<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NUMBER ONE
Form 10-K
/X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the fiscal year ended December 31, 1994.
OR
/ / Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from ______________ to ____________
Commission file number 0-11008
CU BANCORP
(Exact name of registrant as specified in its charter)
California 95-3657044
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
16030 Ventura Boulevard
Encino, California 91436
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (818) 907-9122
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
(title of class)
Indicate by check mark whether the registrant has (1) filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 month (or for shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 220.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K. /X/
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of February 28, 1995: $29,139,633.
Common Stock, no par value-
The number of shares outstanding of the issuer's classes of common stock as of
February 28, 1995 Common Stock, no par value 4,527,324 shares
DOCUMENTS INCORPORATED BY REFERENCE
NONE
This document contains 20 pages.
<PAGE> 2
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, 1994 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 HARTMAN
________________________________________________
PATRICK HARTMAN, CHIEF FINANCIAL OFFICER
DATE: APRIL 29, 1995
<PAGE> 3
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
BOARD OF DIRECTORS
The Bylaws of the Company provide that the number of directors of the
Company may be no less than seven and no more than thirteen, with the exact
number to be fixed by resolution of the Board of Directors or the shareholders.
The number of directors is presently fixed at seven.
The following table provides information as of the December 31, 1994 with
respect to each person who was a member of the Board of Directors of the
Company. See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT"
for information pertaining to stock ownership of the nominees.
<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>
Kenneth L. Bernstein 51 Director Director 1994
Stephen G. Carpenter 54 Director, Chairman, Chief 1992
President, Chief Executive Officer
Executive Officer
Richard H. Close 49 Director, Secretary Director, Secretary 1981
Paul W. Glass 48 Chairman Director 1984
M. David Nathanson 64 Director Director 1981
Ronald S. Parker 49 Director Director 1993
David I. Rainer 37 Director, Chief Director, 1992
Operating Officer President, Chief
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 director nominees.
KENNETH L. BERNSTEIN, was elected to the Board of the Company and the
Bank in December 1993, and assumed the positions in February 1994. He is the
President of BFC Financial Corporation and has served in such capacity since
1965. BFC Financial Corporation performs a variety of service for both the
finance industry and clients of that industry.
STEPHEN G. CARPENTER, joined the Bank in 1992 from Security Pacific
National Bank where
<PAGE> 4
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. He assumed the role of
Chairman of the Bank in February, 1994.
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.
M. DAVID NATHANSON was formerly President of Nathanson, Lewis & Harris
Advertising until 1989. He is currently retired.
RONALD S. PARKER has been the Chairman of Parker, Mulcahy &
Associates, a regional merchant banking firm, since May 1992. Prior to that he
was the Executive Vice President and Group Head of the Corporate Banking Group
of Security Pacific National Bank from March of 1991 to May of 1992. He held a
similar position at Wells Fargo National Bank from 1984 to 1991. *Mr. Parker
resigned from the Board in December 1993. He was reappointed in 1994.
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, 1994 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 55 Director, Chief Chairman, Chief 1992
Executive Officer Executive Officer
DAVID I. RAINER 38 Director, Chief Director, President, 1992
Operating Officer Chief Operating
Officer
ANNE WILLIAMS 37 Chief Credit Officer Chief Credit Officer 1992
PATRICK HARTMAN 45 Chief Financial Chief Financial 1992
Officer Officer
</TABLE>
<PAGE> 5
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. She
was named to the position of 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.
