<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
SILICON VALLEY BANCSHARES
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
THURSDAY, APRIL 15, 1999
4:00 P.M.
------------------------
TO THE SHAREHOLDERS:
I am pleased to invite you to attend the 1999 Annual Meeting of Shareholders
of Silicon Valley Bancshares, which will be held at the Santa Clara Convention
Center, Great America Ballroom, 5001 Great America Parkway, Santa Clara,
California 95054, on Thursday, April 15, 1999, 4:00 p.m., local time. The
purposes of the meeting are to:
1. Elect eight (8) Directors to serve for the ensuing year and until their
successors are elected.
2. Approve a change in Silicon Valley Bancshares' state of incorporation
from California to Delaware by means of a merger of Silicon Valley
Bancshares into a wholly-owned Delaware subsidiary of Silicon Valley
Bancshares.
3. Ratify and approve the Silicon Valley Bancshares 1999 Employee Stock
Purchase Plan.
4. Ratify the appointment of KPMG LLP as the Company's independent
auditors.
5. Transact such other business as may properly come before the meeting.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. TO ASSURE YOUR REPRESENTATION AT THE
MEETING, YOU ARE ENCOURAGED TO MARK YOUR VOTES, SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID
ENVELOPE. Any shareholder attending the meeting may vote in person even if such
shareholder has previously returned a proxy card.
Only shareholders of record on February 16, 1999 will be entitled to vote at
the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
[SIG]
Daniel J. Kelleher
Chairman of the Board
Santa Clara, California
March 19, 1999
- ------------------------
ALTHOUGH YOU MAY PRESENTLY PLAN TO ATTEND THE MEETING, PLEASE INDICATE ON THE
ENCLOSED PROXY CARD YOUR VOTE ON THE MATTERS PRESENTED AND SIGN, DATE AND RETURN
THE PROXY CARD. IF YOU DO ATTEND THE MEETING AND WISH TO VOTE IN PERSON, YOU MAY
WITHDRAW YOUR PROXY AT THAT TIME. WE ENCOURAGE YOU TO VOTE FOR THE ELECTION OF
ALL EIGHT (8) NOMINEES FOR DIRECTORS, FOR THE APPROVAL OF REINCORPORATION OF
SILICON VALLEY BANCSHARES IN DELAWARE, FOR THE RATIFICATION OF THE 1999 SILCION
VALLEY BANCSHARES EMPLOYEE STOCK PURCHASE PLAN, AND FOR RATIFICATION OF THE
SELECTION OF KPMG LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
<PAGE>
PROXY STATEMENT--TABLE OF CONTENTS
<TABLE>
<CAPTION>
MATTER PAGE
- ----------------------------------------------------------------------------------------------------------- -----
<S> <C>
Information Concerning the Proxy Solicitation.............................................................. 1
Proposal No. 1--Election of Directors*..................................................................... 3
Security Ownership of Directors and Executive Officers..................................................... 6
Information on Executive Officers.......................................................................... 7
Report of the Executive Committee of the Board on Executive Compensation................................... 10
Return to Shareholders Performance Graph................................................................... 14
Table 1--Summary Compensation.............................................................................. 15
Option Grants in Last Fiscal Year.......................................................................... 16
Table 2--Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values................. 16
Termination Arrangements................................................................................... 17
Board Committees and Meeting Attendance.................................................................... 20
Stock Ownership Guidelines................................................................................. 21
Director Compensation...................................................................................... 22
Security Ownership of Principal Shareholders............................................................... 23
Section 16(a) Beneficial Ownership Reporting Compliance.................................................... 24
Certain Relationships and Related Transactions............................................................. 24
Proposal No. 2--Approval of Reincorporation in Delaware*................................................... 25
Proposal No. 3--Approval of the Silicon Valley Bancshares 1999 Employee Stock Purchase Plan*............... 41
Proposal No. 4--Ratification of Appointment of Independent Auditors*....................................... 45
Shareholder Proposals...................................................................................... 46
1998 Annual Report......................................................................................... 47
Other Matters.............................................................................................. 47
</TABLE>
- ------------------------
* Denotes items to be voted on at the Meeting
<PAGE>
Mailed to shareholders on or about March 19, 1999
------------------------
PROXY STATEMENT
OF
SILICON VALLEY BANCSHARES
3003 TASMAN DRIVE
SANTA CLARA, CALIFORNIA 95054
------------------------
INFORMATION CONCERNING THE PROXY SOLICITATION
GENERAL
This Proxy Statement is furnished in connection with the solicitation of the
enclosed Proxy by, and on behalf of, the Board of Directors of Silicon Valley
Bancshares, a California corporation and bank holding company (the "Company")
for Silicon Valley Bank (the "Bank"), for use at the 1999 Annual Meeting of
Shareholders of the Company to be held in the Great America Ballroom at the
Santa Clara Convention Center, 5001 Great America Parkway, Santa Clara,
California 95054, ON THURSDAY, APRIL 15, 1999 AT 4:00 P.M., local time and at
all postponements or adjournments thereof (the "Meeting"). Only shareholders of
record on February 16, 1999 (the "Record Date") will be entitled to vote at the
Meeting and any postponements or adjournments thereof. At the close of business
on the Record Date, the Company had 20,751,702 outstanding shares of its no par
value Common Stock (the "Common Stock").
The Company's principal executive offices are located at 3003 Tasman Drive,
Santa Clara, CA 95054 and its telephone number at that location is (408)
654-7400.
VOTING
Shareholders of the Company's Common Stock are entitled to one vote for each
share held, except that in the election of directors, each shareholder has the
right to invoke cumulative voting, which entitles each shareholder to as many
votes as shall equal the number of shares held by such shareholder multiplied by
the number of directors to be elected. A shareholder may cast all of his or her
votes for a single candidate or distribute such votes among as many of the
candidates he or she chooses (up to a maximum of the number of directors to be
elected). However, no shareholder shall be entitled to cumulate votes (in other
words, cast for any candidate a number of votes greater than the number of
shares of stock held by such shareholder) for a candidate unless such
candidate's or candidates' names have been properly placed in nomination prior
to the voting in accordance with Section 2.11 of the Bylaws of the Company and
the shareholder (or any other shareholder) has given notice at the meeting prior
to the voting of the shareholder's intention to cumulate votes. If any
shareholder has given such notice, all shareholders may cumulate their votes for
candidates properly placed in nomination. If cumulative voting is properly
invoked, the Proxy Holders are given discretionary authority under the terms of
the Proxy to cumulate votes represented by shares for which they are named Proxy
Holders as they see fit among management's nominees in order to assure the
election of as many of such nominees as possible.
Section 2.11 of the Bylaws of the Company governs nominations for election
of members of the Board of Directors, as follows: nominations for election of
members of the Company's Board of Directors may be made by the Board of
Directors or by any shareholder of any outstanding class of capital stock of the
Company entitled to vote for the election of directors. Notice of intention to
make any nominations shall be made in writing and shall be delivered or mailed
to the Secretary of the Company no later than the close of business on the
sixtieth (60th) day nor earlier than the close of business on the ninetieth
(90th) day prior to the meeting; provided, however, that in the event that less
than sixty-five (65) days notice of the meeting is given to shareholders, notice
by the shareholder to be timely must be so delivered not earlier
1
<PAGE>
than the close of business on the seventh (7th) day following 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: (a)
the name and address of each proposed nominee; (b) the principal occupation of
each proposed nominee; (c) the number of shares of Common Stock of the Company
owned by each proposed nominee; (d) the name and residence address of the
notifying shareholder; and (e) the number of shares of Common Stock of the
Company owned by the notifying shareholder. Nominations not made in accordance
herewith may, at the discretion of the Chairman of the meeting, be disregarded
and upon the Chairman's instructions, the Inspector of Election can disregard
all votes cast for each such nominee.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting is
a majority of the shares of Common Stock issued and outstanding on the Record
Date. Shares that are voted "FOR", "AGAINST" or "WITHHELD FROM" a matter are
treated as being present at the meeting for purposes of establishing a quorum
and are also treated as shares "represented and voting" at the Annual Meeting
(the "Votes Cast") with respect to such matter.
While there is no definitive statutory or case law authority in California
as to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining the presence or absence of a
quorum for the transaction of business, but should not be counted as Votes Cast
with respect to a proposal, since the shareholder has expressly declined to vote
on such proposal. In the absence of controlling precedent to the contrary, the
Company intends to treat abstentions in this manner.
Similarly, broker non-votes will be counted for purposes of determining the
presence or absence of a quorum for the transaction of business, but will not be
counted for purposes of determining the number of Votes Cast with respect to the
proposal on which the broker has expressly not voted.
Accordingly, abstentions and broker non-votes will not affect the outcome of
the voting on a proposal that requires a majority of the Votes Cast (such as
approval of the Employee Stock Purchase Plan). However, with respect to a
proposal that requires a majority of the outstanding shares (such as approval of
the reincorporation in Delaware), an abstention or a broker non-vote has the
same effect as a vote against the proposal.
REVOCABILITY OF PROXIES
Any person giving a Proxy in the form accompanying this Proxy Statement has
the power to revoke the Proxy at any time prior to its use. A Proxy is revocable
prior to the Meeting by delivering either a written instrument revoking it or a
duly executed Proxy bearing a later date to the Secretary of the Company or to
the Company's transfer agent. Such Proxy is also automatically revoked if the
shareholder is present at the Meeting and votes in person.
SOLICITATION
This solicitation of Proxies is made by, and on behalf of, the Board of
Directors of the Company. The Company will bear the entire cost of preparing,
assembling, printing, and mailing Proxy materials furnished by the Board of
Directors to shareholders. Copies of Proxy materials will be furnished to
brokerage houses, fiduciaries and custodians to be forwarded to the beneficial
owners of the Company's Common Stock. In addition to the solicitation of Proxies
by use of the mail, some of the officers, directors and regular employees of the
Company and the Bank may (without additional compensation) solicit Proxies by
telephone or personal interview, the costs of which the Company will bear.
Unless otherwise instructed, each valid returned Proxy that is not revoked
will be voted in the election of directors "FOR" the Company's nominees to the
Board of Directors, "FOR" approval of the Company's reincorporation in Delaware,
"FOR" ratification of the 1999 Employee Stock Purchase Plan,
2
<PAGE>
"FOR" ratification of the appointment of KPMG LLP as the Company's independent
auditors, and at the Proxy Holders' discretion on such other matters, if any, as
may properly come before the Meeting or any postponement or adjournment thereof
(including any proposal to adjourn the Meeting).
PROPOSAL NO. 1
ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES
The Company's Bylaws currently provide for a range of from eight (8) to
fifteen (15) directors and permit the exact number to be fixed by the Board of
Directors. Effective as of April 15, 1999, the Board of Directors has fixed the
exact number of directors at eight (8).
NOMINEES FOR DIRECTOR
All Proxies will be voted "FOR" the election of the following eight (8)
nominees recommended by the Board of Directors, all of whom are currently
directors, unless authority to vote for the election of directors (or for any
particular nominee) is withheld. All of the nominees have served as directors of
the Company since the last Annual Meeting of Shareholders, except for Stephen E.
Jackson. Mr. Jackson was appointed to the Board of Directors in August 1998. All
incumbent directors are nominees for re-election to the Board, except Clarence
J. Ferrari, Jr., Esq., who is not standing for re-election. Mr. Ferrari will
continue to serve as an advisory (non-voting) member of the Board of Directors.
If any of the nominees should unexpectedly decline or be unable to act as a
director, the Proxies may be voted for a substitute nominee designated by the
Board of Directors. The Board of Directors has no reason to believe that any
nominee will become unavailable and has no present intention to nominate persons
in addition to or in lieu of those listed below. Directors of the Company serve
until the next annual meeting of shareholders or until their successors are
elected and qualified.
The names and certain information about each of the Company's nominees for
director as of the Record Date are set forth below.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR EMPLOYMENT
(1) -----------------------------------------------------------
--- OTHER BUSINESS AFFILIATIONS AND DIRECTOR
NAME OF DIRECTOR NOMINEE AGE (2) PUBLIC COMPANY DIRECTORSHIPS SINCE
- ------------------------------- --- --- ----------------------------------------------------------- ---------
<S> <C> <C> <C> <C>
Gary K. Barr................... 54 (1) President and Chief Executive Officer, Pacific Coast 1982
Capital (a real estate investment and management company),
Carbondale, Colorado since August 1992.
(2) Chief Financial Officer, Import/Export Time Advisor (an
information software company), since April 1997.
James F. Burns, Jr............. 61 (1) Trustee of CBR Liquidating Trust since October 1996, and 1994
formerly, Executive Vice President and Chief Financial
Officer, CBR Information Group (a credit and mortgage
reporting company), Houston, Texas from September 1993 to
October 1996.
(2) Executive Vice President and Chief Financial Officer,
Integratec, Inc. (a company providing credit origination,
servicing and collection services, and the parent company
of CBR Information Group prior to spin-off of CBR in 1993)
from 1988 to 1993.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR EMPLOYMENT
(1) -----------------------------------------------------------
NAME OF DIRECTOR NOMINEE --- OTHER BUSINESS AFFILIATIONS AND DIRECTOR
(CONTINUED) AGE (2) PUBLIC COMPANY DIRECTORSHIPS SINCE
- ------------------------------- --- --- ----------------------------------------------------------- ---------
<S> <C> <C> <C> <C>
John C. Dean................... 51 (1) President and Chief Executive Officer of the Company and 1993
the Bank since May 1993. Also, see "Information on
Executive Officers" below.
(2) Advisory Member of Board of Directors, American Central Gas
Companies, Inc., Tulsa, Oklahoma since August 1994.
David M. deWilde............... 58 (1) Managing Partner, L.A.I. (an executive search firm) since 1995
January 1998.
(2) Founder and Chief Executive Officer, Chartwell Partners
International, Inc. (an executive search firm) from 1989 to
January 1998. Director, Berkshire Realty Company, Inc. (a
real estate investment trust), Boston, Massachusetts since
1993.
Stephen E. Jackson............. 53 (1) President and Chief Executive Officer, American Central Gas 1998
Companies, Inc. (a gas pipeline company), Tulsa, Oklahoma
since April 1996.
(2) Founder, President and Chief Executive Officer, American
Land Development Company (a developer of residential
homesites), Tulsa, Oklahoma since 1988. Co-founder,
director and Chairman of the Board, Bristol Resources
Corporation (an oil and gas exploration and production
company), since 1985.
Daniel J. Kelleher(1).......... 56 (1) Private Investor, Los Altos Hills, California. 1986
James R. Porter................ 63 (1) Chairman, CCI/Triad (a computer services company) since 1994
February 1997.
(2) President, Chief Executive Officer and Director, Triad
Systems Corporation (a computer software company),
Livermore, California from September 1985 to February 1997.
Member of Board of Directors, Firstwave Technologies (a
sales automation company), Atlanta, Georgia since April
1993. Member of the Board of Directors, Cellular Technical
Services (a cellular device company), Seattle, Washington
since July 1997.
Ann R. Wells................... 55 (1) Retired, January 1999. 1986
(2) Chief Executive Officer, Ann Wells Personnel Services, Inc.
(a personnel agency), Sunnyvale, California from January
1980 to January 1998. President, Ann Wells Personnel
Services Division, Personnel Group of America (a personnel
agency) from January 1998 to December 1998.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR EMPLOYMENT
(1) -----------------------------------------------------------
NAME OF DIRECTOR NOMINEE --- OTHER BUSINESS AFFILIATIONS AND DIRECTOR
(CONTINUED) AGE (2) PUBLIC COMPANY DIRECTORSHIPS SINCE
- ------------------------------- --- --- ----------------------------------------------------------- ---------
<S> <C> <C> <C> <C>
OTHER DIRECTOR
Clarence J. Ferrari, Jr.,
Esq.(2)...................... 64 (1) Founder and Principal, Ferrari, Olsen, Ottoboni & Bebb 1983
(Attorneys-at-Law), San Jose, California since 1981.
</TABLE>
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(1) Chair of the Company Board and the Bank Board.
(2) Mr. Ferrari is not standing for re-election.
Henry M. Gay resigned from the Board of Directors on April 17, 1997. Mr. Gay
continues to serve as an advisory (non-voting) member of the Company Board and
the Bank Board.
VOTE REQUIRED
The eight (8) nominees for director receiving the highest number of
affirmative votes of the shares entitled to be voted for them shall be elected
as directors. Votes withheld from any director are counted for purposes of
determining the presence or absence of a quorum, but have no other legal effect
under California law.
5
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding beneficial ownership as
of the Record Date of the Company's Common Stock by each of the Company's
directors, by each of the executive officers named in the Summary Compensation
Table and by all current directors and executive officers as a group. Unless
otherwise noted, the respective nominees have sole voting and investment power
with respect to the shares shown in the table as beneficially owned.
<TABLE>
<CAPTION>
AGGREGATE NUMBER
OF SHARES PERCENT OF
NAME BENEFICIALLY OWNED OUTSTANDING SHARES
- ---------------------------------------- --------------------- --------------------
<S> <C> <C>
DIRECTORS
Gary K. Barr............................ 74,500(a) 0.36%
James F. Burns, Jr...................... 36,500(a) 0.18%
John C. Dean*........................... 347,271(b),(i) 1.67%
David M. deWilde........................ 43,468(a) 0.21%
Clarence J. Ferrari, Jr., Esq........... 98,400(c) 0.47%
Stephen E. Jackson...................... 40,240(d) 0.19%
Daniel J. Kelleher...................... 189,342(a) 0.91%
James R. Porter......................... 31,750(a) 0.15%
Ann R. Wells............................ 135,360(a) 0.65%
EXECUTIVE OFFICERS**
John C. Dean............................ (See listing above under "Directors")
James F. Forrester...................... 111,407(e),(j) 0.54%
Barbara B. Kamm......................... 101,905(f),(k) 0.49%
Harry W. Kellogg, Jr.................... 127,027(g),(l) 0.61%
Kenneth P. Wilcox....................... 85,098(h),(m) 0.41%
All current directors and executive
officers as a group (18 persons)...... 1,541,881*** 7.43%
</TABLE>
- ------------------------
Share numbers shown in the table include (1) the following number of shares
subject to options where the options are exercisable within 60 days after the
Record Date and (2) the following number of shares under the Company's employee
retirement plans:
<TABLE>
<S> <C> <C> <C>
(1) (2)
(a) 16,000 shares (i) 96,891 shares
(b) 25,000 shares (j) 21,430 shares
(c) 12,000 shares (k) 10,289 shares
(d) 6,090 shares (l) 21,562 shares
(e) 29,190 shares (m) 14,192 shares
(f) 54,378 shares
(g) 75,000 shares
(h) 44,000 shares
</TABLE>
- ------------------------
* Share ownership shown does not include 7,000 shares held by Mr. Dean's
youngest daughter, for which shares Mr. Dean disclaims beneficial ownership.
Ms. Dean is a full time college student not living in Mr. Dean's household
on a full time basis. Ms. Dean has sole voting and investment power of these
shares.
** Ownership shown includes dispositive share equivalents beneficially owned by
executive officers under the Company's employee retirement plans. Actual
voting shares will be slightly less due to cash liquidity in such retirement
plans. The difference between dispositive share equivalents and actual
voting shares is not deemed material.
*** Includes (i) 376,284 shares subject to options where the options are
exercisable within 60 days after the Record Date and (ii) 185,113 shares
held for the benefit of current executive officers under the Company's
employee retirement plans.
6
<PAGE>
INFORMATION ON EXECUTIVE OFFICERS(1)
The positions and ages as of the Record Date of the executive officers of
the Company are as set forth below. There are no family relationships among
directors or executive officers of the Company.
<TABLE>
<CAPTION>
EMPLOYEE
NAME AND POSITION AGE BUSINESS EXPERIENCE SINCE
- ------------------------------ --- ------------------------------------------------------------ ---------
<S> <C> <C> <C>
JOHN C. DEAN 51 Prior to joining the Company and the Bank in May 1993, Mr. 1993
President, Chief Executive Dean served as President and Chief Executive Officer of
Officer and Director of the Pacific First Bank, a $6.5 billion federal savings bank
Company and the Bank headquartered in Seattle, Washington from December 1991
until April 1993. From 1990 to 1991, Mr. Dean served as
Chairman and Chief Executive Officer of First Interstate
Bank of Washington and from 1986 to 1990, Chairman and Chief
Executive Officer of First Interstate Bank of Oklahoma.
JAMES E. ANDERSON 45 Prior to joining the Bank in January 1999, Mr. Anderson 1999
Executive Vice President of served as Managing Director in the Technology Investment
the Company and the Bank and Banking Group of CIBC Oppenheimer, a U.S. investment banking
Manager of the Bank's and brokerage subsidiary of the Canadian Imperial Bank of
Corporate Finance Group(2) Commerce ("CIBC"), from December 1997 to December 1998. Mr.
Anderson served as the Managing Director of the Information
Technology Group of CIBC Wood Gundy Securities, an
investment banking affiliate of the Canadian Imperial Bank
of Commerce, from 1995 to 1997. From 1991 to 1995, Mr.
Anderson served as Managing Director of the Electronics
Industry Group of CIBC, Inc.
L. BLAKE BALDWIN 47 Mr. Baldwin joined the Bank in July 1988 as Vice President 1988
Executive Vice President of of the Bank's real estate division. Mr. Baldwin was promoted
the Bank and Manager of the to Senior Vice President and Division Manager of the Real
Bank's Human Resources and Estate Group in December 1992. In March 1996, Mr. Baldwin
Client and Corporate was appointed Executive Vice President and Manager of the
Resources Groups Bank's Special Industries Group. In September 1998, Mr.
