Fill and Sign the Restated Bylaws of the Company as Amended and Currently Form

DIRECTORS§14.213 June 1996 14-171A REDUCTION IN AUTHORIZED NUMBER OF DIRECTORS (PROPOSALS 1A AND 1B) Introduction The Company's Bylaws currently provide for an authorized number of directors of not less than nine and not more than seventeen. Due to the retirement of two directors during 1993, the number of incumbent directors has been reduced to seven, which is two below the minimum number authorized by the Company's Bylaws. Although a search was commenced to fill the vacancies, the Board of Directors rece ntly concluded that it would be preferable to take a longer period of time to identify and screen candidates for election to the Board and, therefore, at least for the near term, to leave the number of directors at seven. In order to do so, it is necessary to amend the Bylaws to reduce the minimum authorized number of directors below nine, and the Board of Directors has deci ded, and is recommending that shareholders approve, a reduction in the minimum number to si x which, under California law, also requires the maximum authorized number of directors be reduced to eleven. Currently, the Board of Directors is divided into three classes. Each class is comprised of three directors and each class is elected once every three years, resulti ng in a term of office for each director of three years. Under California law, if the authorized number of direc tors is at least six, but less than nine, the Board may be classified into not more than two classes, of approximately equal size, with the members of each class elected once every t wo years. Therefore, in order to implement the reduction in the authorized number of directors, it also will be necessary to change the current classification of the Board of Directors from three cl asses into two classes by an amendment to the Articles of Incorporation. As a result, the Board of Di rectors has approved, and is recommending that shareholders also approve, an amendment to the Articles of Incorporation, more fully described below, to reclassify the Board of Directors from the current three classes, each of which is elected for a three year term, int o two classes which would be comprised of three and four directors, respectively, who are elected in alternate years for two year terms. No reduction in the authorized number of directors will be made, and neither the proposed Bylaw amendment nor the proposed amendment of the Articles of Incorporation will be effectuated, unless both the Bylaw Amendment and the amendment of the Articles of Incorporation are approved by the shareholders. The affirmative vote of the holders of a majorit y of the outstanding shares is required for approval of each amendment, which will be voted on separately. As a result, abstentions on these proposals, which will be counted, and broker non- votes which will not be counted, will be the equivalent of a "no" vote. THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 1A AND "FOR" PROPOSAL 1B. Amendment of Bylaws (Proposal 1A) Section 2 of Article III of the Company's Bylaws currently provides that the authorized number of directors shall be not less than nine nor more than seventeen, until changed by amendment of the Articles of Incorporation or by a Bylaw amending that section duly adopt ed by the vote or written consent of the shareholders. The Company's Board of Directors has adopted, and at the meeting shareholders will be asked to approve, an amendment to t he Bylaws to provide for a minimum of six and a maximum of eleven directors, with the exact number to be §14.213 PROXY STATEMENTS: STRATEGY & FORMS © 1996 Jefren Publishing Company, Inc. 14-171B fixed within those limits either by the Board of Directors or the shareholders. Subject to approval of both this amendment and the amendment of the Articles of Incorporation reclassifying the Board of Directors, the Board of Directors has fixed the exact number of directors at seven. The Board of Directors believes that the proposed Bylaw amendment, together with the reclassification of the Board into two classes, will provide the Board with more ti me and greater flexibility to determine the optimum size and composition of the Board in light of changing business conditions and also to enable the Board to take timely advantage of the a vailability of especially well-qualified candidates for appointment to the Board. If this Bylaw amendment and the Board reclassification are approved, shareholders will elect approximately one-half of the directors each year, rather than one-third each year, as is currently the case. The Board will continue to have the authority to fill vacancies on the Board occurring between annual meetings, including vacancies resulting from any increase in the aut horized number of directors, or, in the alternative, to reduce the size of the Board, but not below six, in the event one or