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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 8
AMENDMENT TO APPLICATION OR REPORT
filed pursuant to Section 12, 13, or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
CU BANCORP
-------------------------------------------------
(Exact name of registrant as specified in charter)
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Annual Report on Form 10-K as set
forth in the pages attached hereto:
Form 10-K for the year ended December 31, 1993 is hereby amended
to include Part III, Items 10, 11, 12, and 13.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
CU Bancorp
------------
(Registrant)
By /s/ STEPHEN G. CARPENTER
---------------------------
Stephen G. Carpenter
Chief Executive Officer
By /s/ PATRICK G. HARTMAN
---------------------------
Patrick G. Hartman
Chief Financial Officer
Date: April 29, 1994
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PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table lists the names and certain information concerning
the directors of the Company and the Bank as of December 31, 1993.
<TABLE>
<CAPTION>
POSITION AND OFFICE POSITION AND OFFICE DIRECTOR OF COMPANY
------------------- ------------------- -------------------
NAME AGE WITH THE COMPANY WITH THE BANK AND BANK SINCE:
- - ---- --- ---------------- ------------- ---------------
<S> <C> <C> <C> <C>
Stephen G. Carpenter 54 Director, Director, 1992
President, Chief Chief Executive
Executive Officer Officer
Richard H. Close 49 Director, Secretary Director, Secretary 1981
Paul W. Glass 48 Director Director 1984
M. David Nathanson 64 Director Director 1981
Jon P. Goodman, Phd. 52 Chairman Director 1990
David I. Rainer 37 Director Director, Chief 1992
Operating Officer
</TABLE>
None of the directors or officers of the Company or the Bank were
selected pursuant to any arrangement or understanding other than with the
directors and officers of the Company and the Bank acting in their capacities
as such. There are no family relationships between any two or more of the
directors, officers, or persons nominated or chosen by the Board of Directors
to become a director or officer and none serve as directors of any company
required to report under the Securities Exchange Act of 1934, as amended, or
any investment company registered under the Investment Company Act of 1940, as
amended.
Set forth below are brief summaries of the background and business
experience, including principal occupation, of the directors as of December 31,
1993.
STEPHEN G. CARPENTER, joined the Bank in 1992 from Security Pacific
National Bank where he was Vice Chairman in charge of middle market lending
from July 1989 to June 1992. Mr. Carpenter was previously employed at Wells
Fargo Bank from July 1980 to July 1989, where he was an Executive Vice
President.
RICHARD H. CLOSE has been a principal in the law firm of Shapiro,
Posell, Rosenfeld & Close, a Professional Corporation, in Los Angeles,
California, since 1977.
PAUL W. GLASS is a certified public accountant and has been a principal
in the accountancy firm of Glass & Rosen, in Encino, California, since 1980.
JON P. GOODMAN is the Director of, and a Professor at, the University of
Southern California School of Business Administration. She previously held
similar posts at the University of Houston, College of Business Administration.
She is also a director of Entourage International. Dr. Goodman resigned from
the Board of Directors of the Company and the Bank as of January 31, 1994.
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M. DAVID NATHANSON was formerly President of Nathanson, Lewis & Harris
Advertising until 1989. He is currently retired.
DAVID I. RAINER was appointed Executive Vice President of the Bank in
June 1992 and assumed the position of Chief Operating Officer in late 1992. He
assumed the title of President of the Bank in February, 1994. From July 1989
to June 1992, Mr. Rainer was employed by Bank of America (Security Pacific
National Bank) where he held the position of Senior Vice President. From March
1989 to July 1989, Mr. Rainer was a Senior vice President at Faucet & Company,
where he co-managed a stock and bond portfolio. From July 1982 to March 1989,
Mr. Rainer was employed by Wells Fargo Bank, where he held the positions of
Vice President and Manager.
No director, officer or affiliate of the Company or of the Bank, no
owner of record or beneficially of more than five percent of any class of
voting securities of the Company or no associate of any such director, officer
or affiliate is a party adverse to the Company or the Bank in any material
pending legal proceedings to which the Company or the Bank is a party.
EXECUTIVE OFFICERS
Set forth below is certain information as of December 31, 1993 with
respect to each of the executive officers of the Company.
<TABLE>
<CAPTION>
POSITION AND POSITION AND
OFFICES WITH THE OFFICES WITH OFFICER
NAME AGE COMPANY THE BANK SINCE
---- --- ------- --------- -----
<S> <C> <C> <C> <C>
STEPHEN G. CARPENTER 54 DIRECTOR, PRESIDENT DIRECTOR, PRESIDENT, 1992
CHIEF EXECUTIVE CHIEF EXECUTIVE
OFFICER OFFICER
DAVID A. RAINER 37 DIRECTOR DIRECTOR, CHIEF 1992
OPERATING OFFICER
ANNE WILLIAMS 36 NONE CHIEF CREDIT OFFICER 1992
PATRICK HARTMAN 44 CHIEF FINANCIAL CHIEF FINANCIAL 1992
OFFICER OFFICER
</TABLE>
Set forth below are brief summaries of the background and business
experience, including principal occupation, of the executive officers of the
Company who have not previously been discussed herein.