Baldwin was appointed Manager of the Human Resources Group
and in November 1998 was appointed Manager of the Client and
Corporate Resources Group.
</TABLE>
- ------------------------
(1) Executive Officers include members of the Bank's Executive Committee and
any other officer who performs a policy-making function for the Company
within the meaning of the Securities and Exchange Commission's rules.
(2) Mr. Forrester will resign his position as Manager of the Bank's Corporate
Finance Group in the first quarter of 1999, at which time Mr. Anderson will
assume such position.
7
<PAGE>
<TABLE>
<CAPTION>
EMPLOYEE
NAME AND POSITION AGE BUSINESS EXPERIENCE SINCE
- ------------------------------ --- ------------------------------------------------------------ ---------
<S> <C> <C> <C>
JAMES F. FORRESTER 55 Mr. Forrester joined the Bank in 1987 as Senior Vice 1987
Executive Vice President of President of Operations and Administration. In 1990, Mr.
the Company and the Bank and Forrester founded the Bank's Southern California office and
Manager of the Bank's managed that office until August 1993. From August 1993 to
Corporate Finance Group(2) December 1995, Mr. Forrester managed the Bank's Special
Industries Group and Northern California Technology Group,
and from January 1996 to December 1997, managed the Bank's
Strategic Financial Services Group. Since December 1997, Mr.
Forrester has served as Manager of the Corporate Finance
Group.
DAVID A. JONES 41 Mr. Jones joined the Bank in August 1997 as Executive Vice 1997
Executive Vice President and President and Chief Credit Officer. Prior to joining the
Chief Credit Officer of the Bank, Mr. Jones served as Senior Vice President of Wells
Bank Fargo Bank in Portland, Oregon from April 1996 to August
1997. From January 1982 to April 1996, Mr. Jones was a
Senior Vice President with First Interstate Bank in
Oklahoma, Texas, and Oregon.
BARBARA B. KAMM 47 Ms. Kamm joined the Bank in January 1991 as Vice President 1991
Executive Vice President of and Senior Loan Officer of the Bank's Southern California
the Company and the Bank and Technology Group. Ms. Kamm served as Senior Vice President
Manager of the Bank's and Manager of the Bank's Southern California Group from
Products and Services Group August 1993 to September 1996 (having been promoted to
Executive Vice President in November 1995). Prior to being
appointed Manager of the Bank's Products and Services Group
in November 1998, Ms. Kamm served as Chief Administrative
Officer from September 1996 to November 1998.
HARRY W. KELLOGG, JR. 55 Mr. Kellogg joined the Bank in October 1986 as Senior Vice 1986
Executive Vice President of President of the Bank's Technology Division. Mr. Kellogg
the Company and the Bank and served as Executive Vice President and Chief Marketing
Manager of the Bank's Officer from September 1993 to April 1994 (when he left the
Strategic Marketing Group Bank for ten months, during which time, he served as
Executive Vice President for the Emerging Growth Industries
Division of Cupertino Bank). Mr. Kellogg returned to the
Bank in February 1995 as Executive Vice President and Chief
Marketing Officer. From December 1997 to November 1998, he
served as the Manager of the Bank's Products and Services
Group from December 1997 to November 1998. Mr. Kellogg was
appointed Manager of the Bank's Strategic Marketing Group in
November 1998.
</TABLE>
- ------------------------
(2) Mr. Forrester will resign his position as Manager of the Bank's Corporate
Finance Group in the first quarter of 1999, at which time Mr. Anderson will
assume such position.
8
<PAGE>
<TABLE>
<CAPTION>
EMPLOYEE
NAME AND POSITION AGE BUSINESS EXPERIENCE SINCE
- ------------------------------ --- ------------------------------------------------------------ ---------
<S> <C> <C> <C>
CHRISTOPHER T. LUTES 31 Mr. Lutes joined the Bank's Treasury Department in November 1994
Executive Vice President and 1994 as a Senior Treasury Analyst. In June 1995, he was
Chief Financial Officer of named Senior Vice President and Controller. Mr. Lutes was
the Company and the Bank appointed Executive Vice President and Chief Financial
Officer in May 1998. Prior to joining the Bank, Mr. Lutes
served in various positions within the finance department of
Household Credit Services, a banking services company, in
Salinas, California from March 1993 to November 1994. Prior
to that he served as an auditor with Coopers & Lybrand LLP
in Phoenix, Arizona.
A. CATHERINE NGO 38 Ms. Ngo joined the Bank in April 1993 as Vice President and 1993
Executive Vice President and was appointed Manager of the Legal Department in November
General Counsel of the 1993. Ms. Ngo held increasingly responsible positions with
Company and the Bank, and the Bank from November 1993 to February 1997, when she was
Manager of the Bank's Legal appointed Executive Vice President. Prior to joining the
and Loan Services Group Bank, Ms. Ngo served as a senior associate for Hopkins &
Carley, a law corporation, from June 1989 to April 1993.
KENNETH P. WILCOX 50 Mr. Wilcox joined the Bank in April 1990 as Regional Vice 1990
Executive Vice President of President of the Bank's East Coast Technology Group. Prior
the Company and the Bank and to becoming Executive Vice President and Manager of the East
Chief Banking Officer of the Coast Technology Group in November 1995, Mr. Wilcox held
Bank increasingly responsible positions with the Bank (having
served as Manager of the East Coast Technology Group since
June 1993). Mr. Wilcox was appointed Chief Banking Officer
in December 1997.
</TABLE>
9
<PAGE>
REPORT OF THE EXECUTIVE COMMITTEE OF THE BOARD
ON EXECUTIVE COMPENSATION
THE REPORT OF THE EXECUTIVE COMMITTEE (THE "COMMITTEE") SHALL NOT BE DEEMED
INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT INCORPORATING BY REFERENCE
THIS PROXY STATEMENT INTO ANY FILING UNDER THE SECURITIES ACT OF 1933 OR UNDER
THE SECURITIES EXCHANGE ACT OF 1934 (THE "EXCHANGE ACT"), EXCEPT TO THE EXTENT
THAT THE COMPANY SPECIFICALLY INCORPORATES THE INFORMATION CONTAINED IN THE
REPORT BY REFERENCE, AND SHALL NOT OTHERWISE BE DEEMED FILED UNDER SUCH ACTS.
Decisions regarding compensation of the Company's executive officers,
including those related to stock and stock options, are considered by the full
Board of Directors, based upon the recommendations and analysis performed by the
Executive Committee (the "Committee"), currently composed of Mr. Kelleher,
Chair, and Directors Burns, Dean and Wells. Since the Committee is responsible
for setting the Chief Executive Officer's compensation (subject to approval by
the full Board), Mr. Dean refrains from participating in any discussions of the
Committee relating to his performance or compensation. During 1998, the Board of
Directors did not modify or reject in any material way any action or
recommendation by the Committee.
KEY PRINCIPLES
The Committee has adopted the following principles to use for guidance in
setting compensation:
- PAY COMPETITIVELY
- The Committee maintains a philosophy that executive compensation
levels should be competitive relative to those found in other
financial institutions of comparable asset size. In that way, the
Company can attract and retain highly-qualified executives critical to
the Company's long-term success.
- Consistent with this philosophy, the Committee regularly obtains
information regarding executive salary levels in the financial
institutions industry through various sources, including compensation
surveys conducted by banking industry associations and independent
compensation consultants.
- The Committee attempts to set (a) base compensation at the midpoint of
the range and (b) total compensation (including incentive
compensation) in the 75th to 100th percentile range (subject to the
Company's financial performance being in the top quartile of the
Company's competitive group).
- The Committee strives to reward performance that creates value for the
Company's shareholders.
- TIE INCENTIVE COMPENSATION TO COMPANY FINANCIAL PERFORMANCE
- Total incentive compensation (the "incentive compensation pool") paid
to the Company's officers under the 1998 incentive compensation
program, as in the prior year, was calculated using a financial model
called Economic Value Added-Registered Trademark-, or EVA-Registered
Trademark-(1). EVA-Registered Trademark- is a more accurate measure of
true economic profit than net income, as it takes into account how
effectively capital is being used to produce the profit. By using
EVA-Registered Trademark- to calculate the incentive compensation
pool, sustained, continuous improvement in the Company's financial
performance is rewarded, as the incentive compensation pool increases
with improvement in the Company's performance from the prior year to
the then-current year.
- ------------------------
(1) EVA-Registered Trademark- is a registered trademark of Stern Stewart & Co.
10
<PAGE>
- Once the amount in the incentive compensation pool was determined
(based on the Company's 1998 EVA-Registered Trademark- performance),
the Company allocated such amount among eligible officers in the
Company. The method for allocation involved:
(1) determining a "target" incentive amount (based on the Company's
1998 EVA-Registered Trademark-performance), tied to officer level
in the Company,
(2) determining any additional "discretionary" amount that should be
paid to each officer, and
(3) ensuring on a Company-wide basis, that the aggregate of all
bonuses paid to eligible officers does not exceed the incentive
compensation pool amount.
- Individual performance ratings are based on attainment of goals set at
the beginning of the year. Generally, the goals of officers in the
Company are tied to their respective divisions' results, including
generation of income (for the lending divisions) and client service
levels (for the support divisions).
1998 MARKET SURVEYS
- EXECUTIVE OFFICERS
- A review of the Company's executive compensation was completed by an
independent compensation consultant (Sibson & Company) in May 1998. In
reviewing the 1998 compensation programs (including 1998 base salary,
"target" bonus for 1998 performance and interests in the Company's
venture capital retention program), the compensation consultant
reviewed compensation data for: (a) a peer group of publicly-traded,
financial service firms (the "Peer Group"), and (b) a group of
commercial banks (in general, ranging from $1 billion to $15 billion
in assets) in the "1997 Financial Services Executive Database" from
Towers Perrin (the "Competitive Group"). The Peer Group included
financial service companies with assets between $3.35 billion to $9.5
billion. Because the Peer Group represents companies that have been
screened for performance and the Competitive Group represents
companies generally larger (in asset size) than the Company, the
compensation consultant noted that the compensation data (for the Peer
Group and the Competitive Group) represented compensation levels for
top quartile performance. Of the 7 financial service companies in the
Peer Group and the 18 banks included in the Competitive Group, 12 are
included in the "Nasdaq Banks" index used in the "Return to
Shareholders Performance Graph" below. Specific Bank officers were
"matched" as closely as possible with officers from the competitive
group with similar functional responsibilities. The competitive market
data for both groups was updated to reflect projected 1998
compensation levels, assuming a 5% annualized increase for base salary
and 10% annualized increase for bonus payouts and long-term
incentives. The compensation consultant concluded that annual cash
compensation for executive officers Forrester, Kellogg, Wilcox, and
Kamm, was significantly below that for the Peer Group and the
Competitive Group. Further, the compensation consultant concluded that
the then most recent option grants for the above-named executive
officers were significantly below that for the Peer Group and the
Competitive Group.
- CHIEF EXECUTIVE OFFICER
- The May 1998 compensation study (described above in "1998 Market
Surveys--Executive Officers") included data on chief executive officer
compensation. The study reflected that Mr. Dean's target cash
compensation for 1998 (excluding any interest in the venture capital
retention pool) was below the median compared to total cash
compensation paid to chief
11
<PAGE>
executive officers in the Peer Group and the Competitive Group.(2)
Further, the compensation consultant concluded that the then most
recent option grant for Mr. Dean was significantly below that for the
Peer Group and the Competitive Group.
INCENTIVE COMPENSATION PAID BASED ON 1998 COMPANY PERFORMANCE
- ACTUAL INCENTIVE COMPENSATION PAYMENTS
- EXECUTIVE OFFICERS. In allocating the incentive compensation pool
among eligible officers in the Company, the Committee reviewed the
Company's consolidated EVA-Registered Trademark- results, as well as
actual performance for such officers in 1998. As the Company failed to
attain its threshold EVA-Registered Trademark- performance goals for
1998, the incentive compensation pool was significantly smaller (as
compared with prior years when EVA-Registered Trademark- performance
goals were met). Consistent with the Committee's principles (that
executive officers share significantly in the incentive compensation
pool in high performance years, but also bear a significant share in
any reduction in such pool in lower performance years), the Committee
awarded no incentive compensation to executive officers Kamm,
Forrester, Kellogg, and Wilcox for 1998.
In efforts to continue to retain the executive officers
(notwithstanding disappointing incentive compensation to such
officers), in the first quarter of 1999, the Company allocated
interests in the Company's venture capital retention program (under
which the Company invests in venture capital funds for its own
account) to certain executive officers. Mr. Wilcox received a
$130,000 interest, Mr. Kellogg received a $125,000 interest and Ms.
Kamm received a $90,000 interest in the retention program. The
executive officers' interests are not in the venture capital funds
themselves, but rather, in future distributions to the Company from
such funds. The Company's original investment in the subject funds
(the distributions from which the executive officers have an
interest) generally have been made in the last couple of years.
Accordingly, and given historical data (where distributions from
funds typically are made in the fifth to tenth years after
origination of the funds), the Committee views the venture capital
retention program as a long-term retention program for executives.
Together with other compensation benefits that vest over a stated
period of time (such as Company stock options), the Committee
believes this venture capital retention program serves to retain key
executives, while at the same time will serve to provide some
diversification to executives' investment portfolios.
- CHIEF EXECUTIVE OFFICER. Due to the reduction in the incentive
compensation pool and consistent with the Committee's principles (as
discussed above), the Committee did not award an incentive
compensation payment to Mr. Dean in 1998. In the first quarter of
1999, the Company allocated to Mr. Dean a $275,000 interest in the
Company's venture capital retention program described above.
- EMPLOYEE STOCK OWNERSHIP PLAN
- The Company also made payments to employees under its employee
retirement plans, including to executive officers. See discussion in
"Retirement Plans" below regarding payments to executives under the
Company's qualified defined contribution plans.
- ------------------------
(2) For purposes of the May 1998 compensation study, Mr. Dean's total target
cash compensation for 1998 included a target incentive compensation payment.
As discussed in "Incentive Compensation Paid on 1998 Company
Performance--Chief Executive Officer," Mr. Dean did not receive an incentive
compensation payment for 1998.
12
<PAGE>
TAX CONSEQUENCES
To the extent determinable and as one of the factors in its consideration of
compensation matters, the Committee considers the anticipated tax treatment to
the Company and to the executives of various payments and benefits. The
Committee will consider various alternatives to preserving the deductibility of
compensation payments (in particular, pursuant to Section 162(m) of the Internal
Revenue Code) to the extent reasonably practicable and to the extent consistent
with its other compensation objectives. The Committee does not expect that any
executive officer will receive cash compensation in excess of $1 million during
1998. The Committee adopted limitations on the number of shares that may be
subject to awards granted under the 1989 Stock Option Plan and the 1997 Equity
Incentive Plan during any one calendar year to an individual so that
compensation derived from stock options granted under such plans would qualify
as "performance-based" compensation within the meaning of Section 162(m) and
would therefore be deductible by the Company without regard to the $1 million
limitation.
EXECUTIVE COMMITTEE
DANIEL J. KELLEHER, CHAIR
JAMES F. BURNS, JR.
JOHN C. DEAN
ANN R. WELLS
EXECUTIVE COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1998, the Executive Committee performed all compensation functions of the
Board of Directors, including administration of the Company's stock-based
employee benefit plans. (See discussion below under "Board Committees and
Meeting Attendance" for additional information on the Executive Committee.) The
Executive Committee is currently chaired by Mr. Daniel J. Kelleher, with
Directors Wells, Burns, and Dean serving as members. With the exception of Mr.
Dean, none of the aforementioned persons has ever been an officer or employee of
the Company or the Bank. Mr. Dean refrains from participating in any Committee
discussions related to his performance or compensation.
Through December 1998, Ms. Wells served as the President of the Ann Wells
Personnel Service Division of the Personnel Group of America, which provided
temporary employment and recruiting services to the Bank in 1998. The fees paid
to the Ann Wells Personnel Service Division of the Personnel Group of America by
the Bank did not exceed five (5) percent of that company's gross revenues for
its last full fiscal year and are comparable to those charged by unrelated
parties for similar services.
13
<PAGE>
RETURN TO SHAREHOLDERS PERFORMANCE GRAPH
The following graph compares, for the period from December 31, 1993 through
December 31, 1998, the cumulative total shareholder return on the Common Stock
of the Company with (i) the cumulative total return of the Standard and Poor's
500 ("S&P 500") market index, (ii) the cumulative total return of the Nasdaq
Stock Market-U.S. index, and (iii) the cumulative total return of the Nasdaq
Banks index. The graph assumes an initial investment of $100 and reinvestment of
dividends. The graph is not necessarily indicative of future stock price
performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG SILICON VALLEY
<S> <C> <C>
BANCSHARES, S&P 500, NASDAQ STOCK MARKET - U.S., AND NASDAQ BANKS
SILICON VALLEY BANCSHARES S&P 500
12/93 100.00 100.00
12/94 133.33 101.32
12/95 237.04 139.40
12/96 318.52 171.41
12/97 555.56 228.59
12/98 336.42 293.92
<CAPTION>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG SILICON VALLEY
<S> <C>
BANCSHARES, S&P 500, NASDAQ STOCK MARKET - U.S., AND NASDAQ BANKS
NASDAQ STOCK MARKET - (U.S.)
12/93 100.00
12/94 97.75
12/95 138.26
12/96 170.01
12/97 208.58
12/98 293.21
<CAPTION>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG SILICON VALLEY
BANCSHARES, S&P 500, NASDAQ STOCK MARKET - U.S., AND NASDAQ BANKS
NASDAQ BANKS
12/93 100.00
12/94 99.64
12/95 148.38
12/96 195.91
12/97 328.02
12/98 324.90
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------------
1993 1994 1995 1996 1997 1998
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Silicon Valley Bancshares.............................. 100.00 133.33 237.04 318.52 555.56 336.42
S&P 500................................................ 100.00 101.32 139.40 171.41 228.59 293.92
Nasdaq Stock Market--U.S............................... 100.00 97.75 138.26 170.01 208.58 293.21
Nasdaq Banks........................................... 100.00 99.64 148.38 195.91 328.02 324.90
</TABLE>
14
<PAGE>
TABLE 1--SUMMARY COMPENSATION TABLE
The following table sets forth certain information for each of the last
three (3) fiscal years concerning the compensation of the Chief Executive
Officer and the four other most highly compensated executive officers of the
Company and of the Bank ("Named Officers") (based on salary plus bonus for
1998):
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------------------
AWARDS
ANNUAL COMPENSATION ----------------------- PAYOUTS
--------------------------------------- RESTRICTED SECURITIES --------
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION
POSITION YEAR (1)($) (1)($) (2)($) (3)($) (4)(#) ($) (5)($)
- ------------------------- ---- -------- ----------- ------------ ---------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
JOHN C. DEAN ............ 1998 $349,992 $ -- $ -- $ -- -- -- $294,291
President and Chief 1997 $349,998 $ 250,000 $ -- $ -- 50,000 -- $125,000
Executive Officer 1996 $325,004 $ 375,124(6) $ -- $107,500 -- -- $ 23,080
JAMES F. FORRESTER ...... 1998 $185,000 $ -- $ -- $ -- -- -- $ 13,631
Executive Vice 1997 $185,000 $ 100,000 $ -- $ -- 30,000 -- $ 70,000
President and Manager 1996 $185,000 $ 150,000(6) $ -- $ -- -- -- $ 23,080
of Corporate Finance
Group
BARBARA B. KAMM ......... 1998 $170,000 $ -- $ -- $ -- -- -- $103,497
Executive Vice 1997 $170,000 $ 100,000 $ -- $ -- 15,000 -- $ 70,000
President and Manager 1996 $145,937 $ 110,000(6) $ 43,869 $ -- 50,000 -- $ 21,225
of Products and
Services Group
HARRY W. KELLOGG, JR. ... 1998 $170,000 $ -- $ -- $ -- -- -- $138,631
Executive Vice 1997 $170,000 $ 100,000 $ -- $ -- 30,000 -- $ 70,000
President and Manager 1996 $163,125 $ 125,275(6) $ -- $ -- -- -- $ 23,080
of Strategic Marketing
Group
KENNETH P. WILCOX ....... 1998 $170,000 $ -- $135,052 $ -- -- -- $143,535
Executive Vice 1997 $147,349 $ 100,000 $ -- $ -- 40,000 -- $ 66,659
President and Chief 1996 $135,000 $ 110,000(6) $ -- $ -- -- -- $ 19,600
Banking Officer
</TABLE>
- ------------------------------
(1) Includes amounts deferred at the election of the executive officer.
(2) Amounts in this column represent (a) relocation costs incurred by the
executive officer and reimbursed by the Bank, as well as (b) premiums for
supplemental long-term disability coverage provided by the Bank. Amounts for
the years shown are not reflected if the total value of perquisites paid to
the executive officer during a fiscal year did not exceed, in the aggregate,
the lesser of $50,000 or 10% of the individual's salary plus bonus in the
subject year. Amount reflected for Ms. Kamm in 1996 includes relocation
costs in the amount of $42,532 and premiums in the amount of $1,337. Amount
reflected for Mr. Wilcox in 1998 represents relocation costs in the amount
of $84,302, as well as $50,750 for uncharged interest by the Company in
connection with two interest-free relocation loans made by the Company to
Mr. Wilcox (see discussion in "Certain Relations and Related Transactions").
The uncharged interest was calculated by assuming an interest rate of 6.00%.
