<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.__)
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED
BY RULE 14A-6(E) (2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
SILICON VALLEY BANCSHARES
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
SILICON VALLEY BANCSHARES
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $550 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________
(5) Total fee paid:
________________________________
[ ] Fee paid previously with preliminary materials.
1
<PAGE>
[ ] Check box if any part of the fee is offset as provided by Exchange Act rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
__________________________
(2) Form, Schedule or Registration Statement No.:
__________________________
(3) Filing Party:
__________________________
(4) Dated Filed:
__________________________
2
<PAGE>
SILICON VALLEY BANCSHARES
Notice of Annual Meeting of Shareholders
Tuesday, May 23, 1995
4:00 P.M.
TO THE SHAREHOLDERS:
I am pleased to invite you to attend the 1995 Annual Meeting of Shareholders of
Silicon Valley Bancshares, which will be held at the Renaissance Meeting Center
at Techmart, Silicon Valley Room, 5201 Great America Parkway, Santa Clara,
California 95054, on Tuesday, May 23, 1995, 4:00 p.m., local time. The purposes
of the meeting are to:
1. Elect Directors to serve for the ensuing year and until their
successors are elected.
2. Approve amendments to the Silicon Valley Bancshares 1989 Stock Option
Plan.
3. Ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors.
4. Transact such other business as may properly come before the meeting.
The foregoing items of business are more fully described in the Proxy Statement
accompanying this Notice. TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE
ENCOURAGED TO MARK YOUR VOTES, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS
PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID ENVELOPE. Any shareholder
attending the meeting may vote in person even if such shareholder has previously
returned a proxy card.
Only shareholders of record at the close of business on April 3, 1995 will be
entitled to vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Clarence J. Ferrari, Jr.
Chairman of the Board
San Jose, California
April 13, 1995
- --------------------------------------------------------------------------------
ALTHOUGH YOU MAY PRESENTLY PLAN TO ATTEND THE MEETING, PLEASE INDICATE ON THE
ENCLOSED PROXY CARD YOUR VOTE ON THE MATTERS PRESENTED AND SIGN, DATE AND RETURN
THE PROXY CARD. IF YOU DO ATTEND THE MEETING AND WISH TO VOTE IN PERSON, YOU
MAY WITHDRAW YOUR PROXY AT THAT TIME. WE ENCOURAGE YOU TO VOTE FOR THE ELECTION
OF ALL TEN (10) NOMINEES FOR DIRECTORS, FOR APPROVAL OF THE AMENDMENTS TO THE
SILICON VALLEY BANCSHARES 1989 STOCK OPTION PLAN AND FOR RATIFICATION OF THE
SELECTION OF KPMG PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
- --------------------------------------------------------------------------------
<PAGE>
PROXY STATEMENT - TABLE OF CONTENTS
Matter Page
----- ----
Information Concerning the Proxy Solicitation 1
Proposal No. 1 - Election of Directors* 3
Security Ownership of Directors and Executive Officers 6
Information on Executive Officers 7
Report of the Personnel and Compensation Committee of the Board on
Executive Compensation 8
Return to Shareholders Performance Graph 11
Table 1 - Summary Compensation 12
Table 2 - Option Grants in Fiscal Year 1994 13
Table 3 - Aggregated Option Exercises in Fiscal Year 1994 and
Fiscal Year-End Option Values 14
Termination Arrangements 15
Board Committees and Meeting Attendance 18
Director Compensation 20
Security Ownership of Certain Beneficial Holders 21
Compliance with Section 16(a) of the Exchange Act 22
Certain Relationships and Related Transactions 22
Proposal No. 2 - Approval of Amendments to the 1989 Stock Option Plan* 23
Table 4 - Amended Plan Benefits Table 23
Proposal No. 3 - Ratification of Appointment of Independent Auditors* 29
Shareholder Proposals - 1996 Annual Meeting 29
1994 Annual Report 29
Other Matters 30
- -------------------------
* Denotes Items to be Voted on at the Meeting
<PAGE>
Mailed to shareholders on or about April 13, 1995
---------------
PROXY STATEMENT
OF
SILICON VALLEY BANCSHARES
2232 NORTH FIRST STREET
SAN JOSE, CALIFORNIA 95131
---------------
INFORMATION CONCERNING THE PROXY SOLICITATION
GENERAL
This Proxy Statement is furnished in connection with the solicitation of the
enclosed Proxy by, and on behalf of, the Board of Directors of Silicon Valley
Bancshares, a California corporation and bank holding company (the "Company")
for Silicon Valley Bank (the "Bank"), for use at the 1995 Annual Meeting of
Shareholders of the Company to be held at the Renaissance Meeting Center at
Techmart, Silicon Valley Room, 5201 Great America Parkway, Santa Clara,
California 95054, ON TUESDAY, MAY 23, 1995 AT 4:00 P.M., local time and at all
postponements or adjournments thereof (the "Meeting"). Only shareholders of
record on April 3, 1995 (the "Record Date") will be entitled to vote at the
Meeting and any postponements or adjournments thereof. At the close of business
on the Record Date, the Company had 8,639,858 outstanding shares of its no par
value Common Stock (the "Common Stock") held by 631 shareholders of record.
The Company's principal executive offices are located at 2232 North First
Street, San Jose, CA 95131 and its telephone number at that location is (408)
383-5282.
VOTING
Shareholders of the Company's Common Stock are entitled to one vote for each
share held, except that for the election of directors, each shareholder has
cumulative voting rights entitling the shareholder to as many votes as shall
equal the number of shares held by such shareholder multiplied by the number of
directors to be elected. A shareholder may cast all his or her votes for a
single candidate or distribute such votes among any or all of the candidates he
or she chooses (up to a maximum of the number of directors to be elected).
However, no shareholder shall be entitled to cumulate votes (in other words,
cast for any candidate a number of votes greater than the number of shares of
stock held by such shareholder) for a candidate unless such candidate's or
candidates' names have been placed in nomination prior to the voting in
accordance with Section 2.11 of the Bylaws of the Company and the shareholder
(or any other shareholder) has given notice of the shareholder's intention to
cumulate votes at the Meeting prior to the voting. If any shareholder has given
such notice, all shareholders may cumulate their votes for candidates properly
placed in nomination. The Proxy Holders are given discretionary authority under
the terms of the Proxy to cumulate votes represented by shares for which they
are named Proxy Holders.
Section 2.11 of the Bylaws of the Company governs nominations for election of
members of the Board of Directors, as follows: nominations for election of
members of the Company's Board of Directors may be made by the Board of
Directors or by any shareholder of any outstanding class of capital stock of the
Company entitled to vote for the election of directors. Notice of intention to
make any nominations shall be made in writing and shall be delivered or mailed
to the Secretary of the Company not less than twenty-one (21) days nor more than
sixty (60) days prior to any meeting of shareholders called for the election of
directors; provided, however, that if less than twenty-one (21) days notice of
the meeting is given to shareholders, such notice of intention to nominate shall
be mailed or delivered to the Secretary of the Company not later than the close
of business on the tenth day following the day on which the notice of the
meeting was mailed; provided further, that if notice of such meeting is sent by
third-class mail as permitted by the Bylaws, no notice of intention to make
nominations shall be required. Such notification shall contain the following
information to the extent known to the notifying shareholder: (a) the name and
address of each proposed nominee; (b) the principal occupation of each proposed
nominee; (c) the number of shares of Common Stock of the Company owned by each
proposed nominee; (d) the name and residence address of the notifying
shareholder; and (e) the number of shares of Common Stock of the Company owned
by the notifying shareholder.
1
<PAGE>
Nominations not made in accordance herewith may, at the discretion of the
Chairman of the meeting, be disregarded and upon the Chairman's instructions,
the Inspector of Election can disregard all votes cast for each such nominee.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting is a
majority of the shares of Common Stock issued and outstanding on the Record
Date. Shares that are voted "FOR", "AGAINST" or "WITHHELD FROM" a matter are
treated as being present at the meeting for purposes of establishing a quorum
and are also treated as shares "represented and voting" at the Annual Meeting
(the "Votes Cast") with respect to such matter.
While there is no definitive statutory or case law authority in California as to
the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining both (i) the presence or absence
of a quorum for the transaction of business and (ii) the total number of Votes
Cast with respect to a proposal (other than the election of directors). In the
absence of controlling precedent to the contrary, the Company intends to treat
abstentions in this matter. Accordingly, abstentions will have the same effect
as a vote against the proposal.
Broker non-votes will be counted for purposes of determining the presence or
absence of a quorum for the transaction of business, but will not be counted for
purposes of determining the number of Votes Cast with respect to the proposal on
which the broker has expressly not voted. Thus, a broker non-vote will not
affect the outcome of the voting on a proposal.
REVOCABILITY OF PROXIES
Any person giving a Proxy in the form accompanying this Proxy Statement has the
power to revoke the Proxy at any time prior to its exercise. A Proxy is
revocable prior to the Meeting by delivering either a written instrument
revoking it or a duly executed Proxy bearing a later date to the Secretary of
the Company. Such Proxy is also revoked if the shareholder is present at the
Meeting and elects to vote in person.
SOLICITATION
This solicitation of proxies is made by, and on behalf of, the Board of
Directors of the Company. The Company will bear the entire cost of preparing,
assembling, printing and mailing Proxy materials furnished by the Board of
Directors to shareholders. Copies of Proxy materials will be furnished to
brokerage houses, fiduciaries and custodians to be forwarded to the beneficial
owners of the Company's Common Stock. In addition to the solicitation of
Proxies by use of the mail, some of the officers, directors and regular
employees of the Company and the Bank may (without additional compensation)
solicit Proxies by telephone or personal interview, the costs of which the
Company will bear.
Unless otherwise instructed, each valid returned Proxy that is not revoked will
be voted in the election of directors "FOR" the nominees to the Board of
Directors, "FOR" the proposed amendments to the Company's 1989 Stock Option
Plan, "FOR" ratification of the appointment of KPMG Peat Marwick LLP as the
Company's independent auditors, and at the Proxy Holders' discretion on such
other matters, if any, as may properly come before the Meeting or any
postponement or adjournment thereof (including any proposal to adjourn the
Meeting).
2
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES
The Company's Bylaws provide for a range of from ten (10) to nineteen (19)
directors and permit the exact number to be fixed by the Board. Effective
through May 22, 1995, the Board has fixed the exact number of directors at
twelve (12). Effective as of May 23, 1995, the Board has fixed the exact number
of directors at ten (10).
NOMINEES FOR DIRECTOR
All Proxies will be voted "FOR" the election of the following ten (10) nominees
recommended by the Board of Directors, all of whom are incumbent directors,
unless authority to vote for the election of directors is withheld. All of the
nominees have served as directors of the Company since the last Annual Meeting
of Shareholders, except James R. Porter. Mr. Porter recently was appointed to
the Board of Directors by the Board. All incumbent directors, with the
exceptions of Allan C. Kramer, M.D. and Barry A. Turkus who are not standing for
re-election, are nominees for election. If any of the nominees should
unexpectedly decline or be unable to act as a director, the Proxies may be voted
for a substitute nominee designated by the Board of Directors. The Board of
Directors has no reason to believe any nominee will become unavailable and has
no present intention to nominate persons in addition to or in lieu of those
listed below. Directors of the Company serve until the next annual meeting of
shareholders or until their successors are elected and qualified.
