<PAGE>
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________
FORM 10-Q
(MARK ONE)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________ to ________.
Commission File Number: 33-41102
SILICON VALLEY BANCSHARES
(Exact name of Registrant as specified in its charter)
California 94-2856336
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3003 Tasman Drive 95054
Santa Clara, California (Zip Code)
(Address of principal executive offices)
(408) 383-5282
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period 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 ____
At July 31, 1995, 8,828,561 shares of the Registrant's Common Stock
(no par value) were outstanding.
--------------------------------------------------------------------------------
This Report Contains a Total of 23 Pages
<PAGE>
SILICON VALLEY BANCSHARES
FORM 10-Q
JUNE 30, 1995
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1 SILICON VALLEY BANCSHARES INTERIM CONSOLIDATED
------ FINANCIAL STATEMENTS
CONDENSED BALANCE SHEETS 3
CONDENSED INCOME STATEMENTS 4
CONDENSED STATEMENTS OF CASH FLOWS 5
NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS 6
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
------ FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10
PART II - OTHER INFORMATION
---------------------------
ITEM 1 LEGAL PROCEEDINGS 21
------
ITEM 2 CHANGES IN SECURITIES 21
------
ITEM 3 DEFAULTS UPON SENIOR SECURITIES 21
------
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY
------ HOLDERS 21
ITEM 5 OTHER INFORMATION 22
------
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K 22
------
SIGNATURE 23
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1
------
SILICON VALLEY BANCSHARES
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
CONDENSED BALANCE SHEETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30, December 31, June 30,
1995 1994 1994
(Dollars in thousands) (Unaudited) (Unaudited)
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Cash and Due from Banks $ 119,619 $ 139,792 $ 94,592
Federal Funds Sold and Securities Purchased Under
Agreements to Resell 238,128 150,057 37,739
Investment Securities:
At Fair Market Value 133,447 148,703 181,740
At Cost 7,019 7,786 8,252
Loans:
Commercial 574,857 616,652 510,373
Real Estate Construction 11,769 10,674 10,338
Real Estate Term 58,960 59,120 54,279
Consumer and Other 16,881 21,017 23,521
-------------------------------------------------------------------------------------------------
Gross Loans 662,467 707,463 598,511
Unearned Income on Loans (3,169) (3,654) (3,894)
-------------------------------------------------------------------------------------------------
Loans, Net of Unearned Income 659,298 703,809 594,617
Allowance for Loan Losses (22,500) (20,000) (25,000)
-------------------------------------------------------------------------------------------------
Net Loans 636,798 683,809 569,617
Premises and Equipment 4,351 2,221 2,512
Other Real Estate Owned 5,133 7,089 8,145
Accrued Interest Receivable and Other Assets 29,038 22,082 22,196
-------------------------------------------------------------------------------------------------
TOTAL ASSETS $1,173,533 $1,161,539 $924,792
-------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Deposits:
Noninterest-Bearing Demand Deposits $ 391,138 $ 401,455 $325,029
Money Market, NOW and Savings Deposits 619,008 585,171 454,770
Time Deposits 60,473 88,747 65,203
-------------------------------------------------------------------------------------------------
Total Deposits 1,070,620 1,075,373 845,003
Other Liabilities 10,668 8,910 8,221
-------------------------------------------------------------------------------------------------
Total Liabilities 1,081,288 1,084,282 853,223
-------------------------------------------------------------------------------------------------
Shareholders' Equity:
Preferred Stock, No Par Value:
20,000,000 Shares Authorized;
None Outstanding
Common Stock, No Par Value:
30,000,000 Shares Authorized;
8,818,528 Shares Outstanding at June 30, 1995;
8,509,194 Shares Outstanding at December 31, 1994;
8,366,930 Shares Outstanding at June 30, 1994. 58,282 54,068 52,763
Retained Earnings 34,963 27,702 22,611
Net Unrealized Loss on Available-for-Sale Investments (765) (4,159) (3,360)
Unearned Compensation (234) (355) (445)
-------------------------------------------------------------------------------------------------
Total Shareholders' Equity 92,246 77,257 71,569
-------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,173,533 $1,161,539 $924,792
-------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
</TABLE>
See notes to interim consolidated financial statements.
3
<PAGE>
SILICON VALLEY BANCSHARES
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
CONDENSED INCOME STATEMENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- --------------------------
1995 1994 1995 1994
(Dollars in thousands, except per share amounts) (UNAUDITED) (Unaudited) (UNAUDITED) (Unaudited)
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans, including Fees $19,999 $14,144 $40,178 $27,355
Investment Securities:
Taxable 2,250 3,120 4,481 6,035
Non-Taxable 117 136 239 275
Other 1,937 108 3,413 797
--------------------------------------------------------------------------------------------------------------------------------
Total Interest Income 24,303 17,508 48,311 34,462
--------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Deposits 5,936 3,190 11,780 6,411
Other Borrowings -- 19 -- 19
--------------------------------------------------------------------------------------------------------------------------------
Total Interest Expense 5,936 3,209 11,780 6,431
--------------------------------------------------------------------------------------------------------------------------------
Net Interest Income 18,366 14,299 36,531 28,031
Provision for Loan Losses 1,406 1,055 2,761 1,692
--------------------------------------------------------------------------------------------------------------------------------
Net Interest Income After Provision for Loan Losses 16,960 13,244 33,770 26,339
--------------------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME:
Disposition of Client Warrants 1,578 779 1,803 1,866
Letter of Credit and Foreign Exchange Income 756 569 1,461 1,036
Deposit Service Charges 333 475 685 781
Investment Losses (348) (897) (770) (897)
Other 162 130 280 263
--------------------------------------------------------------------------------------------------------------------------------
Total Noninterest Income 2,481 1,056 3,459 3,049
--------------------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE:
Compensation and Benefits 6,767 5,484 13,857 11,697
Professional Services 1,626 1,026 2,589 1,757
Occupancy 715 601 1,647 1,124
Furniture and Equipment 675 295 1,205 685
FDIC Deposit Insurance 598 609 1,196 1,219
Data Processing Services 223 346 552 610
Corporate Legal Expenses and Litigation 239 472 392 1,210
Client Services 44 321 257 608
Cost of Other Real Estate Owned 20 72 15 1,304
Other 1,508 1,129 2,773 2,182
--------------------------------------------------------------------------------------------------------------------------------
Total Noninterest Expense 12,416 10,356 24,483 22,397
--------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAX EXPENSE 7,026 3,944 12,746 6,992
INCOME TAX EXPENSE 3,046 1,703 5,485 3,017
--------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 3,980 $ 2,241 $ 7,261 $ 3,975
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE $ 0.44 $ 0.26 $ 0.81 $ 0.47
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to interim consolidated financial statements.
4
<PAGE>
SILICON VALLEY BANCSHARES
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
CONDENSED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------
1995 1994
(Dollars in thousands) (UNAUDITED) (Unaudited)
--------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH AND CASH EQUIVALENTS WERE PROVIDED BY (APPLIED TO):
OPERATING ACTIVITIES:
Net Income $ 7,261 $ 3,975
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Provision for Loan Losses 2,761 1,692
Provision for Valuation Adjustments on
Other Real Estate Owned -- 794
Depreciation and Amortization 1,193 476
(Increase) Decrease in Accrued Interest Receivable 956 (181)
(Increase) Decrease in Accounts Receivable (10,450) (662)
Increase (Decrease) in Accrued Interest Payable (36) 39
Increase (Decrease) in Deferred Loan Fees (485) 418
Gain on Sales of Other Real Estate Owned (124) (162)
Net Loss on Sales of Investment Securities 770 897
Other, Net 1,324 1,072
--------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 3,170 8,358
--------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Proceeds from Maturities, Paydowns and
Sales of Investment Securities 53,988 190,469
Purchases of Investment Securities (32,333) (124,839)
Net (Increase) Decrease in Loans 44,735 (41,512)
Net Proceeds from Sales of Other Real Estate Owned 2,079 14,878
Capital Asset Expenditures (3,323) (651)
--------------------------------------------------------------------------------------------------
Net Cash Provided by Investing Activities 65,146 38,345
--------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Net Decrease in Deposits (4,753) (69,956)
Proceeds from Issuance of Common Stock, Net of Issuance Costs 4,335 608
--------------------------------------------------------------------------------------------------
Net Cash Applied to Financing Activities (418) (69,348)
--------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 67,898 (22,645)
Cash and Cash Equivalents at January 1, 289,849 154,976
--------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at June 30, $357,747 $132,331
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
OTHER CASH FLOW INFORMATION:
Interest Paid $ 11,816 $ 6,392
Income Taxes Paid $ 5,318 $ 4,275
--------------------------------------------------------------------------------------------------
NON-CASH FINANCING AND INVESTING ACTIVITIES:
Transfer of Loans to Other Real Estate Owned $ -- $ 2,601
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
</TABLE>
See notes to interim consolidated financial statements.
5
<PAGE>
SILICON VALLEY BANCSHARES
-------------------------
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------
1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The accounting and financial reporting policies of Silicon Valley
Bancshares (the "Company") and its subsidiaries conform with generally
accepted accounting principles and prevailing practices within the banking
industry.
The interim consolidated financial statements include the accounts of the
Company and those of its wholly-owned subsidiaries, Silicon Valley Bank
(the "Bank") and SVB Leasing Company (inactive). The revenue, expenses,
assets and liabilities of the subsidiaries are included in the respective
line items in the interim consolidated financial statements after
elimination of intercompany accounts and transactions.
In the opinion of Management, the interim consolidated financial statements
contain all adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the Company's consolidated financial position
at June 30, 1995, December 31, 1994, and June 30, 1994, the results of its
operations for the three and six month periods ended June 30, 1995 and June
30, 1994, and the results of its cash flows for the six month periods ended
June 30, 1995 and June 30, 1994.
The December 31, 1994 interim consolidated financial statements were
derived from audited financial statements, and certain information and
footnote disclosures normally presented in financial statements prepared
in accordance with generally accepted accounting principles have been
omitted. These interim consolidated financial statements should be read
in conjunction with the consolidated financial statements and notes thereto
included in the Company's 1994 Annual Report to Shareholders. The results
of operations for the three and six month periods ended June 30, 1995 may
not necessarily be indicative of the operating results for the full year.
Certain reclassifications have been made to the Company's 1994 consolidated
financial statements to conform to the 1995 presentations. Such
reclassifications had no effect on the results of operations or
shareholders' equity.
Amounts presented in tables throughout this report have been rounded to the
nearest thousand. Totals or subtotals may appear to differ slightly due to
the effects of rounding.
Cash and cash equivalents as reported in the condensed statements of cash
flows include cash on hand, cash balances due from banks, federal funds
sold and securities purchased under agreements to resell.
2. NET INCOME PER SHARE COMPUTATION
Net income per common and common equivalent share is calculated using
weighted average shares, including the dilutive effect of stock options
outstanding during the
6
<PAGE>
period. Weighted average shares totaled: 9,033,164 and 8,944,291 for the
three and six month periods ended June 30, 1995, and 8,523,244 and
8,498,841 for the three and six month periods ended June 30, 1994,
respectively.
3. FEDERAL FUNDS SOLD AND SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL
Federal funds sold and securities purchased under agreements to resell
includes interest-bearing deposits in other financial institutions of
$128,000, $57,000, and $39,000 at June 30, 1995, December 31, 1994, and
June 30, 1994, respectively.
4. INVESTMENT SECURITIES
The fair market value of investment securities classified as
"held-to-maturity" and recorded at historical cost, adjusted for the
amortization of premium or the accretion of discount where appropriate, was
$7,413,000 at June 30, 1995, $8,050,000 at December 31, 1994, and
$8,671,000 at June 30, 1994.
5. NEW ACCOUNTING PRONOUNCEMENTS
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 114, "Accounting by Creditors
for Impairment of a Loan." This standard, including its amendment by SFAS
No. 118, "Accounting by Creditors for Impairment of a Loan -- Income
Recognition and Disclosures," was adopted by the Company on January 1,
1995. SFAS No. 114 requires the Company to measure impairment of a loan
based upon the present value of expected future cash flows discounted at
the loan's effective interest rate, except that as a practical expedient,
a creditor may measure impairment based on a loan's observable market price
or the fair value of the collateral if the loan is collateral-dependent. A
loan is considered impaired when, based upon current information and
events, it is probable that the Company will be unable to collect all
amounts due according to the contractual terms of the loan agreement.
At the time of adoption, certain insubstance foreclosure loans previously
classified as other real estate owned were reclassified to nonaccrual
loans. The amount of loans reclassified to conform with this new
accounting standard was $1.4 million at December 31, 1994 and $6.9 million
at June 30, 1994.
The aggregate recorded investment in loans for which impairment has been
recognized in accordance with SFAS No. 114 totaled $12.3 million at June
30, 1995. Average impaired loans for the quarter ended June 30, 1995 were
$13.1 million. Allocations to the allowance for loan losses related to
impaired loans totaled $3.3 million at
7
<PAGE>
June 30, 1995. The activity in the allowance for loan losses for the
three and six month periods ended June 30, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
(Dollars in thousands) 1995 1994 1995 1994
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Beginning Balance $21,500 $25,000 $20,000 $25,000
Provision for Loan Losses 1,406 1,055 2,761 1,692
Charge-offs (1,552) (1,455) (2,374) (3,360)
Recoveries 1,146 400 2,113 1,668
-------------------------------------------------------------------------------------------
Balance June 30, $22,500 $25,000 $22,500 $25,000
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
</TABLE>
Loans are placed on nonaccrual status when they become 90 days past due as
to principal or interest payments (unless both are well secured and in the
process of collection), when the Company has determined that the timely
collection of principal or interest is doubtful, or when they otherwise
become impaired under the provisions of SFAS No. 114. When a loan is
placed on nonaccrual status, the accrued interest receivable is reversed
and the loan is accounted for on the cash or cost recovery method
thereafter until qualifying for return to accrual status.
6. REGULATORY MATTERS
During 1993, the Company and Bank consented to formal supervisory orders by
the Federal Reserve Bank of San Francisco and the Bank consented to a
formal supervisory order by the California State Banking Department. These
orders require, among other actions, the following: suspension of cash
dividends; restrictions on transactions between the Company and the Bank
without prior regulatory approval; development of a capital plan to ensure
the Bank maintains adequate capital levels subject to regulatory approval;
development of plans to improve the quality of the Bank's loan portfolio
through collection or improvement of the loans within specified time
frames; changes to the Bank's loan policies requiring the Directors' Loan
Committee to approve all loans to any one borrower exceeding $3.0 million
and requiring the Board of Directors to become more actively involved in
loan portfolio management and monitoring activities; review of, and changes
in, the Bank's loan policies to implement (i) policies for controlling and
monitoring credit concentrations, (ii) underwriting standards for all loan
products and (iii) standards for credit analysis and credit file
documentation; development of an independent loan review function and
related loan review policies and procedures; development of Board of
Directors oversight programs to establish and maintain effective control
and supervision of Management and major Bank operations and activities;
development of a plan, including a written methodology, to maintain an
adequate allowance for loan losses, defined as a minimum of 2.0% of total
loans; development of business plans to establish guidelines for growth and
ensure maintenance of adequate capital levels; a review and evaluation of
existing compensation practices and development of officer compensation
policies and procedures by the Boards of Directors of the Company and Bank;
policies requiring that changes in fees paid to directors as well as
bonuses paid to executive officers first receive regulatory approval; and
development of a detailed internal audit plan for approval by the Board of
Directors of the Bank. The State Banking Department order further requires
the Bank maintain a tangible equity-to-assets ratio of 6.5%.
8
<PAGE>
In addition, such plans, policies, and procedures may not be amended
without prior regulatory approval. The Company and the Bank have taken
steps to address these requirements. The Company believes compliance with
these actions has not and will not have a material adverse impact on the
business of the Bank, its clients, or the Company. The Company and the
Bank were in substantial compliance with such orders at June 30, 1995.