(3) As of December 31, 1998, Mr. Dean held 10,000 restricted shares of the
Company's Common Stock (granted on January 18, 1996), with a market value of
$170,310. Market value is based on the $17.031 per share closing market
price of the Company's Common Stock on the National Association of
Securities Dealers Automated Quotation/National Market on December 31, 1998,
the last trading day of 1998. Holders of restricted stock have rights
equivalent to those of other shareholders, including voting rights and
rights to dividends. All of Mr. Dean's shares will vest on January 17, 2000
or earlier upon a "Change in Control" (as defined). See "Termination
Agreements" below.
(4) The numbers in this column reflect shares of Common Stock underlying
options. The numbers have been adjusted to reflect shares following a
two-for-one stock split (effected in May 1998). No Stock Appreciation Rights
("SARs") were awarded during the years 1996 through 1998.
(5) Amounts in this column represent employer contributions to the Bank's
combined 401(k) and Employee Stock Ownership Plan, and Money Purchase
Pension Plan (see discussion under "Retirement Plans"). Amounts in this
column for 1997 and 1998 also include interests in the Company's venture
capital investment program (under which the Company invests in venture
capital funds for its own account). Interests are not in the venture capital
funds themselves, but rather, in future distributions from such
15
<PAGE>
funds. Amounts for Mr. Dean in 1998 include a $275,000 interest in such
venture capital investment program, which represents a 17.3% interest in the
$1,590,000 pool of venture capital investments earmarked for the 1999
retention program for the Company's officers. Amounts for 1998 for each of
executive officers Kamm, Kellogg and Wilcox include $90,000, $125,000 and
$130,000 interests, respectively, in the 1999 retention program.
Additionally, amounts for 1998 include a payment to Mr. Dean of $10,291 and
$4,631 each to executive officers Forrester, Kamm, Kellogg, and Wilcox
representing distributions under the Company's 1998 venture capital
retention program.
(6) A portion of the executive officers' 1996 bonuses were deferred by the
Company. Amounts deferred for executive officers Dean, Forrester, Kamm,
Kellogg, and Wilcox were $57,000, $40,600, $23,022, $33,205, and $27,133,
respectively. These amounts were paid to such executive officers in August
1997 (and are included in the bonus amounts for 1996 only).
OPTION GRANTS IN LAST FISCAL YEAR
No grants of options to purchase the Company's Common Stock were made to the
Named Officers during 1998.
TABLE 2--AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES(1)
The following table sets forth information concerning the exercise of
options during 1998 and the options held at 1998 fiscal year-end by Named
Officers:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END(3)
ACQUIRED VALUE (#) ($)
ON EXERCISE REALIZED(2) -------------------------- --------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------- ----------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John C. Dean........................... 142,208 $ 3,390,425 12,500 37,500 $ 6,638 $ 19,913
James F. Forrester..................... -- -- 21,690 22,500 $ 148,948 $ 11,948
Barbara B. Kamm........................ 36,622 $ 792,999 40,728 37,650 $ 166,262 $ 160,820
Harry W. Kellogg, Jr................... -- -- 67,500 22,500 $ 601,943 $ 11,948
Kenneth P. Wilcox...................... 8,000 $ 150,984 30,040 33,960 $ 200,511 $ 51,693
</TABLE>
- ------------------------
(1) Consists entirely of stock options. No stock appreciation rights ("SARs")
have been awarded to date. In October 1997, the Board of Directors voted to
permit assignability of non-qualified stock options granted under the 1997
Equity Incentive Plan to immediate family members, family trusts and similar
entities. Any options so assigned will continue to be reported in this table
as if still held by the Named Officer, and exercises by or on behalf of such
assignees are also reflected as exercises by the Named Officer.
(2) Represents the market price of the underlying securities on the date of the
option exercise, minus the exercise price.
(3) Represents the market value of the underlying securities at 1998 fiscal
year-end, based on the $17.031 per share closing market price of the
Company's Common Stock on the National Association of Securities Dealers
Automated Quotation/National Market on December 31, 1998, less the exercise
price.
RETIREMENT PLANS
The Bank has two defined contribution plans: (1) the Silicon Valley Bank
401(k) and Employee Stock Ownership Plan (the "401(k)" and "ESOP") (a qualified
profit sharing plan under the Internal Revenue Code [the "IRC"]) and (2) the
Silicon Valley Bank Money Purchase Pension Plan (the "MPP") (a qualified money
purchase pension plan under the IRC). The Company matches 100% of employee-
deferred salary contributions to the 401(k), up to a maximum contribution of
$1,000 per year per employee. The Company makes contributions to the ESOP and
MPP using a compensation-based formula
16
<PAGE>
(subject to certain limitations on compensation under the IRC). ESOP
contributions are discretionary based on the profitability of the Company, are
invested primarily in the Company's Common Stock and may not exceed 10% of
eligible employees' base compensation. In 1998, there was no ESOP contribution
made by the Company as a result of the Company's failure to attain its threshold
performance goal. MPP contributions are guaranteed at 5% of eligible
compensation and are invested at the participant's direction. Prior to 1995,
these guaranteed contributions were made to the ESOP and invested primarily in
Company Common Stock; however, in 1996, the MPP was established retroactive to
January 1, 1995 for the guaranteed contributions and, in May 1996, the
investments (under the MPP) formerly in Company Common Stock became
participant-directed. The assets of both retirement plans are held in trust for
the exclusive benefit of the employee-participants.
TERMINATION ARRANGEMENTS
The Bank entered into Termination Agreements ("Termination Agreements") with
certain executive officers, including Named Officers Dean, Forrester, Kamm,
Kellogg, and Wilcox on August 12, 1998. These Termination Agreements superseded
other agreements then in effect (with those agreements having expired on August
11, 1998). The Termination Agreements provide for severance pay and continuation
of certain benefits if the executive's employment is terminated following a
"Change in Control" (defined below). The Termination Agreements were approved by
disinterested members of the Boards of Directors of the Company and the Bank
during 1997 (but effective August 1998 following expiration of the then-
operative Agreements).
TERMINATION FOLLOWING A CHANGE IN CONTROL. In order for an executive to
receive benefits under the Termination Agreements following a Change in Control,
the executive must be terminated involuntarily without cause or constructively
terminated within 24 months following the Change in Control. Also, benefits will
be given to executives only following a Change in Control that involves payments
to shareholders in excess of two times the then book value of the Company. (This
reflects a change from the agreements that expired in August 1998, where
benefits would be paid for sales over one times book value.)
Under the Termination Agreements, a "Change in Control" will be deemed to
have occurred in any of the following circumstances:
(1) the acquisition of 50% or more of the outstanding voting stock of the
Company by any person or entity, with certain exceptions for employee
benefit plans of the Company or the Bank;
(2) the acquisition of 25% or more of the outstanding voting stock of the
Company by any person or entity and a change in the composition of the
Board during the following 12 months such that those persons serving as
directors immediately prior to the share acquisition, and those new
directors elected by a vote of at least two-thirds of the directors of
the Company, cease to make up at least 60% of the directors of the
Company;
(3) a merger or consolidation of the Company with any other corporation,
other than a merger or consolidation in which the shareholders of the
Company immediately prior thereto continue to own more than 50% of the
outstanding voting stock of the surviving entity; or
(4) the complete liquidation of the Company or the Bank, or disposition of
all or substantially all of the Company's or the Bank's assets.
A constructive termination is deemed to have occurred if the executive
resigns in writing following a reduction in the executive's then annual base
salary, upon a 15% reduction in the executive's annual compensation (base salary
plus bonus), upon a material reduction in the executive's responsibilities, or
upon a relocation by more than 50 miles of the principal place at which the
executive works.
17
<PAGE>
Under the Termination Agreements, the amount of severance benefits payable
to an executive whose employment is terminated during the 24 months following a
Change in Control is dependent upon the "transaction price multiple" of the then
book value of the Company or the Bank. As the transaction price multiple of book
value increases above 2.0, the severance benefit (the "Severance Benefit")
(represented as a multiple of the executive's annual base salary) increases.
(Under the agreements that expired in August 1998, the severance benefit was
tied to the executive's total annual compensation [base salary plus bonus] and
the Severance Benefit increased as the transaction price multiple of book value
increased above 1.0.) The multiples of annual base salary (for respective sales
percentages received in excess of book value) for the Bank's Executive Committee
members (executive officers Dean, Forrester, Kamm, Kellogg, and Wilcox) are
higher than for non-Executive Committee executives (such as Mr. Jones).
The percentage payout of the Severance Benefit is on a sliding scale tied to
termination date. If the termination date is within 12 months following the
Change in Control, then 100% of the Severance Benefit will be paid. However,
between 12 months and 24 months following a Change in Control, a declining
percentage will be paid, with 75% of the Severance Benefit being payable for
terminations 15 months following a Change in Control and 0% being payable for
terminations 24 months following a Change in Control. Finally, upon a Change in
Control, all outstanding options (representing interests in the Company's Common
Stock) will become immediately and fully vested (and may be exercised) and all
restrictions upon any restricted Company stock will lapse immediately and all
such shares will become fully vested (unless the Board of Directors determines
otherwise at the time of grant).
In linking the amount of termination payments within 24 months following a
Change in Control to the transaction price multiple of book value, the Boards of
Directors of the Company and the Bank underscored their view that management
should be rewarded correspondingly for increased shareholder value. Therefore,
the amount of severance payments to executives under the Termination Agreements
increases in direct proportion to increases in value realized through a Change
in Control of the Company or the Bank. Conversely, sale of the Company or the
Bank for less than 2.0 times book value would result in no cash payout to
executives under the Termination Agreements, although they would still be
entitled to acceleration of vesting.
The severance program approved by the Boards of Directors of the Company and
the Bank includes certain non-executive Bank officers as well. The amount of
severance benefits payable to officers below the executive level is likewise
dependent upon the "transaction price multiple" described above. However,
non-executive bank officers receive severance payments for any sale of the
Company or Bank for one times book value and above. Under the program for
non-executive officers, as the grade level of the officer in the Bank increases,
the multiple of the officer's base salary used in determining the severance
benefit increases.
LIMITATION ON SEVERANCE PAYMENTS. To the extent that the severance payments
otherwise called for by the Termination Agreements would trigger "golden
parachute" tax treatment pursuant to Section 280(g) and/or Section 4999 of the
Internal Revenue Code, the payments will be reduced (including by executive
officers' electing to make payment to third-party charitable organizations) to
the largest amount that the employee determines would result in maximizing the
employee's net proceeds (after taking into account the payment of any applicable
taxes, including excise taxes).
DEAN AND KELLOGG SEVERANCE AGREEMENTS RELATING TO GARAGE.COM-TM-
INTRODUCTION. In March 1998, the Company made an equity investment (the
"Initial Investment") in garage.com-TM-, an internet company that matches
entrepreneurs with investors. To further strengthen relationships between the
founders, advisors and investors in garage.com-TM-, on the one hand, and the
Bank, on the other, Mr. Dean agreed to serve as a director for garage.com-TM-.
18
<PAGE>
As a director for garage.com-TM- , Mr. Dean was offered the right to
purchase shares of common stock in garage.com-TM- . Mr. Dean assigned the right
to the Company. The Company exercised this stock purchase right (the "Subsequent
Investment").
The Company has the right to participate as a member in limited liability
companies ("LLCs") that will hold securities in garage.com-TM-'s entrepreneurs
(successfully matched with investors using garage.com-TM-'s services). This
right arises out of the Company's equity ownership in garage.com-TM-, by virtue
of the Initial Investment, as well as on account of the Subsequent Investment
(which was offered to the Company because of Mr. Dean's role on the board of
garage.com-TM-).
MR. DEAN'S SEVERANCE AGREEMENT. The Board of Directors believes that Mr.
Dean's service as a director for garage.com-TM- indirectly will provide value to
the Company. Accordingly, the Company entered into a severance agreement with
Mr. Dean relating to garage.com-TM- on August 12, 1998. Mr. Dean will receive
benefits under this severance agreement upon the earlier of a covered
termination (following a Change in Control) or a "qualified separation"
(generally, a voluntary resignation, but where Mr. Dean thereafter still will
add value to the Company and the Bank).
Upon a covered termination or qualified separation, Mr. Dean will be
entitled to 50% of the then appraised value of the Subsequent Investment
(including interests in LLCs related to the Subsequent Investment). (Such 50%
Interest shall be referred to as the "Dean Interest"). However, if Mr. Kellogg
is then participating in the Dean Interest pursuant to Mr. Kellogg's severance
agreement with the Company relating to garage.com (see "Mr. Kellogg's Severance
Agreement" below), Mr. Dean will only receive fifty percent (50%) of the Dean
Interest (with the other 50% interest being paid to Mr. Kellogg).
MR. KELLOGG'S SEVERANCE AGREEMENT. By virtue of Mr. Kellogg's assistance to
Mr. Dean in connection with Mr. Dean's service as a director for garage.com-TM-,
the Company entered into a separate severance agreement with Mr. Kellogg
relating to garage.com-TM- on August 12, 1998. Mr. Kellogg will receive fifty
percent (50%) of the Dean Interest (as discussed in "Mr. Dean's Severance
Agreement") under the severance agreement as long as Mr. Kellogg is employed by
the Company and the Bank at the time of Mr. Dean's covered termination or
qualified separation (and further, provided that Mr. Kellogg's severance
agreement is still then in effect).
FORRESTER CONSULTING AGREEMENT
James F. Forrester resigned as Executive Vice President of the Company and
the Bank, effective February 28, 1999. The Bank and Mr. Forrester entered into a
consulting agreement, effective March 1, 1999, pursuant to which Mr. Forrester
will continue to serve as a consultant to the Bank until February 28, 2000.
Under the consulting agreement, Mr. Forrester will receive $8,500 a month for
his services as a consultant. All stock options held by Mr. Forrester will
continue to be outstanding and will vest in accordance with their respective
terms until expiration of the consulting term.
WOODWARD CONSULTING AGREEMENT
Allyn C. Woodward resigned as Senior Executive Vice President and Chief
Operating Officer of the Bank, effective April 1, 1995. The Bank and Mr.
Woodward entered into a consulting agreement, effective April 1, 1995, pursuant
to which Mr. Woodward continued to serve as a consultant to the Bank until
October 1996. Under the consulting agreement, the Bank paid Mr. Woodward
$214,200 over the 19-month period from April 1995 to October 1996, for Mr.
Woodward's services as a consultant. Until October 1996, all stock options held
by Mr. Woodward continued to be outstanding and vested in accordance with their
respective terms. Additionally, the Company and the Bank granted Mr. Woodward
25,000 shares of the Company's Common Stock, which vested as to 1/3 of such
number of shares on each of January 5, 1996,
19
<PAGE>
January 5, 1997 and January 5, 1998 (on account of Mr. Woodward's
non-competition with the Bank through and including such respective dates).(1)
BOARD COMMITTEES AND MEETING ATTENDANCE
The Company and the Bank have Audit and Finance, Executive, and Loan
Committees of their respective Boards of Directors. Members as of the Record
Date were as follows:
<TABLE>
<CAPTION>
AUDIT AND FINANCE EXECUTIVE LOAN
- -------------------------------------------- -------------------------------- -----------------------------
<S> <C> <C>
James F. Burns, Jr., Chair Daniel J. Kelleher, Chair Gary K. Barr, Chair
Clarence J. Ferrari, Jr., Vice-Chair James F. Burns, Jr. David M. deWilde
Gary K. Barr John C. Dean Clarence J. Ferrari, Jr.
David M. deWilde Ann R. Wells Stephen E. Jackson
Stephen E. Jackson Daniel J. Kelleher
James R. Porter James R. Porter
Ann R. Wells
</TABLE>
AUDIT AND FINANCE COMMITTEE (JOINT COMPANY/BANK COMMITTEE) 11 meetings in
fiscal
year 1998
- Approves the selection and termination of the Company's independent
auditors;
- Reviews the scope and results of the audit plans of the independent
auditors;
- Reviews the adequacy of the Company's internal accounting controls;
- Reviews with management and with the independent auditors, reports filed
with banking regulatory agencies and the Securities and Exchange
Commission;
- Evaluates the activities and utilization of the Company's and the Bank's
internal audit relationship;
- Oversees the Bank's investment and funds management policies, which
include the following five policies: investment policy, liquidity
management policy, interest rate risk management policy, hedging policy,
and capital management policy;
- Reviews and approves the Company's and the Bank's insurance policies; and
- Oversees management's efforts in ensuring that the Company is complying
with accounting standards and with federal and state banking laws.
EXECUTIVE COMMITTEE (SEPARATE COMPANY/BANK COMMITTEES) 14 meetings (Company
Executive Committee) in
fiscal year 1998 12
meetings (Bank Executive
Committee) in fiscal
year 1998
- Works with management in developing long-term strategic plans;
- Has the authority of the Board between Board meetings, except as otherwise
provided by California law;
- ------------------------
(1) The number of shares reflected in this paragraph does not take into account
the two-for-one stock split in May 1998, since the final vesting of shares
occurred prior to the date of the split in 1998. Also, as reported in the
Company's 1995, 1996, 1997 and 1998 Proxy Statements, Mr. Woodward's 25,000
restricted shares of the Company's Common Stock held at December 31, 1994
were forfeited to the Company. The grant described in this paragraph
constituted a new grant to Mr. Woodward.
20
<PAGE>
- Serves as the nominating committee for directors as well as Board and
Board committee chairs. (The Executive Committee will consider nominees
for director who are recommended by shareholders. Shareholders that wish
to submit names of prospective director-nominees for consideration by the
Executive Committee should do so in writing to the Secretary of Silicon
Valley Bancshares, 3003 Tasman Drive, Santa Clara, CA 95054.);
- Works with management in ensuring that the Bank's long-term and short-term
compensation programs are competitive and effective in attracting,
retaining, and motivating highly-skilled personnel;
- Reviews and recommends the Chief Executive Officer's compensation (with
the Chief Executive Officer refraining from participating in any Committee
discussions related to the Chief Executive Officer's performance or
compensation); and
- Reviews and approves compensation and administers stock-based employee
benefit plans (including approving individual option and stock grants
under the 1989 Option Plan and the 1997 Equity Incentive Plan).
LOAN COMMITTEE (BANK COMMITTEE) 30 meetings in fiscal year 1998
- Works with management in seeking to ensure that the Bank maintains and
enforces the Bank's credit policy and credit procedures;
- Works with management in ensuring compliance with lending limit
restrictions and with established portfolio constraints and limitations;
- Works with management in ensuring problem credits are identified on a
timely basis;
- Has lending authority and establishes lending authority levels for Bank
committees and respective officer levels in the Bank;
- Reviews the Bank's community delineations to ensure that they meet the
purposes of the Community Reinvestment Act; and
- Works with management in monitoring the loan portfolio, including
reviewing proposed corrective action plans when pre-determined portfolio
credit quality levels are reached.
Actions taken by the above-described Board Committees are reported to the
Company or Bank Board of Directors, as appropriate, following the Committee
meetings.
During fiscal year 1998 (ended December 31, 1998), the Company Board of
Directors met 13 times: 12 regular meetings and 1 special meeting. During fiscal
year 1998 (ended December 31, 1998), the Bank Board of Directors met 12 times:
12 regular meetings and 0 special meetings. All Company directors attended at
least 75% of the aggregate of all Company Board meetings and meetings held by
Committees of the Company's Board of which they were members.
STOCK OWNERSHIP GUIDELINES
In February 1998, the Board of Directors approved the adoption of Stock
Ownership Guidelines for the Company's executive officers, as well as for
certain other officers of the Company. Under the guidelines, the Board has
recommended that by the end of the Company's 2000 fiscal year, the Company's
officers who are covered by the Guidelines own Company stock with a value that
meets or exceeds specified respective multiples of base salary. The recommended
multiples range from "4x" for the Company's CEO (value of stock to be four times
the CEO's base salary) to "2x" (value of stock to be two times the officer's
base salary). The Stock Ownership Guidelines reflect the Board's belief in the
importance of aligning the economic interests of shareholders and management.
21
<PAGE>
DIRECTOR COMPENSATION(1)
Each outside director selected one of two alternative compensation programs
offered for 1997-1998 service, as well as 1998-1999 service, on the Board. The
first program provides for a grant to the outside director of options to
purchase 12,000 shares of the Company's Common Stock (made on January 7, 1997),
with the first 6,000 shares having vested on the date that immediately followed
the Company's 1997 Annual Meeting (the "First Vesting Date") and the remaining
6,000 shares having vested on the date that immediately followed the Company's
1998 Annual Meeting (subject to the director's re-election to the Board) (the
"Second Vesting Date"). The second program provides for a grant of an option to
purchase 6,000 shares of the Company's Common Stock (made on January 7, 1997),
and payment of $30,000 in cash, with the first 3,000 shares having vested (and
the first $15,000 paid) on the First Vesting Date and the final 3,000 shares
having vested (and the balance of $15,000 becoming payable) on the Second
Vesting Date (subject to the director's re-election to the Board). Outside
directors Barr, Burns, deWilde, Ferrari, Kelleher, Porter, and Wells, selected
the first program (consisting of options only). Outside director Jackson, who
was appointed to the Board in August 1998, was granted an option to purchase
1,590 shares of the Company's Common Stock on September 17, 1998 (representing
such pro rata number of shares in accordance with the number of months remaining
in the 1998-1999 term at an exercise price of $15.750).