<PAGE> 6
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 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, 1994 (the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation Awards
Name and Principal Position Year Salary Bonus Other Annual Options LTIP All Other
--------------------------- ---- ------ ----- ------------ ------- ---- ---------
Compensation / Sar's Payouts Compensation
------------ ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Stephen G. Carpenter 1992 $144,872 $ 50,000(3) $ 7,000(2) 74,000 0 0
Chief Executive Officer / 1993 $250,000 $ 50,000(3) $12,000(2) 25,000 $1,882(5)
Chief Executive Officer - 1994 $256,250 $ 50,000 $13,440(2) 100,000 $2,250(5)
California United Bank
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 $3,000(5)
President and Chief Operating 1994 $205,000 $ 50,000 $12,330(2) 75,000 $2,250(5)
Officer - California United
Bank
Patrick Hartman 1993 $138,000 $ 0 $ 8,450(2) 20,000 0 0
Senior Vice President 1994 $140,021 $ 13,000 $ 8,653(2) 10,000 0
Chief Financial Officer /
Chief Financial Officer -
California United Bank
Anne Williams 1993 $103,400 $ 25,000 $ 7,800(2) 5,000 0 $1,439(5)
Executive Vice President 1994 $124,000 $ 15,000 $ 8,092(2) 10,000 $2,085(5)
Chief Credit Officer / Chief
Credit Officer - California
United Bank
</TABLE>
(1) The Company provides memberships in certain clubs for certain
executives, the use of which primarily relates to Company business. The value
of the personal use, if any, of all such benefits cannot be specifically
determined and is not reported in the table.
(2) Consists of amounts paid for automobile allowances and term life
insurance.
(3) These amounts were signing bonuses.
(4) One half of this amount was a signing bonus. The remainder was a
merit bonus.
(5) Consists of the Company's matching portion of 401-K Plan
contributions.
<PAGE> 7
STOCK OPTIONS
The table on the following page contains information concerning the grant of
stock options during the fiscal year ended December 31, 1994 to the Named
Executives:
OPTION / SAR GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES
OF STOCK PRICE
APPRECIATION FOR
THE OPTION TERM
Name OPTIONS/SARS % OF TOTAL EXERCISE OR EXPIRATION 5%($) 10%($)
GRANTED OPTIONS/SARS GRANTED BASE PRICE DATE
# (1)(2)(3)(4) TO EMPLOYEES IN FISCAL ($ / SH)
YEAR
<S> <C> <C> <C> <C> <C> <C>
Stephen Carpenter 100,000 36.45% $6.625 3/29/04 $416,642.69 $1,055,854.38
David Rainer 75,000 28.09% $6.625 3/29/04 $312,482.02 $ 791,890.78
Patrick Hartman 10,000 3.75% $6.625 3/29/04 $ 41,664.27 $ 105,585.44
Anne Williams 10,000 3.75% $6.625 3/29/04 $ 41,664.27 $ 105,585.44
</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, 1994 options
equal to the amounts set forth in the section herein entitled "Security
Ownership of Certain Beneficial Owners and Management", above 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, 1994. These amounts represent
certain assumed rates of appreciation only. Actual gains, if any, on 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, 1985, or 1993 Stock Option Plans.
No options were exercised during 1994 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 1994.
<PAGE> 8
AGGREGATED FISCAL YEAR END OPTION
VALUES
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options at 12/31/94 In-the-money Options
------------------- at 12/31/94
-----------
Name Exercisable / Unexercisable Exercisable / Unexercisable
---- --------------------------- ---------------------------
<S> <C> <C>
S. Carpenter 39,600 / 159,400 $66,850 / $112,775
D. Rainer 31,429 / 123,571 $55,111 / $ 92,044
Patrick Hartman 3,999 / 26,001 $ 750 / $ 5,000
Anne Williams 7,000 / 23,000 $12,375 / $ 20,750
</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 / GOLDEN PARACHUTES
Mr. Carpenter and Mr. Rainer do not have employment contracts,
However, 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 and Mr. Rainer will each be
entitled to any accrued but unpaid bonus at that time. Additionally, in the
event of a Change of Control, if a position commensurate with either of their
current positions with the Bank is not offered and either elects to resign, the
Bank will pay the resigning party, 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 for the period January 1, 1993 through the sale date of November 10,
1993, including $714,126 related to bonuses and other payments 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
<PAGE> 9
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 1994, director compensation
ranged from $22,600 at the highest to $15,600 at the least, for the entire
year, and totalled $130,200 in the aggregate for the year 1994.
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 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.
As of March 31, 1995, all of the warrants had been exercised and there are no
warrants outstanding.
<PAGE> 10
In January 1994, the board of directors awarded former chairman of the
board Dr. Jon P. 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.
