<PAGE>
As filed with the Securities and Exchange Commission on August 13, 1996
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
FORM 10-Q
(MARK ONE)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________ to ________.
Commission File Number: 33-41102
SILICON VALLEY BANCSHARES
(Exact name of registrant as specified in its charter)
California 94-2856336
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3003 Tasman Drive
Santa Clara, California 95054-1191
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 654-7282
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
At July 31, 1996, 9,217,351 shares of the registrant's common stock (no par
value) were outstanding.
================================================================================
This report contains a total of 26 pages.
1
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS 3
CONSOLIDATED INCOME STATEMENTS 4
CONSOLIDATED STATEMENTS OF CASH FLOWS 5
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 10
PART II - OTHER INFORMATION
----------------------------
ITEM 1. LEGAL PROCEEDINGS 24
ITEM 2. CHANGES IN SECURITIES 24
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 24
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 24
ITEM 5. OTHER INFORMATION 25
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 25
SIGNATURES 26
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SILICON VALLEY BANCSHARES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
(Dollars in thousands) (Unaudited)
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Cash and due from banks $ 90,323 $ 85,187
Federal funds sold and securities purchased under
agreement to resell 372,410 257,138
Investment securities, at fair value 445,263 321,309
Loans, net of unearned income 823,651 738,405
Allowance for loan losses (29,000) (29,700)
---------- ----------
Net loans 794,651 708,705
Premises and equipment 4,311 4,697
Other real estate owned 3,733 4,955
Accrued interest receivable and other assets 25,775 25,596
---------- ----------
Total assets $1,736,466 $1,407,587
========== ==========
Liabilities and Shareholders' Equity:
Liabilities:
Noninterest-bearing demand deposits $ 513,263 $ 451,318
Money market and NOW deposits 1,023,604 773,292
Time deposits 71,680 65,450
---------- ----------
Total deposits 1,608,547 1,290,060
Other liabilities 8,947 12,553
---------- ----------
Total liabilities 1,617,494 1,302,613
---------- ----------
Shareholders' Equity:
Preferred stock, no par value:
20,000,000 shares authorized;
none outstanding
Common stock, no par value:
30,000,000 shares authorized;
9,211,790 and 8,963,662 shares outstanding at
June 30, 1996 and December 31, 1995, respectively 64,048 59,357
Retained earnings 56,169 45,855
Net unrealized loss on available-for-sale investments (856) (198)
Unearned compensation (389) (40)
---------- ----------
Total shareholders' equity 118,972 104,974
---------- ----------
Total liabilities and shareholders' equity $1,736,466 $1,407,587
========== =========
</TABLE>
See notes to interim consolidated financial statements.
3
<PAGE>
SILICON VALLEY BANCSHARES AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
<TABLE>
<CAPTION>
For the three months ended For the six months ended
--------------------------- -------------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
(Dollars in thousands, except per share amounts) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income:
Loans $21,195 $19,999 $42,300 $40,178
Investment securities 5,137 2,367 9,416 4,721
Federal funds sold and securities
purchased under agreement to resell 3,687 1,936 6,508 3,411
------- ------- -------- --------
Total interest income 30,019 24,302 58,224 48,310
------- ------- -------- --------
Interest expense:
Deposits 9,153 5,936 17,085 11,779
------- ------- -------- --------
Total interest expense 9,153 5,936 17,085 11,779
------- ------- -------- --------
Net interest income 20,866 18,366 41,139 36,531
Provision for loan losses 2,065 1,406 3,588 2,761
------- ------- -------- --------
Net interest income after provision
for loan losses 18,801 16,960 37,551 33,770
------- ------- -------- --------
Noninterest income:
Disposition of client warrants 1,971 1,578 2,262 1,803
Letter of credit and foreign
exchange income 855 756 1,734 1,461
Deposit service charges 445 333 841 685
Investment gains (losses) - (348) 1 (770)
Other 283 162 549 280
------- ------- -------- --------
Total noninterest income 3,554 2,481 5,387 3,459
------- ------- -------- --------
Noninterest expense:
Compensation and benefits 7,557 6,767 15,345 13,857
Professional services 1,472 1,626 2,276 2,589
Equipment 939 675 1,592 1,205
Occupancy 774 715 1,624 1,647
Client services 173 44 203 257
FDIC deposit insurance 91 598 172 1,196
Data processing services 74 223 200 552
Cost of other real estate owned (124) 20 326 15
Corporate legal and litigation (221) 239 (67) 392
Other 2,225 1,508 4,077 2,773
------- ------- -------- --------
Total noninterest expense 12,960 12,415 25,748 24,483
------- ------- -------- --------
Income before income tax expense 9,395 7,026 17,190 12,746
Income tax expense 3,758 3,046 6,876 5,485
Net income $ 5,637 $ 3,980 $10,314 $ 7,261
======= ======= ======= =======
Net income per common and
common equivalent share $0.58 $0.44 $1.07 $0.81
======= ======= ======= =======
</TABLE>
See notes to interim consolidated financial statements.
4
<PAGE>
SILICON VALLEY BANCSHARES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the six months ended
------------------------
June 30, June 30,
1996 1995
(Dollars in thousands) (Unaudited) (Unaudited)
- ------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 10,314 $ 7,261
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 3,588 2,761
Net (gain) loss on sales of investment securities (1) 770
Depreciation and amortization 598 1,193
Net gain on sales of other real estate owned (367) (124)
Provision for other real estate owned 551 -
Increase (decrease) in unearned income 391 (485)
(Increase) decrease in accrued interest receivable (2,440) 956
Increase in accounts receivable (10) (10,450)
Increase (decrease) in accrued liabilities (3,686) 1,758
Other, net (809) (470)
--------- --------
Net cash provided by operating activities 8,129 3,170
--------- --------
Cash flows from investing activities:
Proceeds from maturities and paydowns of
investment securities 523,770 24,379
Proceeds from sales of investment securities 6,080 29,609
Purchases of investment securities (651,301) (32,333)
Net (increase) decrease in loans (91,331) 42,622
Proceeds from recoveries of charged off loans 1,406 2,113
Net proceeds from sales of other real estate owned 1,038 2,079
Purchases of premises and equipment (212) (3,323)
--------- --------
Net cash provided by (applied to) investing activities (210,550) 65,146
--------- --------
Cash flows from financing activities:
Net increase (decrease) in deposits 318,487 (4,753)
Proceeds from issuance of common stock,
net of issuance costs 4,342 4,335
--------- --------
Net cash provided by (applied to) financing activities 322,829 (418)
--------- --------
Net increase in cash and cash equivalents 120,408 67,898
Cash and cash equivalents at January 1, 342,325 289,849
--------- --------
Cash and cash equivalents at June 30, $ 462,733 $357,747
========= ========
Supplemental disclosures:
Interest paid $ 17,062 $ 11,816
Income taxes paid $ 6,641 $ 5,318
========= ========
</TABLE>
See notes to interim consolidated financial statements.
5
<PAGE>
SILICON VALLEY BANCSHARES AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Silicon Valley Bancshares (the
"Company") and its subsidiaries conform with generally accepted accounting
principles and prevailing practices within the banking industry. Certain
reclassifications have been made to the Company's 1995 consolidated financial
statements to conform to the 1996 presentations. Such reclassifications had no
effect on the results of operations or shareholders' equity. The following is a
summary of the significant accounting and reporting policies used in preparing
the interim consolidated financial statements.
Nature of Operations
- --------------------
The Company is a bank holding company whose principal subsidiary is Silicon
Valley Bank (the "Bank"), a California-chartered bank with headquarters in Santa
Clara, California. The Bank maintains regional banking offices in Northern and
Southern California, and additionally has loan offices in Colorado, Maryland,
Massachusetts, Oregon, Texas and Washington. The Bank serves emerging and
middle-market growth companies in specific targeted niches, and focuses on the
technology and life sciences industries, while identifying and capitalizing on
opportunities to serve other groups of clients with unique financial needs.
Substantially all of the assets, liabilities, and earnings of the Company relate
to its investment in the Bank.
Consolidation
- -------------
The interim consolidated financial statements include the accounts of the
Company and those of its wholly owned subsidiaries, the Bank and SVB Leasing
Company (inactive). The revenues, expenses, assets and liabilities of the
subsidiaries are included in the respective line items in the interim
consolidated financial statements after elimination of intercompany accounts and
transactions.
Interim Consolidated Financial Statements
- -----------------------------------------
In the opinion of Management, the interim consolidated financial statements
contain all adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the Company's consolidated financial position at
June 30, 1996, the results of its operations for the three and six month periods
ended June 30, 1996 and June 30, 1995, and the results of its cash flows for the
six month periods ended June 30, 1996 and June 30, 1995. The December 31, 1995
consolidated financial statements were derived from audited financial
statements, and certain information and footnote disclosures normally presented
in financial statements prepared in accordance with generally accepted
accounting principles have been omitted.
The interim consolidated financial statements should be read in conjunction with
the consolidated financial statements and footnotes thereto included in the
Company's 1995 Annual Report on Form 10-K. The results of operations for the
three and six month periods ended June 30, 1996 may not necessarily be
indicative of the Company's operating results for the full year.
6
<PAGE>
SILICON VALLEY BANCSHARES AND SUBSIDIARIES
------------------------------------------
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basis of Financial Statement Presentation
- -----------------------------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires Management to make estimates and judgments that
affect the reported amounts of assets and liabilities as of the balance sheet
date and the results of operations for the period. Actual results could differ
from those estimates. Material estimates that are particularly susceptible to
possible change in the near term relate to the determination of the allowance
for loan losses and the valuation of other real estate owned (OREO). An
estimate of possible changes or range of possible changes cannot be made.
Net Income Per Share Computation
- --------------------------------
Net income per common and common equivalent share is calculated using weighted
average shares outstanding, including the dilutive effect of stock options
outstanding during the period. Weighted average shares outstanding were
9,665,820 and 9,607,069 for the three and six month periods ended June 30, 1996
and 9,033,164 and 8,944,291 for the three and six month periods ended June 30,
1995.
Cash and Cash Equivalents
- -------------------------
Cash and cash equivalents as reported in the consolidated statements of cash
flows includes cash on hand, cash balances due from banks, federal funds sold
and securities purchased under agreement to resell.
Federal Funds Sold and Securities Purchased Under Agreement to Resell
- ---------------------------------------------------------------------
Federal funds sold and securities purchased under agreement to resell as
reported in the consolidated balance sheets includes interest-bearing deposits
in other financial institutions of $410,000 and $138,000 at June 30, 1996
and December 31, 1995, respectively.
Nonaccrual Loans
- ----------------
Loans are placed on nonaccrual status when they become 90 days past due as to
principal or interest payments (unless the principal and interest are well
secured and in the process of collection), when the Company has determined that
the timely collection of principal or interest is doubtful, or when the loans
otherwise become impaired under the provisions of Statement of Financial
Accounting Standards (SFAS) No. 114, "Accounting by Creditors for Impairment of
a Loan." When a loan is placed on nonaccrual status, the accrued interest is
reversed against interest income and the loan is accounted for on the cash or
cost recovery method thereafter until qualifying for return to accrual status.
Generally, a loan will be returned to accrual status when all delinquent
interest and principal becomes current in accordance with the terms of the loan
agreement and full collection of the principal appears probable.
7
<PAGE>
SILICON VALLEY BANCSHARES AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Accounting Pronouncements
- -----------------------------
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation." SFAS No. 123 establishes financial
accounting and reporting standards for stock-based compensation plans, including
employee stock purchase plans, stock options and restricted stock. SFAS No. 123
encourages all entities to adopt a fair value method of accounting for stock-
based compensation plans, whereby compensation cost is measured at the grant
date based on the fair value of the award and is realized as an expense over the
service or vesting period. However, SFAS No. 123 also allows an entity to
continue to measure compensation cost for these plans using the intrinsic value
method of accounting prescribed by Accounting Principles Board (APB) Opinion No.
25, "Accounting for Stock Issued to Employees," which is the method currently
being used by the Company. Under the intrinsic value method, compensation cost
is the excess, if any, of the quoted market price of the stock at the grant date
or other measurement date over the amount which must be paid to acquire the
stock.
The Company adopted SFAS No. 123 effective January 1, 1996, but will continue to
account for employee and director stock-based compensation plans under the
intrinsic value accounting methodology prescribed by APB Opinion No. 25. SFAS
No. 123 requires that stock-based compensation to other parties be accounted for
under the fair value method. The effect of adoption of this statement on the
interim consolidated financial position and results of operations of the Company
was not material.
2. LOANS
The detailed composition of loans is presented in the following table:
<TABLE>
<CAPTION>
June 30, December 31,
(Dollars in thousands) 1996 1995
- --------------------------- -------- ------------
<S> <C> <C>
Commercial $691,258 $622,488
Real estate term 58,715 56,845
Real estate construction 31,037 17,194
Consumer and other 42,641 41,878
- --------------------------- -------- --------
Total loans (1) $823,651 $738,405
=========================== ======== ========
</TABLE>
(1) Loans are presented net of unearned income of $4,204 and $3,813 at June 30,
1996 and December 31, 1995, respectively.
3. ALLOWANCE FOR LOAN LOSSES
The activity in the allowance for loan losses for the three and six month
periods ended June 30, 1996 and 1995 was as follows:
8
<PAGE>
SILICON VALLEY BANCSHARES AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
3. ALLOWANCE FOR LOAN LOSSES (CONTINUED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -----------------
(Dollars in thousands) 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Beginning balance $30,200 $21,500 $29,700 $20,000
Provision for loan losses 2,065 1,406 3,588 2,761
Loans charged off (4,056) (1,552) (5,695) (2,374)
Recoveries 791 1,146 1,407 2,113
------- ------- ------- -------
Balance at June 30, $29,000 $22,500 $29,000 $22,500
======= ======= ======= =======
</TABLE>
The aggregate recorded investment in loans for which impairment has been
realized in accordance with SFAS No. 114 totaled $23.5 million at June 30, 1996.
Allocations to the allowance for loan losses at June 30, 1996 related to these
loans were $7.9 million. Average impaired loans for the second quarter of 1996
were $25.7 million.
4. REGULATORY MATTERS
During 1993, the Company and the Bank consented to a formal supervisory order by
the Federal Reserve Bank of San Francisco and the Bank consented to a formal
supervisory order by the California State Banking Department. These orders
required, among other actions, the following: suspension of cash dividends;
restrictions on transactions between the Company and the Bank without prior
regulatory approval; development of a capital plan to ensure the Bank maintains
adequate capital levels subject to regulatory approval; development of plans to
improve the quality of the Bank's loan portfolio through collection or
improvement of the credits within specified time frames; changes to the Bank's
loan policies which require the Directors' Loan Committee to approve all loans
to any one borrower exceeding $3.0 million and requiring the Board of Directors
to become more actively involved in loan portfolio management and monitoring
activities; review of, and changes in, the Bank's loan policies to implement (i)
policies for controlling and monitoring credit concentrations, (ii) underwriting
standards for all loan products, and (iii) standards for credit analysis and
credit file documentation; development of an independent loan review function
and related loan review policies and procedures; development of Board of
Directors oversight programs to establish and maintain effective control and
supervision of Management and major Bank operations and activities; development
of a plan, including a written methodology, to maintain an adequate allowance
for loan losses, defined as a minimum of 2.0% of total loans; development of
business plans to establish guidelines for growth and ensure maintenance of
adequate capital levels; a review and evaluation of existing compensation
practices and development of officer compensation policies and procedures by the
Boards of Directors of the Company and the Bank; policies requiring that changes
in fees paid to directors as well as bonuses paid to executive officers first
receive regulatory approval; and development of a detailed internal audit plan
for approval by the Board of Directors of the Bank. The California State Banking
Department order further required the Bank to maintain a minimum tangible
equity-to-assets ratio of 6.5%. The Federal Reserve Bank removed its supervisory
order effective March 27, 1996 and the California State Banking Department
terminated its supervisory order effective April 9, 1996.
9
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Earnings Summary
- ----------------
The Company reported net income of $5.6 million, or $0.58 per share, for the
second quarter of 1996, compared with net income of $4.0 million, or $0.44 per
share, for the second quarter of 1995. Net income totaled $10.3 million, or
$1.07 per share, for the six months ended June 30, 1996, versus $7.3 million, or
$0.81 per share, for the respective 1995 period. The annualized return on
average assets (ROA) was 1.5% for both the second quarter of 1996 and 1995. The
annualized return on average equity (ROE) for the second quarter of 1996 was
19.6%, an increase from 18.4% in the 1995 second quarter. For the first six
months of 1996, ROA was 1.4% and ROE was 18.4% versus 1.4% and 17.4%,
respectively, for the comparable prior year period.
The increase in net income during the three and six month periods ended June 30,
1996, as compared with the prior year respective periods, resulted from growth
in net interest income and noninterest income, offset by increases in both the
provision for loan losses and noninterest expense. The major components of net
income as well as changes in these components are summarized in the following
table for the three and six month periods ended June 30, 1996 and 1995, and are
discussed in more detail below:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
(Dollars in thousands) 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net interest income $20,866 $18,366 $41,139 $36,531
Provision for loan losses 2,065 1,406 3,588 2,761
Noninterest income 3,554 2,481 5,387 3,459
Noninterest expense 12,960 12,415 25,748 24,483
------- ------- ------- -------
Income before income taxes 9,395 7,026 17,190 12,746
Income tax expense 3,758 3,046 6,876 5,485
------- ------- ------- -------
Net income $ 5,637 $ 3,980 $10,314 $ 7,261
======= ======= ======= =======
</TABLE>
Net Interest Income and Margin
- ------------------------------
Net interest income represents the difference between interest earned, primarily
on loans and investments, and interest paid on funding sources, primarily
deposits, and is the principal source of revenue for the Company. Net interest
margin is the amount of net interest income, on a fully taxable-equivalent
basis, expressed as a percentage of average interest-earning assets. The average
yield earned on interest-earning assets is the amount of taxable-equivalent
interest income expressed as a percentage of average interest-earning assets.
The average rate paid on funding sources expresses interest expense as a
percentage of average interest-earning assets.
The following tables set forth average assets, liabilities and shareholders'
equity, interest income and interest expense, average yields and rates, and the
composition of the Company's net interest margin for the three and six month
periods ended June 30, 1996 and 1995, respectively:
10
<PAGE>
AVERAGE BALANCES, RATES AND YIELDS
<TABLE>
<CAPTION>
For the three months ended June 30,
- ---------------------------------------------------------------------------------------------------------------
1996 1995
(Unaudited) (Unaudited)
Average Average
Average Yield/ Average Yield/
(Dollars in thousands) Balance Interest Rate Balance Interest Rate
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Federal funds sold and
securities purchased under
agreement to resell (1) $ 279,286 $ 3,687 5.3% $ 128,331 $ 1,936 6.1%
Investment securities:
Taxable 362,881 5,036 5.6 151,088 2,250 6.0
Non-taxable (2) 6,307 156 9.9 7,131 180 10.1
Loans:
Commercial 650,070 18,068 11.2 582,635 17,758 12.2
Real estate construction and term 75,503 2,185 11.6 64,925 1,691 10.4
Consumer and other 43,071 942 8.8 16,682 550 13.2
- ---------------------------------------- ---------- ---------- ------- -------- ------- ----
Total loans 768,644 21,195 11.1 664,242 19,999 12.1
- ---------------------------------------- ---------- ---------- ------- -------- ------- ----
Total interest-earning assets 1,417,118 30,074 8.5 950,792 24,365 10.3
- ---------------------------------------- ---------- ---------- ------- -------- ------- ----
Cash and due from banks 123,819 114,058
Allowance for loan losses (30,773) (22,511)
Other real estate owned 4,009 5,862
Other assets 27,004 20,296
- ---------------------------------------- ---------- ----------
Total assets $1,541,177 $1,068,497
======================================== ========== ==========
Funding sources:
Interest-bearing liabilities:
Money market, NOW and
savings deposits $ 897,408 8,489 3.8 $553,494 5,418 3.9
Time deposits 67,932 664 3.9 59,949 518 3.5
- ---------------------------------------- ---------- ---------- ------- ---------- ------- ----
Total interest-bearing liabilities 965,340 9,153 3.8 613,443 5,936 3.9
Portion of noninterest-bearing
funding sources 451,778 337,349
- ---------------------------------------- ---------- ----------
Total funding sources 1,417,118 9,153 2.6 950,792 5,936 2.5
- ---------------------------------------- ---------- ---------- ------- ---------- ------- ----
Noninterest-bearing funding sources:
Demand deposits 449,636 355,243
Other liabilities 10,463 13,220
Portion used to fund interest-earning
assets (451,778) (337,349)
Shareholders' equity 115,738 86,591
- ---------------------------------------- ---------- ----------
Total liabilities and shareholders'
equity $1,541,177 $1,068,497
======================================== ========== ==========
Net interest income and margin $ 20,921 5.9% $18,429 7.8%
======================================== ========== ======= ======= ====
Memorandum: Total deposits $1,414,976 $ 968,686
======================================== ========== ==========
</TABLE>
(1) Includes average interest-bearing deposits in other financial institutions
of $418 and $78 for the three months ended June 30, 1996 and 1995,
respectively.
(2) Interest income on non-taxable investments is presented on a fully taxable-
equivalent basis. The tax equivalent adjustments were $55 and $63 for the
three months ended June 30, 1996 and 1995, respectively.
11
<PAGE>
AVERAGE BALANCES, RATES AND YIELDS
<TABLE>
<CAPTION>
For the six months ended June 30,
--------------------------------------------------------------------------
1996 1995
(Unaudited) (Unaudited)
Average Average
Average Yield/ Average Yield/
(Dollars in thousands) Balance Interest Rate Balance Interest Rate
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Federal funds sold and
securities purchased under
agreement to resell (1) $ 244,294 $ 6,508 5.4% $ 116,346 $ 3,411 5.9%
Investment securities:
Taxable 330,977 9,214 5.6 152,470 4,482 5.9
Non-taxable (2) 6,218 311 10.1 7,257 367 10.2
Loans:
Commercial 628,884 35,998 11.5 598,406 35,716 12.0
Real estate construction and term 73,820 4,359 11.9 67,628 3,444 10.3
Consumer and other 43,097 1,943 9.1 17,433 1,018 11.8
- ---------------------------------------- ---------- ---------- ---- ---------- ------- ----
Total loans 745,801 42,300 11.4 683,467 40,178 11.9
- ---------------------------------------- ---------- ---------- ---- ---------- ------- ----
Total interest-earning assets 1,327,290 58,333 8.8 959,540 48,438 10.2
- ---------------------------------------- ---------- ---------- ---- ---------- ------- ----
Cash and due from banks 127,408 117,228
Allowance for loan losses (30,399) (22,040)
Other real estate owned 4,464 6,190
Other assets 27,998 19,831
- ---------------------------------------- ---------- ----------
Total assets $1,456,761 $1,080,749
======================================== ========== ==========
Funding sources:
Interest-bearing liabilities:
Money market, NOW and
savings deposits $ 831,365 15,800 3.8 $ 567,544 10,693 3.8
Time deposits 66,101 1,285 3.9 64,052 1,086 3.4
- ---------------------------------------- ---------- ---------- ---- ---------- ------- ----
Total interest-bearing liabilities 897,466 17,085 3.8 631,596 11,779 3.8
Portion of noninterest-bearing
funding sources 429,824 327,944
- ---------------------------------------- ---------- ----------
Total funding sources 1,327,290 17,085 2.6 959,540 11,779 2.5
- ---------------------------------------- ---------- ---------- ---- ---------- ------- ----
Noninterest-bearing funding sources:
Demand deposits 435,052 352,906
Other liabilities 11,280 12,213
Portion used to fund interest-earning
assets (429,824) (327,944)
Shareholders' equity 112,963 84,034
- ---------------------------------------- ---------- ----------
Total liabilities and shareholders'
equity $1,456,761 $1,080,749
======================================== ========== ==========
Net interest income and margin $ 41,248 6.3% $36,659 7.7%
======================================== ========== ==== ======= ====
Memorandum: Total deposits $1,332,518 $ 984,502
======================================== ========== ==========
</TABLE>
(1) Includes average interest-bearing deposits in other financial institutions
of $310 and $628 for the six months ended June 30, 1996 and 1995, respectively.
(2) Interest income on non-taxable investments is presented on a fully taxable-
equivalent basis. The tax equivalent adjustments were $109 and $128 for the
six months ended June 30, 1996 and 1995, respectively.
12
<PAGE>
Net interest income is affected by changes in the amount and mix of interest-
earnings assets and interest-bearing liabilities, referred to as "volume
change." Net interest income is also affected by changes in yields earned on
interest-earning assets and rates paid on interest-bearing liabilities, referred
to as "rate change." The following table sets forth changes in interest income
and interest expense for each major category of interest-earning assets and
interest-bearing liabilities. Changes which are the combined result of volume
and rate changes have been allocated to volume. Changes relating to investment
securities are presented on a fully taxable-equivalent basis using the federal
statutory rate of 35% in 1996 and 1995.
<TABLE>
<CAPTION>
1996 Versus 1995
-----------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ----------------
Increase (Decrease) Increase (Decrease)
Due to Change in Due to Change in
---------------- ----------------
(Dollars in thousands) Volume Rate Total Volume Rate Total
- --------------------------------------------- ------ -------- ------ ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Federal funds sold and
securities purchased under
agreement to resell $1,993 $ (242) $1,751 $ 3,409 $ (312) $3,097
Investment securities 2,967 (205) 2,762 5,013 (337) 4,676
Loans 2,879 (1,683) 1,196 3,535 (1,413) 2,122
- --------------------------------------------- ------ ------- ------ ------- ------- ------
Increase (decrease) in interest income 7,839 (2,130) 5,709 11,957 (2,062) 9,895
- --------------------------------------------- ------ ------- ------ ------- ------- ------
Interest expense:
Money market, NOW and
savings deposits 3,253 (182) 3,071 5,014 93 5,107
Time deposits 78 68 146 40 159 199
- --------------------------------------------- ------ ------- ------ ------- ------- ------
Increase (decrease) in interest expense 3,331 (114) 3,217 5,054 252 5,306
- --------------------------------------------- ------ ------- ------ ------- ------- ------
Increase (decrease) in net interest income $4,508 $(2,016) $2,492 $ 6,903 $(2,314) $4,589
============================================= ====== ======= ====== ======= ======= ======
</TABLE>
Net interest income, on a fully taxable-equivalent basis, totaled $20.9 million
for the second quarter of 1996, an increase of $2.5 million, or 13.5%, from the
$18.4 million total for the second quarter of 1995. The increase in net interest
income was the result of a $5.7 million, or 23.4%, increase in interest income,
offset by a $3.2 million, or 54.2%, increase in interest expense over the
comparable prior year period.
The $5.7 million increase in interest income for the second quarter of 1996, as
compared to the second quarter of 1995, was the result of a $7.8 million
favorable volume variance offset by a $2.1 million unfavorable rate variance.
The favorable volume variance resulted from a $466.3 million, or 49.0%, increase
in average interest-earning assets over the comparable prior year period. The
increase in average interest-earning assets resulted from growth in the
Company's deposits and was comprised of increases in loans, investment
securities, and liquid investments in federal funds sold and securities
purchased under agreement to resell. The growth in average loans, which were up
$104.4 million, or 15.7%, compared to the second quarter of 1995, primarily
resulted from an increase in commercial loans and personal lines of credit
offered to executives of clients. Average investment securities for the second
quarter of 1996 increased $211.0 million, or 133.3%, over the respective prior
year period, as a portion of the funds generated from the deposit growth were
primarily invested in notes issued by U.S. agencies as well as in commercial
paper. Average federal funds sold and securities purchased under agreement to
resell were up a combined $151.0 million, or 117.6%, over the comparable 1995
period.
13
<PAGE>
Interest income for the second quarter of 1996 decreased $2.1 million from the
comparable prior year period due to an unfavorable rate variance. The
unfavorable rate variance was the result of a decline in market interest rates
during the last half of 1995 and the first quarter of 1996. Lower yields on
loans in the 1996 second quarter accounted for $1.7 million of the total
unfavorable rate variance, as a substantial portion of the Company's loans are
prime-rate based. The remaining $0.4 million portion of the total unfavorable
rate variance was attributed to lower yields on federal funds sold and
securities purchased under agreement to resell, and investment securities.
The overall decrease in the yield on average interest-earning assets of 180
basis points for the second quarter of 1996, as compared to the second quarter
of 1995, was due to a combination of the decline in market interest rates and a
shift in the composition of average interest-earning assets towards lower-
yielding liquid investments in federal funds sold and securities purchased under
agreement to resell, and investment securities. This shift in the composition of
average interest-earning assets resulted from the liquidity generated by the
aforementioned growth in the Company's deposits, which exceeded the growth in
loans.
Total interest expense in the 1996 second quarter increased $3.2 million from
the 1995 second quarter. This increase was due to an unfavorable volume variance
of $3.3 million slightly offset by a $0.1 million favorable rate variance. The
unfavorable volume variance resulted from a $351.9 million, or 57.4%, increase
in average interest-bearing liabilities in the second quarter of 1996 as
compared with the second quarter of 1995. This increase was concentrated in
higher-rate money market deposits, and was attributable to market conditions
combined with the successful business development efforts of the Company.
Changes in the rates paid on average interest-bearing liabilities had a $0.1
million favorable impact on interest expense in the second quarter of 1996, as
the average rate paid on interest-bearing liabilities decreased 10 basis points
from the second quarter of 1995. This slight decrease resulted from a reduction
in the rates paid on interest-bearing liabilities due to the declining interest
rate environment during the last half of 1995 and the first quarter of 1996,
offset by a shift in the composition of average interest-bearing liabilities
towards the aforementioned higher-rate money market deposits.
Net interest income, on a fully taxable-equivalent basis, totaled $41.2 million
for the first six months of 1996, an increase of $4.6 million, or 12.5%, from
the $36.7 million total for the first six months of 1995. The increase in net
interest income was the result of a $9.9 million, or 20.4%, increase in interest
income for the first half of 1996, offset by a $5.3 million, or 45.0%, increase
in interest expense over the comparable prior year period.
The $9.9 million increase in interest income for the first half of 1996, as
compared to the first half of 1995, was the result of a $12.0 million favorable
volume variance offset by a $2.1 million unfavorable rate variance. The
favorable volume variance resulted from a $367.8 million, or 38.3%, increase in
average interest-earning assets over the comparable prior year period. As with
the 1996 second quarter, the increase in average interest-earning assets for the
first six months of 1996, compared with the first six months of 1995, was
comprised of increases in loans, investment securities, and liquid investments
in federal funds sold and securities purchased under agreement to resell, and
resulted from growth in the Company's deposits. The unfavorable rate variance
was attributable to the decline in market interest rates during the last half of
1995 and the first quarter of 1996.
14
<PAGE>
The overall decrease in the yield on average interest-earning assets of 140
basis points for the first six months of 1996, over the comparable period in
1995, was due to a combination of the decline in market interest rates and a
shift in the composition of average interest-earning assets towards lower-
yielding liquid investments in federal funds sold and securities purchased under
agreement to resell, and investment securities. This shift in the composition of
average interest-earning assets resulted from the liquidity generated by the
aforementioned growth in the Company's deposits, which exceeded the growth in
loans.
Total interest expense for the first half of 1996 increased $5.3 million from
the first half of 1995. This increase was due to unfavorable volume and rate
variances of $5.1 million and $0.3 million, respectively. The unfavorable volume
variance resulted from a $265.9 million, or 42.1%, increase in average interest-
bearing liabilities for the first six months of 1996 over the comparable prior
year period. This increase was concentrated in higher-rate money market
deposits, and was attributable to market conditions combined with the successful
business development efforts of the Company. Changes in the rates paid on
average interest-bearing liabilities had a $0.3 million unfavorable impact on
interest expense for the first half of 1996, as compared to the respective 1995
period. This slight increase in interest expense resulted from a shift in the
composition of interest-bearing liabilities towards the aforementioned higher-
rate money market deposits, and was offset by a reduction in the rates paid on
average interest-bearing liabilities due to the declining interest rate
environment during the last half of 1995 and the first quarter of 1996.
Provision For Loan Losses
- -------------------------
The provision for loan losses is based on Management's evaluation of the
adequacy of the existing allowance for loan losses in relation to total loans,
and on Management's continuous assessment of the inherent and identified risk
dynamics of the loan portfolio resulting from reviews of selected individual
loans and loan commitments.
The provision for loan losses totaled $2.1 million for the second quarter of
1996, a $0.7 million, or 46.9%, increase as compared to the $1.4 million
provision for the second quarter of 1995. The provision for loan losses
increased $0.8 million, or 30.0%, to $3.6 million for the first six months of
1996, versus $2.8 million for the comparable 1995 period. See "Financial
Condition - Credit Quality and the Allowance for Loan Losses" for additional
related discussion.
Noninterest Income
- ------------------
The following table summarizes the components of noninterest income for the
three and six month periods ended June 30, 1996 and 1995:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -----------------
(Dollars in thousands) 1996 1995 1996 1995
- -------------------------------------------- -------- ------- ------- ------
<S> <C> <C> <C> <C>
Disposition of client warrants $1,971 $1,578 $2,262 $1,803
Letter of credit and foreign exchange income 855 756 1,734 1,461
Deposit service charges 445 333 841 685
Investment gains (losses) - (348) 1 (770)
Other 283 162 549 280
- -------------------------------------------- -------- ------- ------- ------
Total noninterest income $3,554 $2,481 $5,387 $3,459
============================================ ======== ======= ======= ======
</TABLE>
15
<PAGE>
Total noninterest income for the three and six month periods ended June 30, 1996
was $3.6 million and $5.4 million, an increase of $1.1 million and $1.9 million,
respectively, from the $2.5 million and $3.5 million totals for the comparable
1995 periods. The increase in noninterest income during 1996 was primarily due
to an increase in income from the disposition of client warrants and a decrease
in losses incurred through sales of investment securities.
Income from the disposition of client warrants was $2.0 million in the second
quarter of 1996 and $2.3 million for the first six months of 1996 versus $1.6
million and $1.8 million for the respective 1995 periods. The Company has
historically obtained rights to acquire stock (in the form of warrants) in
certain nonpublic clients as part of negotiated credit facilities. The receipt
of warrants does not change the loan covenants or other collateral control
techniques employed by the Company to mitigate the risk of a loan becoming
nonperforming. Interest rates, loan fees and collateral requirements on loans
with warrants are similar to lending arrangements where warrants are not
obtained. The timing and amount of income from the disposition of client
warrants typically depends upon factors beyond the control of the Company,
including the general condition of the capital markets, and therefore cannot be
predicted with any degree of accuracy and is likely to vary materially from
period to period.
Letter of credit fees, foreign exchange fees and other trade finance income
increased to $0.9 million during the 1996 second quarter, and $1.7 million for
the first six months of 1996, compared to $0.8 million for the 1995 second
quarter and $1.5 million for the first six months of 1995. The growth in this
category of noninterest income reflects a concerted effort by Management to
expand the penetration of trade finance-related services among the Company's
client base.
Deposit service charges totaled $0.4 million and $0.8 million for the three and
six month periods ended June 30, 1996, respectively, versus $0.3 million and
$0.7 million for the comparable 1995 periods. Clients compensate the Company
for depository services either through earnings credits computed on their demand
deposit balances, or via explicit payments recognized as deposit service
charges. The increase during 1996 was primarily related to an increase in the
number of clients incurring deposit service charges.
The Company incurred no gains or losses on sales of investment securities in the
second quarter of 1996 and realized a nominal gain on sales of investment
securities during the first six months of 1996. The Company incurred $0.3
million and $0.8 million in losses through such sales during the 1995 second
quarter and the first six months of 1995, respectively. The securities sold
during both the first and second quarters of 1995 were primarily mortgage-backed
securities. All sales of investment securities were conducted as a normal
component of the Company's interest rate risk and liquidity management
activities.
Other noninterest income is comprised primarily of service-based fee income, and
increased to $0.3 million and $0.5 million for the 1996 second quarter and the
first six months of 1996, respectively, from $0.2 million and $0.3 million for
the comparable prior year periods. The increase during 1996 was primarily due to
increased examination fees on client accounts receivable.
16
<PAGE>
Noninterest Expense
- -------------------
Noninterest expense during the second quarter of 1996 totaled $13.0 million, a
$0.5 million, or 4.4%, increase from the $12.4 million incurred in the
comparable 1995 period. Noninterest expense was $25.7 million for the first six
months of 1996, an increase of $1.3 million, or 5.2%, over the $24.5 million
total for the comparable 1995 period. Management closely monitors the level of
noninterest expense using a variety of financial ratios, including the
efficiency ratio. The efficiency ratio is calculated by dividing the amount of
noninterest expense, excluding costs associated with other real estate owned, by
adjusted revenues, defined as the total of net interest income and noninterest
income, excluding income from the disposition of client warrants and gains or
losses incurred through sales of investment securities. This ratio reflects the
level of operating expense required to generate $1 of operating revenue. The
Company's efficiency ratio improved to 58.3% for the 1996 second quarter, down
from 63.2% for the second quarter of 1995. The Company's efficiency ratio for
the first six months of 1996 was 57.4%, versus 62.8% for the comparable 1995
period. The following table presents the detail of noninterest expense and the
incremental contribution of each line item to the Company's efficiency ratio:
<TABLE>
<CAPTION>
Three Months Ended June 30,
----------------------------------------------
1996 1995
---------------------- ---------------------
Percent of Percent of
Adjusted Adjusted
(Dollars in thousands) Amount Revenues Amount Revenues
- ---------------------------------- -------- ----------- ------- -----------
<S> <C> <C> <C> <C>
Compensation and benefits $ 7,557 33.7% $ 6,767 34.5%
Professional services 1,472 6.6 1,626 8.3
Equipment 939 4.2 675 3.4
Occupancy 774 3.4 715 3.6
Client services 173 0.8 44 0.2
FDIC deposit insurance 91 0.4 598 3.0
Data processing services 74 0.3 223 1.1
Corporate legal and litigation (221) (1.0) 239 1.2
Other 2,225 9.9 1,508 7.7
- ---------------------------------- ------- ---- ------- ----
Total excluding cost of other
real estate owned 13,084 58.3% 12,395 63.2%
Cost of other real estate owned (124) 20
- ---------------------------------- ------- -------
Total noninterest expense $12,960 $12,415
================================== ======= =======
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------------------------
1996 1995
---------------------- ---------------------
Percent of Percent of
Adjusted Adjusted
(Dollars in thousands) Amount Revenues Amount Revenues
- ---------------------------------- -------- ----------- ------- -----------
<S> <C> <C> <C> <C>
Compensation and benefits $15,345 34.7% $13,857 35.6%
Professional services 2,276 5.1 2,589 6.6
Equipment 1,592 3.6 1,205 3.1
Occupancy 1,624 3.7 1,647 4.2
Client services 203 0.5 257 0.7
Data processing services 200 0.5 552 1.4
FDIC deposit insurance 172 0.4 1,196 3.1
Corporate legal and litigation (67) (0.2) 392 0.1
Other 4,077 9.1 2,773 7.1
- ---------------------------------- ------- ---- ------- ----
Total excluding cost of other
real estate owned 25,422 57.4% 24,468 62.8%
Cost of other real estate owned 326 15
- ---------------------------------- ------- -------
Total noninterest expense $25,748 $24,483
================================== ======= =======
</TABLE>
Compensation and benefits expenses totaled $7.6 million in the second quarter of
1996, a $0.8 million, or 11.7%, increase over the $6.8 million incurred in the
second quarter of 1995. For the first six months of 1996, compensation and
benefits expenses totaled $15.3 million, an increase of $1.5 million, or 10.7%,
over the $13.9 million total for the comparable 1995 period. The increase
during 1996 in compensation and benefits expenses was largely the result of an
increase in the number of average full-time equivalent (FTE) staff employed by
the Company. Average FTE were 355 and 353 for the three and six month periods
ended June 30, 1996, compared to 331 and 327 for the respective prior year
periods. The increase in FTE was primarily due to the expansion of the Company's
lending staff in an effort to develop new markets, as well as in response to the
growing client base.
Professional services expenses totaled $1.5 million in the second quarter of
1996, a $0.2 million, or 9.5%, decrease from the $1.6 million incurred in the
second quarter of 1995. Professional services expenses decreased $0.3 million,
or 12.1%, to a total of $2.3 million for the first six months of 1996 versus
$2.6 million for the comparable 1995 period. The decrease during 1996 in
professional services expenses primarily relates to the timing of director's
fees.
Equipment expenses in the second quarter of 1996 totaled $0.9 million, an
increase of $0.3 million, or 39.1%, from the 1995 second quarter total of $0.7
million. Equipment expenses for the first half of 1996 totaled $1.6 million, an
increase of $0.4 million, or 32.1%, from the $1.2 million incurred in the
comparable prior year period. The increase during 1996 was related to
investments in computer equipment as well as other costs associated with the
Company's growth in personnel.
Occupancy expenses totaled $0.8 million for the three months ended June 30,
1996, an increase of $0.1 million, or 8.3%, from the $0.7 million incurred in
the second quarter of 1995. Total occupancy expenses were $1.6 million for the
first six months of both 1996 and 1995. The increase in occupancy expenses for
the second quarter of 1996, as compared to the second quarter of 1995, was
related to additional rent expense associated with several new loan offices
opened during the first half of 1996.
18
<PAGE>
Client services expenses include courier expenses and related costs of loan and
deposit operations. For the second quarter of 1996, client services expenses
totaled $0.2 million, a $0.1 million increase from the $0.1 million incurred in
the second quarter of 1995. Total client services expenses were $0.2 million for
the first six months of 1996, versus $0.3 million for the comparable prior year
period. The variances in these expenses from 1995 to 1996 were largely due to
the timing of reimbursements from clients.
FDIC deposit insurance expense totaled $0.1 million in the second quarter of
1996, a $0.5 million, or 84.8%, decrease from the 1995 second quarter expense of
$0.6 million. Total FDIC deposit insurance expense for the first half of 1996
amounted to $0.2 million, a $1.0 million, or 85.6%, decrease from the $1.2
million incurred in the first half of 1995. The decrease during 1996 was
attributable to reductions in the Bank's assessment rate during both the third
quarter of 1995 and the first quarter of 1996 due to the completion of the
recapitalization of the Bank Insurance Fund. The Bank's assessment rate was
further reduced to the statutory minimum annual assessment of $2,000, effective
July 1, 1996.
Data processing services expenses were $0.1 million and $0.2 million for the
three and six month periods ended June 30, 1996, respectively, a decrease of
$0.1 million, or 66.8%, and $0.4 million, or 63.8%, compared to the $0.2 million
and $0.6 million in expenses for the comparable 1995 periods. The decrease
during 1996 in data processing services expenses was due to the Company's
completion of a conversion to an in-house data processing center during late
1995.
Corporate legal and litigation expenses totaled $(0.2) million for the second
quarter of 1996, a $0.5 million decrease from the $0.2 million total for the
1995 second quarter. Total corporate legal and litigation expenses were $(0.1)
for the first six months of 1996, versus $0.4 million for the first six months
of 1995. The decrease in these expenses during 1996 was primarily the result of
the Company realizing a $0.4 million gain in the 1996 second quarter related to
the net proceeds received from a legal settlement.
Other noninterest expenses in the second quarter of 1996 totaled $2.2 million, a
$0.7 million, or 47.5%, increase from the $1.5 million incurred in the second
quarter of 1995. For the first half of 1996, other noninterest expenses
increased $1.3 million, or 47.0%, to a total of $4.1 million compared to $2.8
million for the first half of 1995. The increase during 1996 largely resulted
from increased advertising costs and business development efforts combined with
other miscellaneous expenses related to the Company's growth in personnel.
Net costs associated with other real estate owned (OREO) in the second quarter
of 1996 decreased $0.1 million from the comparable prior year period, largely
due to a gain realized on the sale of one property. For the first six months of
1996, the net costs associated with OREO increased $0.3 million from the first
half of 1995, primarily due to the write-down of one property owned by the
Company. The costs associated with OREO include: maintenance expenses; property
taxes; marketing costs; net operating expense or income associated with income-
producing properties; property write-downs; and gains or losses on the sales of
such properties.
Income Taxes
- ------------
19
<PAGE>
The Company's effective tax rate was 40.0% in the 1996 second quarter, compared
to 43.4% in the second quarter of the prior year. For the six months ended June
30, 1996, the Company's effective tax rate was 40.0%, versus 43.0% in the
comparable 1995 period. The reduction in the Company's 1996 effective tax rate,
as compared to 1995, was attributable to adjustments in the Company's estimate
of its tax liabilities.
FINANCIAL CONDITION
- -------------------
The Company's total assets were $1.7 billion at June 30, 1996 compared to $1.4
billion at December 31, 1995.
Federal Funds Sold and Securities Purchased Under Agreement to Resell
- ---------------------------------------------------------------------
Federal funds sold and securities purchased under agreement to resell totaled
$372.4 million at June 30, 1996, an increase of $115.3 million, or 44.8%,
compared to the $257.1 million balance at December 31, 1995. This increase was
the result of significant growth in the Company's deposits during the 1996
second quarter.
Investment Securities
- ---------------------
Investment securities totaled $445.3 million at June 30, 1996. This represented
a $124.0 million, or 38.6%, increase over the December 31, 1995 balance of
$321.3 million. The increase in investment securities was related to the
Company's liquidity and investment management activities, as a portion of the
growth in the Company's deposits during the 1996 second quarter was primarily
invested in notes issued by U.S. agencies as well as in commercial paper. These
investments were the result of Management's decision to further diversify the
Company's short-term investments as well as lengthen the average remaining life
of the investment portfolio in an effort to obtain the higher yields available
due to the recent steepening of the yield curve.
Loans
- -----
Total loans, net of unearned income, at June 30, 1996 were $823.7 million, a
$85.2 million, or 11.5%, increase compared to the $738.4 million balance
outstanding at December 31, 1995. The increase in loans from the 1995 year-end
total was primarily concentrated in the commercial loan portfolio, and can be
attributed to the Company's successful business development efforts.
Credit Quality and the Allowance for Loan Losses
- ------------------------------------------------
Lending money involves an inherent risk of nonpayment. Through the
administration of loan policies and monitoring of the portfolio, Management
seeks to reduce such risks. The allowance for loan losses is an estimate to
provide a financial buffer for losses, both identified and unidentified, in the
loan portfolio.
Management regularly reviews and monitors the loan portfolio to determine the
risk profile of each credit, and to identify credits whose risk profiles have
changed. This review includes, but is not limited to, such factors as payment
status, the financial condition of the borrower, borrower compliance with loan
covenants, underlying collateral values, potential loan concentrations, and
general economic conditions. Potential problem credits are identified and,
based upon known information, action plans are developed.
20
<PAGE>
The allowance for loan losses was $29.0 million at June 30, 1996, a decrease of
$0.7 million, or 2.4%, compared to the $29.7 million balance at December 31,
1995. This decrease was due to net charge-offs of $4.3 million for the first
six months of 1996, offset by $3.6 million in additional provisions to the
allowance for loan losses. Gross charge-offs for the first six months of 1996
were $5.7 million, and primarily related to two commercial credits.
In general, Management believes, based on currently known information, that the
allowance for loan losses is adequate as of June 30, 1996. However, future
changes in circumstances, economic conditions or other factors could cause
Management to increase or decrease the allowance for loan losses as deemed
necessary.
Nonperforming assets consist of loans that are past due 90 days or more but
still accruing interest, loans on nonaccrual status, and OREO. The table below
sets forth certain relationships between nonperforming loans, nonperforming
assets and the allowance for loan losses:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
(Dollars in thousands) (Unaudited)
- ---------------------------------------------------- ----------- ------------
<S> <C> <C>
Nonperforming assets:
Loans past due 90 days or more $ 88 $ 906
Nonaccrual loans 23,532 27,867
- ---------------------------------------------------- ------- -------
Total nonperforming loans 23,620 28,773
OREO 3,733 4,955
- ---------------------------------------------------- ------- -------
Total nonperforming assets $27,353 $33,728
==================================================== ======= =======
Nonperforming loans as a percent of total loans 2.9% 3.9%
OREO as a percent of total assets 0.2% 0.4%
Nonperforming assets as a percent of total assets 1.6% 2.4%
Allowance for loan losses: $29,000 $29,700
As a percent of total loans 3.5% 4.0%
As a percent of nonaccrual loans 123.2% 106.6%
As a percent of nonperforming loans 122.8% 103.2%
</TABLE>
Nonperforming loans were $23.6 million, or 2.9% of total loans, at June 30,
1996. This was down from the total of $28.8 million, or 3.9% of total loans, at
the prior year-end. Nonperforming loans at June 30, 1996 included two credits
totaling $10.5 million, one of which, in excess of $6.0 million, was fully
collected in July 1996. Management believes the remaining credit is adequately
covered with collateral and specific reserves.