PATRICK HARTMAN has been employed by the Bank since November, 1992.
Prior to assuming his present positions he was Senior Vice President/Chief
Financial Officer for Cenfed Bank for a period during 1992. Mr. Hartman held
the post of Senior Vice President/Chief Financial Officer of Community Bank,
Pasadena, California, for thirteen years.
ANNE WILLIAMS joined the Bank in 1992 as Senior Loan Officer and
became Chief Credit Officer in July 1993. Prior to that time she spent five
years at Bank of America / Security Pacific National Bank, where she was a
credit administrator in asset based lending, for middle market in the Los
Angeles Area. Ms. Williams was trained at Chase Manhattan Bank in New York,
and was a commercial lender at Societe Generale in Los Angeles and Boston Five
Cents Savings Bank where she managed the corporate lending group.
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Item 11. EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The following information is furnished with respect to (i) the chief
executive officer of the Corporation and (ii) each of the other most highly
compensated executive officers of the Corporation (including officers of the
Bank who may be deemed to be executive officers of the Corporation), who were
serving as executive officers at December 31, 1993 (the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term
Compensation Awards
- - ---------------------------------------------------------------------------------- ----------------------------
Name and Other Annual Options/ LTIP All Other
Principal Position Year Salary Bonus Compensation SARs# Payouts Compensation
------------------ ---- ------ ----- ------------ ----- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Stephen G. Carpenter, 1992 $144,872 $ 50,000 $ 7,000(2) 74,000 0 0
Chief Executive Officer 1993 $250,000 $ 50,000 $12,000(2) 25,000 0 0
David I. Rainer, 1992 $108,333 $ 50,000 $ 5,000(2) 55,000 0 0
Chief Operating Officer 1993 $200,000 $100,000 $12,000(2) 25,000 0 0
Patrick Hartman 1993 $138,000 $0 $ 8,450(2) 20,000 0 0
Senior Vice President
Chief Financial Officer
Anne Williams 1993 $103,400 $ 25,000 $ 3,000(2) 5,000 0 0
Executive Vice President
Chief Credit Officer
</TABLE>
(1) The Company provides memberships in certain clubs for certain
executives, the use of which primarily relates to Company business. The value
of the personal use, if any, of all such benefits cannot be specifically
determined and is not reported in the table.
(2) Consists of amounts paid for automobile allowances.
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STOCK OPTIONS
The following table contains information concerning the grant of stock options
during the fiscal year ended December 31, 1993 to the Named Executives:
OPTION / SAR GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM
- - ------------------------------------------------------------------------ --------------------------
% OF
TOTAL
OPTIONS/
SARS
OPTIONS/ GRANTED TO EXERCISE
SARS EMPLOYEES OR BASE EXPIR -
GRANTED IN FISCAL PRICE ATION
NAME (#) YEAR ($/SH) DATE 5% ($) 10%($)
- - ---- --- ----- ------ ---- ------ ------
<S> <C> <C> <C> <C> <C> <C>
S. CARPENTER* 25,000 20.62% $4.88 2/16/99 $ 41,449 $ 94,034
DAVID RAINER* 22,149 18.27 $4.88 2/16/99 $ 36,722 $ 83,310
2,851 2.35 $6.86 4/8/99 $ 6,666 $ 15,123
----- -------- --------
20.62% $ 43,388 $ 98,433
PATRICK HARTMAN 15,000 12.37 $6.88 4/8/99 $ 35,073 $ 79,567
5,000 4.12 $6.00 8/4/99 $ 10,202 $ 23,147
----- -------- --------
16.49% $ 45,275 $102,714
ANNE WILLIAMS 2,500 2.06 $6.86 4/8/99 $ 5,845 $ 13,261
2,500 2.06 $6.00 8/4/99 $ 5,101 $ 11,573
---- -------- --------
4.12% $ 10,947 $ 24,835
______ ______ ________ ________
TOTALS 75,000 61.86% $141,060 $320,016
------ ------ -------- --------
</TABLE>
(1) The options are exercisable in 20% increments commencing one year
subsequent to grant and are exercisable over a six year period, provided
however, that the options shall vest fully upon the occurrence of certain
significant events that include a merger or dissolution of the Company or sale
of substantially all the Company's assets. As of December 31, 1993 options
equal to the amounts set forth in the section herein entitled "Security
Ownership of Certain Beneficial Owners and Management", below were vested. The
vested portion of each option may be exercised at any time prior to its
expiration by tendering the exercise price in cash, check or in Shares of
Common Stock, valued at fair market value on the date of exercise. Each option
will terminate three months after termination of employment for any reason
other than death or disability. In the event of termination due to death or
disability, the option will terminate no later than one year after such
termination. Each option is not transferable other than by will or the laws of
distribution and is not exercisable by anyone other than the optionee during
his lifetime. If the outstanding shares of stock of the Company are increased,
decreased or changed into or exchanged for, a different number or kind of
shares or securities of the Company, without receipt of consideration by the
Company, a corresponding adjustment changing the number or kind of shares and
the exercise price per share allocated to unexercised options shall be made.