In August 1998, the Board approved the director compensation program for
outside directors for 1999-2000 service, as well as 2000-2001 service, on the
Board. The program provides for a grant to each outside director of options to
purchase 6,000 shares of the Company's Common Stock (made on August 4, 1998 at
an exercise price of $30.063 per share), with the first 3,000 shares subject to
the option scheduled to vest on the date immediately following the Company's
1999 Annual Meeting (subject to the director's re-election to the Board) and the
remaining 3,000 shares subject to the option scheduled to vest on the date
immediately following the Company's 2000 Annual Meeting (subject to the
director's re-election to the Board). Consistent with this program, on September
17, 1998, Mr. Jackson was granted an option to purchase 6,000 shares (and on
such terms, including exercise price) as granted to the other directors the
previous month.
In January 1999, the Board approved a grant to each outside director, except
for Mr. Jackson, of options to purchase 1,000 shares of the Company's Common
Stock (made on January 21, 1999 at an exercise price of $17.875 a share), with
the shares scheduled to vest immediately following the Company's 1999 Annual
Meeting (subject to the director's re-election to the Board). Mr. Jackson was
granted options to purchase 1,500 shares with the same terms as those described
immediately above. The Board believed that Mr. Jackson should be awarded the
additional options to compensate for the exercise price of the options to
purchase 6,000 shares granted in September 1998 (as described above) being set
at a higher price than the then market price of the Company's stock, to keep Mr.
Jackson's grant consistent with the 1999-2000 compensation program.
Mr. Gay, a former director, will remain an advisory director to the Board.
In recognition of this advisory role, the Company will pay Mr. Gay $15,000 for
his advisory services during the 1999-2000 term.
Mr. Ferrari, who is not standing for re-election to the Board, will become
an advisory director to the Board. In recognition of this advisory role, the
Company will pay Mr. Ferrari $15,000 for his advisory services during the
1999-2000 term.
Additionally, outside directors are reimbursed for travel expenses. Also,
the Chair of the Board (who also serves as the Chair of the Executive Committee)
receives an annual fee of $15,000. The Chairs of the respective Board committees
each receive an annual fee of $7,500. Finally, outside directors on the Loan
Committee (including the Chair of this Committee) received $250 for every
Committee meeting attended after the first one in any calendar month from
January 1998 through June 1998.
- ------------------------
(1) The share numbers in this section have been adjusted to reflect the
two-for-one stock split of the Company's shares in May 1998.
22
<PAGE>
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS
Information concerning each person known by the Company to own more than 5%
of the outstanding Common Stock of the Company (as of the Record Date) follows.
The Company knows of no persons other than those entities described below who
beneficially own more than 5% of the outstanding Common Stock of the Company.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
-----------------------
NUMBER PERCENT OF
NAME OF BENEFICIAL OWNER OF SHARES TOTAL
- --------------------------------------------------------------------- ---------- -----------
<S> <C> <C>
Entities affiliated with Franklin Resources, Inc. ................... 1,811,840(1) 8.8%
777 Mariners Island Boulevard
San Mateo, CA 94404
Reich and Tang Asset Management LP .................................. 1,366,750(2) 6.6%
600 Fifth Avenue
New York, New York 100020
T. Rowe Price Associates, Inc. ...................................... 1,573,000(3) 7.6%
100 E. Pratt Street
Baltimore, Maryland 21202
</TABLE>
- ------------------------
(1) The number of shares in this table and the information in this footnote
have been derived from the Schedule 13G dated as of January 26, 1999 filed
with the Securities and Exchange Commission ("SEC") by Franklin Resources,
Inc. ("FRI"), a parent holding company; Charles B. Johnson and Rupert H.
Johnson, Jr., principal shareholders of FRI (collectively, the "Principal
Shareholders"); and Franklin Advisers, Inc. ("FAI"), an investment adviser
and subsidiary of FRI. Franklin Management, Inc. ("FMI") is a subsidiary of
FRI. The shares are beneficially owned by one or more open or closed-end
investment companies or other managed accounts that are advised by direct
and indirect investment subsidiaries of FRI. The advisory contracts grant to
the adviser subsidiaries all investment and/or voting power over the
securities owned by such advisory clients. FAI has the sole dispositive and
voting power with respect to 1,776,700 shares. FMI has the sole power to
dispose or direct the disposition of 35,140 shares, but has no power to vote
or direct the vote of any shares. The Principal Shareholders each own in
excess of 10% of the outstanding Common Stock of FRI. With respect to
securities owned by FAI and FMI, their clients have the right to receive
dividends paid with respect to, as well as the proceeds from the sale of,
such securities.
(2) The number of shares in this table and the information in this footnote
have been derived from the Schedule 13G dated as of February 12, 1999 filed
with the SEC by Reich and Tang Asset Management L.P. ("Reich and Tang"), an
investment adviser. Reich and Tang has shared dispositive and voting power
with respect to 1,366,750 shares. H. Axel Schupf, a portfolio manager at
Reich and Tang, has the sole dispositive and voting power with respect to
121,000 shares. The shares beneficially owned by Reich and Tang were
purchased on behalf of certain accounts for which Reich and Tang provides
investment advice on a fully discretionary basis. Reich and Tang has the
right to receive or the power to direct the receipt of dividends from, or
the proceeds from the sale of, the shares. No individual client has an
interest that relates to more than five percent of the class.
(3) The number of shares in this table and the information in this footnote
have been derived from the Schedule 13G dated as of February 12, 1999 filed
with the SEC by T. Rowe Price Associates, Inc. ("TRP Associates"), an
investment adviser, and T. Rowe Price Small-Cap Value Fund, Inc. ("TRP
Fund"). TRP Associates has sole voting power with respect to 332,300 shares
and sole dispositive power with respect to 1,573,000 shares. TRP Fund has
sole voting power with respect to 1,033,000 shares (which number of shares
is included in the number of shares reported by TRP Associates) and
23
<PAGE>
sole dispositive power as to no shares. The ultimate power to receive
dividends paid with respect to, and the proceeds from the sale of, the
shares held by TRP Associates are vested in the individual and institutional
clients to which TRP Associates serves as an investment adviser. No client
has an interest that relates to more than five (5) percent of the class.
With respect to securities owned by the TRP Fund, only State Street Bank and
Trust Company, as custodian for the TRP Fund, has the right to receive
dividends paid with respect to, and proceeds from the sale of, such
securities. The shareholders of the TRP Fund participate proportionately in
any dividends and distributions so paid. TRP Associates expressly disclaims
beneficial ownership of the shares shown in the table.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that, during fiscal year 1998, its officers (as defined
in the rules under Section 16 of the Exchange Act) and directors have complied
with all Section 16(a) filing requirements in a timely manner, except that Mr.
Dean made one late filing with regard to the sale of Company Stock in an open
market transaction associated with various stock option exercises in February
1998 (with such sale being inadvertently left off the February 1998 Form 4 filed
on March 9, 1998 and reported on the March 1998 Form 4 filed on April 9, 1998).
The Company is not aware of any 10% shareholders.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain directors of the Company and Bank and the entities with which they
are affiliated are customers of the Bank and have had banking transactions with
the Bank in the ordinary course of business. The Board of Directors of the Bank
adopted a policy during 1992 to prohibit new loans or the renewal of existing
loans to insiders after December 31, 1993 (other than on an exception basis).
Term loans existing at December 31, 1992 were permitted to remain outstanding
until scheduled maturity. The Company believes that all extensions of credit
included in such transactions were made in compliance with applicable laws and
on substantially the same terms, including interest rates, collateral and
repayment terms, as those prevailing at the time for comparable transactions
with other persons of similar creditworthiness and, in the opinion of the Board
of Directors of the Bank, did not involve more than a normal risk of
collectibility or default or present any other unfavorable features.
In December 1997 and in conjunction with Mr. Wilcox's promotion to Chief
Banking Officer (and corresponding relocation from Massachusetts to California),
the Company agreed to make two interest-free relocation loans to Mr. Wilcox. The
first loan in the amount of $250,000 (funded in December 1997) is payable in
five annual installments, with the final $50,000 installment due on December 1,
2002. The second loan in the amount of $600,000 (funded in January 1998) is due
in full on December 1, 2002. Both loans are secured by a lien on Mr. Wilcox's
principal residence in California. The largest principal amount outstanding
during 1998 was $850,000, and the principal amount outstanding on December 31,
1998 was $800,000.
Also, in conjunction with Mr. Wilcox's promotion and pursuant to a separate
agreement (separate from the above-described loan documents), the Bank has
agreed to pay Mr. Wilcox a guaranteed $50,000 annual bonus for the next five
years (subject to his continued employment by the Bank), with the first such
bonus paid in December 1998 and the final bonus payable in December 2002.
In June 1998 and in conjunction with Mr. Lutes' promotion to Chief Financial
Officer, the Company made a loan in the amount of $75,000 to Mr. Lutes. The loan
accrues interest at the rate of 5.50% per annum and is payable in three equal
annual installments, with the final $25,000 installment due on March 1, 2001.
The loan is unsecured. The largest principal amount outstanding during 1998 (and
the principal amount outstanding on December 31, 1998) was $75,000.
See also "Compensation Committee Interlocks and Insider Participation."
24
<PAGE>
PROPOSAL NUMBER TWO
APPROVAL OF REINCORPORATION IN DELAWARE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" REINCORPORATION IN DELAWARE
INTRODUCTION
The Board of Directors believes that the best interests of the Company and
its shareholders will be served by changing the state of incorporation of the
Company from California to Delaware (the "Reincorporation Proposal" or the
"Proposed Reincorporation"). The Reincorporation Proposal relates only to
reincorporation of the Company, and specifically does not include the Bank
(which will remain incorporated in California). As discussed below, the
principal reasons for reincorporation of the Company are the greater flexibility
of Delaware corporate law, the substantial body of case law interpreting
Delaware corporate law and the increased ability of the Company to attract and
retain qualified directors. The Company believes that its shareholders will
benefit from the well established principles of corporate governance that
Delaware law affords. Although Delaware law provides the opportunity for the
Board of Directors to adopt various mechanisms which may enhance the Board's
ability to negotiate favorable terms for the shareholders in the event of an
unsolicited takeover attempt, the proposed Delaware certificate of incorporation
and bylaws are similar in many respects to those currently in effect in
California, with the exceptions that cumulative voting, actions by shareholders
by written consent, and the right of a shareholder to call a special meeting of
the Board of Directors will be eliminated. Each of these provisions are rights
that the shareholders currently have, but have never to date exercised.
The Reincorporation Proposal is not being proposed in order to prevent an
unsolicited takeover attempt, nor is it in response to any present attempt known
to the Board of Directors to acquire control of the Company, obtain
representation on the Board of Directors, or take significant action that
affects the Company. Shareholders are urged to read carefully the following
sections of this Proxy Statement, including the related exhibits, before voting
on the Reincorporation Proposal. Throughout the Proxy Statement, the term
"Bancshares California" refers to the existing California corporation and the
term "Bancshares Delaware" refers to the new proposed Delaware corporation, a
wholly-owned subsidiary of Bancshares California, which is the proposed
successor to Bancshares California.
The Reincorporation Proposal will be effected by merging Bancshares
California into Bancshares Delaware (the "Merger"). Upon completion of the
Merger, Bancshares California will cease to exist and Bancshares Delaware will
continue to operate the business of the Company under the name Silicon Valley
Bancshares. Pursuant to the Plan and Agreement of Merger between Bancshares
California and Bancshares Delaware, a copy of which is attached hereto as
Exhibit A (the "Merger Agreement"), each outstanding share of Bancshares
California Common Stock, no par value, will automatically be converted into one
share of Bancshares Delaware Common Stock, $.001 par value. IF THE
REINCORPORATION PROPOSAL IS APPROVED, IT WILL NOT BE NECESSARY FOR SHAREHOLDERS
TO EXCHANGE THEIR EXISTING STOCK CERTIFICATES FOR STOCK CERTIFICATES OF
BANCSHARES DELAWARE.
Upon the date on which the Merger is effective (the "Effective Date"),
Bancshares Delaware will also assume and continue the outstanding stock options
and all other employee benefit plans of Bancshares California. Each outstanding
and unexercised option or other right to purchase shares of Bancshares
California Common Stock will become an option or right to purchase the same
number of shares of Bancshares Delaware Common Stock on the same terms and
conditions and at the same exercise price applicable to any such Bancshares
California option or stock purchase right at the Effective Date.
The Common Stock of Bancshares California are included for trading on the
Nasdaq National Market, and after the Merger, the Common Stock of Bancshares
Delaware will continue to be traded on the Nasdaq National Market under the same
symbol (SIVB).
The Proposed Reincorporation has been unanimously approved by Bancshares
California's Board of Directors. If approved by the shareholders, it is
anticipated that the Effective Date of the Merger will be as
25
<PAGE>
soon as practicable following the Annual Meeting of Shareholders. However,
pursuant to the Merger Agreement, the Merger may be abandoned or the Merger
Agreement may be amended by the Board of Directors (except that certain
principal terms may not be amended without shareholder approval) either before
or after shareholder approval has been obtained and prior to the Effective Date
of the Proposed Reincorporation if, in the opinion of the Board of Directors of
either company, circumstances arise that make it inadvisable to proceed.
The discussion set forth below is qualified in its entirety by reference to
the Merger Agreement, the Certificate of Incorporation and the Bylaws of
Bancshares Delaware, copies of which are attached hereto as Exhibits A, B and C,
respectively.
DISSENTERS RIGHTS
Shareholders of Bancshares California will have no dissenters' rights of
appraisal with respect to the Reincorporation Proposal.
VOTE REQUIRED FOR THE REINCORPORATION PROPOSAL
Approval of the Reincorporation Proposal, which will also constitute
approval of the (i) Merger Agreement, the Certificate of Incorporation and the
Bylaws of Bancshares Delaware and (ii) the assumption of Bancshares California's
employee benefit plans and outstanding stock options by Bancshares Delaware,
will require the affirmative vote of the holders of a majority of the
outstanding shares of Bancshares California Common Stock outstanding on the
Record Date. Accordingly, abstentions and broker non-votes will have the same
effect as a vote against the proposal. The Board of Directors unanimously
recommends a vote "FOR" the Reincorporation Proposal.
PRINCIPAL REASONS FOR THE PROPOSED REINCORPORATION
As the Company plans for the future, the Board of Directors and management
believe that it is essential to be able to draw upon well established principles
of corporate governance in making legal and business decisions. The prominence
and predictability of Delaware corporate law provide a reliable foundation on
which the Company's governance decisions can be based and the Company believes
that shareholders will benefit from the responsiveness of Delaware corporate law
to their needs and to those of the corporation they own.
PROMINENCE, PREDICTABILITY AND FLEXIBILITY OF DELAWARE LAW. For many years
Delaware has followed a policy of encouraging incorporation in that state and,
in furtherance of that Policy, has been a leader in adopting, construing and
implementing comprehensive, flexible corporate laws responsive to the legal and
business needs of corporations organized under its laws. Many corporations have
chosen Delaware initially as a state of incorporation or have subsequently
changed corporate domicile to Delaware in a manner similar to that proposed by
the Company. Because of Delaware's prominence as the state of incorporation for
many major corporations, both the legislature and courts in Delaware have
demonstrated an ability and a willingness to act quickly and effectively to meet
changing business needs. Delaware has a sophisticated, specialized and efficient
court system dedicated to resolving corporate law disputes, which helps to
eliminate much of the uncertainty and addendant risk companies face in
litigation. The Delaware courts have developed considerable expertise in dealing
with corporate issues and a substantial body of case law has developed
construing Delaware law and establishing public policies with respect to
corporate legal affairs.
INCREASED ABILITY TO ATTRACT AND RETAIN QUALIFIED DIRECTORS. Both
California and Delaware law permit a corporation to include a provision in its
certificate of incorporation which reduces or limits the monetary liability of
directors for breaches of fiduciary duty in certain circumstances. The
increasing frequency of claims and litigation directed against directors and
officers has greatly expanded the risks facing directors and officers of
corporations in exercising their respective duties. The amount of time and money
required
26
<PAGE>
to respond to such claims and to defend such litigation can be substantial. The
Company anticipates that it may seek to expand the number of outside directors
on its Board of Directors in the future. Although the Company has not
experienced difficulty in attracting and retaining qualified directors to date,
it is the Company's desire to minimize these risks to its directors and officers
and to limit situations in which monetary damages can be recovered against
directors so that the Company may continue to attract and retain qualified
directors who otherwise might be unwilling to serve because of the risks
involved. The Company believes that, in general, Delaware law provides greater
protection to directors than California law and that Delaware case law regarding
a corporation's ability to limit director liability is more developed and
provides more guidance than California law. See "The Charters and Bylaws of
Bancshares California and Bancshares Delaware--Monetary Liability for
Directors."
WELL ESTABLISHED PRINCIPLES OF CORPORATE GOVERNANCE. There is substantial
judicial precedent in the Delaware courts as to the legal principles applicable
to measures that may be taken by a corporation and as to the conduct of the
Board of Directors under the business judgment rule. The Company believes that
its shareholders will benefit from the well established principles of corporate
governance that Delaware law affords.
NO CHANGE IN THE BOARD MEMBERS, BUSINESS, MANAGEMENT, EMPLOYEE PLANS OR LOCATION
OF PRINCIPAL FACILITIES OF THE COMPANY
The Reincorporation Proposal will effect a change in the legal domicile of
the Company, but not its physical location, and certain other changes of a legal
nature, certain of which are described in this Proxy Statement. The Proposed
Reincorporation will not result in any change in the business, management,
fiscal year, assets or liabilities (except to the extent of legal and other
costs of effecting the reincorporation) or location of the principal facilities
of the Company. The eight directors who are elected at the Annual Meeting of
Shareholders will become the directors of Bancshares Delaware. All employee
benefit plans of Bancshares California will be assumed and continued by
Bancshares Delaware. All stock options, warrants or other rights to acquire
Common Stock of Bancshares California will automatically be converted into an
option or right to purchase the same number of shares of Bancshares Delaware
Common Stock at the same price per share, upon the same terms, and subject to
the same conditions. Bancshares California's other employee benefit arrangements
will also be continued by Bancshares Delaware upon the terms and subject to the
conditions currently in effect.
INITIAL NAME CHANGE
Under Delaware law, the certificate of corporation must set forth the name
of the corporation, which must include either a name (such as "association,"
"company" or "corporation") or abbreviation (such as "co.," "corp.," "inc.," or
"ltd."). However, under Section 102 of the Delaware Corporation Code, the
Division of Corporations may waive this requirement if the corporation files a
certificate with the Delaware Secretary of State stating that its total assets
are not less than $10,000,000. Bancshares Delaware, prior to the completion of
the Merger between Bancshares Delaware and Bancshares California, will have the
name "Silicon Valley Bancshares, Inc." After the completion of the Merger,
Bancshares Delaware intends to file with the Delaware Secretary of State for
exemption under Section 102, as Bancshares Delaware will have total assets over
$10,000,000. If the Delaware Secretary of State approves this exemption request,
Bancshares Delaware will thereafter be named "Silicon Valley Bancshares."
ANTITAKEOVER IMPLICATIONS
Delaware, like many other states, permits a corporation to adopt a number of
measures through amendment of the certificate of incorporation or bylaws or
otherwise, which measures are designed to reduce a corporation's vulnerability
to unsolicited takeover attempts. The Reincorporation Proposal is not being
proposed in order to prevent an unsolicited takeover attempt, nor is it in
response to any present
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attempt known to the Board of Directors to acquire control of the Company,
obtain representation on the Board of Directors or take significant action that
affects the Company.
In the discharge of its fiduciary obligations to shareholders, the Board of
Directors has evaluated the Company's vulnerability to potential unsolicited
bidders. In the course of such evaluation, the Board of Directors of the Company
has considered, or may consider in the future, certain defensive strategies
designed to enhance the Board's ability to negotiate with an unsolicited bidder.
These strategies include, but are not limited to, enforcement of the Company's
Preferred Shares Rights Agreement dated October 22, 1998 (the "Rights Plan"),
adoption of a severance plan for certain of its management and key employees
which becomes effective upon the occurrence of a change in control of the
Company and the authorization of preferred stock, the rights and preferences of
which may be determined by the Board of Directors. Some of these measures may be
implemented by Bancshares under California law. There is nonetheless substantial
judicial precedent in the Delaware courts as to the legal principles applicable
to such defensive measures and as to the conduct of the Board of Directors under
the business judgment rule with respect to unsolicited takeover attempts.
Certain effects of the Reincorporation Proposal may be considered to have
antitakeover implications. Section 203 of the Delaware General Corporation Law
("Section 203"), from which Bancshares Delaware will not opt out, restricts
certain "business combinations" with "interested shareholders" for three years
following the date that a person or entity becomes an interested shareholder,
unless the Board of Directors approves the business combination and/or other
requirements are met. See "Significant Differences Between the Corporation Laws
of California and Delaware--Shareholder Approval of Certain Business
Combinations." There are other measures expressly permitted under Delaware law,
which the Company does not currently plan to implement, such as the
establishment of a classified board of directors. The establishment of a
classified board of directors can also be undertaken under California law in
certain circumstances. For a detailed discussion of all of the changes that will
be implemented as part of the Proposed Reincorporation, see "The Charters and
Bylaws of Bancshares California and Bancshares Delaware." For a discussion of
differences between the laws of California and Delaware, see "Significant
Differences Between the Corporation Laws of California and Delaware."
The Board of Directors has no present intention following the Proposed
Reincorporation to amend the Certificate of Incorporation or Bylaws to include
additional provisions other than those now present in its California Articles of
Incorporation and Bylaws which might deter an unsolicited takeover attempt.
However, in the discharge of its fiduciary obligations to its shareholders, the
Board of Directors of the Company will continue to evaluate the Company's
vulnerability to potential unsolicited bids to acquire the Company on
unfavorable terms and to consider strategies to enhance the Board's ability to
negotiate with an unsolicited bidder.