Despite the July 1996 payoff of the one nonperforming loan in excess of $6.0
million, Management cannot give assurances that the level of nonperforming loans
at the end of the third quarter of 1996 will be below the level as of June 30,
1996, given the potential for additional nonperforming loans. Management has
identified four loans with principal amounts aggregating approximately $8.7
million, including one loan in excess of $7.0 million, that, on the basis of
information known by Management as of June 30, 1996, were judged to have a
higher than normal risk of becoming nonperforming. The Company is not aware of
any other loans at June
21
<PAGE>
30, 1996 where known information about possible problems of the borrower casts
serious doubts about the ability of the borrower to comply with the loan
repayment terms.
OREO totaled $3.7 million at June 30, 1996, a decrease of $1.2 million, or
24.7%, from the $5.0 million balance at December 31, 1995. This decrease
primarily resulted from the previously mentioned write-down of one property
owned by the Company and sales of two properties during the first six months of
1996.
Deposits
- --------
Total deposits were $1.6 billion at June 30, 1996, an increase of $318.5
million, or 24.7%, from the prior year-end total of $1.3 billion. The majority
of this increase was in interest-bearing deposits, which increased $256.5
million, or 30.6%, to $1.1 billion at June 30, 1996 from an $838.7 million
balance at December 31, 1995. This increase was largely concentrated in higher-
rate money market deposits and resulted from market conditions combined with
successful business development efforts by the Company. Noninterest-bearing
demand deposits were $513.3 million at June 30, 1996, representing a $61.9
million, or 13.7%, increase from the $451.3 million balance at December 31,
1995.
LIQUIDITY
- ---------
Management regularly reviews general economic and financial conditions, both
external and internal, and determines whether the positions taken with respect
to liquidity and interest rate sensitivity are appropriate. The objectives of
liquidity management are to provide funds, at an acceptable cost, to meet loan
demand and depositors' needs, and to service other liabilities as they come due.
The Company assesses the likelihood of projected funding requirements by
reviewing historical funding patterns, current and forecasted economic
conditions and individual client funding needs. One measure Management uses to
assess the Company's liquidity is the level of liquid assets relative to total
deposits. Liquid assets include cash and due from banks, federal funds sold,
securities purchased under agreement to resell, and investment securities
maturing within one year. At June 30, 1996, the Company's liquid assets as a
percentage of deposits were 39.1% compared to 41.0% at December 31, 1995. This
decrease resulted primarily from the aforementioned lengthening of the average
remaining life of the investment securities portfolio during the first half of
1996.
22
<PAGE>
CAPITAL RESOURCES
- -----------------
Management seeks to maintain adequate capital to support anticipated asset
growth and credit risks, and to ensure that the Company and the Bank are in
compliance with all regulatory capital guidelines. The primary source of new
capital for the Company has been the retention of earnings. Aside from current
earnings, an additional source of new capital for the Company has been proceeds
from the issuance of common stock under the Company's employee benefit plans,
including the Company's 1983 and 1989 stock option plans, the employee stock
ownership plan, and the employee stock purchase plan.
Shareholders' equity was $119.0 million at June 30, 1996, an increase of $14.0
million, or 13.3%, from the $105.0 million balance at December 31, 1995. This
increase resulted from net income of $10.3 million and capital generated through
the Company's employee benefit plans of $4.3 million in the first six months of
1996, slightly offset by a $0.7 million increase in the net unrealized loss on
available-for-sale investments.
The Company and the Bank are subject to capital adequacy guidelines issued by
the Federal Reserve Board. Under these guidelines, the minimum total risk-based
capital requirement is 10.0% of risk-weighted assets and certain off-balance
sheet items for a "well capitalized" depository institution. At least 6.0% of
the 10.0% total risk-based capital ratio must consist of Tier 1 capital, defined
as tangible common equity, and the remainder may consist of subordinated debt,
cumulative preferred stock, and a limited amount of the allowance for loan
losses.
The Federal Reserve Board has established minimum capital leverage ratio
guidelines for state member banks. The ratio is determined using Tier 1 capital
divided by quarterly average total assets. The guidelines require a minimum of
5.0% for a "well capitalized" depository institution.
The Company's risk-based capital ratios were in excess of regulatory guidelines
for a "well-capitalized" depository institution as of June 30, 1996 and December
31, 1995. Capital ratios for the Company are set forth below:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- ------------
<S> <C> <C>
Total risk-based capital ratio 11.6% 11.9%
Tier 1 risk-based capital ratio 10.3% 10.6%
Tier 1 leverage ratio 7.8% 8.0%
=============================== ===== =====
</TABLE>
The decrease in all of the Company's capital ratios from December 31, 1995 to
June 30, 1996 is attributable to the growth in the Company's assets during the
first six months of 1996, partially offset by the aforementioned growth in the
Company's capital.
23
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
There were no legal proceedings requiring disclosure pursuant to this item
pending at June 30, 1996, or at the date of this report.
ITEM 2 - CHANGES IN SECURITIES
None.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders was held on April 18, 1996. Each of the
persons named in the Proxy Statement as a nominee for director was elected; an
amendment to the Silicon Valley Bancshares 1989 Stock Option Plan was approved;
an amendment to the Company's Bylaws to change the authorized range of Directors
was approved; and the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors was ratified. The following are the voting results on each
of these matters:
<TABLE>
<CAPTION>
Election of Directors In Favor Withheld
- --------------------- --------- --------
<S> <C> <C> <C>
Gary K. Barr 7,421,155 92,238
James F. Burns, Jr. 7,468,815 44,578
John C. Dean 7,450,251 63,142
David M. deWilde 7,443,186 70,207
Clarence J. Ferrari, Jr., Esq. 7,468,615 44,778
Henry M. Gay 7,443,186 70,207
Daniel J. Kelleher 7,447,104 66,289
James R. Porter 7,468,793 44,600
Michael Roster, Esq. 7,468,815 44,578
Ann R. Wells 7,418,503 94,890
Other Matters In Favor Opposed Abstained
- ------------- --------- ------- ---------
Amendment to the Silicon Valley
Bancshares 1989 Stock Option Plan 6,920,422 542,788 50,184
Amendment to the Company's Bylaws
to change the authorized range of
Directors 7,379,610 92,799 40,985
Ratification of the appointment of KPMG
Peat Marwick LLP as the Company's
independent auditors for 1996 7,465,320 92,799 40,985
</TABLE>
24
<PAGE>
ITEM 5 - OTHER INFORMATION
None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
---------
3.2 Bylaws of the Company, as amended
10.28 Amendment and Restatement of the Silicon Valley Bancshares 1989
Stock Option Plan
10.29 Silicon Valley Bank Money Purchase Pension Plan
10.30 Amendment and Restatement of the Silicon Valley Bank Money
Purchase Pension Plan
10.31 Amendment and Restatement of the Silicon Valley Bank 401(k) and
Employee Stock Ownership Plan
27 Financial Data Schedule
(b) Reports on Form 8-K:
--------------------
No reports on Form 8-K were filed by the Company during the quarter
ended June 30, 1996.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SILICON VALLEY BANCSHARES
Date: August 13, 1996 (s) Christopher T. Lutes
------------------------
Christopher T. Lutes
Senior Vice President and Controller
(Principal Accounting Officer)
26
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
SILICON VALLEY BANCSHARES
Amendment and Restatement Effective as of the Date of
-----------------------------------------------------
Obtaining Shareholder Approval on April 18, 1996
------------------------------------------------
ARTICLE I
Offices
Section 1.1. Principal Executive Office. The principal executive
--------------------------
office of this corporation (the "Corporation") is hereby fixed and located at
3000 Lakeside Drive, Santa Clara, California. The Board of Directors (the
"Board") is hereby granted full power and authority to change the principal
executive office from one location to another. Any such change shall be noted in
the Bylaws by the Secretary, opposite this Section, or this Section may be
amended to state the new location.
Section 1.2. Other Offices. Other branch offices or places of business
-------------
may at any time be established by the Board at any place or places deemed
appropriate.
ARTICLE II
Meetings of Shareholders
Section 2.1. Place of Meetings. All annual or other meetings of
-----------------
shareholders shall be held at the principal executive office of the Corporation,
or at any other place which may be designated either by the Board or by the
written consent of all persons entitled to vote thereat given either before or
after the meeting and filed with the Secretary of the Corporation.
Section 2.2. Annual Meetings.
---------------
(a) Time. The Annual Meeting of shareholders shall be held each year
----
on a date and at a time designated by the Board. The date so designated shall be
within fifteen months after the last Annual Meeting.
(b) Business to be transacted. At each Annual Meeting, directors shall
-------------------------
be elected, reports of the affairs of the Corporation shall be considered and
any other business may be transacted which is within the powers of the
shareholders.
(c) Notice. Written notice of each Annual Meeting shall be given to
------
each shareholder entitled to vote, either personally or by first class mail or
other means of written communication, charges prepaid, addressed to such
shareholder at such shareholder's address appearing on the books of the
Corporation, or given by the shareholder to the Corporation for the purpose of
notice, or if no such address appears or is given, at the place where the
principal executive office of the Corporation is located or by publication at
least once in a newspaper of general circulation in the county in which
<PAGE>
the principal executive office is located. If any notice or report addressed to
the shareholder at the address of such shareholder appearing on the books of the
Corporation is returned to the Corporation by the United States Postal Service
marked to indicate that the United States Postal Service is unable to deliver
the notice or report to the shareholder at such address, all future notices or
reports shall be deemed to have been duly given without further mailing if the
same shall be available for the shareholder upon written demand of the
shareholder at the principal executive office of the Corporation for a period of
one year from the date of the giving of the notice or report to all other
shareholders. If a shareholder gives no address, notice shall be deemed to have
been given to the shareholder if sent by mail or other means of written
communication addressed to the place where the principal executive office of the
Corporation is located, or if published at least once in some newspaper of
general circulation in the county in which the principal executive office is
located.
All notices shall be given to each shareholder entitled thereto not
less than ten (10) days nor more than sixty (60) days before each Annual
Meeting. Any such notice shall be deemed to have been given at the time when
delivered personally or deposited in the mail or sent by other means of written
communication. An affidavit of mailing of any such notice in accordance with the
foregoing provisions, executed by the Secretary, Assistant Secretary or any
transfer agent of the Corporation shall be prima facie evidence of the giving of
the notice. Such notices shall specify:
(i) the place, the date and the hour of each meeting;
(ii) those matters which the Board, at the time of the mailing
of the notice, intends to present for action by the shareholders;
(iii) if directors are to be elected, the names of nominees
intended at the time of the notice to be presented by the Board for election;
(iv) the general nature of a proposal, if any, to take action
with respect to approval of: (a) a contract or other transaction with an
interested director, (b) amendment of the Articles of Incorporation, (c) a
reorganization of the Corporation as defined in Section 181 of the California
General Corporation Law, (d) a voluntary dissolution of the Corporation, or (e)
a distribution in dissolution other than in accordance with the rights of
outstanding preferred shares, if any; and
(v) such other matters, if any, as may be required by law.
Section 2.3. Special Meetings. Special meetings of the shareholders,
----------------
for the purpose of taking any action permitted by the shareholders under the
California General Corporation Law and the Articles of Incorporation of the
Corporation, may be called at any time by the Chairman of the Board or the
President, or by the Board, or by one or more shareholders holding not less than
ten percent (10%) of the votes entitled to be cast at the meeting. Upon request
in writing that a special meeting of shareholders be called for any purpose,
directed to the Chairman of the Board, President, Vice President or Secretary by
any person (other than the Board) entitled to call a special meeting of
shareholders, the officer forthwith shall cause notice to be given to
shareholders entitled to vote that a meeting will be held at a time requested by
the person or persons calling the meeting, not less than thirty-five (35) nor
more than sixty (60) days after receipt of the request. Except in special cases
where other express provision is made by statute, notice of special meetings
shall be given in the same manner as for annual meetings of
<PAGE>
shareholders. In addition to the matters required by items (i), and if
applicable, (ii) and (iii) of the preceding Section, notice of any special
meeting shall specify the general nature of the business to be transacted, and
no other business may be transacted at such meeting.
Section 2.4. Quorum. The presence in person or by proxy of the persons
------
entitled to vote a majority of the voting shares at any meeting shall constitute
a quorum for the transaction of business. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough shareholders to
leave less than a quorum, if any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
Section 2.5. Adjourned Meetings and Notice Thereof. Any shareholders'
-------------------------------------
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the vote of a majority of the shares, the holders of which
are either present in person or represented by proxy thereat, but in the absence
of a quorum no other business may be transacted at such meeting, except as
provided in Section 2.4 above.
When any shareholders' meeting, either annual or special, is adjourned
for forty-five (45) days or more, or if after adjournment a new record date is
fixed for the adjourned meeting, notice of the adjourned meeting shall be given
as in the case of an original meeting. Except as provided above, it shall not be
necessary to give any notice of the time and place of the adjourned meeting or
of the business to be transacted thereat, other than by announcement of the time
and place thereof at the meeting at which such adjournment is taken.
Section 2.6. Voting. Unless a record date for voting purposes be fixed
------
as provided in Section 5.1 of these Bylaws, then, subject to the provisions of
Sections 702 through 704 of the California Corporations Code (relating to voting
of shares held by a fiduciary, in the name of a corporation or in joint
ownership), only persons in whose names shares entitled to vote stand on the
stock records of the Corporation at the close of business on the business day
next preceding the day on which notice of the meeting is given or if such notice
is waived, at the close of business on the business day next preceding the day
on which the meeting of shareholders is held, shall be entitled to vote at such
meeting, and such day shall be the record date for such meeting. Such vote may
be oral or by ballot; provided, however, that all elections for directors must
be by ballot upon demand made by a shareholder at any election and before the
voting begins. If a quorum is present, except with respect to election of
directors, the affirmative vote of the majority of the shares represented at the
meeting and entitled to vote on any matter (which shares voting affirmatively
also constitute at least a majority of the required quorum) shall be the act of
the shareholders, unless the vote of a greater number or voting by classes is
required by the California General Corporation Law or the Articles of
Incorporation. Subject to the requirements of the next sentence, every
shareholder entitled to vote at any election for directors shall have the right
to cumulate such shareholder's votes and give one candidate a number of votes
equal to the number of directors to be elected, multiplied by the number of
votes to which such shareholder's shares are entitled, or to distribute his or
her votes on the same principal among as many candidates as the shareholder
shall think fit. No shareholder shall be entitled to cumulate votes unless the
name of the candidate or candidates for whom the votes would be cast has been
placed in nomination prior to the voting and at least one shareholder has given
notice at the meeting, prior to the voting, of the shareholder's intention to
cumulate his or
<PAGE>
her votes. The candidates receiving the highest number of affirmative votes of
shares entitled to be voted for them, up to the number of directors to be
elected, shall be elected. Votes against the directors and votes withheld shall
have no legal effect.
Section 2.7. Validation of Defectively Called or Noticed Meetings. The
----------------------------------------------------
transactions of any meeting of shareholders, either annual or special, however
called and noticed, and wherever held, shall be as valid as though had at a
meeting duly held after regular call and notice, if a quorum be present either
in person or by proxy, and if, either before or after the meeting, each of the
persons entitled to vote, not present in person or by proxy signs a waiver of
notice or a consent to the holding of the meeting, or an approval of the minutes
thereof. The waiver of notice or consent need not specify either the business
to be transacted or the purpose of any annual or special meeting of
shareholders, except that if action is taken or proposed to be taken for
approval of any of those matters specified in Section 2.2(c)(iv) of these
Bylaws, the waiver of notice or consent shall state the general nature of the
proposal. All such waivers, consents or approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of that meeting, except when the person objects, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened, and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters not included in the notice
of the meeting if that objection is expressly made at the meeting.
Section 2.8. Action Without Meeting.
----------------------
(a) Election of Directors. Directors may be elected without a meeting
---------------------
by a consent in writing, setting forth the action so taken, signed by all of the
persons who would be entitled to vote for the election of directors, provided
that, without notice, except as hereinafter set forth, a director may be elected
at any time to fill a vacancy (other than one created by removal) not filled by
the directors, by the written consent of persons holding a majority of the
outstanding shares entitled to vote for the election of directors.
(b) Other Action. Any other action which, under any provision of the
------------
California General Corporation Law, may be taken at a meeting of the
shareholders, may be taken without a meeting, and without prior notice except as
hereinafter set forth, if a consent in writing, setting forth the action so
taken, is signed by the holders of outstanding shares having not less than
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Unless the consents of all shareholders entitled to vote have been
solicited in writing:
(i) Notice of any proposed shareholder approval of (a) a
contract or other transaction with an interested director, (b) indemnification
of an agent of the Corporation as authorized by Section 3.17 of these Bylaws,
(c) a reorganization of the Corporation as defined in Section 181 of the
California General Corporation Law, or (d) a distribution in dissolution other
than in accordance with the rights of outstanding preferred shares, if any,
without a meeting by less than unanimous written consent, shall be given at
least ten (10) days before the consummation of the action authorized by such
approval; and
<PAGE>
(ii) Prompt notice shall be given at the taking of any other
corporate action approved by shareholders without a meeting by less than
unanimous written consent, to those shareholders entitled to vote who have not
consented in writing. Such notices shall be given as provided in Section 2.2(c)
of these Bylaws.
Unless, as provided in Section 5.1 of these Bylaws, the Board has
fixed a record date for the determination of shareholders entitled to notice of
and to give such written consent, the record date for such determination shall
be the day on which the first written consent is given. All such written
consents shall be filed with the Secretary of the Corporation.
Any shareholder giving a written consent, or the shareholder's
proxyholders, or a transferee of the shares, or a personal representative of the
shareholder, or their respective proxyholders, may revoke the consent by a
writing received by the Corporation prior to the time that written consents by
the number of shares required to authorize the proposed action have been filed
with the Secretary of the Corporation, but may not do so thereafter. Such
revocation is effective upon its receipt by the Secretary of the Corporation.
Section 2.9. Proxies. Every person entitled to vote or execute
-------
consents shall have the right to do so either in person or by one or more agents
authorized by a written proxy. A proxy may be in the form of a written
authorization signed or an electronic transmission authorized by a shareholder
or the shareholder's agent. A proxy may be transmitted by an oral telephonic
transmission if it is submitted with information from which it may be determined
that the proxy was authorized by the shareholder or the shareholder's agent.
Any proxy duly executed is not revoked and continues in full force and effect
until (i) an instrument revoking it or a duly executed proxy bearing a later
date is filed with the Secretary of the Corporation prior to the vote pursuant
thereto, (ii) the person executing the proxy attends the meeting and votes in
person, or (iii) written notice of the death or incapacity of the maker of such
proxy is received by the Corporation before the vote pursuant thereto is
counted; provided, that no such proxy shall be valid after the expiration of
eleven (11) months from the date of its execution, unless the person executing
it specifies therein the length of time for which said proxy is to continue in
force.
Section 2.10. Inspectors of Election. In advance of any meeting of
----------------------
shareholders the Board may appoint inspectors of election to act at the meeting
and any adjournment thereof. If inspectors of election are not so appointed, or
if any persons so appointed fail to appear or refuse to act, the Chairman of any
meeting of shareholders may, and on the request of any shareholder or a
shareholder's proxy shall, appoint inspectors of election (or persons to replace
those who so fail or refuse) at the meeting. The number of inspectors shall be
either one or three. If appointed at a meeting on the request of one or more
shareholders or proxies, the majority of shares represented in person or by
proxy shall determine whether one or three inspectors are to be appointed.
The duties of the inspectors shall be as prescribed in Section 707 of
the California General Corporation Law and shall include: (i) determining the
number of shares outstanding and the voting power of each, the shares
represented at the meeting, the existence of a quorum, the authenticity,
validity and effect of proxies; (ii) receiving votes, ballots or consents; (iii)
hearing and determining all challenges and questions in any way arising in
connection with the right to vote; (iv) counting and tabulating all votes
<PAGE>
or consents; (v) determining when the polls shall close; (vi) determining the
result; and (vii) such other acts as may be proper to conduct the election or
vote with fairness to all shareholders. In the determination of the validity
and effect of proxies, the dates contained on the forms of proxy shall
presumptively determine the order of execution on the proxies, regardless of
postmark dates on the envelopes in which they are mailed.
The inspectors of election shall perform their duties impartially, in
good faith, to the best of their ability and as expeditiously as is practical.
If there are three inspectors of election, the decision, act or certificate of a
majority is effective in all respects as the decision, act or certificate of
all. Any report or certificate made by the inspectors of election is prima facie
evidence of the facts stated therein.
Section 2.11. Nomination of Directors. Nominations for election of
-----------------------
members of the Board may be made by the Board or by any shareholder of any
outstanding class of capital stock of the Corporation entitled to vote for the
election of directors. Notice of intention to make any nominations (other than
for persons named in the notice of the meeting at which such nomination is to be
made) shall be made in writing and shall be delivered or mailed to the Secretary
of the Corporation by the later of: the close of business twenty-one (21) days
prior to any meeting of shareholders called for election of directors, or ten
(10) days after the date of mailing notice of the meeting to shareholders. Such
notification shall contain the following information to the extent known to the
notifying shareholder: (i) the name and address of each proposed nominee; (ii)
the principal occupation of each proposed nominee; (iii) the number of shares of
capital stock of the Corporation owned by each proposed nominee; (iv) the name
and residence address of the notifying shareholder; (v) the number of shares of
capital stock of the Corporation owned by the notifying shareholder; and (vi)
with the written consent of the proposed nominee, a copy of which shall be
furnished with the notification, whether the proposed nominee has ever been
convicted of or pleaded nolo contendere to any criminal offense involving
dishonesty or breach of trust, filed a petition in bankruptcy or been adjudged
bankrupt. The notice shall be signed by the nominating shareholder and by the
nominee. Nominations not made in accordance herewith shall be disregarded by
the Chairman of the meeting, and upon the Chairman's instructions, the
inspectors of election shall disregard all votes cast for each such nominee.
The restrictions set forth in this paragraph shall not apply to nomination of a
person to replace a proposed nominee who has died or otherwise become
incapacitated to serve as a director between the last day for giving notice
hereunder and the date of election of directors if the procedure called for in
this paragraph was followed with respect to the nomination of the proposed
nominee.
A copy of the preceding paragraph shall be set forth in the notice to
shareholders of any meeting at which directors are to be elected.
ARTICLE III
Directors
Section 3.1. Powers. Subject to limitation of the Articles of
------
Incorporation and of the California General Corporation Law as to action to be
authorized or approved by the shareholders, and subject to the duties of
directors as prescribed by the Bylaws, and subject to the rules and regulations
as may be promulgated from time to time by applicable regulatory authorities,
all corporate powers shall be exercised by or under
<PAGE>
the authority of, and the business and affairs of the Corporation shall be
controlled by, the Board.
Section 3.2 - Number and Qualification of Directors.
-------------------------------------
The authorized number of directors of the Corporation shall not be
less than eight (8) nor more than fifteen (15) until changed by amendment of the
Articles of Incorporation or by a bylaw amending this Section 3.2 duly adopted
by the vote or written consent of holders of a majority of the outstanding
shares entitled to vote, provided that a proposal to reduce the authorized
minimum number of directors below five cannot be adopted. The exact number of
directors shall be fixed from time to time, within the limits specified in this
Section 3.2: (i) by a resolution duly adopted by the Board; (ii) by a Bylaw or
amendment thereof duly adopted by the vote of a majority of the outstanding
shares entitled to vote; or (iii) by approval of the shareholders (as defined in
Section 153 of the California General Corporation Law). No amendment may change
the stated maximum number of authorized directors to a number greater than two
times the stated minimum number of directors minus one.
Subject to the foregoing provisions for changing the number of
directors, the number of directors of this Corporation has been fixed at ten
(10).
Section 3.3. Election and Term of Office. The directors shall be
---------------------------
elected at each annual meeting of shareholders, but if any such annual meeting
is not held or the directors are not elected thereat, the directors may be
elected at any special meeting of shareholders held for that purpose or by
written consent in accordance with Section 2.8 of these Bylaws. All directors
shall hold office until their respective successors are elected, subject to the
California General Corporation Law and the provisions of these Bylaws with
respect to vacancies on the Board.
Section 3.4 [Reserved].
----------
Section 3.5. Removal of Directors. The entire Board or any
--------------------
individual director may be removed from office by a vote of shareholders holding
a majority of the outstanding shares entitled to vote at an election of
directors. A material breach of the Corporation's Code of Ethics or a
director's failure to attend at least seventy-five percent (75%) of the Board
meetings held during the director's term of office may constitute grounds for
removal. However, unless the entire Board is removed, no individual director
may be removed when the votes cast against removal, or not consenting in writing
to such removal, would be sufficient to elect such director if voted
cumulatively at an election at which the same total number of votes were cast
(or, if such action is taken by written consent, all shares entitled to vote
were voted) and the entire number of directors authorized at the time of the
director's most recent election were then being elected.
Section 3.6. Vacancies. A vacancy in the Board shall be deemed to
---------
exist (i) in case of the death, resignation or removal of any director, (ii) if
a director has been declared of unsound mind by order of court or convicted of a
felony, (iii) if the authorized number of directors be increased, or (iv) if the
shareholders fail, at any annual or special meeting of shareholders at which any
director or directors are elected, to elect the full authorized number of
directors to be voted for at that meeting.
<PAGE>
Vacancies in the Board, except for a vacancy created by the removal of
a director, may be filled by a majority of the remaining directors, though less
than a quorum or by a sole remaining director, and each director so elected
shall hold office until his or her successor is elected at an annual or a
special meting of the shareholders. A vacancy in the Board created by the
removal of a director may only be filled by the vote of a majority of the shares
entitled to vote represented at a duly held meeting at which a quorum is
present, or by the written consent of the holders of all of the outstanding
shares.
The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors. Any such election by
written consent (except to fill a vacancy created by removal) shall require the
consent of holders of a majority of the outstanding shares entitled to vote.
Any director may resign effective upon giving written notice to the
Chairman of the Board, the President, the Secretary or the Board of the
Corporation, unless the notice specifies a later time for the effectiveness of
such resignation. If the Board accepts the resignation of a director tendered
to take effect at a future time, the Board or the shareholders shall have the
power to elect a successor to take office when the resignation is to become
effective.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of his or her term of
office.
Section 3.7. Frequency and Place of Meeting. The Board shall hold a
------------------------------
meeting at least once each calendar quarter. Regular meetings of the Board
shall be held at any place and time which has been designated from time to time
by resolution of the Board or by written consent of all members of the Board.
In the absence of such designation, regular meetings shall be held at the
principal executive office of the Corporation. Special meetings of the Board
may be held either at a place so designated or at the principal executive
office.
Section 3.8. Organizational Meeting. Immediately following each
----------------------
annual meeting of shareholders, the Board shall hold a regular meeting at the
place of the annual meeting or at such other place as shall be fixed by the
Board, for the purpose of organization, election of officers and the transaction
of other business. Call and notice of such meetings are hereby dispensed with.
Section 3.9. Other Regular Meetings. Other regular meetings of the
----------------------
Board shall be held at any place and time which has been designated from time to
time by resolution of the Board or by written consent of all members of the
Board. Notice of all such regular meetings of the Board is hereby dispensed
with.
Section 3.10. Special Meetings. Special meetings of the Board for
----------------
any purpose or purposes may be called at any time by the Chairman of the Board,
the President or by any two directors.
Special meetings shall be held upon four days' notice by mail or other
form of written communication, or 24 hours notice received personally, by
telephone or by facsimile or comparable means of communication. Written notice
of the time and place of special meetings shall be addressed to the director at
the director's address as it is
<PAGE>
shown upon the records of the Corporation or, if it is not so shown on such
records or is not readily ascertainable, at the place at which the meetings of
the directors are regularly held.
Any notice shall state the date, place and hour of the meeting and may
state the general nature of the business to be transacted and that other
business may be transacted at the meeting.
Section 3.11. Action Without Meeting. Any action by the Board may be
----------------------
taken without a meeting if all members of the Board shall individually or
collectively consent in writing to the action. The written consent or consents
shall be filed with the minutes of the proceedings of the Board and shall have
the same force and effect as a unanimous vote of the directors.
Section 3.12. Action at a Meeting, Quorum and Required Vote.
---------------------------------------------
Presence of a majority of the authorized number of directors at a meeting of the
Board constitutes a quorum for the transaction of business, except as
hereinafter provided. Members of the Board may participate in a meeting through
use of conference telephone or similar communications equipment, so long as all
members participating in such meeting can hear one another. (Participation in a
meeting as permitted in the preceding sentence constitutes presence in person at
the meeting.) Every act or decision done or made by a majority of the directors
present at a meeting duly held at which a quorum is present shall be regarded as
the act of the Board, unless a greater number, or the same number after
disqualifying one or more directors from voting, is required by law, by the
Articles of Incorporation or by these Bylaws. A meeting at which a quorum is
initially present may continue to transact business notwithstanding the
withdrawal of a director or directors, provided that any action taken is
approved by at least a majority of the required quorum for the meeting.
Section 3.13. Validation of Defectively Called or Noticed Meetings.
----------------------------------------------------
The transactions of any meeting of the Board, however called and noticed or
wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum is present and if, either before or after
the meeting, each of the directors not present or who, though present, has prior
to the meeting or at its commencement, protested the lack of proper notice: (i)
signs a written waiver of notice or a consent to holding such meeting or an
approval of the minutes thereof; or (ii) waives notice and withdraws his or her
objection. All such waivers, consents or approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
Section 3.14. Adjournment. A majority of the directors present at
-----------
any directors' meeting, either regular or special, may adjourn to another time
and place.
Section 3.15. Notice of Adjournment. If the meeting is adjourned for
---------------------
more than 24 hours, notice of any adjournment to another time or place shall be
given prior to the time of the adjourned meeting to the directors who were not
present at the time of adjournment. Otherwise notice of the time and place of
holding an adjourned meeting need not be given to absent directors if the time
and place be fixed at the meeting adjourned.
Section 3.16. Fees and Compensation. Directors and members of
---------------------
committees may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined by resolution of the
Board.
<PAGE>
Section 3.17. Indemnification of Agents of the Corporation; Purchase
------------------------------------------------------
of Liability Insurance.
- ----------------------
(a) For the purposes of this Section: "agent" means any person who is
or was a director, officer, employee or other agent of this Corporation, or is
or was serving at the request of this Corporation as a director, officer,
employee or agent of another foreign or domestic corporation, partnership, joint
venture, trust or other enterprise or was a director, officer, employee or agent
of a foreign or domestic Corporation which was a predecessor corporation of this
Corporation or of another enterprise at the request of such predecessor
Corporation; "proceeding" means any threatened, pending or completed action or
proceeding, whether civil, criminal, administrative or investigative; and
"expenses" includes, without limitation, attorneys' fees and any expenses of
establishing a right to indemnification under subdivision (d) or subdivision
(e)(4) of this Section.
(b) This Corporation shall indemnify any person who was or is a party,
or is threatened to be made a party, to any proceeding (other than an action by
or in the right of this Corporation) by reason of the fact that such person is
or was an agent of this Corporation, against expenses, judgments, fines,
settlements and other amounts actually and reasonably incurred in connection
with the proceeding if the person acted in good faith and in a manner the person
reasonably believed to be in the best interests of this Corporation and, in the
case of a criminal proceeding, had no reasonable cause to believe the conduct of
the person was unlawful. The termination of any proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent shall
not, of itself, create a presumption that the person did not act in good faith
and in a manner which the person reasonably believed to be in the best interests
of this Corporation or that the person had reasonable cause to believe that the
person's conduct was unlawful.
(c) This Corporation shall indemnify any person who was or is a party,
or is threatened to be made a party, to any threatened, pending or completed
action by or in the right of this Corporation to procure a judgment in its favor
by reason of the fact that the person is or was an agent of this Corporation,
against expenses actually and reasonably incurred by the person in connection
with the defense or settlement of the action if the person acted in good faith,
in a manner the person believed to be in the best interests of this Corporation
and its shareholders. No indemnification shall be made under this subdivision
(c):
(1) In respect to any claim, issue or matter as to which the
person shall have been adjudged to be liable to this Corporation and its
shareholders, in the performance of the person's duty to this Corporation,
unless and only to the extent that the court in which the proceeding is or was
pending shall determine upon application that, in view of all the circumstances
of this case, the person is fairly and reasonably entitled to indemnity for the
expenses which the court shall determine.
(2) Of amounts paid in settling or otherwise disposing of a
pending action, without court approval.
(3) Of expenses incurred in defending a pending action which is
settled or otherwise disposed of without court approval.
(d) To the extent that an agent of this Corporation has been
successful on the merits in defense of any proceedings referred to in
subdivision (b) or (c) or in
<PAGE>
defense of any claim, issue or matter therein, the agent shall be indemnified
against expenses actually and reasonably incurred by the agent in connection
therewith.
(e) Except as provided in subdivision (d), any indemnification under
this Section shall be made by this Corporation only if authorized in the
specific case, upon a determination that indemnification of that agent is proper
in the circumstances because the agent has met the applicable standard of
conduct set forth in subdivision (b) or (c), by any of the following:
(1) A majority vote of a quorum consisting of directors who are
not parties to such proceeding.
(2) If such a quorum of directors is not obtainable, by
independent legal counsel in a written opinion.
(3) Approval of the shareholders, with the shares owned by the
person to be indemnified not being entitled to vote thereon.
(4) The court in which the proceeding is or was pending upon
application made by the Corporation or the agent or the attorney or other person
rendering services in connection with the defense, whether or not the
application by the agent, attorney or other person is opposed by the
Corporation.
(f) Expenses incurred in defending any proceeding may be advanced by
this Corporation prior to the final disposition of the proceeding upon receipt
of a written undertaking by or on behalf of the agent to repay such amount if it
shall be determined ultimately that the agent is not entitled to be indemnified
as authorized in this Section.
(g) The indemnification provided by this Section shall not be deemed
exclusive of any additional rights to indemnification that are authorized in the
Articles of Incorporation. Nothing in this Section shall affect any right to
indemnification to which persons other than the directors and officers may be
entitled by contract or otherwise.
(h) No indemnification or advance shall be made under this Section,
except as provided in subdivision (d) or subdivision (e)(4) of this Section, in
any circumstance where it appears:
(1) That it would be inconsistent with a provision of the
Articles of Incorporation, the Bylaws, a resolution of the shareholders or an
agreement in effect at the time of the accrual of the alleged cause of action
asserted in the proceeding in which the expenses were incurred or other amounts
were paid, which prohibits or otherwise limits indemnification.
(2) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
(i) Upon a determination by the Board, this Corporation may purchase
and maintain insurance on behalf of any agent of the Corporation against any
liability asserted against or incurred by the agent in such capacity or arising
out of the agent's status as such whether or not this Corporation would have the
power to indemnify the agent against such liability under the provisions of this
Section.
<PAGE>
(j) This Section does not apply to any proceeding against any trustee,
investment manager or other fiduciary of an employee benefit plan in that
person's capacity as such, even though the person may also be an agent, as
defined in subdivision (a) of this Section, of the Corporation. The Corporation
shall have power to indemnify such a trustee, investment manager or other
fiduciary to the extent permitted by subdivision (f) of Section 207 of the
California General Corporation Law.
Section 3.18. Committees. The Board may, by resolution or committee
----------
charter adopted by a majority of the authorized number of directors, designate
one or more committees, each committee consisting of two or more directors, to
serve at the pleasure of the Board. These committees may include, without
limitation, an Executive Committee, an Audit Committee, a Stock Committee and
any such other committees as the Board may deem appropriate. Any such
committee, to the extent provided in the resolution of the Board or committee
charter, may exercise those powers and responsibilities so designated, except
that no committee shall be authorized to take action with respect to:
(i) The approval of any action for which shareholder approval
or approval of the outstanding shares is required.
(ii) The filling of vacancies on the Board or in any committee.
(iii) The amendment or repeal of Bylaws or the adoption of new
Bylaws.
(iv) The amendment or repeal of any resolution of the Board
which by its express terms is not so amendable or repealable.
(v) The appointment of other committees of the Board or the
members thereof.
(vi) A distribution, except at a rate, in a periodic amount or
within a price range set forth in the Articles of Incorporation or as determined
by the Board.
ARTICLE IV
Officers
Section 4.1. Officers. The Officers of the Corporation shall be a
--------
Chief Executive Officer, President, Secretary, Chief Financial Officer and, at
the discretion of the Board, such other officers as may be deemed necessary
("Officers"). Any two or more Officer positions, except those of the President
and Secretary, may be held by the same person. In appropriate circumstances, an
Officer of the Corporation may be excluded by resolution of the Board or by a
provision of the Bylaws from participation, other than in the capacity of a
director if applicable, in major policymaking functions of the Corporation.
Section 4.2. Election. Except as otherwise provided in these Bylaws,
--------
the Officers of the Corporation shall be chosen by the Board, and each Officer
shall be employed at will, unless employed for a determinate period of time
pursuant to a written
<PAGE>
employment agreement approved by the Board, and shall have such authority and
perform such duties as are provided in the Bylaws or as the Board may, from time
to time, determine.
Section 4.3. Subordinate Officers. The Corporation may have such
--------------------
subordinate officers as the business of the Corporation may require
("Subordinate Officers"), including one or more Vice Presidents, a Cashier, one
or more Assistant Cashiers, Operations Officers and Managers. Subordinate
Officers may be chosen by the Board, the Chief Executive Officer or the
President, and such Officers and Subordinate Officers upon whom authority is
conferred by the Board, the Chief Executive Officer or the President
("Authorized Officers"). Subordinate Officers shall be employed at will, unless
employed for a determinate period of time pursuant to a written employment
agreement approved by the Board, and shall have such authority and perform such
duties as are provided in the Bylaws or as the Board, Chief Executive Officers,
President or Authorized Officers may, from time to time, determine.
Section 4.4. Removal and Resignation. Any Officer may be removed,
-----------------------
either with or without cause, by the Board, subject, in each case, to the
rights, if any, of an Officer under any contract or employment. Any Subordinate
Officer may be removed, with or without cause, by the Board, Chief Executive
Officer, President or Authorized Officer, subject to such rights, if any, of a
Subordinate Officer under a written employment agreement.
Any Officer or Subordinate Officer may resign at any time by giving
written notice to the Board or to the President, or to the Secretary of the
Corporation. Any such resignation shall take effect at the date of the receipt
of such notice or at any later time specified therein; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 4.5. Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in the Bylaws for regular appointments to such office.
Section 4.6. Chairman of the Board; Vice-Chairman. The Executive
------------------------------------
Committee of the Board shall nominate the Chairman of the Board, subject to
approval by the Board. The Chairman of the Board shall also serve as Chairman
of the Executive Committee and shall serve in such capacities for a maximum of
three consecutive one-year terms. The Chairman shall be an officer of the Board
and shall, if present, preside at all meetings of the Board. The Chairman may
exercise and perform such other powers and duties as may be from time to time be
assigned by the Board or prescribed by the Bylaws. The Chairman shall not,
however, be deemed an Officer of the Corporation.
The Executive Committee of the Board shall nominate a Vice-Chairman of
the Board, subject to approval by the Board. Any Vice-Chairman so approved may
serve a maximum of three consecutive one-year terms. The Vice-Chairman shall
have such powers and perform such duties as may be from time to time be assigned
by the Board or the Chairman of the Board and shall preside at any meeting of
the Board at which the Chairman is absent or otherwise unable to serve. The
Vice-Chairman shall not be deemed an Officer of the Corporation.
Section 4.7. Chief Executive Officer. The Chief Executive Officer
-----------------------
shall, subject to the control of the Board, have general supervision, direction
and control
<PAGE>
of the business and officers of the Corporation. The Chief Executive Officer
shall exercise and perform such other powers and duties as may be from time to
time assigned by the Board or prescribed by the Bylaws.
Section 4.8. President. Subject to such supervisory powers, if any,
---------
as may be given by the Board to the Chairman of the Board, the President shall
preside at all meetings of the shareholders and at all meetings of the Board
when the Chairman of the Board and the Vice-Chairman of the Board are absent or
otherwise unable to serve. The President shall have the general powers and
duties of management usually vested in the office of the President of a bank and
shall have such other powers and duties as may be prescribed by law, the Board
or the Bylaws.
Section 4.9. Vice President. In the absence or disability of the
--------------
President, the Vice Presidents in order of their rank as fixed by the Board or,
if not ranked, the Vice President designated by the Board, shall perform all the
duties of the President, and when so acting shall have all the powers of, and be
subject to all the restrictions upon the President. The Vice Presidents shall
have such other powers and perform such other duties as from time to time may be
prescribed for them respectively by the Board or the Bylaws. No Vice President
shall preside over meetings of the shareholders or at meetings of the Board in
the absence or disability of the President and Chairman of the Board unless the
Vice President so serving is also a Director.
Section 4.10. Secretary. The Secretary shall record or cause to be
---------
recorded, and shall keep or cause to be kept, at the principal executive office
and such other place or places as the Board may order, a book of minutes of
actions taken at all meetings of directors and shareholders, with the time and
place of holding, whether regular or special, and, if special, how authorized,
the notice thereof given, the names of those present at directors' meetings, the
number of shares present or represented at shareholders' meetings, and the
proceedings thereof. In the event of any meeting in Executive Session or
otherwise if the Secretary is not present, an Acting Secretary shall be
designated by the Chairman of the meeting for the purpose of recording the
minutes of actions taken at the meeting or Executive Session thereof.
The Secretary shall keep, or cause to be kept, a copy of the Bylaws of
the Corporation at the principal executive office or business office in
accordance with Section 213 of the California General Corporation Law.
The Secretary shall keep, or cause to be kept, at the principal
executive office, or at the office of the Corporation's transfer agent, a share
register, or a duplicate share register, showing the names of the shareholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates issued for the same, or the number and date of
cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the
meetings of the shareholders and of the Board required by the Bylaws or by law
to be given and shall have such other powers and perform such other duties as
may be prescribed by the Board or by the Bylaws.
Section 4.11. Chief Financial Officer. The Chief Financial Officer
-----------------------
of the Corporation shall keep and maintain, or cause to be kept and maintained,
adequate and correct accounts of the properties and business transactions of the
Corporation, and shall
<PAGE>
send or cause to be sent to the shareholders of the Corporation such financial
statements and reports as are required to be sent to them by law or these
Bylaws.
The Chief Financial Officer shall deposit all moneys and other
valuables in the name and to the credit of the Corporation with such
depositories as may be designated by the Board. The Chief Financial Officer
shall disburse, or cause to be disbursed, the funds of the Corporation as may be
ordered by the Board, shall render to the President and directors, whenever they
request it, an account of all transactions as Chief Financial Officer and of the
financial condition of the Corporation, and shall have such other powers and
perform such other duties as may be prescribed by the Board or the Bylaws.
ARTICLE V
Miscellaneous
Section 5.1. Record Date. The Board may fix a time in the future as
-----------
a record date for the determination of the shareholders entitled to notice of
and to vote at any meetings of shareholders or entitled to give consent to
corporate action in writing without a meeting, to receive any report, to receive
any dividend or distribution, or any allotment of rights or to exercise rights
in respect to any change, conversion or exchange of shares. The record date so
fixed shall be not more than sixty (60) days or less than ten (10) days prior to
the date of any meeting or other event for the purpose of which it is fixed.
When a record date is so fixed, only shareholders of record on that date are
entitled to notice of and to vote at any such meeting, to give consent without a
meeting, to receive any report, to receive a dividend, distribution or allotment
of rights or to exercise the rights, as the case may be, notwithstanding any
transfer of any shares on the books of the Corporation after the record date.
Section 5.2. Inspection of Corporate Records. Except as restricted
-------------------------------
or limited by applicable law, including Sections 1600 through 1605 of the
California General Corporation Law, the accounting books and records, the record
of shareholders and minutes of proceedings of the shareholders and the Board and
committees of the Board of this Corporation and any subsidiary of this
Corporation shall be open to inspection upon the written demand on the
Corporation of any shareholder or holder of a voting trust certificate at any
reasonable time during usual business hours, for a purpose reasonably related to
such holder's interest as shareholder or as the holder of such voting trust
certificate. Such inspection by a shareholder or holder of a voting trust
certificate may be made in person or by agent or attorney, and the right of
inspection includes the right to copy and make extracts.
Section 5.3. Checks, Drafts, Etc. All checks, drafts or other orders
--------------------
for payment of money, notes or other evidence of indebtedness, shall be signed
or endorsed by such person or persons and in such manner as, from time to time,
shall be determined by resolution of the Board.
Section 5.4. Annual and Other Reports. The Board of the Corporation
------------------------
shall cause an annual report to be sent to the shareholders not later than 120
days after the close of the fiscal or calendar year. Notwithstanding the
foregoing sentence, however,
<PAGE>
the requirement for such annual report is dispensed with so long as this
Corporation has less than 100 shareholders of record. If required to be sent to
shareholders, the annual report shall contain a balance sheet as of the end of
such fiscal year and an income statement and statement of changes in financial
position for such fiscal year, accompanied by any report thereon of independent
accountants or, if there is no such report, the certificate of an authorized
officer of the Corporation that such statements were prepared without audit from
the books and records of the Corporation.
Section 5.5. Contracts, Etc., How Executed. The Board, except as in
-----------------------------
the Bylaws otherwise provided, may authorize any officer or officers, agent or
agents, to enter into any contract or execute any instrument in the name of and
on behalf of the Corporation, and such authority may be general or confined to
specific instances.
Section 5.6. Certificate of Shares. Every holder of shares in the
---------------------
Corporation shall be entitled to have a certificate signed in the name of the
Corporation by the Chairman or Vice Chairman of the Board or the President or a
Vice President and by the Chief Financial Officer or an assistant treasurer or
the Secretary or any assistant secretary, certifying the number of shares and
the class or series of shares owned by the shareholder. Any of the signatures
on the certificate may be facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if such person were an officer, transfer agent or registrar at
the date of issue.
No new certificate for shares shall be issued in lieu of an old
certificate unless the latter is surrendered and cancelled at the same time.
The Board may, however, in case any certificate for shares is lost, stolen,
mutilated or destroyed, authorize the issuance of a new certificate in lieu
thereof, upon such terms and conditions, including reasonable indemnification of
the Corporation, as the Board shall determine.
Section 5.7. Inspection of Bylaws. The Corporation shall keep in its
--------------------
principal executive office the original or a copy of the Bylaws as amended or
otherwise altered to date, certified by the Secretary, which shall be open to
inspection by the shareholders at all reasonable times during office hours.
Section 5.8. Construction and Definitions. Unless the context
----------------------------
otherwise requires, the general provisions, rules of construction and
definitions contained in the California General Corporation Law shall govern the
construction of these Bylaws. Without limiting the generality of the foregoing,
the masculine gender includes the feminine and neuter, the singular, number
includes the plural and the plural number includes the singular, and the term
"person" includes a Corporation as well as a natural person.
ARTICLE VI
Amendments
Section 6.1. Power of Shareholders. New Bylaws may be adopted or
---------------------
these Bylaws may be amended or repealed by the affirmative vote of a majority of
the outstanding shares entitled to vote, or by written assent of shareholders
entitled to vote such shares, except as otherwise provided by law or by the
Articles of Incorporation.
<PAGE>
Section 6.2. Power of Directors. Subject to the right of
------------------
shareholders as provided in Section 6.1 to adopt, amend or repeal Bylaws, Bylaws
may be adopted, amended or repealed by the Board provided, however, that the
Board may adopt a bylaw or amendment thereof changing the authorized number of
directors only for the purpose of fixing the exact number of directors within
the limits specified in Section 3.2 of these Bylaws.
<PAGE>
EXHIBIT 10.28
SILICON VALLEY BANCSHARES
1989 STOCK OPTION PLAN
Amendment and Restatement Effective as of the Date,
----------------------------------------------------
of Obtaining Shareholder Approval on April 18, 1996.
----------------------------------------------------
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.
(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
-1-
<PAGE>
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 six
hundred twenty six thousand five hundred thirty two (1,626,532) 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 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:
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(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 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
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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 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
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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.
(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.
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(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 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
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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.
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
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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.
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
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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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EXHIBIT 10.29
SILICON VALLEY BANK
MONEY PURCHASE PENSION PLAN
ESTABLISHED EFFECTIVE JANUARY 1, 1995
1
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SILICON VALLEY BANK
MONEY PURCHASE PENSION PLAN
ESTABLISHED EFFECTIVE JANUARY 1, 1995
Silicon Valley Bank hereby establishes the Silicon Valley Bank Money Purchase
Pension Plan effective January 1, 1995, for the benefit of eligible employees of
the Company and its participating affiliates. The Plan is intended to
constitute a qualified money purchase pension plan, as described in Code section
401(a).
The Silicon Valley Bank Money Purchase Pension Plan, as set forth in this
document, is hereby established effective as of January 1, 1995.
Date: May 28, 1996 SILICON VALLEY BANK
------
By: /s/ Glen Simmons
------------------------------------
Title: E.V.P. Human Resources
---------------------------------
1. DEFINITIONS
When capitalized, the words and phrases below have the following meanings unless
different meanings are clearly required by the context:
1.1 ACCOUNT. The records maintained for purposes of accounting for a
Participant's interest in the Plan. "Account" refers to the following account
which has been created on behalf of a Participant to hold Contributions under
the Plan:
1.2 MONEY PURCHASE PENSION ACCOUNT. An account created to hold Money
Purchase Pension Contributions.