The names and certain information about each of the Company's nominees for
director are set forth below.
NAME OF DIRECTOR AGE (1) PRINCIPAL OCCUPATION OR EMPLOYMENT DIRECTOR
- ---------------- --- (2) OTHER BUSINESS AFFILIATIONS AND SINCE
PUBLIC COMPANY DIRECTORSHIPS -----
----------------------------
Gary K. Barr 50 (1) President and Chief Executive Officer, 1982
Pacific Coast Capital (a real estate
investment and management company),
Carbondale, Colorado since August 1992.
(2) President and Chief Executive Officer,
Landsing Pacific Fund (a California real
estate investment and management company)
from 1984 to August 1992.
Interim Acting Chief Executive Officer of
the Company and the Bank from January-May
1993.
James F. Burns, Jr. 57 (1) Executive Vice President and Chief 1994
Financial Officer, CBR Information Group
(a credit and mortgage reporting company),
Houston, Texas since September 1988.
(2) Executive Vice President and Chief Financial
Officer, Integratec, Inc. (a company
providing credit origination, servicing,
and collection services and the parent
company of CBR Information Group prior to
spin-off of CBR in 1993) from 1988-1993.
John C. Dean 47 (1) President and Chief Executive Officer of 1993
the Company and the Bank since May 1993.
(2) Advisory Member of Board of Directors,
American Central Gas Companies, Inc.,
Tulsa, Oklahoma since August 1994. Also,
see "Information on Executive Officers" below.
3
<PAGE>
NAME OF DIRECTOR AGE (1) PRINCIPAL OCCUPATION OR EMPLOYMENT DIRECTOR
- ---------------- --- (2) OTHER BUSINESS AFFILIATIONS AND SINCE
PUBLIC COMPANY DIRECTORSHIPS -----
----------------------------
Clarence J.
Ferrari, Jr., Esq. 60 (1) Principal, Ferrari, Alvarez, Olsen 1983
and Ottoboni (Attorneys-at-Law),
San Jose, California.
(2) Chair of the Company Board and of
the Bank Board.
Henry M. Gay 70 (1) Retired. 1982
(2) Founder and Director, Triad Systems
Corporation (a computer software company),
Livermore, California since 1971.
Daniel J.
Kelleher(1) 52 (1) Private Investor, Los Altos Hills, 1986
California.
James R. Porter 59 (1) President, Chief Executive Officer, 1994
and Director, Triad Systems Corporation
(a computer software company),
Livermore, California since September 1985.
(2) Member of Board of Directors, Brock Control
Systems (a sales automation company),
Atlanta, Georgia since April 1993.
Michael Roster,
Esq.(2) 49 (1) General Counsel, Stanford University, 1994
Stanford, California since August 1993.
(2) From 1987-1993, partner in the national
law firm of Morrison & Foerster.
Roger V. Smith(3) 53 (1) Partner, Smith Venture Group (a venture 1983
capital firm), Palo Alto, California since
February 1994.
(2) Chief Executive Officer of the Company and
the Bank from 1983-1993. Also, Member of
Board of Directors, Lazertron Corp. (an
electronic game manufacturing company),
Pleasanton, California.
Ann R. Wells 51 (1) Chief Executive Officer, Ann Wells 1986
Personnel Services, Inc. (a personnel
agency), Sunnyvale, California since
January 1980.
- --------------------
(1) Chair-Elect of the Company Board and the Bank Board, such chairmanship to
be effective the day following the 1995 Annual Meeting of Shareholders
(subject to re-election to the Boards).
(2) Vice Chair-Elect of the Company Board and the Bank Board, such vice-
chairmanship to be effective the date following the 1995 Annual Meeting of
Shareholders (subject to re-election to the Boards).
(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.
4
<PAGE>
The names and certain information about the Company's two incumbent directors
not standing for re-election are set forth below.
NAME OF DIRECTOR AGE (1) PRINCIPAL OCCUPATION OR EMPLOYMENT DIRECTOR
- ---------------- --- (2) OTHER BUSINESS AFFILIATIONS AND SINCE
PUBLIC COMPANY DIRECTORSHIPS -----
----------------------------
Allan C. Kramer,
M.D. 58 (1) President and Chief Executive Officer, 1986
The Kramer Group (a business and property
management company), Los Altos, California.
(2) President and Chief Executive Officer of
Professional Insurance Exams, Inc.
(a professional medical group specializing
in medical examinations).
Barry A. Turkus 48 (1) President, BT Commercial (a real estate 1982
brokerage company), San Jose, California
since November 1981.
VOTE REQUIRED
The ten (10) nominees for directors receiving the highest number of affirmative
votes of the shares entitled to be voted for them shall be elected as directors.
Votes withheld from any director are counted for purposes of determining the
presence or absence of a quorum, but have no other legal effect under California
law.
5
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding beneficial ownership
as of the Record Date of the Company's Common Stock by each of the Company's
directors, by each of the executive officers named in the Summary Compensation
Table and by all current directors and executive officers as a group. Unless
otherwise noted, the respective nominees have sole voting and investment power
with respect to the shares shown in the table as beneficially owned.
<TABLE>
<CAPTION>
Aggregate Number of Percent of
Shares Beneficially Outstanding Shares
Name Owned
- ----------------------------------------------------------------------
DIRECTORS
<S> <C> <C>
- ----------------------------------------------------------------------
Gary K. Barr 58,725 (a) .68%
- ----------------------------------------------------------------------
James F. Burns, Jr. 0 0
- ----------------------------------------------------------------------
John C. Dean* 160,683 (b),(n) 1.85%
- ----------------------------------------------------------------------
Clarence J. Ferrari, Jr., Esq. 69,802 (c) .81%
- ----------------------------------------------------------------------
Henry M. Gay 47,332 (d) .55%
- ----------------------------------------------------------------------
Daniel J. Kelleher 87,381 (e) 1.01%
- ----------------------------------------------------------------------
Allan C. Kramer, M.D. 90,833 (f) 1.05%
- ----------------------------------------------------------------------
James R. Porter 0 0
- ----------------------------------------------------------------------
Michael Roster, Esq. 2,000 .02%
- ----------------------------------------------------------------------
Roger V. Smith 318,944 (g),(o) 3.60%
- ----------------------------------------------------------------------
Barry A. Turkus 37,986 (h) .44%
- ----------------------------------------------------------------------
Ann R. Wells 83,930 (i) .97%
- ----------------------------------------------------------------------
EXECUTIVE OFFICERS
- ----------------------------------------------------------------------
A. John Busch 14,447 (j),(p) .17%
- ----------------------------------------------------------------------
John C. Dean (See listing above under "Directors")
- ----------------------------------------------------------------------
Dennis G. Uyemura 7,769 (q) .09%
- ----------------------------------------------------------------------
James F. Forrester 47,463 (k),(r) .55%
- ----------------------------------------------------------------------
Richard H. Harding 21,941 (l),(s) .25%
- ----------------------------------------------------------------------
Allyn C. Woodward 101,498 (m),(t) 1.16%
- ----------------------------------------------------------------------
All current directors and 1,150,734** 12.62%
- ----------------------------------------------------------------------
executive officers as a group
(17 persons)
- ----------------------------------------------------------------------
- -------------------------------
<FN>
Includes (1) the following number of shares subject to options where the options are exercisable within 60 days after the Record
Date and (2) the following number of shares under the Company's Employee Stock Ownership Plan:
(1) (1) (CON'T) (2)
(a) 34,000 shares (h) 4,000 shares (n) 46,965 shares
(b) 37,500 shares (i) 13,193 shares (o) 12,223 shares
(c) 10,893 shares (j) 9,690 shares (p) 1,885 shares
(d) 4,000 shares (k) 19,673 shares (q) 1,073 shares
(e) 13,193 shares (l) 17,940 shares (r) 9,272 shares
(f) 13,193 shares (m) 74,056 shares (s) 1,746 shares
(g) 229,325 shares (t) 9,111 shares
* Share ownership shown does not include 10,000 shares in the aggregate held in two trusts for which Mr. Dean's brother serves as
trustee for the benefit of Mr. Dean's two daughters, as to which shares Mr. Dean disclaims beneficial ownership.
** Includes 480,656 shares subject to options where the options are exercisable within 60 days after the Record Date.
</TABLE>
6
<PAGE>
INFORMATION ON EXECUTIVE OFFICERS
The positions and ages as of the Record Date of the executive officers of the
Company are as set forth below. There are no family relationships among
directors or executive officers of the Company.
NAME AND POSITION AGE BUSINESS EXPERIENCE EMPLOYEE
- ----------------- --- ------------------- SINCE
-----
JOHN C. DEAN 47 Prior to joining the Company and the 1993
President, Chief Executive Bank in May 1993, Mr. Dean served as
Officer and Director of the President and Chief Executive Officer of
Company and the Bank Pacific First Bank, a $6.5 billion
Federal savings bank headquartered in
Seattle, Washington from December 1991
until April 1993. From 1990 to 1991,
Mr. Dean served as Chairman and Chief
Executive Officer of First Interstate
Bank of Washington, and from 1986 to
1990, Chairman and Chief Executive
Officer of First Interstate Bank of
Oklahoma.
ALLYN C. WOODWARD, JR. 54 Mr. Woodward served as Senior Vice 1990
Former Senior Executive Vice President and Group Manager of the
President and Chief Operating Bank of New England, N.A., National
Officer of the Bank Technology Industry Group, from
(Resignation effective 1984 until joining the Bank in 1990 as
April 1, 1995) Executive Vice President and Manager
of the Technology Division's East Coast
Office. Mr. Woodward was promoted to
Senior Executive Vice President and
Chief Operating Officer of the Bank in
May 1993.
A. JOHN BUSCH 40 Mr. Busch served as Executive Vice 1993
Executive Vice President, President and Chief Lending and
Chief Credit Officer and Credit Officer at First National Bank
General Counsel of the in San Diego, California from January
Company and the Bank 1992 until joining the Bank in August
1993. From 1982 until January 1992,
Mr. Busch held increasingly responsible
positions with Union Bank in Los Angeles,
California in the merchant banking and
legal departments.
DENNIS G. UYEMURA 46 Mr. Uyemura served as Senior Vice 1994
Executive Vice President and President and Chief Financial Officer
Chief Financial Officer of the of the Federal Home Loan Bank of San
Company and the Bank Francisco from May 1993 until joining
the Company and the Bank in May 1994
as Executive Vice President and Chief
Financial Officer. From January 1992
until April 1993, Mr. Uyemura held the
position of Senior Partner and Chief
Financial Officer of Pacific First Bank.
From July 1988 until December 1991,
Mr. Uyemura served as Executive Vice
President and Chief Financial Officer
of First Interstate Bank of
Washington.