THE CHARTERS AND BYLAWS OF BANCSHARES CALIFORNIA AND BANCSHARES DELAWARE
The provisions of the Bancshares Delaware Certificate of Incorporation and
Bylaws are similar to those of the Bancshares California Articles of
Incorporation and Bylaws in many respects. However, the Reincorporation Proposal
includes the implementation of certain provisions in the Bancshares Delaware
Certificate of Incorporation and Bylaws that alter the rights of shareholders
and the powers of the Board of Directors. In addition, Bancshares Delaware could
implement certain other changes by amending its Certificate of Incorporation and
Bylaws. For a discussion of such changes, see "Significant Differences Between
the Corporation Laws of California and Delaware."
AUTHORIZED SHARES. The Articles of Incorporation of Bancshares California
currently authorize the Company to issue up to 60,000,000 shares of Common
Stock, no par value, and 20,000,000 shares of Preferred Stock, no par value. The
Certificate of Incorporation of Bancshares Delaware provides that such company
also will have 60,000,000 authorized shares of Common Stock, $.001 par value,
and 20,000,000 shares of Preferred Stock, $.001 par value. Like Bancshares
California's Articles of Incorporation, Bancshares Delaware's Certificate of
Incorporation provides that the Board of Directors is entitled to fix
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or alter the voting rights, designations, powers, preferences and relative and
other special rights and the qualifications, limitations or restrictions, of the
authorized and unissued preferred stock. Thus, although it has no present
intention of doing so, the Board of Directors, without shareholder approval,
could authorize the issuance of Preferred Stock upon terms which could have the
effect of delaying or preventing a change in control of the Company or modifying
the rights of holders of the Company's Common Stock under either California or
Delaware law. The Board of Directors could also utilize such shares for further
financings, possible acquisitions and other uses.
MONETARY LIABILITY OF DIRECTORS. The Articles of Incorporation of
Bancshares California and the Certificate of Incorporation of Bancshares
Delaware both provide for the elimination of personal monetary liability of
directors to the fullest extent permissible under laws of each corporation's
respective state of incorporation. The provision eliminating monetary liability
of directors set forth in the Bancshares Delaware Certificate of Incorporation
is potentially more expansive than the corresponding provision in the Bancshares
California Articles of Incorporation, in that the former incorporates future
amendments to Delaware law with respect to the elimination of such liability.
For a more detailed explanation of the foregoing, see "Significant Differences
Between the Corporation Laws of California and Delaware Indemnification and
Limitation of Liability."
SIZE OF THE BOARD OF DIRECTORS. The Bylaws of Bancshares Delaware provide
for a Board of Directors consisting of eight to fifteen directors. The Bylaws of
Bancshares California provide for a Board of Directors of eight to fifteen
members, with the exact number set at eight directors (effective as of April 15,
1999). Under California law, although changes in the number of directors, in
general, must be approved by a majority of the outstanding shares, the Board of
Directors may fix the exact number of directors within a stated range set forth
in the articles of incorporation of bylaws, if the stated ranges have been
approved by the shareholders. Delaware law permits the board of directors acting
alone, to change the authorized number of directors by amendment to the bylaws,
unless the directors are not authorized to amend the bylaws or the number of
directors is fixed in the certificate of incorporation (in which case a change
in the number of directors may be made only by amendment to the certificate of
incorporation following approval of such change by the shareholders). The
Bancshares Delaware Certificate of Incorporation provides that the number of
directors will be as specified in the Bylaws and authorizes the Board of
Directors to adopt, alter, amend or repeal the Bylaws.
Following the Proposed Reincorporation, the Board of Directors of Bancshares
Delaware could amend the Bylaws to change the size of the Board of Directors
from the current range of eight to fifteen directors without further shareholder
approval. The Board has no present intention to do so, however. If the
Reincorporation Proposal is approved, the eight directors of Bancshares
California who are elected at the 1999 Annual Meeting of Shareholders will
continue as the eight directors of Bancshares Delaware after the Reincorporation
is consummated.
ELIMINATION OF SHAREHOLDER ACTIONS BY WRITTEN CONSENT; SPECIAL
MEETINGS. The Certificate of Incorporation and Bylaws of Bancshares Delaware
provide that shareholders may act only at an annual or special meeting of
shareholders and not by written consent. Although the Bylaws of Bancshares
California provide for shareholder actions by written consent, the Company has
not used this method of obtaining shareholder approval since becoming a public
company in 1988 and, because of the large number of shareholders of the Company
and its current practice of soliciting proxies and holding meetings, the Company
does not expect to use this procedure in the future. In addition, the Bylaws of
Bancshares Delaware provide that special meetings of shareholders can be called
only by the Board of Directors, the Chairman of the Board or the President.
Shareholders are not permitted to call a special meeting or to require that the
Board call a special meeting of shareholders. Moreover, the business permitted
to be conducted at any special meeting of shareholders is limited to the
business brought before the meeting by or at the direction of the Board of
Directors.
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REASONS FOR ELIMINATION OF SHAREHOLDER ACTION BY WRITTEN CONSENT AND RIGHT
TO CALL SPECIAL MEETINGS. The provisions prohibiting shareholder action by
written consent would give all shareholders of the Company the opportunity to
participate in determining any proposed shareholder action and would prevent the
holders of a majority of the voting power of the Company from using the written
consent procedure to take shareholder action. Persons attempting unfriendly
takeovers of corporations have attempted to use written consent procedures in
order to deal directly with shareholders and avoid negotiations with the boards
of directors of such companies. The provisions eliminating the right of
shareholders to call a special meeting would mean that a shareholder could not
force shareholder consideration of a proposal over the opposition of the Board
of Directors other than at an annual meeting by calling a special meeting of
shareholders. By eliminating the use of the written consent procedure and the
ability of shareholders to call a special meeting, the Company intends to
encourage persons seeking to acquire control of the Company to initiate such an
acquisition through arm's-length negotiations with the Company's management and
Board of Directors.
POSSIBLE DISADVANTAGES OF ELIMINATION OF SHAREHOLDER ACTIONS BY WRITTEN
CONSENT AND RIGHT TO CALL SPECIAL MEETINGS. The provisions restricting
shareholder action by written consent and eliminating the shareholders' ability
to call special meetings may have the effect of delaying consideration of a
shareholder proposal until the next annual meeting unless a special meeting is
called by the Board of Directors. Because elimination of the procedures for
shareholders to act by written consent or to call special meetings could make
more difficult an attempt to obtain control of the Company, such action could
have the effect of discouraging a third party from making a tender offer or
otherwise attempting to obtain control of the Company. Because tender offers for
control usually involve a purchase price higher than the prevailing market
price, the provisions restricting shareholder action by written consent and the
elimination of the shareholders' ability to call special meetings may have the
effect of preventing or delaying a bid for the Company's shares which could be
beneficial to the Company and its shareholders. Elimination of the written
consent procedure also means that a meeting of shareholders would be required in
order for the Company's shareholders to replace the Board. The restriction on
the ability of shareholders to call a special meeting means that a proposal to
replace the Board could be delayed until the next annual meeting. These
provisions thus will make the removal of directors more difficult.
ELIMINATION OF CUMULATIVE VOTING. Unlike the Bylaws of Bancshares
California, the Certificate of Incorporation and Bylaws of Bancshares Delaware
do not provide for cumulative voting. Cumulative voting entitles each
shareholder to cast a number of votes that is equal to the number of voting
shares held by such shareholder multiplied by the total number of directors to
be elected, and to cast all such votes for one nominee or distribute such votes
among up to as many candidates as there are positions to be filled. (For a
further description of the mechanics of cumulative voting, see the section
entitled "Voting" on page one of this Proxy Statement.) Without cumulative
voting, a shareholder or group of shareholders must hold a majority of the
voting shares to cause the election of one or more nominees. Cumulative voting
may enable a minority shareholder or group of shareholders to elect at least one
representative to the Board. For example, in each election of directors, under
cumulative voting rules where eight directors are to be elected, a shareholder
or group holding greater than eleven percent (11%) of the voting shares is
guaranteed the ability to elect one director. If the Reincorporation Proposal is
adopted, in all future elections of the Board of Directors, commencing with the
Annual Meeting to be held in 2000, the holders of a majority of the shares
actually voted (assuming that a quorum is present) will be guaranteed the right
to elect all of the directors being elected at that time.
REASONS FOR ELIMINATION OF CUMULATIVE VOTING. The Board of Directors
believes that each director elected to the Board should represent the interests
of all shareholders. The elimination of cumulative voting should help ensure
that each director acts in the best interests of all shareholders, because
shareholders holding a majority of the voting shares will have the power to
elect every director to be elected at any annual meeting. The election of the
Board by holders of a majority of the voting stock is not a departure from the
manner in which the Company's directors have been elected in the past. Even
though
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the Company's shareholders have had cumulative voting rights, such voting has
never been used in the election of a director to the Company's Board.
POSSIBLE DISADVANTAGES OF ELIMINATION OF CUMULATIVE VOTING. The elimination
of cumulative voting may make it more difficult for a minority shareholder or
group of shareholders to elect a representative to the Board of Directors. In
addition, the elimination of cumulative voting may have certain antitakeover
effects. For example, the lack of cumulative voting may, under certain
circumstances, discourage or render more difficult a merger, tender offer or
proxy contest; discourage the acquisition of large blocks of the Company's
shares by persons who would not make such acquisition without assurance of the
ability to place a representative on the Board of Directors; deter or delay the
assumption of control by a holder of a large block of the Company's shares; or
render more difficult the replacement of incumbent directors and management.
COMPLIANCE WITH DELAWARE AND CALIFORNIA LAW
As soon as practicable following the Annual Meeting of Shareholders, if the
Reincorporation Proposal is approved, the Company intends to submit the Merger
Agreement to the office of the California Secretary of State and to the office
of the Delaware Secretary of State for filing.
APPLICATION OF CALIFORNIA LAW TO DELAWARE CORPORATIONS
Under Section 2115 of the California General Corporation, Law, certain
foreign corporations (i.e., corporations not organized under California law) are
placed in a special category if they have characteristics of ownership and
operation which indicate that they have significant contacts with California. So
long as a Delaware or other foreign corporation is in this special category, and
it does not qualify for one of the statutory exemptions, it is subject to a
number of key provisions of the California General Corporation Law applicable to
corporations incorporated in California. Among the more important provisions are
those relating to the election and removal of directors, cumulative voting,
classified boards of directors, director duty of care standards, standards of
liability and indemnification of directors, distributions, dividends and
repurchases of shares, shareholder meetings, approval of certain corporate
transactions, dissenters and appraisal rights and inspection of corporate
records. Some of these substantive provisions are not applicable to Bancshares
Delaware. See "Significant Differences Between the Corporation Laws of
California and Delaware" below.
Exemptions from Section 2115 are provided for corporations whose shares are
listed on a national securities exchange, or on the Nasdaq National Market if
the corporation has 800 or more shareholders. Management believes Bancshares
Delaware will be exempt from Section 2115 following the Proposed Reincorporation
because the Common Stock of Bancshares Delaware will be traded on the Nasdaq
National Market and owned by more than 800 holders.
SIGNIFICANT DIFFERENCES BETWEEN THE CORPORATION LAWS OF CALIFORNIA AND DELAWARE
The corporation laws of California and Delaware differ in a number of
respects. Although all the differences are not set forth in this Proxy
Statement, certain provisions, which could materially affect the rights of
shareholders, are discussed below.
CUMULATIVE VOTING FOR DIRECTORS. Under California law, if any shareholder
has given notice of an intention to cumulate votes for the election of
directors, any other shareholder of the corporation is also entitled to cumulate
his or her votes at such election. California corporations whose stock is listed
on a national stock exchange or whose stock is held by 800 shareholders and
included in the Nasdaq National Market System (a "Listed Company") may eliminate
such cumulative voting rights by adopting amendments to their articles and
bylaws, which amendments must be approved by the shareholders. Bancshares
California qualifies as a Listed Company but has not sought shareholder approval
to eliminate cumulative voting. Therefore, shareholders of Bancshares California
have always had cumulative voting rights. Under Delaware law, cumulative voting
in the election of directors is not mandatory. The Certificate of
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Incorporation and Bylaws of Bancshares Delaware do not provide for cumulative
voting and, therefore, the shareholders of Bancshares Delaware will no longer
have cumulative voting rights. The elimination of cumulative voting may limit
the ability of minority shareholders to obtain representation on the Board of
Directors. See "The Charters and Bylaws of Bancshares California and Bancshares
Delaware."
WRITTEN CONSENT OF SHAREHOLDERS. Both the California and Delaware General
Corporation Laws provide that the shareholders of a corporation may take action
by written consent without a meeting, unless the corporation's charter documents
provide otherwise. The Articles of Incorporation of Bancshares California do not
contain any provisions prohibiting actions by written consent and, accordingly,
the shareholders of Bancshares California may take action by written consent
without a meeting. The Certificate of Incorporation of Bancshares Delaware
explicitly prohibits shareholder actions by written consent. As a result, the
shareholders of Bancshares Delaware can take action only at a duly called
meeting of the shareholders. See "The Charters and Bylaws of Bancshares
California and Bancshares Delaware."
POWER TO CALL SPECIAL SHAREHOLDERS' MEETINGS. Under California law, a
special meeting of shareholders may be called by the Board of Directors, the
Chairman of the Board, the President, the holders of shares entitled to cast not
less than ten percent (10%) of the votes at such meeting and such additional
persons as are authorized by the Articles of Incorporation or the Bylaws. Under
Delaware law, a special meeting of shareholders may be called by the Board of
Directors or by any other person authorized to do so in the Certificate of
Incorporation or the Bylaws. The Certificate of Incorporation and Bylaws of
Bancshares Delaware do not contain provisions granting shareholders the right to
call a special meeting of shareholders. Because the right of shareholders to
call a special meeting is not set forth in the Certificate of Incorporation or
Bylaws of Bancshares Delaware, shareholders will no longer be able to call a
special meeting of shareholders to vote on a transaction that is opposed by the
Board of Directors. See "The Charters and Bylaws of Bancshares California and
Bancshares Delaware."
SHAREHOLDER APPROVAL OF CERTAIN BUSINESS COMBINATIONS. In recent years, a
number of states have adopted special laws designed to make certain kinds of
"unfriendly" corporate takeovers, or other transactions involving a corporation
and one or more of its significant shareholders, more difficult. Under Section
203, certain "business combinations" with "interested shareholders" of Delaware
corporations are subject to a three-year moratorium unless specified conditions
are met.
Section 203 prohibits a Delaware corporation from engaging in a "business
combination" with an "interested shareholder" for three years following the date
that such person or entity becomes an interested shareholder unless certain
conditions are met. With certain exceptions, an interested shareholder is a
person or entity who or which owns, individually or with or through certain
other persons or entities, fifteen percent (15%) or more of the corporation's
outstanding voting stock (including any rights to acquire stock pursuant to an
option, warrant, agreement, arrangement or understanding, or upon the exercise
of conversion or exchange rights, and stock with respect to which the person has
voting rights only), or is an affiliate or associate of the corporation and was
the owner, individually or with or through certain other persons or entities, of
fifteen percent (15%) or more of such voting stock at any time within the
previous three years, or is an affiliate or associate of any of the foregoing.
For purposes of Section 203, the term "business combination" is defined
broadly to include mergers with or caused by the interested shareholder; sales
or other dispositions to the interested shareholder (except proportionately with
the corporation's other shareholders) of assets of the corporation or a direct
or indirect majority-owned subsidiary equal in aggregate market value to ten
percent (10%) or more of the aggregate market value of either the corporation's
consolidated assets or all of its outstanding stock; the issuance or transfer by
the corporation or a direct or, indirect majority-owned subsidiary of stock of
the corporation or such subsidiary to the interested shareholder (except for
certain transfers in a conversion or exchange or a pro rata distribution or
certain other types of specified transactions); or receipt by the interested
shareholder (except proportionately as a shareholder), directly or indirectly,
of any loans, advances, guarantees, pledges or other financial benefits, other
than as expressly provided in Section 203, provided by or through the
corporation or a subsidiary.
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The three-year moratorium imposed on business combinations by Section 203
does not apply if (i) prior to the date on which such shareholder becomes an
interested shareholder the board of directors approves either the business
combination or the transaction that resulted in the person or entity becoming an
interested shareholder, (ii) upon consummation of the transaction that made him
or her an interested shareholder, the interested shareholder owns at least
eighty-five percent (85%) of the corporation's voting stock outstanding at the
time the transaction commenced (excluding from the eighty-five percent (85%)
calculation shares owned by directors who are also officers of the target
corporation and shares held by employee stock plans that do not give employee
participants the right to decide confidentially whether to accept a tender or
exchange offer); or (iii) on or after the date such person or entity becomes an
interested shareholder, the board approves the business combination and it is
also approved at a shareholder meeting by sixty-six and two-thirds percent
(66 2/3%) of the outstanding voting stock not owned by the interested
shareholder.
Section 203 applies to certain publicly held corporations that have a class
of voting stock that is (i) listed on a national securities exchange, (ii)
quoted on an interdealer quotation system of a registered national securities
association or (iii) held of record by more than 2,000 shareholders. Although a
Delaware corporation to which Section 203 applies may elect not to be governed
by Section 203, Bancshares Delaware does not intend to so elect to be excluded
from the statutory provisions of Section 203. Should a majority of the
outstanding shares of Bancshares Delaware vote at a later date to opt out of
Section 203, such action by the shareholders would not take effect until one
year after the vote occurred.
Section 203 will encourage any potential acquirer to negotiate with the
Company's Board of Directors. Section 203 also might have the effect of limiting
the ability of a potential acquirer to make a two-tiered bid for Bancshares
Delaware in which all shareholders would not be treated equally. Shareholders
should note, however, that the application of Section 203 to Bancshares Delaware
will confer upon the Board the power to reject a proposed business combination
in certain circumstances, even though a potential acquirer may be offering a
substantial premium for Bancshares Delaware's shares over the then-current
market price. Section 203 may discourage certain potential acquirers unwilling
to comply with its provisions. See "Shareholder Voting" herein.
SHAREHOLDER RIGHTS PLAN. In October 1998, the Board of Directors of
Bancshares California adopted the Rights Plan. Pursuant to the Rights Plan,
Bancshares California declared a dividend of one Preferred Share Purchase Right
(a "Right") for each outstanding share of Common Stock and each share of Common
Stock issued thereafter. Initially, each Right entitles holders of Common Stock
to purchase from Bancshares California a fraction of a share of the Company's
Preferred Stock with economic terms similar to that of one share of the
Company's Common Stock for $120.00, subject to adjustment. The Rights are not
exercisable until the occurrence of specified events.
The Rights will become exercisable only if a person or group acquires 10% or
more of the Company's Common Stock (subject to certain limitations) or announces
a tender offer or exchange offer which would result in its ownership of 10% or
more of the Common Stock. Ten days after such acquisition or offer, each Right
becomes exercisable and entitles the holder to purchase, for the exercise price,
a number of shares of the Company's Common Stock having a then current market
value of twice the Right's exercise price. Alternatively, if the Company is
involved in a merger or other business combination transaction with another
person, ten or more days after such acquisition or offer, each Right becomes
exercisable at the Right's then current exercise price for shares of common
stock of such person, having a then current market value of twice the then
current market value of twice the Right's exercise price. The Rights are
redeemable at the Company's option for $0.001 per Right at any time on or prior
to the public announcement that a person has acquired beneficial ownership of
10% or more of the Company's Common Stock. The Rights Plan expires on October
22, 2008 unless the Rights are earlier redeemed by the Company.
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The Rights Plan is intended to protect the shareholders in the event of an
unsolicited offer to acquire, or the acquisition of, 10% or more of the Common
Stock of Bancshares California. The Rights are not intended to prevent a
takeover of the Company and will not interfere with any tender offer or business
combination approved by the Board of Directors. The Rights encourage persons
seeking control of the Company to initiate such an acquisition or offer to
acquire through arm's-length negotiations with the Board of Directors.
The Rights Plan will be assumed by Bancshares Delaware pursuant to the terms
of the Merger Agreement. In the past, Delaware courts have upheld the validity
of plans such as the Rights Plan. To date, the California courts have not
considered the validity of such a plan. In any event, the Company believes that
the Rights Plan is more likely to be upheld in the event of a challenge if the
Reincorporation Proposal is effected and Bancshares California is merged into
Bancshares Delaware.
FILLING VACANCIES ON THE BOARD OF DIRECTORS. Under California law, any
vacancy on the board of directors other than one created by removal of a
director may be filled by the Board. If the number of directors is less than a
quorum, a vacancy may be filled by the unanimous written consent of the
directors then in office, by the affirmative vote of a majority of the directors
at a meeting held pursuant to notice or waivers of notice or by a sole remaining
director. A vacancy created by removal of a director may be filled by the board
only if so authorized by a corporation's articles of incorporation or by a bylaw
approved by the corporation's shareholders. Bancshares California's Articles of
Incorporation and Bylaws do not permit directors to fill vacancies created by
removal of a director. Under Delaware law, vacancies and newly created
directorships may be filled by a majority of the directors then in office (even
though less than a quorum) or by a sole remaining director, unless otherwise
provided in the certificate of incorporation or bylaws (or unless the
certificate of incorporation directs that a particular class of stock is to
elect such director(s), in which case a majority of the directors elected by
such class, or a sole remaining director so elected, shall fill such vacancy or
newly created directorship). The Bylaws of Bancshares Delaware provide,
consistent with Delaware law, that any vacancies and newly created directorships
may be filled by a majority of the directors then in office (even though less
than a quorum) or by a sole remaining director.