1.3 ADMINISTRATOR. The Company, which may delegate all or a portion of
the duties of the Administrator under the Plan to a Committee in accordance with
Section 14.6.
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1.4 BENEFICIARY. The person or persons who is to receive benefits after
the death of the Participant pursuant to the "Beneficiary Designation" paragraph
in Section 11, or as a result of a QDRO.
1.5 BREAK IN SERVICE. The fifth anniversary (or sixth anniversary if
absence from employment was due to a Parental Leave) of the date on which a
Participant's employment ends.
1.6 CODE. The Internal Revenue Code of 1986, as amended. Reference to
any specific Code section shall include such section, any valid regulation
promulgated thereunder, and any comparable provision of any future legislation
amending, supplementing or superseding such section.
1.7 COMMITTEE. If applicable, the committee which has been appointed by
the Company to administer the Plan in accordance with Section 14.6.
1.8 COMPANY. Silicon Valley Bank or any successor by merger, purchase or
otherwise.
1.9 COMPANY STOCK. Shares of common stock of Silicon Valley Bancshares,
the parent company of the Company, its predecessor(s), or its successors or
assigns, or any corporation with or into which said corporation may be merged,
consolidated or reorganized, or to which a majority of its assets may be sold.
1.10 COMPENSATION. The sum of a Participant's Taxable Income and salary
reductions, if any, pursuant to Code sections 125, 402(e)(3), 402(h), 403(b),
414(h)(2) or 457 for the Plan Year.
For purposes of determining benefits under this Plan, Compensation is
limited to $150,000, (as adjusted for the cost of living pursuant to Code
sections 401(a)(17) and 415(d)) per Plan Year. For purposes of the preceding
sentence, in the case of an HCE who is a 5% Owner or one of the 10 most highly
compensated Employees, (i) such HCE and such HCE's family group (as defined
below) shall be treated as a single employee and the Compensation of each family
group member shall be aggregated with the Compensation of such HCE, and (ii) the
limitation on Compensation shall be allocated among such HCE and his or her
family group members in proportion to each individual's Compensation before the
application of this sentence. For purposes of this Section, the term "family
group" shall mean an Employee's spouse and lineal descendants who have not
attained age 19 before the close of the year in question.
1.11 CONTRIBUTION. An amount contributed to the Plan by the Employer and
allocated by contribution type to Participants' Accounts, as described in
Section 1.1. Contributions to the Plan consist of:
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1.12 MONEY PURCHASE PENSION CONTRIBUTION. An amount contributed by the
Employer on an eligible Participant's behalf and allocated on a pay based
formula.
1.13 CONVERSION PERIOD. The period of converting the prior accounting
system of any plan and trust which is merged into this Plan subsequent to the
Effective Date, to the accounting system described in Section 6.
1.14 DIRECT ROLLOVER. An Eligible Rollover Distribution that is paid
directly to an Eligible Retirement Plan for the benefit of a Distributee.
1.15 DISABILITY. A Participant's mental or physical disability resulting
in termination of employment as evidenced by presentation of medical evidence
satisfactory to the Administrator.
1.16 DISTRIBUTEE. An Employee or former Employee, the surviving spouse of
an Employee or former Employee and a spouse or former spouse of an Employee or
former Employee determined to be an alternate payee under a QDRO.
1.17 EARLY RETIREMENT DATE. The date of a Participant's 55th birthday and
completion of 10 Years of Vesting Service.
1.18 EFFECTIVE DATE. The date upon which the provisions of this document
become effective. This date is January 1, 1995, unless stated otherwise.
1.19 ELIGIBLE EMPLOYEE. An Employee of an Employer, except any Employee:
(a) whose compensation and conditions of employment are covered by a
collective bargaining agreement to which an Employer is a party unless the
agreement calls for the Employee's participation in the Plan;
(b) who is treated as an Employee because he or she is a Leased
Employee; or
(c) who is a nonresident alien who (i) either receives no earned
income (within the meaning of Code section 911(d)(2)), from sources within the
United States under Code section 861(a)(3); or (ii) receives such earned income
from such sources within the United States but such income is exempt from United
States income tax under an applicable income tax convention.
1.20 ELIGIBLE RETIREMENT PLAN. An individual retirement account described
in Code section 408(a), an individual retirement annuity described in Code
section 408(b), an annuity plan described in Code section 403(a), or a qualified
trust described in Code section 401(a), that accepts a Distributee's Eligible
Rollover Distribution, except that with
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regard to an Eligible Rollover Distribution to a surviving spouse, an Eligible
Retirement Plan is an individual retirement account or individual retirement
annuity.
1.21 ELIGIBLE ROLLOVER DISTRIBUTION. A distribution of all or any portion
of the balance to the credit of a Distributee, excluding a distribution that is
one of a series of substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of a Distributee or the
joint lives (or joint life expectancies) of a Distributee and the Distributee's
designated Beneficiary, or for a specified period of ten years or more; a
distribution to the extent such distribution is required under Code section
401(a)(9); and the portion of a distribution that is not includible in gross
income (determined without regard to the exclusion for net unrealized
appreciation with respect to Employer securities).
1.22 EMPLOYEE. An individual who is:
(a) directly employed by any Related Company and for whom any income
for such employment is subject to withholding of income or social security
taxes, or
(b) a Leased Employee.
1.23 EMPLOYER. The Company and any Related Company which adopts this Plan
with the approval of the Company.
1.24 ERISA. The Employee Retirement Income Security Act of 1974, as
amended. Reference to any specific ERISA section shall include such section,
any valid regulation promulgated thereunder, and any comparable provision of any
future legislation amending, supplementing or superseding such section.
1.25 FORFEITURE ACCOUNT. An account holding amounts forfeited by
Participants who have terminated employment with all Related Companies, invested
in interest bearing deposits of the Trustee, pending disposition as provided in
this Plan and as directed by the Administrator.
1.26 HCE OR HIGHLY COMPENSATED EMPLOYEE. With respect to each Employer
and its Related Companies, an Employee during the Plan Year or "lookback year"
who (in accordance with Code section 414(q)):
(a) was a more than 5% Owner at any time during the "lookback year"
or Plan Year;
(b) received Compensation during the "lookback year" (or in the Plan
Year if among the 100 Employees with the highest Compensation for such Year) in
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excess of (i) $75,000 (as adjusted for such Year pursuant to Code sections
414(q)(1) and 415(d)), or (ii) $50,000 (as adjusted for such Year pursuant to
Code sections 414(q)(1) and 415(d)) in the case of a member of the "top-paid
group" (within the meaning of Code section 414(q)(4)) for such Year, provided,
however, that if the conditions of Code section 414(q)(12)(B)(ii) are met, the
Company may elect for any Plan Year to apply clause (i) by substituting $50,000
for $75,000 and not to apply clause (ii); or
(c) was an officer of a Related Company and received Compensation
during the "lookback year" (or in the Plan Year if among the 100 Employees with
the highest Compensation for such Year) that is greater than 50% of the dollar
limitation in effect under Code section 415(b)(1)(A) and (d) for such Year (or
if no officer has Compensation in excess of the threshold, the officer with the
highest Compensation), provided that the number of officers shall be limited to
50 Employees (or, if less, the greater of three Employees or 10% of the
Employees).
A former Employee shall be treated as an HCE if (1) such former
Employee was an HCE when he separated from service, or (2) such former Employee
was an HCE in service at any time after attaining age 55.
The determination of who is an HCE, including the determinations of the
number and identity of Employees in the top-paid group, the top 100 Employees
and the number of Employees treated as officers shall be made in accordance with
Code section 414(q).
Pursuant to Code section 414(q), the Company elects as the "lookback year"
the 12 months ending immediately prior to the start of the Plan Year.
1.27 INELIGIBLE. The Plan status of an individual during the period in
which he or she is (1) an Employee of a Related Company which is not then an
Employer, (2) an Employee, but not an Eligible Employee, or (3) not an Employee.
1.28 INVESTMENT FUND OR FUND. An investment fund as described in Section
15.2.
1.29 LEASED EMPLOYEE. An individual who is deemed to be an employee of
any Related Company as provided in Code section 414(n) or (o).
1.30 LEAVE OF ABSENCE. A period during which an individual is deemed to be
an Employee, but is absent from active employment, provided that the absence:
(a) was authorized by a Related Company; or
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(b) was due to military service in the United States armed forces and
the individual returns to active employment within the period during which he or
she retains employment rights under federal law.
1.31 NORMAL RETIREMENT DATE. The date of a Participant's 62nd birthday.
1.32 OWNER. A person with an ownership interest in the capital, profits,
outstanding stock or voting power of a Related Company within the meaning of
Code section 318 or 416 (which exclude indirect ownership through a qualified
plan).
1.33 PARENTAL LEAVE. The period of absence from work by reason of
pregnancy, the birth of an Employee's child, the placement of a child with the
Employee in connection with the child's adoption, or caring for such child
immediately after birth or placement as described in Code section 410(a)(5)(E).
1.34 PARTICIPANT. The Plan status of an Eligible Employee after he or she
completes the eligibility requirements as described in Section 2.1. A
Participant's participation continues until his or her employment with all
Related Companies ends and his or her Account is distributed or forfeited.
1.35 PAY. All cash compensation, excluding incentive pay (annual incentive
awards, referral fees and other recognition/achievement awards), paid to an
Eligible Employee by an Employer while a Participant during the current period.
Pay excludes reimbursements or other expense allowances, cash and non-cash
fringe benefits, moving expenses, deferred compensation and welfare benefits.
Pay shall be determined further by including amounts contributed by an
Employer pursuant to Code sections 125 and 402(e)(3). Pay is limited to $150,000
(as adjusted for the cost of living pursuant to Code sections 401(a)(17) and
415(d)) per Plan Year.
For purposes of the Contributions described in Section 5.1, the limitations
as described in the second paragraph of Section 1.9 shall also apply.
1.36 PERIOD OF EMPLOYMENT. The period beginning on the date an Employee
first performs an hour of service and ending on the date his or her employment
ends. Employment ends on the date the Employee quits, retires, is discharged,
dies or (if earlier) the first anniversary of his or her absence for any other
reason. The period of absence starting with the date an Employee's employment
temporarily ends and ending on the date he or she is subsequently reemployed is
(1) included in his or her Period of Employment if the period of absence does
not exceed one year, and (2) excluded if such period exceeds one year.
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Period of Employment includes the period prior to a Break in Service.
An Employee's service with a predecessor or acquired company shall only be
counted in the determination of his or her Period of Employment for eligibility
and/or vesting purposes if (1) the Company directs that credit for such service
be granted, or (2) a qualified plan of the predecessor or acquired company is
subsequently maintained by any Employer or Related Company.
1.37 PLAN. The Silicon Valley Bank Money Purchase Pension Plan set forth
in this document, as from time to time amended.
1.38 Plan Year. The annual accounting period of the Plan which ends on
each December 31.
1.39 QDRO. A domestic relations order which the Administrator has
determined to be a qualified domestic relations order within the meaning of Code
section 414(p).
1.40 REDUCTION IN FORCE. An Employer sponsored program developed to reduce
force on a permanent basis.
1.41 RELATED COMPANY. With respect to any Employer, that Employer and any
corporation, trade or business which is, together with that Employer, a member
of the same controlled group of corporations, a trade or business under common
control, or an affiliated service group within the meaning of Code sections
414(b), (c), (m) or (o), except that for purposes of Section 12 "within the
meaning of Code sections 414(b), (c), (m) or (o), as modified by Code section
415(h)" shall be substituted for the preceding reference to "within the meaning
of Code section 414(b), (c), (m) or (o)."
1.42 SENIOR PARTICIPANT. A Participant who is age 55 or over.
1.43 SETTLEMENT DATE. For each Trade Date, the Trustee's next business
day.
1.44 SPOUSAL CONSENT. The written consent given by a spouse to a
Participant's election or waiver of a specified form of benefit or Beneficiary
designation. The spouse's consent must acknowledge the effect on the spouse of
the Participant's election, waiver or designation, and be duly witnessed by a
Plan representative or notary public. Spousal Consent shall be valid only with
respect to the spouse who signs the Spousal Consent and only for the particular
choice made by the Participant which requires Spousal Consent. A Participant may
revoke (without Spousal Consent) a prior election, waiver or designation that
required Spousal Consent at any time before payments begin. Spousal Consent also
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means a determination by the Administrator that there is no spouse, the spouse
cannot be located, or such other circumstances as may be established by
applicable law.
1.45 SWEEP ACCOUNT. The subsidiary Account for each Participant through
which all transactions are processed, which is invested in interest bearing
deposits of the Trustee.
1.46 SWEEP DATE. The cut off date and time for receiving instructions for
transactions to be processed on the next Trade Date.
1.47 TAXABLE INCOME. Compensation in the amount reported by the Employer
or a Related Company as "Wages, tips, other compensation" on Form W 2, or any
successor method of reporting under Code section 6041(d).
1.48 TRADE DATE. Each day the Investment Funds are valued, which is
normally every day the assets of such Funds are traded.
1.49 TRUST. The legal entity created by those provisions of the Silicon
Valley Bank 401(k) and Employee Stock Ownership Plan and Trust and which relate
to the Trustee and any successor Trust that may be created to hold the Plan
assets. The Trust is part of the Plan and holds the Plan assets which are
comprised of the aggregate of Participants' Accounts, any unallocated funds
invested in deposit or money market type assets pending allocation to
Participants' Accounts or disbursement to pay Plan fees and expenses and the
Forfeiture Account.
1.50 TRUSTEE. Wells Fargo Bank, National Association.
1.51 YEAR OF VESTING SERVICE. A 12 month Period of Employment.
Notwithstanding, Years of Vesting Service shall be calculated as follows if
(and only if) it would be of benefit to the Employee:
(a) For service from January 1, 1995, each 12 month Period of
Employment;
(b) For service prior to January 1, 1995, a 12 month period ending on
the anniversary of the date an individual became an Employee, or as that date
may be adjusted as a result of his or her termination of employment with all
Related Companies and subsequent rehire as an Employee, in which an Employee is
credited with at least 1,000 hours of service, as such term was defined for this
purpose under the terms of the Silicon Valley Bancshares Employee Stock
Ownership Plan as then in effect prior to the Effective Date.
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Years of Vesting Service shall include service credited prior to January 1,
1995.
2. ELIGIBILITY
2.1 ELIGIBILITY. Each Eligible Employee shall become a Participant on the
later of January 1, 1995 or on the first January 1, April 1, July 1 or October 1
after the date he or she attains age 18, and completes one hour of service.
2.2 INELIGIBLE EMPLOYEES. If an Employee completes the above eligibility
requirements, but is Ineligible at the time participation would otherwise begin
(if he or she were not Ineligible), he or she shall become a Participant on the
first subsequent date on which he or she is an Eligible Employee.
2.3 INELIGIBLE OR FORMER PARTICIPANTS. A Participant may not share in
Plan Contributions during the period he or she is Ineligible, but he or she
shall continue to participate for all other purposes. An Ineligible Participant
or former Participant shall automatically become an active Participant on the
date he or she again becomes an Eligible Employee.
3. PARTICIPANT CONTRIBUTIONS
Participant Contributions are not permitted under the Plan.
4. TRANSFERS FROM AND TO OTHER QUALIFIED PLANS
4.1 TRANSFERS FROM AND TO OTHER QUALIFIED PLANS. The Administrator may
accept assets in cash or in-kind directly from another qualified plan or
transfer assets in cash or in-kind directly to another qualified plan; provided
that receipt of a transfer shall not be permitted if:
(a) any amounts are not exempted by Code section 401(a)(11)(B) from
the annuity requirements of Code section 417 unless the Plan complies with such
requirements; or
(b) any amounts include benefits protected by Code section 411(d)(6)
which would not be preserved under applicable Plan provisions.
The Administrator may refuse the receipt of any transfer if:
(a) the Administrator finds the in-kind assets unacceptable; or
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(b) instructions for posting amounts to Participants' Accounts are
incomplete.
Such amounts shall be posted to the appropriate Accounts of Participants as of
the date received.
5. EMPLOYER CONTRIBUTIONS AND FORFEITURE ACCOUNT ALLOCATIONS
5.1 MONEY PURCHASE PENSION CONTRIBUTIONS AND FORFEITURE ACCOUNT
ALLOCATIONS.
(a) FREQUENCY AND ELIGIBILITY. For each quarter of the Plan Year,
the Employer shall make a Money Purchase Pension Contribution on behalf of each
Participant who was an Eligible Employee on the last day of the period. Such
Contributions shall also be made on behalf of each Participant who was an
Eligible Employee at any time during the period but who ceased being an Employee
during the period after having attained his or her Early Retirement Date, Normal
Retirement Date or by reason of his or her Disability or death.
For each Plan Year, the Employer shall allocate any Forfeiture Account
balance remaining as of the end of the Plan Year as Money Purchase Pension
Contributions on behalf of each Participant who was an Eligible Employee on the
last day of the period. Such an allocation shall also be made on behalf of each
Participant who ceased being an Employee during the period after having attained
his or her Early Retirement Date, Normal Retirement Date or by reason of his or
her Disability or death.
5.2 ALLOCATION METHOD. The Money Purchase Pension Contribution for each
period, shall be equal to 5% of each eligible Participant's Pay (not including
Forfeiture Account amounts allocated as Money Purchase Pension Contributions).
Forfeiture Account amounts allocated as Money Purchase Pension
Contributions shall be allocated among eligible Participants in direct
proportion to their Pay.
(a) TIMING, MEDIUM AND POSTING. The Employer shall make each period's
Money Purchase Pension Contribution in cash and allocate Forfeiture Account
amounts as soon as administratively feasible, and for purposes of deducting such
Money Purchase Pension Contribution, not later than the Employer's federal tax
filing date, including extensions. Such amounts shall be posted to each
Participant's Money Purchase Pension Account once the total Contribution
received or Forfeiture Account amount to be allocated has been balanced against
the specific amount to be credited to each Participant's Money Purchase Pension
Account.
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6. ACCOUNTING
6.1 INDIVIDUAL PARTICIPANT ACCOUNTING. The Administrator shall maintain
an individual set of Accounts for each Participant in order to reflect
transactions both by type of Account and investment medium. Financial
transactions shall be accounted for at the individual Account level by posting
each transaction to the appropriate Account of each affected Participant.
Participant Account values shall be maintained in shares for the Investment
Funds and in dollars for the Sweep Account. At any point in time, the Account
value shall be determined using the most recent Trade Date values provided by
the Trustee.
6.2 SWEEP ACCOUNT IS TRANSACTION ACCOUNT. All transactions related to
amounts being contributed to or distributed from the Trust shall be posted to
each affected Participant's Sweep Account. Any amount held in the Sweep Account
shall be credited with interest up until the date on which it is removed from
the Sweep Account.
6.3 TRADE DATE ACCOUNTING AND INVESTMENT CYCLE. Participant Account
values shall be determined as of each Trade Date. For any transaction to be
processed as of a Trade Date, the Trustee must receive instructions for the
transaction by the Sweep Date. Such instructions shall apply to amounts held in
the Account on that Sweep Date. Financial transactions of the Investment Funds
shall be posted to Participants' Accounts as of the Trade Date, based upon the
Trade Date values provided by the Trustee, and settled on the Settlement Date.
6.4 ACCOUNTING FOR INVESTMENT FUNDS. Investments in each Investment Fund
shall be maintained in shares. The share value of each Investment Fund shall be
based on the fair market value of its underlying assets.
6.5 PAYMENT OF FEES AND EXPENSES. Except to the extent Plan fees and
expenses related to Account maintenance, transaction and Investment Fund
management and maintenance, as set forth below, are paid by the Employer
directly, or indirectly, through the Forfeiture Account as directed by the
Administrator, such fees and expenses shall be paid as set forth below. The
Employer may pay a lower portion of the fees and expenses allocable to the
Accounts of Participants who are no longer Employees or who are not
Beneficiaries, unless doing so would result in discrimination.
(a) ACCOUNT MAINTENANCE: Account maintenance fees and expenses, may
include but are not limited to, administrative, Trustee, government annual
report preparation, audit, legal, nondiscrimination testing and fees for any
other special services. Account maintenance fees shall be charged to
Participants on a per Participant basis provided that no fee shall reduce a
Participant's Account balance below zero.
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(b) TRANSACTION: Transaction fees and expenses, may include but are
no limited to, periodic installment payment and Investment Fund election change
fees. Transaction fees shall be charged to the Participant's Account involved in
the transaction provided that no fee shall reduce a Participant's Account
balance below zero.
(c) Investment Fund Management and Maintenance: Management and
maintenance fees and expenses related to the Investment Funds shall be charged
at the Investment Fund level and reflected in the net gain or loss of each Fund.
As of the Effective Date, a breakdown of which Plan fees and expenses shall
generally be borne by the Trust (and charged to individual Participants'
Accounts or charged at the Investment Fund level and reflected in the net gain
or loss of each Fund) and those that shall be paid by the Employer is set forth
in Appendix B and may be changed from time to time by the Administrator, in
writing, without the necessity of amending this Plan or the Trust.
6.6 ERROR CORRECTION. The Administrator may correct any errors or
omissions in the administration of the Plan by restoring any Participant's
Account balance with the amount that would be credited to the Account had no
error or omission been made. Funds necessary for any such restoration shall be
provided through payment made by the Employer, unless the Trustee is required to
provide such restoration funds pursuant to the Trust, or if the restoration
involves an Account holding amounts contributed by an Employer, the
Administrator may direct the Trustee to use amounts from the Forfeiture Account.
6.7 PARTICIPANT STATEMENTS. The Administrator shall provide Participants
with statements of their Accounts as soon after the end of each quarter of the
Plan Year as administratively feasible.
6.8 SPECIAL ACCOUNTING DURING CONVERSION PERIOD. The Administrator may
use any reasonable accounting methods in performing its duties during any
Conversion Period. This includes, but is not limited to, the method for
allocating net investment gains or losses and the extent, if any, to which
contributions received by and distributions paid from the Trust during this
period share in such allocation.
6.9 ACCOUNTS FOR QDRO BENEFICIARIES. A separate Account shall be
established for an alternate payee entitled to any portion of a Participant's
Account under a QDRO as of the date and in accordance with the directions
specified in the QDRO. In addition, a separate Account may be established during
the period of time the Administrator, a court of competent jurisdiction or other
appropriate person is determining whether a domestic relations order qualifies
as a QDRO. Such a separate Account shall be valued and accounted for in the same
manner as any other Account.
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(a) DISTRIBUTIONS PURSUANT TO QDROS. If a QDRO so provides, the
portion of a Participant's Account payable to an alternate payee may be
distributed, in a form as permissible under Section 11 and Code section 414(p),
to the alternate payee at the time specified in the QDRO, regardless of whether
the Participant is entitled to a distribution from the Plan at such time.
(b) INVESTMENT DIRECTION. Where a separate Account has been
established on behalf of an alternate payee and has not yet been distributed,
the alternate payee may direct the investment of such Account in the same manner
as if he or she were a Participant.
7. INVESTMENT AUTHORITY AND INVESTMENT FUNDS
7.1 GENERAL INVESTMENT AUTHORITY. The Administrator shall be responsible
for directing the investment of all Plan assets, except that a Senior
Participant shall be provided the option to direct the investment of his or her
Account as described in this Section. Except for Participants' Sweep Accounts,
the Plan assets shall be maintained in one or more Investment Funds. The
Administrator shall select the Investment Funds and may change the number or
composition of the Investment Funds.
7.2 SPECIAL INVESTMENT AUTHORITY PROVISIONS RELATED TO SENIOR
PARTICIPANTS. A Senior Participant may direct the investment of the balance in
his or her Account in any combination of one or any number of the Investment
Funds offered in accordance with the procedures established by the
Administrator. Any amount deposited to a Senior Participant's Account shall be
invested as directed by the Administrator, until otherwise directed by the
Senior Participant. During any Conversion Period, Plan assets may be held in any
investment vehicle permitted by the Plan, as directed by the Administrator,
irrespective of a Senior Participant's investment elections.
The Administrator shall select the Investment Funds offered to Senior
Participants and may change the number or composition of the Investment Funds.
A Senior Participant may change his or her investment election at any time in
accordance with the procedures established by the Administrator. Investment
elections received by the Sweep Date shall be effective on the following Trade
Date. A reasonable processing fee may be charged directly to a Senior
Participant's Account for Investment Fund election changes in excess of a
specified number per year as determined by the Administrator.
A Senior Participant shall be solely responsible for the selection of his
or her Investment Fund choices. No fiduciary with respect to the Plan is
empowered to advise a Senior Participant as to the manner in which his or her
Account is to be invested, and the fact that an Investment Fund is offered shall
not be construed to be a recommendation for investment.
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As of the Effective Date, a list of the Investment Funds offered under the
Plan to Senior Participants is set forth in Appendix A, and may be changed from
time to time by the Administrator, in writing, without the necessity of amending
this Plan or the Trust.
8. VESTING AND FORFEITURES
8.1 FULL VESTING UPON CERTAIN EVENTS. A Participant's entire Account
shall become fully vested once he or she has attained his or her Normal
Retirement Date as an Employee or upon his or her terminating employment with
all Related Companies due to a Reduction in Force or his or her Disability or
death.
8.2 VESTING SCHEDULE. In addition to the vesting provided above, a
Participant's Money Purchase Pension Account shall become vested in accordance
with the following schedule:
Years of Vesting Vested
Service Percentage
Less than 1 0%
1 but less than 2 20%
2 but less than 3 40%
3 but less than 4 60%
4 but less than 5 80%
5 or more 100%
If this vesting schedule is changed, the vested percentage for each
Participant shall not be less than his or her vested percentage determined as of
the last day prior to this change, and for any Participant with at least three
Years of Vesting Service when the schedule is changed, vesting shall be
determined using the more favorable vesting schedule.
8.3 FORFEITURES. A Participant's non-vested Account balance shall be
forfeited as of the Settlement Date following the Sweep Date on which the
Administrator has reported to the Trustee that the Participant's employment has
terminated with all Related Companies. Forfeitures from all Employer
Contribution Accounts shall be transferred to and maintained in a single
Forfeiture Account. Forfeiture Account amounts shall be utilized to restore
Accounts, to pay Plan fees and expenses at the discretion of the Administrator
and in accordance with Section 5 to increase the amount allocated as Money
Purchase Pension Contributions as directed by the Administrator.
8.4 REHIRED EMPLOYEES.
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(a) SERVICE. If a former Employee is rehired, all Periods of
Employment credited when his or her employment last terminated shall be counted
in determining his or her vested interest.
(b) ACCOUNT RESTORATION. If a former Employee is rehired before he
or she has a Break in Service, the amount forfeited when his or her employment
last terminated shall be restored to his or her Account. The restoration shall
include the interest which would have been credited had such forfeiture been
invested in the Sweep Account from the date forfeited until the date the
restoration amount is restored. The amount shall come from the Forfeiture
Account to the extent possible, and any additional amount needed shall be
contributed by the Employer. The vested interest in his or her restored Account
shall then be equal to:
V% times (AB + D) - D
where:
V% = current vested percentage
AB = current account balance
D = amount previously distributed
9. PARTICIPANT LOANS
Loans to Participants from the Plan are not permitted.
10. In-Service Withdrawals
In-service withdrawals to a Participant who is an Employee are not
permitted other than as required by law pursuant to the terms and conditions as
set forth in Section 11.
11. DISTRIBUTIONS ONCE EMPLOYMENT ENDS OR AS REQUIRED BY LAW
11.1 BENEFIT INFORMATION, NOTICES AND ELECTION. A Participant, or his or
her Beneficiary in the case of his or her death, shall be provided with
information regarding all optional times and forms of distribution available, to
include the notices prescribed by Code section 402(f) and Code section
411(a)(11). Subject to the other requirements of this Section, a Participant, or
his or her Beneficiary in the case of his or her death, may elect, in such
manner and with such advance notice as prescribed by the Administrator, to have
his or her vested Account balance paid to him or her beginning upon any
Settlement
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Date following the Participant's termination of employment with all Related
Companies or, if earlier, at the time required by law as set forth in Section
11.7.
If a distribution is one to which Code sections 401(a)(11) and 417 do not
apply, such distribution may commence less than 30 days after the aforementioned
notices are provided, if:
(a) the Participant is clearly informed that he or she has the right
to a period of at least 30 days after receipt of such notices to consider the
decision as to whether to elect a distribution and if so to elect a particular
form of distribution and to elect or not elect a Direct Rollover for all or a
portion, if any, of his or her distribution which shall constitute an Eligible
Rollover Distribution; and
(b) the Participant after receiving such notices, affirmatively
elects a distribution and a Direct Rollover for all or a portion, if any, of his
or her distribution which shall constitute an Eligible Rollover Distribution or
alternatively elects to have all or a portion made payable directly to him or
her, thereby not electing a Direct Rollover for all or a portion thereof.
11.2 SPOUSAL CONSENT. A Participant is required to obtain Spousal Consent
in order to receive a distribution under the Plan, except with regard to a
distribution made to a Participant without his or her consent.
11.3 PAYMENT FORM AND MEDIUM. Except to the extent otherwise provided by
Section 11.4, a married Participant's benefit shall be paid in the form of an
immediate qualified joint and 50% survivor annuity with the Participant's spouse
as the joint annuitant and a single Participant's or surviving spouse
Beneficiary's benefit shall be paid in the form of a single life annuity.
Notwithstanding, except to the extent otherwise provided by Section 11.4 and
subject to the requirements of Section 11.12, he or she may instead elect:
(a) a single lump sum, or
(b) a portion paid in a lump sum, and the remainder paid later, or
(c) periodic installments over a period not to exceed the life
expectancy of the Participant and his or her Beneficiary, or
(d) a single life annuity or a joint and 50% or 100% survivor
annuity.
Any annuity option permitted shall be provided through the purchase of a
non-transferable single premium contract from an insurance company which must
conform to
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the terms of the Plan and which shall be distributed to the Participant or
Beneficiary in complete satisfaction of the benefit due.
Distributions (other than annuity contracts) shall be made in cash, or if a
Participant so elects, payment may be made in the form of whole shares of
Company Stock and cash in lieu of fractional shares to the extent invested in
the Company Stock Fund. With regard to the portion of a distribution
representing an Eligible Rollover Distribution, a Distributee may elect a Direct
Rollover for all or a portion of such amount.
11.4 DISTRIBUTION OF SMALL AMOUNTS. If after a Participant's employment
with all Related Companies ends, the Participant's vested Account balance is
$3,500 or less, and if at the time of any prior in-service withdrawal or
distribution the Participant's vested Account balance did not exceed $3,500, the
Participant's benefit shall be paid as a single lump sum as soon as
administratively feasible in accordance with procedures prescribed by the
Administrator.
11.5 SOURCE AND TIMING OF DISTRIBUTION FUNDING. A distribution to a
Participant shall be made solely from the assets of his or her own Account and
shall be based on the Account values as of the Trade Date the distribution is
processed. The available assets shall be determined first by Account type and
then within each Account used for funding a distribution, amounts shall first be
taken from the Sweep Account and then taken by Investment Fund in direct
proportion to the market value of the Participant's interest in each Investment
Fund as of the Trade Date on which the distribution is processed.
The distribution shall be funded on the Settlement Date following the Trade
Date as of which the distribution is processed. The Administrator shall direct
the Trustee to make payment as soon thereafter as administratively feasible.
11.6 DEEMED DISTRIBUTION. For purposes of Section 8.3, if at the time a
Participant's employment with all Related Companies has terminated, the
Participant's vested Account balance attributable to Accounts subject to vesting
as described in Section 8, is zero, his or her vested Account balance shall be
deemed distributed as of the Settlement Date following the Sweep Date on which
the Administrator has reported to the Trustee that the Participant's employment
with all Related Companies has terminated.
11.7 LATEST COMMENCEMENT PERMITTED. In addition to any other Plan
requirements and unless a Participant elects otherwise, his or her benefit
payments shall begin not later than 60 days after the end of the Plan Year in
which he or she attains his or her Normal Retirement Date or retires, whichever
is later. However, if the amount of the payment or the location of the
Participant (after a reasonable search) cannot be ascertained by that deadline,
payment shall be made no later than 60 days after the earliest
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date on which such amount or location is ascertained but in no event later than
as described below. A Participant's failure to elect in such manner as
prescribed by the Administrator to have his or her vested Account balance paid
to him or her, shall be deemed an election by the Participant to defer his or
her distribution.
Benefit payments shall begin by the April 1 immediately following the end
of the calendar year in which the Participant attains age 70 1/2, whether or not
he or she is an Employee.
If benefit payments cannot begin at the time required because the location
of the Participant cannot be ascertained (after a reasonable search), the
Administrator may, at any time thereafter, treat such person's Account as
forfeited subject to the provisions of Section 15.5.
11.8 PAYMENT WITHIN LIFE EXPECTANCY. The Participant's payment election
must be consistent with the requirement of Code section 401(a)(9) that all
payments are to be completed within a period not to exceed the lives or the
joint and last survivor life expectancy of the Participant and his or her
Beneficiary. The life expectancies of a Participant and his or her Beneficiary,
if such Beneficiary is his or her spouse, may be recomputed annually.
11.9 INCIDENTAL BENEFIT RULE. The Participant's payment election must be
consistent with the requirement that, if the Participant's spouse is not his or
her sole primary Beneficiary, the minimum annual distribution for each calendar
year, beginning with the year in which he or she attains age 70 1/2, shall not
be less than the quotient obtained by dividing (a) the Participant's vested
Account balance as of the last Trade Date of the preceding year by (b) the
applicable divisor as determined under the incidental benefit requirements of
Code section 401(a)(9).
11.10 PAYMENT TO BENEFICIARY. Payment to a Beneficiary must either: (1)
be completed by the end of the calendar year that contains the fifth anniversary
of the Participant's death or (2) begin by the end of the calendar year that
contains the first anniversary of the Participant's death and be completed
within the period of the Beneficiary's life or life expectancy, except that:
(a) If the Participant dies after the April 1 immediately following
the end of the calendar year in which he or she attains age 70 1/2, payment to
his or her Beneficiary must be made at least as rapidly as provided in the
Participant's distribution election;
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(b) If the surviving spouse is the Beneficiary, payments need not
begin until the end of the calendar year in which the Participant would have
attained age 70 1/2 and must be completed within the spouse's life or life
expectancy; and
(c) If the Participant and the surviving spouse who is the
Beneficiary die (1) before the April 1 immediately following the end of the
calendar year in which the Participant would have attained age 70 1/2 and (2)
before payments have begun to the spouse, the spouse shall be treated as the
Participant in applying these rules.
11.11 BENEFICIARY DESIGNATION. Each Participant may complete a
beneficiary designation form indicating the Beneficiary who is to receive the
Participant's remaining Plan interest at the time of his or her death. The
designation may be changed at any time. However, a Participant's spouse shall be
the sole primary Beneficiary unless the designation includes Spousal Consent for
another Beneficiary. If no proper designation is in effect at the time of a
Participant's death or if the Beneficiary does not survive the Participant, the
Beneficiary shall be, in the order listed, the:
(a) Participant's surviving spouse,
(b) Participant's children, in equal shares, (or if a child does
not survive the Participant, and that child leaves issue, the issue shall be
entitled to that child's share, by right of representation) or
(c) Participant's estate.
11.12 QJSA and QPSA Information and Elections. The following definitions,
information and election rules shall apply to any Participant who is eligible
for an annuity form of payment:
(a) Annuity Starting Date. The first day of the first period for
which an amount is payable as an annuity, or, in the case of a benefit not
payable in the form of an annuity, the first day on which all events have
occurred which entitle the Participant to such benefit.
(b) QJSA. A qualified joint and survivor annuity, meaning for a
married Participant, a form of benefit payment which is the actuarial equivalent
of the Participant's vested Account balance at the Annuity Starting Date,
payable to the Participant in monthly payments for life and providing that, if
the Participant's spouse survives him or her, monthly payments equal to 50% of
the amount payable to the Participant during his or her lifetime shall be paid
to the spouse for the remainder of such person's lifetime and for a single
Participant, a form of benefit payment which is the actuarial equivalent of the
Participant's vested Account balance at the Annuity Starting Date, payable to
the Participant in monthly payments for life.
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(c) QPSA. A qualified pre-retirement survivor annuity, meaning
that upon the death of a Participant before the Annuity Starting Date, the
vested portion of the Participant's Account becomes payable to the surviving
spouse as a life annuity, unless Spousal Consent has been given to a different
Beneficiary or the surviving spouse chooses a different form of payment.
(d) QJSA INFORMATION TO A PARTICIPANT. No less than 30 and no more
than 90 days before the Annuity Starting Date, each Participant shall be given a
written explanation of (1) the terms and conditions of the QJSA, (2) the right
to make an election to waive this form of payment and choose an optional form of
payment and the effect of this election, (3) the right to revoke this election
and the effect of this revocation, and (4) the need for Spousal Consent.
(e) QJSA ELECTION. A Participant may elect, and such election
shall include Spousal Consent if married, at any time within the 90 day period
ending on the Annuity Starting Date, to (1) waive the right to receive the QJSA
and elect an optional form of payment, or (2) revoke or change any such
election.
(f) QPSA Beneficiary Information to a Participant. Upon becoming a
Participant, and with updates as needed to insure such information is accurate
and readily available to each Participant who is between the ages of 32 and 35,
each married Participant shall be given written information stating that (1) his
or her death benefit is payable to his or her surviving spouse, (2) he or she
may choose that the benefit be paid to a different Beneficiary, (3) he or she
has the right to revoke or change a prior designation and the effects of such
revocation or change, and (4) the need for Spousal Consent.
(g) QPSA BENEFICIARY DESIGNATION BY PARTICIPANT. A married
Participant may designate, with Spousal Consent, a non-spouse Beneficiary at any
time after the Participant has been given the information in the QPSA
Beneficiary Information to a Participant paragraph above and upon the earlier of
(1) the date the Participant has terminated employment, or (2) the beginning of
the Plan Year in which the Participant attains age 35.
(h) QPSA INFORMATION TO A SURVIVING SPOUSE. Each surviving spouse
shall be given a written explanation of (1) the terms and conditions of being
paid his or her Account balance in the form of a single life annuity, (2) the
right to make an election to waive this form of payment and choose an optional
form of payment and the effect of this election, and (3) the right to revoke
this election and the effect of this revocation.
(i) QPSA ELECTION BY SURVIVING SPOUSE. A surviving spouse may
elect, at any time up to the Annuity Starting Date, to (1) waive the right to
receive a single
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life annuity and elect an optional form of payment, or (2) revoke or change any
such election.
12. MAXIMUM CONTRIBUTION AND BENEFIT LIMITATIONS
12.1 ANNUAL ADDITION DEFINED. Annual Addition means the sum of all amounts
allocated to the Participant's Account for a Plan Year. Amounts include
contributions (except for rollovers or transfers from another qualified plan),
forfeitures and, if the Participant is a Key Employee (pursuant to Section 13)
for the applicable or any prior Plan Year, medical benefits provided pursuant to
Code section 419A(d)(1). For purposes of this Section 12.1, Account also
includes a Participant's account in all other defined contribution plans
currently or previously maintained by any Related Company. The Plan Year refers
to the year to which the allocation pertains, regardless of when it was
allocated. The Plan Year shall be the Code section 415 limitation year.
12.2 MAXIMUM ANNUAL ADDITION. The Annual Addition to a Participant's
accounts under this Plan and any other defined contribution plan maintained by
any Related Company for any Plan Year shall not exceed the lesser of (1) 25% of
his or her Taxable Income or (2) $30,000 (as adjusted for the cost of living
pursuant to Code section 415(d)).
12.3 CORRECTING AN EXCESS ANNUAL ADDITION. Upon the discovery of an excess
Annual Addition to a Participant's Account (resulting from forfeitures,
allocations, reasonable error in determining Participant compensation or the
amount of elective contributions, or other facts and circumstances acceptable to
the Internal Revenue Service) the excess amount (adjusted to reflect investment
gains) shall be forfeited by the Participant and used as described in Section
8.3.
12.4 CORRECTING A MULTIPLE PLAN EXCESS. If a Participant, whose Account is
credited with an excess Annual Addition, received allocations to more than one
defined contribution plan, the excess shall be corrected by reducing the Annual
Addition to this Plan only after all possible reductions have been made to the
other defined contribution plans.
12.5 DEFINED BENEFIT FRACTION DEFINED. The fraction, for any Plan Year,
where the numerator is the "projected annual benefit," as defined below, and the
denominator is the greater of 125% of the "protected current accrued benefit,"
as defined below, or the normal limit which is the lesser of (1) 125% of the
maximum dollar limitation provided under Code section 415(b)(1)(A) for the Plan
Year or (2) 140% of the amount which may be taken into account under Code
section 415(b)(1)(B) for the Plan Year, where a Participant's:
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(a) projected annual benefit is the annual benefit provided by the
Plan determined pursuant to Code section 415(e)(2)(A), and
(b) protected current accrued benefit in a defined-benefit plan in
existence (1) on July 1, 1982, shall be the accrued annual benefit provided for
under Public Law 97-248, section 235(g)(4), as amended, or (2) on May 6, 1986,
shall be the accrued annual benefit provided for under Public Law 99-514,
section 1106(i)(3).
12.6 DEFINED CONTRIBUTION FRACTION DEFINED. The fraction where the
numerator is the sum of the Participant's Annual Addition for each Plan Year to
date and the denominator is the sum of the "annual amounts" for each year in
which the Participant has performed service with a Related Company. The "annual
amount" for any Plan Year is the lesser of (1) 125% of the Code section
415(c)(1)(A) dollar limitation (determined without regard to subsection (c)(6))
in effect for the Plan Year and (2) 140% of the Code section 415(c)(1)(B) amount
in effect for the Plan Year, where:
(a) each Annual Addition is determined pursuant to the Code section
415(c) rules in effect for such Plan Year, and
(b) the numerator is adjusted pursuant to Public Law 97-248, section
235(g)(3), as amended, or Public Law 99-514, section 1106(i)(4).
12.7 COMBINED PLAN LIMITS AND CORRECTION. If a Participant has also
participated in a defined benefit plan maintained by a Related Company, the sum
of the Defined Benefit Fraction and the Defined Contribution Fraction for any
Plan Year may not exceed 1.0. If the combined fraction exceeds 1.0 for any Plan
Year, the Participant's benefit under any defined benefit plan (to the extent it
has not been distributed or used to purchase an annuity contract) shall be
limited so that the combined fraction does not exceed 1.0 before any defined
contribution limits shall be enforced.
13. TOP HEAVY RULES
13.1 TOP HEAVY DEFINITIONS. When capitalized, the following words and
phrases have the following meanings when used in this Section:
(a) AGGREGATION GROUP. The Aggregation Group is the group consisting
of each qualified plan of an Employer (and its Related Companies) (1) in which a
Key Employee is a participant or was a participant during the determination
period (regardless of whether such plan has terminated), or (2) which enables
another plan in the group to meet the requirements of Code sections 401(a)(4) or
410(b). The Employer may also treat any other qualified plan as part of the
group if the group would continue to meet the requirements of Code sections
401(a)(4) and 410(b) with such plan being taken into account.
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(b) DETERMINATION DATE. The Determination Date is last Trade Date of
the preceding Plan Year or, in the case of the Plan's first year, the last Trade
Date of the first Plan Year.
(c) KEY EMPLOYEE. A Key Employee is a current or former Employee (or
his or her Beneficiary) who at any time during the five year period ending on
the Determination Date was:
(i) an officer of a Related Company whose Compensation (i)
exceeds 50% of the amount in effect under Code section 415(b)(1)(A) and (ii)
places him within the following highest paid group of officers:
Number of Employees Number of
Not Excluded Under Code Highest Paid
Section 414(q)(8) fficers Included
Less than 30 3
30 to 500 10% of the number of
Employees not excluded
under Code section
414(q)(8)
More than 500 50
(ii) a more than 5% Owner,
(iii) a more than 1% Owner whose Compensation exceeds $150,000,
or
(iv) a more than 0.5% Owner who is among the 10 Employees owning
the largest interest in a Related Company and whose Compensation exceeds
the amount in effect under Code section 415(c)(1)(A).
(d) PLAN BENEFIT. Plan Benefit is the sum as of the Determination
Date of (1) an Employee's Account, (2) the present value of his or her other
accrued benefits provided by all qualified plans within the Aggregation Group,
and (3) the aggregate distributions made within the five year period ending on
such date. Plan Benefits shall exclude rollover contributions and plan to plan
transfers made after December 31, 1983 which are both employee initiated and
from a plan maintained by a non-related employer.
(e) TOP HEAVY. The Plan is Top Heavy if the Plan Benefits of Key
Employees account for more than 60% of the Plan Benefits of all Employees who
have
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performed services at any time during the five year period ending on the
Determination Date. The Plan Benefits of Employees who were, but are no longer,
Key Employees (because they have not been an officer or Owner during the five
year period), are excluded in the determination.
13.2 SPECIAL CONTRIBUTIONS.
(a) Minimum Contribution Requirement. For each Plan Year in which the
Plan is Top Heavy, the Employer shall not allow any contributions (other than a
rollover contribution from a plan maintained by a non-related employer, if
otherwise permitted under the Plan) to be made by or on behalf of any Key
Employee unless the Employer makes a contribution on behalf of all Participants
who were Eligible Employees as of the last day of the Plan Year in an amount
equal to at least 3% of each such Participant's Taxable Income. The
Administrator shall remove any such contributions (including applicable
investment gain or loss) credited to a Key Employee's Account in violation of
the foregoing rule and return them to the Employer or Employee to the extent
permitted by the Limited Return of Contributions paragraph of Section 15.
(b) Overriding Minimum Benefit. Notwithstanding, contributions shall
be permitted on behalf of Key Employees if the Employer also maintains a defined
benefit plan which automatically provides a benefit which satisfies the Code
section 416(c)(1) minimum benefit requirements, including the adjustment
provided in Code section 416(h)(2)(A), if applicable. If this Plan is part of an
aggregation group in which a Key Employee is receiving a benefit and no minimum
is provided in any other plan, a minimum contribution of at least 3% of Taxable
Income shall be provided to the Participants specified in the preceding
paragraph. In addition, the Employer may offset a defined benefit minimum by
contributions made to this Plan.
13.3 ADJUSTMENT TO COMBINED LIMITS FOR DIFFERENT PLANS. For each Plan
Year in which the Plan is Top Heavy, 100% shall be substituted for 125% in
determining the Defined Benefit Fraction and the Defined Contribution Fraction.
14. Plan Administration
14.1 PLAN DELINEATES AUTHORITY AND RESPONSIBILITY. Plan fiduciaries
include the Company, the Administrator, the Committee and/or the Trustee, as
applicable, whose specific duties are delineated in this Plan and in the Trust.
In addition, Plan fiduciaries also include any other person to whom fiduciary
duties or responsibility is delegated with respect to the Plan. Any person or
group may serve in more than one fiduciary capacity with respect to the Plan. To
the extent permitted under ERISA section 405, no fiduciary shall be liable for a
breach by another fiduciary.
14.2 FIDUCIARY STANDARDS. Each fiduciary shall:
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(a) discharge his or her duties in accordance with this Plan to the
extent they are consistent with ERISA;
(b) use that degree of care, skill, prudence and diligence that a
prudent person acting in a like capacity and familiar with such matters would
use in the conduct of an enterprise of a like character and with like aims;
(c) act with the exclusive purpose of providing benefits to
Participants and their Beneficiaries, and defraying reasonable expenses of
administering the Plan;
(d) diversify Plan investments, to the extent such fiduciary is
responsible for directing the investment of Plan assets, so as to minimize the
risk of large losses, unless under the circumstances it is clearly prudent not
to do so; and
(e) treat similarly situated Participants and Beneficiaries in a
uniform and nondiscriminatory manner.
14.3 COMPANY IS ERISA PLAN ADMINISTRATOR. The Company is the plan
administrator, within the meaning of ERISA section 3(16), which is responsible
for compliance with all reporting and disclosure requirements, except those that
are explicitly the responsibility of the Trustee under applicable law. The
Administrator and/or Committee shall have any necessary authority to carry out
such functions through the actions of the Administrator, duly appointed officers
of the Company, and/or the Committee.
14.4 ADMINISTRATOR DUTIES. The Administrator shall have the discretionary
authority to construe this Plan and to do all things necessary or convenient to
effect the intent and purposes thereof, whether or not such powers are
specifically set forth in this Plan. Actions taken in good faith by the
Administrator shall be conclusive and binding on all interested parties, and
shall be given the maximum possible deference allowed by law. In addition to
the duties listed elsewhere in this Plan, the Administrator's authority shall
include, but not be limited to, the discretionary authority to:
(a) determine who is eligible to participate, the allocation of
Contributions and the eligibility for distributions;
(b) provide each Participant with a summary plan description no later
than 90 days after he or she has become a Participant (or such other period
permitted under ERISA section 104(b)(1)), as well as informing each Participant
of any material modification to the Plan in a timely manner;
(c) make a copy of the following documents available to Participants
during normal work hours: this Plan, (including subsequent amendments), the
Trust, all
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annual and interim reports of the Trustee related to the entire Plan, the latest
annual report and the summary plan description;
(d) determine the fact of a Participant's death and of any
Beneficiary's right to receive the deceased Participant's interest based upon
such proof and evidence as it deems necessary;
(e) establish and review at least annually a funding policy bearing
in mind both the short-run and long-run needs and goals of the Plan and to the
extent Participants may direct their own investments, the funding policy shall
focus on which Investment Funds are available for Participants to use; and
(f) adjudicate claims pursuant to the claims procedure described in
Section 15.