9
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 2
------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
BUSINESS OVERVIEW
-----------------
Silicon Valley Bancshares (the "Company") is a bank holding company whose
principal subsidiary is Silicon Valley Bank (the "Bank"), a California-chartered
bank with headquarters in Santa Clara, California. The Bank maintains
regional banking offices in Northern and Southern California, and
additionally has loan offices in Oregon and Massachusetts. The Bank focuses
on specific segments within each of its selected markets, including a variety
of high technology, life science, and other emerging growth industries that
present an opportunity for the Bank to differentiate its services from other
providers. Substantially all assets, liabilities, and earnings of the
Company relate to its investment in the Bank.
Early in 1995, the Bank received regulatory approval to relocate its
corporate headquarters and main branch to a new 100,000 square foot facility
in Santa Clara. Concurrent with this move, the Bank will close its existing
branch offices in San Jose and Santa Clara, California and consolidate them
with the nearby headquarters. The Bank commenced the relocation of its staff
beginning in August 1995. The move will continue throughout the remainder of
1995 and early 1996. Additionally, the Bank received regulatory approval in
early 1995 to open a loan production office in San Diego, California. The
San Diego office officially opened June 1, 1995.
RESULTS OF OPERATIONS
---------------------
Amounts presented in tables throughout this analysis have been rounded to the
nearest thousand. Totals or subtotals may appear to differ slightly due to
the effects of rounding.
EARNINGS SUMMARY
The Company reported net income of approximately $4.0 million, or $0.44 per
share, for the second quarter of 1995. This represents an increase of $1.7
million, or $0.18 per share, compared with net income of $2.2 million, or
$0.26 per share, for the second quarter of 1994. Net income for the first six
months of 1995 was $7.3 million, or $0.81 per share, compared with net income
of $4.0 million, or $0.47 per share, for the first six months of the prior
year. The increase in 1995 net income as compared with 1994 (for both the
three and six month periods ended June 30) was primarily due to significant
loan originations and deposit growth during the latter half of 1994, a higher
net interest margin and a substantial reduction in nonperforming assets
during the past twelve months.
The Company's annualized return on average assets ("ROA") was
1.5% for the second quarter of 1995, and 1.4% for the six months
ended June 30, 1995. These ratios improved from the Company's
1.0% ROA for the second quarter of 1994, and 0.8% ROA for the
first six months of 1994. The Company's annualized return on
average equity was 18.4% for the second quarter of
10
<PAGE>
1995 and 17.4% for the first half of 1995, up from 12.5% for the second quarter
of 1994 and 11.0% for the first half of 1994.
NET INTEREST INCOME AND MARGIN
Net interest income is the principal source of revenue for the Company. It
represents the difference between interest earned on loans and investments
and interest paid on funding sources, primarily deposits. Net interest
margin is the amount of net interest income, on a fully taxable-equivalent
basis, expressed as a percentage of average interest-earning assets.
11
<PAGE>
The following table sets forth average assets, liabilities, and shareholders'
equity, interest income and interest expense, average yields and rates, and
the composition of the Company's net interest margin for the three month
periods ended June 30, 1995 and June 30, 1994:
<TABLE>
<CAPTION>
AVERAGE BALANCES, RATES AND YIELDS
Three Months Ended June 30,
-------------------------------------------------------------------
1995 1994
(UNAUDITED) (Unaudited)
--------------------------------------------------------------------------------------------------------------
AVERAGE Average
AVERAGE YIELD/ Average Yield/
(Dollars in thousands) BALANCE INTEREST RATE Balance Interest Rate
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Federal Funds Sold and Securities
Purchased Under Agreements
to Resell $ 128,331 $ 1,937 6.1% $ 11,402 $ 108 3.8%
Investment Securities:
Taxable 151,088 2,250 6.0 232,749 3,120 5.4
Non-Taxable (1) 7,131 180 10.1 8,308 210 10.1
Loans, Net of Unearned Income:
Commercial 582,635 17,758 12.2 478,820 12,432 10.4
Real Estate Construction and Term 64,925 1,691 10.4 60,535 1,192 7.9
Consumer and Other 16,682 549 13.2 23,617 520 8.8
---------------------------------------------------------------------------------------------------------------
Total Loans 664,242 19,999 12.1 562,972 14,144 10.1
---------------------------------------------------------------------------------------------------------------
Total Interest-Earning Assets 950,792 $24,366 10.3% 815,431 $17,582 8.6%
---------------------------------------------------------------------------------------------------------------
Cash and Due from Banks 114,058 111,997
Allowance for Loan Losses (22,511) (25,521)
Other Real Estate Owned 5,862 9,880
Other Assets 20,295 15,213
---------------------------------------------------------------------------------------------------------------
Total Assets $1,068,497 $ 927,000
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
FUNDING SOURCES:
Interest-Bearing Liabilities:
Money Market, NOW and
Savings Deposits $ 553,494 $ 5,418 3.9% $ 461,749 $ 2,784 2.4%
Time Deposits 59,949 518 3.5 63,503 406 2.6
Federal Funds Purchased -- -- -- 1,825 19 4.3
---------------------------------------------------------------------------------------------------------------
Total Interest-Bearing Liabilities 613,443 5,936 3.9 527,077 3,209 2.4
Portion of Noninterest-Bearing
Funding Sources 337,349 288,354
---------------------------------------------------------------------------------------------------------------
Total Funding Sources 950,792 $ 5,936 2.5% 815,431 $ 3,209 1.6%
---------------------------------------------------------------------------------------------------------------
Noninterest-Bearing Funding Sources:
Demand Deposits 355,243 325,319
Portion Used to Fund Interest-Earning
Assets (337,349) (288,354)
Other Liabilities 13,220 2,871
Shareholders' Equity 86,591 71,733
---------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $1,068,497 $ 927,000
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME $18,429 $14,373
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
NET INTEREST MARGIN 7.8% 7.1%
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Memorandum: Total Deposits $ 968,685 $ 850,571
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
<FN>
(1) Interest income on tax exempt investments has been adjusted to a fully
taxable-equivalent basis using the federal statutory rate of 35% for 1994
and 1995. The taxable-equivalent adjustments were $63 and $73 for the
three month periods ended June 30, 1995 and 1994, respectively.
</TABLE>
12
<PAGE>
Net interest income on a fully taxable-equivalent basis was $18.4 million for
the second quarter of 1995, up $4.1 million, or 28.2%, from the $14.4 million
reported for the second quarter of 1994, and $36.5 million for the first six
months of 1995, up $8.5 million from the $28.0 million reported for the first
six months of 1994. This increase resulted from a higher net interest
margin and the growth in average interest-earning assets. The net interest
margin for the quarter ended June 30, 1995 was 7.8%, compared to 7.1% for the
second quarter of 1994. The increase in net interest margin resulted from
higher market interest rates in combination with the Company's asset and
liability repricing structure. It is Management's objective to manage
interest rate risk by maintaining a modestly asset-sensitive position
(whereby interest-earning assets reprice sooner than funding sources), so
that the net interest margin increases as market interest rates rise and
decreases when rates decline. It is likely that the net interest margin
will stabilize or decline should interest rates decline in future periods.
Average loans increased 18.0%, or $101.3 million, to $664.2 million for the
second quarter of 1995, from $563.0 million for the second quarter of 1994.
Average loans for the six months ended June 30, 1995 were $683.5 million, an
increase of 23.3%, or $129.1 million, from $554.4 million for the six months
ended June 30, 1994. This year-over-year increase occurred primarily during
the last six months of 1994, and was concentrated in the commercial loan
portfolio. Average loans have remained fairly constant since December 1994.
Although the production of new loans during the first half of 1995 was
consistent with Management's expectations, there has been a higher than
expected amount of loan payoffs related to the capital raising activities of
some of the Bank's technology clients. The Company estimates that over $70
million of outstanding loans were paid off during the first half of 1995 as a
result of these capital market activities. Because of these loan payoffs,
growth in net interest income may be adversely affected. See "RESULTS OF
OPERATIONS -- Noninterest Income" for additional related information.
Another factor affecting the level of interest-earning assets and net
interest income growth was an improvement in credit quality, as evidenced by
the more than 50% decline in nonperforming assets from June 30, 1994 to June
30, 1995.
The growth in average loans, higher interest rates, and improved credit
quality combined to increase interest and fee income on loans to $20.0
million for the second quarter of 1995 and $40.2 million for the first two
quarters of 1995 combined, up $5.9 million and $12.8 million, respectively,
from $14.1 million and $27.4 million for the comparable periods in 1994.
Average investment securities decreased to $158.2 million for the second
quarter of 1995 from $241.1 million for the second quarter of 1994, and
decreased to $159.7 million for the six months ended June 30, 1995 from
$230.8 million for the six months ended June 30, 1994. The proceeds from
maturities and sales of the investment portfolio have been used to fund a
portion of the growth in loans.
Average total deposits increased to $968.7 million and $984.5 million for the
three and six month periods ended June 30, 1995. These figures represent an
increase of $118.1 million, or 13.9%, and $107.0 million, or 12.2%, from the
comparable periods of 1994. A significant portion of this growth occurred in
money market deposit accounts, which increased 19.8% to average $539.8
million for the second quarter of 1995. Average noninterest-bearing demand
deposits represented
13
<PAGE>
36.7% of average total deposits for the second quarter of 1995 compared to
38.2% of average total deposits for the second quarter of 1994.
PROVISION FOR LOAN LOSSES
The provision for loan losses is based on Management's evaluation of the
adequacy of the existing allowance for loan losses in relation to total loans
and Management's continuous assessment of the inherent and identified risk
dynamics of the loan portfolio resulting from reviews of selected individual
loans and loan commitments.
The provision for loan losses was $1.4 million during the second quarter of
1995, compared with $1.1 million during the second quarter of 1994, and $2.8
million for the first six months of 1995, compared with $1.7 million for the
comparable period in 1994. Gross charge-offs for the first six months of
1995 were $2.4 million, compared with $3.4 million for the first six months
of 1994. Loan loss recoveries for the first six months of the year were $2.1
million in 1995 and $1.7 million in 1994. See "FINANCIAL CONDITION -- Credit
Risk and the Allowance for Loan Losses" for additional related information.
NONINTEREST INCOME
Total noninterest income for the three and six month periods ended June 30,
1995 was $2.5 million and $3.5 million, respectively, up from $1.1 million
and $3.0 million in the comparable 1994 periods. The increase in noninterest
income for the second quarter of 1995 compared to the second quarter of 1994
was primarily related to reduced losses on sales of investment securities
combined with an increase in income related to the disposition of client
warrants. The increase in warrant-related income during the second quarter
of 1995 can be attributed to the high level of technology company stock
offerings during the first half of 1995.
The Company has historically obtained rights to acquire stock (in the form of
warrants) in certain nonpublic clients as part of negotiated credit
facilities. The receipt of warrants does not change the loan covenants or
other collateral control techniques employed by the Bank to mitigate the risk
of a loan becoming nonperforming. Interest rates, loan fees and collateral
requirements on loans with warrants are similar to lending arrangements where
warrants are not obtained. The timing and amount of income from the
disposition of warrants typically depends on factors beyond the control of
the Company, including the general condition of the equity markets, and
therefore cannot be predicted with any degree of accuracy and is likely to
vary materially over time. Based upon public stock offerings which occurred
in the first half of 1995, the Company announced that it has realized
approximately $3.8 million in warrant-related income between July 1 and
August 4, 1995. This income is expected to mitigate anticipated pressure on
net interest income attributable to more than $70 million of loan payoffs
during the first half of 1995 by clients which have recently accessed the
capital markets. See "RESULTS OF OPERATIONS -- Net Interest Income and
Margin" for additional related information.
Losses related to the sales of investment securities decreased from $0.9
million during the second quarter of 1994 to $0.3 million during the second
quarter of 1995. On a year-to-date basis, the losses on sales of investment
securities were $0.8 million at June 30, 1995 and $0.9 million at June 30,
1994. The securities sold during the first half of 1995 were primarily
mortgage-backed
14
<PAGE>
securities. All sales of investment securities were conducted as a normal
component of the Company's interest rate risk and liquidity management
activities.
Letter of credit fees, foreign exchange fees and other income related to
trade finance activities increased 32.8%, or $0.2 million, from the second
quarter of 1994 to the second quarter of 1995, and 40.9%, or $0.4 million,
for the first six months of the respective years. The growth in this
category of noninterest income reflects a concerted effort by Management to
expand the penetration of trade-related services among the existing base of
borrowing clients.
Deposit service charges for the three and six month periods ended June 30
decreased from $0.5 million and $0.8 million in 1994 to $0.3 million and $0.7
million in 1995. Clients compensate the Bank for depository services either
through earnings credits computed on their demand deposit balances, or via
explicit payments recognized as deposit service charges. As interest rates
rose throughout 1994 and early 1995, the earnings credit rates increased,
thus lowering the amount of explicit service charges.
NONINTEREST EXPENSE
Noninterest expense increased to $12.4 million and $24.5 million from $10.4
million and $22.4 million for the three and six month periods ended June 30,
1995 and 1994, respectively. The following table presents the detail of
noninterest expense and the incremental contributions of each line item to
the efficiency ratio:
<TABLE>
<CAPTION>
Three Months Ended June 30,
----------------------------------------------------------------------------------------
1995 1994
----------------------------------------------------------------------------------------
Percent Percent
of Adjusted of Adjusted
(Dollars in thousands) Amount Revenues Amount Revenues
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Compensation and Benefits $ 6,767 34.5% $ 5,484 35.4%
Professional Services 1,626 8.3 1,026 6.6
Occupancy 715 3.6 601 3.9
FDIC Deposit Insurance 598 3.0 609 3.9
Furniture and Equipment 675 3.4 295 1.9
Corporate Legal Expenses and Litigation 239 1.2 472 3.0
Data Processing Services 223 1.1 346 2.2
Client Services 44 0.2 321 2.1
Other 1,508 7.7 1,129 7.3
------- ---- ------- ----
Total Excluding Cost of Other
Real Estate Owned 12,396 10,283
Efficiency Ratio 63.2% 66.5%
---- ----
---- ----
Cost of Other Real Estate Owned 20 72
------- -------
Total Noninterest Expense $12,416 $10,356
------- -------
------- -------
</TABLE>
Management closely monitors the level of noninterest expense using a variety
of financial ratios. The efficiency ratio is calculated by dividing the
amount of noninterest expense, excluding costs associated with other real
estate owned ("OREO"), by adjusted revenues, defined as the total of net
interest income and noninterest income, excluding warrant income and gains or
losses from securities sales. This ratio reflects the level of operating
expense required to generate $1 of
15
<PAGE>
operating revenue. The Company's efficiency ratio improved from 66.5% for
the second quarter of 1994 to 63.2% for the second quarter of 1995, and
improved substantially from 70.0% for the first half of 1994 to 62.8% for the
first half of 1995.
Salaries and related employee benefits expenses increased $1.3 million, or
23.4%, to $6.8 million and increased $2.2 million, or 18.5%, to $13.9 million
for the three and six month periods ended June 30, 1995, from $5.5 million
and $11.7 million for the comparable periods in 1994. Average full-time
equivalent staff for the second quarter of 1995 was 331, compared with 285
for the second quarter of 1994, and 327 for the first six months of 1995,
compared with 290 for the first six months of 1994. Staff increases
year-over-year were primarily due to expansion of the lending staff during
the second half of 1994 in response to growth in the loan portfolio.
Expenses related to professional services have increased $0.6 million from
the second quarter of 1994 to the second quarter of 1995, and $0.8 million
from the first half of 1994 to the first half of 1995. The level of expense
incurred, as well as the increases in 1995 over the comparable periods in
1994, reflects the continuing extensive use of consulting and legal services
associated with building the infrastructure of the Bank, establishing new
policies and procedures, and complying with regulatory consent orders.
Occupancy, furniture and equipment, and other miscellaneous expenses have all
increased during the second quarter and first half of 1995 compared to the
corresponding periods in 1994 in response to the aforementioned growth in
personnel. These expense categories have also increased as a result of the
Company's move to a new corporate headquarters facility and its conversion to
an in-house core computer system.
As a result of the reduction in nonperforming assets throughout the past four
quarters, there has been a sharp decline in the expenses related to OREO.