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 provided 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 was 400,075. As of December 31, 1994, 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 1992 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, 1994, there were 248,440 shares subject to outstanding options,
62,828 shares had been issued upon exercise of options, and 38,732 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 market value of
the Common Stock as of the date of grant, and provided further, the exercise
price for an incentive
<PAGE> 11
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 to be first exercisable 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 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. There were 400,000 shares reserves for
option issuances under the 1993 Plan. At December 31, 1995 options for 262,000
shares had been granted under the 1993 Plan, there were 258,000 shares
outstanding under the 1993 Plan and there were 142,000 shares available for
grant under the 1993 Plan. All full time employees of the Company and its
subsidiary are eligible to participate.
The 1993 Plan supplements the Company's other stock option plans and
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.
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").
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.
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
<PAGE> 12
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 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 optionee's 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
<PAGE> 13
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 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.
1994 NON EMPLOYEE DIRECTOR STOCK OPTION PLAN
On April 27, 1994, the Board of Directors adopted and approved,
subject to shareholder approval, the CU Bancorp 1994 Non-Employee Director
Stock Option Plan (the "1994 Non-Employee Director Plan"), which was approved
by the shareholders of the Company at the 1994 Annual Meeting of Shareholders.
200,000 shares were reserved for options under the 1994 Non-Employee Director
Plan. All non-employee directors of the Company are eligible to participate in
the 1994 Non-Employee Director Plan.
The Plan is intended to provide a vehicle through which the Company
can reward directors for the risks of directorship, encourage their continued
service and encourage their stock ownership in the Company. The following
discussion summarizes the principal features of the Plan. This description is
qualified in its entirety by reference to the full text of the Plan, copies of
which are available for review at the Company's principal office.
The Company intends that options issued under the 1994 Non-Employee
Directors plan shall be Non-Qualified Stock Options.
The 1994 Non-Employee Director Plan is administered by a Committee, to
the extent possible under applicable law. The Committee will not have any
discretion in the amount of options to be granted to any party, the price of
any option or the term and exercisability of any option. Option grants shall
be automatic as described herein and shall not be variable by the Committee.
Each member of a Committee shall be a disinterested person as provided in Rule
16b-3(c)(2) promulgated pursuant to the Securities Exchange Act of
<PAGE> 14
1934, as amended. The Board of Directors or the Committee (as the case shall
be) shall have full power and authority in its discretion to take any and all
action required or permitted to be taken under the Plan.
GRANTS, VESTING AND EXERCISE PRICE OF OPTIONS UNDER THE 1994
NON-EMPLOYEE DIRECTOR PLAN
Under the 1994 Non-Employee Director Plan, the non-employee directors
of the Company are eligible to receive Non-Qualified Stock Options. The 1994
Non-Employee Director Plan provides for the grant of options to non-employee
directors, without any action on the part of the Committee, only upon the
following terms and conditions:
a. Each such person who was a director of the Company on
July 1, 1994 (the "Effective Date") received Non-Qualified
Stock Options to acquire 5,000 shares of stock of the Company,
subject to adjustment, on the Effective Date, and such options
shall be deemed to have been granted on the Effective Date.
The Chairman of the Board on the Effective Date received
options to purchase an additional 2,500 shares of the Company's
Common Stock.
b. Each such person who is a director of the Company on
the day following an Annual Meeting of Shareholders in years
commencing in 1995, shall receive non-qualified options to
acquire 5,000 shares of stock of the Company, subject to
adjustment, provided that the person who is then the Chairman
of the Board shall receive additional nonqualified options to
acquire 2,500 shares of stock of the Company, subject to
adjustment; provided, however, that in the event the shares
available under the 1994 Non-Employee Director Plan are
insufficient to make any such grant, all grants made thereunder
on such date shall be prorated.
c. None of the options will be exercisable until the
March 31 next following the date of grant. Each option shall
become exercisable in the following four cumulative annual
installments: 25% on the first March 31 following the date of
the grant; an additional 25% on the second March 31 following
the date of the grant; an additional 25% on the third March 31
following the date of the grant; and the last 25% on the fourth
March 31 following the 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.