14.5 ADVISORS MAY BE RETAINED. The Administrator may retain such agents
and advisors (including attorneys, accountants, actuaries, consultants, record
keepers, investment counsel and administrative assistants) as it considers
necessary to assist it in the performance of its duties. The Administrator shall
also comply with the bonding requirements of ERISA section 412.
14.6 DELEGATION OF ADMINISTRATOR DUTIES. The Company, as Administrator of
the Plan, has appointed a Committee to administer the Plan on its behalf. Any
Committee member appointed by the Company shall serve at the pleasure of the
Company, but may resign by written notice to the Company. Committee members
shall serve without compensation from the Plan for such services. Except to the
extent that the Company otherwise provides, any delegation of duties to a
Committee shall carry with it the full discretionary authority of the
Administrator to complete such duties.
14.7 COMMITTEE OPERATING RULES.
(a) ACTIONS OF MAJORITY. Any act delegated by the Company to the
Committee may be done by a majority of its members. The majority may be
expressed by a vote at a meeting or in writing without a meeting, and a majority
action shall be equivalent to an action of all Committee members.
(b) MEETINGS. The Committee shall hold meetings upon such notice,
place and times as it determines necessary to conduct its functions properly.
15. RIGHTS, PROTECTION, CONSTRUCTION AND JURISDICTION
15.1 PLAN DOES NOT AFFECT EMPLOYMENT RIGHTS. The Plan does not provide any
employment rights to any Employee. The Employer expressly reserves the right to
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discharge an Employee at any time, with or without cause, without regard to the
effect such discharge would have upon the Employee's interest in the Plan.
15.2 LIMITED RETURN OF CONTRIBUTIONS. Except as provided in this
paragraph, (1) Plan assets shall not revert to the Employer nor be diverted for
any purpose other than the exclusive benefit of Participants or their
Beneficiaries; and (2) a Participant's vested interest shall not be subject to
divestment. As provided in ERISA section 403(c)(2), the actual amount of a
Contribution made by the Employer (or the current value of the Contribution if a
net loss has occurred) may revert to the Employer if:
(a) such Contribution is made by reason of a mistake of fact;
(b) initial qualification of the Plan under Code section 401(a) is
not received and a request for such qualification is made within the time
prescribed under Code section 401(b) (the existence of and Contributions under
the Plan are hereby conditioned upon such qualification); or
(c) such Contribution is not deductible under Code section 404 (such
Contributions are hereby conditioned upon such deductibility) in the
taxable year of the Employer for which the Contribution is made.
The reversion to the Employer must be made (if at all) within one year of the
mistaken payment of the Contribution, the date of denial of qualification, or
the date of disallowance of deduction, as the case may be. A Participant shall
have no rights under the Plan with respect to any such reversion.
15.3 ASSIGNMENT AND ALIENATION. As provided by Code section 401(a)(13) and
to the extent not otherwise required by law, no benefit provided by the Plan may
be anticipated, assigned or alienated, except to create, assign or recognize a
right to any benefit with respect to a Participant pursuant to a QDRO.
15.4 FACILITY OF PAYMENT. If a Plan benefit is due to be paid to a minor
or if the Administrator reasonably believes that any payee is legally incapable
of giving a valid receipt and discharge for any payment due him or her, the
Administrator shall have the payment of the benefit, or any part thereof, made
to the person (or persons or institution) whom it reasonably believes is caring
for or supporting the payee, unless it has received due notice of claim therefor
from a duly appointed guardian or conservator of the payee. Any payment shall to
the extent thereof, be a complete discharge of any liability under the Plan to
the payee.
15.5 REALLOCATION OF LOST PARTICIPANT'S ACCOUNTS. If the Administrator
cannot locate a person entitled to payment of a Plan benefit after a reasonable
search, the Administrator may at any time thereafter treat such person's Account
as forfeited and use
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such amount as described in Section 8.3. If such person subsequently presents
the Administrator with a valid claim for the benefit, such person shall be paid
the amount treated as forfeited, plus the interest that would have been earned
in the Sweep Account to the date of determination. The Administrator shall pay
the amount through an additional amount contributed by the Employer or direct
the Trustee to pay the amount from the Forfeiture Account.
15.6 CLAIMS PROCEDURE.
(a) RIGHT TO MAKE CLAIM. An interested party who disagrees with the
Administrator's determination of his or her right to Plan benefits must submit a
written claim and exhaust this claim procedure before legal recourse of any type
is sought. The claim must include the important issues the interested party
believes support the claim. The Administrator, pursuant to the authority
provided in this Plan, shall either approve or deny the claim.
(b) PROCESS FOR DENYING A CLAIM. The Administrator's partial or
complete denial of an initial claim must include an understandable, written
response covering (1) the specific reasons why the claim is being denied (with
reference to the pertinent Plan provisions) and (2) the steps necessary to
perfect the claim and obtain a final review.
(c) APPEAL OF DENIAL AND FINAL REVIEW. The interested party may make
a written appeal of the Administrator's initial decision, and the Administrator
shall respond in the same manner and form as prescribed for denying a claim
initially.
(d) TIME FRAME. The initial claim, its review, appeal and final
review shall be made in a timely fashion, subject to the following timetable:
Days to Respond
Action from Last Action
Administrator determines benefit NA
Interested party files initial request 60 days
Administrator's initial decision 90 days
Interested party requests final review 60 days
Administrator's final decision 60 days
However, the Administrator may take up to twice the maximum response time for
its initial and final review if it provides an explanation within the normal
period of why an extension is needed and when its decision shall be forthcoming.
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15.7 CONSTRUCTION. Headings are included for reading convenience. The text
shall control if any ambiguity or inconsistency exists between the headings and
the text. The singular and plural shall be interchanged wherever appropriate.
References to Participant shall include Beneficiary when appropriate and even if
not otherwise already expressly stated.
15.8 JURISDICTION AND SEVERABILITY. The Plan shall be construed, regulated
and administered under ERISA and other applicable federal laws and, where not
otherwise preempted, by the laws of the State of California. If any provision of
this Plan shall become invalid or unenforceable, that fact shall not affect the
validity or enforceability of any other provision of this Plan. All provisions
of this Plan shall be so construed as to render them valid and enforceable in
accordance with their intent.
16. AMENDMENT, MERGER, DIVESTITURES AND TERMINATION
16.1 AMENDMENT. The Company reserves the right to amend this Plan at any
time, to any extent and in any manner it may deem necessary or appropriate. The
Company shall be responsible for adopting any amendments necessary to maintain
the qualified status of this Plan under Code sections 401(a) and 501(a). If the
Committee is acting as the Administrator in accordance with Section 14.6, it
shall have the authority to adopt Plan amendments which have no substantial
adverse financial impact upon any Employer or the Plan. All interested parties
shall be bound by any amendment, provided that no amendment shall:
(a) become effective unless it has been adopted in accordance with
the procedures set forth in Section 16.5;
(b) except to the extent permissible under ERISA and the Code, make
it possible for any portion of the Plan assets to revert to an Employer or to be
used for, or diverted to, any purpose other than for the exclusive benefit of
Participants and Beneficiaries entitled to Plan benefits and to defray
reasonable expenses of administering the Plan; nor
(c) decrease the rights of any Employee to benefits accrued
(including the elimination of optional forms of benefits) to the date on which
the amendment is adopted, or if later, the date upon which the amendment becomes
effective, except to the extent permitted under ERISA and the Code.
16.2 MERGER. This Plan may not be merged or consolidated with, nor may its
assets or liabilities be transferred to, another plan unless each Participant
and Beneficiary would, if the resulting plan were then terminated, receive a
benefit just after the merger,
30
<PAGE>
consolidation or transfer which is at least equal to the benefit which would be
received if either plan had terminated just before such event.
16.3 DIVESTITURES. In the event of a sale by an Employer which is a
corporation of: (1) substantially all of the Employer's assets used in a trade
or business to an unrelated corporation, or (2) a sale of such Employer's
interest in a subsidiary to an unrelated entity or individual, lump sum
distributions shall be permitted from the Plan, except as provided below, to
Participants with respect to Employees who continue employment with the
corporation acquiring such assets or who continue employment with such
subsidiary, as applicable.
Notwithstanding, distributions shall not be permitted if the purchaser
agrees, in connection with the sale, to be substituted as the Company as the
sponsor of the Plan or to accept a transfer of the assets and liabilities
representing the Participants' benefits into a plan of the purchaser or a plan
to be established by the purchaser.
16.4 PLAN TERMINATION. The Company may, at any time and for any reason,
terminate the Plan in accordance with the procedures set forth in Section 16.5,
or completely discontinue contributions. Upon either of these events, or in the
event of a partial termination of the Plan within the meaning of Code section
411(d)(3), the Accounts of each affected Employee who has not yet incurred a
Break in Service shall be fully vested. Lump sum distributions shall be made in
accordance with the terms of the Plan as in effect at the time of the Plan's
termination or as thereafter amended provided that a post-termination amendment
shall not be effective to the extent that it violates Section 16.1 unless it is
required in order to maintain the qualified status of the Plan upon its
termination. The Employer's authority shall continue beyond the Plan's
termination date until all Trust assets have been liquidated and distributed.
16.5 AMENDMENT AND TERMINATION PROCEDURES. The following procedural
requirements shall govern the adoption of any amendment or termination (a
"Change") of this Plan:
(a) The Company may adopt any Change by action of its board of
directors in accordance with its normal procedures.
(b) The Committee, if acting as Administrator in accordance with
Section 14.6, may adopt any amendment within the scope of its authority provided
under Section 16.1 and in the manner specified in Section 14.7(a).
(c) Any Change must be (1) set forth in writing, and (2) signed and
dated by an authorized officer of the Company or, in the case of an amendment
adopted by the Committee, at least one of its members.
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(d) If the effective date of any Change is not specified in the
document setting forth the Change, it shall be effective as of the date it is
signed by the last person whose signature is required under clause (2) above,
except to the extent that another effective date is necessary to maintain the
qualified status of this Plan under Code sections 401(a) and 501(a).
16.6 TERMINATION OF EMPLOYER'S PARTICIPATION. Any Employer may, at any
time and for any reason, terminate its Plan participation by action of its board
of directors in accordance with its normal procedures. Written notice of such
action shall be signed and dated by an authorized officer of the Employer and
delivered to the Company. If the effective date of such action is not specified,
it shall be effective on, or as soon as reasonably practicable after, the date
of delivery. Upon the Employer's request, the Company may instruct the Trustee
and Administrator to spin off all affected Accounts and underlying assets into a
separate qualified plan under which the Employer shall assume the powers and
duties of the Company. Alternatively, the Company may treat the event as a
partial termination described above or continue to maintain the Accounts under
the Plan.
APPENDIX A
INVESTMENT FUNDS
I. Investment Funds Available to Senior Participants
The Investment Funds offered under the Plan to Senior Participants as of
the Effective Date include this set of daily valued funds:
Category Funds
Income U.S. Treasury Allocation
Equity Company Stock
S&P 500 Stock
Aim Constellation
Combination LifePath
32
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APPENDIX B
PAYMENT OF PLAN FEES AND EXPENSES
As of the Effective Date, payment of Plan fees and expenses shall be as follows:
(1) Investment Management Fees: These are paid by Participants in that
management fees reduce the investment return reported and credited to
Participants, except that the Employer shall pay the fees related to the Company
Stock Fund. These are paid by the Employer on a quarterly basis.
Recordkeeping Fees: These are paid by the Employer on a quarterly basis, except
that with regard to a Participant who is no longer an Employee or a Beneficiary,
these are paid by the Participant and are assessed monthly and billed/collected
from Accountsquarterly.
Investment Fund Election Changes: For each Investment Fund election change by
Senior Participant, in excess of 4 changes per year, a $10 fee shall be assessed
and billed/collected quarterly from the Senior Participant's Account.
Periodic Installment Payment Fees: A $3.00 per check fee shall be assessed and
billed/collected quarterly from the Participant's Account.
Additional Fees Paid by Employer: All other Plan related fees and expenses
shall be paid by the Employer. To the extent that the Administrator later
elects that any such fees shall be borne by Participants, estimates of the fees
shall be determined and reconciled, at least annually, and the fees shall be
assessed monthly and billed/collected from Accounts quarterly.
33
<PAGE>
EXHIBIT 10.30
Silicon Valley Bank
Money Purchase Pension
Plan and Trust Agreement
As Amended and Restated
Effective January 1, 1996
<PAGE>
Silicon Valley Bank Money Purchase Pension Plan and Trust
As Amended and Restated Effective January 1, 1996
Silicon Valley Bank previously established the Silicon Valley Bank Money
Purchase Pension Plan effective January 1, 1995, for the benefit of eligible
employees of the Company and its participating affiliates.The Plan is intended
to constitute a qualified money purchase pension plan, as described in Code
section 401(a).
The provisions of this Plan and Trust relating to the Trustee constitute the
trust agreement which is entered into by and between Silicon Valley Bank and
BZW Barclays Global Investors, National Association. The Trust is intended to
be tax exempt as described under Code section 501(a).
The Silicon Valley Bank Money Purchase Pension Plan and Trust, as set forth in
this document, is hereby amended and restated effective as of January 1, 1996.
Date: May 28, 1996 Silicon Valley Bank
By: /s/ Glen G. Simmons
--------------------------------------
Title: Executive V.P. Human Resources/
Administration
The trust agreement set forth in those provisions of this Plan and Trust which
relate to the Trustee is hereby executed.
Date: May 30, 1996 BZW Barclays Global Investors, National
Association
By: /s/ Dolores Upton
--------------------------------------
Title: Principal
Date: May 30, 1996 BZW Barclays Global Investors, National
Association
By: /s/ Lisa M. Maloney
--------------------------------------
Title: Principal
<PAGE>
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
1 DEFINITIONS............................................................ 1
-----------
2 ELIGIBILITY............................................................ 8
-----------
2.1 Eligibility..................................................... 8
2.2 Ineligible Employees............................................ 8
2.3 Ineligible or Former Participants............................... 8
3 PARTICIPANT CONTRIBUTIONS.............................................. 9
-------------------------
4 TRANSFERS FROM AND TO OTHER QUALIFIED PLANS............................ 10
-------------------------------------------
4.1 Transfers From and To Other Qualified Plans..................... 10
5 EMPLOYER CONTRIBUTIONS................................................. 11
----------------------
5.1 Money Purchase Pension Contributions............................ 11
6 ACCOUNTING............................................................. 12
----------
6.1 Individual Participant Accounting............................... 12
6.2 Sweep Account is Transaction Account............................ 12
6.3 Trade Date Accounting and Investment Cycle...................... 12
6.4 Accounting for Investment Funds................................. 12
6.5 Payment of Fees and Expenses.................................... 12
6.6 Error Correction................................................ 13
6.7 Participant Statements.......................................... 14
6.8 Special Accounting During Conversion Period..................... 14
6.9 Accounts for QDRO Beneficiaries................................. 14
7 INVESTMENT AUTHORITY AND INVESTMENT FUNDS.............................. 15
-----------------------------------------
7.1 General Investment Authority.................................... 15
7.2 Special Investment Authority Provisions Related to Senior
Participants.................................................... 15
8 VESTING & FORFEITURES.................................................. 16
---------------------
8.1 Full Vesting Upon Certain Events................................ 16
8.2 Vesting Schedule................................................ 16
8.3 Forfeitures..................................................... 16
8.4 Rehired Employees............................................... 16
9 PARTICIPANT LOANS...................................................... 18
-----------------
10 IN-SERVICE WITHDRAWALS................................................. 19
----------------------
11 DISTRIBUTIONS ONCE EMPLOYMENT ENDS OR AS REQUIRED BY LAW............... 20
--------------------------------------------------------
11.1 Benefit Information, Notices and Election....................... 20
11.2 Spousal Consent................................................. 20
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
11.3 Payment Form and Medium......................................... 20
11.4 Distribution of Small Amounts................................... 21
11.5 Source and Timing of Distribution Funding....................... 21
11.6 Deemed Distribution............................................. 22
11.7 Latest Commencement Permitted................................... 22
11.8 Payment Within Life Expectancy.................................. 22
11.9 Incidental Benefit Rule......................................... 23
11.10 Payment to Beneficiary.......................................... 23
11.11 Beneficiary Designation......................................... 23
11.12 QJSA and QPSA Information and Elections......................... 24
12 MAXIMUM CONTRIBUTION AND BENEFIT LIMITATIONS........................... 26
--------------------------------------------
12.1 "Annual Addition" Defined....................................... 26
12.2 Maximum Annual Addition......................................... 26
12.3 Correcting an Excess Annual Addition............................ 26
12.4 Correcting a Multiple Plan Excess............................... 26
12.5 "Defined Benefit Fraction" Defined.............................. 26
12.6 "Defined Contribution Fraction" Defined......................... 27
12.7 Combined Plan Limits and Correction............................. 27
13 TOP HEAVY RULES........................................................ 28
---------------
13.1 Top Heavy Definitions........................................... 28
13.2 Special Contributions........................................... 29
13.3 Adjustment to Combined Limits for Different Plans............... 30
14 PLAN ADMINISTRATION.................................................... 31
-------------------
14.1 Plan Delineates Authority and Responsibility.................... 31
14.2 Fiduciary Standards............................................. 31
14.3 Company is ERISA Plan Administrator............................. 31
14.4 Administrator Duties............................................ 32
14.5 Advisors May be Retained........................................ 32
14.6 Delegation of Administrator Duties.............................. 33
14.7 Committee Operating Rules....................................... 33
15 MANAGEMENT OF INVESTMENTS.............................................. 34
-------------------------
15.1 Trust Agreement................................................. 34
15.2 Investment Funds................................................ 34
15.3 Authority to Hold Cash.......................................... 35
15.4 Trustee to Act Upon Instructions................................ 35
15.5 Administrator Has Right to Vote Registered Investment Company
Shares.......................................................... 35
15.6 Custom Fund Investment Management............................... 35
15.7 Master Custom Fund.............................................. 36
15.8 Authority to Segregate Assets................................... 36
15.9 Maximum Permitted Investment in Company Stock................... 36
15.10 Participants Have Right to Vote and Tender Company Stock........ 37
15.11 Registration and Disclosure for Company Stock................... 37
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
16 TRUST ADMINISTRATION................................................... 38
--------------------
16.1 Trustee to Construe Trust....................................... 38
16.2 Trustee To Act As Owner of Trust Assets......................... 38
16.3 United States Indicia of Ownership.............................. 38
16.4 Tax Withholding and Payment..................................... 39
16.5 Trust Accounting................................................ 39
16.6 Valuation of Certain Assets..................................... 39
16.7 Legal Counsel................................................... 40
16.8 Fees and Expenses............................................... 40
16.9 Trustee Duties and Limitations.................................. 40
17 RIGHTS, PROTECTION, CONSTRUCTION AND JURISDICTION...................... 41
-------------------------------------------------
17.1 Plan Does Not Affect Employment Rights.......................... 41
17.2 Limited Return of Contributions................................. 41
17.3 Assignment and Alienation....................................... 41
17.4 Facility of Payment............................................. 41
17.5 Reallocation of Lost Participant's Accounts..................... 42
17.6 Claims Procedure................................................ 42
17.7 Construction.................................................... 43
17.8 Jurisdiction and Severability................................... 43
17.9 Indemnification by Employer..................................... 43
18 AMENDMENT, MERGER, DIVESTITURES AND TERMINATION........................ 44
-----------------------------------------------
18.1 Amendment....................................................... 44
18.2 Merger.......................................................... 44
18.3 Divestitures.................................................... 44
18.4 Plan Termination................................................ 45
18.5 Amendment and Termination Procedures............................ 45
18.6 Termination of Employer's Participation......................... 46
18.7 Replacement of the Trustee...................................... 46
18.8 Final Settlement and Accounting of Trustee...................... 46
APPENDIX A - INVESTMENT FUNDS............................................... 47
APPENDIX B - PAYMENT OF PLAN FEES AND EXPENSES.............................. 48
</TABLE>
iii
<PAGE>
1 DEFINITIONS
-----------
When capitalized, the words and phrases below have the following meanings
unless different meanings are clearly required by the context:
1.1 "Account". The records maintained for purposes of accounting for a
Participant's interest in the Plan. "Account" refers to the
following account which has been created on behalf of a Participant
to hold Contributions under the Plan:
(a) "Money Purchase Pension Account". An account created to hold
Money Purchase Pension Contributions.
1.2 "Administrator". The Company, which may delegate all or a portion
of the duties of the Administrator under the Plan to a Committee in
accordance with Section 14.6.
1.3 "Beneficiary". The person or persons who is to receive benefits
after the death of the Participant pursuant to the "Beneficiary
Designation" paragraph in Section 11, or as a result of a QDRO.
1.4 "Break in Service". The fifth anniversary (or sixth anniversary if
absence from employment was due to a Parental Leave) of the date on
which a Participant's employment ends.
1.5 "Code". The Internal Revenue Code of 1986, as amended. Reference to
any specific Code section shall include such section, any valid
regulation promulgated thereunder, and any comparable provision of
any future legislation amending, supplementing or superseding such
section.
1.6 "Committee". If applicable, the committee which has been appointed
by the Company to administer the Plan in accordance with Section
14.6.
1.7 "Company". Silicon Valley Bank or any successor by merger, purchase
or otherwise.
1.8 "Company Stock". Shares of common stock of Silicon Valley
Bancshares, the parent company of the Company, its predecessor(s),
or its successors or assigns, or any corporation with or into which
said corporation may be merged, consolidated or reorganized, or to
which a majority of its assets may be sold.
1.9 "Compensation". The sum of a Participant's Taxable Income and
salary reductions, if any, pursuant to Code sections 125,
402(e)(3), 402(h), 403(b), 414(h)(2) or 457 for the Plan Year.
For purposes of determining benefits under this Plan, Compensation
is limited to $150,000, (as adjusted for the cost of living
pursuant to Code sections 401(a)(17) and 415(d)) per Plan Year.
For purposes of the preceding sentence,
1
<PAGE>
in the case of an HCE who is a 5% Owner or one of the 10 most
highly compensated Employees, (i) such HCE and such HCE's family
group (as defined below) shall be treated as a single employee and
the Compensation of each family group member shall be aggregated
with the Compensation of such HCE, and (ii) the limitation on
Compensation shall be allocated among such HCE and his or her
family group members in proportion to each individual's
Compensation before the application of this sentence. For purposes
of this Section, the term "family group" shall mean an Employee's
spouse and lineal descendants who have not attained age 19 before
the close of the year in question.
1.10 "Contribution". An amount contributed to the Plan by the Employer
and allocated by contribution type to Participants' Accounts, as
described in Section 1.1. Contributions to the Plan consist of:
(a) "Money Purchase Pension Contribution". An amount contributed
by the Employer on an eligible Participant's behalf and
allocated on a pay based formula.
1.11 "Conversion Period". The period of converting the prior accounting
system of any plan and trust which is merged into this Plan and
Trust subsequent to the Effective Date, to the accounting system
described in Section 6.
1.12 "Direct Rollover". An Eligible Rollover Distribution that is paid
directly to an Eligible Retirement Plan for the benefit of a
Distributee.
1.13 "Disability". A Participant's mental or physical disability
resulting in termination of employment as evidenced by presentation
of medical evidence satisfactory to the Administrator.
1.14 "Distributee". An Employee or former Employee, the surviving spouse
of an Employee or former Employee and a spouse or former spouse of
an Employee or former Employee determined to be an alternate payee
under a QDRO.
1.15 "Early Retirement Date". The date of a Participant's 55th birthday
and completion of 10 Years of Vesting Service.
1.16 "Effective Date". The date upon which the provisions of this
document become effective. This date is January 1, 1996, unless
stated otherwise. In general, the provisions of this document only
apply to Participants who are Employees on or after the Effective
Date. However, investment and distribution provisions apply to all
Participants with Account balances to be invested or distributed
after the Effective Date.
1.17 "Eligible Employee". An Employee of an Employer, except any
Employee:
(a) whose compensation and conditions of employment are covered by
a collective bargaining agreement to which an Employer is a
party unless the agreement calls for the Employee's
participation in the Plan;
2
<PAGE>
(b) who is treated as an Employee because he or she is a Leased
Employee; or
(c) who is a nonresident alien who (i) either receives no earned
income (within the meaning of Code section 911(d)(2)), from
sources within the United States under Code section 861(a)(3);
or (ii) receives such earned income from such sources within
the United States but such income is exempt from United States
income tax under an applicable income tax convention.
1.18 "Eligible Retirement Plan". An individual retirement account
described in Code section 408(a), an individual retirement annuity
described in Code section 408(b), an annuity plan described in Code
section 403(a), or a qualified trust described in Code section
401(a), that accepts a Distributee's Eligible Rollover
Distribution, except that with regard to an Eligible Rollover
Distribution to a surviving spouse, an Eligible Retirement Plan is
an individual retirement account or individual retirement annuity.
1.19 "Eligible Rollover Distribution". A distribution of all or any
portion of the balance to the credit of a Distributee, excluding a
distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the
life (or life expectancy) of a Distributee or the joint lives (or
joint life expectancies) of a Distributee and the Distributee's
designated Beneficiary, or for a specified period of ten years or
more; a distribution to the extent such distribution is required
under Code section 401(a)(9); and the portion of a distribution
that is not includible in gross income (determined without regard
to the exclusion for net unrealized appreciation with respect to
Employer securities).
1.20 "Employee". An individual who is:
(a) directly employed by any Related Company and for whom any
income for such employment is subject to withholding of income
or social security taxes, or
(b) a Leased Employee.
1.21 "Employer". The Company and any Related Company which adopts this
Plan with the approval of the Company.
1.22 "ERISA". The Employee Retirement Income Security Act of 1974, as
amended. Reference to any specific ERISA section shall include
such section, any valid regulation promulgated thereunder, and any
comparable provision of any future legislation amending,
supplementing or superseding such section.
3
<PAGE>
1.23 "Forfeiture Account". An account holding amounts forfeited by
Participants who have terminated employment with all Related
Companies, invested in interest bearing deposits of the Trustee,
pending disposition as provided in this Plan and Trust and as
directed by the Administrator.
1.24 "HCE" or "Highly Compensated Employee". With respect to each
Employer and its Related Companies, an Employee during the Plan
Year or "lookback year" who (in accordance with Code section
414(q)):
(a) was a more than 5% Owner at any time during the "lookback
year" or Plan Year;
(b) received Compensation during the "lookback year" (or in the
Plan Year if among the 100 Employees with the highest
Compensation for such Year) in excess of (i) $75,000 (as
adjusted for such Year pursuant to Code sections 414(q)(1) and
415(d)), or (ii) $50,000 (as adjusted for such Year pursuant
to Code sections 414(q)(1) and 415(d)) in the case of a member
of the "top-paid group" (within the meaning of Code section
414(q)(4)) for such Year, provided, however, that if the
conditions of Code section 414(q)(12)(B)(ii) are met, the
Company may elect for any Plan Year to apply clause (i) by
substituting $50,000 for $75,000 and not to apply clause (ii);
or
(c) was an officer of a Related Company and received Compensation
during the "lookback year" (or in the Plan Year if among the
100 Employees with the highest Compensation for such Year)
that is greater than 50% of the dollar limitation in effect
under Code section 415(b)(1)(A) and (d) for such Year (or if
no officer has Compensation in excess of the threshold, the
officer with the highest Compensation), provided that the
number of officers shall be limited to 50 Employees (or, if
less, the greater of three Employees or 10% of the Employees).
A former Employee shall be treated as an HCE if (1) such former
Employee was an HCE when he separated from service, or (2) such
former Employee was an HCE in service at any time after attaining
age 55.
The determination of who is an HCE, including the determinations of
the number and identity of Employees in the top-paid group, the top
100 Employees and the number of Employees treated as officers shall
be made in accordance with Code section 414(q).
Pursuant to Code section 414(q), the Company elects as the
"lookback year" the 12 months ending immediately prior to the start
of the Plan Year.
1.25 "Ineligible". The Plan status of an individual during the period in
which he or she is (1) an Employee of a Related Company which is
not then an Employer, (2) an Employee, but not an Eligible
Employee, or (3) not an Employee.
4
<PAGE>
1.26 "Investment Fund" or "Fund". An investment fund as described in
Section 15.2.
1.27 "Leased Employee". An individual who is deemed to be an employee of
any Related Company as provided in Code section 414(n) or (o).
1.28 "Leave of Absence". A period during which an individual is deemed
to be an Employee, but is absent from active employment, provided
that the absence:
(a) was authorized by a Related Company; or
(b) was due to military service in the United States armed forces
and the individual returns to active employment within the
period during which he or she retains employment rights under
federal law.
1.29 "Normal Retirement Date". The date of a Participant's 62nd
birthday.
1.30 "Owner". A person with an ownership interest in the capital,
profits, outstanding stock or voting power of a Related Company
within the meaning of Code section 318 or 416 (which exclude
indirect ownership through a qualified plan).
1.31 "Parental Leave". The period of absence from work by reason of
pregnancy, the birth of an Employee's child, the placement of a
child with the Employee in connection with the child's adoption, or
caring for such child immediately after birth or placement as
described in Code section 410(a)(5)(E).
1.32 "Participant". The Plan status of an Eligible Employee after he or
she completes the eligibility requirements as described in Section
2.1. A Participant's participation continues until his or her
employment with all Related Companies ends and his or her Account
is distributed or forfeited.
1.33 "Pay". All cash compensation, excluding incentive pay (annual
incentive awards, referral fees and other recognition/achievement
awards), paid to an Eligible Employee by an Employer while a
Participant during the current period. Pay excludes reimbursements
or other expense allowances, cash and non-cash fringe benefits,
moving expenses, deferred compensation and welfare benefits.
Pay shall be determined further by excluding amounts contributed by
an Employer pursuant to Code sections 125 and 402(e)(3). Pay is
limited to $150,000 (as adjusted for the cost of living pursuant to
Code sections 401(a)(17) and 415(d)) per Plan Year.
For purposes of the Contributions described in Section 5.1, the
limitations as described in the second paragraph of Section 1.9
shall also apply.
1.34 "Period of Employment". The period beginning on the date an
Employee first performs an hour of service and ending on the date
his or her employment ends. Employment ends on the date the
Employee quits, retires, is discharged,
5
<PAGE>
dies or (if earlier) the first anniversary of his or her absence
for any other reason. The period of absence starting with the date
an Employee's employment temporarily ends and ending on the date he
or she is subsequently reemployed is (1) included in his or her
Period of Employment if the period of absence does not exceed one
year, and (2) excluded if such period exceeds one year.
Period of Employment includes the period prior to a Break in
Service.
An Employee's service with a predecessor or acquired company shall
only be counted in the determination of his or her Period of
Employment for eligibility and/or vesting purposes if (1) the
Company directs that credit for such service be granted, or (2) a
qualified plan of the predecessor or acquired company is
subsequently maintained by any Employer or Related Company.
1.35 "Plan". The Silicon Valley Bank Money Purchase Pension Plan set
forth in this document, as from time to time amended.
1.36 "Plan Year". The annual accounting period of the Plan and Trust
which ends on each December 31.
1.37 "QDRO". A domestic relations order which the Administrator has
determined to be a qualified domestic relations order within the
meaning of Code section 414(p).
1.38 "Reduction in Force". An Employer sponsored program developed to
reduce force on a permanent basis.
1.39 "Related Company". With respect to any Employer, that Employer and
any corporation, trade or business which is, together with that
Employer, a member of the same controlled group of corporations, a
trade or business under common control, or an affiliated service
group within the meaning of Code sections 414(b), (c), (m) or (o),
except that for purposes of Section 12 "within the meaning of Code
sections 414(b), (c), (m) or (o), as modified by Code section
415(h)" shall be substituted for the preceding reference to "within
the meaning of Code section 414(b), (c), (m) or (o)".
1.40 "Senior Participant". A Participant who is age 55 or over.
1.41 "Settlement Date". For each Trade Date, the Trustee's next business
day.
1.42 "Spousal Consent". The written consent given by a spouse to a
Participant's election or waiver of a specified form of benefit or
Beneficiary designation. The spouse's consent must acknowledge the
effect on the spouse of the Participant's election, waiver or
designation, and be duly witnessed by a Plan representative or
notary public. Spousal Consent shall be valid only with respect to
the spouse who signs the Spousal Consent and only for the
particular choice made by the Participant which requires Spousal
Consent. A Participant may revoke (without Spousal Consent) a
prior election, waiver or
6
<PAGE>
designation that required Spousal Consent at any time before
payments begin. Spousal Consent also means a determination by the
Administrator that there is no spouse, the spouse cannot be
located, or such other circumstances as may be established by
applicable law.
1.43 "Sweep Account". The subsidiary Account for each Participant
through which all transactions are processed, which is invested in
interest bearing deposits of the Trustee.
1.44 "Sweep Date". The cut off date and time for receiving instructions
for transactions to be processed on the next Trade Date.
1.45 "Taxable Income". Compensation in the amount reported by the
Employer or a Related Company as "Wages, tips, other compensation"
on Form W-2, or any successor method of reporting under Code
section 6041(d).
1.46 "Trade Date". Each day the Investment Funds are valued, which is
normally every day the assets of such Funds are traded.
1.47 "Trust". The legal entity created by those provisions of this
document which relate to the Trustee. The Trust is part of the Plan
and holds the Plan assets which are comprised of the aggregate of
Participants' Accounts, any unallocated funds invested in deposit
or money market type assets pending allocation to Participants'
Accounts or disbursement to pay Plan fees and expenses and the
Forfeiture Account.
1.48 "Trustee". BZW Barclays Global Investors, National Association.
1.49 "Year of Vesting Service". A 12 month Period of Employment.
Notwithstanding, Years of Vesting Service shall be calculated as
follows if (and only if) it would be of benefit to the Employee:
(a) For service from January 1, 1995, each 12 month Period of
Employment;
(b) For service prior to January 1, 1995, a 12 month period ending
on the anniversary of the date an individual became an
Employee, or as that date may be adjusted as a result of his
or her termination of employment with all Related Companies
and subsequent rehire as an Employee, in which an Employee is
credited with at least 1,000 hours of service, as such term
was defined for this purpose under the terms of the Silicon
Valley Bancshares Employee Stock Ownership Plan as then in
effect prior to the Effective Date.
Years of Vesting Service shall include service credited prior to
January 1, 1995.
7
<PAGE>
2 ELIGIBILITY
-----------
2.1 Eligibility
All Participants as of January 1, 1996 shall continue their
eligibility to participate. Each other Eligible Employee shall
become a Participant on the first January 1, April 1, July 1 or
October 1 after the date he or she attains age 18, and completes
one hour of service.
2.2 Ineligible Employees
If an Employee completes the above eligibility requirements, but is
Ineligible at the time participation would otherwise begin (if he
or she were not Ineligible), he or she shall become a Participant
on the first subsequent date on which he or she is an Eligible
Employee.
2.3 Ineligible or Former Participants
A Participant may not share in Plan Contributions during the period
he or she is Ineligible, but he or she shall continue to
participate for all other purposes. An Ineligible Participant or
former Participant shall automatically become an active Participant
on the date he or she again becomes an Eligible Employee.
8
<PAGE>
3 PARTICIPANT CONTRIBUTIONS
-------------------------
Participant Contributions are not permitted under the Plan.
9
<PAGE>
4 TRANSFERS FROM AND TO OTHER QUALIFIED PLANS
-------------------------------------------
4.1 Transfers From and To Other Qualified Plans
The Administrator may instruct the Trustee to receive assets in
cash or in-kind directly from another qualified plan or transfer
assets in cash or in-kind directly to another qualified plan;
provided that receipt of a transfer should not be directed if:
(a) any amounts are not exempted by Code section 401(a)(11)(B)
from the annuity requirements of Code section 417 unless the
Plan complies with such requirements; or
(b) any amounts include benefits protected by Code section
411(d)(6) which would not be preserved under applicable Plan
provisions.
The Trustee may refuse the receipt of any transfer if:
(a) the Trustee finds the in-kind assets unacceptable; or
(b) instructions for posting amounts to Participants' Accounts are
incomplete.
Such amounts shall be posted to the appropriate Accounts of
Participants as of the date received by the Trustee.
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5 EMPLOYER CONTRIBUTIONS
----------------------
5.1 Money Purchase Pension Contributions
(a) Frequency and Eligibility. For each quarter of the Plan Year,
the Employer shall make a Money Purchase Pension Contribution
on behalf of each Participant who was an Eligible Employee on
the last day of the period. Such Contributions shall also be
made on behalf of each Participant who was an Eligible
Employee at any time during the period but who ceased being an
Employee during the period after having attained his or her
Early Retirement Date, Normal Retirement Date or by reason of
his or her Disability or death.
(b) Allocation Method. The Money Purchase Pension Contribution for
each period, shall be equal to 5% of each eligible
Participant's Pay (including Forfeiture Account amounts
applied as Money Purchase Pension Contributions).
(c) Timing, Medium and Posting. The Employer shall make each
period's Money Purchase Pension Contribution in cash as soon
as administratively feasible, and for purposes of deducting
such Money Purchase Pension Contribution, not later than the
Employer's federal tax filing date, including extensions. The
Trustee shall post such amounts to each Participant's Money
Purchase Pension Account once the total Contribution received
has been balanced against the specific amount to be credited
to each Participant's Money Purchase Pension Account.
11
<PAGE>
6 ACCOUNTING
----------
6.1 Individual Participant Accounting
The Administrator shall maintain an individual set of Accounts for
each Participant in order to reflect transactions both by type of
Account and investment medium. Financial transactions shall be
accounted for at the individual Account level by posting each
transaction to the appropriate Account of each affected
Participant. Participant Account values shall be maintained in
shares for the Investment Funds and in dollars for the Sweep
Account. At any point in time, the Account value shall be
determined using the most recent Trade Date values provided by the
Trustee.
6.2 Sweep Account is Transaction Account
All transactions related to amounts being contributed to or
distributed from the Trust shall be posted to each affected
Participant's Sweep Account. Any amount held in the Sweep Account
shall be credited with interest up until the date on which it is
removed from the Sweep Account.
6.3 Trade Date Accounting and Investment Cycle
Participant Account values shall be determined as of each Trade
Date. For any transaction to be processed as of a Trade Date, the
Trustee must receive instructions for the transaction by the Sweep
Date. Such instructions shall apply to amounts held in the Account
on that Sweep Date. Financial transactions of the Investment Funds
shall be posted to Participants' Accounts as of the Trade Date,
based upon the Trade Date values provided by the Trustee, and
settled on the Settlement Date.
6.4 Accounting for Investment Funds
Investments in each Investment Fund shall be maintained in shares.
The Trustee is responsible for determining the share values of each
Investment Fund as of each Trade Date. To the extent an Investment
Fund is comprised of collective investment funds of the Trustee, or
any other fiduciary to the Plan, the share values shall be
determined in accordance with the rules governing such collective
investment funds, which are incorporated herein by reference. All
other share values shall be determined by the Trustee. The share
value of each Investment Fund shall be based on the fair market
value of its underlying assets.
6.5 Payment of Fees and Expenses
Except to the extent Plan fees and expenses related to Account
maintenance, transaction and Investment Fund management and
maintenance, as set forth below, are paid by the Employer directly,
or indirectly, through the Forfeiture
12
<PAGE>
Account as directed by the Administrator, such fees and expenses
shall be paid as set forth below. The Employer may pay a lower
portion of the fees and expenses allocable to the Accounts of
Participants who are no longer Employees or who are not
Beneficiaries, unless doing so would result in discrimination.
(a) Account Maintenance: Account maintenance fees and expenses,
may include but are not limited to, administrative, Trustee,
government annual report preparation, audit, legal,
nondiscrimination testing and fees for any other special
services. Account maintenance fees shall be charged to
Participants on a per Participant basis provided that no fee
shall reduce a Participant's Account balance below zero.
(b) Transaction: Transaction fees and expenses, may include but
are not limited to, periodic installment payment and
Investment Fund election change fees. Transaction fees shall
be charged to the Participant's Account involved in the
transaction provided that no fee shall reduce a Participant's
Account balance below zero.
(c) Investment Fund Management and Maintenance: Management and
maintenance fees and expenses related to the Investment Funds
shall be charged at the Investment Fund level and reflected in
the net gain or loss of each Fund.
As of the Effective Date, a breakdown of which Plan fees and
expenses shall generally be borne by the Trust (and charged to
individual Participants' Accounts or charged at the Investment Fund
level and reflected in the net gain or loss of each Fund) and those
that shall be paid by the Employer is set forth in Appendix B and
may be changed from time to time by the Administrator, in writing,
without the necessity of amending this Plan and Trust.
The Trustee shall have the authority to pay any such fees and
expenses, which remain unpaid by the Employer for 60 days, from the
Trust.
6.6 Error Correction
The Administrator may correct any errors or omissions in the
administration of the Plan by restoring any Participant's Account
balance with the amount that would be credited to the Account had
no error or omission been made. Funds necessary for any such
restoration shall be provided through payment made by the Employer,
or by the Trustee to the extent the error or omission is
attributable to actions or inactions of the Trustee, or if the
restoration involves an Account holding amounts contributed by an
Employer, the Administrator may direct the Trustee to use amounts
from the Forfeiture Account.
13
<PAGE>
6.7 Participant Statements
The Administrator shall provide Participants with statements of
their Accounts as soon after the end of each quarter of the Plan
Year as administratively feasible.
6.8 Special Accounting During Conversion Period
The Administrator and Trustee may use any reasonable accounting
methods in performing their respective duties during any Conversion
Period. This includes, but is not limited to, the method for
allocating net investment gains or losses and the extent, if any,
to which contributions received by and distributions paid from the
Trust during this period share in such allocation.
6.9 Accounts for QDRO Beneficiaries
A separate Account shall be established for an alternate payee
entitled to any portion of a Participant's Account under a QDRO as
of the date and in accordance with the directions specified in the
QDRO. In addition, a separate Account may be established during
the period of time the Administrator, a court of competent
jurisdiction or other appropriate person is determining whether a
domestic relations order qualifies as a QDRO. Such a separate
Account shall be valued and accounted for in the same manner as any
other Account.
(a) Distributions Pursuant to QDROs. If a QDRO so provides, the
portion of a Participant's Account payable to an alternate
payee may be distributed, in a form as permissible under
Section 11 and Code section 414(p), to the alternate payee at
the time specified in the QDRO, regardless of whether the
Participant is entitled to a distribution from the Plan at
such time.
(b) Investment Direction. Where a separate Account has been
established on behalf of an alternate payee and has not yet
been distributed, the alternate payee may direct the
investment of such Account in the same manner as if he or she
were a Participant.
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<PAGE>
7 INVESTMENT AUTHORITY AND INVESTMENT FUNDS
-----------------------------------------
7.1 General Investment Authority
The Administrator shall be responsible for directing the investment
of all Trust assets, except that a Senior Participant shall be
provided the option to direct the investment of his or her Account
as described in this Section. Except for Participants' Sweep
Accounts, the Trust shall be maintained in one or more Investment
Funds. The Administrator shall select the Investment Funds and may
change the number or composition of the Investment Funds, subject
to the terms and conditions agreed to with the Trustee.
7.2 Special Investment Authority Provisions Related to Senior
Participants
A Senior Participant may direct the investment of the balance in
his or her Account in any combination of one or any number of the
Investment Funds offered in accordance with the procedures
established by the Administrator and Trustee. Any amount deposited
to a Senior Participant's Account shall be invested as directed by
the Administrator, until otherwise directed by the Senior
Participant. During any Conversion Period, Trust assets may be
held in any investment vehicle permitted by the Plan, as directed
by the Administrator, irrespective of a Senior Participant's
investment elections.
The Administrator shall select the Investment Funds offered to
Senior Participants and may change the number or composition of the
Investment Funds, subject to the terms and conditions agreed to
with the Trustee. A Senior Participant may change his or her
investment election at any time in accordance with the procedures
established by the Administrator and Trustee. Investment elections
received by the Trustee by the Sweep Date shall be effective on the
following Trade Date. A reasonable processing fee may be charged
directly to a Senior Participant's Account for Investment Fund
election changes in excess of a specified number per year as
determined by the Administrator.
A Senior Participant shall be solely responsible for the selection
of his or her Investment Fund choices. No fiduciary with respect
to the Plan is empowered to advise a Senior Participant as to the
manner in which his or her Account is to be invested, and the fact
that an Investment Fund is offered shall not be construed to be a
recommendation for investment.
As of the Effective Date, a list of the Investment Funds offered
under the Plan to Senior Participants is set forth in Appendix A,
and may be changed from time to time by the Administrator, in
writing, and as agreed to by the Trustee, without the necessity of
amending this Plan and Trust.
15
<PAGE>
8 VESTING & FORFEITURES
---------------------
8.1 Full Vesting Upon Certain Events
A Participant's entire Account shall become fully vested once he or
she has attained his or her Normal Retirement Date as an Employee
or upon his or her terminating employment with all Related
Companies due to a Reduction in Force or his or her Disability or
death.
8.2 Vesting Schedule
In addition to the vesting provided above, a Participant's Money
Purchase Pension Account shall become vested in accordance with the
following schedule:
<TABLE>
<CAPTION>
YEARS OF VESTING VESTED
SERVICE PERCENTAGE
---------------- -----------
<S> <C>
Less than 1 0%
1 but less than 2 20%
2 but less than 3 40%
3 but less than 4 60%
4 but less than 5 80%
5 or more 100%
</TABLE>
If this vesting schedule is changed, the vested percentage for each
Participant shall not be less than his or her vested percentage
determined as of the last day prior to this change, and for any
Participant with at least three Years of Vesting Service when the
schedule is changed, vesting shall be determined using the more
favorable vesting schedule.
8.3 Forfeitures
A Participant's non-vested Account balance shall be forfeited as of
the Settlement Date following the Sweep Date on which the
Administrator has reported to the Trustee that the Participant's
employment has terminated with all Related Companies. Forfeitures
from all Employer Contribution Accounts shall be transferred to and
maintained in a single Forfeiture Account, which shall be invested
in interest bearing deposits of the Trustee. Forfeiture Account
amounts shall be utilized to restore Accounts, to pay Plan fees and
expenses at the discretion of the Administrator and to reduce Money
Purchase Pension Contributions as directed by the Administrator.
8.4 Rehired Employees
(a) Service. If a former Employee is rehired, all Periods of
Employment credited when his or her employment last
terminated shall be counted in determining his or her vested
interest.
16
<PAGE>
(b) Account Restoration. If a former Employee is rehired before he
or she has a Break in Service, the amount forfeited when his
or her employment last terminated shall be restored to his or
her Account. The restoration shall include the interest which
would have been credited had such forfeiture been invested in
the Sweep Account from the date forfeited until the date the
restoration amount is restored. The amount shall come from the
Forfeiture Account to the extent possible, and any additional
amount needed shall be contributed by the Employer. The vested
interest in his or her restored Account shall then be equal
to:
V% times (AB plus D) minus D
where:
V% = current vested percentage
AB = current account balance
D = amount previously distributed
17
<PAGE>
9 PARTICIPANT LOANS
-----------------
Loans to Participants from the Plan are not permitted.
18
<PAGE>
10 IN-SERVICE WITHDRAWALS
----------------------
In-service withdrawals to a Participant who is an Employee are not
permitted other than as required by law pursuant to the terms and
conditions as set forth in Section 11.
19
<PAGE>
11 DISTRIBUTIONS ONCE EMPLOYMENT ENDS OR AS REQUIRED BY LAW
---------------------------------------------------------
11.1 Benefit Information, Notices and Election
A Participant, or his or her Beneficiary in the case of his or her
death, shall be provided with information regarding all optional
times and forms of distribution available, to include the notices
prescribed by Code section 402(f) and Code section 411(a)(11).
Subject to the other requirements of this Section, a Participant,
or his or her Beneficiary in the case of his or her death, may
elect, in such manner and with such advance notice as prescribed by
the Administrator, to have his or her vested Account balance paid
to him or her beginning upon any Settlement Date following the
Participant's termination of employment with all Related Companies
or, if earlier, at the time required by law as set forth in Section
11.7.
A distribution may commence less than 30 days, but more than seven
days if such distribution is one to which Code sections 401(a)(11)
and 417 apply, after the aforementioned notices are provided, if:
(a) the Participant is clearly informed that he or she has the
right to a period of at least 30 days after receipt of such
notices to consider the decision as to whether to elect a
distribution and if so to elect a particular form of
distribution and to elect or not elect a Direct Rollover for
all or a portion, if any, of his or her distribution which
shall constitute an Eligible Rollover Distribution;
(b) the Participant after receiving such notices, affirmatively
elects a distribution and a Direct Rollover for all or a
portion, if any, of his or her distribution which shall
constitute an Eligible Rollover Distribution or alternatively
elects to have all or a portion made payable directly to him
or her, thereby not electing a Direct Rollover for all or a
portion thereof; and
(c) if such distribution is one to which Code sections 401(a)(11)
and 417 apply, the Participant's election includes Spousal
Consent.