Subject to certain limitations in the Plan, each option may be amended by
mutual agreement of the optionee and the Company.
(2) The exercise price of all options is adjustable in connection with stock
dividends, stock splits and similar events.
(3) The Potential Realizable Value is the product of (a) the difference
between (i) and the product of the closing market price per share at the
grant date and the sum of (A) 1 plus (B) the assumed rate of appreciation of
the Common Stock compounded annually over the term of the option and (ii) the
per share exercise price of the option and (b) the number of shares of Common
Stock underlying the option at December 31, 1993. These amounts represent
certain assumed rates of appreciation only. Actual gains, if any, on
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stock option exercises are dependent on a variety of factors, including
market conditions and the price performance of the Common Stock. There can be
no assurance that the rate of appreciation presented in this table will be
achieved.
(4) Reflects the number of shares of Common Stock underlying the options
granted to the Named Executives during the year. Each of the options was
granted pursuant to the Company's 1983 or 1985 Stock Option Plans.
No options were exercised during 1993 by any of the named parties in the
Compensation Table.
No exercise price of any option previously granted to any executive officer was
adjusted or amended ("repriced") during 1993.
______________________________________________________________________________
AGGREGATED FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-money Options
Options at 12/31/93 at 12/31/93
------------------- -----------
Name Exercisable / Unexercisable Exercisable / Unexercisable
- - ---- --------------------------- ---------------------------
<S> <C> <C>
S. Carpenter 14,800 / 84,200 $20,350 / $122,025
D. Rainer 11,000 / 69,000 $16,500 / $101,992
Patrick Hartman 0 / 20,000 $0 / $ 2,500
Anne Williams 3,000 / 17,000 $ 5,250 / $ 22,250
</TABLE>
DEFERRED COMPENSATION PLAN
In December of 1992, the Bank terminated its deferred compensation
plan whereby eligible senior officers and directors of the Bank were entitled
to defer certain amounts of compensation and received limited matching amounts
from the Bank. All participants were paid in full. No compensation was
received by the parties named in the Summary Compensation Table.
OTHER MATTERS RELATED TO COMPENSATION
OTHER COMPENSATION
Mr. Carpenter was hired by the Bank as Chief Executive Officer on June
2, 1992, at an annual base salary of $250,000. Mr. Carpenter was granted a
$100,000 "signing bonus" (payable $50,000 upon commencing employment, and
$50,000 on January 2, 1993) and received options to purchase 74,000 shares of
the Company's stock at $5.125 per share. In connection with his employment,
Mr. Carpenter receives an auto allowance of $1,000 per month and the use of a
country club membership for business purposes.
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In the event that there is a change in control ("Change of Control) of
the Bank or its parent company (including a change of more than 50% of the
current shareholders of the Company), Mr. Carpenter will be entitled to any
accrued but unpaid bonus at that time. Additionally, in the event of a Change
of Control, if Mr. Carpenter is not offered a position commensurate with his
position with the Bank, and elects to resign, the Bank will pay him, subject to
non-disapproval by the regulators, 12 months' compensation.
Mr. Rainer commenced employment with the Bank on June 15, 1992, as
Executive Vice President. Mr. Rainer's annual compensation is $200,000. Mr.
Rainer was granted a $100,000 "signing bonus" (payable $50,000 on commencement
of employment and $50,000 on January 2, 1993) and received options to purchase
55,000 shares of the Company's common stock at $5.00 per share. In addition,
Mr. Rainer received a guaranteed $50,000 bonus at the expiration of one year
from the commencement of his employment. This will be applied to any incentive
bonus payable to Mr. Rainer at such one year anniversary. Mr. Rainer receives
an auto allowance of $1,000 per month and the use of a country club membership
for business purposes.
In the event of a Change of Control, Mr. Rainer would be entitled to
any accrued but unpaid bonus at that time. Additionally, in the event of a
Change of Control, if Mr. Rainer is not offered a position commensurate with
his position with the Bank, and elects to resign, the Bank will pay him,
subject to non-disapproval by the regulators, 12 months' compensation.
During 1993, the Bank sold its mortgage origination network and
certain related loan production offices. In connection with that transaction,
compensation was required by prior agreement to be paid to the two officers who
had founded the mortgage banking division and who managed that business with
regard to the value of the mortgage servicing portfolio (which was retained by
the Bank) and related to the profitability of the division. As a result, each
of Messrs. Douglas Jones and Daniel LuVisi received total compensation of
$900,507, including $714,126 related to bonuses based on profitability and
value of the mortgage servicing portfolio. Messrs. Jones and LuVisi resigned
from their positions with the Bank concurrently with the sale of the mortgage
origination network, to be employed by the purchaser of the network.
