed in part by the Federal Reserve
Act, as amended, and other federal laws and regulations.
COMMON STOCK PERFORMANCE CHART
Set forth below is a line graph comparing the cumulative total stockholder
return on our common stock, based on its market price, with the cumulative total
return on companies on the Nasdaq Stock Market (U.S.), and the Nasdaq Bank
Index, assuming reinvestment of dividends for the period beginning December 31,
1999 and ending December 31, 2004. This graph assumes that the value of the
investment in our common stock and each of the comparison groups was $100 on
December 31, 1999.
Trading in our common stock is solely through the over-the-counter bulletin
board and, until the last two to three quarters, was not consistent or
extensive. Consequently, sales price information consists largely of quotations
by dealers making a market in our common stock and may not represent actual
transactions. As such, sales price information for our common stock reflects
inter-dealer prices without any adjustments for mark-ups, mark-downs or
commissions. Moreover, during periods of light volume, the sales price may not
be a reliable indication of market value. The prices presented for our common
stock are not necessarily indicative of future performance.
25
The following graph shows the cumulative return experienced by the
Company's shareholders during the last five years compared to the hypothetical
cumulative total return on NASDAQ Stock Market Index (U.S. companies) and the
NASDAQ Bank Stock Index. The graph assumes the investment of $100 on December
31, 1998 in the Company's common stock and in each index and the reinvestment of
all dividends paid during the five-year period.
12/31/1999 12/31/2000 12/31/2001 12/31/2002 12/31/2003 12/31/2004
TMCV 100.00 67.14 109.14 144.57 308.57 405.71
NASDAQ 100.00 60.31 47.84 33.07 49.45 53.81
NASDAQ BANK 100.00 114.23 123.68 126.55 162.92 186.45
SELECTION OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
We have not selected an independent registered public accounting firm for
the 2005 fiscal year. Although Vavrinek, Trine, Day & Co., LLP ("Vavrinek") has
audited the accounts of the Bank since 1996 and of our Company since its
creation in mid-2002, we agreed with Vavrinek that we would engage a firm for
the 2005 fiscal year that has more resources to match our anticipated growth and
operating complexity as well as more accelerated filer clients with stock that
is publicly traded, like us. This decision was approved by our audit committee
and our board. Vavrinek has never issued to us an adverse opinion or a
disclaimer of opinion, nor has there been, at any time, any disagreements on any
matter of accounting principals or practices, financial statement disclosure, or
auditing scope or procedure, or otherwise. Vavrinek will continue to assist us
for several months until we retain a successor firm.
26
Upon selection of our new independent registered public accounting firm, we
anticipate that audit services will include the annual audit examination,
limited reviews of unaudited quarterly financial data, assistance in filings
with various regulatory authorities, aid with the Annual Report to Shareholders
and the provision of information regarding accounting principles and practices
followed by the Bank and our Company in preparing its financial statements.
Audit Fees
The aggregate fees billed by Vavrinek for professional services rendered
for the audit of our annual financial statements for fiscal years 2004 and 2003
and the reviews of the financial statements included in our Form 10-Qs for such
fiscal years were $47,000 and $42,000, respectively.
Audit-Related Fees and Tax Fees
There were no fees billed by Vavrinek for professional services rendered
for assurance and related service or for tax compliance, advice or planning for
fiscal years 2004 and 2003 except fees paid for Sarbanes/Oxley Review which
totaled $37,700.
Tax return preparation fees for years 2004 and 2003 were $6,000 and $6,000,
respectively.
All Other Fees
There were no fees for services rendered to us for 2004 and 2003 other than
the services described above under the captions "Audit Fees" and "Audit-Related
Fees and Tax Fees."
None of the time devoted by Vavrinek on its engagement to audit our
financial statements for the year ended December 31, 2004 is attributable to
work performed by persons other than Vavrinek employees.
A representative of Vavrinek, Trine, Day & Co., LLP is expected to attend
the annual meeting and to be available to answer appropriate questions posed by
our shareholders.
Pre-Approval Policies and Procedures
Before the firm chosen to replace Vavrinek is engaged for 2005, the
engagement will be approved by our Audit Committee.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act requires our and the
Bank's directors and executive officers, and holders of more than 10% of a
registered class of our equity securities, to file with the SEC reports of
ownership and changes in ownership of any equity securities of our Company.
Officers, directors and greater than 10% shareholders are required by SEC
regulation to furnish the Bank with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that all required forms
were filed, we believe that, during 2004, all Section 16 filing requirements
were met.
27
ADDITIONAL INFORMATION
Under the Securities and Exchange Act at Sections 13 and 15(d), periodic
and current reports must be filed with the SEC. Our Company electronically files
the following reports with the SEC: Form 10-K (Annual Report), Form 10-Q
(Quarterly Report), Form 8-K (Current Report) and Schedule 14A (Proxy
Statement). We may file additional forms. The public may read and copy any
materials we file with the SEC at the SEC's Public Reference Room at 450 Fifth
Street, N.W., Washington D.C. 20549 and may obtain information on the operation
of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC
maintains an Internet site, www.sec.gov, through which all forms filed
electronically may be accessed. Additionally, all forms filed with the SEC are
accessible through our website by way of a hyperlink to the SEC website.
Additional shareholder information is available free of charge on our website:
www.temvalbank.com. We post our quarterly and annual reports to our website as
soon as reasonably practicable after filing them with the SEC. None of the
information on or hyperlinked from our website is incorporated into this proxy
statement.