11.2 Spousal Consent
A Participant is required to obtain Spousal Consent in order to
receive a distribution under the Plan, except with regard to a
distribution made to a Participant without his or her consent.
11.3 Payment Form and Medium
Except to the extent otherwise provided by Section 11.4, a married
Participant's benefit shall be paid in the form of an immediate
qualified joint and 50% survivor annuity with the Participant's
spouse as the joint annuitant
20
<PAGE>
and a single Participant's or surviving spouse Beneficiary's
benefit shall be paid in the form of a single life annuity.
Notwithstanding, except to the extent otherwise provided by Section
11.4 and subject to the requirements of Section 11.12, he or she
may instead elect:
(a) a single lump sum, or
(b) a portion paid in a lump sum, and the remainder paid later, or
(c) periodic installments over a period not to exceed the life
expectancy of the Participant and his or her Beneficiary, or
(d) a single life annuity or a joint and 50% or 100% survivor
annuity.
Any annuity option permitted shall be provided through the purchase
of a non-transferable single premium contract from an insurance
company which must conform to the terms of the Plan and which shall
be distributed to the Participant or Beneficiary in complete
satisfaction of the benefit due.
Distributions (other than annuity contracts) shall be made in cash,
or if a Participant so elects, payment may be made in the form of
whole shares of Company Stock and cash in lieu of fractional shares
to the extent invested in the Company Stock Fund. With regard to
the portion of a distribution representing an Eligible Rollover
Distribution, a Distributee may elect a Direct Rollover for all or
a portion of such amount.
11.4 Distribution of Small Amounts
If after a Participant's employment with all Related Companies
ends, the Participant's vested Account balance is $3,500 or less,
and if at the time of any prior in-service withdrawal or
distribution the Participant's vested Account balance did not
exceed $3,500, the Participant's benefit shall be paid as a single
lump sum as soon as administratively feasible in accordance with
procedures prescribed by the Administrator.
11.5 Source and Timing of Distribution Funding
A distribution to a Participant shall be made solely from the
assets of his or her own Account and shall be based on the Account
values as of the Trade Date the distribution is processed. The
available assets shall be determined first by Account type and then
within each Account used for funding a distribution, amounts shall
first be taken from the Sweep Account and then taken by Investment
Fund in direct proportion to the market value of the Participant's
interest in each Investment Fund as of the Trade Date on which the
distribution is processed.
21
<PAGE>
The distribution shall be funded on the Settlement Date following
the Trade Date as of which the distribution is processed. The
Trustee shall make payment as soon thereafter as administratively
feasible.
11.6 Deemed Distribution
For purposes of Section 8.3, if at the time a Participant's
employment with all Related Companies has terminated, the
Participant's vested Account balance attributable to Accounts
subject to vesting as described in Section 8, is zero, his or her
vested Account balance shall be deemed distributed as of the
Settlement Date following the Sweep Date on which the Administrator
has reported to the Trustee that the Participant's employment with
all Related Companies has terminated.
11.7 Latest Commencement Permitted
In addition to any other Plan requirements and unless a Participant
elects otherwise, his or her benefit payments shall begin not later
than 60 days after the end of the Plan Year in which he or she
attains his or her Normal Retirement Date or retires, whichever is
later. However, if the amount of the payment or the location of
the Participant (after a reasonable search) cannot be ascertained
by that deadline, payment shall be made no later than 60 days after
the earliest date on which such amount or location is ascertained
but in no event later than as described below. A Participant's
failure to elect in such manner as prescribed by the Administrator
to have his or her vested Account balance paid to him or her, shall
be deemed an election by the Participant to defer his or her
distribution.
Benefit payments shall begin by the April 1 immediately following
the end of the calendar year in which the Participant attains age
70 1/2, whether or not he or she is an Employee.
If benefit payments cannot begin at the time required because the
location of the Participant cannot be ascertained (after a
reasonable search), the Administrator may, at any time thereafter,
treat such person's Account as forfeited subject to the provisions
of Section 17.5.
11.8 Payment Within Life Expectancy
The Participant's payment election must be consistent with the
requirement of Code section 401(a)(9) that all payments are to be
completed within a period not to exceed the lives or the joint and
last survivor life expectancy of the Participant and his or her
Beneficiary. The life expectancies of a Participant and his or her
Beneficiary, if such Beneficiary is his or her spouse, may be
recomputed annually.
22
<PAGE>
11.9 Incidental Benefit Rule
The Participant's payment election must be consistent with the
requirement that, if the Participant's spouse is not his or her
sole primary Beneficiary, the minimum annual distribution for each
calendar year, beginning with the year in which he or she attains
age 70 1/2, shall not be less than the quotient obtained by
dividing (a) the Participant's vested Account balance as of the
last Trade Date of the preceding year by (b) the applicable divisor
as determined under the incidental benefit requirements of Code
section 401(a)(9).
11.10 Payment to Beneficiary
Payment to a Beneficiary must either: (1) be completed by the end
of the calendar year that contains the fifth anniversary of the
Participant's death or (2) begin by the end of the calendar year
that contains the first anniversary of the Participant's death and
be completed within the period of the Beneficiary's life or life
expectancy, except that:
(a) If the Participant dies after the April 1 immediately
following the end of the calendar year in which he or she
attains age 70 1/2, payment to his or her Beneficiary must be
made at least as rapidly as provided in the Participant's
distribution election;
(b) If the surviving spouse is the Beneficiary, payments need not
begin until the end of the calendar year in which the
Participant would have attained age 70 1/2 and must be
completed within the spouse's life or life expectancy; and
(c) If the Participant and the surviving spouse who is the
Beneficiary die (1) before the April 1 immediately following
the end of the calendar year in which the Participant would
have attained age 70 1/2 and (2) before payments have begun to
the spouse, the spouse shall be treated as the Participant in
applying these rules.
11.11 Beneficiary Designation
Each Participant may complete a beneficiary designation form
indicating the Beneficiary who is to receive the Participant's
remaining Plan interest at the time of his or her death. The
designation may be changed at any time. However, a Participant's
spouse shall be the sole primary Beneficiary unless the designation
includes Spousal Consent for another Beneficiary. If no proper
designation is in effect at the time of a Participant's death or if
the Beneficiary does not survive the Participant, the Beneficiary
shall be, in the order listed, the:
(a) Participant's surviving spouse,
23
<PAGE>
(b) Participant's children, in equal shares, (or if a child does
not survive the Participant, and that child leaves issue, the
issue shall be entitled to that child's share, by right of
representation) or
(c) Participant's estate.
11.12 QJSA and QPSA Information and Elections
The following definitions, information and election rules shall
apply to all Participants:
(a) Annuity Starting Date. The first day of the first period for
which an amount is payable as an annuity, or, in the case of a
benefit not payable in the form of an annuity, the first day
on which all events have occurred which entitle the
Participant to such benefit. Such date shall be a date no
earlier than the expiration of the seven-day period that
commences the day after the information described in the QJSA
Information to a Participant paragraph below is provided to
the Participant.
(b) "QJSA". A qualified joint and survivor annuity, meaning for a
married Participant, a form of benefit payment which is the
actuarial equivalent of the Participant's vested Account
balance at the Annuity Starting Date, payable to the
Participant in monthly payments for life and providing that,
if the Participant's spouse survives him or her, monthly
payments equal to 50% of the amount payable to the Participant
during his or her lifetime shall be paid to the spouse for the
remainder of such person's lifetime and for a single
Participant, a form of benefit payment which is the actuarial
equivalent of the Participant's vested Account balance at the
Annuity Starting Date, payable to the Participant in monthly
payments for life.
(c) "QPSA". A qualified pre-retirement survivor annuity, meaning
that upon the death of a Participant before the Annuity
Starting Date, the vested portion of the Participant's Account
becomes payable to the surviving spouse as a life annuity,
unless Spousal Consent has been given to a different
Beneficiary or the surviving spouse chooses a different form
of payment.
(d) QJSA Information to a Participant. No more than 90 days before
the Annuity Starting Date, each Participant who is eligible
for an annuity form of payment shall be given a written
explanation of (1) the terms and conditions of the QJSA, (2)
the right to a period of at least 30 days after receipt of the
written explanation to make an election to waive this form of
payment and choose an optional form of payment and the effect
of this election, (3) the right to revoke this election and
the effect of this revocation, and (4) the need for Spousal
Consent.
24
<PAGE>
(e) QJSA Election. A Participant may elect, and such election
shall include Spousal Consent if married, at any time within
the 90 day period ending on the Annuity Starting Date, to (1)
waive the right to receive the QJSA and elect an optional form
of payment, or (2) revoke or change any such election.
(f) QPSA Beneficiary Information to a Participant. Upon becoming a
Participant, and with updates as needed to insure such
information is accurate and readily available to each affected
Participant who is between the ages of 32 and 35, each married
Participant shall be given written information stating that
(1) his or her death benefit is payable to his or her
surviving spouse, (2) he or she may choose that the benefit be
paid to a different Beneficiary, (3) he or she has the right
to revoke or change a prior designation and the effects of
such revocation or change, and (4) the need for Spousal
Consent.
(g) QPSA Beneficiary Designation by Participant. A married
Participant may designate, with Spousal Consent, a non-spouse
Beneficiary at any time after the Participant has been given
the information in the QPSA Beneficiary Information to a
Participant paragraph above and upon the earlier of (1) the
date the Participant is no longer an Employee, or (2) the
beginning of the Plan Year in which the Participant attains
age 35. A Participant who has been given the information in
the QPSA Beneficiary Information to a Participant paragraph
above may, prior to the time described in the preceding
sentence, make a special qualified election to designate, with
Spousal Consent, a non-spouse Beneficiary. Such special
qualified designation shall become invalid at the beginning of
the Plan Year in which the Participant attains age 35 and a
new designation, with Spousal Consent, shall be necessary.
(h) QPSA Information to a Surviving Spouse. Each surviving spouse
who is eligible for an annuity form of payment shall be given
a written explanation of (1) the terms and conditions of being
paid his or her Account balance in the form of a single life
annuity, (2) the right to make an election to waive this form
of payment and choose an optional form of payment and the
effect of this election, and (3) the right to revoke this
election and the effect of this revocation.
(i) QPSA Election by Surviving Spouse. A surviving spouse may
elect, at any time up to the Annuity Starting Date, to (1)
waive the right to receive a single life annuity and elect an
optional form of payment, or (2) revoke or change any such
election.
25
<PAGE>
12 MAXIMUM CONTRIBUTION AND BENEFIT LIMITATIONS
--------------------------------------------
12.1 "Annual Addition" Defined
The Annual Addition means the sum of all amounts allocated to the
Participant's Account for a Plan Year. Amounts include
contributions (except for rollovers or transfers from another
qualified plan), forfeitures and, if the Participant is a Key
Employee (pursuant to Section 13) for the applicable or any prior
Plan Year, medical benefits provided pursuant to Code section
419A(d)(1). For purposes of this Section 12.1, "Account" also
includes a Participant's account in all other defined contribution
plans currently or previously maintained by any Related Company.
The Plan Year refers to the year to which the allocation pertains,
regardless of when it was allocated. The Plan Year shall be the
Code section 415 limitation year.
12.2 Maximum Annual Addition
The Annual Addition to a Participant's accounts under this Plan and
any other defined contribution plan maintained by any Related
Company for any Plan Year shall not exceed the lesser of (1) 25% of
his or her Taxable Income or (2) $30,000 (as adjusted for the cost
of living pursuant to Code section 415(d)).
12.3 Correcting an Excess Annual Addition
Upon the discovery of an excess Annual Addition to a Participant's
Account (resulting from forfeitures, allocations, reasonable error
in determining Participant compensation or the amount of elective
contributions, or other facts and circumstances acceptable to the
Internal Revenue Service) the excess amount (adjusted to reflect
investment gains) shall be forfeited by the Participant and used as
described in Section 8.3.
12.4 Correcting a Multiple Plan Excess
If a Participant, whose Account is credited with an excess Annual
Addition, received allocations to more than one defined
contribution plan, the excess shall be corrected by reducing the
Annual Addition to this Plan only after all possible reductions
have been made to the other defined contribution plans.
12.5 "Defined Benefit Fraction" Defined
The fraction, for any Plan Year, where the numerator is the
"projected annual benefit", as defined below, and the denominator
is the greater of 125% of the "protected current accrued benefit",
as defined below, or the normal limit which is the lesser of (1)
125% of the maximum dollar limitation provided under Code section
415(b)(1)(A) for the Plan Year or (2) 140% of the amount which may
be taken into account under Code section 415(b)(1)(B) for the Plan
Year, where a Participant's:
26
<PAGE>
(a) "projected annual benefit" is the annual benefit provided by
the Plan determined pursuant to Code section 415(e)(2)(A), and
(b) "protected current accrued benefit" in a defined benefit plan
in existence (1) on July 1, 1982, shall be the accrued annual
benefit provided for under Public Law 97-248, section
235(g)(4), as amended, or (2) on May 6, 1986, shall be the
accrued annual benefit provided for under Public Law 99-514,
section 1106(i)(3).
12.6 "Defined Contribution Fraction" Defined
The fraction where the numerator is the sum of the Participant's
Annual Addition for each Plan Year to date and the denominator is
the sum of the "annual amounts" for each year in which the
Participant has performed service with a Related Company. The
"annual amount" for any Plan Year is the lesser of (1) 125% of the
Code section 415(c)(1)(A) dollar limitation (determined without
regard to subsection (c)(6)) in effect for the Plan Year and (2)
140% of the Code section 415(c)(1)(B) amount in effect for the Plan
Year, where:
(a) each Annual Addition is determined pursuant to the Code
section 415(c) rules in effect for such Plan Year, and
(b) the numerator is adjusted pursuant to Public Law 97-248,
section 235(g)(3), as amended, or Public Law 99-514, section
1106(i)(4).
12.7 Combined Plan Limits and Correction
If a Participant has also participated in a defined benefit plan
maintained by a Related Company, the sum of the Defined Benefit
Fraction and the Defined Contribution Fraction for any Plan Year
may not exceed 1.0. If the combined fraction exceeds 1.0 for any
Plan Year, the Participant's benefit under any defined benefit plan
(to the extent it has not been distributed or used to purchase an
annuity contract) shall be limited so that the combined fraction
does not exceed 1.0 before any defined contribution limits shall be
enforced.
27
<PAGE>
13 TOP HEAVY RULES
---------------
13.1 Top Heavy Definitions
When capitalized, the following words and phrases have the
following meanings when used in this Section:
(a) "Aggregation Group". The Aggregation Group is the group
consisting of each qualified plan of an Employer (and its
Related Companies) (1) in which a Key Employee is a
participant or was a participant during the determination
period (regardless of whether such plan has terminated), or
(2) which enables another plan in the group to meet the
requirements of Code sections 401(a)(4) or 410(b). The
Employer may also treat any other qualified plan as part of
the group if the group would continue to meet the requirements
of Code sections 401(a)(4) and 410(b) with such plan being
taken into account.
(b) "Determination Date". The Determination Date is the last Trade
Date of the preceding Plan Year or, in the case of the Plan's
first year, the last Trade Date of the first Plan Year.
(c) "Key Employee". A Key Employee is a current or former Employee
(or his or her Beneficiary) who at any time during the five
year period ending on the Determination Date was:
(1) an officer of a Related Company whose Compensation (i)
exceeds 50% of the amount in effect under Code section
415(b)(1)(A) and (ii) places him within the following
highest paid group of officers:
<TABLE>
<CAPTION>
NUMBER OF EMPLOYEES NUMBER OF
NOT EXCLUDED UNDER CODE HIGHEST PAID
SECTION 414(Q)(8) OFFICERS INCLUDED
-------------------------- -------------------------
<S> <C>
Less than 30 3
30 to 500 10% of the number of
Employees not excluded
under Code section
414(q)(8)
More than 500 50
</TABLE>
(2) a more than 5% Owner,
(3) a more than 1% Owner whose Compensation exceeds $150,000,
or
28
<PAGE>
(4) a more than 0.5% Owner who is among the 10 Employees
owning the largest interest in a Related Company and
whose Compensation exceeds the amount in effect under
Code section 415(c)(1)(A).
(d) "Plan Benefit". The Plan Benefit is the sum as of the
Determination Date of (1) an Employee's Account, (2) the
present value of his or her other accrued benefits provided by
all qualified plans within the Aggregation Group, and (3) the
aggregate distributions made within the five year period
ending on such date. Plan Benefits shall exclude rollover
contributions and plan to plan transfers made after December
31, 1983 which are both employee initiated and from a plan
maintained by a non-related employer.
(e) "Top Heavy". The Plan is Top Heavy if the Plan Benefits of Key
Employees account for more than 60% of the Plan Benefits of
all Employees who have performed services at any time during
the five year period ending on the Determination Date. The
Plan Benefits of Employees who were, but are no longer, Key
Employees (because they have not been an officer or Owner
during the five year period), are excluded in the
determination.
13.2 Special Contributions
(a) Minimum Contribution Requirement. For each Plan Year in which
the Plan is Top Heavy, the Employer shall not allow any
contributions (other than a rollover contribution from a plan
maintained by a non-related employer, if otherwise permitted
under the Plan) to be made by or on behalf of any Key Employee
unless the Employer makes a contribution on behalf of all
Participants who were Eligible Employees as of the last day of
the Plan Year in an amount equal to at least 3% of each such
Participant's Taxable Income. The Administrator shall remove
any such contributions (including applicable investment gain
or loss) credited to a Key Employee's Account in violation of
the foregoing rule and return them to the Employer or Employee
to the extent permitted by the Limited Return of Contributions
paragraph of Section 17.
(b) Overriding Minimum Benefit. Notwithstanding, contributions
shall be permitted on behalf of Key Employees if the Employer
also maintains a defined benefit plan which automatically
provides a benefit which satisfies the Code section 416(c)(1)
minimum benefit requirements, including the adjustment
provided in Code section 416(h)(2)(A), if applicable. If this
Plan is part of an aggregation group in which a Key Employee
is receiving a benefit and no minimum is provided in any other
plan, a minimum contribution of at least 3% of Taxable Income
shall be provided to the Participants specified in the
preceding paragraph. In addition, the Employer may offset a
defined benefit minimum by contributions made to this Plan.
29
<PAGE>
13.3 Adjustment to Combined Limits for Different Plans
For each Plan Year in which the Plan is Top Heavy, 100% shall be
substituted for 125% in determining the Defined Benefit Fraction
and the Defined Contribution Fraction.
30
<PAGE>
14 PLAN ADMINISTRATION
-------------------
14.1 Plan Delineates Authority and Responsibility
Plan fiduciaries include the Company, the Administrator, the
Committee and/or the Trustee, as applicable, whose specific duties
are delineated in this Plan and Trust. In addition, Plan
fiduciaries also include any other person to whom fiduciary duties
or responsibility is delegated with respect to the Plan. Any
person or group may serve in more than one fiduciary capacity with
respect to the Plan. To the extent permitted under ERISA section
405, no fiduciary shall be liable for a breach by another
fiduciary.
14.2 Fiduciary Standards
Each fiduciary shall:
(a) discharge his or her duties in accordance with this Plan and
Trust to the extent they are consistent with ERISA;
(b) use that degree of care, skill, prudence and diligence that a
prudent person acting in a like capacity and familiar with
such matters would use in the conduct of an enterprise of a
like character and with like aims;
(c) act with the exclusive purpose of providing benefits to
Participants and their Beneficiaries, and defraying reasonable
expenses of administering the Plan;
(d) diversify Plan investments, to the extent such fiduciary is
responsible for directing the investment of Plan assets, so as
to minimize the risk of large losses, unless under the
circumstances it is clearly prudent not to do so; and
(e) treat similarly situated Participants and Beneficiaries in a
uniform and nondiscriminatory manner.
14.3 Company is ERISA Plan Administrator
The Company is the plan administrator, within the meaning of ERISA
section 3(16), which is responsible for compliance with all
reporting and disclosure requirements, except those that are
explicitly the responsibility of the Trustee under applicable law.
The Administrator and/or Committee shall have any necessary
authority to carry out such functions through the actions of the
Administrator, duly appointed officers of the Company, and/or the
Committee.
31
<PAGE>
14.4 Administrator Duties
The Administrator shall have the discretionary authority to
construe this Plan and Trust, other than the provisions which
relate to the Trustee, and to do all things necessary or convenient
to effect the intent and purposes thereof, whether or not such
powers are specifically set forth in this Plan and Trust. Actions
taken in good faith by the Administrator shall be conclusive and
binding on all interested parties, and shall be given the maximum
possible deference allowed by law. In addition to the duties
listed elsewhere in this Plan and Trust, the Administrator's
authority shall include, but not be limited to, the discretionary
authority to:
(a) determine who is eligible to participate, the allocation of
Contributions and the eligibility for distributions;
(b) provide each Participant with a summary plan description no
later than 90 days after he or she has become a Participant
(or such other period permitted under ERISA section
104(b)(1)), as well as informing each Participant of any
material modification to the Plan in a timely manner;
(c) make a copy of the following documents available to
Participants during normal work hours: this Plan and Trust
(including subsequent amendments), all annual and interim
reports of the Trustee related to the entire Plan, the latest
annual report and the summary plan description;
(d) determine the fact of a Participant's death and of any
Beneficiary's right to receive the deceased Participant's
interest based upon such proof and evidence as it deems
necessary;
(e) establish and review at least annually a funding policy
bearing in mind both the short-run and long-run needs and
goals of the Plan and to the extent Participants may direct
their own investments, the funding policy shall focus on which
Investment Funds are available for Participants to use; and
(f) adjudicate claims pursuant to the claims procedure described
in Section 17.
14.5 Advisors May be Retained
The Administrator may retain such agents and advisors (including
attorneys, accountants, actuaries, consultants, record keepers,
investment counsel and administrative assistants) as it considers
necessary to assist it in the performance of its duties. The
Administrator shall also comply with the bonding requirements of
ERISA section 412.
32
<PAGE>
14.6 Delegation of Administrator Duties
The Company, as Administrator of the Plan, has appointed a
Committee to administer the Plan on its behalf. The Company shall
provide the Trustee with the names and specimen signatures of any
persons authorized to serve as Committee members and act as or on
its behalf. Any Committee member appointed by the Company shall
serve at the pleasure of the Company, but may resign by written
notice to the Company. Committee members shall serve without
compensation from the Plan for such services. Except to the extent
that the Company otherwise provides, any delegation of duties to a
Committee shall carry with it the full discretionary authority of
the Administrator to complete such duties.
14.7 Committee Operating Rules
(a) Actions of Majority. Any act delegated by the Company to the
Committee may be done by a majority of its members. The
majority may be expressed by a vote at a meeting or in writing
without a meeting, and a majority action shall be equivalent
to an action of all Committee members.
(b) Meetings. The Committee shall hold meetings upon such notice,
place and times as it determines necessary to conduct its
functions properly.
(c) Reliance by Trustee. The Committee may authorize one or more
of its members to execute documents on its behalf and may
authorize one or more of its members or other individuals who
are not members to give written direction to the Trustee in
the performance of its duties. The Committee shall provide
such authorization in writing to the Trustee with the name and
specimen signatures of any person authorized to act on its
behalf. The Trustee shall accept such direction and rely upon
it until notified in writing that the Committee has revoked
the authorization to give such direction. The Trustee shall
not be deemed to be on notice of any change in the membership
of the Committee, parties authorized to direct the Trustee in
the performance of its duties, or the duties delegated to and
by the Committee until notified in writing.
33
<PAGE>
15 MANAGEMENT OF INVESTMENTS
-------------------------
15.1 Trust Agreement
All Plan assets shall be held by the Trustee in trust, in
accordance with those provisions of this Plan and Trust which
relate to the Trustee, for use in providing Plan benefits and
paying Plan fees and expenses not paid directly by the Employer.
Plan benefits shall be drawn solely from the Trust and paid by the
Trustee as directed by the Administrator. Notwithstanding, the
Administrator may appoint, with the approval of the Trustee,
another trustee to hold and administer Plan assets which do not
meet the requirements of Section 15.2.
15.2 Investment Funds
The Administrator is hereby granted authority to direct the Trustee
to invest Trust assets in one or more Investment Funds. The number
and composition of Investment Funds may be changed from time to
time, without the necessity of amending this Plan and Trust. The
Trustee may establish reasonable limits on the number of Investment
Funds as well as the acceptable assets for any such Investment
Fund. Each of the Investment Funds may be comprised of any of the
following:
(a) shares of a registered investment company, whether or not the
Trustee or any of its affiliates is an advisor to, or other
service provider to, such company;
(b) collective investment funds maintained by the Trustee, or any
other fiduciary to the Plan, which are available for
investment by trusts which are qualified under Code sections
401(a) and 501(a);
(c) individual equity and fixed income securities which are
readily tradeable on the open market;
(d) guaranteed investment contracts issued by a bank or insurance
company;
(e) interest bearing deposits of the Trustee; and
(f) Company Stock.
Any Investment Fund assets invested in a collective investment
fund, shall be subject to all the provisions of the instruments
establishing and governing such fund. These instruments, including
any subsequent amendments, are incorporated herein by reference.
34
<PAGE>
15.3 Authority to Hold Cash
The Trustee shall have the authority to cause the investment
manager of each Investment Fund to maintain sufficient deposit or
money market type assets in each Investment Fund to handle the
Fund's liquidity and disbursement needs. Each Participant's and
Beneficiary's Sweep Account, which is used to hold assets pending
investment or disbursement, shall consist of interest bearing
deposits of the Trustee.
15.4 Trustee to Act Upon Instructions
The Trustee shall carry out instructions to invest assets in the
Investment Funds as soon as practicable after such instructions are
received from the Administrator, Participants, or Beneficiaries.
Such instructions shall remain in effect until changed by the
Administrator, Participants or Beneficiaries.
15.5 Administrator Has Right to Vote Registered Investment Company
Shares
The Administrator shall be entitled to vote proxies or exercise any
shareholder rights relating to shares held on behalf of the Plan in
a registered investment company. Notwithstanding, the authority to
vote proxies and exercise shareholder rights related to such shares
held in a Custom Fund is vested as provided otherwise in Section
15.
15.6 Custom Fund Investment Management
The Administrator may designate, with the consent of the Trustee,
an investment manager for any Investment Fund established by the
Trustee solely for Participants of this Plan and, subject to
Section 15.7, any other qualified plan of the Company or a Related
Company (a "Custom Fund"). The investment manager may be the
Administrator, Trustee or an investment manager pursuant to ERISA
section 3(38). The Administrator shall advise the Trustee in
writing of the appointment of an investment manager and shall cause
the investment manager to acknowledge to the Trustee in writing
that the investment manager is a fiduciary to the Plan.
A Custom Fund shall be subject to the following:
(a) Guidelines. Written guidelines, acceptable to the Trustee,
shall be established for a Custom Fund. If a Custom Fund
consists solely of collective investment funds or shares of a
registered investment company (and sufficient deposit or money
market type assets to handle the Fund's liquidity and
disbursement needs), its underlying instruments shall
constitute the guidelines.
(b) Authority of Investment Manager. The investment manager of a
Custom Fund shall have the authority to vote or execute
proxies,
35
<PAGE>
exercise shareholder rights, manage, acquire, and dispose of
Trust assets. Notwithstanding, the authority to vote proxies
and exercise shareholder rights related to shares of Company
Stock held in a Custom Fund is vested as provided otherwise in
Section 15.
(c) Custody and Trade Settlement. Unless otherwise agreed to by
the Trustee, the Trustee shall maintain custody of all Custom
Fund assets and be responsible for the settlement of all
Custom Fund trades. For purposes of this section, shares of a
collective investment fund, shares of a registered investment
company and guaranteed investment contracts issued by a bank
or insurance company, shall be regarded as the Custom Fund
assets instead of the underlying assets of such instruments.
(d) Limited Liability of Co-Fiduciaries. Neither the Administrator
nor the Trustee shall be obligated to invest or otherwise
manage any Custom Fund assets for which the Trustee or
Administrator is not the investment manager nor shall the
Administrator or Trustee be liable for acts or omissions with
regard to the investment of such assets except to the extent
required by ERISA.
15.7 Master Custom Fund
The Trustee may establish, at the direction of the Company, a
single Custom Fund (a "Master Custom Fund"), for the benefit of
this Plan and any other qualified plan of the Company or a Related
Company for which the Trustee acts as trustee pursuant to a plan
and trust document that contains a provision substantially
identical to this provision. The assets of this Plan, to the
extent invested in the Master Custom Fund, shall consist only of
that percentage of the assets of the Master Custom Fund represented
by the shares held by this Plan.
15.8 Authority to Segregate Assets
The Company may direct the Trustee to split an Investment Fund into
two or more funds in the event any assets in the Fund are illiquid
or the value is not readily determinable. In the event of such
segregation, the Company shall give instructions to the Trustee on
what value to use for the split-off assets, and the Trustee shall
not be responsible for confirming such value.
15.9 Maximum Permitted Investment in Company Stock
If the Company provides for a Company Stock Fund, the Fund shall be
comprised of Company Stock and sufficient deposit or money market
type assets to handle the Fund's liquidity and disbursement needs.
The Fund may be as large as necessary to comply with the
Administrator's and a Senior Participant's investment direction to
invest Trust assets in the Company Stock Fund.
36
<PAGE>
15.10 Participants Have Right to Vote and Tender Company Stock
Each Participant or Beneficiary shall be entitled to instruct the
Trustee as to the voting or tendering of any full or partial shares
of Company Stock held on his or her behalf in the Company Stock
Fund. Prior to such voting or tendering of Company Stock, each
Participant or Beneficiary shall receive a copy of the proxy
solicitation or other material relating to such vote or tender
decision and a form for the Participant or Beneficiary to complete
which confidentially instructs the Trustee to vote or tender such
shares in the manner indicated by the Participant or Beneficiary.
Upon receipt of such instructions, the Trustee shall act with
respect to such shares as instructed. The Administrator shall
instruct the Trustee with respect to how to vote or tender any
shares for which instructions are not received from Participants or
Beneficiaries.
15.11 Registration and Disclosure for Company Stock
The Administrator shall be responsible for determining the
applicability (and, if applicable, complying with) the requirements
of the Securities Act of 1933, as amended, the California Corporate
Securities Law of 1968, as amended, and any other applicable blue
sky law. The Administrator shall also specify what restrictive
legend or transfer restriction, if any, is required to be set forth
on the certificates for the securities and the procedure to be
followed by the Trustee to effectuate a resale of such securities.
37
<PAGE>
16 TRUST ADMINISTRATION
--------------------
16.1 Trustee to Construe Trust
The Trustee shall have the discretionary authority to construe
those provisions of this Plan and Trust which relate to the Trustee
and to do all things necessary or convenient to the administration
of the Trust, whether or not such powers are specifically set forth
in this Plan and Trust. Actions taken in good faith by the Trustee
shall be conclusive and binding on all interested parties, and
shall be given the maximum possible deference allowed by law.
16.2 Trustee To Act As Owner of Trust Assets
Subject to the specific conditions and limitations set forth in
this Plan and Trust, the Trustee shall have all the power,
authority, rights and privileges of an absolute owner of the Trust
assets and, not in limitation but in amplification of the
foregoing, may:
(a) receive, hold, manage, invest and reinvest, sell, tender,
exchange, dispose of, encumber, hypothecate, pledge, mortgage,
lease, grant options respecting, repair, alter, insure, or
distribute any and all property in the Trust;
(b) borrow money, participate in reorganizations, pay calls and
assessments, vote or execute proxies, exercise subscription or
conversion privileges, exercise options and register any
securities in the Trust in the name of the nominee, in federal
book entry form or in any other form as shall permit title
thereto to pass by delivery;
(c) renew, extend the due date, compromise, arbitrate, adjust,
settle, enforce or foreclose, by judicial proceedings or
otherwise, or defend against the same, any obligations or
claims in favor of or against the Trust; and
(d) lend, through a collective investment fund, any securities
held in such collective investment fund to brokers, dealers or
other borrowers and to permit such securities to be
transferred into the name and custody and be voted by the
borrower or others.
16.3 United States Indicia of Ownership
The Trustee shall not maintain the indicia of ownership of any
Trust assets outside the jurisdiction of the United States, except
as authorized by ERISA section 404(b).
38
<PAGE>
16.4 Tax Withholding and Payment
(a) Withholding. The Trustee shall calculate and withhold federal
(and, if applicable, state) income taxes with regard to any
Eligible Rollover Distribution that is not paid as a Direct
Rollover in accordance with the Participant's withholding
election or as required by law if no election is made or the
election is less than the amount required by law. With regard
to any taxable distribution that is not an Eligible Rollover
Distribution, the Trustee shall calculate and withhold federal
(and, if applicable, state) income taxes in accordance with
the Participant's withholding election or as required by law
if no election is made.
(b) Taxes Due From Investment Funds. The Trustee shall pay from
the Investment Fund any taxes or assessments imposed by any
taxing or governmental authority on such Fund or its income,
including related interest and penalties.
16.5 Trust Accounting
(a) Annual Report. Within 60 days (or other reasonable period)
following the close of the Plan Year, the Trustee shall
provide the Administrator with an annual accounting of Trust
assets and information to assist the Administrator in meeting
ERISA's annual reporting and audit requirements.
(b) Periodic Reports. The Trustee shall maintain records and
provide sufficient reporting to allow the Administrator to
properly monitor the Trust's assets and activity.
(c) Administrator Approval. Approval of any Trustee accounting
shall automatically occur 90 days after such accounting has
been received by the Administrator, unless the Administrator
files a written objection with the Trustee within such time
period. Such approval shall be final as to all matters and
transactions stated or shown therein and binding upon the
Administrator.
16.6 Valuation of Certain Assets
If the Trustee determines the Trust holds any asset which is not
readily tradeable and listed on a national securities exchange
registered under the Securities Exchange Act of 1934, as amended,
the Trustee may engage a qualified independent appraiser to
determine the fair market value of such property, and the appraisal
fees shall be paid from the Investment Fund containing the asset.
39
<PAGE>
16.7 Legal Counsel
The Trustee may consult with legal counsel of its choice, including
counsel for the Employer or counsel of the Trustee, upon any
question or matter arising under this Plan and Trust. When relied
upon by the Trustee, the opinion of such counsel shall be evidence
that the Trustee has acted in good faith.
16.8 Fees and Expenses
The Trustee's fees for its services as Trustee shall be such as may
be mutually agreed upon by the Company and the Trustee. Trustee
fees and all reasonable expenses of counsel and advisors retained
by the Trustee shall be paid in accordance with Section 6.
16.9 Trustee Duties and Limitations
The Trustee's duties, unless otherwise agreed to by the Trustee,
shall be confined to construing the terms of the Plan and Trust as
they relate to the Trustee, receiving funds on behalf of and making
payments from the Trust, safeguarding and valuing Trust assets,
investing and reinvesting Trust assets in the Investment Funds as
directed by the Administrator, Participants or Beneficiaries and
those duties as described in this Section 16.
The Trustee shall have no duty or authority to ascertain whether
Contributions are in compliance with the Plan, to enforce
collection or to compute or verify the accuracy or adequacy of any
amount to be paid to it by the Employer. The Trustee shall not be
liable for the proper application of any part of the Trust with
respect to any disbursement made at the direction of the
Administrator.
40
<PAGE>
17 RIGHTS, PROTECTION, CONSTRUCTION AND JURISDICTION
-------------------------------------------------
17.1 Plan Does Not Affect Employment Rights
The Plan does not provide any employment rights to any Employee.
The Employer expressly reserves the right to discharge an Employee
at any time, with or without cause, without regard to the effect
such discharge would have upon the Employee's interest in the Plan.
17.2 Limited Return of Contributions
Except as provided in this paragraph, (1) Plan assets shall not
revert to the Employer nor be diverted for any purpose other than
the exclusive benefit of Participants or their Beneficiaries; and
(2) a Participant's vested interest shall not be subject to
divestment. As provided in ERISA section 403(c)(2), the actual
amount of a Contribution made by the Employer (or the current value
of the Contribution if a net loss has occurred) may revert to the
Employer if:
(a) such Contribution is made by reason of a mistake of fact;
(b) initial qualification of the Plan under Code section 401(a) is
not received and a request for such qualification is made
within the time prescribed under Code section 401(b) (the
existence of and Contributions under the Plan are hereby
conditioned upon such qualification); or
(c) such Contribution is not deductible under Code section 404
(such Contributions are hereby conditioned upon such
deductibility) in the taxable year of the Employer for which
the Contribution is made.
The reversion to the Employer must be made (if at all) within one
year of the mistaken payment of the Contribution, the date of
denial of qualification, or the date of disallowance of deduction,
as the case may be. A Participant shall have no rights under the
Plan with respect to any such reversion.
17.3 Assignment and Alienation
As provided by Code section 401(a)(13) and to the extent not
otherwise required by law, no benefit provided by the Plan may be
anticipated, assigned or alienated, except to create, assign or
recognize a right to any benefit with respect to a Participant
pursuant to a QDRO.
17.4 Facility of Payment
If a Plan benefit is due to be paid to a minor or if the
Administrator reasonably believes that any payee is legally
incapable of giving a valid receipt and discharge for any payment
due him or her, the Administrator shall have the payment of the
benefit, or any part thereof, made to the person (or persons or
41
<PAGE>
institution) whom it reasonably believes is caring for or
supporting the payee, unless it has received due notice of claim
therefor from a duly appointed guardian or conservator of the
payee. Any payment shall to the extent thereof, be a complete
discharge of any liability under the Plan to the payee.
17.5 Reallocation of Lost Participant's Accounts
If the Administrator cannot locate a person entitled to payment of
a Plan benefit after a reasonable search, the Administrator may at
any time thereafter treat such person's Account as forfeited and
use such amount as described in Section 8.3. If such person
subsequently presents the Administrator with a valid claim for the
benefit, such person shall be paid the amount treated as forfeited,
plus the interest that would have been earned in the Sweep Account
to the date of determination. The Administrator shall pay the
amount through an additional amount contributed by the Employer or
direct the Trustee to pay the amount from the Forfeiture Account.
17.6 Claims Procedure
(a) Right to Make Claim. An interested party who disagrees with
the Administrator's determination of his or her right to Plan
benefits must submit a written claim and exhaust this claim
procedure before legal recourse of any type is sought. The
claim must include the important issues the interested party
believes support the claim. The Administrator, pursuant to the
authority provided in this Plan, shall either approve or deny
the claim.
(b) Process for Denying a Claim. The Administrator's partial or
complete denial of an initial claim must include an
understandable, written response covering (1) the specific
reasons why the claim is being denied (with reference to the
pertinent Plan provisions) and (2) the steps necessary to
perfect the claim and obtain a final review.
(c) Appeal of Denial and Final Review. The interested party may
make a written appeal of the Administrator's initial decision,
and the Administrator shall respond in the same manner and
form as prescribed for denying a claim initially.
(d) Time Frame. The initial claim, its review, appeal and final
review shall be made in a timely fashion, subject to the
following time table:
<TABLE>
<CAPTION>
Days to Respond
Action From Last Action
------ ----------------
<S> <C>
Administrator determines benefit NA
Interested party files initial request 60 days
Administrator's initial decision 90 days
Interested party requests final review 60 days
Administrator's final decision 60 days
</TABLE>
42
<PAGE>
However, the Administrator may take up to twice the maximum
response time for its initial and final review if it provides an
explanation within the normal period of why an extension is
needed and when its decision shall be forthcoming.
17.7 Construction
Headings are included for reading convenience. The text shall
control if any ambiguity or inconsistency exists between the
headings and the text. The singular and plural shall be
interchanged wherever appropriate. References to Participant shall
include Beneficiary when appropriate and even if not otherwise
already expressly stated.
17.8 Jurisdiction and Severability
The Plan and Trust shall be construed, regulated and administered
under ERISA and other applicable federal laws and, where not
otherwise preempted, by the laws of the State of California. If
any provision of this Plan and Trust shall become invalid or
unenforceable, that fact shall not affect the validity or
enforceability of any other provision of this Plan and Trust. All
provisions of this Plan and Trust shall be so construed as to
render them valid and enforceable in accordance with their intent.
17.9 Indemnification by Employer
The Employers hereby agree to indemnify all Plan fiduciaries
against any and all liabilities resulting from any action or
inaction, (including a Plan termination in which the Company fails
to apply for a favorable determination from the Internal Revenue
Service with respect to the qualification of the Plan upon its
termination), in relation to the Plan or Trust (1) including
(without limitation) expenses reasonably incurred in the defense of
any claim relating to the Plan or its assets, and amounts paid in
any settlement approved by the Employer relating to the Plan or its
assets, but (2) excluding liability resulting from actions or
inactions made in bad faith, or resulting from the negligence or
willful misconduct of the Trustee. The Company shall have the
right, but not the obligation, to conduct the defense of any action
to which this Section applies. The Plan fiduciaries are not
entitled to indemnity from the Plan assets relating to any such
action.
43
<PAGE>
18 AMENDMENT, MERGER, DIVESTITURES AND TERMINATION
-----------------------------------------------
18.1 Amendment
The Company reserves the right to amend this Plan and Trust at any
time, to any extent and in any manner it may deem necessary or
appropriate. The Company (and not the Trustee) shall be
responsible for adopting any amendments necessary to maintain the
qualified status of this Plan and Trust under Code sections 401(a)
and 501(a). If the Committee is acting as the Administrator in
accordance with Section 14.6, it shall have the authority to adopt
Plan and Trust amendments which have no substantial adverse
financial impact upon any Employer or the Plan. All interested
parties shall be bound by any amendment, provided that no amendment
shall:
(a) become effective unless it has been adopted in accordance with
the procedures set forth in Section 18.5;
(b) except to the extent permissible under ERISA and the Code,
make it possible for any portion of the Trust assets to revert
to an Employer or to be used for, or diverted to, any purpose
other than for the exclusive benefit of Participants and
Beneficiaries entitled to Plan benefits and to defray
reasonable expenses of administering the Plan; nor
(c) decrease the rights of any Employee to benefits accrued
(including the elimination of optional forms of benefits) to
the date on which the amendment is adopted, or if later, the
date upon which the amendment becomes effective, except to the
extent permitted under ERISA and the Code.
18.2 Merger
This Plan and Trust may not be merged or consolidated with, nor may
its assets or liabilities be transferred to, another plan unless
each Participant and Beneficiary would, if the resulting plan were
then terminated, receive a benefit just after the merger,
consolidation or transfer which is at least equal to the benefit
which would be received if either plan had terminated just before
such event.
18.3 Divestitures
In the event of a sale by an Employer which is a corporation of:
(1) substantially all of the Employer's assets used in a trade or
business to an unrelated corporation, or (2) a sale of such
Employer's interest in a subsidiary to an unrelated entity or
individual, lump sum distributions shall be permitted from the
Plan, except as provided below, to Participants with respect to
Employees who continue employment with the corporation acquiring
such assets or who continue employment with such subsidiary, as
applicable.
44
<PAGE>
Notwithstanding, distributions shall not be permitted if the
purchaser agrees, in connection with the sale, to be substituted as
the Company as the sponsor of the Plan or to accept a transfer of
the assets and liabilities representing the Participants' benefits
into a plan of the purchaser or a plan to be established by the
purchaser.
18.4 Plan Termination
The Company may, at any time and for any reason, terminate the Plan
in accordance with the procedures set forth in Section 18.5, or
completely discontinue contributions. Upon either of these events,
or in the event of a partial termination of the Plan within the
meaning of Code section 411(d)(3), the Accounts of each affected
Employee who has not yet incurred a Break in Service shall be fully
vested. Lump sum distributions shall be made in accordance with
the terms of the Plan as in effect at the time of the Plan's
termination or as thereafter amended provided that a post-
termination amendment shall not be effective to the extent that it
violates Section 18.1 unless it is required in order to maintain
the qualified status of the Plan upon its termination. The
Trustee's and Employer's authority shall continue beyond the Plan's
termination date until all Trust assets have been liquidated and
distributed.
18.5 Amendment and Termination Procedures
The following procedural requirements shall govern the adoption of
any amendment or termination (a "Change") of this Plan and Trust:
(a) The Company may adopt any Change by action of its board of
directors in accordance with its normal procedures.
(b) The Committee, if acting as Administrator in accordance with
Section 14.6, may adopt any amendment within the scope of its
authority provided under Section 18.1 and in the manner
specified in Section 14.7(a).
(c) Any Change must be (1) set forth in writing, and (2) signed
and dated by an authorized officer of the Company or, in the
case of an amendment adopted by the Committee, at least one of
its members.
(d) If the effective date of any Change is not specified in the
document setting forth the Change, it shall be effective as of
the date it is signed by the last person whose signature is
required under clause (2) above, except to the extent that
another effective date is necessary to maintain the qualified
status of this Plan and Trust under Code sections 401(a) and
501(a).
(e) No Change affecting the Trustee in its capacity as Trustee or
in any other capacity shall become effective until it is
accepted and signed by the Trustee (which acceptance shall not
unreasonably be withheld).
45
<PAGE>
18.6 Termination of Employer's Participation
Any Employer may, at any time and for any reason, terminate its
Plan participation by action of its board of directors in
accordance with its normal procedures. Written notice of such
action shall be signed and dated by an authorized officer of the
Employer and delivered to the Company. If the effective date of
such action is not specified, it shall be effective on, or as soon
as reasonably practicable after, the date of delivery. Upon the
Employer's request, the Company may instruct the Trustee and
Administrator to spin off all affected Accounts and underlying
assets into a separate qualified plan under which the Employer
shall assume the powers and duties of the Company. Alternatively,
the Company may treat the event as a partial termination described
above or continue to maintain the Accounts under the Plan.
18.7 Replacement of the Trustee
The Trustee may resign as Trustee under this Plan and Trust or may
be removed by the Company at any time upon at least 90 days written
notice (or less if agreed to by both parties). In such event, the
Company shall appoint a successor trustee by the end of the notice
period. The successor trustee shall then succeed to all the powers
and duties of the Trustee under this Plan and Trust. If no
successor trustee has been named by the end of the notice period,
the Company's chief executive officer shall become the trustee, or
if he or she declines, the Trustee may petition the court for the
appointment of a successor trustee.
18.8 Final Settlement and Accounting of Trustee
(a) Final Settlement. As soon as administratively feasible after
its resignation or removal as Trustee, the Trustee shall
transfer to the successor trustee all property currently held
by the Trust. However, the Trustee is authorized to reserve
such sum of money as it may deem advisable for payment of its
accounts and expenses in connection with the settlement of its
accounts or other fees or expenses payable by the Trust. Any
balance remaining after payment of such fees and expenses
shall be paid to the successor trustee.
(b) Final Accounting. The Trustee shall provide a final accounting
to the Administrator within 90 days of the date Trust assets
are transferred to the successor trustee.
(c) Administrator Approval. Approval of the final accounting shall
automatically occur 90 days after such accounting has been
received by the Administrator, unless the Administrator files
a written objection with the Trustee within such time period.
Such approval shall be final as to all matters and
transactions stated or shown therein and binding upon the
Administrator.
46
<PAGE>
APPENDIX A - INVESTMENT FUNDS
I. Investment Funds Available to Senior Participants
The Investment Funds offered under the Plan to Senior Participants as of
the Effective Date include this set of daily valued funds:
CATEGORY FUNDS
-------- -----
INCOME U.S. Treasury Allocation
------
EQUITY Company Stock
------
S&P 500 Stock
Aim Constellation
COMBINATION LifePath
-----------
47
<PAGE>
APPENDIX B - PAYMENT OF PLAN FEES AND EXPENSES
As of the Effective Date, payment of Plan fees and expenses shall be as
follows:
1) Investment Management Fees: These are paid by Participants in that
management fees reduce the investment return reported and credited to
Participants, except that the Employer shall pay the fees related to the
Company Stock Fund. These are paid by the Employer on a quarterly basis.
2) Recordkeeping Fees: These are paid by the Employer on a quarterly basis,
except that with regard to a Participant who is no longer an Employee or
a Beneficiary, these are paid by the Participant and are assessed monthly
and billed/collected from Accounts quarterly.
3) Investment Fund Election Changes: For each Investment Fund election
change by a Senior Participant, in excess of 4 changes per year, a $10
fee shall be assessed and billed/collected quarterly from the Senior
Participant's Account.
4) Periodic Installment Payment Fees: A $3.00 per check fee shall be
assessed and billed/collected quarterly from the Participant's Account.
5) Additional Fees Paid by Employer: All other Plan related fees and
expenses shall be paid by the Employer. To the extent that the
Administrator later elects that any such fees shall be borne by
Participants, estimates of the fees shall be determined and reconciled,
at least annually, and the fees shall be assessed monthly and
billed/collected from Accounts quarterly.