COMPENSATION OF DIRECTORS
Directors of the Company receive no compensation for attending
meetings of the Board of Directors. However, the directors of the Company also
serve as directors of the Bank. The Bank paid the sum of between $3,800 and
$1,600 per month during 1993 to each director of the Bank, depending on the
number and type of meetings attended by the director. The Director Compensation
Plan ties director compensation to board and committee meeting attendance and
is also designed to be substantially similar in total compensation to similar
banking institutions. Directors who are also salaried employees of the Bank do
not receive any additional compensation for activities as directors. Eligible
directors receive: (i) $1,000 per board meeting; and (ii) $200 per committee
meeting (for committees for which they are members). During 1993, director
compensation ranged from $34,600 at the highest to $27,400 at the least, for
the entire year, and totalled $145,400 in the aggregate for the year 1993.
SPECIAL STOCK OPTION PLAN
On October 20, 1987, the shareholders of the Company approved the 1987
Special Stock Option Plan ("Special Plan") for the Company's directors, to
encourage them to continue as directors, give them additional incentive as
directors and reward them for past services. This Special Plan is limited to
directors of the Company and the Bank and provides for the issuance of 120,960
authorized but previously unissued shares of Common Stock. Only options which
do not qualify as "incentive stock options" ("Nonstatutory
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Stock Options") under Section 422A of the Internal Revenue Code of 1986, as
amended (the "Code"), may be issued. Pursuant to the shareholders' approval of
the Special Plan, each then current director received options to purchase
15,120 shares. THERE ARE NO ADDITIONAL OPTIONS CURRENTLY AVAILABLE FOR GRANT
UNDER THE SPECIAL PLAN. The majority of the current directors do not have any
special options, although Messrs. Carpenter and Rainer have employee stock
options. Options terminate 90 days after a director ceases being a director.
The Special Plan provides that the exercise price shall not be less
than 100% of the fair market value of the shares on the day the options are
granted. On October 20, 1987, when the shareholders approved the Special Plan,
the directors received such options with an exercise price of $5.791 per share.
The options have an exercise period of ten years and are currently fully
vested.
Options granted under the Special Plan are nontransferable (other than
by the laws of descent and distribution) and may not be exercised more than
three months after termination of directorship, except in the case of the death
or disability of an optionee. In such event, the option remains exercisable
for one year to the extent it was exercisable at the date of death or
disability.
Pursuant to the Special Plan, payment for the exercise of options must
be received in full prior to the issuance of shares. Payment may be made (a)
in cash, (b) by delivery of shares of Common Stock previously owned by the
optionee (to the extent legally permissible), or (c) in a combination of common
Stock and cash. The Special Plan also enables an optionee the possibility to
satisfy tax withholding amounts due upon exercise with shares of Common Stock
rather than cash, by either delivering already owned shares of Common Stock or
withholding from the shares of Common Stock to be issued upon exercise that
number of shares which, based on the value of the Common Stock, would satisfy
the tax withholding amounts due. Since the Common Stock is listed on NASDAQ,
the value of the Common Stock delivered as payment or withheld is deemed to be
the closing price of the stock on the date of exercise or, if no sale occurred
on such date, the nearest preceding day on which a sale of Common Stock
occurred.
DIRECTOR WARRANTS
In May 1985, the shareholders ratified the grant to certain directors
at that time, of warrants to purchase 30,006 shares each, a total of 330,066
shares of Common Stock, over a ten-year period as compensation for the personal
guarantees of a capital note of the Company in the amount of $1,250,000 from
First Interstate Bank of California. Director Glass received an identical
warrant to purchase 30,006 shares, at a later date. To comply with regulatory
capital requirements by supporting the Company's additional asset growth, the
Company issued the capital note, for which the lender required the guarantees
by the directors in connection with the purchase of such capital note. The
exercise price of such warrants of $4.17 per share was the weighted average
price of the Common Stock for the 60 days prior to April 2, 1984, the date on
which First Interstate Bank of California approved the purchase of the capital
note. The purchase price of each warrant to purchase 30,006 shares was $750.
No warrants were exercised during 1992. Based on the required repayment of the
capital note subsequent to the Company's public offering of June 30, 1987, all
these warrants are currently exercisable. 207,042 warrants remain outstanding
and eligible for exercise.
In January 1994, the board of directors awarded former chairman of the
board Dr. Jon C. Goodman warrants to purchase 7,500 shares of stock at fair
market value on date of grant which was $7.00, in recognition of her services
to the Company, in view of the fact that she was the only long term director
without such incentive, and in connection with her resignation. Dr. Goodman
also received special compensation of $30,000 at the same time.