d. Subject to earlier termination as provided elsewhere in
the 1994 Non-Employee Director Plan, each option shall expire
ten (10) years from the date the option was granted.
e. The exercise price of each option shall be equal to one
hundred percent (100%) of the fair market value of the stock
subject to the option on the date the option is granted, which
shall be the closing price for the stock of the Company on the
date of such grant or if the date of such grant is not a
trading day, the first immediately preceding trading day. The
closing price for any day shall be the last reported sale price
regular way or, in case no such reported sale takes place on
such date, the average of the last reported bid and asked
prices regular way, in either case on the principal national
securities exchange registered under the 1934 Act on which the
stock of the Company is admitted to trading or listed, or if
not listed or admitted to trading on any national securities
exchange, the last sale price of the stock of the Company on
the National Association of Securities Dealers National Market
System ("NMS") or, if not quoted in the NMS, the average of the
closing bid and asked prices of the stock of the Company on the
National Association of Securities Dealers Automated Quotation
System ("NASDAQ") or any comparable system, or if the stock of
the Company is not listed on NASDAQ or any comparable system,
the closing bid and asked prices as furnished by any member of
the National Association of Securities Dealers, Inc. selected
from time to time by the Company for that purpose.
<PAGE> 15
The exercise price of Common Stock acquired pursuant to an option
shall be paid in cash or check payable to the order of the Company 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) equal to the
option price of the shares being purchased, or a combination of stock and cash
or check payable to the order to the Company, 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 Plan on account of any such
adjustment.
EXPIRATION, TERMINATION AND TRANSFER OF OPTIONS
Each option granted under the 1994 Non-Employee Director Plan shall,
except as discussed below, expire ten (10) years from the date of the grant.
Except in the event of termination of directorship due to death, or
termination for cause, options will terminate twelve (12) months after an
optionee ceases to be a director of the Company, unless the options by their
terms were scheduled to terminate earlier. During that twelve (12) month
period after the non-employee director optionee ceases to serve as a director
of the Company, 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 a director of the Company or its subsidiaries. If such
termination was due to such optionee's death while a director or in the twelve
month period following termination of the directorship, the option, by its
terms, may be exercisable for one year after death. If the non-employee
director optionee is removed from the Board of Directors of the Company for
cause, the option terminates immediately on the date of such removal. Removal
for cause shall include removal of a director who has been declared of unsound
mind by an order of court or convicted of a felony. 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 PLAN
The 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 Board of
Directors or the Committee (as the case may be) 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 with respect to which
installments, if any, have then accrued, subject, however, to earlier
expiration or termination as provided elsewhere in the Plan. The Board of
Directors or the Committee (as the case may be) may also suspend or terminate
the Plan at any time. Unless sooner terminated, the Plan shall terminate ten
(10) years from the effective date, of the Plan. No options may be granted
under the Plan while the Plan is
<PAGE> 16
suspended or after the Plan is terminated. Rights and obligations under any
option granted pursuant to the Plan, while in effect, shall not be altered or
impaired by suspension or termination of the Plan, except with the consent of
the person to whom the stock option was granted.
<PAGE> 17
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of December 31,
1994 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, all nominees to be 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.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER RELATIONSHIP WITH COMPANY OWNERSHIP(2)(3)(4) CLASS(1)
------------------------ ------------------------- ------------------ --------
<S> <C> <C> <C>
Kenneth L. Bernstein Director, Nominee 27,864 .62
Stephen G. Carpenter Director, Nominee, President, 45,100 1.20
Chief Executive Officer
Richard H. Close Director, Nominee 116,486 1.89
Paul W. Glass Chairman, Director Nominee 100,028 1.52
M. David Nathanson Director 97,145 1.46
Ronald S. Parker Director, Nominee 6,000 .13
David I. Rainer Director, Nominee, Chief 33,429 .74
Operating Officer
Dimensional Fund Advisors Inc. Beneficial Owner of More Than 240,396(10) 5.38
5%
ALL CURRENT EXECUTIVE OFFICERS 437,551 9.33
AND DIRECTORS AS A GROUP (9 IN
NUMBER)(6)(9)
- ------------------------------------------------------------------------------------
</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.