48
<PAGE>
AMENDMENT NO. 1
TO THE
SILICON VALLEY BANK
MONEY PURCHASE PENSION PLAN AND TRUST
WHEREAS, Silicon Valley Bank (the "Company"), approved and adopted the
Silicon Valley Bank Money Purchase Pension Plan (the "Plan") and Trust
Agreement (the "Trust") which were originally effective January 1, 1995 and
most recently restated effective January 1, 1996;
WHEREAS, Section 18.1 of the Plan and Trust provides that the Company
reserves the right to amend the Plan and Trust;
NOW THEREFORE RESOLVED, that Sections 1, 7 and 15 and Appendices A and B
are amended effective May 28, 1996 as follows:
1. Section 1 is amended to hereby delete Subsection 1.40 and to redesignate
each existing Subsection.
2. Section 7 is amended to restate the Heading thereof, to restate
Subsections 7.1 and 7.2 each in its entirety including the Titles
thereof and to add new Subsections 7.3, 7.4, 7.5 and 7.6 as follows:
7 INVESTMENT FUNDS AND ELECTIONS
------------------------------
7.1 Investment Funds
Except for Participants' Sweep Accounts, the Trust shall be
maintained in various Investment Funds. The Administrator
shall select the Investment Funds offered to Participants and
may change the number or composition of the Investment Funds,
subject to the terms and conditions agreed to with the
Trustee. A list of the Investment Funds offered under the
Plan is set forth in Appendix A, and may be changed from time
to time by the Administrator, in writing, and as agreed to by
the Trustee, without the necessity of amending this Plan and
Trust. If the Company provides for a Company Stock Fund, the
Administrator has the discretion to deny or restrict the
availability of the Company Stock Fund to certain
Participants in accordance with procedures prescribed by the
Administrator to the extent such denial or restriction does
not violate Code section 401(a).
7.2 Investment Fund Elections
Each Participant shall direct the investment of his or her
Account. A Participant shall make his or her investment
election in any combination of one or any number of the
Investment Funds offered in accordance with the procedures
established by the Administrator and Trustee. However,
during any Conversion Period, Trust assets may be held in any
investment vehicle permitted by the Plan, as directed by the
Administrator, irrespective of Participant investment
elections.
1
<PAGE>
SILICON VALLEY BANK AMENDMENT NO. 1
MONEY PURCHASE PENSION PLAN AND TRUST
The Administrator may set a maximum percentage of the total
election that a Participant may direct into any specific
Investment Fund, which maximum, if any, is set forth in
Appendix A, and may be changed from time to time by the
Administrator, in writing, without the necessity of amending
this Plan and Trust.
7.3 Responsibility for Investment Choice
Each Participant shall be solely responsible for the
selection of his or her Investment Fund choices. No
fiduciary with respect to the Plan is empowered to advise a
Participant as to the manner in which his or her Accounts are
to be invested, and the fact that an Investment Fund is
offered shall not be construed to be a recommendation for
investment.
7.4 Default if No Election
The Administrator shall specify an Investment Fund for the
investment of that portion of a Participant's Account which
is not yet held in an Investment Fund and for which no valid
investment election is on file. The Investment Fund
specified is set forth in Appendix A, and may be changed from
time to time by the Administrator, in writing, without the
necessity of amending this Plan and Trust.
7.5 Timing
A Participant shall make his or her initial investment
election upon becoming a Participant and may change his or
her investment election at any time in accordance with the
procedures established by the Administrator and Trustee.
Investment elections received by the Trustee by the Sweep
Date shall be effective on the following Trade Date.
7.6 Investment Fund Election Change Fees
A reasonable processing fee may be charged directly to a
Participant's Account for Investment Fund election changes in
excess of a specified number per year as determined by the
Administrator.
3. Section 15 is amended to restate Subsection 15.9 in its entirety as
follows:
15.9 Maximum Permitted Investment in Company Stock
If the Company provides for a Company Stock Fund, the Fund shall be
comprised of Company Stock and sufficient deposit or money market
type assets to handle the Fund's liquidity and disbursement needs.
The Fund may be as large as necessary to comply with Participants'
and Beneficiaries' investment elections.
2
<PAGE>
SILICON VALLEY BANK AMENDMENT NO. 1
MONEY PURCHASE PENSION PLAN TRUST
4. Appendix A is amended to restate in its entirety in the form attached
hereto.
5. Appendix B is amended to restate item 3) in its entirety as follows:
3) Investment Fund Election Changes: For each Investment Fund
election change by a Participant, in excess of 4 changes per year,
a $10 fee shall be assessed and billed/collected quarterly from the
Participant's Account.
Date: May 28, 1996 SILICON VALLEY BANK
By: /s/ Glen G. Simmons
--------------------------------------
Title: Executive V.P. Human Resources/
Administration
The provisions of the above amendment which relate to the Trustee are
hereby approved and executed.
Date: May 30,1996 BZW BARCLAYS GLOBAL INVESTORS, NATIONAL
ASSOCIATION
By: /s/ Dolores Upton
--------------------------------------
Title: Principal
Date: May 30, 1996 BZW BARCLAYS GLOBAL INVESTORS, NATIONAL
ASSOCIATION
By: /s/ Lisa M. Maloney
--------------------------------------
Title: Principal
3
<PAGE>
SILICON VALLEY BANK AMENDMENT NO. 1
MONEY PURCHASE PENSION PLAN AND TRUST
APPENDIX A - INVESTMENT FUNDS
I. Investment Funds Available
The Investment Funds offered under the Plan include this set of daily
valued funds:
<TABLE>
<CAPTION>
CATEGORY FUNDS
-------- -----
<S> <C>
INCOME U.S. Treasury Allocation
------
EQUITY Company Stock
------ S&P 500 Stock
Aim Constellation
COMBINATION LifePath
-----------
</TABLE>
II. Default Investment Fund
The default Investment Fund is the U.S. Treasury Allocation Fund.
III. Maximum Percentage Restrictions Applicable to Certain Investment Funds
A Participant or Beneficiary may not elect to invest more than the
following percentages in these Investment Funds:
Company Stock Fund 25%
47 05/01/96
<PAGE>
EXHIBIT 10.31
SILICON VALLEY BANK
401(K) AND EMPLOYEE STOCK
OWNERSHIP PLAN
PLAN AND TRUST AGREEMENT
AS AMENDED AND RESTATED
EFFECTIVE MARCH 1, 1995
<PAGE>
Silicon Valley Bank 401(k) and
Employee Stock Ownership Plan and Trust
As Amended and Restated Effective March 1, 1995
Silicon Valley Bank previously established the Silicon Valley Bancshares
Employee Stock Ownership Plan, intended to constitute a qualified stock bonus
plan, as described in Code section 401(a), and the Silicon Valley Bank 401(k)
Plan, intended to constitute a qualified profit sharing plan as described in
Code section 401(a), including a qualified cash or deferred arrangement, as
described in Code section 401(k), effective January 1, 1989 and January 1,
1985, respectively. Each plan together with its related trust was established
for the benefit of eligible employees of the Company and its participating
affiliates.
Effective March 1, 1995, the Silicon Valley Bancshares Employee Stock Ownership
Plan was merged into the Silicon Valley Bank 401(k) Plan and the merged plan
was restated and renamed the Silicon Valley Bank 401(k) and Employee Stock
Ownership Plan. The Plan is intended to constitute a qualified profit sharing
plan, as described in Code section 401(a), which includes a qualified cash or
deferred arrangement, as described in Code section 401(k).
The provisions of this Plan and Trust relating to the Trustee constitute the
trust agreement which is entered into by and between Silicon Valley Bank and
Wells Fargo Bank, National Association. The Trust is intended to be tax exempt
as described under Code section 501(a).
Date: October 11, 1995 Silicon Valley Bank
By: /s/ Glen G. Simmons
--------------------------------------
Title: Executive Vice President -
Human Resources
The trust agreement set forth in those provisions of this Plan and Trust which
relate to the Trustee is hereby executed.
Date: November 10, 1995 Wells Fargo Bank, National Association
By: /s/ Lisa M. Maloney
--------------------------------------
Title: Vice President
Date: November 10, 1995 Wells Fargo Bank, National Association
By: /s/ Gwyn E. Slack
--------------------------------------
Title: Vice President
<PAGE>
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
1 DEFINITIONS.......................................................... 1
-----------
2 ELIGIBILITY.......................................................... 9
-----------
2.1 Eligibility.................................................. 9
2.2 Ineligible Employees......................................... 9
2.3 Ineligible or Former Participants............................ 9
3 PARTICIPANT CONTRIBUTIONS............................................ 10
-------------------------
3.1 Employee Contribution Election............................... 10
3.2 Changing a Contribution Election............................. 10
3.3 Revoking and Resuming a Contribution Election................ 10
3.4 Contribution Percentage Limits............................... 10
3.5 Refunds When Contribution Dollar Limit Exceeded.............. 11
3.6 Timing, Posting and Tax Considerations....................... 11
4 ROLLOVERS AND TRANSFERS FROM OTHER QUALIFIED PLANS................... 12
--------------------------------------------------
4.1 Rollovers.................................................... 12
4.2 Transfers From Other Qualified Plans......................... 12
5 EMPLOYER CONTRIBUTIONS AND FORFEITURE ACCOUNT ALLOCATIONS............ 13
---------------------------------------------------------
5.1 Company Match Contributions and
Company Match Forfeiture Account Allocations................. 13
5.2 ESOP Contributions and ESOP Forfeiture Account Allocations... 14
6 ACCOUNTING........................................................... 16
----------
6.1 Individual Participant Accounting............................ 16
6.2 Sweep Account is Transaction Account......................... 16
6.3 Trade Date Accounting and Investment Cycle................... 16
6.4 Accounting for Investment Funds.............................. 16
6.5 Payment of Fees and Expenses................................. 16
6.6 Accounting for Participant Loans............................. 17
6.7 Error Correction............................................. 17
6.8 Participant Statements....................................... 18
6.9 Special Accounting During Conversion Period.................. 18
6.10 Accounts for QDRO Beneficiaries.............................. 18
7 INVESTMENT FUNDS AND ELECTIONS....................................... 19
------------------------------
7.1 Investment Funds............................................. 19
7.2 Investment Fund Elections.................................... 19
7.3 Responsibility for Investment Choice......................... 20
7.4 Default if No Election....................................... 20
7.5 Timing....................................................... 20
7.6 Investment Fund Election Change Fees......................... 20
</TABLE>
i
<PAGE>
<TABLE>
<C> <S> <C>
8 VESTING & FORFEITURES................................................ 21
---------------------
8.1 Fully Vested Contribution Accounts........................... 21
8.2 Full Vesting upon Certain Events............................. 21
8.3 Vesting Schedule............................................. 21
8.4 Forfeitures.................................................. 21
8.5 Rehired Employees............................................ 22
9 PARTICIPANT LOANS.................................................... 23
-----------------
9.1 Participant Loans Permitted.................................. 23
9.2 Loan Application, Note and Security.......................... 23
9.3 Spousal Consent.............................................. 23
9.4 Loan Approval................................................ 23
9.5 Loan Funding Limits, Account Sources and Funding Order....... 23
9.6 Maximum Number of Loans...................................... 24
9.7 Source and Timing of Loan Funding............................ 24
9.8 Interest Rate................................................ 24
9.9 Loan Payment................................................. 24
9.10 Loan Payment Hierarchy....................................... 25
9.11 Repayment Suspension......................................... 25
9.12 Loan Default................................................. 25
9.13 Call Feature................................................. 25
10 IN-SERVICE WITHDRAWALS............................................... 26
----------------------
10.1 In-Service Withdrawals Permitted............................. 26
10.2 In-Service Withdrawal Application and Notice................. 26
10.3 Spousal Consent.............................................. 26
10.4 In-Service Withdrawal Approval............................... 26
10.5 Minimum Amount, Payment Form and Medium...................... 26
10.6 Source and Timing of In-Service Withdrawal Funding........... 27
10.7 Hardship Withdrawals......................................... 27
10.8 Over Age 59 1/2 Withdrawals.................................. 29
11 DISTRIBUTIONS ONCE EMPLOYMENT ENDS OR AS REQUIRED BY LAW............. 30
--------------------------------------------------------
11.1 Benefit Information, Notices and Election.................... 30
11.2 Spousal Consent.............................................. 30
11.3 Payment Form and Medium...................................... 30
11.4 Distribution of Small Amounts................................ 31
11.5 Source and Timing of Distribution Funding.................... 31
11.6 Deemed Distribution.......................................... 31
11.7 Latest Commencement Permitted................................ 32
11.8 Payment Within Life Expectancy............................... 32
11.9 Incidental Benefit Rule...................................... 32
11.10 Payment to Beneficiary....................................... 33
11.11 Beneficiary Designation...................................... 33
11.12 QJSA and QPSA Annuity Information and Elections.............. 33
</TABLE>
ii
<PAGE>
<TABLE>
<C> <S> <C>
12 ADP AND ACP TESTS.................................................... 36
-----------------
12.1 Contribution Limitation Definitions.......................... 36
12.2 ADP and ACP Tests............................................ 38
12.3 Correction of ADP and ACP Tests.............................. 39
12.4 Multiple Use Test............................................ 40
12.5 Correction of Multiple Use Test.............................. 40
12.6 Adjustment for Investment Gain or Loss....................... 41
12.7 Testing Responsibilities and Required Records................ 41
12.8 Separate Testing............................................. 41
13 MAXIMUM CONTRIBUTION AND BENEFIT LIMITATIONS......................... 42
--------------------------------------------
13.1 "Annual Addition" Defined.................................... 42
13.2 Maximum Annual Addition...................................... 42
13.3 Avoiding an Excess Annual Addition........................... 42
13.4 Correcting an Excess Annual Addition......................... 42
13.5 Correcting a Multiple Plan Excess............................ 43
13.6 "Defined Benefit Fraction" Defined........................... 43
13.7 "Defined Contribution Fraction" Defined...................... 43
13.8 Combined Plan Limits and Correction.......................... 43
14 TOP HEAVY RULES...................................................... 44
---------------
14.1 Top Heavy Definitions........................................ 44
14.2 Special Contributions........................................ 45
14.3 Adjustment to Combined Limits for Different Plans............ 46
15 PLAN ADMINISTRATION.................................................. 47
-------------------
15.1 Plan Delineates Authority and Responsibility................. 47
15.2 Fiduciary Standards.......................................... 47
15.3 Company is ERISA Plan Administrator.......................... 47
15.4 Administrator Duties......................................... 48
15.5 Advisors May be Retained..................................... 48
15.6 Delegation of Administrator Duties........................... 49
15.7 Committee Operating Rules.................................... 49
16 MANAGEMENT OF INVESTMENTS............................................ 50
-------------------------
16.1 Trust Agreement.............................................. 50
16.2 Investment Funds............................................. 50
16.3 Authority to Hold Cash....................................... 51
16.4 Trustee to Act Upon Instructions............................. 51
16.5 Administrator Has Right to
Vote Registered Investment Company Shares................... 51
16.6 Custom Fund Investment Management............................ 51
16.7 Authority to Segregate Assets................................ 52
16.8 Maximum Permitted Investment in Company Stock................ 52
16.9 Participants Have Right to Vote and Tender Company Stock..... 52
16.10 Registration and Disclosure for Company Stock................ 53
</TABLE>
iii
<PAGE>
<TABLE>
<C> <S> <C>
17 TRUST ADMINISTRATION................................................. 54
--------------------
17.1 Trustee to Construe Trust.................................... 54
17.2 Trustee To Act As Owner of Trust Assets...................... 54
17.3 United States Indicia of Ownership........................... 54
17.4 Tax Withholding and Payment.................................. 55
17.5 Trust Accounting............................................. 55
17.6 Valuation of Certain Assets.................................. 55
17.7 Legal Counsel................................................ 56
17.8 Fees and Expenses............................................ 56
17.9 Trustee Duties and Limitations............................... 56
18 RIGHTS, PROTECTION, CONSTRUCTION AND JURISDICTION.................... 57
-------------------------------------------------
18.1 Plan Does Not Affect Employment Rights....................... 57
18.2 Limited Return of Contributions.............................. 57
18.3 Assignment and Alienation.................................... 57
18.4 Facility of Payment.......................................... 58
18.5 Reallocation of Lost Participant's Accounts.................. 58
18.6 Claims Procedure............................................. 58
18.7 Construction................................................. 59
18.8 Jurisdiction and Severability................................ 59
18.9 Indemnification by Employer.................................. 59
19 AMENDMENT, MERGER, DIVESTITURES AND TERMINATION
-----------------------------------------------
19.1 Amendment.................................................... 60
19.2 Merger....................................................... 60
19.3 Divestitures................................................. 60
19.4 Plan Termination............................................. 61
19.5 Amendment and Termination Procedures......................... 61
19.6 Termination of Employer's Participation...................... 62
19.7 Replacement of the Trustee................................... 62
19.8 Final Settlement and Accounting of Trustee................... 62
APPENDIX A - INVESTMENT FUNDS............................................. 64
APPENDIX B - PAYMENT OF PLAN FEES AND EXPENSES............................ 65
APPENDIX C - LOAN INTEREST RATE........................................... 66
</TABLE>
iv
<PAGE>
1 DEFINITIONS
-----------
When capitalized, the words and phrases below have the following meanings
unless different meanings are clearly required by the context:
1.1 "Account". The records maintained for purposes of accounting for a
Participant's interest in the Plan. "Account" may refer to one or
all of the following accounts which have been created on behalf of a
Participant to hold specific types of Contributions under the Plan
or predecessor plans as merged herein as of the Effective Date:
(a) "Employee Account". An account created to hold Employee
Contributions.
(b) "Rollover Account". An account created to hold Rollover
Contributions.
(c) "Prior ESOP Rollover Account". An account created to hold
amounts representing Rollover Contributions contributed to the
Silicon Valley Bancshares Employee Stock Ownership Plan.
(d) "Company Match Account". An account created to hold Company
Match Contributions for periods commencing on or after March 1,
1995.
(e) "Prior Match Account" An account created to hold Company Match
Contributions for periods commencing prior to March 1, 1995.
(f) "ESOP Account". An account created to hold ESOP Contributions.
1.2 "ACP" or "Average Contribution Percentage". The percentage
calculated in accordance with Section 12.1.
1.3 "Administrator". The Company, which may delegate all or a portion of
the duties of the Administrator under the Plan to a Committee in
accordance with Section 15.6.
1.4 "ADP" or "Average Deferral Percentage". The percentage calculated in
accordance with Section 12.1.
1.5 "Beneficiary". The person or persons who is to receive benefits
after the death of the Participant pursuant to the "Beneficiary
Designation" paragraph in Section 11, or as a result of a QDRO.
1.6 "Break in Service". The fifth anniversary (or sixth anniversary if
absence from employment was due to a Parental Leave) of the date on
which a Participant's employment ends.
1
<PAGE>
1.7 "Code". The Internal Revenue Code of 1986, as amended. Reference to
any specific Code section shall include such section, any valid
regulation promulgated thereunder, and any comparable provision of
any future legislation amending, supplementing or superseding such
section.
1.8 "Committee". If applicable, the committee which has been appointed
by the Company to administer the Plan in accordance with Section
15.6.
1.9 "Company". Silicon Valley Bank or any successor by merger, purchase
or otherwise.
1.10 "Company Stock". Shares of common stock of Silicon Valley
Bancshares, the parent company of the Company, its predecessor(s),
or its successors or assigns, or any corporation with or into which
said corporation may be merged, consolidated or reorganized, or to
which a majority of its assets may be sold.
1.11 "Compensation". The sum of a Participant's Taxable Income and salary
reductions, if any, pursuant to Code sections 125, 402(e)(3),
402(h), 403(b), 414(h)(2) or 457.
For purposes of determining benefits under this Plan, Compensation
is limited to $150,000, (as adjusted for the cost of living pursuant
to Code sections 401(a)(17) and 415(d)) per Plan Year. For purposes
of the preceding sentence, in the case of an HCE who is a 5% Owner
or one of the 10 most highly compensated Employees, (i) such HCE and
such HCE's family group (as defined below) shall be treated as a
single employee and the Compensation of each family group member
shall be aggregated with the Compensation of such HCE, and (ii) the
limitation on Compensation shall be allocated among such HCE and his
or her family group members in proportion to each individual's
Compensation before the application of this sentence. For purposes
of this Section, the term "family group" shall mean an Employee's
spouse and lineal descendants who have not attained age 19 before
the close of the year in question.
For purposes of determining HCEs and key employees, Compensation for
the entire Plan Year shall be used. For purposes of determining ADP
and ACP, Compensation shall be limited to amounts paid to an
Eligible Employee while a Participant.
1.12 "Contribution". An amount contributed to the Plan by the Employer or
an Eligible Employee, and allocated by contribution type to
Participants' Accounts, as described in Section 1.1. Specific types
of contribution include:
(a) "Employee Contribution". An amount contributed by an eligible
Participant in conjunction with his or her Code section 401(k)
salary deferral election which shall be treated as made by the
Employer on an eligible Participant's behalf.
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<PAGE>
(b) "Rollover Contribution". An amount contributed by an Eligible
Employee which originated from another employer's or an
Employer's qualified plan.
(c) "Company Match Contribution". An amount contributed by the
Employer on an eligible Participant's behalf based upon the
amount contributed by the eligible Participant.
(d) "ESOP Contribution". An amount contributed by the Employer on
an eligible Participant's behalf and allocated on a pay based
formula.
1.13 "Contribution Dollar Limit". The annual limit placed on each
Participant's Employee Contributions, which shall be $7,000 per
calendar year (as adjusted for the cost of living pursuant to Code
sections 402(g)(5) and 415(d)). For purposes of this Section, a
Participant's Employee Contributions shall include (i) any employer
contribution made under any qualified cash or deferred arrangement
as defined in Code section 401(k) to the extent not includible in
gross income for the taxable year under Code section 402(e)(3) or
402(h)(1)(B) (determined without regard to Code section 402(g)), and
(ii) any employer contribution to purchase an annuity contract under
Code section 403(b) under a salary reduction agreement (within the
meaning of Code section 3121(a)(5)(D)).
1.14 "Conversion Period". The period of converting the prior accounting
system of the Plan and Trust, if such Plan and Trust were in
existence prior to the Effective Date, or the prior accounting
system of any plan and trust which is merged into this Plan and
Trust subsequent to the Effective Date, to the accounting system
described in Section 6.
1.15 "Direct Rollover". An Eligible Rollover Distribution that is paid
directly to an Eligible Retirement Plan for the benefit of a
Distributee.
1.16 "Disability". A Participant's mental or physical disability
resulting in termination of employment as evidenced by presentation
of medical evidence satisfactory to the Administrator.
1.17 "Distributee". An Employee or former Employee, the surviving spouse
of an Employee or former Employee and a spouse or former spouse of
an Employee or former Employee determined to be an alternate payee
under a QDRO.
1.18 "Early Retirement Date". The date of a Participant's 55th birthday
and completion of 10 Years of Vesting Service.
1.19 "Effective Date". The date upon which the provisions of this
document become effective. This date is March 1, 1995, unless stated
otherwise. In general, the provisions of this document only apply to
Participants who are Employees on or after the Effective Date.
However, investment and distribution provisions apply to all
Participants with Account balances to be invested or distributed
after the Effective Date.
3
<PAGE>
1.20 "Eligible Employee". An Employee of an Employer, except any
Employee:
(a) whose compensation and conditions of employment are covered by
a collective bargaining agreement to which an Employer is a
party unless the agreement calls for the Employee's
participation in the Plan;
(b) who is treated as an Employee because he or she is a Leased
Employee; or
(c) who is a nonresident alien who (i) either receives no earned
income (within the meaning of Code section 911(d)(2)), from
sources within the United States under Code section 861(a)(3);
or (ii) receives such earned income from such sources within
the United States but such income is exempt from United States
income tax under an applicable income tax convention.
1.21 "Eligible Retirement Plan". An individual retirement account
described in Code section 408(a), an individual retirement annuity
described in Code section 408(b), an annuity plan described in Code
section 403(a), or a qualified trust described in Code section
401(a), that accepts a Distributee's Eligible Rollover Distribution,
except that with regard to an Eligible Rollover Distribution to a
surviving spouse, an Eligible Retirement Plan is an individual
retirement account or individual retirement annuity.
1.22 "Eligible Rollover Distribution". A distribution of all or any
portion of the balance to the credit of a Distributee, excluding a
distribution that is one of a series of substantially equal periodic
payments (not less frequently than annually) made for the life (or
life expectancy) of a Distributee or the joint lives (or joint life
expectancies) of a Distributee and the Distributee's designated
Beneficiary, or for a specified period of ten years or more; a
distribution to the extent such distribution is required under Code
section 401(a)(9); and the portion of a distribution that is not
includible in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to Employer
securities).
1.23 "Employee". An individual who is:
(a) directly employed by any Related Company and for whom any
income for such employment is subject to withholding of income
or social security taxes, or
(b) a Leased Employee.
1.24 "Employer". The Company and any Related Company which adopts this
Plan with the approval of the Company.
4
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1.25 "ERISA". The Employee Retirement Income Security Act of 1974, as
amended. Reference to any specific section shall include such
section, any valid regulation promulgated thereunder, and any
comparable provision of any future legislation amending,
supplementing or superseding such section.
1.26 "Forfeiture Account". An account holding amounts forfeited by
Participants who have left the Employer, invested in interest
bearing deposits of the Trustee, pending disposition as provided in
this Plan and Trust and as directed by the Administrator.
1.27 "HCE" or "Highly Compensated Employee". An Employee described as a
Highly Compensated Employee in Section 12.
1.28 "Ineligible". The Plan status of an individual during the period in
which he or she is (1) an Employee of a Related Company which is not
then an Employer, (2) an Employee, but not an Eligible Employee, or
(3) not an Employee.
1.29 "Investment Fund" or "Fund". An investment fund as described in
Section 16.2. The Investment Funds authorized by the Administrator
to be offered under the Plan as of the Effective Date are set forth
in Appendix A.
1.30 "Leased Employee". An individual who is deemed to be an employee of
any Related Company as provided in Code section 414(n) or (o).
1.31 "Leave of Absence". A period during which an individual is deemed to
be an Employee, but is absent from active employment, provided that
the absence:
(a) was authorized by a Related Company; or
(b) was due to military service in the United States armed forces
and the individual returns to active employment within the
period during which he or she retains employment rights under
federal law.
1.32 "Loan Account". The record maintained for purposes of accounting for
a Participant's loan and payments of principal and interest thereon.
1.33 "NHCE" or "Non-Highly Compensated Employee". An Employee described
as a Non-Highly Compensated Employee in Section 12.
1.34 "Normal Retirement Date". The date of a Participant's 62nd birthday.
1.35 "Owner". A person with an ownership interest in the capital,
profits, outstanding stock or voting power of a Related Company
within the meaning of Code section 318 or 416 (which exclude
indirect ownership through a qualified plan).
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<PAGE>
1.36 "Parental Leave". The period of absence from work by reason of
pregnancy, the birth of an Employee's child, the placement of a
child with the Employee in connection with the child's adoption, or
caring for such child immediately after birth or placement as
described in Code section 410(a)(5)(E).
1.37 "Participant". An Eligible Employee who begins to participate in the
Plan after completing the eligibility requirements as described in
Section 2.1 or such eligibility requirements as were in effect prior
to the Effective Date under this Plan or predecessor plans as merged
herein as of the Effective Date. An Eligible Employee who makes a
Rollover Contribution prior to completing the eligibility
requirements as described in Section 2.1 shall also be considered a
Participant, except that he or she shall not be considered a
Participant for purposes of provisions related to Contributions,
other than a Rollover Contribution, until he or she completes the
eligibility requirements as described in Section 2.1. A
Participant's participation continues until his or her employment
with all Related Companies ends and his or her Account is
distributed or forfeited.
1.38 "Pay". All cash compensation paid to an Eligible Employee by an
Employer while a Participant during the current period, except that
for purposes of ESOP Contributions, "All cash compensation,
excluding incentive pay (annual incentive awards, referral fees and
other recognition/achievement awards)" shall be substituted for the
preceding reference to "All cash compensation". Pay excludes
reimbursements or other expense allowances, cash and non-cash fringe
benefits, moving expenses, deferred compensation and welfare
benefits.
Pay is neither increased by any salary credit or decreased by any
salary reduction pursuant to Code sections 125 or 402(e)(3). Pay is
limited to $150,000 (as adjusted for the cost of living pursuant to
Code sections 401(a)(17) and 415(d)) per Plan Year.
For purposes of the Contributions described in Section 5.2, the
limitations as described in the second paragraph of Section 1.11
shall also apply.
1.39 "Period of Employment". The period beginning on the date an Employee
first performs an hour of service and ending on the date his or her
employment ends. Employment ends on the date the Employee quits,
retires, is discharged, dies or (if earlier) the first anniversary
of his or her absence for any other reason. The period of absence
starting with the date an Employee's employment temporarily ends and
ending on the date he or she is subsequently reemployed is (1)
included in his or her Period of Employment if the period of absence
does not exceed one year, and (2) excluded if such period exceeds
one year.
Period of Employment includes the period prior to a Break in
Service.
An Employee's service with a predecessor or acquired company shall
only be counted in the determination of his or her Period of
Employment for eligibility
6
<PAGE>
and/or vesting purposes if (1) the Company directs that credit for
such service be granted, or (2) a qualified plan of the predecessor
or acquired company is subsequently maintained by any Employer or
Related Company.
1.40 "Plan". The Silicon Valley Bank 401(k) and Employee Stock Ownership
Plan set forth in this document, as from time to time amended.
1.41 "Plan Year". The annual accounting period of the Plan and Trust
which ends on each December 31.
1.42 "QDRO". A domestic relations order which the Administrator has
determined to be a qualified domestic relations order within the
meaning of Code section 414(p).
1.43 "Reduction in Force". An Employer sponsored program developed to
reduce force on a permanent basis.
1.44 "Related Company". With respect to any Employer, that Employer and
any corporation, trade or business which is, together with that
Employer, a member of the same controlled group of corporations, a
trade or business under common control, or an affiliated service
group within the meaning of Code sections 414(b), (c), (m) or (o)
and except that for purposes of Section 13 "within the meaning of
Code sections 414(b), (c), (m) or (o), as modified by Code section
415(h)" shall be substituted for the preceding reference to "within
the meaning of Code section 414(b), (c), (m) or (o)".
1.45 "Settlement Date". For each Trade Date, the Trustee's next business
day.
1.46 "Spousal Consent". The written consent given by a spouse to a
Participant's election or waiver of a specified form of benefit or
Beneficiary designation. The spouse's consent must acknowledge the
effect on the spouse of the Participant's election, waiver or
designation, and be duly witnessed by a Plan representative or
notary public. Spousal Consent shall be valid only with respect to
the spouse who signs the Spousal Consent and only for the particular
choice made by the Participant which requires Spousal Consent. A
Participant may revoke (without Spousal Consent) a prior election,
waiver or designation that required Spousal Consent at any time
before payments begin. Spousal Consent also means a determination
by the Administrator that there is no spouse, the spouse cannot be
located, or such other circumstances as may be established by
applicable law.
1.47 "Sweep Account". The subsidiary Account for each Participant through
which all transactions are processed, which is invested in interest
bearing deposits of the Trustee.
1.48 "Sweep Date". The cut off date and time for receiving instructions
for transactions to be processed on the next Trade Date.
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<PAGE>
1.49 "Taxable Income". Compensation in the amount reported by the
Employer or a Related Company as "Wages, tips, other compensation"
on Form W-2, or any successor method of reporting under Code section
6041(d).
1.50 "Trade Date". Each day the Investment Funds are valued, which is
normally every day the assets of such Funds are traded.
1.51 "Trust". The legal entity created by those provisions of this
document which relate to the Trustee. The Trust is part of the Plan
and holds the Plan assets which are comprised of the aggregate of
Participants' Accounts, any unallocated funds invested in deposit or
money market type assets pending allocation to Participants'
Accounts or disbursement to pay Plan fees and expenses and the
Forfeiture Account.
1.52 "Trustee". Wells Fargo Bank, National Association.
1.53 "Year of Vesting Service". A 12 month Period of Employment.
Notwithstanding, Years of Vesting Service shall be calculated as
follows if (and only if) it would be of benefit to the Employee:
(a) For service from January 1, 1995, each 12 month Period of
Employment;
(b) For the period before January 1, 1995, a 12 consecutive month
period ending on the anniversary of the date an individual
became an Employee, or as that date may be adjusted as a result
of his or her termination of employment with all related
Companies and subsequent rehire as an Employee, in which an
Employee is credited with at least 1,000 hours of service, as
such term was defined for this purpose prior to January 1,
1995.
Years of Vesting Service shall include service credited prior to
January 1, 1985.
8
<PAGE>
2 ELIGIBILITY
-----------
2.1 Eligibility
All Participants as of March 1, 1995 shall continue their
eligibility to participate. Each other Eligible Employee shall
become a Participant on March 1, 1995 or thereafter, on the first
January 1, April 1, July 1 or October 1 after the date he or she
attains age 18, and completes one hour of service.
2.2 Ineligible Employees
If an Employee completes the above eligibility requirements, but is
Ineligible at the time participation would otherwise begin (if he or
she were not Ineligible), he or she shall become a Participant on
the first subsequent date on which he or she is an Eligible
Employee.
2.3 Ineligible or Former Participants
A Participant may not make or share in Plan Contributions, nor
generally be eligible for a new Plan loan, during the period he or
she is Ineligible, but he or she shall continue to participate for
all other purposes. An Ineligible Participant or former Participant
shall automatically become an active Participant on the date he or
she again becomes an Eligible Employee.
9
<PAGE>
3 PARTICIPANT CONTRIBUTIONS
-------------------------
3.1 Employee Contribution Election
Upon becoming a Participant, an Eligible Employee may elect to
reduce his or her Pay by an amount which does not exceed the
Contribution Dollar Limit, within the limits described in the
Contribution Percentage Limits paragraph of this Section 3, and have
such amount contributed to the Plan by the Employer as a Employee
Contribution. The election shall be made as a whole percentage of
Pay or a fixed dollar amount of Pay in such manner and with such
advance notice as prescribed by the Administrator. A Participant
who makes a fixed dollar amount of Pay election shall do so with
full knowledge that such election shall not apply to any portion of
his or her Pay attributable to incentive pay (annual incentive
awards, referral fees and other recognition/achievement awards). In
no event shall an Employee's Employee Contributions under the Plan
and comparable contributions to all other plans, contracts or
arrangements of all Related Companies exceed the Contribution Dollar
Limit for the Employee's taxable year beginning in the Plan Year.
3.2 Changing a Contribution Election
A Participant who is an Eligible Employee may change his or her
Employee Contribution election as of any January 1, April 1, July 1
or October 1 in such manner and with such advance notice as
prescribed by the Administrator, and such election shall be
effective with the first payroll paid after such date.
Participants' Contribution election percentages shall automatically
apply to Pay increases or decreases.
3.3 Revoking and Resuming a Contribution Election
A Participant may revoke his or her Contribution election at any
time in such manner and with such advance notice as prescribed by
the Administrator, and such revocation shall be effective with the
first payroll paid after such date.
A Participant who is an Eligible Employee may resume Contributions
by making a new Contribution election at the same time in which a
Participant may change his or her election in such manner and with
such advance notice as prescribed by the Administrator, and such
election shall be effective with the first payroll paid after such
date.
3.4 Contribution Percentage Limits
The Administrator may establish and change from time to time, in
writing, without the necessity of amending this Plan and Trust, the
minimum, if applicable, and maximum Employee Contribution
percentages, prospectively or retrospectively (for the current Plan
Year), for all Participants. In addition, the Administrator may
establish any lower percentage limits for Highly
10
<PAGE>
Compensated Employees as it deems necessary to satisfy the tests
described in Section 12. As of the Effective Date, the Employee
Contribution maximum percentage is 15%.
Irrespective of the limits that may be established by the
Administrator in accordance with this paragraph, in no event shall
the contributions made by or on behalf of a Participant for a Plan
Year exceed the maximum allowable under Code section 415.
3.5 Refunds When Contribution Dollar Limit Exceeded
A Participant who makes Employee Contributions for a calendar year
to this Plan and comparable contributions to any other qualified
defined contribution plan in excess of the Contribution Dollar Limit
may notify the Administrator in writing by the following March 1 (or
as late as April 14 if allowed by the Administrator) that an excess
has occurred. In this event, the amount of the excess specified by
the Participant, adjusted for investment gain or loss, shall be
refunded to him or her by April 15 and shall not be included as an
Annual Addition under Code section 415 for the year contributed.
Refunds shall not include investment gain or loss for the period
between the end of the applicable Plan Year and the date of
distribution. Excess amounts shall first be taken from unmatched
Employee Contributions and then from matched Employee Contributions.
Any Company Match Contributions attributable to refunded excess
Employee Contributions as described in this Section shall be
forfeited and used as described in Section 8.4.
3.6 Timing, Posting and Tax Considerations
Participants' Contributions, other than Rollover Contributions, may
only be made through payroll deduction. Such amounts shall be paid
to the Trustee in cash and posted to each Participant's Account(s)
as soon as such amounts can reasonably be separated from the
Employer's general assets and balanced against the specific amount
made on behalf of each Participant. In no event, however, shall
such amounts be paid to the Trustee more than 90 days after the date
amounts are deducted from a Participant's Pay. Employee
Contributions shall be treated as Contributions made by an Employer
in determining tax deductions under Code section 404(a).
11
<PAGE>
4 ROLLOVERS AND TRANSFERS FROM OTHER QUALIFIED PLANS
--------------------------------------------------
4.1 Rollovers
The Administrator may authorize the Trustee to accept a rollover
contribution, within the meaning of Code section 402(c) or
408(d)(3)(A)(ii), in cash, directly from an Eligible Employee or as
a Direct Rollover from another qualified plan on behalf of the
Eligible Employee, even if he or she is not yet a Participant. The
Employee shall be responsible for furnishing satisfactory evidence,
in such manner as prescribed by the Administrator, that the amount
is eligible for rollover treatment. A rollover contribution
received directly from an Eligible Employee must be paid to the
Trustee in cash within 60 days after the date received by the
Eligible Employee from a qualified plan or conduit individual
retirement account. Contributions described in this paragraph shall
be posted to the applicable Employee's Rollover Account as of the
date received by the Trustee.
If it is later determined that an amount contributed pursuant to the
above paragraph did not in fact qualify as a rollover contribution
under Code section 402(c) or 408(d)(3)(A)(ii), the balance credited
to the Employee's Rollover Account shall immediately be (1)
segregated from all other Plan assets, (2) treated as a nonqualified
trust established by and for the benefit of the Employee, and (3)
distributed to the Employee. Any such nonqualifying rollover shall
be deemed never to have been a part of the Plan.
4.2 Transfers From Other Qualified Plans
The Administrator may instruct the Trustee to receive assets in cash
or in kind directly from another qualified plan; provided that a
transfer should not be directed if:
(a) any amounts are not exempted by Code section 401(a)(11)(B) from
the annuity requirements of Code section 417 unless the Plan
complies with such requirements; or
(b) any amounts include benefits protected by Code section
411(d)(6) which would not be preserved under applicable Plan
provisions.
The Trustee may refuse the receipt of any transfer if:
(a) the Trustee finds the in-kind assets unacceptable; or
(b) instructions for posting amounts to Participants' Accounts are
incomplete.
Such amounts shall be posted to the appropriate Accounts of
Participants as of the date received by the Trustee.
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5 EMPLOYER CONTRIBUTIONS AND FORFEITURE ACCOUNT ALLOCATIONS
---------------------------------------------------------
5.1 Company Match Contributions and Company Match Forfeiture Account
Allocations
(a) Frequency and Eligibility. For each period for which
Participants' Contributions are made, the Employer shall make
Company Match Contributions, as described in the following
Allocation Method paragraph, on behalf of each Participant who
contributed during the period.
Effective January 1, 1995, for each Plan Year, the Employer
shall allocate any Forfeiture Account balance remaining as of
the end of the Plan Year attributable to forfeited Company
Match Account amounts and earnings thereon, as Company Match
Contributions on behalf of each Participant who contributed
during the period and therefore received an allocation of
Company Match Contributions and who was an Eligible Employee on
the last day of the period. Such an allocation shall also be
made on behalf of each Participant who contributed during the
period but who ceased being an Employee during the period after
having attained his or her Early Retirement Date, Normal
Retirement Date, or by reason of his or her Disability or
death.
(b) Allocation Method. The Company Match Contributions for each
period shall total 100% of each eligible Participant's Employee
Contributions for the period. Notwithstanding, the maximum
dollar match (not including Forfeiture Account amounts
allocated as Company Match Contributions) shall not exceed
$1,000 for the Plan Year. The Employer may change the 100%
matching rate to any other percentage, including 0%,or the
maximum dollar match, generally by notifying eligible
Participants in sufficient time to adjust their Contribution
elections prior to the start of the period for which the new
percentage or amount apply.
Forfeiture Account amounts to be allocated as Company Match
Contributions shall be allocated among eligible Participants in
direct proportion to each eligible Participant's Employee
Contributions for the Plan Year to the total Employee
Contributions for the Plan Year for all such eligible
Participants.
(c) Timing, Medium and Posting. The Employer shall make each
period's Company Match Contribution in cash and allocate
Forfeiture Account amounts as soon as administratively
feasible, and for purposes of deducting such Company Match
Contribution, not later than the Employer's federal tax filing
date, including extensions. The Trustee shall post such amounts
to each Participant's Company Match Account
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<PAGE>
once the total Contribution received or Forfeiture Account
amount to be allocated has been balanced against the specific
amount to be credited to each Participant's Company Match
Account.
5.2 ESOP Contributions and ESOP Forfeiture Account Allocations
(a) Frequency and Eligibility. Subject to determination made by the
Employer's board of directors, or duly authorized committee
appointed by the Employer's board of directors, for each
quarter of the Plan Year, the Employer shall make ESOP
Contributions on behalf of each Participant who was an Eligible
Employee on the last day of the quarter and for each Plan Year
the Employer may make additional ESOP Contributions on behalf
of each Participant who was an Eligible Employee on the last
day of the Plan Year. If such Contributions are made, such
Contributions shall also be made on behalf of each Participant
who was an Eligible Employee at any time during the applicable
period (quarter or Plan Year) but who ceased being an Employee
during the applicable period (quarter or Plan Year) after
having attained his or her Early Retirement Date, Normal
Retirement Date, or by reason of his or her Disability or
death.
Notwithstanding, the Employer reserves the right to suspend
quarterly ESOP Contributions which were otherwise authorized by
the Employer's board of directors, or duly authorized committee
appointed by the Employer's board of directors, in the event of
adverse business conditions incurred subsequent to the
authorization of such quarterly ESOP Contributions or other
good cause.
For each Plan Year, the Employer shall allocate any Forfeiture
Account balance remaining as of the end of the Plan Year
attributable to forfeited ESOP Account amounts and earnings
thereon, as ESOP Contributions on behalf of each Participant
who was an Eligible Employee on the last day of the period.
Such an allocation shall also be made on behalf of each
Participant who ceased being an Employee during the period
after having attained his or her Early Retirement Date, Normal
Retirement Date, or by reason of his or her Disability or
death.
(b) Allocation Method. The ESOP Contributions for each quarter,
shall be equal to a specified percentage, including 0% and up
to 5%, of each eligible Participant's Pay. As of the Effective
Date, the specified percentage is 5%. The ESOP Contributions
for each Plan Year, shall be equal to a specified percentage,
including 0% and up to 10%, of each eligible Participant's Pay.
Together, the quarterly and annual ESOP Contribution (not
including Forfeiture Account amounts allocated as ESOP
Contributions), shall not exceed 15% of each eligible
Participant's Pay.
Forfeiture Account amounts to be allocated as ESOP
Contributions shall be allocated among eligible Participants in
direct proportion to their Pay.
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<PAGE>
(c) Timing, Medium and Posting. The Employer shall make each
period's ESOP Contribution in cash and allocate Forfeiture
Account amounts as soon as administratively feasible, and for
purposes of deducting such ESOP Contribution, not later than
the Employer's federal tax filing date, including extensions.
The Trustee shall post such amount to each Participant's ESOP
Account once the total Contribution received or Forfeiture
Account amount to be allocated has been balanced against the
specific amount to be credited to each Participant's ESOP
Account.
15
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6 ACCOUNTING
----------
6.1 Individual Participant Accounting
The Administrator shall maintain an individual set of Accounts for
each Participant in order to reflect transactions both by type of
Contribution and investment medium. Financial transactions shall be
accounted for at the individual Account level by posting each
transaction to the appropriate Account of each affected Participant.
Participant Account values shall be maintained in shares for the
Investment Funds and in dollars for the Sweep and Loan Accounts. At
any point in time, the Account value shall be determined using the
most recent Trade Date values provided by the Trustee.
6.2 Sweep Account is Transaction Account
All transactions related to amounts being contributed to or
distributed from the Trust shall be posted to each affected
Participant's Sweep Account. Any amount held in the Sweep Account
shall be credited with interest up until the date on which it is
removed from the Sweep Account.
6.3 Trade Date Accounting and Investment Cycle
Participant Account values shall be determined as of each Trade
Date. For any transaction to be processed as of a Trade Date, the
Trustee must receive instructions for the transaction by the Sweep
Date. Such instructions shall apply to amounts held in the Account
on that Sweep Date. Financial transactions of the Investment Funds
shall be posted to Participants' Accounts as of the Trade Date,
based upon the Trade Date values provided by the Trustee, and
settled on the Settlement Date.
6.4 Accounting for Investment Funds
Investments in each Investment Fund shall be maintained in shares.
The Trustee is responsible for determining the share values of each
Investment Fund as of each Trade Date. To the extent an Investment
Fund is comprised of collective investment funds of the Trustee, or
any other fiduciary to the Plan, the share values shall be
determined in accordance with the rules governing such collective
investment funds, which are incorporated herein by reference. All
other share values shall be determined by the Trustee. The share
value of each Investment Fund shall be based on the fair market
value of its underlying assets.
6.5 Payment of Fees and Expenses
Except to the extent Plan fees and expenses related to Account
maintenance, transaction and Investment Fund management and
maintenance, as set forth below, are paid by the Employer directly,
or indirectly, through the Forfeiture
16
<PAGE>
Account as directed by the Administrator, such fees and expenses
shall be paid as set forth below. The Employer may pay a lower
portion of the fees and expenses allocable to the Accounts of
Participants who are no longer Employees or who are not
Beneficiaries, unless doing so would result in discrimination.
(a) Account Maintenance: Account maintenance fees and expenses, may
include but are not limited to, administrative, Trustee,
government annual report preparation, audit, legal,
nondiscrimination testing and fees for any other special
services. Account maintenance fees shall be charged to
Participants on a per Participant basis provided that no fee
shall reduce a Participant's Account balance below zero.
(b) Transaction: Transaction fees and expenses, may include but are
not limited to, periodic installment payment, Investment Fund
election change and loan fees. Transaction fees shall be
charged to the Participant's Account involved in the
transaction provided that no fee shall reduce a Participant's
Account balance below zero.
(c) Investment Fund Management and Maintenance: Management and
maintenance fees and expenses related to the Investment Funds
shall be charged at the Investment Fund level and reflected in
the net gain or loss of each Fund.
As of the Effective Date, a breakdown of which Plan fees and
expenses shall generally be borne by the Trust (and charged to
individual Participants' Accounts or charged at the Investment Fund
level and reflected in the net gain or loss of each Fund) and those
that shall be paid by the Employer is set forth in Appendix B and
may be changed from time to time by the Administrator, in writing,
without the necessity of amending this Plan and Trust.
The Trustee shall have the authority to pay any such fees and
expenses, which remain unpaid by the Employer for 60 days, from the
Trust.
6.6 Accounting for Participant Loans
Participant loans shall be held in a separate Loan Account of the
Participant and accounted for in dollars as an earmarked asset of
the borrowing Participant's Account.
6.7 Error Correction
The Administrator may correct any errors or omissions in the
administration of the Plan by restoring any Participant's Account
balance with the amount that would be credited to the Account had no
error or omission been made. Funds necessary for any such
restoration shall be provided through payment made by the Employer,
or by the Trustee to the extent the error or omission is
17
<PAGE>
attributable to actions or inactions of the Trustee, or if the
restoration involves an Account holding amounts contributed by an
Employer, the Administrator may direct the Trustee to use amounts
from the Forfeiture Account.
6.8 Participant Statements
The Administrator shall provide Participants with statements of
their Accounts as soon after the end of each quarter of the Plan
Year as administratively feasible.
6.9 Special Accounting During Conversion Period
The Administrator and Trustee may use any reasonable accounting
methods in performing their respective duties during any Conversion
Period. This includes, but is not limited to, the method for
allocating net investment gains or losses and the extent, if any, to
which contributions received by and distributions paid from the
Trust during this period share in such allocation.
6.10 Accounts for QDRO Beneficiaries
A separate Account shall be established for an alternate payee
entitled to any portion of a Participant's Account under a QDRO as
of the date and in accordance with the directions specified in the
QDRO. In addition, a separate Account may be established during the
period of time the Administrator, a court of competent jurisdiction
or other appropriate person is determining whether a domestic
relations order qualifies as a QDRO. Such a separate Account shall
be valued and accounted for in the same manner as any other Account.