For the three and six month periods ended June 30, 1995, this expense was
less than $20,000, compared with $72,000 for the second quarter of 1994 and
$1.3 million for the six months ended June 30, 1994. The cost of OREO
includes: maintenance expenses; property taxes; marketing costs; net
operating expense or income associated with income-producing properties;
property write-downs; and losses or gains on the sales of such properties.
The total amount of OREO declined to $5.1 million at June 30, 1995, from $8.1
million at June 30, 1994.
INCOME TAXES
The Company's effective tax rate was 43.0% for the first six months of 1995
and 43.1% for the first six months of 1994. The Company's effective tax rate
does not differ significantly from the statutory rate structure, currently
35.0% for Federal income taxes, and approximately 11.5% for California
franchise taxes.
FINANCIAL CONDITION
-------------------
Total assets were $1.2 billion at June 30, 1995, compared with $1.2 billion
at December 31, 1994, and $0.9 billion at June 30, 1994.
16
<PAGE>
FEDERAL FUNDS SOLD AND SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL
Federal funds sold, interest-bearing deposits in other financial
institutions, and securities purchased under agreements to resell totaled
$238.1 million at the end of the second quarter of 1995, compared with $150.1
million at year-end 1994, and $37.7 million at the end of the second quarter
of 1994. The significant increase from June to December of 1994 was
primarily due to successful deposit gathering efforts by the Company. The
further increase during the first six months of 1995 was due to technology
company public stock offerings and the resulting loan paydowns, as well as
increased deposit balances.
INVESTMENT SECURITIES
Investment securities were $140.5 million at June 30, 1995, 10.2% lower than
the $156.5 million total at December 31, 1994, and 26.1% lower than the
$190.0 million at June 30, 1994. The decrease in investment securities was
primarily in response to the growth of the loan portfolio as well as the
Bank's interest rate risk and liquidity management activities. The Company
had an outstanding receivable of $9.5 million at June 30, 1995 related to the
sales of certain investment securities, the proceeds of which were received
in early July, 1995.
LOANS
As of June 30, 1995, total loans, net of unearned income, were $659.3
million, down 6.3% from the $703.8 million at year-end 1994, but up 10.9%
from the $594.6 million recorded at the end of the second quarter of 1994.
Commercial loans, net of unearned income, were $572.3 million and accounted
for 86.8% of the total loan portfolio at June 30, 1995. This represents a
12.9% increase from the $507.0 million one year prior. The decline in total
loans from year-end reflects an unusually large amount of capital-raising
activity by the Bank's technology clients. Over $70 million of loan payoffs
during the first six months of 1995 are attributable to such events. See,
"RESULTS OF OPERATIONS -- Net Interest Income and Margin, and Noninterest
Income", respectively, for additional related information.
CREDIT RISK AND THE ALLOWANCE FOR LOAN LOSSES
Lending money involves an inherent risk of nonpayment. Through the
administration of the loan policies and careful monitoring of the portfolio,
Management seeks to reduce such risks to an acceptable level. The allowance
for loan losses provides a financial buffer for losses, both identified and
unidentified, in the loan portfolio. Management regularly reviews and
monitors the loan portfolio to determine the risk profile of each credit and
to identify credits whose risk profiles have changed. This review includes,
but is not limited to, such factors as payment status, the financial
condition of the borrower, borrower compliance with loan covenants,
underlying collateral values, potential loan concentrations, and general
economic conditions. Potential problem credits are identified and
appropriate action plans are developed.
17
<PAGE>
Nonperforming assets consist of loans that are past due 90 days or more but
still accruing interest, loans on nonaccrual status, and OREO. The table
below sets forth certain relationships between nonperforming loans,
nonperforming assets, and the allowance for loan losses.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
CREDIT QUALITY
----------------------------------------------------------------------------------------------------
JUNE 30, December 31, June 30,
1995 1994 1994
(Dollars in thousands) (Unaudited) (Unaudited)
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NONPERFORMING ASSETS:
Loans Past Due 90 Days or More $ 936 $ 444 $ 2,726
Nonaccrual Loans (1) 12,255 11,269 29,098
----------------------------------------------------------------------------------------------------
Total Nonperforming Loans 13,191 11,713 31,824
OREO (1) 5,133 7,089 8,145
----------------------------------------------------------------------------------------------------
Total Nonperforming Assets $18,324 $18,802 $39,969
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
Nonperforming Loans as a Percent of Total Loans 2.0% 1.7% 5.4%
OREO as a Percent of Total Assets 0.4% 0.6% 0.9%
Nonperforming Assets as a Percent of Total Assets 1.6% 1.6% 4.3%
ALLOWANCE FOR LOAN LOSSES $22,500 $20,000 $25,000
As a Percent of Total Loans 3.4% 2.8% 4.2%
As a Percent of Nonaccrual Loans 183.6% 177.5% 85.9%
As a Percent of Nonperforming Loans 170.6% 170.8% 78.6%
<FN>
(1) In accordance with Statement of Financial Accounting Standard No. 114,
insubstance foreclosure loans have been reclassified from OREO to
nonaccrual loans. The reclassified amounts are: $6,869 at June 30, 1994
and $1,377 at December 31, 1994.
</TABLE>
Nonperforming assets have shown substantial improvement from one year ago,
declining from $40.0 million at June 30, 1994 to $18.8 million at December
31, 1994 and $18.3 million at June 30, 1995. The improvement in nonperforming
assets has resulted from the concerted efforts of Management to maintain a
strong credit discipline and consistent administration of credit policies and
procedures.
As of January 1, 1995, the Company adopted Statement of Financial Accounting
Standard ("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan"
as amended by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan
-- Income Recognition and Disclosures." At the time of adoption,
approximately $1.4 million of insubstance foreclosure loans previously
classified as other real estate owned were reclassified to nonaccrual loans.
Prior period presentations of insubstance foreclosure loans have been
reclassified to conform with this accounting standard.
In addition to loans included in nonperforming assets, Management has
identified one loan with a principal amount aggregating approximately $7.0
million that, on the basis of information available to Management as of June
30, 1995, was judged to have a higher than normal risk of becoming
nonperforming. The Company is not aware of any other loans at June 30, 1995
where known information about possible problems of the borrower casts serious
doubts about the ability of the borrower to comply with the loan repayment
terms.
18
<PAGE>
DEPOSITS
The growth in total assets over the past four quarters was funded, primarily,
by the growth in total deposits. Total deposits were $1,070.6 million at
June 30, 1995, compared with $1,075.4 million at December 31, 1994 and $845.0
million at June 30, 1994. Noninterest-bearing demand deposits were $391.1
million at the end of the second quarter of 1995, compared with $401.5
million at year-end 1994, and $325.0 million at the end of the second quarter
of 1994. Money market, NOW, and savings deposits totaled $619.0 million at
June 30, 1995, up from $585.2 million at December 31, 1994, and $454.8
million at June 30, 1994. The increase in deposits during the past four
quarters resulted from successful marketing efforts by the Bank.
LIQUIDITY MANAGEMENT
Management regularly reviews general economic and financial conditions, both
external and internal, and determines whether the positions taken with
respect to liquidity and interest rate sensitivity are appropriate. The
objectives of liquidity management are to provide funds at an acceptable cost
to meet loan demand and depositors' needs, and to service other liabilities
as they come due. As of June 30, 1995, liquid assets as a percentage of
deposits were 36.5%, compared with 30.4% at December 31, 1994 and 19.6% at
June 30, 1994. Liquid assets include cash and due from banks, short-term
time deposits, federal funds sold, securities purchased under agreements to
resell, and investment securities maturing within one year.
CAPITAL RESOURCES
Management seeks to maintain adequate capital to support anticipated asset
growth and credit risks, and to ensure that the Company and the Bank are in
compliance with all regulatory capital guidelines. The primary source of
increased capital for the Company has been the retention of earnings. Aside
from current earnings, an additional source of new capital for the Company
has been proceeds from the issuance of common stock under the Company's
employee benefits plans including the Company's Stock Option Plan, Employee
Stock Ownership Plan, and Employee Stock Purchase Plan. Capital generated
through employee benefits plans during the second quarter and first six
months of 1995 was $2.8 million and $4.3 million, respectively, compared with
$0.2 million and $0.6 million during the comparable periods of 1994.
Shareholders' equity also increased during the twelve month period ended June
30, 1995 due to a decline in the net unrealized loss on investment securities
from $3.4 million at June 30, 1994 and $4.2 million at year-end 1994 to $0.8
million at June 30, 1995.
The Company and Bank are subject to capital adequacy guidelines issued by the
Federal Reserve Board. Under these guidelines, the minimum total capital
requirement is 8.0% of assets and certain off-balance sheet items, weighted
by risk. At least 4.0% of the total 8.0% capital ratio must consist of Tier
1 capital, defined as tangible common equity, and the remainder may consist
of subordinated debt, cumulative preferred stock, and a limited amount of the
allowance for loan losses.
The Federal Reserve Board has established minimum capital leverage ratio
guidelines for state member banks. The ratio is determined using Tier 1
capital divided by quarterly average total assets. The guidelines require a
minimum of 3.0%; however, banks experiencing high growth rates are expected
to maintain capital positions well above minimum supervisory levels.
19
<PAGE>
In addition to the foregoing requirements, the Bank is also subject to a
capital requirement established by the California State Banking Department.
Under the regulatory consent order with the State Banking Department, the Bank
must maintain a minimum tangible equity-to-assets ratio of 6.5%. The Bank's
tangible equity-to-assets ratio at June 30, 1995 was 7.6%, compared with
6.5% at December 31, 1994 and 7.4% at June 30, 1994.
The Company and the Bank had capital ratios in excess of regulatory guidelines
as of June 30, 1995. Capital ratios for the Company are set forth below:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
June 30, December 31, June 30,
1995 1994 1994
-----------------------------------------------------------------------------
<S> <C> <C> <C>
Total Risk-Based Capital Ratio 11.3% 10.1% 11.9%
Tier 1 Risk-Based Capital Ratio 10.0% 8.9% 10.6%
Tier 1 Leverage Ratio 8.7% 8.3% 8.1%
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
</TABLE>
The decrease in the Total and Tier 1 risk-based capital ratios from June to
December, 1994 was primarily the result of growth in total assets, loans and
commitments outstanding at year-end. Total assets were roughly the same at
June 30, 1995 as at year-end 1994, while outstanding loan balances decreased
during the first half of 1995 and shareholders' equity experienced a
substantial increase during this six month period. As a result, the
Company's Total and Tier 1 risk-based capital ratios improved to 11.3% and
10.0%, respectively, at June 30, 1995.
CURRENT OPERATING ENVIRONMENT
The National and California economies have slowed somewhat from the growth
experienced during 1994, resulting in a recent 25 basis point decline in the
target federal funds rate by the Federal Open Market Committee. This was the
first such reduction in the target rate since prior to 1994. If interest
rates throughout the remainder of the year remain little changed from June
30, 1995, the Company's net interest margin may decline modestly, reflecting
higher deposit costs.
The intense pace of technology company stock offerings by the Bank's clients
during the first half of 1995 has had a two-pronged effect on the Company.
It has resulted in more than $70 million of loan payoffs by these clients,
but it has also enabled the Company to exercise a number of stock warrants
from clients that completed public offerings. During the first half of 1995,
the disposition of stock warrants contributed $1.8 million to the Company's
pre-tax earnings. Between July 1 and August 4, 1995, the Bank realized
approximately $3.8 million in warrant-related income. Management anticipates
that these trends related to the capital market activities of technology
companies will continue during the second half of 1995. See, "RESULTS OF
OPERATIONS -- Net Interest Income and Margin, and Noninterest Income,"
respectively, for additional related information.
The Company remains subject to the regulatory consent orders discussed in
Note 6. While the Company cannot predict the effect of any specific
requirement of these actions, the Company believes that continued compliance
with these actions will not have a significant adverse impact on the business
of the Bank, its clients or the Company.
Current financial results should not be considered to be an indicator of
future financial performance, and investors should not use historical trends
to anticipate results or trends in future periods.
20
<PAGE>
PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS
-----------------
Certain lawsuits and claims arising in the ordinary course of business have
been filed or are pending against the Bank and/or the Company. Based upon
information available to the Company, its review of such claims to date, and
consultation with its counsel, Management believes the liability relating to
these actions, if any, will not have a material adverse effect on the
Company's consolidated financial position or results of operations.
ITEM 2. CHANGES IN SECURITIES
---------------------
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
a) The Annual Meeting of Shareholders was held on May 23, 1995.
Each of the persons named in the Proxy Statement as a nominee for
director was elected; amendments to the Silicon Valley Bancshares
1989 Stock Option Plan were approved; and the appointment of KPMG
Peat Marwick, LLP as the Company's independent auditors was ratified.
The following are the voting results on each of these matters:
<TABLE>
<CAPTION>
1) Election of Directors: In Favor Withheld
---------------------- --------- --------
<S> <C> <C>
Gary K. Barr 5,563,847 97,560
James F. Burns, Jr. 5,606,817 54,590
John C. Dean 5,607,051 54,356
Clarence J. Ferrari, Jr., Esq. 5,593,250 68,157
Henry M. Gay 5,589,016 72,391
Daniel J. Kelleher (1) 5,556,259 105,148
James R. Porter 5,607,647 53,760
Michael Roster, Esq. (2) 5,607,596 53,811
Roger V. Smith (3) 5,589,911 71,496
Ann R. Wells 5,588,679 72,728
<FN>
(1) Chair-Elect of the Company Board and the Bank Board
(2) Vice Chair-Elect of the Company Board and the Bank Board
(3) Pursuant to an agreement among the Company, the Bank,
and Mr. Smith, the Company has agreed to nominate Mr.
Smith as a director of the Company in 1995.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
In Favor Opposed Abstained
--------- ------- ---------
<S> <C> <C> <C>
2) Amendments to the Silicon
Valley Bancshares
1989 Stock Option Plan 5,194,909 406,308 60,190
3) Ratification of the
appointment of KPMG
Peat Marwick, LLP as the
Company's independent
auditors for 1995 5,621,295 11,931 28,181
</TABLE>
ITEM 5. OTHER INFORMATION
-----------------
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
---------------------------------
a) Exhibits:
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit Number Exhibit Page
-------------- ------- ----
<C> <S> <C>
10.19 Agreement not to Stand for Re-election as
Director of Silicon Valley Bancshares and
Silicon Valley Bank and Mutual General
Release of Claims between Dr. Allan C.
Kramer and Silicon Valley Bancshares and
Silicon Valley Bank 1
10.20 Agreement not to Stand for Re-election as
Director of Silicon Valley Bancshares and
Silicon Valley Bank and Mutual General
Release of Claims between Barry A. Turkus and
Silicon Valley Bancshares and Silicon Valley
Bank 5
10.21 Separation Agreement and General Release
between Allyn C. Woodward, Jr. and Silicon
Valley Bancshares and Silicon Valley Bank 9
10.22 Restricted Stock Bonus and Non-Compete
Agreement between Allyn C. Woodward, Jr. and
Silicon Valley Bancshares and Silicon Valley
Bank 20
10.23 Amendment and Restatement of Silicon
Valley Bancshares 1989 Stock Option Plan 23
</TABLE>
b) No reports on Form 8-K have been filed by the Registrant during the three
months ended June 30, 1995.
22
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SILICON VALLEY BANCSHARES
-------------------------
(Registrant)
Date: August 9, 1995 By: (s) Dennis G. Uyemura
----------------------- -----------------------
Dennis G. Uyemura
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
23
<PAGE>
---------------
EXHIBIT # 10.19
---------------
April 28, 1995
Dr. Allan C. Kramer
22 Almendra Lane
Los Altos, CA 94022
RE: AGREEMENT NOT TO STAND FOR REELECTION AS DIRECTOR
OF SILICON VALLEY BANCSHARES AND SILICON VALLEY BANK
AND MUTUAL GENERAL RELEASE OF CLAIMS
Dear Allan:
This letter agreement ("Agreement") is made and entered into this 28th
day of April, 1995 (the "Effective Date") by and among Silicon Valley Bancshares
("Bancshares"), Silicon Valley Bank (the "Bank") and Dr. Allan C. Kramer (the
"Director") with reference to the following.