JAMES F. FORRESTER 51 Mr. Forrester joined the Bank in 1987
Executive Vice President and 1987 as Senior Vice President of
Manager of the Bank's Special Operations and Administration. In
Industries and Northern 1990, Mr. Forrester founded the
California Technology Groups Bank's Southern California office
and managed that office until August
1993. Mr. Forrester returned to
Northern California in 1993 to manage
the Bank's Special Industries Group.
In February 1995, Mr. Forrester
additionally took over management of
the Bank's Northern California
Technology Group.
RICHARD H. HARDING 51 Mr. Harding served as a Partner 1993
Executive Vice President in Pacific First Bank's Private
and Manager of the Bank's and Business Banking Division from
Strategic Financial January 1992 until joining the
Services Group Bank in April 1993. From August
1973 until January 1992, Mr. Harding
held increasingly responsible
positions in First Interstate Bank of
Washington's Corporate Banking
Division.
7
<PAGE>
REPORT OF THE PERSONNEL AND COMPENSATION COMMITTEE OF THE BOARD ON EXECUTIVE
COMPENSATION
THE REPORT OF THE PERSONNEL AND COMPENSATION COMMITTEE SHALL NOT BE DEEMED
INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT INCORPORATING BY REFERENCE
THIS PROXY STATEMENT INTO ANY FILING UNDER THE SECURITIES ACT OF 1933 OR UNDER
THE SECURITIES EXCHANGE ACT OF 1934 (THE "EXCHANGE ACT"), EXCEPT TO THE EXTENT
THAT THE COMPANY SPECIFICALLY INCORPORATES THE INFORMATION CONTAINED IN THE
REPORT BY REFERENCE, AND SHALL NOT OTHERWISE BE DEEMED FILED UNDER SUCH ACTS.
Decisions regarding compensation of the Company's executive officers, including
those related to stock and stock options, are considered by the full Board of
Directors, based upon the recommendations and analysis performed by the
Personnel and Compensation Committee (the "Committee"), currently comprised of
Ms. Wells, Chair, and Mssrs. Barr, Kelleher and Roster.
KEY PRINCIPLES
The Committee has adopted the following principles to use for guidance in
setting compensation:
- PAY COMPETITIVELY.
- The Committee maintains a philosophy that executive compensation
levels should be competitive with that provided to others in
other financial institutions of comparable size. In that way,
the Company can attract and retain highly-qualified executives
critical to the Company's long-term success.
- Consistent with this philosophy, the Committee regularly obtains
information regarding executive salary levels in the financial
institutions industry through various sources, including
compensation surveys conducted by banking industry associations
and independent compensation consultants.
- The Committee attempts to set (a) base compensation at the
midpoint of the range and (b) total compensation (including
incentive compensation) in the range of 75th to 90th percentile
(subject to the Company's financial performance in the top
quartile of the Company's competitive group).
- TIE INCENTIVE COMPENSATION TO COMPANY FINANCIAL PERFORMANCE.
- The Company's incentive compensation program is generally based
on measured financial performance of the Company and of the
division managed by the executive officer, if applicable.
Incentive payouts primarily depend on results, not efforts.
Payouts are calculated as percentages of base salaries, with
threshold, target, and stretch payout percentages being set at
the beginning of each calendar year. Actual payouts, i.e.
whether threshold, target, or stretch amounts, depend on
achievement of specifically-defined goals, including corporate,
division, and individual goals.
- In developing the 1994 Incentive Compensation Program, the
Committee reviewed the executive compensation programs of the
Bank's competitive group. The competitive group included 10
banks meeting the following criteria: 1) total assets in the
range of $500 million to $4 billion; 2) retail loans constituting
less than 50% of total loans; 3) comparable risk profile (as
determined by leverage ratio and non-performing loan ratio); and
4) location in a major metropolitan area. Within the 10-bank
competitive group, the Committee reviewed not only incentive
compensation bonuses, but also the base salaries and other annual
compensation of the Named Officers (individually and as a group).
The 1994 aggregated base salary and bonus paid to the Chief
Executive Officer of the Company and the Bank (John Dean) ranked
in the 25th percentile level of aggregated base salaries and
bonuses paid to chief executive officers in the 10-bank group in
1994.
In 1994, incentive compensation goals for executive officers were tied to the
Company's profitability, and, if applicable, the financial results of the
division managed by the executive officer. The Company's profitability
comprised a minimum of 45% of each executive officer's incentive compensation
goals. For the Chief Executive Officer of the Company and the Bank (John Dean),
100 % of his incentive compensation payout depended on the Company's 1994
profitability.
8
<PAGE>
INCENTIVE COMPENSATION PAID BASED ON 1994 COMPANY PERFORMANCE
- ACTUAL INCENTIVE COMPENSATION PAYMENTS.
- CHIEF EXECUTIVE OFFICER. 100% of John Dean's 1994 incentive
compensation payment depended on total Company profitability.
Under the 1994 Incentive Compensation Program, the threshold,
target, and stretch payout amounts (represented as percentages of
base salary) for John Dean were 10%, 30%, and 65%, respectively.
The Company's 1994 net income exceeded the target goal but was
less than the stretch goal. Accordingly, John Dean's incentive
compensation payment of $123,681 (all of which was paid in stock)
represented 48.7% (that point on the continuum between the target
and stretch payouts of 30% and 65%, respectively, as
representative of actual 1994 company profitability between the
target and stretch profitability goals) of his base salary on
December 31, 1994 ($254,200).
- OTHER EXECUTIVE OFFICERS. In addition to the Company's
profitability, the Personnel and Compensation Committee set other
goals for the other executive officers' threshold, target, and
stretch payment goals, namely division and individual
performances. For those executive officers in profit-generating
units, including Allyn Woodward, James Forrester, and Richard
Harding, division goals (and actual payments) were tied to net
profitability of the respective division, increase in the
division's deposits, and client calls made by the division. For
those executive officers in support divisions, including John
Busch, 1994 incentive compensation goals (and actual payments)
were tied to management of credit risk, client service, and
minimization of audit risk.
- PAYMENTS IN COMPANY STOCK.
- 100% of the incentive compensation payment to John Dean was paid
in Company stock. 60% of the incentive compensation payments to
Allyn Woodward and John Busch were paid in Company stock (with
the balance having been paid in cash).
TAX CONSEQUENCES
To the extent readily determinable and as one of the factors in its
consideration of compensation matters, the Committee considers the anticipated
tax treatment to the Company and to the executives of various payments and
benefits. The Committee will consider various alternatives to preserving the
deductibility of compensation payments (and specifically, pursuant to Section
162(m) of the Internal Revenue Code) to the extent reasonably practicable and to
the extent consistent with its other compensation objectives.
PERSONNEL AND COMPENSATION COMMITTEE
ANN R. WELLS, CHAIR (since January 24, 1995)
GARY K. BARR
JOHN C. DEAN (until May 18, 1994)
DANIEL J. KELLEHER (Chair until January 24, 1995)
ALLAN C. KRAMER (until December 31, 1994)
MICHAEL ROSTER (since June 28, 1994)
9
<PAGE>
PERSONNEL AND COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1994, the Personnel and Compensation Committee performed all compensation
functions of the Board of Directors. With regard to stock-based compensation
(including under the Company's employee benefit plans), the Personnel and
Compensation Committee worked with the Stock Committee, which has primary
responsibility for reviewing and approving the Company's stock-based
compensation plans. (See discussion below under "Board Committees and Meeting
Attendance" for additional information on the Personnel and Compensation
Committee and the Stock Committee). The Personnel and Compensation Committee
and the Stock Committee are currently chaired by Ms. Ann Wells, with Mssrs.
Barr, Kelleher and Roster serving as members. With the exceptions of Mr. Dean,
President and Chief Executive Officer of the Company and the Bank, and Mr. Barr,
who served as Interim Acting Chief Executive Officer of the Bank during the
period January 1993 through May 1993, none of the aforementioned persons has
ever been an officer or employee of the Company or the Bank.
Ann R. Wells, Chief Executive Officer of Ann Wells Personnel Services, Inc.,
provided temporary employment and recruiting services to the Bank in 1994 and is
expected to perform such services in 1995. The fees paid to Ann Wells Personnel
Services by the Bank in 1994 did not exceed five (5) percent of the firm's gross
revenues for the year and are comparable to those charged by unrelated parties
for similar services.
Freedom Travel (of which Daniel J. Kelleher was a principal owner until March
1995) provided travel agency services to the Bank in 1994 and is expected to
perform such services in 1995. The fees paid to Freedom Travel by the Bank in
1994 did not exceed five (5) percent of the Company's gross revenues for the
year and are comparable to those charged by unrelated parties for similar
services.
As a state-chartered bank that is a member of the Federal Reserve System, the
Bank is subject to regular examinations by the California State Banking
Department ("Department") and the Federal Reserve Bank of San Francisco. In a
concurrent Department/Federal Reserve Bank of San Francisco examination
concluded in the fourth quarter of 1993, the regulators identified two loans to
Mr. Barr, a director, totaling $529,000 at December 31, 1993, which, in the
regulators' opinion, involved more than a normal risk of default. Both loans
were upgraded during 1994 and accordingly, as of December 31, 1994, both loans
were graded to reflect no more than a normal risk of default. Mr. Barr repaid
one of the loans in full in February 1995. As of February 28, 1995, the
outstanding balance on the other loan was $266,670.
10
<PAGE>
RETURN TO SHAREHOLDERS PERFORMANCE GRAPH
The following graph compares, for the period from December 31, 1989 through
December 31, 1994, the yearly percentage change in the cumulative total
shareholder return on the Common Stock of the Company with (i) the cumulative
total return of the S&P 500 market index, (ii) the cumulative total return of
the NASDAQ market index and (iii) the cumulative total return of the Montgomery
Securities' WESTERN BANK MONITOR California Independent Bank Proxy market index.
The graph assumes an initial investment of $100 and reinvestment of dividends.
The graph is not necessarily indicative of future stock price performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL
RETURN AMONG SILICON VALLEY BANCSHARES, S&P 500,
NASDAQ AND CALIFORNIA INDEPENDENT BANK PROXY MARKET ISSUES
[GRAPH]
<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Silicon Valley Bancshares 100 108.29 147.86 93.73 115.04 153.38
S&P 500 100 93.44 118.02 123.29 131.99 129.96
California Independent Bank Proxy 100 87.47 83.46 82.46 98.04 103.01
NASDAQ 100 82.20 128.92 148.84 170.79 165.33
</TABLE>
11
<PAGE>
TABLE 1 - SUMMARY COMPENSATION
The following table sets forth certain information for each of the last three
(3) fiscal years concerning the compensation of the Chief Executive Officer and
the four other most highly compensated executive officers of the Company and of
the Bank ("Named Officers") (based on salary plus bonus for 1994):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
------------------------------------------------------------------------------
Awards Payouts
--------------------------------------
Other Securities
Annual Restricted Underlying All Other
Compen- Stock Options/ LTIP Compen-
Name and Salary(1) Bonus sation(2) Award(3) SARs(4) Payouts sation(5)
Principal Position Year ($) ($) ($) ($) (#) ($) ($)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <S> <C> <C> <C> <C> <C> <C>
JOHN C. DEAN(6)
President and Chief 1994 $250,525 $123,681(10) -- -- -- -- $19,998
Executive Officer 1993 $175,346 $75,000 $87,741 $475,000 100,000 -- $1,000
ALLYN C. WOODWARD, JR.(7) 1994 $210,525 $92,911(10) -- -- 10,000 -- $19,998
Former Executive Vice President 1993 $214,825 $90,000 $54,255 $243,750 22,500 -- $24,584
and Chief Operating Officer 1992 $171,250 $49,000 -- -- 36,000 -- $20,368
A. JOHN BUSCH(8)
Executive Vice President, Chief 1994 $155,525 $77,523(10) -- -- 3,500 -- $19,998
Credit Officer and General 1993 $59,104 $50,000 $91,620 -- 25,000 -- --
Counsel
JAMES F. FORRESTER
Executive Vice President 1994 $145,675 $73,238 -- -- 15,000 -- $19,998
1993 $142,083 $60,000 $118,125 -- 15,000 -- $18,369
1992 $115,000 $37,000 -- -- 6,000 -- $16,060
RICHARD H. HARDING(9)
Executive Vice President 1994 $135,525 $67,784 -- -- 3,500 -- $18,630
1993 $92,596 $30,000 $35,283 -- 25,000 -- $1,000
<FN>
__________________________
(1) Includes amounts deferred at the election of the executive officer.