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EMPLOYEE STOCK OPTION PLAN (1983)
In April 1983, the Company adopted the Employee Stock Option Plan
(1983) ("1983 Plan") which the shareholders approved in May 1983. The 1983
Plan provides for the issuance of both "incentive stock options" within the
meaning of Section 422A of the Code ("Incentive Stock Options") and
Nonstatutory Stock Options. The number of shares of Common Stock reserved for
issuance under the 1983 Plan is 400,075. As of December 31, 1993, there were
49,030 shares subject to outstanding options. NO SHARES REMAIN AVAILABLE FOR
FUTURE GRANTS. THE 1983 PLAN HAS EXPIRED BY ITS TERMS, ALTHOUGH OUTSTANDING
OPTIONS REMAIN AND ARE EXERCISABLE OVER THE PERIOD DESIGNATED IN THE 1983 PLAN.
Only full time employees of the Company or the Bank were eligible to
participate in the 1983 Plan. No director of the Company who is not an officer
was eligible for a grant of options under the 1983 Plan. Options are
exercisable in installments as provided in individual stock option agreements.
The exercise price of options under the 1983 Plan was equal to at
least 100% of the fair market value of the Common Stock as of the date of
grant. The exercise price is due in full upon exercise and may be paid (a) in
cash, (b) by delivering shares of Common Stock equal in value to the exercise
price, subject to certain limitations for shares of stock previously acquired
upon exercise of an incentive stock option, or (c) by a combination of cash and
Common Stock. Since the Common Stock is listed on NASDAQ, the value of the
Common Stock delivered as payment is deemed to be the closing price of such
stock as the date of exercise or, if no sale occurred on such date, the nearest
preceding day on which a sale of Common Stock occurred.
No option granted under the 1983 Plan is transferable by the optionee
other than by will or the laws of descent and distribution. Each option is
exercisable only while the optionee is employed by the Company, except that if
the optionee's employment is terminated for any reason, the option is
exercisable for a period of three months thereafter. Upon the disability or
death of an optionee, such option is exercisable within one year from the date
of disability or death. Information as to grants of options under the 1983
Plan during 1993 is set forth in the section entitled "Compensation of
Executive Officers and Directors".
FIRST AMENDED AND RESTATED 1985 EMPLOYEE STOCK OPTION PLAN
In October 1985 the shareholders approved the adoption of, and in
October 1987 the shareholders approved the amendment to, the First Amended and
Restated 1985 Employee Stock Option Plan ("1985 Plan") which provides for the
issuance of incentive or nonstatutory stock options. The 1985 Plan provides
for the issuance of options to purchase 350,000 shares of Common Stock. As of
December 31, 1993, there were 261,516 shares subject to outstanding options,
61,828 shares had been issued upon exercise of options, and 26,656 shares were
available for future grants.
As the 1985 Plan is presently drafted, the Board of Directors, or a
Stock Option Committee appointed by the Board of Directors, may administer the
plan.
Only full time employees and directors are eligible to participate in
the 1985 Plan. However, no options have been issued to any director who is not
a full-time employee under the 1985 Plan and there is no intention to do so.
Options are exercisable in installments as provided in individual stock option
agreements. The 1985 Plan terminates in 1995.
The Board of Directors has the authority to determine the exercise
price for all stock options granted under the 1985 Plan; provided, however,
such exercise price must be equal to at least 100% of the fair
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market value of the Common Stock as of the date of grant, and provided further,
the exercise price for an incentive stock option granted to a Ten Percent
Shareholder may not be less than 110% of the fair market value of the Common
Stock on the date of grant. The exercise price is due in full upon exercise
and may be paid (a) in cash, (b) by delivering shares of Common Stock equal in
value to the exercise price, subject to certain limitations for shares of stock
previously acquired upon exercise of an incentive stock option, or (c) a
combination of cash and Common Stock. Since the Common Stock is listed on
NASDAQ, the value of the Common Stock delivered as payment is deemed to be the
closing price of such stock as the date of exercise or, if no sale occurred on
such date, the nearest preceding day on which a sale of Common Stock occurred.
The term during which an option granted under the 1985 Plan is
exercisable may not exceed ten years from the date of grant; provided, however,
an option granted to a Ten Percent Shareholder may not have a term in excess of
five years. The aggregate fair market value of the Common Stock (determined at
the date of grant) for which any employee may be granted incentive stock
options in any fiscal year may not exceed $100,000. No option granted under
the 1985 Plan is transferable by the optionee other than by will or the laws of
descent and distribution. Each option is exercisable only while the optionee
is employed by the Company, except that if the optionee's employment is
terminated for any reason, the option is exercisable for a period of three
months thereafter. Upon the disability or death of an optionee, such option is
exercisable within one year from the date of disability or death.
Information as to options granted pursuant to the 1985 Plan during
1993 to executive officers is contained in the section "Compensation of
Executive Officers and Directors".
1993 EMPLOYEE STOCK OPTION PLAN
In November, 1993, the Board of Directors adopted and approved,
subject to shareholder approval, the CU Bancorp 1993 Employee Stock Option Plan
(the " 1993 Plan"). The 1993 Plan was approved by requisite vote of the
shareholders on December 17, 1993. No options were granted under the 1993 Plan
during 1993.