(a) Distributions Pursuant to QDROs. If a QDRO so provides, the
portion of a Participant's Account payable to an alternate
payee may be distributed, in a form as permissible under
Section 11 and Code section 414(p), to the alternate payee at
the time specified in the QDRO, regardless of whether the
Participant is entitled to a distribution from the Plan at such
time.
(b) Participant Loans. Except to the extent required by law, an
alternate payee, on whose behalf a separate Account has been
established, shall not be entitled to borrow from such Account.
If a QDRO specifies that the alternate payee is entitled to any
portion of the Account of a Participant who has an outstanding
loan balance, all outstanding loans shall generally continue to
be held in the Participant's Account and shall not be divided
between the Participant's and alternate payee's Accounts.
(c) Investment Direction. Where a separate Account has been
established on behalf of an alternate payee and has not yet
been distributed, the alternate payee may direct the investment
of such Account in the same manner as if he or she were a
Participant.
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7 INVESTMENT FUNDS AND ELECTIONS
------------------------------
7.1 Investment Funds
Except for Participants' Sweep and Loan Accounts, the Trust shall be
maintained in various Investment Funds. The Administrator shall
select the Investment Funds offered to Participants and may change
the number or composition of the Investment Funds, subject to the
terms and conditions agreed to with the Trustee. As of the
Effective Date, a list of the Investment Funds offered under the
Plan is set forth in Appendix A, and may be changed from time to
time by the Administrator, in writing, and as agreed to by the
Trustee, without the necessity of amending this Plan and Trust. If
the Company provides for a Company Stock Fund, the Administrator has
the discretion to deny or restrict the availability of the Company
Stock Fund to certain Participants in accordance with procedures
prescribed by the Administrator to the extent such denial or
restriction does not violate Code section 401(a).
7.2 Investment Fund Elections
Each Participant shall direct the investment of all of his or her
Contribution Accounts except for these Accounts:
Prior ESOP Rollover Account
ESOP Account
which shall be entirely invested in the Investment Fund specified by
the Administrator, which Investment Fund as of the Effective Date is
set forth in Appendix A. However, a Participant who has attained age
55 may direct the investment of the balance in his or her Prior ESOP
Rollover Account and ESOP Account. Future amounts allocated to his
or her Prior ESOP Rollover Account and ESOP Account shall continue
to be entirely invested in the Investment Fund specified by the
Administrator, until otherwise directed by the Participant.
A Participant shall make his or her investment election in any
combination of one or any number of the Investment Funds offered in
accordance with the procedures established by the Administrator and
Trustee. However, during any Conversion Period, Trust assets may be
held in any investment vehicle permitted by the Plan, as directed by
the Administrator, irrespective of Participant investment elections.
The Administrator may set a maximum percentage of the total election
that a Participant may direct into any specific Investment Fund,
which maximum, if any, as of the Effective Date, is set forth in
Appendix A, and may be changed from time to time by the
Administrator, in writing, without the necessity of amending this
Plan and Trust.
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7.3 Responsibility for Investment Choice
Each Participant shall be solely responsible for the selection of
his or her Investment Fund choices. No fiduciary with respect to
the Plan is empowered to advise a Participant as to the manner in
which his or her Accounts are to be invested, and the fact that an
Investment Fund is offered shall not be construed to be a
recommendation for investment.
7.4 Default if No Election
The Administrator shall specify an Investment Fund for the
investment of that portion of a Participant's Account which is not
yet held in an Investment Fund and for which no valid investment
election is on file. The Investment Fund specified as of the
Effective Date is set forth in Appendix A, and may be changed from
time to time by the Administrator, in writing, without the necessity
of amending this Plan and Trust.
7.5 Timing
A Participant shall make his or her initial investment election upon
becoming a Participant and may change his or her investment election
at any time in accordance with the procedures established by the
Administrator and Trustee. Investment elections received by the
Trustee by the Sweep Date shall be effective on the following Trade
Date.
7.6 Investment Fund Election Change Fees
A reasonable processing fee may be charged directly to a
Participant's Account for Investment Fund election changes in excess
of a specified number per year as determined by the Administrator.
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8 VESTING & FORFEITURES
---------------------
8.1 Fully Vested Contribution Accounts
A Participant shall be fully vested in these Accounts at all times:
Employee Account
Rollover Account
Prior ESOP Rollover Account
Prior Match Account
Notwithstanding, prior to the Effective Date a Participant's Prior
Match Account became vested in accordance with a vesting schedule
then in effect.
8.2 Full Vesting upon Certain Events
A Participant's entire Account shall become fully vested once he or
she has attained his or her Normal Retirement Date as an Employee or
upon his or her terminating employment with all Related Companies
due to a Reduction in Force or his or her Disability or death.
8.3 Vesting Schedule
In addition to the vesting provided above, a Participant's Company
Match and ESOP Accounts shall become vested in accordance with the
following schedule:
<TABLE>
<CAPTION>
YEARS OF VESTING VESTED
SERVICE PERCENTAGE
---------------- ----------
<S> <C>
Less than 1 0%
1 but less than 2 20%
2 but less than 3 40%
3 but less than 4 60%
4 but less than 5 80%
5 or more 100%
</TABLE>
If this vesting schedule is changed, the vested percentage for each
Participant shall not be less than his or her vested percentage
determined as of the last day prior to this change, and for any
Participant with at least three Years of Vesting Service when the
schedule is changed, vesting shall be determined using the more
favorable vesting schedule.
8.4 Forfeitures
A Participant's non-vested Account balance shall be forfeited as of
the Settlement Date following the Sweep Date on which the
Administrator has reported to the Trustee that the Participant's
employment has terminated with
21
<PAGE>
all Related Companies. Forfeitures from all Employer Contribution
Accounts shall be transferred to and maintained in a single
Forfeiture Account, which shall be invested in interest bearing
deposits of the Trustee. Forfeiture Account amounts shall be
utilized to restore Accounts, to pay Plan fees and expenses at the
discretion of the Administrator and in accordance with Section 5 to
increase the amount allocated as Company Match Contributions and
ESOP Contributions as directed by the Administrator.
8.5 Rehired Employees
(a) Service. If a former Employee is rehired, all Periods of
Employment credited when his or her employment last terminated
shall be counted in determining his or her vested interest.
(b) Account Restoration. If a former Employee is rehired before he
or she has a Break in Service, the amount forfeited when his or
her employment last terminated shall be restored to his or her
Account. The restoration shall include the interest which would
have been credited had such forfeiture been invested in the
Sweep Account from the date forfeited until the date the
restoration amount is restored. The amount shall come from the
Forfeiture Account to the extent possible, and any additional
amount needed shall be contributed by the Employer. The vested
interest in his or her restored Account shall then be equal to:
V% times (AB plus D) minus D
where:
V% = current vested percentage
AB = current account balance
D = amount previously distributed
22
<PAGE>
9 PARTICIPANT LOANS
-----------------
9.1 Participant Loans Permitted
Loans to Participants are permitted pursuant to the terms and
conditions set forth in this Section.
9.2 Loan Application, Note and Security
A Participant shall apply for any loan in such manner and with such
advance notice as prescribed by the Administrator. All loans shall
be evidenced by a promissory note, secured only by the portion of
the Participant's Account from which the loan is made, and the Plan
shall have a lien on this portion of his or her Account.
9.3 Spousal Consent
A Participant is not required to obtain Spousal Consent in order to
take out a loan under the Plan.
9.4 Loan Approval
The Administrator, or the Trustee, if otherwise authorized by the
Administrator and agreed to by the Trustee, is responsible for
determining that a loan request conforms to the requirements
described in this Section and granting such request.
9.5 Loan Funding Limits, Account Sources and Funding Order
The loan amount must meet all of the following limits as determined
as of the Sweep Date the loan is processed and shall be funded from
the Participant's Accounts as follows:
(a) Plan Minimum Limit. The minimum amount for any loan is $1,000.
(b) Plan Maximum Limit, Account Sources and Funding Order. Subject
to the legal limit described in (c) below, the maximum a
Participant may borrow, including the outstanding balance of
existing Plan loans, is 100% of the following of the
Participant's Accounts which are fully vested in the priority
order as follows:
Employee Account
Rollover Account
(c) Legal Maximum Limit. The maximum a Participant may borrow,
including the outstanding balance of existing Plan loans, is
50% of his or her vested Account balance, not to exceed
$50,000. However, the
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<PAGE>
$50,000 maximum is reduced by the Participant's highest
outstanding loan balance during the 12 month period ending on
the day before the Sweep Date as of which the loan is made. For
purposes of this paragraph, the qualified plans of all Related
Companies shall be treated as though they are part of this Plan
to the extent it would decrease the maximum loan amount.
9.6 Maximum Number of Loans
A Participant may have a maximum of two loans outstanding at any
given time.
9.7 Source and Timing of Loan Funding
A loan to a Participant shall be made solely from the assets of his
or her own Account. The available assets shall be determined first
by Account type and then within each Account used for funding a
loan, amounts shall first be taken from the Sweep Account and then
taken by Investment Fund in direct proportion to the market value of
the Participant's interest in each Investment Fund as of the Trade
Date on which the loan is processed.
The loan shall be funded on the Settlement Date following the Trade
Date as of which the loan is processed. The Trustee shall make
payment to the Participant as soon thereafter as administratively
feasible.
9.8 Interest Rate
The interest rate charged on Participant loans shall be a fixed
reasonable rate of interest, determined from time to time by the
Administrator, which provides the Plan with a return commensurate
with the prevailing interest rate charged by persons in the business
of lending money for loans which would be made under similar
circumstances. As of the Effective Date, the interest rate is
determined as set forth in Appendix C, and may be changed from time
to time by the Administrator, in writing, without the necessity of
amending this Plan and Trust.
9.9 Loan Payment
Substantially level amortization shall be required of each loan with
payments made at least monthly, generally through payroll deduction.
Loans may be prepaid in full or in part at any time. The
Participant may choose the loan repayment period, not to exceed 5
years, except that the repayment period may be for any period not to
exceed 10 years if the purpose of the loan is to acquire the
Participant's principal residence.
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<PAGE>
9.10 Loan Payment Hierarchy
Loan principal payments shall be credited to the Participant's
Accounts in the inverse of the order used to fund the loan. Loan
interest shall be credited to the Participant's Accounts in direct
proportion to the principal payment. Loan payments are credited to
the Investment Funds based upon the Participant's current investment
election for new Contributions.
9.11 Repayment Suspension
The Administrator may agree to a suspension of loan payments for up
to four months for a Participant who is on a Leave of Absence
without pay. During the suspension period interest shall continue
to accrue on the outstanding loan balance. At the expiration of the
suspension period all outstanding loan payments and accrued interest
thereon shall be due unless otherwise agreed upon by the
Administrator.
9.12 Loan Default
A loan is treated as a default if scheduled loan payments are more
than 90 days late. A Participant shall then have 30 days from the
time he or she receives written notice of the default and a demand
for past due amounts to cure the default before it becomes final.
In the event of default, the Administrator may direct the Trustee to
report the outstanding principal balance of the loan and accrued
interest thereon as a taxable distribution. As soon as a Plan
withdrawal or distribution to such Participant would otherwise be
permitted, the Administrator may instruct the Trustee to execute
upon its security interest in the Participant's Account by
distributing the note to the Participant.
9.13 Call Feature
The Administrator shall have the right to call any Participant loan
once a Participant's employment with all Related Companies has
terminated or if the Plan is terminated.
25
<PAGE>
10 IN-SERVICE WITHDRAWALS
----------------------
10.1 In-Service Withdrawals Permitted
In-service withdrawals to a Participant who is an Employee are
permitted pursuant to the terms and conditions set forth in this
Section and as required by law as set forth in Section 11.
10.2 In-Service Withdrawal Application and Notice
A Participant shall apply for any in-service withdrawal in such
manner and with such advance notice as prescribed by the
Administrator. The Participant shall be provided the notice
prescribed by Code section 402(f).
If an in-service withdrawal is one to which Code sections 401(a)(11)
and 417 do not apply, such in-service withdrawal may commence less
than 30 days after the aforementioned notice is provided, if:
(a) the Participant is clearly informed that he or she has the
right to a period of at least 30 days after receipt of such
notice to consider his or her option to elect or not elect a
Direct Rollover for all or a portion, if any, of his or her in-
service withdrawal which shall constitute an Eligible Rollover
Distribution; and
(b) the Participant after receiving such notice, affirmatively
elects a Direct Rollover for all or a portion, if any, of his
or her in-service withdrawal which shall constitute an Eligible
Rollover Distribution or alternatively elects to have all or a
portion made payable directly to him or her, thereby not
electing a Direct Rollover for all or a portion thereof.
10.3 Spousal Consent
A Participant is not required to obtain Spousal Consent in order to
make an in-service withdrawal under the Plan.
10.4 In-Service Withdrawal Approval
The Administrator, or the Trustee, if otherwise authorized by the
Administrator and agreed to by the Trustee, is responsible for
determining that an in-service withdrawal request conforms to the
requirements described in this Section and granting such request.
10.5 Minimum Amount, Payment Form and Medium
The minimum amount for any type of withdrawal is $1,000.
26
<PAGE>
With regard to the portion of a withdrawal representing an Eligible
Rollover Distribution, a Participant may elect a Direct Rollover for
all or a portion of such amount. The form of payment for an in-
service withdrawal shall be a single lump sum and payment shall be
made in cash, except that regard to an Over Age 59 1/2 Withdrawal, a
Participant may elect to have the portion of his or her Over Age 59
1/2 Withdrawal attributable to amounts invested in the Company Stock
Fund be made in the form of whole shares of Company Stock and cash
in lieu of fractional shares.
10.6 Source and Timing of In-Service Withdrawal Funding
An in-service withdrawal to a Participant shall be made solely from
the assets of his or her own Account and shall be based on the
Account values as of the Trade Date the in-service withdrawal is
processed. The available assets shall be determined first by
Account type and then within each Account used for funding an in-
service withdrawal, amounts shall first be taken from the Sweep
Account and then taken by Investment Fund in direct proportion to
the market value of the Participant's interest in each Investment
Fund (which excludes his or her Loan Account balance) as of the
Trade Date on which the in-service withdrawal is processed.
The in-service withdrawal shall be funded on the Settlement Date
following the Trade Date as of which the in-service withdrawal is
processed. The Trustee shall make payment as soon thereafter as
administratively feasible.
10.7 Hardship Withdrawals
(a) Requirements. A Participant who is an Employee may request the
withdrawal of up to the amount necessary to satisfy a financial
need including amounts necessary to pay any federal, state or
local income taxes or penalties reasonably anticipated to
result from the withdrawal. Only requests for withdrawals (1)
on account of a Participant's "Deemed Financial Need", and (2)
which are "Deemed Necessary" to satisfy the financial need
shall be approved.
(b) "Deemed Financial Need". An immediate and heavy financial need
relating to:
(1) the payment of unreimbursable medical expenses described
under Code section 213(d) incurred (or to be incurred) by
the Employee, his or her spouse or dependents;
(2) the purchase (excluding mortgage payments) of the
Employee's principal residence;
27
<PAGE>
(3) the payment of unreimbursable tuition, related educational
fees and room and board for up to the next 12 months of
post-secondary education for the Employee, his or her
spouse or dependents;
(4) the payment of amounts necessary for the Employee to
prevent losing his or her principal residence through
eviction or foreclosure on the mortgage; or
(5) any other circumstance specifically permitted under Code
section 401(k)(2)(B)(i)(IV).
(c) "Deemed Necessary". A withdrawal is "deemed necessary" to
satisfy the financial need only if the withdrawal amount does
not exceed the financial need and all of these conditions are
met:
(1) the Employee has obtained all possible withdrawals (other
than hardship withdrawals) and nontaxable loans available
from this Plan and all other plans maintained by Related
Companies;
(2) the Administrator shall suspend the Employee from making
any contributions to this Plan and all other qualified and
nonqualified plans of deferred compensation and all stock
option or stock purchase plans maintained by Related
Companies for 12 months from the date the withdrawal
payment is made; and
(3) the Administrator shall reduce the Contribution Dollar
Limit for the Employee with regard to this Plan and all
other plans maintained by Related Companies, for the
calendar year next following the calendar year of the
withdrawal by the amount of the Employee's Employee
Contributions for the calendar year of the withdrawal.
(d) Account Sources and Funding Order. The withdrawal amount shall
come from the following of the Participant's fully vested
Accounts, in the priority order as follows:
Rollover Account
Employee Account
The amount that may be withdrawn from a Participant's Employee
Account shall not include any earnings credited to his or her
Employee Account after the start of the first Plan Year
beginning after December 31, 1988.
(e) Suspension from Further Contributions. Upon making a Hardship
withdrawal, a Participant may not make additional Employee
28
<PAGE>
Contributions (or additional contributions to all other
qualified and nonqualified plans of deferred compensation and
all stock option or stock purchase plans maintained by Related
Companies) for a period of 12 months from the date the
withdrawal payment is made.
(f) Permitted Frequency. There is no restriction on the number of
Hardship withdrawals permitted to a Participant.
10.8 Over Age 59 1/2 Withdrawals
(a) Requirements. A Participant who is an Employee and over age
59 1/2 may withdraw from the Accounts listed in paragraph (b)
below.
(b) Account Sources and Funding Order. The withdrawal amount shall
come from the following of the Participant's fully vested
Accounts, in the priority order as follows:
Rollover Account
Employee Account
Prior ESOP Rollover Account
ESOP Account
(c) Permitted Frequency. The maximum number of Over Age 59 1/2
withdrawals permitted to a Participant in any 12-month period
is one.
(d) Suspension from Further Contributions. An Over Age 59 1/2
withdrawal shall not affect a Participant's ability to make or
be eligible to receive further Contributions.
29
<PAGE>
11 DISTRIBUTIONS ONCE EMPLOYMENT ENDS OR AS REQUIRED BY LAW
---------------------------------------------------------
11.1 Benefit Information, Notices and Election
A Participant, or his or her Beneficiary in the case of his or her
death, shall be provided with information regarding all optional
times and forms of distribution available, to include the notices
prescribed by Code section 402(f) and Code section 411(a)(11).
Subject to the other requirements of this Section, a Participant, or
his or her Beneficiary in the case of his or her death, may elect,
in such manner and with such advance notice as prescribed by the
Administrator, to have his or her vested Account balance paid to him
or her beginning upon any Settlement Date following the
Participant's termination of employment with all Related Companies
or, if earlier, at the time required by law as set forth in Section
11.7.
If a distribution is one to which Code sections 401(a)(11) and 417
do not apply, such distribution may commence less than 30 days after
the aforementioned notices are provided, if:
(a) the Participant is clearly informed that he or she has the
right to a period of at least 30 days after receipt of such
notices to consider the decision as to whether to elect a
distribution and if so to elect a particular form of
distribution and to elect or not elect a Direct Rollover for
all or a portion, if any, of his or her distribution which
shall constitute an Eligible Rollover Distribution; and
(b) the Participant after receiving such notices, affirmatively
elects a distribution and a Direct Rollover for all or a
portion, if any, of his or her distribution which shall
constitute an Eligible Rollover Distribution or alternatively
elects to have all or a portion made payable directly to him or
her, thereby not electing a Direct Rollover for all or a
portion thereof.
11.2 Spousal Consent
A Participant is not required to obtain Spousal Consent in order to
receive a distribution under the Plan, except for a Participant who
is eligible for an annuity form of payment as described in Section
11.3 and who elects an annuity form of payment.
11.3 Payment Form and Medium
Except to the extent otherwise provided by Section 11.4, a
Participant may elect to be paid in any of these forms:
(a) a single lump sum, or
(b) a portion paid in a lump sum, and the remainder paid later, or
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<PAGE>
(c) periodic installments over a period not to exceed the life
expectancy of the Participant and his or her Beneficiary, or
(d) a single life annuity or a joint and 50%or 100% survivor
annuity.
Any annuity option permitted shall be provided through the purchase
of a non-transferable single premium contract from an insurance
company which must conform to the terms of the Plan and which shall
be distributed to the Participant or Beneficiary in complete
satisfaction of the benefit due.
Except to the extent a distribution consists of a loan call as
described in Section 9, distributions (other than annuity contracts)
shall be made in cash, or if a Participant so elects, in the form of
whole shares of Company Stock and cash in lieu of fractional shares
to the extent invested in the Company Stock Fund. With regard to
the portion of a distribution representing an Eligible Rollover
Distribution, a Distributee may elect a Direct Rollover for all or a
portion of such amount.
11.4 Distribution of Small Amounts
If, after a Participant's employment with all Related Companies
ends, the Participant's vested Account balance is $3,500 or less,
and if at the time of any prior withdrawal or distribution the
Participant's vested Account balance did not exceed $3,500, the
Participant's benefit shall be paid as a single lump sum as soon as
administratively feasible in accordance with procedures prescribed
by the Administrator.
11.5 Source and Timing of Distribution Funding
A distribution to a Participant shall be made solely from the assets
of his or her own Accounts and shall be based on the Account values
as of the Trade Date the distribution is processed. The available
assets shall be determined first by Account type and then within
each Account used for funding a distribution, amounts shall first be
taken from the Sweep Account and then taken by Investment Fund in
direct proportion to the market value of the Participant's interest
in each Investment Fund as of the Trade Date on which the
distribution is processed.
The distribution shall be funded on the Settlement Date following
the Trade Date as of which the distribution is processed. The
Trustee shall make payment as soon thereafter as administratively
feasible.
11.6 Deemed Distribution
For purposes of Section 8.4, if at the time a Participant's
employment with all Related Companies has terminated, the
Participant's vested Account balance attributable to Accounts
subject to vesting as described in Section 8, is zero,
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<PAGE>
his or her vested Account balance shall be deemed distributed as of
the Settlement Date following the Sweep Date on which the
Administrator has reported to the Trustee that the Participant's
employment with all Related Companies has terminated.
11.7 Latest Commencement Permitted
In addition to any other Plan requirements and unless a Participant
elects otherwise, his or her benefit payments shall begin not later
than 60 days after the end of the Plan Year in which he or she
attains his or her Normal Retirement Date or retires, whichever is
later. However, if the amount of the payment or the location of the
Participant (after a reasonable search) cannot be ascertained by
that deadline, payment shall be made no later than 60 days after the
earliest date on which such amount or location is ascertained but in
no event later than as described below. A Participant's failure to
elect in such manner as prescribed by the Administrator to have his
or her vested Account balance paid to him or her, shall be deemed an
election by the Participant to defer his or her distribution.
Benefit payments shall begin by the April 1 immediately following
the end of the calendar year in which the Participant attains age 70
1/2, whether or not he or she is an Employee.
If benefit payments cannot begin at the time required because the
location of the Participant cannot be ascertained (after a
reasonable search), the Administrator may, at any time thereafter,
treat such person's Account as forfeited subject to the provisions
of Section 18.5.
11.8 Payment Within Life Expectancy
The Participant's payment election must be consistent with the
requirement of Code section 401(a)(9) that all payments are to be
completed within a period not to exceed the lives or the joint and
last survivor life expectancy of the Participant and his or her
Beneficiary. The life expectancies of a Participant and his or her
Beneficiary, if such Beneficiary is his or her spouse, may be
recomputed annually.
11.9 Incidental Benefit Rule
The Participant's payment election must be consistent with the
requirement that, if the Participant's spouse is not his or her sole
primary Beneficiary, the minimum annual distribution for each
calendar year, beginning with the year in which he or she attains
age 70 1/2, shall not be less than the quotient obtained by dividing
(a) the Participant's vested Account balance as of the last Trade
Date of the preceding year by (b) the applicable divisor as
determined under the incidental benefit requirements of Code section
401(a)(9).
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<PAGE>
11.10 Payment to Beneficiary
Payment to a Beneficiary must either: (1) be completed by the end of
the calendar year that contains the fifth anniversary of the
Participant's death or (2) begin by the end of the calendar year
that contains the first anniversary of the Participant's death and
be completed within the period of the Beneficiary's life or life
expectancy, except that:
(a) If the Participant dies after the April 1 immediately following
the end of the calendar year in which he or she attains age 70
1/2, payment to his or her Beneficiary must be made at least as
rapidly as provided in the Participant's distribution election;
(b) If the surviving spouse is the Beneficiary, payments need not
begin until the end of the calendar year in which the
Participant would have attained age 70 1/2 and must be
completed within the spouse's life or life expectancy; and
(c) If the Participant and the surviving spouse who is the
Beneficiary die (1) before the April 1 immediately following
the end of the calendar year in which the Participant would
have attained age 70 1/2 and (2) before payments have begun to
the spouse, the spouse shall be treated as the Participant in
applying these rules.
11.11 Beneficiary Designation
Each Participant may complete a beneficiary designation form
indicating the Beneficiary who is to receive the Participant's
remaining Plan interest at the time of his or her death. The
designation may be changed at any time. However, a Participant's
spouse shall be the sole primary Beneficiary unless the designation
includes Spousal Consent for another Beneficiary. If no proper
designation is in effect at the time of a Participant's death or if
the Beneficiary does not survive the Participant, the Beneficiary
shall be, in the order listed, the:
(a) Participant's surviving spouse,
(b) Participant's children, in equal shares, (or if a child does
not survive the Participant, and that child leaves issue, the
issue shall be entitled to that child's share, by right of
representation) or
(c) Participant's estate.
11.12 QJSA and QPSA Annuity Information and Elections
The following definitions, information and election rules shall
apply to any Participant who is eligible for an annuity form of
payment and who elects an annuity form of payment:
33
<PAGE>
(a) Annuity Starting Date. The first day of the first period for
which an amount is payable as an annuity, or, in the case of a
benefit not payable in the form of an annuity, the first day on
which all events have occurred which entitle the Participant to
such benefit.
(b) "QJSA". A qualified joint and survivor annuity, meaning for a
married Participant, a form of benefit payment which is the
actuarial equivalent of the Participant's vested Account
balance at the Annuity Starting Date, payable to the
Participant in monthly payments for life and providing that, if
the Participant's spouse survives him or her, monthly payments
equal to 50% of the amount payable to the Participant during
his or her lifetime shall be paid to the spouse for the
remainder of such person's lifetime and for a single
Participant, a form of benefit payment which is the actuarial
equivalent of the Participant's vested Account balance at the
Annuity Starting Date, payable to the Participant in monthly
payments for life.
(c) "QPSA". A qualified pre-retirement survivor annuity, meaning
that upon the death of a Participant before the Annuity
Starting Date, the vested portion of the Participant's Account
becomes payable to the surviving spouse as a life annuity,
except to the extent of any Loan Account balance, unless
Spousal Consent has been given to a different Beneficiary or
the surviving spouse chooses a different form of payment.
(d) QJSA Information to a Participant. No less than 30 and no more
than 90 days before the Annuity Starting Date, each Participant
shall be given a written explanation of (1) the terms and
conditions of the QJSA, (2) the right to make an election to
waive this form of payment and choose an optional form of
payment and the effect of this election, (3) the right to
revoke this election and the effect of this revocation, and (4)
the need for Spousal Consent.
(e) QJSA Election. A Participant may elect, and such election shall
include Spousal Consent if married, at any time within the 90
day period ending on the Annuity Starting Date, to (1) waive
the right to receive the QJSA and elect an optional form of
payment, or (2) revoke or change any such election.
(f) QPSA Beneficiary Information to Participant. Upon becoming a
Participant, and with updates as needed to insure such
information is accurate and readily available to each
Participant who is between the ages of 32 and 35, each married
Participant shall be given written information stating that (1)
his or her death benefit is payable to his or her surviving
spouse, (2) he or she may choose that the benefit be paid to a
different Beneficiary, (3) he or she has the right to revoke or
change a prior designation and the effects of such revocation
or change, and (4) the need for Spousal Consent.
34
<PAGE>
(g) QPSA Beneficiary Designation by Participant. A married
Participant may designate, with Spousal Consent, a non-spouse
Beneficiary at any time after the Participant has been given
the information in the QPSA Beneficiary Information to
Participant paragraph above and upon the earlier of (1) the
date the Participant has terminated employment, or (2) the
beginning of the Plan Year in which the Participant attains age
35.
(h) QPSA Information to a Surviving Spouse. Each surviving spouse
shall be given a written explanation of (1) the terms and
conditions of being paid his or her Account balance in the form
of a single life annuity, (2) the right to make an election to
waive this form of payment and choose an optional form of
payment and the effect of this election, and (3) the right to
revoke this election and the effect of this revocation.
(i) QPSA Election by Surviving Spouse. A surviving spouse may
elect, at any time up to the Annuity Starting Date, to (1)
waive the right to receive a single life annuity and elect an
optional form of payment, or (2) revoke or change any such
election.
35
<PAGE>
12 ADP AND ACP TESTS
-----------------
12.1 Contribution Limitation Definitions
The following definitions are applicable to this Section 12 (where a
definition is contained in both Sections 1 and 12, for purposes of
Section 12 the Section 12 definition shall be controlling):
(a) "ACP" or "Average Contribution Percentage". The Average
Percentage calculated using Contributions allocated to
Participants as of a date within the Plan Year.
(b) "ACP Test". The determination of whether the ACP is in
compliance with the Basic or Alternative Limitation for a Plan
Year (as defined in Section 12.2).
(c) "ADP" or "Average Deferral Percentage". The Average Percentage
calculated using Deferrals allocated to Participants as of a
date within the Plan Year.
(d) "ADP Test". The determination of whether the ADP is in
compliance with the Basic or Alternative Limitation for a Plan
Year (as defined in Section 12.2).
(e) "Average Percentage". The average of the calculated percentages
for Participants within the specified group. The calculated
percentage refers to either the "Deferrals" or "Contributions"
(as defined in this Section) made on each Participant's behalf
for the Plan Year, divided by his or her Compensation for the
portion of the Plan Year in which he or she was an Eligible
Employee while a Participant. (Employee Contributions to this
Plan or comparable contributions to plans of Related Companies
which shall be refunded solely because they exceed the
Contribution Dollar Limit are included in the percentage for
the HCE Group but not for the NHCE Group.)
(f) "Contributions" shall include Company Match Contributions. In
addition, Contributions may include Employee Contributions, but
only to the extent that (1) the Employer elects to use them,
(2) they are not used or counted in the ADP Test and (3) they
otherwise satisfy the requirements as prescribed under Code
section 401(m) permitting treatment as Contributions for
purposes of the ACP Test.
(g) "Deferrals" shall include Employee Contributions.
(h) "Family Member". An Employee who is, at any time during the
Plan Year or Lookback Year, a spouse, lineal ascendant or
descendant, or spouse of a lineal ascendant or descendant of
(1) an active or former
36
<PAGE>
Employee who at any time during the Plan Year or Lookback Year
is a more than 5% Owner (within the meaning of Code section
414(q)(3)), or (2) an HCE who is among the 10 Employees with
the highest Compensation for such Year.
(i) "HCE" or "Highly Compensated Employee". With respect to each
Employer and its Related Companies, an Employee during the Plan
Year or Lookback Year who (in accordance with Code section
414(q)):
(1) Was a more than 5% Owner at any time during the Lookback
Year or Plan Year;
(2) Received Compensation during the Lookback Year (or in the
Plan Year if among the 100 Employees with the highest
Compensation for such Year) in excess of (i) $75,000 (as
adjusted for such Year pursuant to Code sections 414(q)(1)
and 415(d)), or (ii) $50,000 (as adjusted for such Year
pursuant to Code sections 414(q)(1) and 415(d)) in the
case of a member of the "top-paid group" (within the
meaning of Code section 414(q)(4)) for such Year),
provided, however, that if the conditions of Code section
414(q)(12)(B)(ii) are met, the Company may elect for any
Plan Year to apply clause (i) by substituting $50,000 for
$75,000 and not to apply clause (ii);
(3) Was an officer of a Related Company and received
Compensation during the Lookback Year (or in the Plan Year
if among the 100 Employees with the highest Compensation
for such Year) that is greater than 50% of the dollar
limitation in effect under Code section 415(b)(1)(A) and
(d) for such Year (or if no officer has Compensation in
excess of the threshold, the officer with the highest
Compensation), provided that the number of officers shall
be limited to 50 Employees (or, if less, the greater of
three Employees or 10% of the Employees); or
(4) Was a Family Member at any time during the Lookback Year
or Plan Year, in which case the Contributions and
Compensation of the HCE and his or her Family Members
shall be aggregated and they shall be treated as a single
HCE.
A former Employee shall be treated as an HCE if (1) such former
Employee was an HCE when he separated from service, or (2) such
former Employee was an HCE in service at any time after
attaining age 55.
The determination of who is an HCE, including the
determinations of the number and identity of Employees in the
top-paid group, the top 100 Employees and the number of
Employees treated as officers shall be made in accordance with
Code section 414(q).
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<PAGE>
(j) "HCE Group" and "NHCE Group". With respect to each Employer and
its Related Companies, the respective group of HCEs and NHCEs
who are eligible to have amounts contributed on their behalf
for the Plan Year, including Employees who would be eligible
but for their election not to participate or to contribute, or
because their Pay is greater than zero but does not exceed a
stated minimum.
(1) If the Related Companies maintain two or more plans which
are subject to the ADP or ACP Test and are considered as
one plan for purposes of Code sections 401(a)(4) or
410(b), all such plans shall be aggregated and treated as
one plan for purposes of meeting the ADP and ACP Tests,
provided that the plans may only be aggregated if they
have the same Plan Year.
(2) If an HCE, who is one of the top 10 paid Employees or a
more than 5% Owner, has any Family Members, the Deferrals,
Contributions and Compensation of such HCE and his or her
Family Members shall be combined and treated as a single
HCE. Such amounts for all other Family Members shall be
removed from the NHCE Group percentage calculation and be
combined with the HCE's.
(3) If an HCE is covered by more than one cash or deferred
arrangement, or more than one arrangement permitting
employee and matching contributions, maintained by the
Related Companies, all such plans shall be aggregated and
treated as one plan for purposes of calculating the
separate percentage for the HCE which is used in the
determination of the Average Percentage.
(k) "Lookback Year". Pursuant to Code section 414(q), the Company
elects as the Lookback Year the 12 months ending immediately
prior to the start of the Plan Year.
(l) "Multiple Use Test". The test described in Section 12.4 which a
Plan must meet where the Alternative Limitation (described in
Section 12.2(b)) is used to meet both the ADP and ACP Tests.
(m) "NHCE" or "Non-Highly Compensated Employee". An Employee who is
not an HCE.
12.2 ADP and ACP Tests
For each Plan Year, the ADP and ACP for the HCE Group must meet
either the Basic or Alternative Limitation when compared to the
respective ADP and ACP for the NHCE Group, defined as follows:
38
<PAGE>
(a) Basic Limitation. The HCE Group Average Percentage may not
exceed 1.25 times the NHCE Group Average Percentage.
(b) Alternative Limitation. The HCE Group Average Percentage is
limited by reference to the NHCE Group Average Percentage as
follows:
<TABLE>
<CAPTION>
IF THE NHCE GROUP THEN THE MAXIMUM HCE
AVERAGE PERCENTAGE IS: GROUP AVERAGE PERCENTAGE IS:
---------------------- -----------------------------
<S> <C>
Less than 2% 2 times NHCE Group Average %
2% to 8% NHCE Group Average % plus 2%
More than 8% NA - Basic Limitation applies
</TABLE>
12.3 Correction of ADP and ACP Tests
If the ADP or ACP Tests are not met, the Administrator shall
determine, no later than the end of the next Plan Year, a maximum
percentage to be used in place of the calculated percentage for all
HCEs that would reduce the ADP and/or ACP for the HCE group by a
sufficient amount to meet the ADP and ACP Tests. ADP and/or ACP
corrections shall be made in accordance with the leveling method as
described below.
(a) ADP Correction. The HCE with the highest Deferral percentage
shall have his or her Deferral percentage reduced to the lesser
of the extent required to meet the ADP Test or to cause his or
her Deferral percentage to equal that of the HCE with the next
highest Deferral percentage. The process shall be repeated
until the ADP Test is met.
To the extent an HCE's Deferrals were determined to be reduced
as described in the paragraph above, Employee Contributions
shall, by the end of the next Plan Year, be refunded to the HCE
in an amount equal to the actual Deferrals minus the product of
the maximum percentage and the HCE's Compensation, except that
such amount to be refunded shall be reduced by Employee
Contributions previously refunded because they exceeded the
Contribution Dollar Limit. Excess amounts shall first be taken
from unmatched Employee Contributions and then from matched
Employee Contributions. Any Company Match Contributions
attributable to refunded excess Employee Contributions as
described in this Section shall be forfeited and used as
described in Section 8.4.
(b) ACP Correction. The HCE with the highest Contribution
percentage shall have his or her Contribution percentage
reduced to the lesser of the extent required to meet the ACP
Test or to cause his or her Contribution percentage to equal
that of the HCE with the next highest Contribution percentage.
The process shall be repeated until the ACP Test is met.
39
<PAGE>
To the extent an HCE's Contributions were determined to be
reduced as described in the paragraph above, Company Match
Contributions shall, by the end of the next Plan Year, be
refunded to the HCE to the extent vested, and forfeited to the
extent such amounts were not vested, as of the end of the Plan
Year being tested, in an amount equal to the actual
Contributions minus the product of the maximum percentage and
the HCE's Compensation.
(c) Investment Fund Sources. Once the amount of excess Deferrals
and/or Contributions is determined amounts shall first be taken
from the Sweep Account and then taken by Investment Fund in
direct proportion to the market value of the Participant's
interest in each Investment Fund (which excludes his or her
Loan Account balance) as of the Trade Date on which the
correction is processed.
(d) Family Member Correction. To the extent any reduction is
necessary with respect to an HCE and his or her Family Members
that have been combined and treated for testing purposes as a
single Employee, the excess Deferrals and Contributions from
the ADP and/or ACP Test shall be prorated among each such
Participant in direct proportion to his or her Deferrals or
Contributions included in each Test.
12.4 Multiple Use Test
If the Alternative Limitation (defined in Section 12.2) is used to
meet both the ADP and ACP Tests, the ADP and ACP for the HCE Group
must also comply with the requirements of Code section 401(m)(9).
Such Code section requires that the sum of the ADP and ACP for the
HCE Group (as determined after any corrections needed to meet the
ADP and ACP Tests have been made) not exceed the sum (which produces
the most favorable result) of:
(a) the Basic Limitation (defined in Section 12.2) applied to
either the ADP or ACP for the NHCE Group, and
(b) the Alternative Limitation applied to the other NHCE Group
percentage.
12.5 Correction of Multiple Use Test
If the multiple use limit is exceeded, the Administrator shall
determine a maximum percentage to be used in place of the calculated
percentage for all HCEs that would reduce either or both the ADP or
ACP for the HCE Group by a sufficient amount to meet the multiple
use limit. Any excess shall be handled in the same manner that the
distribution of excess Deferrals or Contributions are handled.
40
<PAGE>
12.6 Adjustment for Investment Gain or Loss
Any excess Deferrals or Contributions to be refunded to a
Participant or forfeited in accordance with Section 12.3 or 12.5
shall be adjusted for investment gain or loss. Refunds or
forfeitures shall not include investment gain or loss for the period
between the end of the applicable Plan Year and the date of
distribution.
12.7 Testing Responsibilities and Required Records
The Administrator shall be responsible for ensuring that the Plan
meets the ADP Test, the ACP Test and the Multiple Use Test, and that
the Contribution Dollar Limit is not exceeded. In carrying out its
responsibilities, the Administrator shall have sole discretion to
limit or reduce Deferrals or Contributions at any time. The
Administrator shall maintain records which are sufficient to
demonstrate that the ADP Test, the ACP Test and the Multiple Use
Test, have been met for each Plan Year for at least as long as the
Employer's corresponding tax year is open to audit.
12.8 Separate Testing
(a) Multiple Employers: The determination of HCEs, NHCEs, and the
performance of the ADP Test, the ACP Test and Multiple Use
Test, and any corrective action resulting therefrom, shall be
made separately with regard to the Employees of each Employer
(and its Related Companies) that is not a Related Company with
the other Employer(s).
(b) Collective Bargaining Units: The performance of the ADP Test,
and if applicable, the ACP Test and Multiple Use Test, and any
corrective action resulting therefrom, shall be applied
separately to Employees who are eligible to participate in the
Plan as a result of a collective bargaining agreement.
In addition, separate testing may be applied, at the discretion of
the Administrator and to the extent permitted under Treasury
regulations, to any group of Employees for whom separate testing is
permissible.
41
<PAGE>
13 MAXIMUM CONTRIBUTION AND BENEFIT LIMITATIONS
--------------------------------------------
13.1 "Annual Addition" Defined
The sum of all amounts allocated to the Participant's Account for a
Plan Year. Amounts include contributions (except for rollovers or
transfers from another qualified plan), forfeitures and, if the
Participant is a Key Employee (pursuant to Section 14) for the
applicable or any prior Plan Year, medical benefits provided
pursuant to Code section 419A(d)(1). For purposes of this Section
13.1, "Account" also includes a Participant's account in all other
defined contribution plans currently or previously maintained by any
Related Company. The Plan Year refers to the year to which the
allocation pertains, regardless of when it was allocated. The Plan
Year shall be the Code section 415 limitation year.
13.2 Maximum Annual Addition
The Annual Addition to a Participant's accounts under this Plan and
any other defined contribution plan maintained by any Related
Company for any Plan Year shall not exceed the lesser of (1) 25% of
his or her Taxable Income or (2) $30,000 (as adjusted for the cost
of living pursuant to Code section 415(d)).
13.3 Avoiding an Excess Annual Addition
If, at any time during a Plan Year, the allocation of any additional
Contributions would produce an excess Annual Addition for such year,
Contributions to be made for the remainder of the Plan Year shall be
limited to the amount needed for each affected Participant to
receive the maximum Annual Addition.
13.4 Correcting an Excess Annual Addition
Upon the discovery of an excess Annual Addition to a Participant's
Account (resulting from forfeitures, allocations, reasonable error
in determining Participant compensation or the amount of elective
contributions, or other facts and circumstances acceptable to the
Internal Revenue Service) the excess amount (adjusted to reflect
investment gains) shall first be returned to the Participant to the
extent of his or her Employee Contributions (however to the extent
Employee Contributions were matched, the applicable Company Match
Contributions shall be forfeited in proportion to the returned
matched Employee Contributions) and the remaining excess, if any,
shall be forfeited by the Participant first from Company Match
Contributions and then from ESOP Contributions and together with
forfeited Company Match Contributions attributable to returned
Employee Contributions used as described in Section 8.4.
42
<PAGE>
13.5 Correcting a Multiple Plan Excess
If a Participant, whose Account is credited with an excess Annual
Addition, received allocations to more than one defined contribution
plan, the excess shall be corrected by reducing the Annual Addition
to this Plan only after all possible reductions have been made to
the other defined contribution plans.
13.6 "Defined Benefit Fraction" Defined
The fraction, for any Plan Year, where the numerator is the
"projected annual benefit" and the denominator is the greater of
125% of the "protected current accrued benefit" or the normal limit
which is the lesser of (1) 125% of the maximum dollar limitation
provided under Code section 415(b)(1)(A) for the Plan Year or (2)
140% of the amount which may be taken into account under Code
section 415(b)(1)(B) for the Plan Year, where a Participant's:
(a) "projected annual benefit" is the annual benefit provided by
the Plan determined pursuant to Code section 415(e)(2)(A), and
(b) "protected current accrued benefit" in a defined benefit plan
in existence (1) on July 1, 1982, shall be the accrued annual
benefit provided for under Public Law 97-248, section
235(g)(4), as amended, or (2) on May 6, 1986, shall be the
accrued annual benefit provided for under Public Law 99-514,
section 1106(i)(3).
13.7 "Defined Contribution Fraction" Defined
The fraction where the numerator is the sum of the Participant's
Annual Addition for each Plan Year to date and the denominator is
the sum of the "annual amounts" for each year in which the
Participant has performed service with a Related Company. The
"annual amount" for any Plan Year is the lesser of (1) 125% of the
Code section 415(c)(1)(A) dollar limitation (determined without
regard to subsection (c)(6)) in effect for the Plan Year and (2)
140% of the Code section 415(c)(1)(B) amount in effect for the Plan
Year, where:
(a) each Annual Addition is determined pursuant to the Code section
415(c) rules in effect for such Plan Year, and
(b) the numerator is adjusted pursuant to Public Law 97-248,
section 235(g)(3), as amended, or Public Law 99-514, section
1106(i)(4).
13.8 Combined Plan Limits and Correction
If a Participant has also participated in a defined benefit plan
maintained by a Related Company, the sum of the Defined Benefit
Fraction and the Defined Contribution Fraction for any Plan Year may
not exceed 1.0. If the combined fraction exceeds 1.0 for any Plan
Year, the Participant's benefit under any defined benefit plan (to
the extent it has not been distributed or used to purchase an
annuity contract) shall be limited so that the combined fraction
does not exceed 1.0 before any defined contribution limits shall be
enforced.
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<PAGE>
14 TOP HEAVY RULES
---------------
14.1 Top Heavy Definitions
When capitalized, the following words and phrases have the following
meanings when used in this Section:
(a) "Aggregation Group". The group consisting of each qualified
plan of an Employer (and its Related Companies) (1) in which a
Key Employee is a participant or was a participant during the
determination period (regardless of whether such plan has
terminated), or (2) which enables another plan in the group to
meet the requirements of Code sections 401(a)(4) or 410(b). The
Employer may also treat any other qualified plan as part of the
group if the group would continue to meet the requirements of
Code sections 401(a)(4) and 410(b) with such plan being taken
into account.
(b) "Determination Date". The last Trade Date of the preceding Plan
Year or, in the case of the Plan's first year, the last Trade
Date of the first Plan Year.
(c) "Key Employee". A current or former Employee (or his or her
Beneficiary) who at any time during the five year period ending
on the Determination Date was:
(1) an officer of a Related Company whose Compensation (i)
exceeds 50% of the amount in effect under Code section
415(b)(1)(A) and (ii) places him within the following
highest paid group of officers:
<TABLE>
<CAPTION>
NUMBER OF EMPLOYEES NUMBER OF
NOT EXCLUDED UNDER CODE HIGHEST PAID
SECTION 414(Q)(8) OFFICERS INCLUDED
----------------------- -----------------
<S> <C>
Less than 30 3
30 to 500 10% of the number of
Employees not excluded
under Code section
414(q)(8)
More than 500 50
</TABLE>
(2) a more than 5% Owner,
(3) a more than 1% Owner whose Compensation exceeds $150,000,
or
44
<PAGE>
(4) a more than 0.5% Owner who is among the 10 Employees
owning the largest interest in a Related Company and whose
Compensation exceeds the amount in effect under Code
section 415(c)(1)(A).
(d) "Plan Benefit". The sum as of the Determination Date of (1) an
Employee's Account, (2) the present value of his or her other
accrued benefits provided by all qualified plans within the
Aggregation Group, and (3) the aggregate distributions made
within the five year period ending on such date. Plan Benefits
shall exclude rollover contributions and plan to plan transfers
made after December 31, 1983 which are both employee initiated
and from a plan maintained by a non-related employer.
(e) "Top Heavy". The Plan's status when the Plan Benefits of Key
Employees account for more than 60% of the Plan Benefits of all
Employees who have performed services at any time during the
five year period ending on the Determination Date. The Plan
Benefits of Employees who were, but are no longer, Key
Employees (because they have not been an officer or Owner
during the five year period), are excluded in the
determination.
14.2 Special Contributions
(a) Minimum Contribution Requirement. For each Plan Year in which
the Plan is Top Heavy, the Employer shall not allow any
contributions (other than a Rollover Contribution) to be made
by or on behalf of any Key Employee unless the Employer makes a
contribution (other than contributions made by an Employer in
accordance with a Participant's salary deferral election or
contributions made by an Employer based upon the amount
contributed by a Participant) on behalf of all Participants who
were Eligible Employees as of the last day of the Plan Year in
an amount equal to at least 3% of each such Participant's
Taxable Income. The Administrator shall remove any such
contributions (including applicable investment gain or loss)
credited to a Key Employee's Account in violation of the
foregoing rule and return them to the Employer or Employee to
the extent permitted by the Limited Return of Contributions
paragraph of Section 18.
(b) Overriding Minimum Benefit. Notwithstanding, contributions
shall be permitted on behalf of Key Employees if the Employer
also maintains a defined benefit plan which automatically
provides a benefit which satisfies the Code section 416(c)(1)
minimum benefit requirements, including the adjustment provided
in Code section 416(h)(2)(A), if applicable. If this Plan is
part of an aggregation group in which a Key Employee is
receiving a benefit and no minimum is provided in any other
plan, a minimum contribution of at least 3% of Taxable Income
45
<PAGE>
shall be provided to the Participants specified in the
preceding paragraph. In addition, the Employer may offset a
defined benefit minimum by contributions (other than
contributions made by an Employer in accordance with a
Participant's salary deferral election or contributions made by
an Employer based upon the amount contributed by a Participant)
made to this Plan.