(2) Amounts in this column represent relocation costs incurred by the employee
and reimbursed by the Bank. Amounts for the years shown are not reflected
if the total value of perquisites paid to the executive officer during a
fiscal year did not exceed, in the aggregate, the lesser of $50,000 or 10%
of the individual's salary plus bonus in the subject year.
(3) As of December 31, 1994, Mr. Dean held 50,000 restricted shares of the
Company's Common Stock, with a market value of $675,000. At December 31,
1994, Mr. Woodward held 25,000 restricted shares of the Company's Common
Stock, with a market value of $337,500. Market values were based on the
$13.50 closing market price of the Company's Common Stock on the National
Association of Securities Dealers Automated Quotation/National Market
System on December 30, 1994. Holders of restricted stock have rights
equivalent to those of other shareholders, including voting rights and
rights to dividends. Since the date of grant, Mr. Dean's and Mr.
Woodward's restricted stock grants were amended to change the vesting,
which provided for a three-year vesting period beginning in 1994, and
replaced such vesting with cliff-vesting in 1996 (with vesting contingent
upon continued employment). Upon Mr. Woodward's resignation as of April 1,
1995, Mr. Woodward's shares will be forfeited to the Company.
(4) The numbers in this column reflect securities underlying options. No Stock
Appreciation Rights ("SARs") were awarded during the years 1992 through
1994.
(5) Amounts in this column represent employer contributions to the Company's
Employee Stock Ownership Plan and 401(k) Plan.
(6) Mr. Dean joined the Company and the Bank in May 1993.
(7) Mr. Woodward resigned effective as of April 1, 1995.
(8) Mr. Busch joined the Bank in August 1993.
(9) Mr. Harding joined the Bank in April 1993.
12
<PAGE>
(10) These bonuses were payable in stock, with the number of shares tied to the
closing market price of the Company's stock ($13.625) on the date of Board
approval of the bonuses (January 24, 1995). With regard to such stock
grants, the Board offered the executive officers their choice of the
following: (1) 100% of the bonus amount would be paid in stock, with the
officer being responsible to pay out-of-pocket the taxes related to such
stock grant or (2) the bonus amount would be paid in part stock and part
cash, with the cash portion of such bonus amount being equal to the amount
of taxes payable on the total bonus amount. (Such cash portion was
withheld by the Company to pay the taxes, and accordingly, no cash was
payable to the executive). Mr. Dean selected the former option, and Mssrs.
Woodward and Busch selected the latter option.
</TABLE>
DENNIS G. UYEMURA, Executive Vice President and Chief Financial Officer of the
Company and the Bank, joined the Company and the Bank in May 1994. If Mr.
Uyemura had been an employee of the Company and the Bank for the full 1994
fiscal year, he would have been one of the five most highly compensated officers
of the Company and the Bank in 1994.
STOCK OPTIONS
The following table sets forth information concerning the grant of options to
purchase the Company's Common Stock to the Named Officers during 1994:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
TABLE 2 - OPTION/SAR GRANTS IN LAST FISCAL YEAR
- ----------------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS IN 1994(1)
- ----------------------------------------------------------------------------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS POTENTIAL REALIZABLE VALUE
UNDERLYING /SARs AT ASSUMED ANNUAL RATES
OPTIONS/ GRANTED TO EXERCISE OR OF STOCK PRICE
SARs EMPLOYEES IN BASE PRICE EXPIRATION APPRECIATION FOR OPTION
GRANTED(#) FISCAL YEAR (%/SHARE) DATE TERM
NAME 5%($) 10%($)
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
John C. Dean -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Allyn C. Woodward, Jr. 10,000 4.69% $9.88 01/25/99 $27,297 $60,318
- ----------------------------------------------------------------------------------------------------------------------
A. John Busch 3,500 1.64% $9.88 01/25/99 $9,554 $21,111
- ----------------------------------------------------------------------------------------------------------------------
James F. Forrester 15,000 7.03% $9.88 01/25/99 $40,945 $90,478
- ----------------------------------------------------------------------------------------------------------------------
Richard H. Harding 3,500 1.64% $9.88 01/25/99 $9,554 $21,111
- ----------------------------------------------------------------------------------------------------------------------
<FN>
__________________________
(1) Consists entirely of options granted pursuant to the Company's 1989 Stock
Option Plan (the "Plan"). The Plan provides for administration of the Plan
by the Board of Directors of the Company, or by the Stock Committee (to
which Committee the Board has delegated authority to administer the Plan)
(the "Administrator"). As Administrator, the Stock Committee designates
the persons to be granted options, the type of option, the number of
underlying shares, the exercise price, the date of grant and the date
options are exercisable. The Administrator also has broad discretion to
amend outstanding options or to effect repricings. These options were
granted at 100% of the fair market value of the Company's Common Stock on
the date of grant. The option grants vest ratably over three years and
expire five years from the date of grant. Upon a "change in control" of
the Company or the Bank, the options will become fully exercisable.
</TABLE>
13
<PAGE>
The following table sets forth information concerning the exercise of options
during 1994 and the options held at 1994 fiscal year-end by Named Officers.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
TABLE 3 - AGGREGATED OPTION / SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION / SAR VALUES (1)
- -------------------------------------------------------------------------------------------------------------
SHARES
ACQUIRED NUMBER OF SECURITIES
ON VALUE UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE
EXERCISE REALIZED (2) OPTIONS / SARs AT FISCAL MONEY OPTIONS / SARs AT
(#) ($) YEAR-END FISCAL YEAR-END (3)
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
John C. Dean -- -- 25,000 75,000 $114,000 $342,000
- -------------------------------------------------------------------------------------------------------------
Allyn C. Woodward, Jr. 3,385 $17,602 61,251 36,729 $267,289 $150,540
- -------------------------------------------------------------------------------------------------------------
A. John Busch -- -- 8,500 20,000 $26,520 $64,150
- -------------------------------------------------------------------------------------------------------------
James F. Forrester -- -- 24,939 26,880 $146,495 $82,812
- -------------------------------------------------------------------------------------------------------------
Richard H. Harding -- -- 8,500 20,000 $43,520 $97,150
- -------------------------------------------------------------------------------------------------------------
</TABLE>
EMPLOYEE STOCK OWNERSHIP PLAN
The Company makes annual contributions to the Employee Stock Ownership Plan
("ESOP" or the "Plan"), a qualified defined contribution plan. The assets of
the ESOP (Company stock) are held in trust for the exclusive benefit of the
employee-participants. Prior to 1994, Company contributions to each employee's
account constituted 10% of such employee's total compensation. In 1994, the
Company modified the ESOP such that annual contribution amounts would be tied to
the Company's profitability. Under the new program effective in 1994, the
guaranteed contribution was 5% of each employee's eligible base compensation,
with, however, an additional potential 10% (of eligible base compensation) to be
paid, depending on attaining Company profitability goals (subject to certain
limitations on contributions under the Internal Revenue Code and other
limitations, including vesting provisions, under the Plan). The Company's
profitability in 1994 (between the target and stretch goals) resulted in
payments to each employee of 12.67% of 1994 annual base compensation.
_________________________
(1) Consists entirely of stock options. No stock appreciation rights ("SARs")
have been awarded to date.
(2) Represents the market price of the underlying securities on the date of the
option exercise, minus the exercise price.
(3) Represents the market value of the underlying securities at 1994 fiscal
year-end, based on the $13.50 closing market price of the Company's Common
Stock on the National Association of Securities Dealers Automated
Quotation/ National Market System on December 30, 1994, less the exercise
price.
14
<PAGE>
TERMINATION ARRANGEMENTS
The Bank has entered into Termination Agreements ("Termination Agreements") with
Mssrs. Dean, Busch, Forrester, Harding, and other executive officers. The
Termination Agreements provide for severance pay and continuation of certain
benefits if (1) the executive's employment is terminated following a "Change In
Control" (defined below) or (2) the executive is terminated without cause, other
than in connection with a Change In Control. The Termination Agreements were
approved by disinterested members of the Boards of Directors of the Company and
the Bank during 1994.
TERMINATION FOLLOWING A CHANGE IN CONTROL. In order for an executive to receive
benefits under the Termination Agreements following a Change In Control, the
executive must (i) be terminated involuntarily without cause or constructively
terminated within 12 months following the Change In Control or (ii) voluntarily
terminate his employment within 180 days following a Change In Control (in which
case he retains the right to limited severance benefits, including one-half of
the termination payments otherwise provided for following a Change In Control).
Under the Termination Agreements, a "Change In Control" will be deemed to have
occurred in any of the following circumstances:
(1) the acquisition of fifty percent or more of the outstanding voting stock of
the Company or the Bank by any person or entity, with certain exceptions
for employee benefit plans of the Company or the Bank;
(2) the acquisition of twenty-five percent or more of the outstanding voting
stock of the Company or the Bank by any person or entity and a change in
the composition of the Board during the following 12 months such that those
persons serving as directors immediately prior to the share acquisition,
and those new directors elected by a vote of at least two-thirds of the
directors of the Company or the Bank, cease to make up at least sixty
percent of the directors of the Company or the Bank;
(3) a 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 immediately prior thereto continue to own at
least seventy-five percent of the outstanding voting stock of the surviving
entity; or
(4) the complete liquidation of the Company or the Bank, or disposition of all
or substantially all of the Company's or the Bank's assets.
A constructive termination is deemed to have occurred if the executive resigns
in writing following a reduction in the executive's then annual base salary, a
material reduction in the executive's responsibilities, incentive compensation
or benefits, or a relocation by more than 50 miles of the principal place at
which the executive works.