REMOVAL OF DIRECTORS. Under California law, any director or the entire
board of directors may be removed, with or without cause, with the approval of a
majority of the outstanding shares entitled to vote; however, no individual
director may be removed (unless the entire board is removed) if the number of
votes cast against such removal would be sufficient to elect the director if
voted under cumulative voting. Under Delaware law, a director of a corporation
that does not have a classified board of directors or cumulative voting may be
removed with or without cause with the approval of a majority of the outstanding
shares entitled to vote at an election of directors. In the case of a Delaware
corporation having cumulative voting, if less than the entire board is to be
removed, a director may not be removed without cause if the number of shares
voted against such removal would be sufficient to elect the director under
cumulative voting. A director of a corporation with a classified board of
directors may be removed only for cause, unless the certificate of incorporation
otherwise provides. The Certificate of Incorporation of Bancshares Delaware does
not provide for a classified board of directors and does not provide for
cumulative voting.
AMENDMENT OF BYLAWS. Under California law and Bancshares California Bylaws,
bylaws may be adopted, amended or repealed either by the vote of a majority of
the outstanding shares entitled to vote thereon or (subject to any restrictions
in the charter or bylaws) by the approval of the board of directors, except that
amendments to the bylaws specifying or changing a fixed number of directors or
the maximum or minimum number or changing from a fixed to a variable board or
vice versa may only be adopted by approval of the outstanding shares.
Under Delaware law, the power to adopt, amend or repeal bylaws is vested in
the shareholders entitled to vote unless the certificate of incorporation
confers the power to adopt, amend or repeal bylaws upon the directors as well.
Bancshares Delaware's charter confers such powers on the Bancshares Delaware
Board.
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CLASSIFIED BOARD OF DIRECTORS. A classified board is one on which a certain
number, but not all, of the directors are elected on a rotating basis each year.
This method of electing directors makes changes in the composition of the board
of directors more difficult, and thus may have the effect of making a potential
change in control of a corporation a lengthier and more difficult process.
California law permits certain qualifying corporations to provide for a
classified board of directors by adopting amendments to their articles of
incorporation or bylaws, which amendments must be approved by the shareholders.
Although Bancshares California qualifies to adopt a classified board of
directors, Delaware law permits, but does not require, a classified board of
directors, pursuant to which the directors can be divided into as many as three
classes with staggered terms of office, with only one class of directors
standing for election each year. The Bancshares Delaware Certificate of
Incorporation and Bylaws do not provide for a classified board and Bancshares
Delaware presently does not intend to propose establishment of a classified
board. The establishment of a classified board following the Proposed
Reincorporation would require the approval of the shareholders of Bancshares
Delaware.
INDEMNIFICATION AND LIMITATION OF LIABILITY. California and Delaware have
similar laws respecting indemnification by a corporation of its officers,
directors, employees and other agents. The laws of both states also permit, with
certain exceptions, a corporation to adopt a provision in its articles of
incorporation or certificate of incorporation, as the case may be, eliminating
the liability of a director to the corporation or its shareholders for monetary
damages for breach of the director's fiduciary duty. There are nonetheless
certain differences between the laws of the two states respecting
indemnification and limitation of liability.
The Articles of Incorporation of Bancshares California eliminate the
liability of directors to the corporation to the fullest extent permissible
under California law. California law does not permit the elimination of monetary
liability where such liability is based on (a) intentional misconduct or knowing
and culpable violation of law; (b) act or omissions that a director believes to
be contrary to the best interests of the corporation or its shareholders, or
that involve the absence of good faith on the part of the director; (c) receipt
of an improper personal benefit; (d) acts or omissions that show reckless
disregard for the director's duty to the corporation or its shareholders, where
the director in the ordinary course of performing a director's duties should be
aware of a risk of serious injury to the corporation or its shareholders; (e)
acts or omissions that constitute an unexcused pattern of inattention that
amounts to an abdication of the director's duty to the corporation and its
shareholders; (f) interested transactions between the corporation and a director
in which a director has a material financial interest; or (g) liability for
improper distributions, loans or guarantees.
The Certificate of Incorporation of Bancshares Delaware also eliminates the
liability of directors to the corporation or its shareholders for monetary
damages for breach of fiduciary duty as a director to the fullest extent
permissible under Delaware law, as such law exists currently or as it may be
amended in the future. Under Delaware law, such provision may not eliminate or
limit director monetary liability for (a) breaches of the director's duty of
loyalty to the corporation or its shareholders-, (b) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law; (c)
the payment of unlawful dividends or unlawful stock repurchases or redemptions;
or (d) transactions in which the director received an improper personal benefit.
Such limitation of liability provisions also may not limit a director's
liability for violation of, or otherwise relieve Bancshares Delaware or its
directors from the necessity of complying with federal or state securities laws,
or affect the availability of non-monetary remedies such as injunctive relief or
rescission.
California law permits indemnification of expenses incurred in derivative or
third-party actions, except that with respect to derivative actions (a) no
indemnification may be made without court approval when a person is adjudged
liable to the corporation in the performance of that person's duty to the
corporation and its shareholders, unless a court determines such person is
entitled to indemnity for expenses, and then such indemnification may be made
only to the extent that such court shall determine, and (b) no indemnification
may be made without court approval in respect of amounts paid or expenses
incurred in
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settling or otherwise disposing of a threatened or pending action or amounts
incurred in defending a pending action that is settled or otherwise disposed of
without court approval.
California law requires indemnification when the individual has defended
successfully the action on the merits (as opposed to Delaware law, which
requires indemnification relating to a successful defense on the merits or
otherwise, which could include dismissal or summary judgment).
Delaware law generally permits indemnification of expenses, including
attorney's fees, actually and reasonably incurred in the defense or settlement
of a derivative or third-party action, provided there is a determination by a
majority vote of a disinterested quorum of the directors, by independent legal
counsel or by a majority vote of a quorum of the shareholders that the person
seeking indemnification acted in good faith and in a manner reasonably believed
to be in or (in contrast to California law) not opposed to the best interests of
the corporation. Without court approval, however, no indemnification may be made
in respect of any derivative action in which such person is adjudged liable for
negligence or misconduct in the performance of his or her duty to the
corporation. Delaware law requires indemnification of expenses when the
individual being indemnified has successfully defended any action, claim, issue,
or matter therein, on the merits or otherwise.
Expenses incurred by an officer or director in defending an action may be
paid in advance, under Delaware law and California law, if such director or
officer undertakes to repay such amounts if it is ultimately determined that he
or she is not entitled to indemnification. In addition, the laws of both states
authorize a corporation's purchase of indemnity insurance for the benefit of its
officers, directors, employees and agents whether or not the corporation would
have the power to indemnify against the liability covered by the policy.
California law permits a California corporation to provide rights to
indemnification beyond those mandated by California law to the extent such
additional indemnification is authorized in the corporation's articles of
incorporation. Thus, if so authorized, rights to indemnification may be provided
pursuant to agreements or bylaw provisions which make mandatory the permissive
indemnification provided by California law. Under California law, there are two
limitations on such additional rights to indemnification: (i) such
indemnification is not permitted for acts, omissions or transactions from which
a director of a California corporation may not be relieved of personal
liability, as described above; and (ii) such indemnification is not permitted in
circumstances where California law expressly prohibits indemnification, as
described above. Bancshares California's Articles of Incorporation permit
indemnification beyond that expressly mandated by the California Corporations
Code and limit director monetary liability to the extent permitted by California
law.
Delaware law also permits a Delaware corporation to provide indemnification
in excess of that provided by statute. By contrast to California law, Delaware
law does not require authorizing provisions in the certificate of incorporation
and does not contain express prohibitions on indemnification in certain
circumstances. Limitations on indemnification may be imposed by a court,
however, based on principles of public policy.
Currently, there are no actions pending against officer of directors of the
Company in their capacity as such.
The indemnification and limitation of liability provisions of California
law, and not Delaware law, will apply to actions of the directors and officer of
Bancshares California made prior to the Proposed Reincorporation.
INSPECTION OF SHAREHOLDER LIST. Both California and Delaware law allow any
shareholder to inspect and copy the shareholder list for a purpose reasonably
related to such person's interest as a shareholder. California law provides, in
addition, for an absolute right to inspect and copy the corporation's
shareholder list by persons holding an aggregate of five percent (5%) or more of
a corporation's voting shares, or shareholders holding an aggregate of one
percent (1%) or more of such shares who have filed a
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Schedule 14B with the Securities and Exchange Commission in connection with a
contested election of directors. The latter provision has not been amended in
response to the elimination of Schedule 14B under the revised proxy rules. Under
California law, such absolute inspection rights also apply to a corporation
formed under the laws of any other state if its principal executive offices are
in California if it customarily holds meetings of its board in California.
Delaware law also provides for inspection rights as to a list of shareholders
entitled to vote at a meeting within a ten (10) day period preceding a
shareholders' meeting for any purpose germane to the meeting. However, Delaware
law contains no provisions comparable to the absolute right of inspection
provided by California law for certain shareholders.
DIVIDENDS AND REPURCHASES OF SHARES. California law dispenses with the
concepts of par value of shares as well as statutory definitions of capital,
surplus and the like. The concepts of par value, capital and surplus are
retained under Delaware law. Bancshares Delaware's Common Stock and Preferred
Stock will each have a par value of $.001 per share.
Under California law, a corporation may not make any distribution (including
dividends, whether in cash or other property, and repurchases of its shares,
other than repurchases of its shares issued under employee stock plans
contemplated by Section 408 of the California Corporations Code) unless either
(i) the corporation's retained earnings immediately prior to the proposed
distribution equal or exceed the amount of the proposed distribution or (ii)
immediately after giving effect to such distribution, the corporation's assets
(exclusive of goodwill, capitalized research and development expenses and
deferred charges) would be at least equal to 1.25 times its liabilities (not
including deferred taxes, deferred income and other deferred credits), and the
corporation's current assets would be at least equal to its current liabilities
(or 1.25 times its current liabilities if the average pre-tax and pre-interest
expense earnings for the preceding two fiscal years were less than the average
interest expense for such years). Such tests are applied to California
corporations on a consolidated basis.
Delaware law permits a corporation to declare and pay dividends out of
surplus or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of all classes having a preference upon the
distribution of assets. In addition, Delaware law generally provides that a
corporation may redeem or repurchase its shares only if the capital of the
corporation is not impaired and such redemption or repurchase would not impair
the capital of the corporation.
Since 1992, the Company has not declared or paid cash dividends on its
capital stock. The Company currently expects it will retain its future earnings
for use in the operation and expansion of its business and does not anticipate
paying any cash dividends in the forseeable future.
SHAREHOLDER VOTING. Both California and Delaware law generally require that
a majority of the shareholders of both acquiring and target corporations approve
statutory mergers. Delaware law does not require a shareholder vote of the
surviving corporation in a merger of two Delaware corporations (unless the
corporation provides otherwise in its certificate of incorporation) if (a) the
merger agreement does not amend the existing certificate of incorporation, (b)
each share of the stock of the surviving corporation outstanding immediately
before the effective date of the merger is an identical outstanding or treasury
share after the merger, and (c) either no shares of common stock of the
surviving corporation and no shares, securities or obligations convertible into
such stock are to be issued or delivered under the plan of merger, or the
authorized unissued shares or the treasury shares of common stock of the
surviving corporation to be issued or delivered under the plan of merger plus
those initially issuable upon conversion of any other shares, securities or
obligations to be issued or delivered under such plan do not exceed twenty
percent (20%) of the shares of common stock of such constituent corporation
outstanding immediately prior to the effective date of the merger. California
law contains a similar exception to its voting requirements for reorganizations
where shareholders or the corporation itself, or both, immediately
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prior to the reorganization or immediately after the reorganization will own
equity securities constituting more than five-sixths of the voting power of the
surviving or acquiring corporation or its parent entity.
Both California law and Delaware law also require that a sale of all or
substantially all of the assets of a corporation be approved by a majority of
the outstanding voting shares of the corporation transferring such assets.
With certain exceptions, California law also requires that mergers,
reorganizations, certain sales of assets and similar transactions be approved by
a majority vote of each class of shares outstanding. In contrast, Delaware law
generally does not require class voting, except in certain transactions
involving an amendment to the certificate of incorporation that adversely affect
a specific class of shares. As a result, shareholder approval of such
transactions may be easier to obtain under Delaware law for companies which have
more than one class of shares outstanding.
California law also requires that holders of nonredeemable common stock
receive nonredeemable common stock in a merger of the corporation with the
holder of more than fifty percent (50%) but less than ninety percent (90%) of
such common stock or its affiliate unless all of the holders of such common
stock consent to the transaction. This provision of California law may have the
effect of making a "cash-out" merger by a majority shareholder more difficult to
accomplish. Although Delaware law does not parallel California law in this
respect, under some circumstances Section 203 does provide similar protection
against coercive two-tiered bids for a corporation in which the shareholders are
not treated equally. See "Significant Differences Between the Corporation Laws
of California and Delaware Shareholder Approval of Certain Business
Combinations."
California law provides that, except in certain circumstances, when a tender
offer or a proposal for a reorganization or for a sale of assets is made by an
interested party (generally a controlling or managing person of the target
corporation), an affirmative opinion in writing as to the fairness of the
consideration to be paid to the shareholders must be delivered to shareholders.
This fairness opinion requirement does not apply to a corporation that does
not have shares held of record by at least 100 persons, or to a transaction that
has been qualified under California state securities laws. Furthermore, if a
tender of shares or vote is sought pursuant to an interested party's proposal
and a later proposal is made by another party at least ten days prior to the
date of acceptance of the interested party proposal, the shareholders must be
informed of the later offer and be afforded a reasonable opportunity to withdraw
any vote, consent or proxy, or to withdraw any tendered shares. Delaware law has
no comparable provision.
INTERESTED DIRECTOR TRANSACTIONS. Under both California and Delaware law,
certain contracts or transactions in which one or more of a corporation's
directors has an interest are not void or voidable because of such interest
provided that certain conditions, such as obtaining the required approval and
fulfilling the requirements of good faith and full disclosure, are met. With
certain exceptions, the conditions are similar under California and Delaware
law. Under California and Delaware law; (a) either the shareholders or the board
of directors must approve any such contract or transaction after full disclosure
of the material facts, and, in the case of board approval, the contract or
transaction must also be "just and reasonable," in California, or (b) the
contract or transaction must have been just and reasonable or fair as to the
corporation at the time it was approved. In the latter case, California law
explicitly places the burden of proof on the interested director. Under
California law, if shareholder approval is sought, the interested director is
not entitled to vote his or her shares at a shareholder meeting with respect to
any action regarding such contract or transaction. If board approval is sought,
the contract or, transaction must be approved by a majority vote of a quorum of
the directors, without counting the vote of any interested directors (except
that interested directors may be counted for purposes of establishing a quorum).
Under Delaware law, if board approval is sought, the contract or transaction
must be approved by a majority of the disinterested directors (even if the
disinterested directors are less than a quorum). Therefore, certain transactions
that the Board of Directors of Bancshares California might not be able to
approve because of
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the number of interested directors, could be approved by a majority of the
disinterested directors of Bancshares Delaware, although less than a majority of
a quorum. The Company is not aware of any plans to propose any transaction
involving directors of the Company that could not be approved under California
law but could be so approved under Delaware law.
SHAREHOLDER DERIVATIVE SUITS. California law provides that a shareholder
bringing a derivative action on behalf of a corporation need not have been a
shareholder at the time of the transaction in question, provided that certain
tests are met. Under Delaware law, a shareholder may bring a derivative action
on behalf of the corporation only if the shareholder was a shareholder of the
corporation at the time of the transaction in question or if his or her stock
thereafter devolved upon him or her by operation of law. California law also
provides that the corporation or the defendant in a derivative suit may make a
motion to the court for an order requiring the plaintiff shareholder to furnish
a security bond. Delaware does not have a similar bonding requirement.
APPRAISAL RIGHTS. Under both California and Delaware law, a shareholder of
a corporation participating in certain major corporate transactions may, under
varying circumstances, be entitled to appraisal rights pursuant to which such
shareholder may receive cash in the amount of the fair market value of his or
her shares in lieu of the consideration he or she would otherwise receive in the
transaction. Such fair market value is determined exclusive of any element of
value arising from the accomplishment or expectation of the merger or
consolidation. Under Delaware law, such appraisal rights are not available (a)
with respect to the sale, lease or exchange of all or substantially all of the
assets of a corporation, (b) with respect to a merger or consolidation by a
corporation the shares of which are either listed on a national securities
exchange or are held of record by more than 2,000 holders if such shareholders
receive only shares of the surviving corporation or shares of any other
corporation that are either listed on a national securities exchange or held of
record by more than 2,000 holders, plus cash in lieu of fractional shares, or
(c) to shareholders of a corporation surviving a merger if no vote of the
shareholders of the surviving corporation is required to approve the merger
because the merger agreement does not amend the existing certificate of
incorporation, each share of the surviving corporation outstanding prior to the
merger is an identical outstanding or treasury share after the merger, and the
number of shares to be issued in the merger does not exceed 20% or the shares of
the surviving corporation outstanding immediately prior to the merger and if
certain other conditions are met.
The limitations on the availability of appraisal rights under California law
are different from those under Delaware law. Shareholders of a California
corporation whose shares are listed on a national securities exchange or on a
list of over-the-counter margin stocks issued by the Board of Governors of the
Federal Reserve System generally do not have such appraisal rights unless the
holders of at least five percent (5%) of the class of outstanding shares claim
the right or the corporation or any law restricts the transfer of such shares.
Appraisal rights are also unavailable if the shareholders of a corporation or
the corporation itself, or both, immediately prior to the reorganization will
own immediately after the reorganization equity securities constituting more
than five-sixths of the voting power of the surviving or acquiring corporation
or its parent entity (as will be the case in the Reincorporation Proposal).
California law generally affords appraisal rights in sale of asset
reorganizations.
Appraisal or dissenters' rights are, therefore, not available to
shareholders of Bancshares California with respect to the Reincorporation
Proposal.
DISSOLUTION. Under California law, shareholders holding fifty percent (50%)
or more of the total voting power may authorize a corporation's dissolution,
with or without the approval of the corporation's board of directors, and this
right may not be modified by the articles of incorporation. Under Delaware law,
unless the board of directors approves the proposal to dissolve, the dissolution
must be approved by all the shareholders entitled to vote thereon. Only if the
dissolution is initially approved by the board of directors may it be approved
by a simple majority of the outstanding shares of the corporation's stock
entitled to vote. In the event of such a board-initiated dissolution, Delaware
law allows a Delaware
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corporation to include in its certificate of incorporation a supermajority
(greater than a simple majority) voting requirement in connection with
dissolutions. Bancshares Delaware's Certificate of Incorporation contains no
such supermajority voting requirement, however, and a majority of the
outstanding shares entitled to vote, voting at a meeting at which a quorum is
present, would be sufficient to approve a dissolution of Bancshares Delaware
that had previously been approved by its Board of Directors.
POSSIBLE DISADVANTAGES OF THE REINCORPORATION PROPOSAL. Despite the
unanimous belief of the Board of Directors that the Reincorporation Proposal is
in the best interests of Bancshares California and its shareholders, it should
be noted that Delaware law has been criticized by some commentators on the
grounds that it does not afford minority shareholders the same substantive
rights and projections as are available in a number of other states. For a
comparison of shareholders' rights and the powers of management under Delaware
and California law, see "Significant Differences Between the Corporation Laws of
California and Delaware." In addition, there may be circumstances in which
Bancshares California could recover damages from a director for actions or
omissions that result in damage to the Company, in which Bancshares Delaware
will not be able to recover from such director due to the broader protection
afforded under Delaware Law. See "Significant Differences Between the
Corporation Laws of California and Delaware--Indemnification and Limitation of
Liability." In this regard it should be noted that the current directors of the
Company will benefit from the elimination of director liability provision
contained in Bancshares Delaware's Certificate of Incorporation as to actions or
omissions by them after the Proposed Reincorporation is consummated, and
accordingly have a personal interest in approval of the Reincorporation
Proposal. At present, there is no material pending litigation or proceeding
involving a director, officer, employee or agent for which indemnification is
sought, and the Company is not aware of any material threatened litigation or
proceeding that may result in a claim for indemnification. For a detailed
discussion of the changes which will be implemented as part of the Proposed
Reincorporation, see "The Charters and Bylaws of Bancshares California and
Bancshares Delaware." Furthermore, the Company estimates that on a going-forward
basis Bancshares Delaware will pay approximately $150,000 more in additional
annual fees, which includes Delaware franchise tax fees, than Bancshares
California is currently paying.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS.
The following is a discussion of certain federal income tax considerations
that may be relevant to holders of Bancshares California Common Stock who
receive Bancshares Delaware Common Stock in exchange for their Bancshares
California Common Stock as a result of the Proposed Reincorporation. The
discussion does not address all of the tax consequences of the Proposed
Reincorporation that may be relevant to particular Bancshares California
shareholders who acquired their shares upon the exercise of stock options, nor
does it address the tax consequences to holders of options or warrants to
acquire Bancshares California Common Stock. Furthermore, no foreign, state, or
local tax considerations are addressed herein. IN VIEW OF THE VARYING NATURE OF
SUCH TAX CONSEQUENCES, EACH SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX
ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE PROPOSED REINCORPORATION,
INCLUDING THE APPLICABILITY OF FEDERAL, STATE, LOCAL OR FOREIGN TAX LAWS. This
discussion is based on the Internal Revenue Code of 1986, as amended (the
"Code"), the applicable Treasury Regulations promulgated thereunder, judicial
authority and current administrative rulings and practices in effect on the date
of this Proxy Statement.