<PAGE> 18
(3) Includes as if currently outstanding the following shares subject to
options or warrants which are exercisable within 60 days.
<TABLE>
<CAPTION>
Director Options Exercisable Warrants Exercisable
-------- ------------------- ---------------------
<S> <C> <C>
Bernstein 0 0
Carpenter 39,600 0
Close 15,120 30,006
Glass 15,120 30,006
Parker 0 0
Nathanson 15,120 30,006
Rainer 31,429 0
</TABLE>
(4) Shares issuable pursuant to options and warrants which may be
exercised within 60 days of December 31, 1994 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 27,461 shares held by the Glass, and Rosen Profit Sharing
Plan 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 127,388 shares subject to
options and 90,018 shares subject to warrants held by directors and
officers which are exercisable within 60 days from December 31, 1994.
(8) Information is based on filing with Securities and Exchange Commission
(9) The address of all listed individuals, with the exception of
Dimensional Fund Advisers, Inc. is c/o CU Bancorp, 16030 Ventura
Boulevard, Encino, California 91436. The address of Dimensional Fund
Advisers, Inc. is 1299 Ocean Avenue, 11th Floor, Santa Monica,
California 90401.
(10) Dimensional Fund Advisors, Inc. ("Dimensional"), a registered
investment advisor is deemed to have beneficial ownership of
240,396 shares of CU Bancorp stock as of December 31, 1994, all of
which shares are held in portfolios of DFA Investment Dimensions Group
Inc.,a registered open-end investment company or in a series of the DFA
Investment Trust Company, a Delaware business trust, or the DFA Group
Trust and DFA Participation Group Trust, investment vehicles for
qualified employee benefit plans, of which Dimensional Fund Advisors
Inc. serves as an investment manager. Dimensional Disclaims beneficial
ownership of all such shares.
- --------------------------------------------------------------------------------
<PAGE> 19
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, and
the Bank expects to have limited such ordinary banking transactions with such
persons in the future. The Bank has adopted a policy that it generally will
not make new loans to Directors, with the exception of loans fully secured by
cash. In the opinion of the management of the Bank and except as provided
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 credit worthiness, and did not
involve more than a normal risk of collectibility or present other unfavorable
features. Although the Bank does not have any limits on the aggregate amount
it would be willing to lend to directors and officers as a group, loans to
individual directors and officers must comply with the Bank's respective
lending policies and statutory lending limits, and prior approval of the Board
of Directors is required for these loans.
There were no related party loans as of December 31, 1994.
During 1992, the Bank charged off loans, and a letter of credit
totalling $1,300,000 and $650,000 respectively, to a former director and
another party. As a result of Bank initiated legal actions against the
obligors and certain former officers and directors of the Bank settlements were
entered into which resulted in recovery of approximately $1.1 Million. In
addition, the settlement included potential long term payments of additional
amounts. The Collateral for this long term obligation which was not given
specific value by the Bank, has been substantially diminished or extinguished
by the exercise of foreclosure powers under a deed of trust by an unaffiliated
financial institution. The Bank has charged off all amounts related to these
transactions and there is no assurance of further recovery.
OTHER MATERIAL TRANSACTIONS
Except as set forth below, 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.
In 1993, prior to his election as a director of the Company, Kenneth
Bernstein entered into an agreement with the Bank to assist in collection of a
large charged off credit. In exchange for Mr. Bernstein's assistance, the Bank
agreed to pay him 50% of amounts recovered on such credit (after deduction of
legal fees). Although the Bank, with Mr. Bernstein's assistance, located the
debtor, the debtor subsequently filed bankruptcy and no amounts have been
recovered.
<PAGE> 20
REGULATORY AGREEMENT
In November 1993, the Bank was informed by the Office of the
Comptroller of the Currency ("OCC"), that the OCC had terminated the formal
written agreement (the "Agreement") with the OCC entered into in June 1992,
based upon the Bank's compliance with the provisions of the Agreement.
In November 1993, the Federal Reserve Bank of San Francisco terminated
a Memorandum of Understanding with the Company, originally entered into In
August, 1992. The termination of the MOU was taken in recognition of the
Company's compliance with these requirements.