Under the Termination Agreements, the amount of severance benefits payable to an
executive whose employment is terminated during the 12 months following a Change
in Control is dependent upon the "transaction price multiple" of the then book
value of the Company or the Bank. As the transaction price multiple of book
value increases above 1.0, the severance benefit (represented as a multiple of
the executive's base salary) increases. For the percentage of consideration
received in excess of book value, the executive is entitled to receive twice
that percentage multiplied by his then annual base salary. Also, the executive
is entitled to a pro rata portion of earned bonus compensation. Finally, all
outstanding options (representing interests in the Company's Common Stock) will
become immediately and fully vested (and may be exercised within three months
following termination) and all restrictions upon any restricted Company stock
will lapse immediately and all such shares will become fully vested.
In linking the amount of termination payments within 12 months following a
Change In Control to the transaction price multiple of book value, the Boards of
Directors of the Company and the Bank underscored their view that management
should be rewarded correspondingly for increased shareholder value. Therefore,
the amount of severance payments to executives under the Termination Agreements
increases in direct proportion to increases in value realized through a Change
in Control of the Company or the Bank. Conversely, sale of the Company or the
Bank for less than book value, would result in no cash payout to executives
under the Termination Agreements, although they would still be entitled to
acceleration of vesting and continuation of benefits.
15
<PAGE>
The severance program approved by the Boards of the Company and the Bank
includes non-executive Bank officers above a specified grade level in the Bank.
The amount of severance benefits payable to officers below the executive level
is likewise dependent upon the "transaction price multiple" described above.
Under the program for non-executive officers, as the grade level of the officer
in the Bank increases, the multiple of the officer's base salary used in
determining the severance benefit increases.
In reviewing the proposed Termination Agreements, the Boards of the Company and
the Bank researched change in control protections afforded to employees in other
banking institutions of similar size. Based on this review, it is the Board's
view that the program approved by the Boards is less generous to employees than
programs typically afforded to other institutions' employees, particularly, in
light of the required premium benefits to shareholders as a condition to any
cash severance payments being made.
TERMINATION WITHOUT CAUSE. Under the Termination Agreements, executives are
entitled to different severance benefits if they are terminated without cause
either prior to a Change in Control or more than 12 months after a Change in
Control. The severance benefit is equal to 50% of the executive's then annual
base salary, plus a pro rata portion of earned bonus compensation. The payment
may be made in a lump sum or, at the executive's election, in equal monthly
installments for a period not to exceed six months from the date of termination.
During the period, the executive is entitled to receive reasonable outplacement
services and continuation of insurance and other health related benefits
provided by the Bank. Also, all outstanding options (representing interests in
the Company's Common Stock) on the date of termination will become immediately
and fully vested (and may be exercised within three months following
termination) and all restrictions upon any restricted Company stock will lapse
immediately and all such shares will become fully vested.
LIMITATION ON SEVERANCE PAYMENTS. To the extent that the severance payments
otherwise called for by the Termination Agreements would trigger "golden
parachute" tax treatment pursuant to Section 280G and/or Section 4999 of the
Internal Revenue Code, the payments will be reduced so that such adverse tax
consequences to the Company are not triggered.
DEAN EMPLOYMENT AGREEMENT
Mr. Dean entered into an employment agreement with the Company and the Bank,
effective April 12, 1993. The agreement provided for a one-year term of
employment, renewable annually thereafter by mutual agreement. Mr. Dean's
employment agreement provides for a grant of 50,000 shares of restricted stock,
25% of which shares vested on each of March 31, 1993, 1994, and 1995, with the
final 25% of the shares vesting on March 31, 1996. Additionally, under Mr.
Dean's employment agreement, the Company granted Mr. Dean options to purchase
50,000 shares of the Company's common stock pursuant to the Company's 1989 Stock
Option Plan. The options vest as to 25% each year, beginning in 1994. With the
adoption of the above-described Termination Agreements and with the exception of
the above-described terms in Mr. Dean's employment agreement, most key
provisions of Mr. Dean's employment agreement have been superseded.
SMITH EMPLOYMENT AGREEMENT
Mr. Smith resigned as Vice Chairman of the Company and the Bank, effective
February 18, 1994. Mr. Smith continues to serve on the Board of Directors of
the Company. In connection with Mr. Smith's resignation, the Company and the
Bank agreed to pay Mr. Smith $260,000, payable over a 24-month period from March
20, 1994 to March 20, 1996. Pursuant to the agreement, Mr. Smith will remain an
employee of the Bank until March 20, 1996. Until such date, all options held by
Mr. Smith will continue to be outstanding and vest in accordance with their
respective terms.
WOODWARD CONSULTING AGREEMENT
Mr. Woodward resigned as Senior Executive Vice President and Chief Operating
Officer of the Bank, effective April 1, 1995. It is contemplated that the Bank
and Mr. Woodward will enter into a consulting agreement, pursuant to which Mr.
Woodward will continue to serve as a consultant to the Bank until October 1996.
Under the currently proposed consulting agreement, the Bank will pay Mr.
Woodward $214,200 over the 19-month period from April 1995 to October 1996, for
Mr. Woodward's services as a consultant. Until October 1996, all stock options
held by Mr. Woodward will continue to be outstanding and vest in accordance with
their respective terms. Additionally, the Company and the Bank contemplate
granting Mr. Woodward 25,000 shares of the Company's Common Stock,
16
<PAGE>
which would vest as to 1/3 of such number of shares on each of January 5, 1996,
1997 and 1998, contingent upon Mr. Woodward's non-competition with the Bank
through and including the respective vesting dates.(1)
AGREEMENTS WITH KRAMER AND TURKUS
The Company and the Bank contemplate entering into respective agreements with
Mssrs. Kramer and Turkus, pursuant to which Mssrs. Kramer and Turkus will
acknowledge that they will not stand for reelection as directors of the Company
and the Bank at the 1995 Annual Meetings of the Company and the Bank,
respectively. Under the currently proposed agreements, the Company would grant
2,500 unrestricted shares of the Company's Common Stock to each respective
director in exchange for a release.(2)
_________________________
(1) As noted in Footnote 3 to the Summary Compensation Table in this Proxy
Statement, Mr. Woodward's 25,000 restricted shares of the Company's Common Stock
held at December 31, 1994 were forfeited to the Company. The grant described in
this paragraph constitutes a new grant to Mr. Woodward.
(2) Pursuant to the proposed Amendments to the Company's 1989 Stock Option Plan
described in this Proxy Statement, Mssrs. Kramer and Turkus will not be
entitled to the 1995 Grant under the automatic stock grant program for
directors. See "Proposal No. 2: Approval of Amendments to the Silicon Valley
Bancshares 1989 Stock Option Plan".
17
<PAGE>
BOARD COMMITTEES AND MEETING ATTENDANCE
The Company and the Bank have Audit, Directors' Loan, Executive, Finance,
Personnel and Compensation/Stock Committees of their respective Boards of
Directors. Members as of the Record Date were as follows:
<TABLE>
<CAPTION>
AUDIT DIRECTORS' LOAN EXECUTIVE
- ----- --------------- ---------
<S> <C> <C>
Barry A. Turkus, Chair Gary K. Barr, Chair Clarence J. Ferrari, Jr., Chair
James F. Burns, Jr. John C. Dean Gary K. Barr
Clarence J. Ferrari, Jr. Daniel J. Kelleher John C. Dean
Dr. Allan C. Kramer Ann R. Wells Henry M. Gay
Daniel J. Kelleher
<CAPTION>
PERSONNEL AND
FINANCE COMPENSATION / STOCK
- ------- --------------------
<S> <C>
James F. Burns, Jr., Chair Ann R. Wells, Chair
John C. Dean Gary K. Barr
Allan C. Kramer Daniel J. Kelleher
James R. Porter Michael Roster
</TABLE>
AUDIT COMMITTEE (JOINT COMPANY/BANK COMMITTEE) 13 meetings in fiscal year 1994
- Approves the selection and termination of the Company's
independent auditors;
- Reviews the scope and results of the audit plans of the
independent auditors;
- Reviews the adequacy of the Company's internal accounting
controls;
- Reviews with management, and with the independent auditors,
reports filed with banking regulatory agencies and the
Securities and Exchange Commission;
- Evaluates the activities and utilization of the Company's
internal auditing personnel; and
- Oversees management's efforts in ensuring that the Company
is complying with accounting standards and with federal and
state banking laws.
DIRECTORS' LOAN COMMITTEE (BANK COMMITTEE) 59 meetings in fiscal year 1994
- Works with management in seeking to ensure that the Bank
maintains and enforces the Bank's credit policy and credit
procedures;
- Works with management in ensuring compliance with lending
limit restrictions and with established portfolio
constraints and limitations;
- Works with management in ensuring problem credits are
identified on a timely basis;
- Establishes lending authority levels for Bank committees and
respective officer levels in the Bank; and
- Reviews the Bank's community delineations to ensure that
they meet the purposes of the Community Reinvestment Act.
18
<PAGE>
EXECUTIVE COMMITTEE 9 meetings (Company Executive
(SEPARATE COMPANY/BANK COMMITTEES) Committee) in fiscal year 1994
1 Meeting (Bank Executive
Committee) in fiscal year 1994
- Works with management in developing long-term strategic plans;
- Has the authority of the Board between Board meetings, except as
otherwise provided by California law; and
- Serves as the nominating committee for directors as well as Board
and Board committee chairs. (Shareholders that wish to submit
names of prospective director-nominees for consideration by the
Executive Committee should do so in writing to the Secretary of
Silicon Valley Bancshares, 2218 N. 1st Street, San Jose, CA
95131.)
FINANCE COMMITTEE (BANK COMMITTEE) 2 meetings in fiscal year 1994
- Oversees the Bank's investment and funds management policies,
which are comprised of the following four policies: investment
policy, liquidity management policy, asset/liability management
policy, and capital management policy; and
- Reviews and approves the Company's and the Bank's insurance
policies.
PERSONNEL AND COMPENSATION COMMITTEE 11 meetings in fiscal year 1994
(BANK COMMITTEE)
- Works with management in ensuring that the Bank's long-term and
short-term compensation programs are competitive and therefore,
effective in attracting, retaining, and motivating highly-skilled
personnel;
- Reviews and approves the Chief Executive Officer's (and the
Bank's Managing Committee members') compensation;
- Ensures that an appropriate mix of long-term and short-term
compensation programs are in place to provide performance-
oriented incentives to the Bank's employees; and
- Reviews and approves compensation and employee benefit plans.
(With regard to stock-based plans, the Personnel and Compensation
Committee coordinates its efforts with those of the Company's
Stock Committee.)
STOCK COMMITTEE (COMPANY COMMITTEE) 0 meetings in fiscal year 1994
(COMMITTEE RESPONSIBILITIES PREVIOUSLY HANDLED (formed in August 1994)
BY JOINT COMPANY/BANK PERSONNEL AND COMPENSATION
COMMITTEE)
- Reviews and approves all stock-based compensation plans,
including employee stock option plans and employee stock
ownership plans;
- Makes option grants to executive officers; and
- Works with the Bank's Personnel and Compensation Committee in
ensuring that stock-based compensation plans for the Company and
the Bank are effective in incentivizing employees to excel in
performance.
Actions taken by the above-described Board committees are reported to the
Company or Bank Board, as appropriate, following the Committee meetings.