more vacancies occurs in the future. It is expected that the B oard will review from time to time other possible candidates for appointment to the Board in the future and will add new members when it deems such actions to be in the best interests of the Company. Accordingly, it is proposed that Section 2 of Article III of the Bylaws be amended and restated in its entirety to read as follows: "Section 2. Number and Qualification of Directors. The authorized number of directors shall not be less than six (6) nor more than eleven (11). The exact number of directors shall be seven (7) until changed within the limits specified above, by vote or written consent of the board of directors or by the vote or written consent of holders of a majority of the outstanding shams entitled to vote. The indefinite number of directors may be changed, or a definite number fixed without provision for an indefinite number, by amendment of the Articles of Incorporation or by a Bylaw amending this Section 2 duly adopted by the vote or written consent of holders of a majority of the outstanding shares entitled to vote; provided that a proposal to reduce the authorized number of directors below five cannot be adopted if the voters cast against its 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." Amendment of Articles of Incorporation (Proposal 1B) Article Seven of the Company's Articles of Incorporation currently provides that the Board of Directors shall be divided into three classes and that the members of each cla ss of directors shall stand for election once every three years and serve for a three year term. The C ompany's Board of Directors has adopted, and at the meeting the shareholders will be asked to approve, an amendment to the Company's Articles of Incorporation to reclassify the Board of Directors from three classes to two classes, each class consisting of a number of directors equal as nearly as practicable to one-half of the total number of directors. After implementation, the members of each class of directors would stand for election once every two years and would serve for a two- year term. Shareholders are being asked to approve this amendment to permit the authorized number of directors to be reduced to a minimum of six from the current minimum of nine. Establishment of a classified Board of Directors is permitted pursuant to California la w that became effective on January 1, 1990. Under this law, a qualifying California corporation, such as the Company, may divide its Board into two or three classes, with one-half or one-third, respectively, of the directors elected at each annual meeting (or as near to one -half or one-third DIRECTORS§14.213 June 1996 14-171C as practicable). The authorized number of directors must be not less than six in the case of a two- class board and not less than nine in the case of a three-class board For the reasons described above, the Board of Directors believes that this amendment to t he Articles of Incorporation, which will reclassify the Board into two classes, from the current three class structure, is in the interests of the Company and its shareholders. This amendme nt will provide more time and flexibility to determine the optimum size and composition of the Board in response to changing business conditions. In addition, if approved, this amendment will require approximately one-half of the directors to stand for election by the shareholders each year, ra ther than one-third each year as is presently the case. The Board of Directors also beli eves that retaining a classified Board structure will help to provide continuity and stabili ty of the management of the Company. Following adoption of the reclassified board structure, at any given time approximately one-half of the members of the Board of Directors will general ly have had prior experience as directors of the Company. The Board believes that this will continue to facilitate long-range planning, strategy and policy and will strengthen the Company's marketing efforts since directors play an important role in attracting customers and depositors to the Bank. If the proposal is approved, the Board of Directors will designate the two classes of directors. Information concerning the composition of each such class and the current nominees for elec tion as directors at the Annual Meeting is set forth below under "Election of Directors." Accordingly, it is proposed that Article Seven of the Articles of Incorporation of the Company be amended and restated in its entirety to read as follows: "Classification of Board of Directors Seven: The directors shall be divided into two classes, designated Class I and Cla ss II. Each Class shall consist of one-half of the directors or as close an approximation there to as possible. The initial term of office of the directors of Class I shall expire at t he annual meeting of shareholders of the corporation to be held during