The 1993 Plan supplements the Company's other stock option plans
provides an additional vehicle through which the Company can continue to grant
options to key employees. The Board of Directors believes that the Company's
long-standing policy of encouraging stock ownership by its key employees in
part through the granting of stock options has enhanced the Company's ability
to retain and attract such persons.
PURPOSE
The purpose of the 1993 Plan is to strengthen the Company by providing
to participating employees added incentives for high levels of performance and
to encourage stock ownership in the Company. The 1993 Plan seeks to accomplish
these goals by providing a means whereby such employees of the Company and its
subsidiaries may be given an opportunity to purchase, by way of option, Common
Stock of the Company. The 1993 Plan is also intended to enable the Company and
its subsidiaries to compete effectively for and retain the services of such
persons and to provide incentives for such persons to exert maximum efforts for
the success of the Company and its subsidiaries.
Options issued under the 1993 Employee Plan shall, in the discretion
of a committee appointed by the Board of Directors (as described below), be
either incentive stock options ("Incentive Stock Options") as that term is used
in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
or any successor thereto, or options which do not qualify as incentive stock
options ("Non-Qualified Stock Options").
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ADMINISTRATION
The 1993 Plan is administered by a committee (the "Committee")
appointed by the Board of Directors, which shall consist of not less than two
members of the Board of Directors. Each member of the Committee shall be a
disinterested person as provided in Rule 16b-3(c)(2) promulgated pursuant to
the Securities Exchange Act of 1934, as amended. The Committee shall have full
power and authority in its discretion to take any and all action required or
permitted to be taken under the 1993 Plan. At the present time the
Compensation Committee serves as the Stock Option Committee.
SHARES RESERVED
The number of shares of Common Stock reserved for issuance upon
exercise of options granted under the 1993 Employee Plan is 400,000. If any
option granted under the 1993 Plan shall for any reason expire, be cancelled or
otherwise terminate without having been exercised in full, the shares not
purchased under such option shall again become available for grant under the
1993 Plan.
ELIGIBILITY
All employees of the Company or its subsidiaries are eligible to
participate in the 1993 Employee Plan.
GRANTS, VESTING AND EXERCISE PRICE OF OPTIONS UNDER THE 1993 EMPLOYEE PLAN
Under the 1993 Employee Plan, the Committee shall select the eligible
participants to whom options will be granted, the type of option to be granted,
the exercise price of each option, the number of shares covered by such option
and the other terms and conditions of each option. The eligible employees are
able to receive Incentive and Non-Qualified Stock Options; provided, however,
that the aggregate fair market value (determined at the time the Incentive
Stock Option is granted) of the stock with respect to which Incentive Stock
Options are exercisable for the first time by the optionee during any calendar
year (under all Incentive Stock Option plans of the Company) shall not exceed
One Hundred Thousand Dollars ($100,000). Should it be determined that any
Incentive Stock Option granted exceeds such maximum, such Incentive Stock
Option shall be considered to be a Non-Qualified Stock Option to the extent,
but only to the extent, of such excess.
None of the options will be exercisable within the first 12 months
from the date of the grant. Each option shall become exercisable in the
following four cumulative annual installments: 25% on the first anniversary
date of the grant; an additional 25% on the second anniversary date of the
grant; an additional 25% on the third anniversary date of the grant; and the
last 25% on the fourth anniversary date of the grant. From time to time during
each of such installment periods, the option may be exercised with respect to
some or all of the shares allotted to that period and/or with respect to some
or all of the shares allotted to any prior period as to which the option was
not fully exercised. During the remainder of the term of the option (if its
term extends beyond the end of the installment periods), the option may be
exercised from time to time with respect to any shares then remaining subject
to the option.
The exercise price of each option granted pursuant to the 1993
Employee Plan shall be not less than one hundred percent (100%) of the fair
market value of the stock subject to the option on the date the option is
granted; provided, however, that the purchase price of the stock subject to an
Incentive Stock Option may not be less than one hundred ten percent (110%) of
such fair market value (without regard to any restriction other than a
restriction which by its terms will never lapse) where the optionee owns (or is
deemed to own pursuant to Section 424(d) of the Code) stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company.
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<PAGE> 12
The exercise price of Common Stock acquired pursuant to an option
granted under the 1993 Employee Plan shall be paid in cash or check payable at
the time the option is exercised, in whole shares of stock of the Company owned
by the optionee having a fair market value on the exercise date (determined by
the Committee in accordance with any reasonable evaluation method including the
evaluation method) equal to the option price of the shares being purchased, or
a combination of stock and cash or check, equal in the aggregate to the option
price of the shares being purchased.