The Proposed Reincorporation is expected to qualify as a reorganization
within the meaning of Section 368(a) of the Code, with the following tax
consequences:
(a) No gain or loss should be recognized by holders of Banchsares
California Common Stock upon receipt of Bancshares Delaware Common Stock
pursuant to the Proposed Reincorporation;
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(b) The aggregate tax basis of the Bancshares Delaware Common Stock
received by each shareholder in the Proposed Reincorporation should be equal
to the aggregate tax basis of the Bancshares California Common Stock
surrendered in exchange therefor; and
(c) The holding period of the Bancshares Delaware Common Stock received
by each shareholder of Bancshares California should include the period for
which such shareholder held the Bancshares California Common Stock
surrendered in exchange therefor, provided that such Bancshares California
Common Stock was held by the shareholder as a capital asset at the time of
Proposed Reincorporation.
The Company has not requested a ruling from the Internal Revenue Service
(the "IRS") or an opinion of counsel with respect to the federal income tax
consequences of the Proposed Reincorporation under the Code. A successful IRS
challenge to the reorganization status of the Proposed Reincorporation (in
consequence of a failure to satisfy the "continuity of interest" requirement or
otherwise) would result in a shareholder recognizing gain or loss with respect
to each share of Bancshares California Common Stock exchanged in the Proposed
Reincorporation equal to the difference between the shareholder's basis in such
share and the fair market value, as of the time of the Proposed Reincorporation,
of the Bancshares Delaware, Common Stock received in exchange therefor. In such
event, a shareholder's aggregate basis in the shares of Bancshares Delaware
Common Stock received in the exchange would equal their fair market value on
such date, and the shareholder's holding period for such shares would not
include the period during which the shareholder held Bancshares California
Common Stock.
PROPOSAL NO. 3
APPROVAL OF THE SILICON VALLEY BANCSHARES
1999 EMPLOYEE STOCK PURCHASE PLAN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
1999 EMPLOYEE STOCK PURCHASE PLAN
INTRODUCTION
In January 1999, the Board of Directors adopted the Company's 1999 Employee
Stock Purchase Plan (the "Purchase Plan"). The Purchase Plan authorizes the
issuance of 200,000 shares of Common Stock, plus an annual increase to be added
on the first day of the Company's fiscal year beginning in 2000 equal to the
least of the following amounts (i) 200,000 shares, (ii) 2% of the Company's
outstanding shares on such date (rounded to the nearest whole share) or (iii) an
amount determined by the Board. The issuance of such shares shall be pursuant to
rights to purchase shares of the Company's Common Stock by authorizing a
specified amount to be collected through payroll withholding over a
predetermined period and applied to the purchase of shares at the end of such
period (each, an "offering") which purchase rights are granted solely to
eligible employees of the Company and its affiliates. The Purchase Plan is
intended to be an "employee stock purchase plan" as defined in section 423 of
the Internal Revenue Code (the "Code").
The Purchase Plan was adopted by the Board to provide a means by which
employees of the Company and its affiliates will be given an opportunity to
purchase stock in the Company, to assist in retaining the services of its
employees, to secure and retain the services of new employees and to provide
incentives for such persons to exert maximum efforts for the success of the
Company. The Purchase Plan is similar in operation to, and is intended to
replace the 1988 Employee Stock Purchase Plan previously approved by the
shareholders.
VOTE REQUIRED
At the Annual Meeting, shareholders are requested in this Proposal Three to
approve the Purchase Plan. The affirmative vote of the Votes Cast on this
proposal will be required to approve the Purchase Plan. For purposes of this
vote, abstention and broker non-votes will not be counted for any purpose in
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determining whether this matter has been approved. The Board of Directors
recommends a vote "FOR" approval of the Purchase Plan.
The essential features of the Purchase Plan are outlined below.
PURPOSE
The purpose of the Purchase Plan is to provide a means by which key
employees of the Company (and any parent or subsidiary of the Company designated
by the Board of Directors to participate in the Purchase Plan) may be given an
opportunity to purchase Common Stock of the Company through payroll deductions,
to assist the Company in retaining the services of its employees, to secure and
retain the services of new employees, and to provide incentives for such persons
to exert maximum efforts for the success of the Company.
The rights to purchase Common Stock granted under the Purchase Plan are
intended to qualify as options issued under an "employee stock purchase plan" as
that term is defined in Section 423(b) of the Code.
ADMINISTRATION
The Purchase Plan is administered by the Board of Directors, which has the
final power to construe and interpret the Purchase Plan and the rights granted
under it. The Board has the power, subject to the provisions of the Purchase
Plan, to determine when and how rights to purchase Common Stock of the Company
will be granted, the provisions of each offering of such rights (which need not
be identical), and whether any parent or subsidiary of the Company shall be
eligible to participate in such plan. The Board has the power to delegate
administration of such plan to a committee of not less than two Board members.
The Board may abolish any such committee at any time and revest in the Board the
administration of the Purchase Plan.
OFFERINGS
The Purchase Plan is implemented by offerings of rights to all eligible
employees from time to time by the Board. Generally, each such offering is of 6
months duration.
ELIGIBILITY
Any person who is customarily employed at least 20 hours per week and five
months per calendar year by the Company (or by any parent or subsidiary of the
Company designated from time to time by the Board) on the first day of an
offering period is eligible to participate in that offering under the Purchase
Plan, provided such employee has been in the continuous employ of the Company
for a period as required by the Board, not to exceed two years preceding the
first day of the offering period.
Notwithstanding the foregoing, no employee is eligible for the grant of any
rights under the Purchase Plan if, immediately after such grant, the employee
would own, directly or indirectly, stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company or of any
parent or subsidiary of the Company (including any stock which such employee may
purchase under all outstanding rights and options), nor will any employee be
granted rights that would permit him or her to buy more than $25,000 worth of
stock (determined at the fair market value of the shares at the time such rights
are granted) under all employee stock purchase plans of the Company in any
calendar year.
As of the Record Date, approximately 598 of the Bank's 610 employees are
eligible to participate in the Purchase Plan.
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PARTICIPATION IN THE PLAN
On each date an offering commences (the "Offering Date"), each eligible
employee shall be granted the right to purchase the number of shares of Common
Stock of the Company purchasable with the employee's payroll deductions. Such
deductions may not exceed the percentage designated by the Board (which may not
exceed 15%) of such employee's "Earnings" during the period that begins on the
Offering Date and ends on a designated date not in excess of 27 months after the
Offering Date. "Earnings" is defined in the Purchase Plan as an employee's
regular salary or wages (including amounts salary or wages elected to be
deferred by the employee, that otherwise would have been paid, under any
arrangement established by the Company that is intended to comply with Section
125, Section 401(k), Section 402(e)(3), Section 402(h), or Section 403(b) of the
Code, and also including any deferrals under a non-qualified deferred
compensation plan or arrangement established by the Company), and also, if
determined by the Board or Committee and set forth in the terms of the Offering,
may include any or all of the following: (i) overtime pay, (ii) commissions,
(iii) bonuses, incentive pay, profit sharing and other remuneration paid
directly to the employee, and/or (iv) other items of remuneration not
specifically excluded pursuant to the Plan. Earnings shall not include the cost
of employee benefits paid for by the Company or an affiliate, education or
tuition reimbursements, imputed income arising under any group insurance or
benefit program, traveling expenses, business and moving expense reimbursements,
income received in connection with stock options, contributions made by the
Company or an affiliate under any employee benefit plan, and similar items of
compensation as determined by the Board or committee thereof. Notwithstanding
the foregoing, the Board or committee thereof may modify the definition of
"Earnings" with respect to one or more offerings as the Board or such committee
determines appropriate. In connection with each offering, the Board may specify
a maximum number of shares that may be purchased by an employee as well as a
maximum aggregate number of shares that may be purchased by all eligible
employees. If an offering contains more than one purchase date, the Board may
specify a maximum aggregate number of shares that may be purchased by all
eligible employees on any given purchase date under the offering. If the
aggregate purchase of shares upon exercise of rights granted under the offering
would exceed any such maximum aggregate number or exceeds the number of shares
in the Purchase Plan's share reserve, the Board will make a pro rata allocation
of the shares available in as nearly a uniform manner as practicable and as the
Board deems equitable.
PURCHASE PRICE
The purchase price per share at which shares are sold in an offering under
the Purchase Plan is the lower of (a) 85% of the fair market value of a share of
Common Stock on the Offering Date, or (b) 85% of the fair market value of a
share of Common Stock on the last day of the purchase period. The closing price
of the Company's Common Stock on the Nasdaq National Market on the Record Date
was $18.00 per share.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions over
the offering period. At any time during the purchase period, a participant may
withdraw from an offering and thereby terminate his or her payroll deductions by
giving fifteen days written notice to the Company. Otherwise no changes in the
payroll deduction amount may be made during the purchase period. All payroll
deductions made for a participant are credited to his or her account under the
Purchase Plan and deposited with the general funds of the Company. A participant
may not make any additional payments into such account.
PURCHASE OF STOCK
By executing an agreement to participate in the Purchase Plan, the employee
is entitled to purchase shares under such plan. In connection with offerings
made under the Purchase Plan, the Board may specify a maximum number of shares
any employee may be granted the right to purchase and the maximum
43
<PAGE>
aggregate number of shares which may be purchased pursuant to such offering by
all participants. If the aggregate number of shares to be purchased upon
exercise of rights granted in the offering would exceed the maximum aggregate
number or exceeds the number of shares remaining in the Purchase Plan's share
reserve, the Board would make a pro rata allocation of shares available in a
uniform and equitable manner. Unless the employee's participation is
discontinued, his or her right to purchase shares is exercised automatically at
the end of the purchase period at the applicable price. Any money remaining in
an employee's account following the purchase of shares shall be rolled over into
the next purchase period. See "Withdrawal" below.
WITHDRAWAL
While each participant in the Purchase Plan is required to sign an agreement
authorizing payroll deductions, the participant may withdraw from a given
offering by terminating his or her payroll deductions and by delivering to the
Company a notice of withdrawal from the Purchase Plan. Written notice must be
given to the Company fifteen (15) days prior to the effective date of such a
withdrawal.
Upon any withdrawal from an offering by the employee, the Company will
distribute to the employee his or her accumulated payroll deductions without
interest, reduced by any accumulated deductions previously applied to the
purchase of stock on the employee's behalf during such offering, and such
employee's interest in the offering will be automatically terminated. The
employee is not entitled to again participate in such offering. An employee's
withdrawal from an offering will not have any effect upon such employee's
eligibility to participate in subsequent offerings under the Purchase Plan.
TERMINATION OF EMPLOYMENT
Rights granted pursuant to any offering under the Purchase Plan terminate
immediately upon cessation of an employee's employment for any reason, and the
Company will distribute to such employee all of his or her accumulated payroll
deductions, without interest.
RESTRICTIONS ON TRANSFER
Rights granted under the Purchase Plan are not transferable other than by
will or the laws of descent and distribution, or by a beneficiary designation as
provided in the Purchase Plan, and during an employee's lifetime, may be
exercised only by the employee to whom such rights are granted.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the Purchase Plan at any time.
The Board may also amend the Purchase Plan at any time. Any amendment of the
Purchase Plan must be approved by the shareholders within 12 months of its
adoption by the Board if the amendment would (a) increase the number of shares
of Common Stock reserved for issuance under the Purchase Plan, (b) modify the
designation of corporations whose employees may be offered purchase rights under
the Purchase Plan, or (c) any other amendment for which shareholder approval may
be required under Section 423 of the Code, Rule 16b-3 under the Exchange Act,
applicable exchange listing requirements, or other governing laws or
regulations.
Rights granted before amendment or termination of the Purchase Plan will not
be impaired by any amendment or termination of such plan without consent of the
person to whom such rights were granted.
EFFECT OF CERTAIN CORPORATE EVENTS
In the event of a dissolution, liquidation or specified type of merger or
sale of stock or assets of the Company, the surviving or acquiring corporation
either will assume the rights under the Purchase Plan or
44
<PAGE>
substitute similar rights, or the purchase date of any ongoing offering will be
accelerated such that the outstanding rights may be exercised immediately prior
to, or concurrently with, any such event.
STOCK SUBJECT TO PURCHASE PLAN
A total of 200,000 shares is proposed to be reserved for initial issuance
under the Purchase Plan (with an annual increase to be added on the first day of
the Company's fiscal year, as described in the "Introduction" above). If rights
granted under the Purchase Plan expire, lapse or otherwise terminate without
being exercised, the Common Stock not purchased under such rights again becomes
available for issuance under such plan.
FEDERAL INCOME TAX INFORMATION
Rights granted under the Purchase Plan are intended to qualify for favorable
federal income tax treatment associated with rights granted under an employee
stock purchase plan that qualifies under provisions of Section 423 of the Code.
A participant will be taxed on amounts withheld for the purchase of shares
as if such amounts were actually received. Other than this, no income will be
taxable to a participant until disposition of the shares acquired, and the
method of taxation will depend upon the holding period of the purchase shares.
If the stock is disposed of at least two years after the beginning of the
offering period and at least one year after the stock is transferred to the
participant, then the lesser of (a) the 15% excess of the fair market value of
the stock at the time of such disposition over the purchase price or (b) the 15%
excess of the fair market value of the stock as of the beginning of the offering
period over the purchase price (determined as of the beginning of the offering
period) will be treated as ordinary income. Any further gain or any loss will be
taxed as capital gain or loss. Any capital gain or loss generally will be
short-term or long-term depending on how long the stock has been held. Long-term
capital gains currently are subject to lower tax rates than ordinary income and
such treatment is available for shares of the Company's Common Stock held for
more than one (1) year.
If the stock is sold or disposed of before the expiration of either of the
holding periods described above, then the entire excess of the fair market value
of the stock on the purchase date over the purchase price will be treated as
ordinary income at the time of such disposition. The balance of any gain will be
treated as capital gain. Even if the stock is later disposed of for less than
its fair market value on the purchase date, the same amount of ordinary income
is attributed to the participant, and a capital loss is recognized equal to the
difference between the sales price and the fair market value of the stock on
such purchase date. Any capital gain or loss generally will be short-term or
long-term depending on how long the stock has been held.
There are no federal income tax consequences to the Company by reason of the
grant or purchase of rights under the Purchase Plan. The Company is entitled to
a deduction to the extent amounts are taxed as ordinary income to a participant
(subject to the requirement of reasonableness, the provisions of Section 162(m)
of the Internal Revenue Code and the satisfaction of a tax reporting
obligation).
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF AUDITORS
The firm of KPMG LLP has been approved by the Audit and Finance Committee
and the Board of Directors of the Company to be the independent auditor of the
Company for the 1999 fiscal year. KPMG LLP has audited the Company's financial
statements since November 1994. The shareholders are being asked to ratify the
selection of KPMG LLP. If the shareholders do not ratify such selection by the
affirmative vote of a majority of the Votes Cast, the Board will reconsider its
selection.
45
<PAGE>
Representatives from the firm of KPMG LLP will be present at the Annual
Meeting of Shareholders and afforded the opportunity to make a statement if they
desire to do so, and will be available to respond to shareholders' questions.
SHAREHOLDER PROPOSALS
Shareholders are entitled to present proposals for action at a forthcoming
Annual Meeting of Shareholders only if they comply with the applicable
requirements of corporate law, the proxy rules and the Company's Bylaws. Any
shareholder proposal intended to be presented at the 2000 Annual Meeting of
Shareholders of the Company that a shareholder desires to have included in the
Company's Proxy Statement relating to such meeting must be received at the
Company's principal executive office on or before November 20, 1999 in order to
be considered for possible inclusion in the Company's Proxy Statement and form
of proxy relating to such annual meeting.
Under the Company's bylaws, in order for a shareholder proposal to be deemed
properly presented, notice must be delivered to the Secretary of the Company,
not less than 60 days nor more than 90 days prior to the Annual Meeting;
provided, however, if less than 65 days' notice of the date of the Annual
Meeting has been given, notice by the shareholder to be timely must be received
by the Company no later than the close of business on the seventh (7th) day
following the day on which such notice of the Annual Meeting was mailed. The
deadline computed in accordance with the foregoing is referred to as the "Bylaw
Deadline." The shareholder's notice must set forth, as to each proposed matter:
(a) a brief description of the business and reason for conducting such business
at the meeting; (b) the name and address as they appear on the Company's books
of the shareholder proposing such business, or the name of the beneficial holder
or other party on whose behalf the proposal is made; (c) the class and number of
shares of the Company owned by the shareholder or beneficial holder or other
party on whose behalf the proposal is made; and (d) any material interest of the
shareholder or beneficial holder or other party on whose behalf the proposal is
made in such business. The presiding officer of the meeting may refuse to
acknowledge any matter not made in compliance with the foregoing procedure.
If shareholder wishes to present a proposal at the Company's annual meeting
in the year 2000 and the proposal is not intended to be included in the
Company's proxy statement relating to that meeting, the shareholder must give
advance notice to the Company prior to the Bylaw Deadline for such meeting
determined in accordance with the Bylaws, as described above. If a shareholder
gives notice of such a proposal after the Bylaw Deadline, the shareholder will
not be permitted to present the proposal to the shareholders for a vote at the
meeting.
SEC rules also establish a different deadline for submission of shareholder
proposals that are not intended to be included in the Company's proxy statement
with respect to discretionary voting (the "Discretionary Vote Deadline"). The
Discretionary Vote Deadline for the year 2000 annual meeting is February 3, 2000
(45 calendar days prior to the anniversary of the mailing date of this proxy
statement). If a shareholder gives notice of such a proposal after the
Discretionary Vote Deadline, the Company's proxy holders will be allowed to use
their discretionary voting authority to vote against the shareholder proposal
when and if the proposal is raised at the Company's year 2000 annual meeting.
Because the Bylaw Deadline is not capable of being determined until the Company
publicly announces the date for its next annual meeting, it is possible that the
Bylaw Deadline may occur after the Discretionary Vote Deadline. In such a case,
a proposal received after the Discretionary Vote Deadline but before the Bylaw
Deadline would be eligible to be presented at next year's annual meeting and the
Company believes that its proxy holders would be allowed to use the
discretionary authority granted by the proxy card to vote against the proposal
at the meeting without including any disclosure of the proposal in the proxy
statement relating to such meeting.
The Company has not been notified by any shareholder of his or her intent to
present a shareholder proposal from the floor at this year's Annual Meeting. The
enclosed proxy card grants the proxy holders
46
<PAGE>
discretionary authority to vote on any matter properly brought before the Annual
Meeting, including any shareholder proposals received between the date of this
proxy statement and the Bylaw Deadline for this year's Annual Meeting, which is
March 26, 1999.
1998 ANNUAL REPORT
Enclosed is a copy of the Company's 1998 Annual Report to Shareholders,
including financial statements for the year ended December 31, 1998. Also
enclosed is a copy of the Company's Annual Report on Form 10-K (without
exhibits) for the year ended December 31, 1998 as filed with the Securities and
Exchange Commission. Shareholders who wish to obtain additional copies of the
Annual Report to Shareholders or the Annual Report on Form 10-K should address a
written request to Shareholder Relations, Silicon Valley Bancshares, 3003 Tasman
Drive, Santa Clara, California 95054.
OTHER MATTERS
As of the date of this Proxy Statement, there are no other matters that
Management intends to present or has reason to believe others will present at
the Annual Meeting. If other matters properly come before the Annual Meeting,
those who act as Proxy Holders will vote in accordance with their best judgment.
THE BOARD OF DIRECTORS
[SIG]
A. Catherine Ngo
CORPORATE SECRETARY
Santa Clara, California
March 19, 1999
47
<PAGE>
EXHIBIT A
PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREEMENT OF MERGER is dated as of , 1999 between
SILICON VALLEY BANCSHARES, INC., a Delaware corporation ("Bancshares Delaware"
or the "Surviving Corporation") and SILICON VALLEY BANCSHARES, a California
corporation ("Bancshares California"). (Bancshares Delaware and Bancshares
California are sometimes referred to herein as the "Constituent Corporations.")
W I T N E S S E T H:
WHEREAS, Bancshares Delaware is a corporation duly organized and existing
under the laws of the State of Delaware, having been incorporated on ,
1999, by a Certificate of Incorporation filed with the Secretary of State and
recorded in the Office of the Recorder of Deeds of the County of New Castle,
Delaware, on that date; the registered office of Bancshares Delaware in the
State of Delaware is located at 1013 Centre Road, in the city of Wilmington,
County of New Castle, and the name of its registered agent at such office is
Corporate Service Company.
WHEREAS, Bancshares California is a corporation duly organized and existing
under the laws of the State of California, having been incorporated on April 23,
1982, by Articles of Incorporation filed with the Secretary of State of
California on that date; the principal business office of Bancshares California
in the State of California is located at 3003 Tasman Drive, Santa Clara,
California 95054.
WHEREAS, Bancshares Delaware has an authorized capitalization consisting of
60,000,000 shares of Common Stock, par value $.001 per share ("Bancshares
Delaware Common Stock"), of which 1,000 shares are issued and outstanding as of
the date hereof and owned of record by Bancshares California, and 20,000,000
shares of Preferred Stock, $.001 par value per share, none of which are issued
and outstanding as of the date hereof.
WHEREAS, Bancshares California has an authorized capitalization consisting
of 60,000,000 shares of Common Stock, no par value ("Bancshares California
Common Stock"), of which shares are issued and are outstanding as of the
date hereof, and 20,000,000 shares of Preferred Stock, no par value, none of
which are issued and outstanding as of the date hereof.