The Director has served as a director of Bancshares and the Bank. The
Boards of Directors of Bancshares and the Bank have determined to reduce the
authorized number of directors from 12 to 10, with respect to the Bancshares
Board, effective as of the date of Bancshares' 1995 annual meeting of
shareholders, and from 11 to 9, with respect to the Bank's Board, effective as
of the date of the Bank's 1995 annual meeting of shareholders. The Director,
Bancshares and the Bank have decided that it is in their mutual best interests
for the Director not to stand for reelection at the Bancshares' 1995 annual
meeting or at the Bank's 1995 annual meeting.
During 1994, persons serving as nonemployee directors of Bancshares
and the Bank, including the Director, were authorized to receive restricted
grants of Bancshares' common stock as compensation for their service as
directors for each of the 1994-1995, 1995-1996 and 1996-1997 terms of office.
As authorized by the Bancshares' and Bank's Boards of Directors, these stock
grants are to be awarded in amounts of 2,500 per year and are subject to certain
restrictions on resale or transfer. In connection with the foregoing, it has
previously been determined that the Director is to receive a restricted stock
grant of 2,500 shares for his service during the 1994-1995 term. Because the
Director will not stand for reelection at Bancshares' 1995 annual meeting or the
Bank's 1995 annual meeting, the Director is not entitled to receive a stock
grant or other form of compensation in connection with the 1995-1996 or 1996-
1997 terms of office.
1
<PAGE>
Notwithstanding the foregoing, however, and in addition to the 2,500
shares he is to receive as compensation for his 1994-1995 term, in consideration
of the Director's execution of this Agreement, Bancshares and the Bank have
agreed to grant to the Director 2,500 unrestricted shares of Bancshares' common
stock (the "Stock Grant"), which Stock Grant shall be made as of the Effective
Date hereof.
Now, therefore, in consideration of the foregoing and performance of
this Agreement and of the covenants and promises herein contained, the adequacy
and receipt of which consideration is hereby acknowledged, the parties hereto
agree as follows:
1. The Director shall not stand for reelection as a director of
Bancshares or the Bank at Bancshares' 1995 annual meeting or at the Bank's 1995
annual meeting and will not accept nomination to either Board by any person.
2. As of the Effective Date, Bancshares shall make the Stock Grant
to the Director. The Director acknowledges in this regard that, except with
respect to the restricted stock grant (the "1994 Grant") to be made in
connection with his service during the 1994-1995 term of office, he is not
otherwise entitled to receive a grant of stock or other payment from Bancshares
or the Bank in consideration for his service as a director of Bancshares or the
Bank. Shares of stock issued pursuant to the Stock Grant shall not be subject
to any resale restrictions by Bancshares or the Bank (although other
restrictions on sale or transfer may apply under applicable securities laws).
Additionally, the 1994 Grant shall not be subject to any resale restrictions by
Bancshares of the Bank (assuming shareholder approval is received at the 1995
Annual Meeting of Shareholders to delete existing resale restrictions) (although
other restrictions on sale or transfer may apply under applicable securities
laws).
3. From and after the Effective Date, the Director, on the one hand,
and Bancshares and the Bank, on the other hand, on behalf of themselves and
their respective heirs, legal representatives, successors and assigns,
irrevocably release and discharge each other and their respective heirs, legal
representatives, successors and assigns, officers, directors, shareholders,
attorneys, agents and employees, and each of them, from any and all causes of
action, claims, actions, rights, demands, obligations, damages or liabilities of
whatever kind or character, which they may have against each other, whether
known or unknown.
4. The Director, on the one hand, and Bancshares and the Bank, on
the other hand, on behalf of themselves and their respective heirs, legal
representatives, agents, successors and assigns, expressly waive all rights
afforded by California Civil Code Section 1542 and do so acknowledging the
significance of such specific waiver. The Director further acknowledges that he
has been afforded the opportunity to be represented in this matter by counsel.
The Director, on the one hand, and Bancshares and the Bank, on the other hand,
acknowledge that they are familiar with the provisions of California Civil Code
Section 1542, which provides as follows:
A general release does not extend to claims which
the creditor does not know or suspect to exist in
his favor at the time of executing the
2
<PAGE>
release, which if known by him must have materially affected
his settlement with the debtor.
5. The Director agrees to maintain confidentiality with respect to
all confidential information of any type which the Director may have obtained
during the course of his service as a director of Bancshares or the Bank. The
Director further agrees to maintain the confidentiality of this Agreement and
its underlying facts or circumstances. The Director further agrees to return to
Bancshares or the Bank, upon their reasonable request, all manuals, documents,
files or other proprietary materials used by the Director during his service,
which the Director acknowledges to be the property of Bancshares or the Bank, as
the case may be.
6. The Director acknowledges that, pursuant to Bancshares' 1983 and
1989 stock option plans (the "Plans"), stock options previously granted to the
Director under the Plans must be exercised within 3 months following termination
of the Director's status as a director of Bancshares or the Bank and otherwise
in accordance with the requirements of the Plans.
7. Bancshares, the Bank and the Director acknowledge and agree that
they shall not now or in the future make to any other person any negative or
otherwise disparaging comments or statements about the other, or any of their
respective officers, agents or employees, including disparaging comments
regarding business practices, and that none of them shall communicate to any
person any facts or opinions that might tend to reflect adversely upon the other
or to harm the reputation of the other in the conduct of their respective
personal, business or professional affairs. Without limiting the generality of
the foregoing sentence, Bancshares and the Bank agree that, when responding to
inquiries by third parties regarding the circumstances of the Director's
departure from the Bancshares Board and the Bank Board, Bancshares and/or the
Bank will communicate that the Director left the Boards in good standing. The
Director acknowledges and agrees that he shall not interfere with, nor cause
interference with, the conduct of Bancshares' or the Bank's 1995 annual
shareholders' meetings. The Director further acknowledges and agrees that he
will not participate in any proxy contests with respect to any such 1995
meetings or otherwise interfere with the proxy solicitation efforts relating
thereto.
8. Bancshares, the Bank and the Director acknowledge and agree that
in the event of any breach of any term or provision of this Agreement, such
party shall indemnify and hold harmless each of the other parties from and
against any and all claims, demands, causes of action, obligations, damages or
liabilities, including reasonable costs and attorneys' fees, arising from or in
connection with that breach.
9. Bancshares and the Bank shall indemnify the Director to the
maximum extent permitted under the respective companies' bylaws, the California
Corporations Code, and the Directors and Officers Liability Insurance
maintained by the respective companies. The provisions of this paragraph shall
inure to the benefit of Director's estate, executor, administrator, heirs,
legatees and devisees.
10. This Agreement shall be governed by and construed in accordance
with the laws of California.
3
<PAGE>
11. This Agreement contains all of the terms and conditions agreed
upon by the parties hereto relating to the subject matter hereof and supersedes
any prior agreements, negotiations or representations, whether oral or written,
relating thereto. Should any provision of this Agreement be held invalid or
illegal, the remaining portions of this Agreement shall remain fully enforceable
in accordance with their terms. Any amendment or modification of this Agreement
must be in writing and executed by the Director and duly authorized
representatives of Bancshares and the Bank. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, all of
which together shall constitute one and the same instrument.
Please acknowledge your acceptance of this Agreement and each of the
respective terms hereof by signing and dating below.
Very truly yours,
SILICON VALLEY BANCSHARES
By: s/ Clarence J. Ferrari, Jr.
----------------------------------
Clarence J. Ferrari, Jr., Chairman
Date: 5/17/95
---------------
SILICON VALLEY BANK
By: s/ Clarence J. Ferrari, Jr.
----------------------------------
Clarence J. Ferrari, Jr., Chairman
Date: 5/17/95
----------------
DIRECTOR
s/ Dr. Allan C. Kramer
----------------------------
Dr. Allan C. Kramer
Date: 5/11/95
----------------
4
<PAGE>
---------------
EXHIBIT # 10.20
---------------
April 28, 1995
Barry A. Turkus
11987 Murietta Lane
Los Altos Hills, CA 94022
RE: AGREEMENT NOT TO STAND FOR REELECTION AS DIRECTOR
OF SILICON VALLEY BANCSHARES AND SILICON VALLEY BANK
AND MUTUAL GENERAL RELEASE OF CLAIMS
Dear Barry:
This letter agreement ("Agreement") is made and entered into this
28th day of April, 1995 (the "Effective Date") by and among Silicon Valley
Bancshares ("Bancshares"), Silicon Valley Bank (the "Bank") and Barry A.
Turkus (the "Director") with reference to the following.
The Director has served as a director of Bancshares and the Bank.
The Boards of Directors of Bancshares and the Bank have determined to reduce
the authorized number of directors from 12 to 10, with respect to the
Bancshares Board, effective as of the date of Bancshares' 1995 annual meeting
of shareholders, and from 11 to 9, with respect to the Bank's Board,
effective as of the date of the Bank's 1995 annual meeting of shareholders.
The Director, Bancshares and the Bank have decided that it is in their mutual
best interests for the Director not to stand for reelection at the
Bancshares' 1995 annual meeting or at the Bank's 1995 annual meeting.
During 1994, persons serving as nonemployee directors of Bancshares
and the Bank, including the Director, were authorized to receive restricted
grants of Bancshares' common stock as compensation for their service as
directors for each of the 1994-1995, 1995-1996 and 1996-1997 terms of office.
As authorized by the Bancshares' and Bank's Boards of Directors, these stock
grants are to be awarded in amounts of 2,500 per year and are subject to
certain restrictions on resale or transfer. In connection with the
foregoing, it has previously been determined that the Director is to receive
a restricted stock grant of 2,500 shares for his service during the 1994-1995
term. Because the Director will not stand for reelection at Bancshares' 1995
annual meeting or the Bank's 1995 annual meeting, the Director is not
entitled to receive a stock grant or other form of compensation in connection
with the 1995-1996 or 1996-1997 terms of office.
Notwithstanding the foregoing, however, and in addition to the
2,500 shares he is to receive as compensation for his 1994-1995 term, in
consideration of the Director's execution of this
1
<PAGE>
Agreement, Bancshares and the Bank have agreed to grant to the Director 2,500
unrestricted shares of Bancshares' common stock (the "Stock Grant"), which
Stock Grant shall be made as of the Effective Date hereof.
Now, therefore, in consideration of the foregoing and performance
of this Agreement and of the covenants and promises herein contained, the
adequacy and receipt of which consideration is hereby acknowledged, the
parties hereto agree as follows:
1. The Director shall not stand for reelection as a director of
Bancshares or the Bank at Bancshares' 1995 annual meeting or at the Bank's
1995 annual meeting and will not accept nomination to either Board by any
person.
2. As of the Effective Date, Bancshares shall make the Stock
Grant to the Director. The Director acknowledges in this regard that, except
with respect to the restricted stock grant (the "1994 Grant") to be made in
connection with his service during the 1994-1995 term of office, he is not
otherwise entitled to receive a grant of stock or other payment from
Bancshares or the Bank in consideration for his service as a director of
Bancshares or the Bank. Shares of stock issued pursuant to the Stock Grant
shall not be subject to any resale restrictions by Bancshares or the Bank
(although other restrictions on sale or transfer may apply under applicable
securities laws). Additionally, the 1994 Grant shall not be subject to any
resale restrictions by Bancshares of the Bank (assuming shareholder approval
is received at the 1995 Annual Meeting of Shareholders to delete existing
resale restrictions) (although other restrictions on sale or transfer may
apply under applicable securities laws).
3. From and after the Effective Date, the Director, on the one
hand, and Bancshares and the Bank, on the other hand, on behalf of themselves
and their respective heirs, legal representatives, successors and assigns,
irrevocably release and discharge each other and their respective heirs,
legal representatives, successors and assigns, officers, directors,
shareholders, attorneys, agents and employees, and each of them, from any and
all causes of action, claims, actions, rights, demands, obligations, damages
or liabilities of whatever kind or character, which they may have against
each other, whether known or unknown.
4. The Director, on the one hand, and Bancshares and the Bank, on
the other hand, on behalf of themselves and their respective heirs, legal
representatives, agents, successors and assigns, expressly waive all rights
afforded by California Civil Code Section 1542 and do so acknowledging the
significance of such specific waiver. The Director further acknowledges that
he has been afforded the opportunity to be represented in this matter by
counsel. The Director, on the one hand, and Bancshares and the Bank, on the
other hand, acknowledge that they are familiar with the provisions of
California Civil Code Section 1542, which provides as follows:
A general release does not extend to claims which
the creditor does not know or suspect to exist in
his favor at the time of executing the release,
which if known by him must have materially
affected his settlement with the debtor.
2
<PAGE>
5. The Director agrees to maintain confidentiality with respect
to all confidential information of any type which the Director may have
obtained during the course of his service as a director of Bancshares or the
Bank. The Director further agrees to maintain the confidentiality of this
Agreement and its underlying facts or circumstances. The Director further
agrees to return to Bancshares or the Bank, upon their reasonable request,
all manuals, documents, files or other proprietary materials used by the
Director during his service, which the Director acknowledges to be the
property of Bancshares or the Bank, as the case may be.
6. The Director acknowledges that, pursuant to Bancshares' 1983
and 1989 stock option plans (the "Plans"), stock options previously granted
to the Director under the Plans must be exercised within 3 months following
termination of the Director's status as a director of Bancshares or the Bank
and otherwise in accordance with the requirements of the Plans.
7. Bancshares, the Bank and the Director acknowledge and agree
that they shall not now or in the future make to any other person any
negative or otherwise disparaging comments or statements about the other, or
any of their respective officers, agents or employees, including disparaging
comments regarding business practices, and that none of them shall
communicate to any person any facts or opinions that might tend to reflect
adversely upon the other or to harm the reputation of the other in the
conduct of their respective personal, business or professional affairs.
Without limiting the generality of the foregoing sentence, Bancshares and the
Bank agree that, when responding to inquiries by third parties regarding the
circumstances of the Director's departure from the Bancshares Board and the
Bank Board, Bancshares and/or the Bank will communicate that the Director
left the Boards in good standing. The Director acknowledges and agrees that
he shall not interfere with, nor cause interference with, the conduct of
Bancshares' or the Bank's 1995 annual shareholders' meetings. The Director
further acknowledges and agrees that he will not participate in any proxy
contests with respect to any such 1995 meetings or otherwise interfere with
the proxy solicitation efforts relating thereto.
8. Bancshares, the Bank and the Director acknowledge and agree
that in the event of any breach of any term or provision of this Agreement,
such party shall indemnify and hold harmless each of the other parties from
and against any and all claims, demands, causes of action, obligations,
damages or liabilities, including reasonable costs and attorneys' fees,
arising from or in connection with that breach.
9. Bancshares and the Bank shall indemnify the Director to the
maximum extent permitted under the respective companies' bylaws, the
California Corporations Code, and the Directors and Officers Liability
Insurance maintained by the respective companies. The provisions of this
paragraph shall inure to the benefit of Director's estate, executor,
administrator, heirs, legatees and devisees.
10. This Agreement shall be governed by and construed in
accordance with the laws of California.
11. This Agreement contains all of the terms and conditions agreed
upon by the parties hereto relating to the subject matter hereof and
supersedes any prior agreements,
3
<PAGE>
negotiations or representations, whether oral or written, relating thereto.
Should any provision of this Agreement be held invalid or illegal, the
remaining portions of this Agreement shall remain fully enforceable in
accordance with their terms. Any amendment or modification of this Agreement
must be in writing and executed by the Director and duly authorized
representatives of Bancshares and the Bank. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original, all
of which together shall constitute one and the same instrument.
Please acknowledge your acceptance of this Agreement and each of
the respective terms hereof by signing and dating below.
Very truly yours,
SILICON VALLEY BANCSHARES
By: s/ Clarence J. Ferrari, Jr.
----------------------------------
Clarence J. Ferrari, Jr., Chairman
Date: 5/17/95
---------------
SILICON VALLEY BANK
By: s/ Clarence J. Ferrari, Jr.