ADJUSTMENTS UPON CHANGES IN STOCK
If the outstanding shares of the stock of the Company are increased,
decreased or changed into, or exchanged for a different number or kind of
shares or securities of the Company, without receipt of consideration by the
Company, through reorganization, merger, recapitalization, reclassification,
stock split, stock dividend, stock consolidation, or otherwise, an appropriate
and proportionate adjustment shall be made in the number and kind of shares as
to which options may be granted. A corresponding adjustment changing the
number or kind of shares and the exercise price per share allocated to
unexercised options, or portions thereof, which shall have been granted prior
to any such change shall likewise be made. Any such adjustment, however, in an
outstanding option shall be made without change in the total price application
to the unexercised portion of the option but with a corresponding adjustment in
the price for each share subject to the option. Adjustments under this section
shall be made by the Committee whose determination as to what adjustments shall
be made, and the extent thereof, shall be final and conclusive. No fractional
shares of stock shall be issued under the 1993 Plan on account of any such
adjustment.
EXPIRATION, TERMINATION AND TRANSFER OF OPTIONS
Under the 1993 Employee Plan, no option may extend more than ten (10)
years from the date of grant. For purposes of the 1993 Plan, the date of
grant of an option shall be the date on which the Committee takes final action
approving the award of the option, notwithstanding the date the optionee
accepts the option, the date of execution of the option agreement, or any other
date with respect to such option. Except in the event of termination of
employment due to death, disability or termination for cause, options will
terminate three (3) months after an employee optionee ceases to be employed by
the Company or its subsidiaries, unless the options by their terms were
scheduled to terminate earlier. During that three (3) month period after the
employee optionee ceases to be employed by the Company or its subsidiaries,
such options shall be exercisable only as to those shares with respect to which
installments, if any, had accrued as of the date of which the optionee ceased
to be employed by the Company or its subsidiaries. If such termination was due
to such optionees' permanent and total disability, or such optionee's death,
the option, by its terms, may be exercisable for one year after such
termination of employment. If the employee optionee's employment is terminated
for cause, the option terminates immediately, unless such termination is waived
by the Committee. An option by its terms may only be transferred by will or by
laws of descent and distribution upon the death of the optionee, shall not be
transferable during the optionee's lifetime and shall be exercisable during the
lifetime of the person to whom the option is granted only by such person.
TERMINATION AND AMENDMENT OF THE 1993 PLAN
The 1993 Plan will terminate upon the occurrence of a terminating
event, including, but not limited to, liquidation, reorganization, merger or
consolidation of the Company with another corporation in which the Company is
not the surviving corporation or resulting corporation, or a sale of
substantially all the assets of the Company to another person, or a reverse
merger in which the Company is the surviving corporation but the shares of the
Company's stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property (a "Terminating Event"). The
Committee shall notify each optionee not less than thirty (30) days prior
thereto of the pendency of a Terminating Event. Upon delivery of such notice,
any option outstanding shall be exercisable in full and not only as to those
shares
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<PAGE> 13
with respect to which installments, if any, have then accrued, subject,
however, to earlier expiration or termination as provided elsewhere in each of
the 1993 Plan. The Committee may also suspend or terminate the 1993 Plan at
any time. Unless sooner terminated, the 1993 Plan shall terminate ten (10)
years from the effective date, October 27, 1993, of the 1993 Plan. No options
may be granted under the 1993 Plan while the 1993 Plan is suspended or after
the 1993 Plan is terminated. Rights and obligations under any option granted
pursuant to the 1993 Plan, while in effect, shall not be altered or impaired by
suspension or termination of the 1993 Plan, except with the consent of the
person to whom the stock option was granted.
The 1993 Plan may be amended by the Committee at any time. However,
except as otherwise provided in the 1993 Plan relating to adjustments upon
changes in stock (e.g., stock splits or stock dividends), no amendment shall be
effective unless approved by the affirmative vote of a majority of the shares
of the Company present, or represented, and entitled to vote at a duly held
meeting at which a quorum is present or by the unanimous written consent of the
holders of all outstanding shares of the Company entitled to vote, if the
amendment will: (a) increase the number of shares reserved for options under
the 1993 Plan; (b) materially modify the requirements as to eligibility for
participation in the 1993 Plan; or (c) materially increase the benefits
accruing to participants under the 1993 Plan. Notwithstanding the foregoing,
shareholder approval need not be obtained to effect any such amendment if the
Committee determines that such approval is not otherwise required under
applicable law and that the failure to obtain such approval will not adversely
affect the 1993 Plan under the Code.
NO OPTIONS WERE GRANTED PURSUANT TO THE 1993 PLAN IN 1993.
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<PAGE> 14
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth information as of December 31,
1993 pertaining to beneficial ownership of Common Stock by persons known to the
Company to own five percent or more of such stock, current directors of the
Company, and all directors and officers of the Company as a group. The
information contained herein has been obtained from the Company's records, from
information furnished directly by the individual or entity to the Company, or
from various filings made by the named individuals with the Securities and
Exchange Commission.