During fiscal year 1994 (ended December 31, 1994), the Board of Directors met 11
times: 9 regular meetings and 2 special meetings. All directors attended at
least 75% of the Board meetings and meetings held by Committees of which they
were members.
19
<PAGE>
DIRECTOR COMPENSATION
Outside directors receive an annual automatic stock grant of 2,500 shares of the
Company's Common Stock, together with reimbursement for travel expenses. The
Chair of the Board receives an additional annual fee of $5,000. The Chairs of
the respective Board Committees, as well as the Vice-Chair of the Board, receive
an annual fee of $1,500. Finally, outside directors on the Directors' Loan
Committee (including the Chair of this Committee) receive $150 for every
Committee meeting attended after the first two in any calendar month. The
Committee has five scheduled meetings each calendar month.
At the April 26, 1994 Annual Meeting of Shareholders, the Company's 1989 Stock
Option Plan (the "1989 Plan") was amended to provide for annual automatic stock
grants of 2,500 shares to each outside director on April 28, 1994, May 1, 1995,
and May 1, 1996. Under the terms of the 1989 Plan, the automatic stock awards
made on April 28, 1994 (the "April 1994 Awards") were subject to a contractual
restriction on resale for two years following the date of grant.
At the October 1994 Board meeting, the Board of Directors approved an amendment
to the 1989 Plan, deleting the two-year contractual prohibition on resale or
transfer for director stock awards granted under the 1989 Plan on or after the
date of approval of such amendment by the Board. In addition, the Company's
Board amended the 1989 Plan to grant an award of 2,500 shares in recognition of
1994-1995 service on the Board, to be effective on May 24, 1995, the day after
the annual meeting, subject to shareholder approval. In April 1995, the Board
of Directors intends to further amend the provisions of the 1989 Plan relating
to director awards to change the grant dates for the 1995 and 1996 awards from
May 1 of each such year to the day after the annual meeting of shareholders held
in such year. An item for approval at the 1995 Shareholders' Meeting (described
in Proposal No. 2 of this Proxy Statement) is approval of the October and April
amendments to the 1989 Plan.
The Board of Directors authorized the rescission of the April 1994 Awards made
under the 1989 Plan and all directors surrendered such awards for cancellation.
The basis for the rescission was mutual mistake of fact including, but not
limited to, unintended and adverse tax consequences that were not contemplated
by the Company or the outside directors.
20
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS
PRINCIPAL SHAREHOLDERS
Information concerning the owners of more than 5% of the outstanding Common
Stock of the Company (as of the Record Date) follows. The Company knows of no
persons other than those entities described below who beneficially own more than
5% of the outstanding Common Stock of the Company.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER SHARES BENEFICIALLY OWNED
------------------------ -------------------------
Number Percent
of Shares of Total
--------- --------
<S> <C> <C>
Entities affiliated with 722,815(1) 8.4%
Brinson Partners, Inc.
209 South La Salle
Chicago, Illinois 60604
Entities affiliated with 621,745(2) 7.2%
GeoCapital Corporation
767 Fifth Avenue
New York, New York 10153
H.A. Schupf & Co., Inc. 613,565(3) 7.1%
101 East 52nd Street
New York, New York 10022
The TCW Group, Inc. 443,025(4) 5.1%
865 South Figueroa Street
Los Angles, California 90017
<FN>
_________________________
(1) The number of shares, together with information in this footnote, have been
derived from Amendment No. 1 to Schedule 13G completed as of February 13,
1995 by Brinson Partners, Inc. ("BPI"), an investment adviser, for filing
with the Securities and Exchange Commission ("SEC"). BPI is a wholly owned
subsidiary of Brinson Holdings, Inc. ("BHI"), a parent holding company; and
Brinson Trust Company ("BTC"), a bank, is a wholly-owned subsidiary of BPI.
BPI and BHI are deemed to beneficially own an aggregate of 722,815 shares
held of record by BPI and BTC. BTC has sole voting and dispositive power
with respect to 416,290 shares and BPI has sole voting and dispositive
power with respect to 306,525 shares at December 31, 1994.
(2) The number of shares in this table, together with information in this
footnote, have been derived from the schedule 13G completed as of February
9, 1995 by the subject company for filing with the SEC. GeoCapital
Corporation ("GCC") is deemed to be the beneficial owner of 523,745 shares
since it has the power to make investment decisions over such shares for
its clients; however, GCC does not have any voting power, nor any economic
interest in the securities of those clients. The clients are the actual
owners of the securities and have the right to receive and the power to
direct the receipt of dividends from, or the proceeds from the sale of,
such securities. No individual client has an interest that relates to more
than five (5) percent of the class.
Irwin Lieber and Barry K. Fingerhut, principal stockholders of GCC, own
directly 42,650 and 51,350 shares, respectively. Jeanne E. Flaherty, an
employee of GCC, owns 500 shares; Seth Lieber, an employee of GCC, owns
1,500 shares; and Jonathan Lieber, an employee of GCC, owns 2,000 shares.
In addition, by reason of their ownership interests in GCC, Mssrs. Lieber
and Fingerhut may also be deemed to be indirect beneficial owners of the
523,745 shares that GeoCapital Corporation is deemed to own beneficially.
21
<PAGE>
(3) The number of shares in this table, together with information in this
footnote, have been derived from Amendment No. 2 to Schedule 13G completed
as of January 5, 1995 by the subject company for filing with the SEC. H.A.
Schupf & Co., Inc., an investment adviser, has sole voting power with
respect to 50,000 shares and sole dispositive power with respect to all
613,565 shares. Its clients are the actual owners of 563,565 of the shares
and have the right to receive or the power to direct the receipt of
dividends from, or the proceeds from the sale of, such securities. No
individual client has an interest that relates to more than five (5)
percent of the class.
(4) The number of shares in this table, together with information in this
footnote, have been derived from the Schedule 13G completed as of January
30, 1995 by the subject company for filing with the SEC. The TCW Group,
Inc. ("TCW") is the parent holding company of two subsidiaries that own the
Company's securities: (1) Trust Company of the West, a bank, and (2) TCW
Asset Management Company, an investment adviser. TCW has sole voting and
dispositive power with respect to all 443,025 shares.
</TABLE>
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The Company believes that during fiscal year 1994, with the exception of the
following items, its officers (as defined in the rules under Section 16 of the
Exchange Act) and directors have complied with all Section 16(a) filing
requirements. Mr. Dean filed a total of two reports late in fiscal years 1993
and 1994, relating to a total of three transactions (one of which related to a
1993 rollover into the Company's Employee Stock Ownership Plan (an ERISA plan)
("ESOP") and the other two of which related to the simultaneous purchase and
gift of 30 shares, in the aggregate, of Company stock in 1994). Mssrs.
Forrester, Smith, and Woodward amended their 1993 Reports in 1995 to reflect
ESOP allocations to them, respectively, for fiscal year 1993 and for prior
fiscal years.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain directors of the Company and Bank and the entities with which they are
affiliated are customers of the Bank and have had banking transactions with the
Bank in the ordinary course of business. The Board of Directors of the Bank
adopted a policy during 1992 to prohibit new loans or the renewal of existing
loans to insiders after December 31, 1993. Term loans existing at December 31,
1992 were permitted to remain outstanding until scheduled maturity. The Company
believes that all extensions of credit included in such transactions were made
in compliance with applicable laws and on substantially the same terms,
including interest rates, collateral and repayment terms, as those prevailing at
the time for comparable transactions with other persons of similar
creditworthiness and, in the opinion of the Board of Directors of the Bank, did
not involve more than a normal risk of collectability or default or present any
other unfavorable features.
See also "COMPENSATION OF EXECUTIVE OFFICERS - Personnel and Compensation
Committee Interlocks and Insider Participation".
22
<PAGE>
PROPOSAL NO. 2
APPROVAL OF AMENDMENTS TO
THE SILICON VALLEY BANCSHARES 1989 STOCK OPTION PLAN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENTS TO THE OPTION PLAN
PROPOSED AMENDMENTS
The 1989 Silicon Valley Bancshares Stock Option Plan ("Option Plan") was amended
by the Board of Directors in October 1994, subject to approval by the Company's
shareholders, to modify the Option Plan's automatic stock grant program for
directors, for the purpose of: (i) deleting the two-year prohibition on resale
or transfer of automatic director stock grants made on or after the date of
such amendment, and (ii) issuing stock awards of 2,500 shares to each director
in recognition of 1994-1995 service on the Board, to be effective May 24, 1995,
the day after the Annual Meeting. In April 1995, the Board of Directors intends
to further amend the provisions of the Option Plan relating to director stock
grants to change the grant dates for the 1995 and 1996 awards from May 1 of each
such year to the day after the annual meeting of shareholders held in such year.
The above-described items are the proposed amendments to the Option Plan that
are being submitted to the shareholders for approval at the 1995 Annual Meeting.
PARTICIPATION IN THE OPTION PLAN
The grant of options, stock purchase rights and stock bonuses under the Option
Plan to employees, including the executive officers named in the Summary
Compensation Table (the "Named Officers"), is subject to the discretion of the
Company's Board of Directors or of the Stock Committee (to which Committee the
Board has delegated authority to administer the Option Plan) (the
"Administrator"). As of the date of this proxy statement, the only awards that
have been granted under the Option Plan are options and stock bonuses. There
has been no determination made by the Administrator with respect to future
discretionary awards to employees under the Option Plan. Accordingly, future
awards to employees are not determinable. Non-employee directors are only
eligible to participate in the automatic grant program under the Option Plan.
The automatic grant of shares to non-employee directors under the plan is non-
discretionary but is subject to the continued service as a director on the
automatic grant date. Accordingly, future awards to non-employee directors are
not determinable. The following table sets forth information with respect to
the grant of options during the last fiscal year:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
TABLE 4 - AMENDED PLAN BENEFITS TABLE
1989 STOCK OPTION PLAN
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
DOLLAR VALUE OF SHARES SUBJECT TO
NAME POSITION OPTIONS(1) OPTIONS GRANTED
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
John C. Dean President and Chief Executive Officer -- --
- -------------------------------------------------------------------------------------------------------------------------------
Allyn C. Woodward, Jr. Executive Vice President and Chief Operating Officer $135,000 10,000
- -------------------------------------------------------------------------------------------------------------------------------
A. John Busch Executive Vice President, Chief Credit Officer and $47,250 3,500
General Counsel
- -------------------------------------------------------------------------------------------------------------------------------
James F. Forrester Executive Vice President $202,500 15,000
- -------------------------------------------------------------------------------------------------------------------------------
Richard H. Harding Executive Vice President $47,250 3,500
- -------------------------------------------------------------------------------------------------------------------------------
All Current Executive $803,250 59,500
- -------------------------------------------------------------------------------------------------------------------------------
Officers as a Group
- -------------------------------------------------------------------------------------------------------------------------------
All Other Employees as a Group $2,075,625 153,750
- -------------------------------------------------------------------------------------------------------------------------------
All Outside Directors as a Group (2) -- --
- -------------------------------------------------------------------------------------------------------------------------------
<FN>
_________________________________
(1) Dollar value does not represent potential realizable value to the optionee,
but was computed by multiplying the number of shares by the closing market
price of the Company's Common Stock of $13.50 on December 30, 1994 as
quoted in the National Association of Securities Dealers Automated
Quotation/National Market System.