fiscal year 1996. The Class II directors shall stand for election at the 1995 annual meeting of shareholders and shall be elected for a two-year term. At each annual meeting of the shareholders, commenci ng with the annual meeting to be held during fiscal 1996, each of the successors to the directors of the class whose term shall have expired at such annual meeting shall be elected for a term running until the second annual meeting next succeeding his or her election and until his or her successor shall have been duly elected and qualified." Operation and Effect of Classification of the Board of Directors. The California Corporations Code permits certain qualifying corporations to provide for a classified Board of Directors by amending their articles of incorporation or bylaws, with the approval of their shareholders. The Company continues to qualify as a corporation which may have a classified board because its Common Stock is quoted on the National Association of Securities Dealers, Inc. Automated Quotation National Market System and is held of record by more than 800 shareholders. If the amendments to the Company's Bylaws and Articles of Incorporation are adopted, the classification of directors will apply to every future election of directors for so long as at least six directors are authorized under the Company's Bylaws. Under the proposed amendment to the Articles of Incorporation, the Board of Directors would be divided into two classes. Directors will serve for a term of two years rather than three years, and one-half of the directors (or as near to one-half as practicable) will be elected each year. Initially, the Class I directors would be elected to serve for a term of two years. The Class II directors, all of whom were pre viously §14.213 PROXY STATEMENTS: STRATEGY & FORMS © 1996 Jefren Publishing Company, Inc. 14-171D elected for three year terms expiring either in 1995 or 1996, will stand for election at the 1995 annual meeting of shareholders and if elected will serve for a term of two years. Under California law, members of the Board of Directors may be removed by the Board of Directors for cause (defined to be a felony conviction or court declaration of unsound mind), by the shareholders without cause or by court order for fraudulent or dishonest acts or gross abuse of authority or discretion. Removal of a director by the shareholders cannot be accomplished if the votes cast against such removal (or, if done by written consent, the votes eligible t o be cast by the non-consenting shareholders) are sufficient to elect such director under cumulative voting in an election of the number of directors authorized as of the last director election a ssuming that the same number of votes were cast as are being cast for removal (or, in the case of a wri tten consent, assuming that all outstanding shares were voted). In the case of classified boards, California law modifies the foregoing provision slightly to use, as the number of directors, t he greater of the number of directors elected at the most recent annual meeting of sha reholders or the number sought to be removed. This removal provision will apply equally to corporations that permit cumulative voting and to those that do not. Classification of the Board of Directors may have the effect of making it more di fficult to replace incumbent directors and management, even if the reason for doing so is inadequat e performance. A minimum of two annual meetings of shareholders would generally be required to replace a majority of the Board, absent intervening vacancies. While the classifi ed board is not intended as an "anti-takeover" measure in response to a specific threat, it may di scourage the acquisition of large blocks of the Company's shares by causing it to take longer for a person or group of persons who acquire such a block of shares to effect a change in management. DIRECTORS§14.213 June 1996 14-171E ELECTION OF DIRECTORS (Proposal 2) Currently, the authorized number of directors is set at nine directors, divided into thre e classes. However, due to the recent retirement of two incumbent directors, the number of directors currently in office is seven. As a result, Class I presently consists of two directors who are serving the balance of a three-year term expiring in 1994, with one vacancy in tha t Class; Class II consists of two directors who are serving a three-year term expiring in 1995, with one vacancy in that Class; and Class III consists of three directors who are serving a three -year term expiring in 1996. The Articles of Incorporation currently provide that one class of the directors i s to be elected each year to serve for a term of three years. At the Annual Meeting, shareholders will consider and vote on approval of a proposed amendment to the Company's Bylaws to provide for a minimum of six and a maximum of eleven directors and on approval of a proposed amendment to the