----------------------------------
Clarence J. Ferrari, Jr., Chairman
Date: 5/17/95
---------------
DIRECTOR
s/ Barry A. Turkus
---------------------------------
Barry A. Turkus
Date: 5/3/95
--------------------
4
<PAGE>
SEPARATION AGREEMENT AND GENERAL RELEASE
This Separation Agreement And General Release ("Agreement") is made by and
among SILICON VALLEY BANK (the "BANK") and Silicon Valley Bancshares, the
holding company of the BANK (the "HOLDING COMPANY"), collectively referred to
herein as the "COMPANIES," and ALLYN C. WOODWARD, JR. ("EMPLOYEE"), with respect
to the following facts:
Employee was employed by and associated with each of the Companies; and
The Companies and Employee desire to amicably terminate their employment
relationship; and
NOW THEREFORE, in consideration for the covenants contained herein and
other good and valuable consideration, sufficiency of which is hereby
acknowledged, Employee and the Companies, and each of them, agree as follows:
1. VOLUNTARY RESIGNATION. Employee agrees to resign from his position as
Senior Executive Vice President and Chief Operating Officer of the Bank
effective April 1, 1995.
2. CONSULTING ENGAGEMENT. Bank agrees to engage Employee in a consulting
capacity for a term of nineteen (19) months, beginning April 1, 1995, and
continuing through and including October 31, 1996. In the capacity of
consultant, Employee agrees to be reasonably available to provide appropriate
advisory services to the Bank if and when the Bank requests such services from
Employee, provided that Bank shall reimburse Employee for any and all travel and
other out-of-pocket expenses associated with providing such services. Bank
agrees to pay Employee the sum of Two Hundred Fourteen Thousand Two Hundred
Dollars ($214,200.00) as compensation for any and all services performed by
Employee during the aforesaid term of the consulting engagement. The aforesaid
sum shall be payable to Employee semi-monthly, on the Bank's customary payroll
dates.
3. REIMBURSEMENT OF GROUP MEDICAL, VISION AND DENTAL PREMIUMS. Should
Employee elect to continue the group medical, vision and dental benefits
provided to him prior to the effective date of his resignation (April 1, 1995)
under the provisions of COBRA, the Bank agrees to reimburse Employee for the
cost of COBRA continuation premiums paid by him for such group medical, vision
and dental benefits for the duration of the consulting engagement through and
including October 31, 1996, or the date of any forfeiture of consideration, as
described in Paragraph 8 of this Agreement or the date on which Employee becomes
eligible for coverage under any other Employer's group medical benefits plan,
whichever occurs first.
4. CLUB MEMBERSHIP. Bank agrees to continue to pay Employee's standard
membership dues and fees to the Braeburn Country Club through and including
October 31, 1996, or the date of any forfeiture of consideration, as described
in Paragraph 7 of this Agreement, or the date on which Employee begins
employment with an employer other than the Companies, whichever occurs first.
5. PERSONAL OFFICE EQUIPMENT. Bank hereby conveys to Employee, effective
upon the effective date of this Agreement as defined in Section 20 below, all
right, title and interest in and to the two (2) personal computers, fax machine,
car telephones, and the pictures currently hanging in Employee's office which
Employee has customarily used in the course of his employment with the Companies
prior to the effective date of his resignation.
6. MOVING EXPENSES. Bank agrees to reimburse Employee for the properly
documented actual expense of moving office and personal belongings from
California to Massachusetts, up to a maximum of Six Thousand Dollars
($6,000.00).
7. OUTPLACEMENT. Bank agrees to reimburse Employee for the actual cost
to Employee of reasonable and appropriate outplacement services, in an amount
not to exceed Two Thousand Five Hundred Dollars ($2,500.00).
1
<PAGE>
8. FORFEITURE OF CONSIDERATION. Employee agrees that he shall not become
employed, or engage in any self-employment, in competition with the Companies
during the period of the consulting engagement described in Paragraph 2 herein,
without the prior written consent of the Companies and further agrees that such
consent, if obtained, may be granted only in a writing, signed by the Chief
Executive Officer of the Companies. Employee further agrees that should he
undertake any such competitive employment or self-employment without the express
written consent of the Companies, as provided herein, or should he otherwise
breach any other term of this Agreement, that all obligations of the Companies
to provide any compensation or benefits to Employee under Paragraphs 2, 3 and 4
of this Agreement shall be forfeited and waived by Employee, and the Companies
shall be under no further obligation to Employee in connection with the
provisions of those aforesaid paragraphs. For the purpose of this Agreement,
the terms "competitive" or "in competition with" shall mean providing, or
attempting to provide, products or services similar to those provided by the
Companies to existing or prospective clients of the Companies. Notwithstanding
the foregoing, it is expressly agreed that Employee may be employed by (a) an
investment banking firm, (b) a professional search firm, (c) an accounting firm,
or (d) a venture capital firm without obtaining the prior written consent of the
Chief Executive Officer of the Companies. Employee and Bank shall make their
best efforts to provide referrals to each other.
9. STOCK OPTIONS. Attached hereto and incorporated by reference herein
as Exhibit A is a list of all stock options owned and held by Employee as of the
effective date of this Agreement. During the period of consulting engagement
described in Paragraph 2 of this Agreement, all stock options held by Employee
shall continue to be outstanding and shall vest in accordance with their
respective terms under which such stock options were issued. Employee
acknowledges and agrees that upon termination of Employee's consulting
engagement as described in Paragraph 2 herein for any reason (including pursuant
to Section 8 of this Agreement), all then-unvested options shall lapse, and
further that all then unexercised but vested rights under all such stock options
shall lapse three (3) months following termination.
10. PAYMENT OF VESTED BENEFITS. As of the effective date of this
Agreement, all accrued and unused vacation, less applicable withholding and
Employee-designated deductions, shall be paid to Employee on April 1, 1995.
Employee's vested benefits under the Companies' Employee Stock Ownership Plan,
Employee Stock Purchase Plan, and 401K Plan shall be distributed to Employee in
accordance with applicable provisions of the plan documents governing such
distribution. Employee acknowledges and understands that he is not entitled
under the terms of this Agreement to continued participation in any other group
benefit plans provided to him by the Companies prior to April 1, 1995 including
but not limited to Employee Stock Ownership Plan, Employee Stock Purchase Plan,
group long-term disability benefits and group life insurance.
11. PAYMENT OF WAGES DUE. Employee acknowledges and represents that the
consideration for this Agreement is not accrued salary, wages or vacation, and
is in excess of any established severance practice or policy of the Companies,
and further acknowledges that California Labor Code Section 206.5 is not
applicable to this Agreement or to the parties hereto. That section provides in
pertinent part:
No employer shall require the execution of any
release of any claim or right on account of wages
due, or to become due, or made as an advance on
wages to be earned, unless payment of such wages
has been made.
12. RELEASE. Except as expressly set forth herein, Employee agrees that
the foregoing consideration represents settlement in full of all outstanding
obligations owed to Employee by the Companies. Employee, on behalf of himself
and his heirs, executors, and assigns, hereby fully and forever releases
Companies and their officers, directors, employees, predecessor, subsidiary and
successor corporations, and assigns, of and from, and agrees not to sue
concerning, any claim, duty, obligation or cause of action relating to any
matters of any kind, whether presently known or unknown, suspected or
unsuspected, that he may possess arising from any omissions, acts or facts that
have occurred up to and including the effective date (as defined below) of this
Agreement, including, without limitation,
(a) any and all claims relating to or arising from Employee's
employment and/or termination of employment with the Companies;
(b) any and all claims for violation of any federal, state or
municipal statute, including but not limited to Title VII of the Civil Rights
Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment
Act of 1967,
2
<PAGE>
the Americans With Disabilities Act of 1990, the Employee Retirement Income
Security Act, and the California Fair Employment and Housing Act;
(c) any and all claims arising out of any other laws and regulations
relating to employment or employment discrimination.
13. SECTION 1542 WAIVER. The provisions of Section 1542 of the Civil Code
of the State of California are expressly waived by Employee, and Employee
understands that it provides:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR
AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY
HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.
14. COVENANT NOT TO SUE. Employee specifically acknowledges that this
Agreement shall operate as a complete bar to any litigation, charges,
complaints, grievances or demands of any kind whatsoever, relating to the
matters described in Section 12 herein.
15. NON-ADMISSION. Employee understands and acknowledges that this
Agreement constitutes a compromise and settlement of all differences between
Employee and the Companies, that the liability for any and all claims has been
and is denied by the Companies, and this final compromise and settlement of all
claims shall never be deemed to be, nor construed as, an admission of liability
or responsibility by either party to the other party or to any third party, at
any time for any purpose.
16. CONFIDENTIALITY. The Companies and Employee agree to use their best
efforts to maintain in confidence the existence of this Agreement and its terms
and conditions, and the consideration for this Agreement. The Companies and
Employee agree to take every reasonable precaution to prevent disclosure of any
of the terms and conditions of this Agreement to any third party, and further
agree that there will be no publicity, directly or indirectly, concerning this
Agreement or any of its terms and conditions unless agreed to by the Companies
and Employee or unless they are legally compelled to do so. The Companies and
Employee further agree to take every precaution to disclose information
concerning this Agreement only to those employees, officers, directors,
attorneys, accountants, governmental entities, and family members who have a
reasonable need to know of such information. Notwithstanding the foregoing
nothing in this Agreement shall be construed to prevent the Companies from
disclosing this Agreement or any of its terms in a proxy statement or to
government regulatory agencies.
17. INDEMNIFICATION. The Companies shall indemnify Employee to the
maximum extent permitted under the Companies' By-Laws, the California
Corporations Code and Directors and Officers Liability Insurance and Financial
Institutions Bond maintained by the Companies. The provisions of this paragraph
shall inure to the benefit of Employee's estate, executor, administrator, heirs,
legatees and devisees.
18. NO DISPARAGEMENT. The Companies and Employee agree to refrain from
taking any action or making any statement of any type which disparages,
criticizes, harms, tends to harm, inconveniences, embarrasses, is against the
best interest of, or brings into disrepute each other, or the employees,
officers, directors, and family members of each other.
19. TAX CONSEQUENCES. The Companies make no representations or warranties
with respect to the tax consequences to Employee under the terms of the
Agreement. Employee and the Companies agree that all sums paid under Paragraph
2 of this Agreement shall be subject to normal federal and state payroll tax
withholding.
20. NO RELIANCE ON REPRESENTATIONS. The Companies and Employee represent
that each has had the opportunity to consult with an attorney, and has carefully
read and understand the scope and effect of the provisions of this Agreement.
In entering into this Agreement, the Companies and Employee each rely upon their
own judgment and have not been influenced by any statement made by the other or
by any person representing or employed by the other.
21. SEPARABILITY. Should any part, term or provision of this Agreement be
declared or determined by any Court or other tribunal to be illegal, invalid or
unenforceable, any illegal, invalid or unenforceable part, term or provision
shall be
3
<PAGE>
deemed stricken from this Agreement and all of the other parts, terms and
provisions of this Agreement shall remain in full force and effect to the
fullest extent permitted by law.
22. EFFECTIVE DATE. The Companies and Employee agree that Employee shall
have the right to revoke this Agreement for a period of seven (7) calendar days
after signing it, and that this Agreement shall become effective on the eighth
(8th) calendar day after Employee has signed this Agreement.
23. HEADINGS. The various headings in this Agreement are inserted for
convenience only and shall not be deemed a part of or in any manner affect this
Agreement or any provision hereof.
24. BREACH OF AGREEMENT/ARBITRATION. In the event of a breach of the
representations or the obligations set forth in this Agreement, the sole and
exclusive remedy for such breach shall be through final and binding arbitration,
in which the prevailing party shall be entitled to recover all provable damages,
consequential or otherwise, in addition to such other remedies as may be
available under this Agreement, at law or in equity. Any arbitration hearing
under this provision shall be held in the County of Santa Clara, California.
25. COSTS AND ATTORNEYS' FEES. Should any action be brought to enforce
any of the terms or conditions of this Agreement, the prevailing party shall be
entitled to recover all costs and expenses incurred in the prosecution or
defense of that action, including attorneys' fees. Except as provided in this
section, the parties shall bear their own attorneys' fees and costs incurred
herein. Notwithstanding the foregoing, the Companies agree to reimburse
Employee for attorneys' fees incurred by Employee in connection with the
negotiation of this Agreement, up to a maximum of Seven Thousand Five Hundred
Dollars ($7,500.00).
26. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of California.
27. MATERIALITY. This Agreement would not have been agreed upon but for
the inclusion of each and every one of its conditions.
28. AUTHORITY. The Companies represent and warrant that the undersigned
has the authority to act on behalf of the Companies and to bind the Companies
and all who may claim through it to the terms and conditions of this Agreement.
Employee represents and warrants that he has the capacity to act on his own
behalf and on behalf of all who might claim through him to bind them to the
terms and conditions of this Agreement. Each party warrants and represents that
there are no liens or claims of lien or assignments in law or equity or
otherwise of or against any of the claims or causes of actions released herein.
29. NO ORAL MODIFICATION. This Agreement may only be amended in writing,
signed by both Employee and the Chief Executive Officer of the Companies.
30. VOLUNTARY EXECUTION OF AGREEMENT. Employee agrees that this Agreement
is executed by him voluntarily and without any duress or undue influence on the
part or behalf of the parties hereto, with the full intent of releasing all
claims. Employee acknowledges that: (a) he has read this Agreement; (b) he has
been given a reasonable period of time to consider the legal effects of this
Agreement; (c) he has been represented in the preparation, negotiation, and
execution of this Agreement by legal counsel of his own choice; (d) he
understands the terms and consequences of this Agreement and of the releases it
contains; and (e) he is fully aware of the legal and binding effect of this
Agreement.
31. SUCCESSORS. This Agreement and the respective rights and obligations
of the parties hereunder shall inure to the benefit of, and be binding upon,
their respective successors, assigns and legal representatives. This provision
with respect to Employee's right of successorship shall, however, inure only to
the benefit of Employee's estate, executor, administrator, and heirs.
32. ENTIRE AGREEMENT. This Agreement represents the entire agreement and
understanding between the Companies and Employee, and supersedes and replaces
any and all prior agreements and understandings between Employee and the
Companies.
4
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the 1st
day of April, 1995.
ALLYN C. WOODWARD, JR., an individual
s/ Allyn C. Woodward, Jr.
-------------------------------------
SILICON VALLEY BANCSHARES
By: s/ John C. Dean, Jr.
--------------------------------
John C. Dean, Jr.
President and Chief Executive Officer
SILICON VALLEY
By: s/ John C. Dean, Jr.
--------------------------------
John C. Dean, Jr.