(2) Automatic stock grants to outside directors that would have been made on
April 28, 1994 were rescinded due to mutual mistake of fact.
</TABLE>
23
<PAGE>
The essential features of the Option Plan are outlined below. The description
below assumes that the amendments to the Option Plan are approved by the
shareholders.
GENERAL
The Board of Directors believes that the ability to grant equity-based awards is
an important factor in attracting and retaining skilled employees, directors and
consultants. The Board believes that such equity-based awards help to align the
interests of employees, directors and consultants with the interests of the
Company and shareholders of the Company.
ESSENTIAL FEATURES
The Option Plan provides for the grant of stock options, stock bonuses and stock
purchase rights to eligible participants. As of April 3, 1995, options
to purchase 1,665,059 shares of Common Stock had been granted under the Option
Plan, with a weighted average exercise price of $9.37 per share, of which
options to purchase 272,702 shares had been exercised and options to purchase
1,010,048 shares were outstanding and 193,782 shares were available for future
grant.
PURPOSE
The purposes of the Option Plan are to attract and retain the best available
personnel for positions of substantial responsibility, to provide additional
incentive to employees, directors and consultants of the Company and to promote
the success of the Company's business.
ADMINISTRATION
With respect to discretionary grants of options, stock bonus awards or stock
purchase rights to employees who are also officers or directors of the Company
subject to Section 16(b) of the Exchange Act, the Option Plan will be
administered by (i) the Board of Directors of the Company if the Board of
Directors may administer the Option Plan in compliance with Rule 16b-3
promulgated under the Exchange Act or any successor rule thereto ("Rule 16b-3")
with respect to a plan intended to qualify thereunder as a discretionary plan,
or (ii) the Stock Committee, in conjunction with the Personnel and Compensation
Committee (collectively, the "Committee") designated by the Boards of Directors
of the Company and the Bank to administer the Option Plan, which Committee will
be constituted in such a manner as to permit the Option Plan to comply with
Rule 16b-3 with respect to a plan intended to qualify thereunder as a
discretionary plan. With respect to grants of options, stock purchase rights or
stock bonus awards to employees or consultants who are neither officers nor
directors of the Company, the Option Plan will be administered by (i) the Board
of Directors, or (ii) the Committee. With respect to the annual automatic stock
awards to members of the Board of Directors, as described below, such grants
shall be automatic and not subject to the discretion of any person.
ELIGIBILITY
The Option Plan provides that discretionary awards may be granted to employees,
directors and consultants of the Company or any parent or majority-owned
subsidiary. Incentive stock options may be granted only to employees. Except
with respect to annual automatic stock bonus awards to members of the Board of
Directors, the Board or the Committee selects the recipients and determines the
number of shares to be subject to each award. In making such determination, the
duties and responsibilities of the recipient, the value of his or her services,
his or her present and potential contribution to the success of the Company, the
anticipated number of years of future service and other relevant factors are
taken into account. As of April 3, 1995, there are approximately 332 employees,
11 directors and 1 consultant eligible to participate in the Option Plan.
AUTOMATIC STOCK AWARDS TO DIRECTORS
The Option Plan, as amended, provides that members of the Board of Directors,
who are not also employees of the Company (or affiliates thereof) and who have
not been employees of the Company (or affiliates thereof) for the period
commencing three years prior to the date of any grants under this paragraph
("Outside Directors"), shall be
24
<PAGE>
automatically awarded 2,500 shares of the Company's Common Stock on (i) the day
after shareholder approval of the amendments to the Option Plan is obtained (May
24, 1995) (1994 Grant), (ii) the day after the annual meeting of shareholders
held in 1995 (May 24, 1995) (1995 Grant) and (iii) the day after the annual
meeting of shareholders held in 1996 (1996 Grant). Moreover, Outside 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 the Company's 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.
Director stock awards granted under the Option Plan, as amended, are not subject
to vesting or contractual transfer restrictions.
LIMITATIONS ON AWARDS
The Option Plan limits the discretion allowed to the Committee in granting
awards. This limitation is intended to preserve the Company's ability to deduct
for federal income tax purposes the compensation expense relating to awards
granted to certain executive officers under the Option Plan. Without this
provision in the Option Plan, the federal tax legislation enacted in August 1993
might limit the Company's ability to deduct such compensation expense.
The limitation provides that no employee may be granted in any one fiscal year
awards to receive more than 250,000 shares of Common Stock of the Company.
TERMS OF OPTIONS
The terms of options granted under the Option Plan are determined by the Board
or the Committee. Each option granted under the Option Plan is evidenced by a
written stock option agreement between the Company and the optionee and is
subject to the following additional terms and conditions:
(a) EXERCISE OF THE OPTION. Under forms of Option Agreements used with the
Option Plan, options typically vest as to one-quarter to one-third of the
shares after the first year of grant and at the rate of one-quarter to one-
third of the shares per year thereafter, as determined by the Board of
Directors or the Committee, although different vesting schedules may be
used.
An option granted under the Option Plan is exercised by giving written
notice of exercise to the Company, specifying the number of full shares of
Common Stock to be purchased and tendering payment of the purchase price to
the Company. Payment for shares issued upon exercise of an option may
consist of cash, check, promissory note, other shares of the Company's
Common Stock which have been held by the optionee for at least six months,
cashless exercise or any combination of such methods of payment, or such
other consideration and method of payment as is permitted under applicable
laws.
(b) EXERCISE PRICE. The per share exercise price of options granted under the
Option Plan is determined by the Board or the Committee and, in the case of
incentive stock options, may not be less than 100% of the fair market value
on the date of grant. However, in the case of options granted to an
optionee who owns more than 10% of the voting power or value of all classes
of stock of the Company, the per share exercise price must not be less than
110% of the fair market value on the date of grant.
(c) TERMINATION OF STATUS AS AN EMPLOYEE, CONSULTANT OR DIRECTOR. If the
optionee's employment or consulting relationship with the Company or status
as a Director is terminated for any reason (other than death or
disability), options are exercisable for three months (or such other period
of time not exceeding six months as is determined by the Board or the
Committee ) after such termination as to all or part of the shares as to
which the optionee was entitled to exercise at the date of such
termination.
25
<PAGE>
(d) DEATH OR DISABILITY OF OPTIONEE. Options are exercisable for no more than
12 months (or such shorter time as is determined by the Board, or the
Committee, with such determination in the case of an Incentive Stock Option
being made at the time of grant of the option) following termination
because of a permanent and total disability or within 12 months by the
employee's estate after his or her death.
(e) TERM AND TERMINATION OF OPTIONS. Options granted under the Option Plan
shall be for a term not to exceed ten years, as determined by the Board or
the Committee on the date of grant. No option may be exercised by any
person after the expiration of its term. In the case of an option granted
to an optionee who, immediately before the grant of such option, owns more
than 10% of the voting power of all classes of stock of the Company, the
term of the option may not be more than five years.
(f) OTHER PROVISIONS. The option agreement may contain such other terms,
provisions and conditions not inconsistent with the Option Plan as may be
determined by the Board or the Committee.
TERMS OF STOCK PURCHASE RIGHTS
The Option Plan permits the Company to grant stock purchase rights to purchase
Common Stock of the Company ("Stock Purchase Rights") either alone, in addition
to, or in tandem with other awards under the Option Plan and/or cash awards made
outside the Option Plan. Upon the granting of a Stock Purchase Right, the
offeree shall be advised in writing of the terms, conditions and restrictions
related to the offer, including the number of shares of Common Stock 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 60 days
from the date upon which the Administrator made the determination to grant the
Stock Purchase Right). The offer shall be accepted by execution of a restricted
stock purchase agreement between the Company and the offeree.
Unless the Administrator of the Silicon Valley Bancshares 1989 Stock Option Plan
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 or consulting relationship with the
Company for any reason (including death or permanent and total 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 such rate as the Administrator may determine.
TERMS OF STOCK BONUS AWARDS
The Option Plan also permits the granting of Stock Bonus Awards. Such awards
shall be based on such performance or employment-related factors as the
Administrator, in its discretion, shall determine. Stock Bonus Awards may vary
from participant to participant and group to group. Such awards shall be
granted for no cash consideration.
Stock Bonus Awards will be payable in Common Stock of the Company and may be
subject to forfeiture provisions (i.e., may be in the form of restricted stock).
NONTRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS
An option or right is not transferable by the recipient, other than by will or
the laws of descent and distribution, and is exercisable during the recipient's
lifetime only by the recipient. In the event of the recipient's death, options
or rights may be exercised by a person who acquires the right to exercise the
option or right by bequest or inheritance.
CHANGES IN CAPITALIZATION
In the event a change, such as a stock split or stock dividend payable in Common
Stock, is made in the Company's capitalization which results in an exchange of
Common Stock for a greater or lesser number of shares without receipt of
consideration by the Company, appropriate adjustment shall be made in the price
and number of shares subject to outstanding awards. Appropriate adjustment will
also be made in the number of shares of Common Stock which have been authorized
for issuance under the Option Plan but as to which no awards have yet been
granted or which have been returned to the Option Plan upon cancellation of an
award. Such adjustments shall be made by
26
<PAGE>
the Board of Directors, whose determination shall be final, binding and
conclusive, subject to any required action by the shareholders of the Company.
In the event of a "Change in Control" (defined below) recipients of outstanding
options and rights shall have the right to exercise, and shall be vested as to,
all outstanding options and rights as to all of the stock covered thereby,
including shares as to which the option or right would not otherwise be
exercisable or 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
three months (or such other period of time not exceeding six months as is
determined by the Board or Committee 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:
(1) the acquisition of fifty percent or more of the outstanding voting stock of
the Company or the Bank by any person or entity, with certain exceptions
for employee benefit plans of the Company or the Bank;
(2) the acquisition of twenty-five percent or more of the outstanding voting
stock of the Company or the Bank by any person or entity and a change in
the composition of the Board during the following 12 months such that those
persons serving as directors immediately prior to the share acquisition,
and those new directors elected by a vote of at least two-thirds of the
directors of the Company or the Bank, cease to make up at least sixty
percent of the directors of the Company or the Bank;
(3) a 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 immediately prior thereto continue to own at
least seventy-five percent of the outstanding voting stock of the Company
or the Bank; or
(4) the complete liquidation of the Company or the Bank, or disposition of all
or substantially all of the Company's or the Bank's assets.
AMENDMENT AND TERMINATION OF THE PLAN
The Board may amend or terminate the Option Plan from time to time in such
respects as the Board may deem advisable; provided that, to the extent necessary
to comply with Rule 16b-3 promulgated under Section 16 of the Exchange Act or
with Section 422 of the Internal Revenue Code (the "Code") (or any other
successor or applicable law or regulation), the Company shall obtain shareholder
approval of any Option Plan amendment in such a manner and to such a degree as
is required by the applicable law, rule or regulation. Any amendment or
termination of the Option Plan shall not affect awards already granted and such
awards shall remain in full force and effect as if the Option Plan had not
adversely been amended or terminated, unless mutually agreed otherwise between
the recipient and the Company, which agreement must be in writing and signed by
the recipient and the Company.