The Company is of the opinion that there is no person who
possesses, directly or indirectly, the power to direct or cause to direct the
management and policies of the Company, nor is it aware of the existence of a
group of persons formed for such purpose, whether through the ownership of
voting securities, by contract, or otherwise.
The information contained herein has been obtained from the Company's
records, from information furnished directly by the individual or entity to the
Company, or from various filings made by the named individuals with the
Securities and Exchange Commission.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER RELATIONSHIP WITH COMPANY BENEFICIAL OWNERSHIP CLASS
------------------------ ------------------------- -------------------- ---------
<S> <C> <C> <C>
Stephen G. Carpenter Director, President, Chief
Executive Officer 24,800 0.56%
Richard H. Close Director 115,136 2.58
Paul W. Glass Director 98,778 2.22
Jon P. Goodman Chairman 1,000 0.02
M. David Nathanson Director 95,895 2.15
David I. Rainer Director 16,929 0.38
Dimensional Fund Advisors Inc. Beneficial Owner of More Than 278,496 (8) 6.31
5%
ALL CURRENT EXECUTIVE OFFICERS 355,788 7.7%
AND DIRECTORS AS A GROUP (8 IN
NUMBER)
</TABLE>
_____________
(1) Only Common Stock is outstanding.
(2) Includes shares beneficially owned, directly and indirectly, together
with associates. Subject to applicable community property laws and
shared voting and investment power with a spouse, the persons listed
have sole voting and investment power with respect to such shares
unless otherwise noted.
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<PAGE> 15
(3) Includes as if currently outstanding the following shares subject to
warrants and subject to options which are exercisable within 60 days.
<TABLE>
<CAPTION>
OPTIONS WARRANTS
DIRECTOR EXERCISABLE EXERCISABLE
-------- ----------- -----------
<S> <C> <C>
Carpenter 19,800 0
Close 15,120 30,006
Glass 15,120 30,006
Goodman 0 0
Nathanson 15,120 30,006
Rainer 15,429 0
</TABLE>
(4) Shares issuable pursuant to options or warrants which may be exercised
within 60 days of the Record Date are deemed to be issued and
outstanding in calculating the percentage ownership of those
individuals possessing such interest, but not for any other
individuals.
(5) Includes 9952 shares held by the Glass, and Rosen Money Purchase and
Profit Sharing Plans of which Mr. Glass is a trustee.
(6) The listing of individuals as executive officers in this table or
elsewhere in this Proxy Statement should not be interpreted as an
indication that such individuals are considered to be executive
officers of the Company or the Bank for any other purposes.
(7) Includes as if currently outstanding 173,607 shares subject to options
held by directors and officers which are exercisable within 60 days
from the Record Date.
(8) Information is based on filing with Securities and Exchange Commission
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<PAGE> 16
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Indebtedness of Management
Some of the Company's directors and executive officers, as
well as their immediate family and associates, are customers of, and have had
banking transactions with, the Bank in the ordinary course of the Bank's
business. The Bank's current policy is not to make loans to directors or
executive officers, with the exception of cash secured loans, overdraft lines
of credit and first mortgage loans for which a commitment to purchase by a
third party is in existence at the time of funding the loan. Except as set
forth below, in the opinion of the management of the Bank, except as noted
below, all loans and commitments to lend included in such transactions were
made in compliance with applicable laws, and on substantially the same terms,
including interest rates and collateral, as those prevailing for comparable
transactions with other persons of similar creditworthiness, and did not
involve more than a normal risk of collectibility or present other unfavorable
features.
All related party loans were current as to principal and interest payments as
of December 31, 1993. In management's opinion, these loans were made in the
ordinary course of business at prevailing rates and terms. There were no loans
to executive officers at December 31, 1993 and 1992, or at any time during the
years then ended.
In addition to the amounts noted above, at December 31, 1992, the Bank had
charged off loans, and a letter of credit totalling $1,300,000 and $650,000
respectively, to a former director and another party.
During 1992 and 1993, the Bank initiated legal actions to recover these amounts
on which the obligors are a former director and another unaffiliated person.
In addition, the Bank sued certain former officers and directors of the Bank in
connection with this matter. While the Bank is continuing to pursue the
unaffiliated party, it has entered into a settlement of the litigation with the
former director and officers which resulted in recovery of $766 thousand (some
of which will be applied to legal costs in collection and to accrued interest)
during 1993. Another $325 thousand was received during the first quarter of
1994. In addition, the settlement included potential long term payments of up
to an additional $500 thousand subject to offset for certain payments. While
this long term payment is secured by certain collateral, because an unrelated
financial institution holds a trust deed and has commenced foreclosure
proceedings on the underlying property, the Bank considers this to be unsecured
and there is no assurance that the full amount will actually be recovered.
Other Material Transactions
There are no other existing or proposed material transactions
between the Company and the Bank and any of the Company's directors, executive
officers, or beneficial owners of five percent or more of the Common Stock, or
the immediate family or associates of any of the foregoing persons.
16