President and Chief Executive Officer
5
<PAGE>
Exhibit A
Silicon Valley Bancshares STOCK OPTION PERSONNEL SUMMARY AS OF 03/29/95
Allyn C. Woodward, Jr. ID: ###-##-#### [Executive] Form: HRCm10
14 Meadowbrook Road Location: Santa Clara Date: 3/29/95
Wellesley, MA 02181 Department: Lending DivAdmin Time: 9:29:54
<TABLE>
<CAPTION>
Grant Grant Plan/
Number Date Type Granted Price Exercised Vested Cancelled Unvested Outstanding Exercisable
------ -------- -------- ------- ------ ---------- ------ --------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
000158 10/16/90 1989/ISO 22,050 $ 6.80 3,385 22,050 0 0 18,665 18,665
000179 04/09/91 1989/ISO 6,615 $12.70 0 6,615 0 0 6,615 6,615
000183 10/15/91 1989/ISO 4,200 $11.43 0 4,200 0 0 4,200 4,200
000202 05/19/92 1989/ISO 6,000 $12.25 0 4,020 0 1,980 6,000 4,020
000210 08/11/92 1989/ISO 7,400 $9.13 0 4,958 0 2,442 7,400 4,958
000211 08/11/92 1989/NQ 22,600 $9.13 0 15,142 0 7,458 22,600 15,142
000238 01/11/93 1989/ISO 8,429 $8.88 0 5,648 0 2,781 8,429 5,648
000239 01/11/93 1989/NQ 14,071 $8.88 0 9,428 0 4,643 14,071 9,428
000338 01/25/94 1989/ISO 9,509 $9.88 0 2,909 0 6,600 9,509 2,909
000339 01/25/94 1989/NQ 491 $9.88 0 491 0 0 491 491
000442 01/24/95 1989/RSP 4,287 $13.63 4,287 4,287 0 0 0 0
------- ------ ----- ------ ------- ------ ------ ------
105,652 [$9.34] 7,672 79,748 0 25,904 97,980 72,076
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
---------------------------------------------------------------------------------------------------------------------------
EMPLOYEE STOCK OPTION SUMMARY Silicon Valley Bancshares
ID: ###-##-#### [Executive] As of 03/29/95
Allyn C. Woodward, Jr. Location: Santa Clara Total Shares Currently Exercisable: 72,076
14 Meadowbrook Road Department: Lending DivAdmin Total Option Price: $659,125.87
Wellesley, MA 02181
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Grant No: 000158 Grant Date: 10/16/90 Shares: 22,050 Price: $6.80 Plan: 1989 Type: Incentive Stock Option
------------------------------------------------------------------------------------------------------------------------------------
Vesting Schedule: Transactions Cancellations Splits
Granted Full Vest Exercisable Total Price Expires Date Type Shares Value Date Reason Shares Ratio Date
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11,025 04/16/91 7,640 $ 51,952.00 04/16/95* 12/5/94 Cash 3,385 $12.00 1.050/1 05/15/91
Exercise
11,025 04/16/92 11,025 $ 74,970.00 04/16/95* 1.050/1 05/18/92
------ ------ -----------
22,050 18,665 $126,922.00
* Option Expires in Current Year
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Grant No: 000179 Grant Date: 04/09/91 Shares: 6,615 Price: $12.70 Plan: 1989 Type: Incentive Stock Option
------------------------------------------------------------------------------------------------------------------------------------
Vesting Schedule: Transactions Cancellations Splits
Granted Full Vest Exercisable Total Price Expires Date Type Shares Value Date Reason Shares Ratio Date
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1,654 04/09/91 1,654 $20,997.92 04/09/96 1.050/1 05/15/91
1,654 04/09/92 1,654 $20,997.92 04/09/96 1.050/1 05/18/92
1,654 04/09/93 1,654 $20,997.92 04/09/96
1,653 04/09/94 1,653 $20,985.23 04/09/96
----- ----- ----------
6,615 6,615 $83,978.99
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
---------------------------------------------------------------------------------------------------------------------------
EMPLOYEE STOCK OPTION SUMMARY Silicon Valley Bancshares
ID: ###-##-#### [Executive] As of 03/29/95
Allyn C. Woodward, Jr. Location: Santa Clara Total Shares Currently Exercisable: 72,076
14 Meadowbrook Road Department: Lending DivAdmin Total Option Price: $659,125.87
Wellesley, MA 02181
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Grant No: 000183 Grant Date: 10/15/91 Shares: 4,200 Price: $11.43 Plan: 1989 Type: Incentive Stock Option
------------------------------------------------------------------------------------------------------------------------------------
Vesting Schedule: Transactions Cancellations Splits
Granted Full Vest Exercisable Total Price Expires Date Type Shares Value Date Reason Shares Ratio Date
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2,100 10/15/92 2,100 $24,000.00 10/15/96 1.050/1 05/18/92
2,100 10/15/93 2,100 $24,000.00 10/15/96
----- ----- ----------
4,200 4,200 $48,000.00
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Grant No: 000202 Grant Date: 05/19/92 Shares: 6,000 Price: $12.25 Plan: 1989 Type: Incentive Stock Option
------------------------------------------------------------------------------------------------------------------------------------
Vesting Schedule: Transactions Cancellations Splits
Granted Full Vest Exercisable Total Price Expires Date Type Shares Value Date Reason Shares Ratio Date
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2,040 05/19/93 2,040 $24,990.00 05/19/97
1,980 05/19/94 1,980 $24,255.00 05/19/97
1,980 05/19/95 0 $ 0.00 05/19/97
----- ----- ----------
6,000 4,020 $49,245.00
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
---------------------------------------------------------------------------------------------------------------------------
EMPLOYEE STOCK OPTION SUMMARY Silicon Valley Bancshares
ID: ###-##-#### [Executive] As of 03/29/95
Allyn C. Woodward, Jr. Location: Santa Clara Total Shares Currently Exercisable: 72,076
14 Meadowbrook Road Department: Lending DivAdmin Total Option Price: $659,125.87
Wellesley, MA 02181
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Grant No: 000210 Grant Date: 08/11/92 Shares: 7,400 Price: $9.13 Plan: 1989 Type: Incentive Stock Option
------------------------------------------------------------------------------------------------------------------------------------
Vesting Schedule: Transactions Cancellations Splits
Granted Full Vest Exercisable Total Price Expires Date Type Shares Value Date Reason Shares Ratio Date
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2,516 08/11/93 2,516 $22,971.08 08/11/97
2,442 08/11/94 2,442 $22,295.46 08/11/97
2,442 08/11/95 0 $ 0.00 08/11/97
----- ----- ----------
7,400 4,958 $45,266.54
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Grant No: 000211 Grant Date: 08/11/92 Shares: 22,600 Price: $9.13 Plan: 1989 Type: Non-Qualified Stock Option
------------------------------------------------------------------------------------------------------------------------------------
Vesting Schedule: Transactions Cancellations Splits
Granted Full Vest Exercisable Total Price Expires Date Type Shares Value Date Reason Shares Ratio Date
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7,684 08/11/93 7,684 $ 70,154.92 08/11/97
7,458 08/11/94 7,458 $ 68,091.54 08/11/97
7,458 08/11/95 0 $ 0.00 08/11/97
------ ------ -----------
22,600 15,142 $138,246.46
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
---------------------------------------------------------------------------------------------------------------------------
EMPLOYEE STOCK OPTION SUMMARY Silicon Valley Bancshares
ID: ###-##-#### [Executive] As of 03/29/95
Allyn C. Woodward, Jr. Location: Santa Clara Total Shares Currently Exercisable: 72,076
14 Meadowbrook Road Department: Lending DivAdmin Total Option Price: $659,125.87
Wellesley, MA 02181
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Grant No: 000238 Grant Date: 01/11/93 Shares: 8,429 Price: $8.88 Plan: 1Type: Incentive Stock Option
------------------------------------------------------------------------------------------------------------------------------------
Vesting Schedule: Transactions Cancellations Splits
Granted Full Vest Exercisable Total Price Expires Date Type Shares Value Date Reason Shares Ratio Date
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2,866 01/11/94 2,866 $25,450.08 01/11/98
2,782 01/11/95 2,782 $24,704.16 01/11/98
2,781 01/11/96 0 $0.00 01/11/98
----- ----- ----------
8,429 5,648 $50,154.24
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Grant No: 000239 Grant Date: 01/11/93 Shares: 14,071 Price: $8.88 Plan: 1989 Type: Non-Qualified Stock Option
------------------------------------------------------------------------------------------------------------------------------------
Vesting Schedule: Transactions Cancellations Splits
Granted Full Vest Exercisable Total Price Expires Date Type Shares Value Date Reason Shares Ratio Date
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4,785 01/11/94 4,785 $42,490.80 01/11/98
4,643 01/11/95 4,643 $41,229.84 01/11/98
4,643 01/11/96 0 $ 0.00 01/11/98
------ ----- ----------
14,071 9,428 $83,720.64
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
---------------------------------------------------------------------------------------------------------------------------
EMPLOYEE STOCK OPTION SUMMARY Silicon Valley Bancshares
ID: ###-##-#### [Executive] As of 03/29/95
Allyn C. Woodward, Jr. Location: Santa Clara Total Shares Currently Exercisable: 72,076
14 Meadowbrook Road Department: Lending DivAdmin Total Option Price: $659,125.87
Wellesley, MA 02181
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Grant No: 000338 Grant Date: 01/25/94 Shares: 9,509 Price: $9.88 Plan: 1Type: Incentive Stock Option
------------------------------------------------------------------------------------------------------------------------------------
Vesting Schedule: Transactions Cancellations Splits
Granted Full Vest Exercisable Total Price Expires Date Type Shares Value Date Reason Shares Ratio Date
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2,909 01/25/95 2,909 $28,740.92 01/25/99
3,300 01/25/96 0 $ 0.00 01/25/99
3,300 01/25/97 0 $ 0.00 01/25/99
----- ----- ----------
9,509 2,909 $28,740.92
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Grant No: 000339 Grant Date: 01/25/94 Shares: 491 Price: $9.88 Plan: 1989 Type: Non-Qualified Stock Option
------------------------------------------------------------------------------------------------------------------------------------
Vesting Schedule: Transactions Cancellations Splits
Granted Full Vest Exercisable Total Price Expires Date Type Shares Value Date Reason Shares Ratio Date
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
491 01/25/95 491 $4,851.08 01/25/99
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Grant No: 000442 Grant Date: 01/24/95 Shares: 4,287 Price: $13.63 Plan: 1989 Type: Restricted Stock Purchase
------------------------------------------------------------------------------------------------------------------------------------
Vesting Schedule: Transactions Cancellations Splits
Granted Full Vest Exercisable Total Price Expires Date Type Shares Value Date Reason Shares Ratio Date
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4,287 01/24/95 0 $0.00 01/24/95 Cash 4,287 $13.63
Exercise
</TABLE>
<PAGE>
---------------
EXHIBIT # 10-22
---------------
RESTRICTED STOCK BONUS AND NON-COMPETE AGREEMENT
WHEREAS, Allyn C. Woodward, Jr. (the "GRANTEE") is an employee of Silicon
Valley Bank ("BANK"), a wholly-owned subsidiary of Silicon Valley Bancshares
(the "HOLDING COMPANY"), collectively referred to herein as the "COMPANIES", and
GRANTEE's employment with the COMPANIES shall be, and is, terminated by
voluntary resignation effective April 1, 1995; and
WHEREAS, the Grantee and the Companies have agreed that it is in their
mutual interest to provide Grantee with fair and adequate compensation as
consideration for Grantee's promise not to compete with the Companies for a
reasonable period of time following the effective date of his resignation; and
WHEREAS, in August 1993, the Holding Company granted to Grantee twenty-five
thousand (25,000) shares of the Holding Company's common stock (the "Original
Grant"); and
WHEREAS, the shares under the Original Grant have been registered with the
Securities and Exchange Commission under a Form S-3/S-8; and
WHEREAS, under the Original Grant terms, the shares under the Original
Grant were to cliff vest in August 1996, such vesting contingent upon Grantee's
continued employment by the Bank; and
WHEREAS, Grantee, the Holding Company and the Bank wish to amend the terms
of the Original Grant to, among other things, delete the original cliff vesting
requirement and provide for new vesting terms; and
WHEREAS, this Agreement shall supersede any earlier agreements entered into
among the Companies and Grantee with regard to the Original Grant; and
THEREFORE, the parties agree as follows:
1. GRANT OF STOCK. The Companies hereby agree to grant Grantee twenty-
five thousand (25,000) shares of Silicon Valley Bancshares' common stock,
subject to the following vesting schedule:
<TABLE>
<CAPTION>
Shares Vested Date
------------- ----
<S> <C> <C>
8,333 on January 5, 1996
8,333 on January 5, 1997
8,334 on January 5, 1998
</TABLE>
2. As consideration for this Stock Grant, Grantee agrees that he shall
not become employed or engage in any self-employment in competition with the
Companies without the consent of the Companies for the period, beginning October
31, 1996, through and including January 5, 1998 ("the vesting period"). Consent
by the Companies may be granted only in a writing, signed by the Chief Executive
Office of the Companies. For the purpose of this Agreement, the term "in
competition with" shall mean providing, or attempting to provide, products or
services similar to those provided by the Companies to existing or prospective
clients of the Companies. Notwithstanding the foregoing, it is expressly agreed
that Employee may be employed by (a) an investment banking firm, (b) a
professional search firm, (c) an accounting firm, or (d) a venture capital firm
without obtaining the prior written consent of the Chief Executive Officer of
the Companies. Grantee further agrees that should he undertake any employment
or self-employment in competition with the Companies during the vesting period
without the express written consent of the Companies, as provided herein, all
unvested portions of this Stock Grant shall be forfeited and waived and that any
and all obligations of the Companies under this Restricted Stock Bonus And Non-
Compete Agreement shall be forfeited and waived by Grantee. Upon such
forfeiture, the Companies shall become the legal and beneficial owner of the
shares forfeited and all rights and interests therein or relating thereto, and
the Companies shall have the right to retain and transfer to its own name the
number of shares forfeited.
3. ISSUANCE OF SHARE CERTIFICATES.
1
<PAGE>
A. Upon occurrence of each vesting date, the Companies shall cause
the certificate representing the vested shares to be delivered to the Grantee,
or, at its sole discretion, the Companies may, in lieu of issuance of share
certificates, make a cash payment to Grantee in an amount equal to the fair
market value of such vested shares, as of the vesting date set forth in
Paragraph 1 herein.
B. Subject to the terms hereof, the Grantee shall have all the
rights of a shareholder with respect to such shares at the time Grantee becomes
vested in such shares, under the vesting schedule set forth in Paragraph 1
herein, including without limitation the right to vote the shares and receive
any cash dividends declared thereon.
4. ADJUSTMENT FOR STOCK SPLIT. All references to the number of shares in
this Agreement shall be appropriately adjusted to reflect any stock splits,
stock dividend recapitalization, merger, consolidation, split-up, combination or
exchange of shares or other change in the shares which may be made by the
Companies after the date of this Agreement.
5. TAX CONSEQUENCES. Grantee is relying solely on his own tax advisors
in connection with the federal, state, local and foreign tax consequences of
this Agreement and the transactions contemplated by this Agreement, and has not
relied on any statements or representations of the Companies or any of its
agents. Grantee understands that the Grantee, and not the Companies, shall be
responsible for the Grantee's own tax liability that may arise as a result of
this Agreement or the transactions contemplated by this Agreement.
6. APPLICABLE LAW. This Agreement shall be governed by the laws of the
State of California.
7. ASSIGNMENT. The rights and benefits of the Companies under this
Agreement shall be transferable to any one or more persons or entities, and all
covenants and agreements hereunder shall inure to the benefit of, and be
enforceable by, the Companies' successors and assigns. The rights and
obligations of the Grantee under this Agreement shall inure to the benefit of
the Grantee's estate, executor, administrator, heirs, legatees, and devisees.
8. FAILURE OF CONSIDERATION. Should any court or other tribunal declare
or determine that Grantee's promise not to engage in employment or self-
employment in competition with the Companies is unenforceable, or is inadequate
or insufficient as consideration for the Companies' grant of shares under this
Agreement, then, as of the date of such declaration or determination, this
Restricted Stock Bonus And Non-Compete Agreement shall be null and void and the
Companies' performance of any obligations of this Agreement shall be excused and
the Companies shall be under no further obligation to the Grantee.
9. ENTIRE AGREEMENT. This Restricted Stock Bonus And Non-Compete
Agreement represents the entire agreement between the parties with respect to
the receipt of shares by the Grantee, and supersedes and replaces any and all
prior agreements and understandings between Grantee and the Companies concerning
the same.
2
<PAGE>
By the Grantee's signature below, Grantee represents that he has reviewed
this Agreement in its entirety, has had an opportunity to obtain the advice of
counsel prior to executing this Agreement, and fully understands all provisions
of this Agreement. This Restricted Stock Bonus And Non-Compete Agreement is
executed as of April 1, 1995.
ALLYN C. WOODWARD, JR., GRANTEE
s/ Allyn C. Woodward, Jr.
--------------------------------
SILICON VALLEY BANCSHARES
By: s/ John C. Dean, Jr.
-------------------------------
John C. Dean, Jr.
President and Chief Executive Officer
SILICON VALLEY BANK
By: s/ John C. Dean, Jr.
------------------------------
John C. Dean, Jr.
President and Chief Executive Officer
3
<PAGE>
---------------
EXHIBIT # 10-23
---------------
SILICON VALLEY BANCSHARES
1989 STOCK OPTION PLAN
AMENDMENT AND RESTATEMENT EFFECTIVE AS OF THE DATE
OF OBTAINING SHAREHOLDER APPROVAL IN 1995.