14.3 Adjustment to Combined Limits for Different Plans
For each Plan Year in which the Plan is Top Heavy, 100% shall be
substituted for 125% in determining the Defined Benefit Fraction and
the Defined Contribution Fraction.
46
<PAGE>
15 PLAN ADMINISTRATION
-------------------
15.1 Plan Delineates Authority and Responsibility
Plan fiduciaries include the Company, the Administrator, the
Committee and/or the Trustee, as applicable, whose specific duties
are delineated in this Plan and Trust. In addition, Plan
fiduciaries also include any other person to whom fiduciary duties
or responsibility is delegated with respect to the Plan. Any person
or group may serve in more than one fiduciary capacity with respect
to the Plan. To the extent permitted under ERISA section 405, no
fiduciary shall be liable for a breach by another fiduciary.
15.2 Fiduciary Standards
Each fiduciary shall:
(a) discharge his or her duties in accordance with this Plan and
Trust to the extent they are consistent with ERISA;
(b) use that degree of care, skill, prudence and diligence that a
prudent person acting in a like capacity and familiar with such
matters would use in the conduct of an enterprise of a like
character and with like aims;
(c) act with the exclusive purpose of providing benefits to
Participants and their Beneficiaries, and defraying reasonable
expenses of administering the Plan;
(d) diversify Plan investments, to the extent such fiduciary is
responsible for directing the investment of Plan assets, so as
to minimize the risk of large losses, unless under the
circumstances it is clearly prudent not to do so; and
(e) treat similarly situated Participants and Beneficiaries in a
uniform and nondiscriminatory manner.
15.3 Company is ERISA Plan Administrator
The Company is the plan administrator, within the meaning of ERISA
section 3(16), which is responsible for compliance with all
reporting and disclosure requirements, except those that are
explicitly the responsibility of the Trustee under applicable law.
The Administrator and/or Committee shall have any necessary
authority to carry out such functions through the actions of the
Administrator, duly appointed officers of the Company, and/or the
Committee.
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<PAGE>
15.4 Administrator Duties
The Administrator shall have the discretionary authority to construe
this Plan and Trust, other than the provisions which relate to the
Trustee, and to do all things necessary or convenient to effect the
intent and purposes thereof, whether or not such powers are
specifically set forth in this Plan and Trust. Actions taken in
good faith by the Administrator shall be conclusive and binding on
all interested parties, and shall be given the maximum possible
deference allowed by law. In addition to the duties listed
elsewhere in this Plan and Trust, the Administrator's authority
shall include, but not be limited to, the discretionary authority
to:
(a) determine who is eligible to participate, if a contribution
qualifies as a rollover contribution, the allocation of
Contributions, and the eligibility for loans, withdrawals and
distributions;
(b) provide each Participant with a summary plan description no
later than 90 days after he or she has become a Participant (or
such other period permitted under ERISA section 104(b)(1)), as
well as informing each Participant of any material modification
to the Plan in a timely manner;
(c) make a copy of the following documents available to
Participants during normal work hours: this Plan and Trust
(including subsequent amendments), all annual and interim
reports of the Trustee related to the entire Plan, the latest
annual report and the summary plan description;
(d) determine the fact of a Participant's death and of any
Beneficiary's right to receive the deceased Participant's
interest based upon such proof and evidence as it deems
necessary;
(e) establish and review at least annually a funding policy bearing
in mind both the short-run and long-run needs and goals of the
Plan. To the extent Participants may direct their own
investments, the funding policy shall focus on which Investment
Funds are available for Participants to use; and
(f) adjudicate claims pursuant to the claims procedure described in
Section 18.
15.5 Advisors May be Retained
The Administrator may retain such agents and advisors (including
attorneys, accountants, actuaries, consultants, record keepers,
investment counsel and administrative assistants) as it considers
necessary to assist it in the performance of its duties. The
Administrator shall also comply with the bonding requirements of
ERISA section 412.
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<PAGE>
15.6 Delegation of Administrator Duties
The Company, as Administrator of the Plan, has appointed a Committee
to administer the Plan on its behalf. The Company shall provide the
Trustee with the names and specimen signatures of any persons
authorized to serve as Committee members and act as or on its
behalf. Any Committee member appointed by the Company shall serve
at the pleasure of the Company, but may resign by written notice to
the Company. Committee members shall serve without compensation
from the Plan for such services. Except to the extent that the
Company otherwise provides, any delegation of duties to a Committee
shall carry with it the full discretionary authority of the
Administrator to complete such duties.
15.7 Committee Operating Rules
(a) Actions of Majority. Any act delegated by the Company to the
Committee may be done by a majority of its members. The
majority may be expressed by a vote at a meeting or in writing
without a meeting, and a majority action shall be equivalent to
an action of all Committee members.
(b) Meetings. The Committee shall hold meetings upon such notice,
place and times as it determines necessary to conduct its
functions properly.
(c) Reliance by Trustee. The Committee may authorize one or more of
its members to execute documents on its behalf and may
authorize one or more of its members or other individuals who
are not members to give written direction to the Trustee in the
performance of its duties. The Committee shall provide such
authorization in writing to the Trustee with the name and
specimen signatures of any person authorized to act on its
behalf. The Trustee shall accept such direction and rely upon
it until notified in writing that the Committee has revoked the
authorization to give such direction. The Trustee shall not be
deemed to be on notice of any change in the membership of the
Committee, parties authorized to direct the Trustee in the
performance of its duties, or the duties delegated to and by
the Committee until notified in writing.
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<PAGE>
16 MANAGEMENT OF INVESTMENTS
-------------------------
16.1 Trust Agreement
All Plan assets shall be held by the Trustee in trust, in accordance
with those provisions of this Plan and Trust which relate to the
Trustee, for use in providing Plan benefits and paying Plan fees and
expenses not paid directly by the Employer. Plan benefits shall be
drawn solely from the Trust and paid by the Trustee as directed by
the Administrator. Notwithstanding, the Administrator may appoint,
with the approval of the Trustee, another trustee to hold and
administer Plan assets which do not meet the requirements of Section
16.2.
16.2 Investment Funds
The Administrator is hereby granted authority to direct the Trustee
to invest Trust assets in one or more Investment Funds. The number
and composition of Investment Funds may be changed from time to
time, without the necessity of amending this Plan and Trust. The
Trustee may establish reasonable limits on the number of Investment
Funds as well as the acceptable assets for any such Investment Fund.
Each of the Investment Funds may be comprised of any of the
following:
(a) shares of a registered investment company, whether or not the
Trustee or any of its affiliates is an advisor to, or other
service provider to, such company;
(b) collective investment funds maintained by the Trustee, or any
other fiduciary to the Plan, which are available for investment
by trusts which are qualified under Code sections 401(a) and
501(a);
(c) individual equity and fixed income securities which are readily
tradeable on the open market;
(d) guaranteed investment contracts issued by a bank or insurance
company;
(e) interest bearing deposits of the Trustee; and
(f) Company Stock.
Any Investment Fund assets invested in a collective investment fund,
shall be subject to all the provisions of the instruments
establishing and governing such fund. These instruments, including
any subsequent amendments, are incorporated herein by reference.
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16.3 Authority to Hold Cash
The Trustee shall have the authority to cause the investment manager
of each Investment Fund to maintain sufficient deposit or money
market type assets in each Investment Fund to handle the Fund's
liquidity and disbursement needs. Each Participant's and
Beneficiary's Sweep Account, which is used to hold assets pending
investment or disbursement, shall consist of interest bearing
deposits of the Trustee.
16.4 Trustee to Act Upon Instructions
The Trustee shall carry out instructions to invest assets in the
Investment Funds as soon as practicable after such instructions are
received from the Administrator, Participants, or Beneficiaries.
Such instructions shall remain in effect until changed by the
Administrator, Participants or Beneficiaries.
16.5 Administrator Has Right to Vote Registered Investment Company Shares
The Administrator shall be entitled to vote proxies or exercise any
shareholder rights relating to shares held on behalf of the Plan in
a registered investment company. Notwithstanding, the authority to
vote proxies and exercise shareholder rights related to such shares
held in a Custom Fund is vested as provided otherwise in Section 16.
16.6 Custom Fund Investment Management
The Administrator may designate, with the consent of the Trustee, an
investment manager for any Investment Fund established by the
Trustee solely for Participants of this Plan (a "Custom Fund"). The
investment manager may be the Administrator, Trustee or an
investment manager pursuant to ERISA section 3(38). The
Administrator shall advise the Trustee in writing of the appointment
of an investment manager and shall cause the investment manager to
acknowledge to the Trustee in writing that the investment manager is
a fiduciary to the Plan.
A Custom Fund shall be subject to the following:
(a) Guidelines. Written guidelines, acceptable to the Trustee,
shall be established for a Custom Fund. If a Custom Fund
consists solely of collective investment funds or shares of a
registered investment company (and sufficient deposit or money
market type assets to handle the Fund's liquidity and
disbursement needs), its underlying instruments shall
constitute the guidelines.
(b) Authority of Investment Manager. The investment manager of a
Custom Fund shall have the authority to vote or execute
proxies, exercise shareholder rights, manage, acquire, and
dispose of Trust
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<PAGE>
assets. Notwithstanding, the authority to vote proxies and
exercise shareholder rights related to shares of Company Stock
held in a Custom Fund is vested as provided otherwise in
Section 16.
(c) Custody and Trade Settlement. Unless otherwise agreed to by the
Trustee, the Trustee shall maintain custody of all Custom Fund
assets and be responsible for the settlement of all Custom Fund
trades. For purposes of this section, shares of a collective
investment fund, shares of a registered investment company and
guaranteed investment contracts issued by a bank or insurance
company, shall be regarded as the Custom Fund assets instead of
the underlying assets of such instruments.
(d) Limited Liability of Co-Fiduciaries. Neither the Administrator
nor the Trustee shall be obligated to invest or otherwise
manage any Custom Fund assets for which the Trustee or
Administrator is not the investment manager nor shall the
Administrator or Trustee be liable for acts or omissions with
regard to the investment of such assets except to the extent
required by ERISA.
16.7 Authority to Segregate Assets
The Company may direct the Trustee to split an Investment Fund into
two or more funds in the event any assets in the Fund are illiquid
or the value is not readily determinable. In the event of such
segregation, the Company shall give instructions to the Trustee on
what value to use for the split-off assets, and the Trustee shall
not be responsible for confirming such value.
16.8 Maximum Permitted Investment in Company Stock
If the Company provides for a Company Stock Fund the Fund shall be
comprised of Company Stock and sufficient deposit or money market
type assets to handle the Fund's liquidity and disbursement needs.
The Fund may be as large as necessary to comply with Participants'
and Beneficiaries' investment elections as well the total investment
of Participants' and Beneficiaries' ESOP Accounts.
16.9 Participants Have Right to Vote and Tender Company Stock
Each Participant or Beneficiary shall be entitled to instruct the
Trustee as to the voting or tendering of any full or partial shares
of Company Stock held on his or her behalf in the Company Stock
Fund. Prior to such voting or tendering of Company Stock, each
Participant or Beneficiary shall receive a copy of the proxy
solicitation or other material relating to such vote or tender
decision and a form for the Participant or Beneficiary to complete
which confidentially instructs the Trustee to vote or tender such
shares in the manner indicated by the Participant or Beneficiary.
Upon receipt of such instructions, the Trustee
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<PAGE>
shall act with respect to such shares as instructed. The
Administrator shall instruct the Trustee with respect to how to vote
or tender any shares for which instructions are not received from
Participants or Beneficiaries.
16.10 Registration and Disclosure for Company Stock
The Administrator shall be responsible for determining the
applicability (and, if applicable, complying with) the requirements
of the Securities Act of 1933, as amended, the California Corporate
Securities Law of 1968, as amended, and any other applicable blue
sky law. The Administrator shall also specify what restrictive
legend or transfer restriction, if any, is required to be set forth
on the certificates for the securities and the procedure to be
followed by the Trustee to effectuate a resale of such securities.
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17 TRUST ADMINISTRATION
--------------------
17.1 Trustee to Construe Trust
The Trustee shall have the discretionary authority to construe those
provisions of this Plan and Trust which relate to the Trustee and to
do all things necessary or convenient to the administration of the
Trust, whether or not such powers are specifically set forth in this
Plan and Trust. Actions taken in good faith by the Trustee shall be
conclusive and binding on all interested parties, and shall be given
the maximum possible deference allowed by law.
17.2 Trustee To Act As Owner of Trust Assets
Subject to the specific conditions and limitations set forth in this
Plan and Trust, the Trustee shall have all the power, authority,
rights and privileges of an absolute owner of the Trust assets and,
not in limitation but in amplification of the foregoing, may:
(a) receive, hold, manage, invest and reinvest, sell, tender,
exchange, dispose of, encumber, hypothecate, pledge, mortgage,
lease, grant options respecting, repair, alter, insure, or
distribute any and all property in the Trust;
(b) borrow money, participate in reorganizations, pay calls and
assessments, vote or execute proxies, exercise subscription or
conversion privileges, exercise options and register any
securities in the Trust in the name of the nominee, in federal
book entry form or in any other form as shall permit title
thereto to pass by delivery;
(c) renew, extend the due date, compromise, arbitrate, adjust,
settle, enforce or foreclose, by judicial proceedings or
otherwise, or defend against the same, any obligations or
claims in favor of or against the Trust; and
(d) lend, through a collective investment fund, any securities held
in such collective investment fund to brokers, dealers or other
borrowers and to permit such securities to be transferred into
the name and custody and be voted by the borrower or others.
17.3 United States Indicia of Ownership
The Trustee shall not maintain the indicia of ownership of any Trust
assets outside the jurisdiction of the United States, except as
authorized by ERISA section 404(b).
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<PAGE>
17.4 Tax Withholding and Payment
(a) Withholding. The Trustee shall calculate and withhold federal
(and, if applicable, state) income taxes with regard to any
Eligible Rollover Distribution that is not paid as a Direct
Rollover in accordance with the Participant's withholding
election or as required by law if no election is made or the
election is less than the amount required by law. With regard
to any taxable distribution that is not an Eligible Rollover
Distribution, the Trustee shall calculate and withhold federal
(and, if applicable, state) income taxes in accordance with the
Participant's withholding election or as required by law if no
election is made.
(b) Taxes Due From Investment Funds. The Trustee shall pay from the
Investment Fund any taxes or assessments imposed by any taxing
or governmental authority on such Fund or its income, including
related interest and penalties.
17.5 Trust Accounting
(a) Annual Report. Within 60 days (or other reasonable period)
following the close of the Plan Year, the Trustee shall provide
the Administrator with an annual accounting of Trust assets and
information to assist the Administrator in meeting ERISA's
annual reporting and audit requirements.
(b) Periodic Reports. The Trustee shall maintain records and
provide sufficient reporting to allow the Administrator to
properly monitor the Trust's assets and activity.
(c) Administrator Approval. Approval of any Trustee accounting
shall automatically occur 90 days after such accounting has
been received by the Administrator, unless the Administrator
files a written objection with the Trustee within such time
period. Such approval shall be final as to all matters and
transactions stated or shown therein and binding upon the
Administrator.
17.6 Valuation of Certain Assets
If the Trustee determines the Trust holds any asset which is not
readily tradeable and listed on a national securities exchange
registered under the Securities Exchange Act of 1934, as amended,
the Trustee may engage a qualified independent appraiser to
determine the fair market value of such property, and the appraisal
fees shall be paid from the Investment Fund containing the asset.
55
<PAGE>
17.7 Legal Counsel
The Trustee may consult with legal counsel of its choice, including
counsel for the Employer or counsel of the Trustee, upon any
question or matter arising under this Plan and Trust. When relied
upon by the Trustee, the opinion of such counsel shall be evidence
that the Trustee has acted in good faith.
17.8 Fees and Expenses
The Trustee's fees for its services as Trustee shall be such as may
be mutually agreed upon by the Company and the Trustee. Trustee
fees and all reasonable expenses of counsel and advisors retained by
the Trustee shall be paid in accordance with Section 6.
17.9 Trustee Duties and Limitations
The Trustee's duties, unless otherwise agreed to by the Trustee,
shall be confined to construing the terms of the Plan and Trust as
they relate to the Trustee, receiving funds on behalf of and making
payments from the Trust, safeguarding and valuing Trust assets,
investing and reinvesting Trust assets in the Investment Funds as
directed by the Administrator, Participants or Beneficiaries and
those duties as described in this Section 17.
The Trustee shall have no duty or authority to ascertain whether
Contributions are in compliance with the Plan, to enforce collection
or to compute or verify the accuracy or adequacy of any amount to be
paid to it by the Employer. The Trustee shall not be liable for the
proper application of any part of the Trust with respect to any
disbursement made at the direction of the Administrator.
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<PAGE>
18 RIGHTS, PROTECTION, CONSTRUCTION AND JURISDICTION
-------------------------------------------------
18.1 Plan Does Not Affect Employment Rights
The Plan does not provide any employment rights to any Employee.
The Employer expressly reserves the right to discharge an Employee
at any time, with or without cause, without regard to the effect
such discharge would have upon the Employee's interest in the Plan.
18.2 Limited Return of Contributions
Except as provided in this paragraph, (1) Plan assets shall not
revert to the Employer nor be diverted for any purpose other than
the exclusive benefit of Participants or their Beneficiaries; and
(2) a Participant's vested interest shall not be subject to
divestment. As provided in ERISA section 403(c)(2), the actual
amount of a Contribution made by the Employer (or the current value
of the Contribution if a net loss has occurred) may revert to the
Employer if:
(a) such Contribution is made by reason of a mistake of fact;
(b) initial qualification of the Plan under Code section 401(a) is
not received and a request for such qualification is made
within the time prescribed under Code section 401(b) (the
existence of and Contributions under the Plan are hereby
conditioned upon such qualification); or
(c) such Contribution is not deductible under Code section 404
(such Contributions are hereby conditioned upon such
deductibility) in the taxable year of the Employer for which
the Contribution is made.
The reversion to the Employer must be made (if at all) within one
year of the mistaken payment of the Contribution, the date of denial
of qualification, or the date of disallowance of deduction, as the
case may be. A Participant shall have no rights under the Plan with
respect to any such reversion.
18.3 Assignment and Alienation
As provided by Code section 401(a)(13) and to the extent not
otherwise required by law, no benefit provided by the Plan may be
anticipated, assigned or alienated, except:
(a) to create, assign or recognize a right to any benefit with
respect to a Participant pursuant to a QDRO, or
(b) to use a Participant's vested Account balance as security for a
loan from the Plan which is permitted pursuant to Code section
4975.
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<PAGE>
18.4 Facility of Payment
If a Plan benefit is due to be paid to a minor or if the
Administrator reasonably believes that any payee is legally
incapable of giving a valid receipt and discharge for any payment
due him or her, the Administrator shall have the payment of the
benefit, or any part thereof, made to the person (or persons or
institution) whom it reasonably believes is caring for or supporting
the payee, unless it has received due notice of claim therefor from
a duly appointed guardian or conservator of the payee. Any payment
shall to the extent thereof, be a complete discharge of any
liability under the Plan to the payee.
18.5 Reallocation of Lost Participant's Accounts
If the Administrator cannot locate a person entitled to payment of a
Plan benefit after a reasonable search, the Administrator may at any
time thereafter treat such person's Account as forfeited and use
such amount as described in Section 8.4. If such person
subsequently presents the Administrator with a valid claim for the
benefit, such person shall be paid the amount treated as forfeited,
plus the interest that would have been earned in the Sweep Account
to the date of determination. The Administrator shall pay the
amount through an additional amount contributed by the Employer or
direct the Trustee to pay the amount from the Forfeiture Account.
18.6 Claims Procedure
(a) Right to Make Claim. An interested party who disagrees with the
Administrator's determination of his or her right to Plan
benefits must submit a written claim and exhaust this claim
procedure before legal recourse of any type is sought. The
claim must include the important issues the interested party
believes support the claim. The Administrator, pursuant to the
authority provided in this Plan, shall either approve or deny
the claim.
(b) Process for Denying a Claim. The Administrator's partial or
complete denial of an initial claim must include an
understandable, written response covering (1) the specific
reasons why the claim is being denied (with reference to the
pertinent Plan provisions) and (2) the steps necessary to
perfect the claim and obtain a final review.
(c) Appeal of Denial and Final Review. The interested party may
make a written appeal of the Administrator's initial decision,
and the Administrator shall respond in the same manner and form
as prescribed for denying a claim initially.
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<PAGE>
(d) Time Frame. The initial claim, its review, appeal and final
review shall be made in a timely fashion, subject to the
following time table:
<TABLE>
<CAPTION>
Days to Respond
Action From Last Action
------ ----------------
<S> <C>
Administrator determines benefit NA
Interested party files initial request 60 days
Administrator's initial decision 90 days
Interested party requests final review 60 days
Administrator's final decision 60 days
</TABLE>
However, the Administrator may take up to twice the maximum
response time for its initial and final review if it provides
an explanation within the normal period of why an extension is
needed and when its decision shall be forthcoming.
18.7 Construction
Headings are included for reading convenience. The text shall
control if any ambiguity or inconsistency exists between the
headings and the text. The singular and plural shall be
interchanged wherever appropriate. References to Participant shall
include Beneficiary when appropriate and even if not otherwise
already expressly stated.
18.8 Jurisdiction and Severability
The Plan and Trust shall be construed, regulated and administered
under ERISA and other applicable federal laws and, where not
otherwise preempted, by the laws of the State of California. If any
provision of this Plan and Trust shall become invalid or
unenforceable, that fact shall not affect the validity or
enforceability of any other provision of this Plan and Trust. All
provisions of this Plan and Trust shall be so construed as to render
them valid and enforceable in accordance with their intent.
18.9 Indemnification by Employer
The Employers hereby agree to indemnify all Plan fiduciaries against
any and all liabilities resulting from any action or inaction,
(including a Plan termination in which the Company fails to apply
for a favorable determination from the Internal Revenue Service with
respect to the qualification of the Plan upon its termination), in
relation to the Plan or Trust (1) including (without limitation)
expenses reasonably incurred in the defense of any claim relating to
the Plan or its assets, and amounts paid in any settlement approved
by the Company relating to the Plan or its assets, but (2) excluding
liability resulting from actions or inactions made in bad faith, or
resulting from the negligence or willful misconduct of the Trustee.
The Company shall have the right, but not the obligation, to conduct
the defense of any action to which this Section applies. The Plan
fiduciaries are not entitled to indemnity from the Plan assets
relating to any such action.
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19 AMENDMENT, MERGER, DIVESTITURES AND TERMINATION
-----------------------------------------------
19.1 Amendment
The Company reserves the right to amend this Plan and Trust at any
time, to any extent and in any manner it may deem necessary or
appropriate. The Company (and not the Trustee) shall be responsible
for adopting any amendments necessary to maintain the qualified
status of this Plan and Trust under Code sections 401(a) and 501(a).
If the Committee is acting as the Administrator in accordance with
Section 15.6, it shall have the authority to adopt Plan and Trust
amendments which have no substantial adverse financial impact upon
any Employer or the Plan. All interested parties shall be bound by
any amendment, provided that no amendment shall:
(a) become effective unless it has been adopted in accordance with
the procedures set forth in Section 19.5;
(b) except to the extent permissible under ERISA and the Code, make
it possible for any portion of the Trust assets to revert to an
Employer or to be used for, or diverted to, any purpose other
than for the exclusive benefit of Participants and
Beneficiaries entitled to Plan benefits and to defray
reasonable expenses of administering the Plan;
(c) decrease the rights of any Employee to benefits accrued
(including the elimination of optional forms of benefits) to
the date on which the amendment is adopted, or if later, the
date upon which the amendment becomes effective, except to the
extent permitted under ERISA and the Code; nor
(d) permit an Employee to be paid the balance of his or her
Employee Account unless the payment would otherwise be
permitted under Code section 401(k).
19.2 Merger
This Plan and Trust may not be merged or consolidated with, nor may
its assets or liabilities be transferred to, another plan unless
each Participant and Beneficiary would, if the resulting plan were
then terminated, receive a benefit just after the merger,
consolidation or transfer which is at least equal to the benefit
which would be received if either plan had terminated just before
such event.
19.3 Divestitures
In the event of a sale by an Employer which is a corporation of: (1)
substantially all of the Employer's assets used in a trade or
business to an unrelated corporation, or (2) a sale of such
Employer's interest in a subsidiary
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to an unrelated entity or individual, lump sum distributions shall
be permitted from the Plan, except as provided below, to
Participants with respect to Employees who continue employment with
the corporation acquiring such assets or who continue employment
with such subsidiary, as applicable.
Notwithstanding, distributions shall not be permitted if the
purchaser agrees, in connection with the sale, to be substituted as
the Company as the sponsor of the Plan or to accept a transfer of
the assets and liabilities representing the Participants' benefits
into a plan of the purchaser or a plan to be established by the
purchaser.
19.4 Plan Termination
The Company may, at any time and for any reason, terminate the Plan
in accordance with the procedures set forth in Section 19.5, or
completely discontinue contributions. Upon either of these events,
or in the event of a partial termination of the Plan within the
meaning of Code section 411(d)(3), the Accounts of each affected
Employee who has not yet incurred a Break in Service shall be fully
vested. If no successor plan is established or maintained, lump sum
distributions shall be made in accordance with the terms of the Plan
as in effect at the time of the Plan's termination or as thereafter
amended provided that a post-termination amendment shall not be
effective to the extent that it violates Section 19.1 unless it is
required in order to maintain the qualified status of the Plan upon
its termination. The Trustee's and Employer's authority shall
continue beyond the Plan's termination date until all Trust assets
have been liquidated and distributed.
19.5 Amendment and Termination Procedures
The following procedural requirements shall govern the adoption of
any amendment or termination (a "Change") of this Plan and Trust:
(a) The Company may adopt any Change by action of its board of
directors in accordance with its normal procedures.
(b) The Committee, if acting as Administrator in accordance with
Section 15.6, may adopt any amendment within the scope of its
authority provided under Section 19.1 and in the manner
specified in Section 15.7(a).
(c) Any Change must be (1) set forth in writing, and (2) signed and
dated by an authorized officer of the Company or, in the case
of an amendment adopted by the Committee, at least one of its
members.
(d) If the effective date of any Change is not specified in the
document setting forth the Change, it shall be effective as of
the date it is signed by the last person whose signature is
required under clause (2) above,
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except to the extent that another effective date is necessary
to maintain the qualified status of this Plan and Trust under
Code sections 401(a) and 501(a).
(e) No Change affecting the Trustee in its capacity as Trustee or
in any other capacity shall become effective until it is
accepted and signed by the Trustee (which acceptance shall not
unreasonably be withheld).
19.6 Termination of Employer's Participation
Any Employer may, at any time and for any reason, terminate its Plan
participation by action of its board of directors in accordance with
its normal procedures. Written notice of such action shall be
signed and dated by an authorized officer of the Employer and
delivered to the Company. If the effective date of such action is
not specified, it shall be effective on, or as soon as reasonably
practicable, after the date of delivery. Upon the Employer's
request, the Company may instruct the Trustee and Administrator to
spin off all affected Accounts and underlying assets into a separate
qualified plan under which the Employer shall assume the powers and
duties of the Company. Alternatively, the Company may treat the
event as a partial termination described above or continue to
maintain the Accounts under the Plan.
19.7 Replacement of the Trustee
The Trustee may resign as Trustee under this Plan and Trust or may
be removed by the Company at any time upon at least 90 days written
notice (or less if agreed to by both parties). In such event, the
Company shall appoint a successor trustee by the end of the notice
period. The successor trustee shall then succeed to all the powers
and duties of the Trustee under this Plan and Trust. If no
successor trustee has been named by the end of the notice period,
the Company's chief executive officer shall become the trustee, or
if he or she declines, the Trustee may petition the court for the
appointment of a successor trustee.
19.8 Final Settlement and Accounting of Trustee
(a) Final Settlement. As soon as administratively feasible after
its resignation or removal as Trustee, the Trustee shall
transfer to the successor trustee all property currently held
by the Trust. However, the Trustee is authorized to reserve
such sum of money as it may deem advisable for payment of its
accounts and expenses in connection with the settlement of its
accounts or other fees or expenses payable by the Trust. Any
balance remaining after payment of such fees and expenses shall
be paid to the successor trustee.
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(b) Final Accounting. The Trustee shall provide a final accounting
to the Administrator within 90 days of the date Trust assets
are transferred to the successor trustee.
(c) Administrator Approval. Approval of the final accounting shall
automatically occur 90 days after such accounting has been
received by the Administrator, unless the Administrator files a
written objection with the Trustee within such time period.
Such approval shall be final as to all matters and transactions
stated or shown therein and binding upon the Administrator.
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APPENDIX A - INVESTMENT FUNDS
I. Investment Funds Available
The Investment Funds offered under the Plan as of the Effective Date
include this set of daily valued funds, except that the Company Stock Fund
shall be offered under the Plan at such later date as determined by the
Administrator:
<TABLE>
<CAPTION>
CATEGORY FUNDS
-------- -----
<S> <C>
INCOME U.S. Treasury Allocation
------
EQUITY Company Stock
------ S&P 500 Stock
Aim Constellation
COMBINATION LifePath
-----------
</TABLE>
II. Default Investment Fund
The default Investment Fund as of the Effective Date is the U.S. Treasury
Allocation Fund.
III. Contribution Accounts For Which Investment is Restricted
A Participant or Beneficiary may direct the investment of his or her
entire Account except for the following Contribution Accounts, and except
as otherwise provided in Section 7, which shall be invested as of the
Effective Date as follows:
Prior ESOP Rollover Account Company Stock Fund
ESOP Account Company Stock Fund
IV. Maximum Percentage Restrictions Applicable to Certain Investment Funds
With regard to those Accounts for which a Participant or Beneficiary may
direct investment, at such time as the Company Stock Fund is offered under
the Plan, a Participant or Beneficiary may not elect to invest more than
the following percentages in these Investment Funds:
Company Stock Fund 25%
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<PAGE>
APPENDIX B - PAYMENT OF PLAN FEES AND EXPENSES
As of the Effective Date, payment of Plan fees and expenses shall be as
follows:
1) Investment Management Fees: These are paid by Participants in that
management fees reduce the investment return reported and credited to
Participants, except that the Employer shall pay the fees related to the
Company Stock Fund. These are paid by the Employer on a quarterly basis.
2) Recordkeeping Fees: These are paid by the Employer on a quarterly basis,
except that with regard to a Participant who is no longer an Employee or a
Beneficiary, these are paid by the Participant and are assessed monthly
and billed/collected from Accounts quarterly.
3) Loan Fees: A $3.50 per month fee is assessed and billed/collected
quarterly from the Account of each Participant who has an outstanding loan
balance.
4) Investment Fund Election Changes: For each Investment Fund election
change by a Participant, in excess of 4 changes per year, a $10 fee shall
be assessed and billed/collected quarterly from the Participant's Account.
5) Periodic Installment Payment Fees: A $3.00 per check fee shall be assessed
and billed/collected quarterly from the Participant's Account.
6) Additional Fees Paid by Employer: All other Plan related fees and
expenses shall be paid by the Employer. To the extent that the
Administrator later elects that any such fees shall be borne by
Participants, estimates of the fees shall be determined and reconciled, at
least annually, and the fees shall be assessed monthly and
billed/collected from Accounts quarterly.
65
<PAGE>
APPENDIX C - LOAN INTEREST RATE
As of the Effective Date, the interest rate charged on Participant loans shall
be equal to the Trustee's prime rate, plus 1%.
66
<PAGE>
AMENDMENT NO. 1
TO THE
SILICON VALLEY BANK
401(k) AND EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST
WHEREAS, Silicon Valley Bank (the "Company"), approved and adopted the
Silicon Valley Bancshares Employee Stock Ownership Plan, intended to
constitute a qualified stock bonus plan, as described in Code section 401(a),
and the Silicon Valley Bank 401(k) Plan, intended to constitute a qualified
profit sharing plan, as described in Code section 401(a), including a cash or
deferred arrangement, as described in Code section 401(k), which were
originally effective January 1, 1989 and January 1, 1985, respectively;
WHEREAS, effective March 1, 1995, the Silicon Valley Bancshares Employee
Stock Ownership Plan was merged into the Silicon Valley Bank 401(k) Plan and
the merged plan was restated and renamed the Silicon Valley Bank 401(k) and
Employee Stock Ownership Plan (the "Plan") and Trust Agreement (the "Trust"),
then intended to constitute a qualified profit sharing plan, as described in
Code section 401(a), which includes a qualified cash or deferred arrangement,
as described in Code section 401(k);
WHEREAS, Section 19.1 of the Plan and Trust provides that the Company
reserves the right to amend the Plan and Trust;
NOW THEREFORE RESOLVED, that Sections 5, 9, 13 and 16 are amended
effective January 1, 1995, Sections 1, 3, 5, 8, 10 and 11 are amended
effective January 1, 1996 and Section 10 is amended effective May 1, 1996 as
follows:
Effective January 1, 1995:
-------------------------
1. Section 5 is amended to restate (a) and (b) of Subsection 5.2 each in its
entirety as follows:
5.2 ESOP Contributions and ESOP Forfeiture Account Allocations
(a) Frequency and Eligibility. Subject to determination made by
the Employer's board of directors, or duly authorized
committee appointed by the Employer's board of directors, for
each Plan Year, the Employer may make an ESOP Contribution on
behalf of each Participant who was an Eligible Employee on the
last day of the period. If such Contributions are made, such
Contributions shall also be made on behalf of each Participant
who was an Eligible Employee at any time during the period but
who ceased being an Employee during the period after having
attained his or her Early Retirement Date, Normal Retirement
Date or by reason of his or her Disability or death.
For each Plan Year, the Employer shall allocate any Forfeiture
Account balance remaining as of the end of the Plan Year
attributable to forfeited ESOP Account amounts and earnings
thereon, as ESOP Contributions on behalf of each Participant
who was an Eligible Employee on the last day of the period.
Such an allocation shall also be made on behalf of each
1
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Silicon Valley Bank Amendment No. 1
401(k) and Employee Stock Ownership Plan and Trust
Participant who ceased being an Employee during the period
after having attained his or her Early Retirement Date, Normal
Retirement Date or by reason of his or her Disability or
death.
(b) Allocation Method. The ESOP Contribution for each period,
shall be equal to a specified percentage, including 0% and up
to 10%, of each eligible Participant's Pay (not including
Forfeiture Account amounts allocated as ESOP Contributions).
Forfeiture Account amounts to be allocated as ESOP
Contributions shall be allocated among eligible Participants
in direct proportion to their Pay.
2. Section 9 is amended to restate (c) of Subsection 9.5 in its entirety as
follows:
9.5 Loan Funding Limits, Account Sources and Funding Order
(c) Legal Maximum Limit. The maximum a Participant may borrow,
including the outstanding balance of existing Plan loans, is
50% of his or her combined vested balance in this Plan and the
Silicon Valley Bank Money Purchase Pension Plan, not to exceed
$50,000. However, the $50,000 maximum is reduced by the
Participant's highest outstanding loan balance during the 12
month period ending on the day before the Sweep Date as of
which the loan is made. For purposes of this paragraph and
except as otherwise stated for purposes of determining a
Participant's vested balance, the qualified plans of all
Related Companies shall be treated as though they are part of
this Plan to the extent it would decrease the maximum loan
amount.
3. Section 13 is amended to hereby delete Subsection 13.3, to redesignate
each subsequent Subsection and to restate Subsection 13.5 in its entirety
as follows:
13.5 Correcting a Multiple Plan Excess
If a Participant, whose Account is credited with an excess Annual
Addition, received allocations to more than one defined contribution
plan, the excess shall be corrected by first reducing the Annual
Addition to this Plan before any reductions are made to the other
defined contribution plans.
4. Section 16 is amended to restate the first paragraph of Subsection 16.6,
to add a new Subsection 16.7 and to redesignate each existing subsection
as follows:
16.6 Custom Fund Investment Management
The Administrator may designate, with the consent of the Trustee, an
investment manager for any Investment Fund established by the
Trustee solely
2
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Silicon Valley Bank Amendment No. 1
401(k) and Employee Stock Ownership Plan and Trust
for Participants of this Plan and, subject to Section 16.7, any
other qualified plan of the Company or a Related Company (a "Custom
Fund"). The investment manager may be the Administrator, Trustee or
an investment manager pursuant to ERISA section 3(38). The
Administrator shall advise the Trustee in writing of the appointment
of an investment manager and shall cause the investment manager to
acknowledge to the Trustee in writing that the investment manager is
a fiduciary to the Plan.
16.7 Master Custom Fund
The Trustee may establish, at the direction of the Company, a single
Custom Fund (a "Master Custom Fund"), for the benefit of this Plan
and any other qualified plan of the Company or a Related Company for
which the Trustee acts as trustee pursuant to a plan and trust
document that contains a provision substantially identical to this
provision. The assets of this Plan, to the extent invested in the
Master Custom Fund, shall consist only of that percentage of the
assets of the Master Custom Fund represented by the shares held by
this Plan.
Effective January 1, 1996:
-------------------------
1. Section 1 is amended to restate Subsections 1.38 and 1.52 each in its
entirety as follows:
1.38 "Pay". All cash compensation paid to an Eligible Employee by an
Employer while a Participant during the current period, except that
for purposes of ESOP Contributions, "All cash compensation,
excluding incentive pay (annual incentive awards, referral fees and
other recognition/achievement awards)" shall be substituted for the
preceding reference to "All cash compensation". Pay excludes
reimbursements or other expense allowances, cash and non-cash fringe
benefits, moving expenses, deferred compensation and welfare
benefits.
Pay shall be determined further by including amounts contributed by
an Employer pursuant to Code sections 125 and 402(e)(3), except that
for purposes of ESOP Contributions, "excluding amounts" shall be
substituted for the preceding reference to "including amounts". Pay
is limited to $150,000 (as adjusted for the cost of living pursuant
to Code sections 401(a)(17) and 415(d)) per Plan Year.
For purposes of the Contributions described in Section 5.2, the
limitations as described in the second paragraph of Section 1.11
shall also apply.
1.52 "Trustee". BZW Barclays Global Investors, National Association.
3
<PAGE>
Silicon Valley Bank Amendment No. 1
401(k) and Employee Stock Ownership Plan and Trust
2. Section 3 is amended to restate Subsection 3.4 in its entirety as
follows:
3.4 Contribution Percentage Limits
The Administrator may establish and change from time to time, in
writing, without the necessity of amending this Plan and Trust, the
minimum, if applicable, and maximum Employee Contribution
percentages, prospectively or retrospectively (for the current Plan
Year), for all Participants. In addition, the Administrator may
establish any lower percentage limits for Highly Compensated
Employees as it deems necessary to satisfy the tests described in
Section 12. The Employee Contribution maximum percentage is 5%.
Irrespective of the limits that may be established by the
Administrator in accordance with this paragraph, in no event shall
the contributions made by or on behalf of a Participant for a Plan
Year exceed the maximum allowable under Code section 415.
3. Section 5 is amended to restate the Heading thereof and Subsections 5.1
and 5.2 each in its entirety including the Titles thereof as follows:
5 EMPLOYER CONTRIBUTIONS
----------------------
5.1 Company Match Contributions
(a) Frequency and Eligibility. For each period for which
Participants' Contributions are made, the Employer shall
make Company Match Contributions, as described in the
following Allocation Method paragraph, on behalf of each
Participant who contributed during the period.
(b) Allocation Method. The Company Match Contributions for
each period shall total 100% of each eligible
Participant's Employee Contributions for the period.
Notwithstanding, the maximum dollar match (including
Forfeiture Account amounts applied as Company Match
Contributions in accordance with Section 8.4) shall not
exceed $1,000 for the Plan Year. The Employer may change
the 100% matching rate to any other percentage, including
0%, or the maximum dollar match, generally by notifying
eligible Participants in sufficient time to adjust their
Contribution elections prior to the start of the period
for which the new percentage or amount apply.
(c) Timing, Medium and Posting. The Employer shall make each
period's Company Match Contribution in cash as soon as
administratively feasible, and for purposes of deducting
such
4
<PAGE>
Silicon Valley Bank Amendment No. 1
401(k) and Employee Stock Ownership Plan and Trust
Company Match Contribution, not later than the Employer's
federal tax filing date, including extensions. The
Trustee shall post such amount to each Participant's
Company Match Account once the total Contribution
received has been balanced against the specific amount to
be credited to each Participant's Company Match Account.
5.2 ESOP Contributions
(a) Frequency and Eligibility. Subject to determination made
by the Employer's board of directors, or duly authorized
committee appointed by the Employer's board of directors,
for each Plan Year, the Employer may make an ESOP
Contribution on behalf of each Participant who was an
Eligible Employee on the last day of the period. If such
Contributions are made, such Contributions shall also be
made on behalf of each Participant who was an Eligible
Employee at any time during the period but who ceased
being an Employee during the period after having attained
his or her Early Retirement Date, Normal Retirement Date
or by reason of his or her Disability or death.
(b) Allocation Method. The ESOP Contribution for each
period, shall be equal to a specified percentage,
including 0% and up to 10%, of each eligible
Participant's Pay (including Forfeiture Account amounts
applied as ESOP Contributions in accordance with Section
8.4).
(c) Timing, Medium and Posting. The Employer shall make each
period's ESOP Contribution in cash as soon as
administratively feasible, and for purposes of deducting
such ESOP Contribution, not later than the Employer's
federal tax filing date, including extensions. The
Trustee shall post such amount to each Participant's ESOP
Account once the total Contribution received has been
balanced against the specific amount to be credited to
each Participant's ESOP Account.
4. Section 8 is amended to restate Subsection 8.4 in its entirety as
follows:
8.4 Forfeitures
A Participant's non-vested Account balance shall be forfeited as of
the Settlement Date following the Sweep Date on which the
Administrator has reported to the Trustee that the Participant's
employment has terminated with all Related Companies. Forfeitures
from all Employer Contribution Accounts shall be transferred to and
maintained in a single Forfeiture Account, which shall
5
<PAGE>
Silicon Valley Bank Amendment No. 1
401(k) and Employee Stock Ownership Plan and Trust
be invested in interest bearing deposits of the Trustee. Forfeiture
Account amounts shall be utilized to restore Accounts, to pay Plan
fees and expenses at the discretion of the Administrator and to
reduce Company Match Contributions and ESOP Contributions as
directed by the Administrator.
5. Section 10 is amended to restate Subsections 10.1 and 10.2 each in its
entirety as follows:
10.1 In-Service Withdrawals Permitted
In-service withdrawals to a Participant who is an Employee are
permitted pursuant to the terms and conditions as set forth in this
Section and as required by law pursuant to the terms and conditions
as set forth in Section 11.
10.2 In-Service Withdrawal Application and Notice
A Participant shall apply for any in-service withdrawal in such
manner and with such advance notice as prescribed by the
Administrator. The Participant shall be provided the notice
prescribed by Code section 402(f).
Code sections 401(a)(11) and 417 do not apply to in-service
withdrawals under the Plan as described in this Section. An in-
service withdrawal may therefore commence less than 30 days after
the aforementioned notice is provided, if:
(a) the Participant is clearly informed that he or she has the
right to a period of at least 30 days after receipt of such
notice to consider his or her option to elect or not elect a
Direct Rollover for all or a portion, if any, of his or her
in-service withdrawal which shall constitute an Eligible
Rollover Distribution; and
(b) the Participant after receiving such notice, affirmatively
elects a Direct Rollover for all or a portion, if any, of his
or her in-service withdrawal which shall constitute an
Eligible Rollover Distribution or alternatively elects to have
all or a portion made payable directly to him or her, thereby
not electing a Direct Rollover for all or a portion thereof.
6. Section 11 is amended to restate Subsection 11.1 and the Title of
Subsection 11.12 and (a) and (d) thereof each its entirety as follows:
11.1 Benefit Information, Notices and Election
A Participant, or his or her Beneficiary in the case of his or her
death, shall be provided with information regarding all optional
times and forms of distribution available, to include the notices
prescribed by Code section 402(f) and Code section 411(a)(11).
Subject to the other requirements of this Section, a
6
<PAGE>
Silicon Valley Bank Amendment No. 1
401(k) and Employee Stock Ownership Plan and Trust
Participant, or his or her Beneficiary in the case of his or her
death, may elect, in such manner and with such advance notice as
prescribed by the Administrator, to have his or her vested Account
balance paid to him or her beginning upon any Settlement Date
following the Participant's termination of employment with all
Related Companies or, if earlier, at the time required by law as set
forth in Section 11.7.
A distribution may commence less than 30 days, but more than seven
days if such distribution is one to which Code sections 401(a)(11)
and 417 apply, after the aforementioned notices are provided, if:
(a) the Participant is clearly informed that he or she has the
right to a period of at least 30 days after receipt of such
notices to consider the decision as to whether to elect a
distribution and if so to elect a particular form of
distribution and to elect or not elect a Direct Rollover for
all or a portion, if any, of his or her distribution which
shall constitute an Eligible Rollover Distribution; and
(b) the Participant after receiving such notices, affirmatively
elects a distribution and a Direct Rollover for all or a
portion, if any, of his or her distribution which shall
constitute an Eligible Rollover Distribution or alternatively
elects to have all or a portion made payable directly to him
or her, thereby not electing a Direct Rollover for all or a
portion thereof; and
(c) if such distribution is one to which Code sections 401(a)(11)
and 417 apply, the Participant's election includes Spousal
Consent.
11.12 QJSA and QPSA Information and Elections
(a) Annuity Starting Date. The first day of the first period for
which an amount is payable as an annuity, or, in the case of a
benefit not payable in the form of an annuity, the first day
on which all events have occurred which entitle the
Participant to such benefit. Such date shall be a date no
earlier than the expiration of the seven-day period that
commences the day after the information described in the QJSA
Information to a Participant paragraph below is provided to
the Participant.
(d) QJSA Information to a Participant. No more than 90 days
before the Annuity Starting Date, each Participant shall be
given a written explanation of (1) the terms and conditions of
the QJSA, (2) the right to a period of at least 30 days after
receipt of the written explanation to make an election to
waive this form of payment and choose an optional form of
payment and the effect of this election, (3) the right to
revoke this election and the effect of this revocation, and
(4) the need for Spousal Consent.
7
<PAGE>
Silicon Valley Bank Amendment No. 1
401(k) and Employee Stock Ownership Plan and Trust
Effective May 1, 1996:
---------------------
1. Section 10 is amended to restate (b) of Subsection 10.8 in its entirety
as follows:
10.8 Over Age 59 1/2 Withdrawals
(b) Account Sources and Funding Order. The withdrawal amount
shall come from the following of the Participant's fully
vested Accounts, in the priority order as follows:
Rollover Account
Employee Account
Prior ESOP Rollover Account
Company Match Account
ESOP Account
Prior Match Account
Date: May 28, 1996 SILICON VALLEY BANK
By: /s/ Glen G. Simmons
--------------------------------------
Title: Executive V.P. Human Resources/
Administration
The provisions of the above amendment which relate to the Trustee are hereby
approved and executed.
Date: May 30, 1996 BZW BARCLAYS GLOBAL INVESTORS, NATIONAL
ASSOCIATION
By: /s/ Gwyn E. Slack
--------------------------------------
Title: Principal
Date: May 30, 1996 BZW BARCLAYS GLOBAL INVESTORS, NATIONAL
ASSOCIATION
By: /s/ Lisa M. Maloney
--------------------------------------
Title: Principal
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS, RELATED NOTES, AND
MANAGEMENT'S DISCUSSION AND ANALYSIS CONTAINED IN THE REPORT ON FORM 10-Q FILED
BY SILICON VALLEY BANCSHARES FOR THE QUARTER JUNE 30, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 90,323
<INT-BEARING-DEPOSITS> 410
<FED-FUNDS-SOLD> 372,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 445,263
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 823,651
<ALLOWANCE> 29,000
<TOTAL-ASSETS> 1,736,466
<DEPOSITS> 1,608,547
<SHORT-TERM> 0
<LIABILITIES-OTHER> 8,947
<LONG-TERM> 0
0
0
<COMMON> 63,659
<OTHER-SE> 55,313
<TOTAL-LIABILITIES-AND-EQUITY> 1,736,466
<INTEREST-LOAN> 42,300
<INTEREST-INVEST> 9,416
<INTEREST-OTHER> 6,508
<INTEREST-TOTAL> 58,224
<INTEREST-DEPOSIT> 17,085
<INTEREST-EXPENSE> 17,085
<INTEREST-INCOME-NET> 41,139
<LOAN-LOSSES> 3,588
<SECURITIES-GAINS> 1
<EXPENSE-OTHER> 4,077
<INCOME-PRETAX> 17,190
<INCOME-PRE-EXTRAORDINARY> 17,190
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,314
<EPS-PRIMARY> $1.07
<EPS-DILUTED> $1.07
<YIELD-ACTUAL> 8.8
<LOANS-NON> 23,532
<LOANS-PAST> 88
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 8,670
<ALLOWANCE-OPEN> 29,700
<CHARGE-OFFS> 5,695
<RECOVERIES> 1,407
<ALLOWANCE-CLOSE> 29,000
<ALLOWANCE-DOMESTIC> 18,807
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 10,193
</TABLE>