OTHER MATTERS
Our Board of Directors has no knowledge of any other matter that may come
before the meeting, and does not intend to present any other matters. However,
if any other matters shall come before the meeting or any adjournment or
postponement thereof (including the election of any one or more substitutes for
any of the foregoing nominees who are unable to, or for good reason will not,
serve on our Board of Directors), the persons named as proxies will have the
discretion and authority to vote the shares represented by a proxy in accordance
with their best judgment.
28
ANNUAL REPORT
We have enclosed with this proxy statement our annual report for 2004 along
with the opinion of Vavrinek, Trine, Day & Co., LLP, the independent registered
public accounting firm engaged by us.
Upon written request by any person entitled to vote at the meeting,
addressed to Donald A. Pitcher, Secretary of our Company, at 27710 Jefferson
Avenue, Suite A100, Temecula, CA 92590, we will provide, without charge, a copy
of our 2004 annual report on Form 10-K, including the financial statements and
the schedule thereto filed with the SEC pursuant to the Securities and Exchange
Act.
By Order of the Board of Directors
/s/ Donald A. Pitcher
---------------------
Donald A. Pitcher
Secretary
Temecula, California
April 19, 2005
29
REVOCABLE PROXY--TEMECULA VALLEY BANCORP INC.
ANNUAL MEETING OF SHAREHOLDERS--May 24, 2005
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Temecula Valley Bancorp Inc. (the "Company")
hereby constitutes and appoints Dr. Robert P. Beck and Mr. Richard W. Wright,
with power to appoint their respective substitutes, as attorney and proxy to
appear, attend and vote all shares of the Company which the undersigned is
entitled to vote at the Annual Meeting of Shareholders to be held at main
offices of the Company, 27710 Jefferson Avenue, Suite A100, Temecula.,
California on Tuesday, May 24, 2005 at 6:00 p.m. local time, and any
adjournments or postponements thereof, as fully and with the same force and
effect as the undersigned might or could do if personally present thereat. The
Board of Directors of the Company recommends a vote "FOR" the election of all
nominees.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE PROPOSALS INDICATED AND IN ACCORDANCE WITH THE DISCRETION OF THE PROXY
HOLDER ON ANY OTHER BUSINESS. ALL PROXIES HERETOFORE GIVEN BY THE UNDERSIGNED IN
CONNECTION WITH THE ACTIONS PROPOSED ON THIS PROXY ARE HEREBY EXPRESSLY REVOKED.
THIS PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED BY WRITTEN NOTICE TO
THE SECRETARY OF THE COMPANY, BY ISSUANCE OF A SUBSEQUENT PROXY OR BY VOTING AT
THE ANNUAL MEETING IN PERSON.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
Vote by Internet or Telephone or Mail
24 Hours a Day - 7 Days a Week
Your telephone or Internet vote authorizes the named proxies to vote your
shares in the same manner as if you marked, signed and returned your proxy card.
INTERNET OR TELEPHONE OR MAIL
www.proxyvoting.com/tmcv 1-888-426-7035 Mark, sign and date
your proxy card
Use the Internet to Vote your Use any touch-tone telephone and
proxy. Have your proxy card to vote your proxy. Have your return it in the
in hand when you access the proxy card in hand when you enclosed
web site. You will be prompted call. You will be prompted to postage-paid
to enter your control number, enter your control number envelope.
located in the box below, to located in the box below, and
create and submit an electronic then follow the directions
ballot. given.
If you vote your proxy by Internet or by telephone
you do NOT need to mail back your proxy card.
FOLD AND DETACH HERE
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Please date, sign and mail
your proxy card in the envelope
provided as soon as possible.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF ALL NOMINEES.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [x]
1. Election of Directors. To elect the following seven (7) persons to the
Board of Directors of the Company to serve until the next annual meeting
and until their successors are elected and qualified:
[ ] FOR ALL NOMINEES NOMINEES:
01. Steven W. Aichle
[ ] WITHHOLD AUTHORITY FOR ALL NOMINEES 02. Robert P. Beck
03. Neil M. Cleveland
[ ] FOR ALL EXCEPT (see instructions below) 04. George Cossolias
05. Luther J. Mohr
06. Stephen H. Wacknitz
07. Richard W. Wright
Instruction: To withhold authority to vote for any individual nominee(s),
mark "FOR ALL EXCEPT" and fill in the circle next to each nominee you wish to
withhold, as shown here: o
2. The proxy holder is authorized to vote upon, in his or her discretion,
such other business as may properly come before the meeting, or any adjournments
or postponements thereof.
IF THE UNDERSIGNED SHAREHOLDER WISHES TO CUMULATE VOTES IN THE ELECTION OF
DIRECTORS, THE UNDERSIGNED MUST APPEAR AND VOTE IN PERSON AT THE 2005 ANNUAL
MEETING. IF ANY SHAREHOLDER GIVES PROPER NOTICE AT THE 2005 ANNUAL MEETING OF
HIS OR HER INTENTION TO CUMULATE VOTES IN THE ELECTION OF DIRECTORS, THE PROXY
HOLDER WILL HAVE THE FULL DISCRETION AND AUTHORITY TO VOTE CUMULATIVELY EXCEPT
TO THE EXTENT DESCRIBED IN THE PROXY STATEMENT.
Date:
__________________________________
__________________________________
__________________________________
Signature(s)
I (We) will |_| will not |_| attend the Annual
Meeting in person.
NOTE: Please sign exactly as your name or names appear on this Proxy. Joint
owners should each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If the signer is a
corporation, please sign full corporate name by a duly authorized officer,
giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.