1. PURPOSE
The purpose of this Silicon Valley Bancshares Stock Option Plan (the
"Plan") is to provide a method whereby those key employees, directors and
consultants of Silicon Valley Bancshares (the "Company") and its affiliates, who
are primarily responsible for the management and growth of the Company's
business and who are presently making and are expected to make substantial
contributions to the Company's future management and growth, may be offered
incentives in addition to those presently available, and may be stimulated by
increased personal involvement in the success of the Company to continue in its
service, thereby advancing the interests of the Company and its shareholders.
The word "affiliate," as used in the Plan, means any bank or
corporation in any unbroken chain of banks or corporations beginning or ending
with the Company, if at the time of the granting of an option, right or stock
bonus award, each such bank or corporation other than the last in that chain
owns stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other banks or corporations in the
chain.
2. ADMINISTRATION
(i) Multiple Administrative Bodies. If permitted by Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended ("Rule 16b-3;"
the "Exchange Act"), the Plan may be administered by different bodies with
respect to directors, officers who are not directors, and employees who are
neither directors nor officers.
(ii) Administration With Respect to Directors and Officers
Subject to Section 16(b). Except for the automatic grants to directors provided
for in Sections 6 and 9, which shall be automatic and not subject to any
discretion, with respect to option, stock purchase right or stock bonus award
grants made to employees who are also officers or directors subject to Section
16(b) of the Exchange Act, the Plan shall be administered by (A) the Board, if
the Board may administer the Plan in compliance with the rules governing a plan
intended to qualify as a discretionary plan under Rule 16b-3, or (B) the Stock
Committee of the Board, which committee shall be constituted to comply with the
rules governing a plan intended to qualify as a discretionary plan under
Rule 16b-3 (the Board or its committee shall be referred to herein as the
"Committee"). Once appointed, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board. From time to time
the Board may increase the size of the Committee and appoint additional members,
remove members (with or without cause) and substitute new members, fill
vacancies (however caused), and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by the
rules governing a plan intended to qualify as a discretionary plan under
Rule 16b-3.
(iii) Administration With Respect to Other Persons. With respect
to option, stock purchase right or stock bonus award grants made to employees or
consultants who are neither directors nor officers of the Company, the Plan
shall be administered by (A) the Board or (B) a committee designated by the
Board, which committee shall be constituted to satisfy applicable laws (the
Board or its committee shall be referred to herein as the "Committee"). Once
appointed, such Committee shall serve in its designated capacity until otherwise
directed by the Board. The Board may increase the size of the Committee and
appoint additional members, remove members (with or without cause) and
substitute new members, fill vacancies (however caused), and remove all members
of the Committee and thereafter directly administer the Plan, all to the extent
permitted by applicable laws.
-1-
<PAGE>
(iv) The Company shall effect the grant of options, rights and
stock bonus awards under the Plan by execution of instruments in writing in a
form approved by the Committee. Subject to the express terms and conditions of
the Plan, the Committee shall have full power to construe the Plan and the terms
of any option, right or stock bonus award granted under the Plan, to prescribe,
amend and rescind rules and regulations relating to the Plan or such options,
rights or stock bonus awards and to make all other determinations necessary or
advisable for the Plan's administration, including, without limitation, the
power to (i) determine which persons meet the requirements of Section 3 hereof
for selection as participants in the Plan; (ii) determine to whom of the
eligible persons, if any, options, right or stock bonus award shall be granted
under the Plan; (iii) establish the terms and conditions required or permitted
to be included in every option, right or stock bonus award agreement or any
amendments thereto, including whether options to be granted thereunder shall be
"incentive stock options," as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (hereinafter the "Code") or nonstatutory stock options
not described in Section 422 of the Code; (iv) specify the number of shares to
be covered by each option, right or stock bonus award; (v) determine the fair
market value of shares of the Company's common stock used by a participant to
exercise options or rights; (vi) grant options or rights in exchange for
cancellation of options or rights granted earlier at different exercise prices;
(vii) take appropriate action to amend any option, right or stock bonus award
hereunder, provided that no such action may be taken without the written consent
of the affected participant; and (viii) make all other determinations deemed
necessary or advisable for administering the Plan. The Committee's
determination on the foregoing matters shall be conclusive.
3. ELIGIBILITY
The persons who shall be eligible to receive options, rights or stock
bonus awards under this Plan shall be the key employees and officers of the
Company and its affiliates, persons who became employees of the Company or its
affiliates within thirty days of the date of grant of an option, right or stock
bonus award, directors of the Company or its affiliates, and consultants of the
Company or its affiliates.
4. THE SHARES
The shares of stock subject to options, rights or stock bonus awards
authorized to be granted under the Plan shall consist of one million four
hundred and seventy-six thousand five hundred and thirty-two (1,476,532) shares
of the Company's no par value Common Stock (hereinafter the "Shares"), or the
number and kind of shares of stock or other securities which shall be
substituted for such Shares or to which such Shares shall be adjusted as
provided in Section 11 hereof. Upon the expiration or termination for any
reason of an outstanding option or right under the Plan which has not been
exercised in full, all unissued Shares thereunder shall again become available
for the grant of options, rights or stock bonus awards under the Plan.
5. LIMITATION ON PLAN AWARDS
The following limitations shall apply to grants of options, stock
purchase rights and stock bonus awards to Employees:
(i) No Employee shall be granted, in any fiscal year of the
Company, options, stock purchase rights or stock bonus awards to purchase more
than two hundred and fifty thousand (250,000) Shares.
(ii) The foregoing limitation shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 11.
(iii) If an option, stock purchase right or stock bonus award is
cancelled (other than in connection with a transaction described in Section 11),
the cancelled option, stock purchase right or stock bonus award will be counted
against the limit set forth in Section 5. For this purpose, if the exercise
price of an option or stock purchase right is reduced, the transaction will be
treated as a cancellation of the option or stock purchase right and the grant of
a new option or stock purchase right.
6. GRANT, TERMS AND CONDITIONS OF OPTIONS
A. AUTOMATIC GRANTS TO OUTSIDE DIRECTORS
Members of the Board of Directors of the Company who are not employees
of the Company ("Outside Directors") shall, in January, 1991 on the date of the
regularly scheduled meeting of the Board of Directors of the Company and on the
January meeting of the Board of Directors in 1992 and 1993, each be granted an
option to
-2-
<PAGE>
purchase 2,000 Shares under the Plan; provided, however, that if there are
insufficient Shares available under the Plan for each Outside Director to
receive an option to purchase 2,000 Shares (as adjusted) in any year, the number
of Shares subject to each option shall equal the total number of available
Shares remaining under the Plan divided by the number of Outside Directors on
such date, as rounded down to avoid fractional Shares. All options granted to
Outside Directors shall be subject to the following terms and conditions:
(i) Nonstatutory Options. All stock options granted to Outside
Directors pursuant to the Plan shall be nonstatutory stock options.
(ii) Option Price. The purchase price under each option granted
to an Outside Director shall be one hundred percent of the fair market value of
the Shares subject thereto on the date the option is granted, as such value is
determined by the Committee. The fair market value of such stock shall be
determined in accordance with any reasonable valuation method, including the
valuation methods described in Treasury Regulation Section 20.2031-2.
(iii) Duration and Vesting of Options. Each option shall be for a
three-year term and shall be immediately vested for exercise in full on the date
of grant. The termination of the Plan shall not alter the maximum duration, the
vesting provisions, or any other term or condition of any option granted prior
to the termination of the Plan.
(iv) Termination of Tenure on the Board. Unless the Committee
determines otherwise, upon the termination of an optionee's status as a member
of the Board, his or her rights to exercise an option then held shall be only as
follows:
DEATH OR DISABILITY: If an optionee's tenure on the Board is terminated by
death or disability, such optionee or such optionee's qualified representative
(in the event of the optionee's mental disability) or the optionee's estate (in
the event of optionee's death) shall have the right for a period of twelve
months following the date of such death or disability to exercise the option to
the extent the optionee was entitled to exercise such option on the date of the
optionee's death or disability; provided the actual date of exercise is in no
event after the expiration of the term of the option. An optionee's "estate"
shall mean the optionee's legal representative or any person who acquires the
right to exercise an option by reason of the optionee's death.
OTHER REASONS: If an optionee's tenure on the Board is terminated for any
reason other than those mentioned above under "Death or Disability," the
optionee may, within three months (or such longer period not exceeding six
months as the Board may determine) following such termination, exercise the
option to the extent such option was exercisable by the optionee on the date of
such termination, provided the date of exercise is in no event after the
expiration of the term of the option.
(v) The automatic grants to Outside Directors pursuant to this Section 5.A
shall not be subject to the discretion of any person. The provisions of this
Section 5.A shall not be amended more than once every six months, other than to
comport with changes in the Code or the rules thereunder. Any amendment to this
Section 5.A shall, to the extent required by applicable rules of the Securities
and Exchange Commission, be approved by the shareholders of the Company.
B. GRANTS TO EMPLOYEES AND CONSULTANTS
Options, at the discretion of the Committee, may be granted at any time
prior to the termination of the Plan to persons who are employees or consultants
of the Company, including employees who are also directors of the Company.
Options granted by the Committee to employees and consultants pursuant to the
Plan shall be subject to the following terms and conditions:
(i) Grant of Options. Stock options granted pursuant to the Plan may
be either incentive stock options or nonstatutory stock options. If the
aggregate fair market value of the Shares which are exercisable for the first
time during any one calendar year under all incentive stock options held by an
optionee exceeds $100,000 (determined at the time of the grant of the options),
such options shall be treated as nonstatutory stock options to the extent of
such excess.
(ii) Option Price. The purchase price under each option shall be
determined by the Committee; provided, however, that (i) the purchase price of a
nonstatutory stock option shall not be less than one hundred
-3-
<PAGE>
percent of the fair market value of the Shares subject thereto on the date the
option is granted, (ii) the purchase price of an incentive stock option granted
to an individual who does not own stock possessing more than ten percent of the
total combined voting power of all classes of stock of the Company shall not be
less than one hundred percent of the fair market value of the Shares subject
thereto on the date the option is granted, and (iii) the purchase price of an
incentive stock option granted to an individual who owns stock possessing more
than ten percent of the total combined voting power of all classes of stock of
the Company shall not be less than one hundred ten percent of the fair market
value of the Shares subject thereto on the date the option is granted. The fair
market value of such stock shall be determined in accordance with any reasonable
valuation method, including the valuation methods described in Treasury
Regulation Section 20.2031-2.
(iii) Duration of Options. Each option shall be for a term
determined by the Committee; provided, however, that the term of any option may
not exceed ten years and, provided further, that the term of any option granted
to an individual who owns stock possessing more than ten percent of the total
combined voting power of all classes of stock of the Company shall not exceed
five years. Each option shall vest in such manner and at such time as the
Committee shall determine and the Committee may accelerate the time of exercise
of any option, provided, however, that if compliance with the terms of Rule 16b-
3, as promulgated under the Securities Exchange Act of 1934, as amended
(hereinafter the "Exchange Act") so requires, no option may vest prior to six
months after the date of grant. The termination of the Plan shall not alter the
maximum duration, the vesting provisions, or any other term or condition of any
option granted prior to the termination of the Plan.
(iv) Termination of Employment or Consultant Status. Unless the
Committee determines otherwise, upon the termination of an optionee's status as
an employee or officer of the Company, his or her rights to exercise an option
then held shall be only as follows;
DEATH OR DISABILITY: If an optionee's employment or status as a consultant
is terminated by death or disability, such optionee or such optionee's qualified
representative (in the event of the optionee's mental disability) or the
optionee's estate (in the event of optionee's death) shall have the right for a
period of twelve (12) months following the date of such death or disability to
exercise the option to the extent the optionee was entitled to exercise such
option on the date of the optionee's death or disability; provided the actual
date of exercise is in no event after the expiration of the term of the option.
An optionee's "estate" shall mean the optionee's legal representative or any
person who acquires the right to exercise an option by reason of the optionee's
death.
CAUSE: If an optionee's employment or status as a consultant is terminated
because such optionee is determined by the Board to have committed an act of
embezzlement, fraud, dishonesty, breach of fiduciary duty to the Company, or to
have deliberately disregarded the rules of the Company which resulted in loss,
damage or injury to the Company, or if an optionee makes any unauthorized
disclosure of any of the secrets or confidential information of the Company,
induces any client or customer of the Company to break any contract with the
Company or induces any principal for whom the Company acts as agent to terminate
such agency relations, or engages in any conduct which constitutes unfair
competition with the Company, or if an optionee is removed from any office of
the Company by any bank regulatory agency, neither the optionee nor the
optionee's estate shall be entitled to exercise any option with respect to any
Shares whatsoever. In making such determination, the Board shall act fairly and
shall give the optionee an opportunity to appear and be heard at a hearing
before the full Board and present evidence on the optionee's behalf. For the
purpose of this paragraph, termination of employment or consultant status shall
be deemed to occur when the Company dispatches notice or advice to the optionee
that the optionee's employment or status as a consultant is terminated, and not
at the time of optionee's receipt thereof.
OTHER REASONS: If an optionee's employment or status as a consultant is
terminated for any reason other than those mentioned above under "Death or
Disability" and "Cause," the optionee may, within three months (or within such
other period not exceeding six months as may be determined by the Committee)
following such termination, exercise the option to the extent such option was
exercisable by the optionee on the date of termination of the optionee's
employment or status as a consultant; provided the date of exercise is in no
event after the expiration of the term of the option and provided further that
any option which is exercisable more than three months following termination
shall be treated as a nonstatutory option whether or not it was designated as
such at the time it was granted.
C. TERMS AND CONDITIONS APPLICABLE TO ALL OPTIONS
The following terms and conditions shall apply to all options granted
pursuant to the Plan:
-4-
<PAGE>
(i) Exercise of Options. To the extent the right to purchase Shares
has vested under an optionee's stock option agreement, options may be exercised
from time to time by delivering payment therefor in cash, certified check,
official bank check, or the equivalent thereof acceptable to the Company,
together with written notice to the Secretary of the Company, identifying the
option or part thereof being exercised and specifying the number of Shares for
which payment is being tendered. An optionee may also exercise an option by
electing to deliver shares of Company Common Stock that have been held by the
optionee for at least six months. The Committee may, in its discretion, permit
optionees who are employees of the Company to pay the exercise price of options
by delivering to the Company a full recourse promissory Note. Such an election
is subject to approval or disapproval by the Committee, and if the optionee is
subject to short-swing profit liability under Section 16 of the Exchange Act,
the timing of the election must satisfy the requirements of Rule 16b-3, as
promulgated under the Exchange Act. The Company shall deliver to the optionee,
which delivery shall be not less than fifteen (15) days and not more than thirty
(30) days after the giving of such notice, without transfer or issue tax to the
optionee (or other person entitled to exercise the option), at the principal
office of the Company, or such other place as shall be mutually acceptable, a
certificate or certificates for such Shares dated the date the options were
validly exercised; provided, however, that the time of such delivery may be
postponed by the Company for such period as may be required for it with
reasonable diligence to comply with any requirements of law.
(ii) Use of Proceeds from Stock. Proceeds from the sale of Shares
pursuant to the exercise of options granted under the Plan shall constitute
general funds of the Company.
(iii) Rights as a Shareholder. The optionee shall have no rights as
a shareholder with respect to any Shares until the date of issuance of a stock
certificate for such Shares. No adjustment shall be made for dividends or other
rights for which the record date is prior to the date of such issuance, except
as provided in Section 11 hereof.
(iv) Withholding. The Company shall have the right to condition the
issuance of shares upon exercise of a nonstatutory stock option upon payment by
the optionee of any income taxes required to be withheld under federal, state or
local tax laws or regulations in connection with such exercise.
(v) Limitations on Grants to Directors. No Director of the Company
shall be granted options in any one calendar year which would entitle him or her
to acquire more than ten percent of the Shares, as adjusted pursuant to
Section 11. The aggregate amount of Shares subject to options granted to all
Directors of the Company as a group shall not exceed thirty-three percent of the
Shares, as adjusted pursuant to Section 11.
(vi) Other Terms and Conditions. Options may also contain such
other provisions, which shall not be inconsistent with any of the foregoing
terms, as the Committee shall deem appropriate. No option, however, nor
anything contained in the plan, shall confer upon any optionee any right to
continue in the employ or in the status as a director or consultant of the
Company, nor limit in any way the right of the Company to terminate an
optionee's employment or status as a consultant at any time.