Company's Articles of Incorporation to reclassify the Board of Directors from three classes to two classes. See Proposals 1A and 1B above. If those proposals are approved, at the Annual Meeting three of the seven incumbent directors will be nominated for election for a term of two years expiring in 1996 ("Class I") and the remaining four directors, each of whom previously has been elected to serve a term expiring in either 1995 or 1996 under the current classified board structure, will be designated as Class II directors whose term of office will be two years, expiring at the 1995 annual meeting of shareholders. As each class of directors comes up for election in future years, the direc tors in that class would be elected to serve for a two-year term and until their successors are duly elected and have qualified. If the proposal to amend the Company's Bylaws and Articles of Incorporation is approved by the shareholders at the Annual Meeting, the Board of Directors will designate Lawrence B rooks, Earl A. Musser and George E. Langley as Class I directors to be elected at t he 1994 Annual Meeting to serve on the Board of Directors for a two-year term ending in 1996 and until their successors are duly elected and have qualified. All three of the nominees are incumbe nt directors who have been nominated for re-election at this Annual Meeting. William V. Lande cena, O. L. Mestad, Richard H. Barker and Charles G. Boone will be designated as Class II directors a nd will serve for a two year term ending at the 1995 annual meeting of shareholders. If the proposals to amend the Company's Bylaws and Articles of Incorporation are not approved by the shareholders, the current three class structure will be retained and three C lass I directors will be elected to serve on the Board of Directors of the Company for a three year term ending in 1997 and until their successors are duly elected and have qualified. Two of the thre e nominees, Lawrence Brooks and Earl A. Musser, are incumbent Class I directors who have been nominated for re-election at this Annual Meeting. George E. Langley, a director since 1980, who is an incumbent Class II director serving a three-year term expiring in 1995, will be nomi nated as a Class I director to fill a vacancy in such class and to stand for election at the 1994 Annual Meeting. If the proposals to amend the Company's Bylaws and Articles of Incorporation are approved by the shareholders at the Annual Meeting, unless otherwise instructed, the proxy holders named in the enclosed proxy will vote the proxies received by them for the election of Lawrenc e Brooks, Earl A. Musser and George E. Langley as Class I directors to serve for a two-year term ending in 1996. If the proposals to amend the Company's Bylaws and Articles of Incorporation are not approved by the shareholders at the Annual Meeting, unless otherwise instructed, the proxy holders named in the enclosed proxy will vote the proxies received by them for the §14.213 PROXY STATEMENTS: STRATEGY & FORMS © 1996 Jefren Publishing Company, Inc. 14-171F election of Lawrence Brooks, Earl A. Musser and George E. Langley as Class I directors to serve for a three-year term ending in 1997. If any nominee becomes unavailable for any reason before the election, then the enclosed proxy will be voted for the election of such substitute nominee or nominees, if any, as shall be designated by the Board of Directors. The Board of Directors has no reason to believe that any of the nominees will be unavailable to serve. Under California law, the three nominees receiving the highest number of votes will be elected as directors at the Annual Meeting. As a result, proxies voted to "Withhol d Authority," which will be counted, and broker non-votes, which will not be counted, will have no practic al effect. Discretionary authority to cumulate votes represented by proxies is solicited by the Board of Directors because, in the event nominations are made in opposition to the nominee s of the Board of Directors, it is the intention of the persons named as proxy holders in the enclosed Proxy to cumulate votes represented by proxies for individual nominees in accordance with their best judgment in order to assure the election of as many of the nominees named below to the Board of Directors as possible. The names and certain information concerning the three nominees for election as di rectors are set forth below. YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF EACH OF THE NOMINEES NAMED BELOW. Also set forth below is information concerning each of the other current directors with unexpired terms who will continue in office. DIRECTORS AND NOMINEES Name and Positions Age Director of the Company Since(1) Shares of Common Stock Beneficially Owned as of April 7, 1994 Percent of Class Principal Occupation and Business Experience Nominees Lawrence Brooks† Director of the Company and the Bank 64 1986 41,162(2) 