In any event, the Option Plan shall terminate in 1999. Any awards outstanding
under the Option Plan at the time of its termination shall remain outstanding
until they expire by their terms.
TAX INFORMATION
Stock Options. Options granted under the Option Plan may be either "incentive
stock options," as defined in Section 422 of the Code, or nonstatutory options.
INCENTIVE STOCK OPTIONS. An optionee who is granted an incentive stock option
will not recognize taxable income either at the time the option is granted or
upon its exercise, although the exercise may subject the optionee to the
alternative minimum tax. Upon the sale or exchange of the shares more than two
years after grant of the option and one year after exercising the option, any
gain or loss will be treated as long-term capital gain or loss. If these
holding periods are not satisfied, the optionee will recognize ordinary income
at the time of sale or exchange equal to the difference between the exercise
price and the lower of (i) the fair market value of the shares at the date of
the option exercise or (ii) the sale price of the shares. A different rule for
measuring ordinary income upon such a premature
27
<PAGE>
disposition may apply if the optionee is also an officer, director, or 10%
shareholder of the Company. The Company will be entitled to a deduction in the
same amount as the ordinary income recognized by the optionee. Any gain or loss
recognized on such a premature disposition of the shares in excess of the amount
treated as ordinary income will be characterized as long-term or short-term
capital gain or loss, depending on the holding period.
NONSTATUTORY STOCK OPTIONS. All other options which do not qualify as incentive
stock options are referred to as nonstatutory options. An optionee will not
recognize any taxable income at the time he is granted a nonstatutory option.
However, upon its exercise, the optionee will recognize taxable income generally
measured as the excess of the then fair market value of the shares purchased
over the purchase price. Any taxable income recognized in connection with an
option exercise by an optionee who is also an employee of the Company will be
subject to tax withholding by the Company. Upon resale of such shares by the
optionee, any difference between the sales price and the optionee's purchase
price, to the extent not recognized as taxable income as described above, will
be treated as long-term or short-term capital gain or loss, depending on the
holding period. The Company will be entitled to a tax deduction in the same
amount as the ordinary income recognized by the Optionee with respect to shares
acquired upon exercise of a nonstatutory option.
STOCK PURCHASE RIGHTS. Stock Purchase Rights will generally be taxed in the
same manner as nonstatutory options. However, restricted stock is usually
purchased upon exercise of a Stock Purchase Right. At the time of purchase,
restricted stock is subject to a "substantial risk of forfeiture" within the
meaning of Section 83 of the Code. As a result, the purchaser will not
recognize ordinary income at the time of purchase. Instead, the purchaser will
recognize ordinary income on the dates when the stock ceases to be subject to
substantial risk of forfeiture. The stock will generally cease to be subject to
a substantial risk of forfeiture when it is no longer subject to the Company's
right to repurchase the stock upon the purchaser's termination of employment
with the Company (i.e., as it "vests"). At such times, the purchaser will
recognize the ordinary income measured as the difference between the purchase
price and the fair market value of the stock on the date the stock is no longer
subject to a substantial risk of forfeiture. However, a purchaser may
accelerate to the date of purchase his or her recognition of ordinary income, if
any, and the beginning of any capital gain holding period by timely filing an
election pursuant to Section 83(b) of the Code. In such event, the ordinary
income recognized, if any, would be equal to the difference between the purchase
price and the fair market value of the stock on the date of purchase, and the
capital gain holding period would commence on the purchase date. The ordinary
income recognized by a purchaser who is an employee will be treated as wages and
will be subject to tax withholding by the Company out of the current
compensation of the purchaser. If such current compensation is insufficient to
pay the withholding tax, the purchaser will be required to make direct payment
to the Company for the tax liability. Generally, the Company will be entitled
to a tax deduction in the amount and at the time the purchaser recognizes
ordinary income.
Different rules may apply in the case of purchasers who are subject to Section
16 of the Securities Exchange Act of 1934, as amended.
STOCK BONUS AWARDS. A recipient who receives restricted stock pursuant to a
Stock Bonus Award will recognize ordinary income equal to the fair market value
of the stock at the time or times the restrictions lapse (unless a Code
Section 83(b) election is timely filed at the time of grant). Different rules
may apply if the recipient is subject to Section 16(b) of the Exchange Act.
Generally, the Company will be entitled to a tax deduction in the amount and at
the time the recipient recognizes ordinary income.
The foregoing is only a summary of the effect of federal income taxation upon
the grantee and the Company with respect to the grant and exercise of options,
and with respect to the grant of stock purchase rights and stock bonus awards,
under the Option Plan. It does not purport to be complete, and does not discuss
the tax consequences of the optionee's death or the income tax laws of any
municipality, state or foreign country in which an optionee may reside.
28
<PAGE>
VOTE REQUIRED
Approval of the amendments to the 1989 Stock Option Plan requires the
affirmative vote of a majority of the Votes Cast.
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The firm of KPMG Peat Marwick LLP, which was selected as the independent
auditors for the Company and the Bank in November 1994, has been selected by the
Audit Committee and approved by the Board of Directors of the Company to be its
independent auditors for the 1995 fiscal year. KPMG Peat Marwick LLP has no
interest, financial or otherwise, in the Company or the Bank.
Representatives from the firm of KPMG Peat Marwick LLP will be present at the
Annual Meeting of Shareholders and afforded the opportunity to make a statement
if they desire to do so, and will be available to respond to shareholders'
questions.
The Company's financial statements for fiscal year 1993 were audited by Deloitte
& Touche LLP. On November 1, 1994, the Audit Committee of the Board of
Directors of the Company (i) dismissed the firm of Deloitte & Touche LLP as
independent auditors for the Company and its subsidiaries and (ii) retained the
firm of KPMG Peat Marwick LLP as independent auditors for the Company and its
subsidiaries for the fiscal year ending December 31, 1994. None of the reports
by Deloitte & Touche LLP on the financial statements of the Company for the
years in the two-year period ended December 31, 1993, and the subsequent interim
period, contain any adverse opinions or disclaimers of opinion nor are they
qualified or modified as to uncertainty, audit scope, or accounting principles.
In connection with the audits of the Company's financial statements for each of
the years in the two-year period ended December 31, 1993, and in the subsequent
interim period, there were no disagreements with Deloitte & Touche LLP on any
matters of accounting principles or practices, financial statement disclosure,
or auditing scope and procedures, which, if not resolved to the satisfaction of
Deloitte & Touche LLP, would have caused Deloitte & Touche LLP to make reference
to the matter in their reports. At the Company's request, Deloitte & Touche LLP
provided a letter addressed to the Securities and Exchange Commission stating
that it agreed with the above statements.
SHAREHOLDER PROPOSALS--1996 ANNUAL MEETING
Shareholders are entitled to present proposals for action at a forthcoming
Annual Meeting of Shareholders if they comply with the requirements of
California corporate law, the proxy rules and the Company's Bylaws. Any
shareholder proposal intended to be presented at the 1996 Annual Meeting of
Shareholders of the Company must be received at the Company's San Jose office on
or before December 15, 1995 in order to be considered for possible inclusion in
the Company's Proxy Statement and form of proxy relating to such annual meeting.
1994 ANNUAL REPORT
Enclosed is a copy of the Company's 1994 Annual Report to Shareholders,
including financial statements for the year ended December 31, 1994.
Shareholders who wish to obtain, without charge, a copy of the Company's Annual
Report on Form 10-K for the year ended December 31, 1994 as filed with the
Securities and Exchange Commission should address a written request to
Shareholder Relations, Silicon Valley Bancshares, 2232 North First Street, San
Jose, California 95131.
29
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OTHER MATTERS
As of the date of this Proxy Statement, there are no other matters that
Management intends to present or has reason to believe others will present at
the Annual Meeting. If other matters properly come before the Annual Meeting,
those who act as Proxy Holders will vote in accordance with their best judgment.
THE BOARD OF DIRECTORS
San Jose, California A. Catherine Ngo
April 13, 1995 Corporate Secretary
30
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SILICON VALLEY BANCSHARES
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY FOR ANNUAL MEETING IF SHAREHOLDERS
TUESDAY, MAY 23, 1995
The undersigned appoints JOHN C. DEAN and A.CATHERINE NGO or either of
them, with full power of substitution for himself or herself, as the Proxy
Holder of the undersigned to vote and otherwise represent all of the shares
registered in the name of the undersigned at the Annual Meeting of Shareholders
of the Company to be held on Tuesday, May 23, 1995, at 4:00 p.m. at the
RENAISSANCE MEETING CENTER AT TECHMART, SILICON VALLEY ROOM, 5201 GREAT AMERICA
PARKWAY, SANTA CLARA, CALIFORNIA 95054 and any postponements or adjournments
thereof, with the same effect as if the undersigned were present and voting such
shares, on the following matters and in the following manner.
1. To elect directors to serve for the ensuing year and until their successors
are elected.
/ / FOR all nominees listed below, with / / WITHHOLD AUTHORITY to vote for
the discretionary authority to all nominees listed below.
cumulate votes, except votes
withheld
IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THAT EMPLOYEE'S NAME APPEARING IN THE LIST BELOW:
Gary K. Barr, James F. Burns, Jr., John C. Dean, Clarence J. Ferrari, Jr.,
Henry M. Gay, Daniel J. Kellehaer, James R. Porter, Michael Roster, Roger V.
Smith, and Ann R. Wells
2. To ratify and approve amendments to the Silicon Valley Bancshares 1989 Stock
Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
3. To ratify the appointments of KPMG Peat MARWICK LLP as the Company's
independent auditors.
/ / FOR / / AGAINST / / ABSTAIN
(CONTINUED ON OTHER SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
4. To vote or otherwise represent the shares on any other business which may
properly come before the meeting and any postponements or adjournments
thereof, according to the Proxy Holder's decision and in their discretion.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR
EACH OF THE ABOVE PERSONS AND PROPOSALS, AND FOR SUCH OTHER MATTERS AS MAY
COME BEFORE THE MEETING AND ANY POSTPONEMENTS OR ADJOURNMENTS THEREOF, AS THE
SAID PROXY HOLDERS DEEM ADVISABLE.
-----------------------------------
(Shareholder Signature)
-----------------------------------
(Name typed or printed)
Date signed ______________, 1995
I plan to attend the meeting,
/ / YES / / NO
Sign exactly as your name(s)
appears(s) on your stock
certificate. A corporation is
requested to sign its name by its
President or other duly authorized
officer, with the officer held
designated. Executors,
administrators, trustees, etc., are
requested to so indicate when
signing. If stock is registered in
two names, both should sign.
SHAREHOLDERS SHOULD MARK, SIGN AND DATE THIS PROXY PROMPTLY AND
RETURN IT IN THE ENCLOSED ENVELOPE.
<PAGE>
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.
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(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
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<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 percent of the fair
market value of the Shares subject thereto on the date the option is granted,
(ii) the purchase price
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<PAGE>
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:
(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
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<PAGE>
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.
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(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, 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
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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 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.
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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 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.
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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.
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