7. STOCK BONUS AWARDS
Stock bonus awards may be either granted alone or in addition to
options and other rights granted under the Plan. Such awards shall be granted
for no cash consideration. The Committee shall determine, in its sole
discretion, the terms, conditions and restrictions for each stock bonus award,
and shall determine any performance or employment related factors to be
considered in the granting of stock bonus awards and the extent to which such
stock bonus awards have been earned. Stock bonus awards may vary from
participant to participant and between groups of participants. Each stock bonus
award shall be confirmed by, and be subject to the terms of, a stock bonus award
agreement.
8. STOCK PURCHASE RIGHTS
(i) Rights to Purchase. Stock purchase rights may be
issued either alone, in addition to, or in tandem with other awards granted
under the Plan and/or cash awards made outside of the Plan. After the Committee
determines that it will offer stock purchase rights under the Plan, it shall
advise the offeree in writing, of the terms, conditions and restrictions related
to the offer, including the number of Shares that the offeree shall be entitled
to purchase, the price to be paid, and the time within which the offeree must
accept such offer, which shall in no event exceed sixty (60) days from the date
upon which the Committee made the determination to grant the stock purchase
right. The offer shall be accepted by execution of a restricted stock purchase
agreement in the form determined by the Committee.
-5-
<PAGE>
(ii) Repurchase Option. Unless the Committee determines
otherwise, the restricted stock purchase agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
disability). The purchase price for Shares repurchased pursuant to the
restricted stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Committee.
(iii) Rule 16b-3. Stock purchase rights granted to individual subject to
Section 16 of the Exchange Act, and Shares purchased by such individuals in
connection with stock purchase rights, shall be subject to any restrictions
applicable thereto in compliance with Rule 16b-3. An Insider may only purchase
Shares pursuant to the grant of a stock purchase right, and may only sell Shares
purchased pursuant to the grant of a stock purchase right, during such time or
times as are permitted by Rule 16b-3.
(iv) Other Provisions. The restricted stock purchase
agreement shall contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Committee in its sole
discretion. In addition, the provisions of restricted stock purchase agreements
need not be the same with respect to each purchaser.
(v) Rights as a Shareholder. Once the stock purchase right
is exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the stock purchase right is exercised, except as provided in Section 11
of the Plan.
9. AUTOMATIC OUTSIDE DIRECTOR STOCK AWARDS
Members of the Board of Directors of the Company who are not also
employees of the Company or its affiliates and who have not been employees of
the Company or its affiliates for the period commencing three years prior to the
date of any grants under this Section 9, shall be automatically awarded 2,500
shares of Company common stock on (i) the day after shareholder approval of the
amendment to this Section 9 of the Option Plan (approved by the Board of
Directors in October 1994) is obtained (1994 Grant), (ii) the day after
shareholder approval of the amendment to this Section 9 of the Option Plan (to
be approved by the Board of Directors in April 1995) is obtained (1995 Grant)
and (iii) the day after the 1996 Annual Meeting of Shareholders (1996 Grant).
Moreover, members of the Board of Directors who are appointed or elected to the
Board subsequent to any of the above grant dates shall automatically be awarded
a number of shares of Company common stock, on the date of such appointment or
election, determined by multiplying 2,500 by a fraction, the numerator of which
shall be the number of months until the next May 1 (counting any partial month
as a full month) and the denominator of which shall be 12, which number shall be
rounded down to the nearest whole integer.
The automatic grants to certain Outside Directors pursuant to this
Section 9 shall not be subject to the discretion of any person. The provisions
of this Section 9 shall not be amended more than once every six months, other
than to comport with changes in the Code or the rules thereunder. Any amendment
to this Section 9 shall, to the extent required by applicable rules of the
Securities and Exchange Commission, be approved by the shareholders of the
Company.
10. NON-TRANSFERABILITY
Each option and right shall be transferable only by will or the laws
of descent and distribution and shall be exercisable during the participant's
lifetime only by the participant, or in the event of disability, the
participant's qualified representative. In addition, in order for Shares
acquired under incentive stock options to receive the tax treatment afforded
such shares, the Shares may not be disposed of within two years from the date of
the option grant nor within one year after the date of transfer of such Shares
to the optionee.
11. ADJUSTMENT OF, AND CHANGES IN, THE SHARES
In the event the shares of Common Stock of the Company, as presently
constituted, shall be changed into or exchanged for a different number or kind
of shares of stock or other securities of the Company or of another corporation
(whether by reason of reorganization, merger, consolidation, recapitalization,
reclassification, split-up,
-6-
<PAGE>
combination of shares, or otherwise), or if the number of Shares of Common Stock
of the Company shall be increased through the payment of a stock dividend, there
shall be substituted for or added to each Share of Common Stock of the Company
theretofore appropriated or thereafter subject or which may become subject to an
option, right or stock bonus award under the Plan, the number and kind of shares
of stock or other securities into which each outstanding share of Common Stock
of the Company shall be so changed, or for which each share shall be exchanged,
or to which each such share shall be entitled, as the case may be. In addition,
appropriate adjustment shall be made in the number and kind of Shares as to the
outstanding options, rights or stock bonus awards or portions thereof, then
unexercised, so that any participant's proportionate interest in the Company by
reason of his or her rights under unexercised portions of such options, rights
or stock bonus awards shall be maintained as before the occurrence of such
event. Such adjustment in outstanding options or rights shall be made without
change in the total price to the unexercised portion of the option or right, and
with a corresponding adjustment in the option or right price per share.
In the event of a proposed dissolution or liquidation of the Company,
options, rights and shares outstanding under the Plan shall become accelerated
so as to become 100% vested immediately prior to the consummation of such
proposed action.
In the event of a "change in control" (as defined in the immediately
succeeding paragraph), all outstanding options, rights and shares under the
Plan, shall become 100% vested. If outstanding options and rights become fully
vested in the event of a change in control, the Board shall notify all
participants that their outstanding options and rights shall be fully
exercisable for a period of 3 months (or such other period of time not
exceeding six months as is determined by the Board at the time of grant) from
the date of such notice, and any unexercised options or rights shall terminate
upon the expiration of such period.
"Change in control" means the occurrence of any of the following events:
(i) Any "person" (as such term is used in Section 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
other than a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or a corporation owned directly or indirectly by the
shareholders of the Company or of the Company's wholly-owned bank subsidiary
(the "Bank") in substantially the same proportions as their ownership of stock
in the Company or the Bank (as the case may be), becomes after the date hereof
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of the securities of the Company or the Bank
representing fifty percent (50%) or more of the total voting power represented
by the Company's or the Bank's then outstanding securities that vote generally
in the election of directors ("Voting Securities");
(ii) Any "person" (as such term is used in Section 13(d) and
14(d) of the Exchange Act), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or a corporation owned
directly or indirectly by the shareholders of the Company or the Bank in
substantially the same proportions as their ownership of stock in the Company or
the Bank (as the case may be), becomes after the date hereof the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of twenty-five percent (25%) or more of the Voting Securities of the
Company or the Bank, and within a period of twelve (12) months of such
acquisition of beneficial ownership, individuals who at the beginning of such
period constitute the Board of Directors of the Company or the Bank, or any new
director whose election or nomination was approved by a vote of at least two-
thirds of the directors of the Company or the Bank (as the case may be), then
still in office who were directors at the beginning of such period, or whose
election or nomination was previously so approved, cease for any reason to
constitute at least sixty percent (60%) of the directors of the Company or the
Bank;
(iii) The merger or consolidation of the Company or the Bank
with any other corporation, other than a merger or consolidation in which the
shareholders of the Company or the Bank (as the case may be) immediately prior
thereto continue to own, directly or indirectly, Voting Securities representing
at least seventy-five percent (75%) of the total voting power of the entity
surviving such merger or consolidation; or
(iv) The complete liquidation of the Company or the Bank or
sale or disposition by the Company or the Bank (in one transaction or a series
of transactions) of all or substantially all of the Company's or the Bank's
assets.
No right to purchase fractional shares shall result from any
adjustment in options or rights pursuant to this Section 11. In case of any
such adjustment, the shares subject to the option or right
-7-
<PAGE>
shall be rounded down to the nearest whole share. Notice of any adjustment
shall be given by the Company to each holder of an option or right which was in
fact so adjusted and such adjustment (whether or not such notice is given) shall
be effective and binding for all purposes of the Plan.
To the extent the foregoing adjustments relate to stock or securities
of the Company, such adjustments shall be made by the Committee, whose
determination in that respect shall be final, binding and conclusive.
Except as expressly provided in this Section 11, a participant shall
have no rights by reason of any of the following events: (1) subdivision or
consolidation of shares of stock of any class issued by the Company; (2) payment
by the Company of any stock dividend; (3) any other increase or decrease in the
number of shares of stock of any class; (4) any dissolution, liquidation,
merger, consolidation, spin-off or acquisition of assets or stock of another
corporation by the Company. Any issue by the Company of shares of stock of any
class, or securities convertible into shares of any class, shall not affect the
number or price of shares of Common Stock subject to the option, right or stock
bonus award, and no adjustment by reason thereof shall be made.
The grant of an option, right or stock bonus award pursuant to the
Plan shall not affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure or to merge or to consolidate or to dissolve, liquidate or
sell, or transfer all or any part of its business or assets.
12. LISTING OR QUALIFICATION OF SHARES
All options and rights granted under the Plan are subject to the
requirement that if at any time the Committee shall determine in its discretion
that the listing or qualification of the Shares subject thereto on any
securities exchange or under any applicable law, or the consent or approval of
any governmental regulatory body, is necessary or desirable as a condition of or
in connection with the issuance of the Shares under the option or right, the
option or right may not be exercised in whole or in part unless such listing,
qualification, consent or approval shall have been effected or obtained, free of
any condition not acceptable to the Committee.
13. BINDING EFFECT OF CONDITIONS
The conditions and stipulations herein contained, or in any option,
right or stock bonus award granted pursuant to the Plan shall be, and
constitute, a covenant running with all of the Shares acquired by the
participant pursuant to this Plan, directly or indirectly, whether the same have
been issued or not, and those Shares owned by the participant shall not be sold,
assigned or transferred by any person save and except in accordance with the
terms and conditions herein provided. In addition, the participant shall agree
to use the participant's best efforts to cause the officers of the Company to
refuse to record on the books of the Company any assignment or transfer made or
attempted to be made, except as provided in the Plan, and to cause said officers
to refuse to cancel old certificates or to issue or deliver new certificates
therefor where the purchaser or assignee has acquired certificates or the shares
represented thereby, except strictly in accordance with the provisions of the
Plan.
14. AMENDMENT AND TERMINATION OF THE PLAN
The Board shall have complete power and authority to terminate or
amend the Plan; provided, however, that the Board shall not, without the
approval of the shareholders of the Company, amend the Plan in a manner that
requires shareholder approval for continued compliance with the terms of
Rule 16b-3, as promulgated under the Exchange Act, Section 422 of the Code, any
successor rules, or other regulatory authority. Except as provided in
Section 11, no termination, modification or amendment of the Plan may, without
the consent of any employee or officer to whom such option, right or stock bonus
award was previously granted under the Plan, adversely affect the rights of such
employee or officer under such option, right or stock bonus award.
The Plan, unless sooner terminated, shall terminate ten years from the
date the Plan is adopted by the Board. An option, right or stock bonus award
may not be granted under the Plan after the Plan is terminated.
15. EFFECTIVENESS OF THE PLAN
The Plan shall become effective only upon adoption by the Board. The
effectiveness of the Plan shall be conditioned upon the approval of the Plan by
the shareholders of the Company within twelve (12) months of the adoption of the
Plan by the Board. Options, rights or stock bonus awards may be granted from
time to time, as the Committee may determine; provided, however, that the
exercise of any option or right under the Plan shall be conditioned upon the
registration of the Shares with the Securities and Exchange Commission and
qualification of
-8-
<PAGE>
the options, rights and underlying Shares under the California securities laws
unless in the opinion of counsel to the Company such registration or
qualification is not necessary.
16. PRIVILEGES OF STOCK OWNERSHIP, SECURITIES LAW COMPLIANCE AND NOTICE OF
SALE
No participant shall be entitled to the privileges of stock ownership
as to any Shares not actually issued and delivered to the participant. No
Shares shall be purchased upon the exercise of any option unless and until all
of the then applicable requirements of any (i) regulatory agencies having
jurisdiction and (ii) any exchanges upon which the Common Stock of the Company
may be listed shall have been fully complied with. The Company shall diligently
endeavor to comply with all applicable securities laws before any options,
rights or stock bonus awards are granted under the Plan and before any Shares
are issued pursuant to the exercise of such options, rights or stock bonus
awards. The participant shall give the Company notice of any sale or other
disposition of any such Shares not more than five days after such sale or
disposition.
17. INDEMNIFICATION
To the extent permitted by applicable law in effect from time to time,
no member of the Board or the Committee shall be liable for any action or
omission of any other member of the Board or Committee nor for any act or
omission on the member's own part, excepting only the member's own willful
misconduct or gross negligence. The Company shall pay expenses incurred by, and
satisfy a judgment or fine rendered or levied against, a present or former
director or member of the Committee in any action against such person (whether
or not the Company is joined as a party defendant) to impose liability or a
penalty on such person for an act alleged to have been committed by such person
while a director or member of the Committee arising with respect to the Plan or
administration thereof or out of membership on the Committee or by the Company,
or all or any combination of the preceding; provided the director or Committee
member was acting in good faith, within what such director or Committee member
reasonably believed to have been within the scope of his or her employment or
authority and for a purpose which he or she reasonably believed to he in the
best interests of the Company or its shareholders. Payments authorized
hereunder include amounts paid and expenses incurred in settling any such action
or threatened action. This section does not apply to any action instituted or
maintained in the right of the Company by a shareholder or holder of a voting
trust certificate representing shares of the Company. The provisions of this
section shall apply to the estate, executor, administrator, heirs, legatees or
devisees of a director or Committee member, and the term "person" as used in
this section shall include the estate, executor, administrator, heirs, legatees
or devisees of such person.
-9-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS, RELATED NOTES, AND
MANAGEMENT'S DISCUSSION AND ANALYSIS CONTAINED IN THE REPORT ON FORM 10-Q FILED
BY SILICON VALLEY BANCSHARES FOR THE QUARTER ENDED JUNE 30, 1995.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 119,619
<INT-BEARING-DEPOSITS> 128
<FED-FUNDS-SOLD> 238,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 133,447
<INVESTMENTS-CARRYING> 7,019
<INVESTMENTS-MARKET> 7,413
<LOANS> 659,298
<ALLOWANCE> (22,500)
<TOTAL-ASSETS> 1,173,533
<DEPOSITS> 1,070,620
<SHORT-TERM> 0
<LIABILITIES-OTHER> 10,668
<LONG-TERM> 0
<COMMON> 58,048
0
0
<OTHER-SE> 34,198
<TOTAL-LIABILITIES-AND-EQUITY> 1,173,533
<INTEREST-LOAN> 40,178
<INTEREST-INVEST> 4,720
<INTEREST-OTHER> 3,413
<INTEREST-TOTAL> 48,311
<INTEREST-DEPOSIT> 11,780
<INTEREST-EXPENSE> 11,780
<INTEREST-INCOME-NET> 36,531
<LOAN-LOSSES> 2,761
<SECURITIES-GAINS> (770)
<EXPENSE-OTHER> 2,773
<INCOME-PRETAX> 12,746
<INCOME-PRE-EXTRAORDINARY> 12,746
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,261
<EPS-PRIMARY> 0.81
<EPS-DILUTED> 0.81
<YIELD-ACTUAL> 10.3
<LOANS-NON> 12,255
<LOANS-PAST> 936
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 7,000
<ALLOWANCE-OPEN> 20,000
<CHARGE-OFFS> 2,374
<RECOVERIES> 2,113
<ALLOWANCE-CLOSE> 22,500
<ALLOWANCE-DOMESTIC> 14,750
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 7,750
</TABLE>