1.2% Mr. Brooks is, and for more than the past five years has been, President of Brooks Industries, Inc., a furniture manufacturing company. Earl A. Musser† Director of the Company and the Bank 72 1973 49,746(3) 1.4% Mr. Musser retired in 1981. Prior to his retirement, he held various positions with and also owned a dairy. George E. Langley††President, Chief Executive Officer and a Director of the Company and the Bank 53 1980 105,904(4) 3.0% Mr. Langley was elected President and Chief Executive Officer of the Company and the Bank effective April 1, 1992. For more than the prior five years Mr. Langley served as Executive Vice President, the Chief Financial Officer and Secretary of the Company and the Bank. Directors Charles G. Boone†††Director of the Company and the Bank 71 1973 98,114(5) 2.8% Mr. Boone is, and for more than the past five years has been, a private engineering consultant in the area of cryogenic engineering. Prior to 1984, Mr. Boone was affiliated with the engineering firm of DIRECTORS§14.213 June 1996 14-171G Linhardt & Associates. William V. Landecena†††† Chairman of the Board of Directors and a Director of the Company and the Bank 69 1974 233,717(3) 6.6% Prior to his retirement in 1981, Mr. Landecena had been a partner for a number of years in the Arrow Meat Company. O.L. Mestad††††Director of the Company and the Bank 71 1973 138,948(3) 3.9% Dr. Mestad is a private investor. Prior to his retirement in 1983, Dr. Mestad had been engaged in the private practice of dentistry for more than twenty years. From May 1987 until May 1992, Dr. Mestad served as Chairman of the Board of Directors of the Company and the Bank, having been elected to that position by the other members of the Board of Directors. §14.213 PROXY STATEMENTS: STRATEGY & FORMS © 1996 Jefren Publishing Company, Inc. 14-171H Name andPositions Age Director of the Company Since(l) Shares of Common Stock Beneficially Owned as of April 7, 1994 Percent of Class Principal Occupation and Business Experience Richard H. Barker†††† Director of the Company and the Bank 59 1993 19,250(6) * For 24 years, until his retirement in June 1992, Mr. Barker held various management positions with City National Bank in Beverly Hills, California. His most recent position was Senior Vice President in charge of sales and trading in the Investment Department. * Less than 1% † Currently a Class I director serving a three-year term expiring in 1994. To be nominated for election as a Class I director to serve a two-year term expiring in 1996 if the shareholders approve Proposals 1A and 1B to amend the Company's Bylaws and Articles of Incorporation. †† Currently a Class II director serving a three-year term expiring in 1995. To be nominated for election as a Class I director and to serve a two-year term expiring in 1996 if the shareholders approve Proposals 1A and 1B to amend the Company's Bylaws and Articles of Incorporation, or a term of three years, if either of those Proposals are not approved. ††† Currently a Class II director serving a three-year term expiring in 1995. To be redesignated as a Class II director whose term of office will expire at the 1995 annual meeting of shareholders if the shareholders approve Proposals 1A and 1B to amend the Company's Bylaws and Articles of Incorporation. †††† Currently a Class III director serving a three-year term expiring in 1996. To be redesignated as a Class II director whose term of office will expire at the 1995 annual meeting of shareholders if the shareholders approve Proposals 1A and 1B to amend the Company's Bylaws and Articles of Incorporation. (1) All dates are the dates when the named individuals first became directors of the Bank, the Company's predecessor and wholly-owned subsidiary. (2) Includes 12,100 shares subject to outstanding options exercisable during the 60-day period ending June 7, 1994. (3) Includes 27,850 shares subject to outstanding options exercisable during the 60-day period ending June 7, 1994. (4) Includes 36,750 shares subject to outstanding options exercisable during the 60-day period ending June 7, 1994. (5) Includes 17,850 shares subject to outstanding options exercisable during the 60-day period ending June 7, 1994. (6) Includes 5,250 shares subject to outstanding options exercisable during the 60-day period ending June 7, 1994. The Board of Directors of the Company held thirteen meetings during the year ended DIRECTORS§14.213 June 1996 14-171I December 31, 1993. Each incumbent Director attended at least 75% of the aggregate of the number of meetings of the Board and the number of meetings held by all committees of the Board on which he served, except for Mr. Brooks who attended 69% of the aggregate of the number of meetings of the Board and of the Committees of which he is a member. There are no family relationships among any of the directors or executive officers of t he Company. Foothill Independent Bancorp 4/11/94