WHEREAS, the Boards of Directors of Bancshares Delaware and Bancshares
California deem it desirable, upon the terms and subject to the conditions
herein stated, that Bancshares California be merged with and into Bancshares
Delaware and that Bancshares Delaware be the Surviving Corporation, that each
share of Bancshares California Common Stock outstanding on the date hereof be
converted into the right to receive one share of Bancshares Delaware Common
Stock.
NOW, THEREFORE, it is agreed as follows:
A G R E E M E N T
1. MERGER. At the Effective Time of the Merger (as hereinafter defined),
Bancshares California shall be merged with and into Bancshares Delaware with
Bancshares Delaware as the Surviving Corporation and the separate corporate
existence of Bancshares California shall cease.
2. CONVERSION OF SHARES. At the Effective Time of the Merger, by virtue of
the merger and without any action on the part of the holder thereof,
(a) Each then outstanding share of Bancshares California Common Stock
shall, be converted into the right to receive one (1) share of Bancshares
Delaware Common Stock, $.001 par value per share.
A-1
<PAGE>
(b) The 1,000 outstanding shares of Bancshares Delaware Common Stock
owned by Bancshares California shall be canceled and retired and shall
resume the statues of authorized and unissued shares of Bancshares Delaware.
3. EFFECTIVE TIME. The merger shall become effective at the time and date
specified in the Certificate of Merger filed with the Secretary of State of the
State of Delaware, herein sometimes referred to as the "Effective Time of the
Merger."
4. GOVERNING DOCUMENTS. The Certificate of Incorporation of Bancshares
Delaware in effect at the Effective Time of the Merger shall be the Certificate
of Incorporation of the Surviving Corporation, to remain unchanged until amended
in accordance with the provisions thereof and of applicable law. The Bylaws of
Bancshares Delaware in effect at the Effective Time of the Merger shall be the
Bylaws of the Surviving Corporation, to remain unchanged until amended in
accordance with the provisions thereof and of applicable law.
5. DIRECTORS AND OFFICERS. The directors and officers of Bancshares
California at the Effective Time of the Merger shall be the directors and
officers of the Surviving Corporation, to serve until such time as their
successors are elected or appointed in accordance with the Bylaws.
6. STOCK CERTIFICATES. At and after the Effective Time of the Merger, all
of the outstanding certificates which immediately prior to the Effective Time of
the Merger evidenced shares of Bancshares California Common Stock shall be
deemed for all purposes to evidence ownership of, and to represent, shares of
Bancshares Delaware Common Stock into which the Bancshares California Common
Stock formerly evidenced by such certificates have been converted as provided
herein. The registered owner on the books and records of Bancshares California
or its transfer agents of each outstanding certificate evidence shares of
Bancshares California Common Stock shall, until such certificate shall have been
surrendered for transfer or conversion or otherwise accounted for to Bancshares
Delaware or its transfer agents, have and be entitled to exercise any and all
voting and other rights with respect to, and to receive any and all dividends
and other distributions upon, the shares of Bancshares Delaware Common Stock of
which such person is the owner.
7. RIGHTS AND DUTIES OF SURVIVING CORPORATION. At and after the Effective
Time of the Merger, all rights, privileges, powers and franchises and all
property and assets of every kind and description of Bancshares California shall
be vested in and be held and enjoyed by Bancshares Delaware, without further act
or deed, and all the estates and interests of every kind of Bancshares
California, including all debts due to it, shall be as effectively the property
of Bancshares Delaware as they were of Bancshares California, and the title to
any real estate vested by deed or otherwise in Bancshares California shall not
revert or be in any way impaired by reason of the Merger; and all rights of
creditors and liens upon any property of Bancshares California shall be
preserved unimpaired and all debts, liabilities and duties of Bancshares
California shall be debts, liabilities and duties of Bancshares Delaware and may
be enforced against it to the same extent as if said debts, liabilities and
duties had been incurred or contracted by it.
At and after the Effective Time of the Merger, each option or other right to
acquire shares of Bancshares California Common Stock granted under (a) any
employee option or benefit plan of Bancshares California or (b) any other
employee option or benefit plan of any subsidiary of Bancshares California for
which Bancshares California has agreed to provide shares of Bancshares
California Common Stock (the "Plans"), which is outstanding immediately prior to
the Effective Time of the Merger shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into and become an option
or right to acquire (and Bancshares Delaware hereby assumes the obligation to
deliver) the same number of shares of Bancshares Delaware Common Stock at the
same price per share, and upon the same terms and subject to the same
conditions, as set forth in each of such plans as in effect at the Effective
Time of the Merger. The same number of shares of Bancshares Delaware Common
Stock shall be reserved for purposes of such plans as is equal to the number of
shares of Bancshares California Common Stock reserved as of the Effective Time
of the Merger. Bancshares Delaware hereby assumes, as
A-2
<PAGE>
of the Effective Time of the Merger, (x) the Plans and all obligations under the
Plans, including the outstanding options or awards or portions thereof granted
pursuant to the Plans and (y) all obligations of Bancshares California under all
other benefit plans as of the Effective Time of the Merger with respect to which
employee rights or accrued benefits are outstanding at the Effective Time of the
Merger.
8. STOCKHOLDER APPROVALS. This Agreement shall be submitted to the
stockholders entitled to vote thereon of each of the Constituent Corporations as
provided by the applicable laws of the States of Delaware and California. If
this Agreement is duly adopted by the requisite votes of such stockholders and
is not terminated as contemplated by Section 10, a certificate of merger in
substantially the form attached hereto as Exhibit "A" ("Certificate of Merger"),
executed in accordance with the laws of the State of Delaware, shall be filed
with the Secretary of State of the State of Delaware.
9. AMENDMENT. At any time prior to the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware, this Agreement may be
amended by the Boards of Directors of the Constituent Corporations to the extent
permitted by Delaware law notwithstanding favorable action on the merger by the
stockholders of either or both of the Constituent Corporations.
10. TERMINATION. At any time prior to the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware, this Agreement may
be terminated and abandoned by the Board of Directors of either of the
Constituent Corporations, notwithstanding favorable action on the merger by the
stockholders of either or both of the Constituent Corporations.
IN WITNESS WHEREOF, the parties have each caused this Agreement to be
executed by its Chairman of the Board of Directors or its President or any duly
authorized officer and attested to by its Secretary or an Assistant Secretary,
all as of the date first above written.
<TABLE>
<S> <C>
ATTEST: SILICON VALLEY BANCSHARES, INC.
a Delaware Corporation
By: ---------------------------------------
Its: --------------------------------------- Its: ---------------------------------------
ATTEST: SILICON VALLEY BANCSHARES,
a California Corporation
By: ---------------------------------------
Its: --------------------------------------- Its: ---------------------------------------
</TABLE>
A-3
<PAGE>
CERTIFICATE OF THE SECRETARY
OF
SILICON VALLEY BANCSHARES, INC.
A DELAWARE CORPORATION
I, , the Secretary of SILICON VALLEY BANCSHARES,
INC., a Delaware Corporation (the "Corporation"), hereby certify that the
Agreement of Merger to which this certificate is attached, after having been
first duly signed on behalf of the Corporation by its authorized officer and
attested to by its Secretary, was duly approved and adopted by Silicon Valley
Bancshares, a California corporation and the sole stockholder of the Corporation
by a majority of the outstanding stock of the Corporation entitled to vote
thereon.
DATED: , 1999
--------------------------------------
SECRETARY
<PAGE>
CERTIFICATE OF THE SECRETARY
OF
SILICON VALLEY BANCSHARES,
A CALIFORNIA CORPORATION
I, , the Secretary of SILICON VALLEY BANCSHARES, a
California Corporation (the "Corporation"), hereby certify that the Agreement of
Merger to which this certificate is attached, after having been first duly
signed on behalf of the Corporation by its authorized officer and attested to by
its Secretary, was duly approved and adopted by the stockholders of the
Corporation the holders of a majority of the outstanding stock of the
Corporation entitled to vote thereon.
DATED: , 1999
--------------------------------------
SECRETARY
<PAGE>
EXHIBIT "A"
CERTIFICATE OF MERGER
The undersigned corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the name and state of incorporation of each of the Constituent
Corporations of the merger is as follows:
<TABLE>
<CAPTION>
STATE OF
NAME INCORPORATION
- ------------------------------------------------------------------------ --------------------
<S> <C>
SILICON VALLEY BANCSHARES, INC.......................................... Delaware
SILICON VALLEY BANCSHARES............................................... California
</TABLE>
SECOND: That a Plan and Agreement of Merger between the parties to the
merger has been approved, adopted, certified, executed and acknowledged by each
of the Constituent Corporations in accordance with the requirements of Section
252 of the General Corporation Law of the State of Delaware.
THIRD: That the name of the Surviving Corporation of the merger is SILICON
VALLEY BANCSHARES.
FOURTH: That the Certificate of Incorporation of SILICON VALLEY BANCSHARES,
INC., a Delaware corporation, the Surviving Corporation, shall be the
Certificate of Incorporation of the merged corporation.
FIFTH: That the executed Plan and Agreement of Merger is on file at the
principal place of business of the Surviving Corporation. The address of the
principal place of business of the Surviving Corporation is 3003 Tasman Drive,
Santa Clara, California 95054.
SIXTH: That a copy of the Plan and Agreement of Merger will be furnished by
the Surviving Corporation, on request and without cost to any stockholder of any
Constituent Corporation.
SEVENTH: That Silicon Valley Bancshares, a California corporation, has an
authorized capitalization consisting of 60,000,000 shares of Common Stock, no
par value, of which shares are issued and are outstanding as of the date
hereof, and 20,000,000 shares of Preferred Stock, no par value, none of which
are issued and outstanding as of the date hereof.
SILICON VALLEY BANCSHARES, INC.
A Delaware Corporation
By: __________________________________
Its: _________________________________
ATTEST:
BY: __________________________________
SECRETARY
<PAGE>
EXHIBIT B
CERTIFICATE OF INCORPORATION OF
SILICON VALLEY BANCSHARES, INC.
A DELAWARE CORPORATION
FIRST: The name of this corporation is SILICON VALLEY BANCSHARES, INC. (the
"Corporation").
SECOND: The address of the registered office of the Corporation in the State
of Delaware is 1013 Centre Road, in the City of Wilmington, County of New
Castle, 19805. The name and address of the Corporation's registered agent in the
State of Delaware is Corporation Service Company, 1013 Centre Road, Wilmington,
Delaware 19805.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may now or hereafter be organized under the
General Corporation Law of Delaware.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 80,000,000, consisting of
60,000,000 shares of Common Stock, $.001 par value per share ("Common Stock"),
and 20,000,000 shares of Preferred Stock, $.001 par value per share. The
Preferred Stock may be issued from time to time in one or more series. The Board
of Directors is hereby authorized to fix or alter the voting rights,
designations, powers, preferences and relative and other special rights, and the
qualifications, limitations and restrictions of any wholly unissued series of
Preferred Stock, and the number of shares constituting any such series, or any
of them, and to increase or decrease the number of shares of any such series
subsequent to the issue of shares of that series, but not below the number of
shares of such series then outstanding. In case the number of shares of any
series shall be decreased, the shares constituting such decrease shall resume
the status which they had prior to the adoption of the resolution originally
fixing the number of shares of that series.
FIFTH: The name and mailing address of the incorporator are as follows:
Eileen Lyon
11355 West Olympic Boulevard
Los Angeles, California 90064
SIXTH: The business and affairs of the Corporation shall be managed by and
under the direction of the Board of Directors. The exact number of directors of
the Corporation shall be fixed by or in the manner provided in the bylaws of the
Corporation (the "Bylaws").
SEVENTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
(a) to adopt, repeal, rescind, alter or amend in any respect the Bylaws,
and to confer in the Bylaws powers and authorities upon the directors of the
Corporation in addition to the powers and authorities expressly, conferred
upon them by statute;
(b) from time to time to set apart out of any funds or assets of the
Corporation available for dividends an amount or amounts to be reserved as
working capital or for any other lawful purpose and to abolish any reserve
so created and to determine whether any, and, if any, what part, of the
surplus of the Corporation or its net profits applicable to dividends shall
be declared in dividends and paid to its shareholders, and all rights of the
holders of stock of the Corporation in respect of dividends shall be subject
to the power of the Board of Directors so to do;
(c) subject to the laws of the State of Delaware, from time to time to
sell, lease or otherwise dispose of any part or parts of the properties of
the Corporation and to cease to conduct the business connected therewith or
again to resume the same, as it may deem best; and
B-1
<PAGE>
(d) in addition to the powers and authorities hereinbefore and by the
laws of the State of Delaware conferred upon the Board of Directors, to
execute all such powers and to do all acts and things as may be exercised or
done by the Corporation; subject, nevertheless, to the express provisions of
said laws of the Certificate of Incorporation of the Corporation and its
Bylaws.
EIGHTH: Any action required or permitted to be taken by the shareholders of
the Corporation must be effected at a duly called annual or special meeting of
shareholders of the Corporation and may not be effected by any consent in
writing by such shareholders.
NINTH: Each director shall serve until his or her successor is elected and
qualified or until his or her death, resignation or removal, and no decrease in
the authorized number of directors shall shorten the term of any incumbent
director.
TENTH: Meetings of shareholders of the Corporation may be held within or
without the State of Delaware, as the Bylaws may provide. The books of the
Corporation may be kept (subject to any provision of applicable law) outside the
State of Delaware at such place or places as may be designated from time to time
by the Board of Directors or in the Bylaws.
ELEVENTH: A director of the Corporation shall not be personally liable to
the corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its shareholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, as the same exists or hereafter may be amended, or (iv) for any transaction
from which the director derived an improper personal benefit. If the Delaware
General Corporation Law hereafter is amended to authorize the further
elimination or limitation of the liability of directors, then the liability of a
director of the Corporation, in addition to the limitation on personal liability
provided herein, shall be limited to the fullest extent permitted by the amended
Delaware General Corporation Law. No amendment to or repeal of this Article
Tenth shall apply to or have an effect on the liability or alleged liability of
any director of the Corporation for or with respect to any acts or omissions of
such director occurring prior to such amendment or repeal.
TWELFTH: The Corporation reserves the right to adopt, repeal, rescind, alter
or amend in any respect any provision contained in this Certificate of
Incorporation in the manner now or hereafter prescribed by applicable law, and
all rights conferred on shareholders herein are granted subject to this
reservation.
I, THE UNDERSIGNED, for purposes of forming a corporation under the laws of
the State of Delaware, do make, file and record this Certificate, and do certify
that the facts herein stated are true, and I have accordingly hereunto set my
hand this day of , 1999.
______________________________________
Eileen Lyon, Incorporator
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EXHIBIT C
BYLAWS
OF
SILICON VALLEY BANCSHARES, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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ARTICLE I OFFICES.......................................................................................... 1
Section 1. Registered Office......................................................................... 1
Section 2. Principle Executive Office................................................................ 1
Section 3. Other Offices............................................................................. 1
ARTICLE II MEETINGS OF SHAREHOLDERS........................................................................ 1
Section 1. Place of Meetings......................................................................... 1
Section 2. Annual Meetings........................................................................... 1
Section 3. Special Meetings.......................................................................... 1
Section 4. Nominations and Proposals................................................................. 1
Section 5. Quorum.................................................................................... 2
Section 6. Voting.................................................................................... 2
Section 7. List of Shareholders Entitled to Vote..................................................... 2
Section 8. Stock Ledger.............................................................................. 3
ARTICLE III DIRECTORS...................................................................................... 3
Section 1. Number and Election of Directors.......................................................... 3
Section 2. Vacancies................................................................................. 3
Section 3. Duties and Powers......................................................................... 3
Section 4. Meetings.................................................................................. 3
Section 5. Quorum.................................................................................... 3
Section 6. Actions of Board.......................................................................... 3
Section 7. Meetings by Means of Conference Telephone................................................. 3
Section 8. Committees................................................................................ 4
Section 9. Compensation.............................................................................. 4
Section 10. Interested Directors...................................................................... 4
ARTICLE IV OFFICERS........................................................................................ 4
Section 1. General................................................................................... 4
Section 2. Election.................................................................................. 5
Section 3. Voting Securities Owned by the Corporation................................................ 5
Section 4. Chairman of the Board of Directors........................................................ 5
Section 5. President................................................................................. 5
Section 6. Vice Presidents........................................................................... 5
Section 7. Secretary................................................................................. 6
Section 8. Treasurer................................................................................. 6
Section 9. Assistant Secretaries..................................................................... 6
Section 10. Assistant Treasurers...................................................................... 6
Section 11. Other Officers............................................................................ 6
ARTICLE V STOCK............................................................................................ 7
Section 1. Form of Certificates...................................................................... 7
Section 2. Signatures................................................................................ 7
Section 3. Lost Certificates......................................................................... 7
Section 4. Transfers................................................................................. 7
Section 5. Record Date............................................................................... 7
Section 6. Beneficial Owners......................................................................... 7
ARTICLE VI NOTICES......................................................................................... 8
Section 1. Notices................................................................................... 8
</TABLE>
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<TABLE>
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Section 2. Waivers of Notice......................................................................... 8
ARTICLE VII GENERAL PROVISIONS............................................................................. 8
Section 1. Dividends................................................................................. 8
Section 2. Disbursements............................................................................. 8
Section 3. Fiscal Year............................................................................... 8
Section 4. Corporate Seal............................................................................ 8
ARTICLE VIII INDEMNIFICATION............................................................................... 8
Section 1. Power to Indemnify in Actions, Suits or Proceedings other than Those by or in the Right of
the Corporation........................................................................... 8
Section 2. Power to Indemnify in Actions, Suits or Proceedings by or in the Right of the
Corporation............................................................................... 9
Section 3. Authorization of Indemnification.......................................................... 9
Section 4. Good Faith Defined........................................................................ 9
Section 5. Indemnification by a Court................................................................ 9
Section 6. Expenses Payable in Advance............................................................... 10
Section 7. Nonexclusivity of Indemnification and Advancement of Expenses............................. 10
Section 8. Insurance................................................................................. 10
Section 9. Certain Definitions....................................................................... 10
Section 10. Survival of Indemnification and Advancement of Expenses................................... 11
ARTICLE IX AMENDMENTS...................................................................................... 11
Section 1................................................................................................ 11
Section 2. Entire Board of Directors................................................................. 11
</TABLE>
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BYLAWS
OF
SILICON VALLEY BANCSHARES, INC.
A DELAWARE CORPORATION
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of Silicon Valley
Bancshares, Inc. (the "Corporation") in the State of Delaware shall be at 1013
Centre Road, in the City of Wilmington, County of New Castle, 19805. The name of
the Corporation's registered agent at that address is Corporation Service
Company.
SECTION 2. PRINCIPLE EXECUTIVE OFFICE. The principle executive office of
the Corporation shall be located as such place within or outside of the State of
Delaware as the Board of Directors of the Corporation ("Board of Directors")
from time to time shall designate.
SECTION 3. OTHER OFFICES. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 1. PLACE OF MEETINGS. Meetings of the shareholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
SECTION 2. ANNUAL MEETINGS. 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. Written
notice of the Annual Meeting stating the place, date and hour of the meeting
shall be given to each shareholder entitled to vote at such meeting not less
than ten nor more than sixty days before the date of the meeting.
SECTION 3. SPECIAL MEETINGS. Unless otherwise prescribed by law or by the
Certificate of Incorporation, Special Meetings of Shareholders, for any purpose
or purposes, may be called by a majority of the Board of Directors, the Chairman
of the Board, or the President. Written notice of a Special Meeting stating the
place, date and hour of the meeting and the purpose or purposes for which the
meeting is called shall be given not less than ten nor more than sixty days
before the date of the meeting to each shareholder entitled to vote at such
meeting.
SECTION 4. NOMINATIONS AND PROPOSALS. Nominations of persons for election
to the Board of Directors of the Corporation and the proposal of business to be
considered by the shareholders may be made at any meeting of shareholders only
(a) pursuant to the Corporation's notice of meeting, (b) by or at the direction
of the Board of Directors or (c) by any shareholder of the Corporation who was a
shareholder of record at the time of giving of notice provided for in these
bylaws, who is entitled to vote at the meeting and who complies with the notice
procedures set forth in this Section 4.
For nominations or other business to be properly brought before a
shareholders meeting by a shareholder pursuant to clause (c) of the preceding
sentence, the shareholder must have given timely notice thereof in writing to
the Secretary of the Corporation and such other business must otherwise be a
proper matter for shareholder action. To be timely, a shareholder's notice shall
be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 60th day nor earlier
than the close of business on the 90th day prior to the meeting; provided,
however,
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that in the event that less than 65 days notice of the meeting is given to
shareholders, notice by the shareholder to be timely must be so delivered not
earlier than the close of business on the seventh (7th) day following the day on
which the notice of meeting was mailed. In no event shall the public
announcement of an adjournment of a shareholders meeting commence a new time
period for the giving of a shareholder's notice as described above. Such
shareholder's notice shall set forth (a) as to each person whom the shareholder
proposes to nominate for election or reelection as a director all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors in an election contest, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (or any successor thereto) and Rule 14a-11 thereunder
(or any successor thereto) (including such person's written consent to being
named in the proxy statement as a nominee and to serving as a director if
elected); (b) as to any other business that the shareholder proposes to bring
before the meeting, a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at the meeting and
any material interest in such business of such shareholder and the beneficial
owner, if any, on whose behalf the proposal is made; and (c) as to the
shareholder giving the notice and the beneficial owner, if any, on whose behalf
the nomination or proposal is made (i) the name and address of such shareholder,
as they appear on the Corporation's books, and of such beneficial owner, and
(ii) the class and number of shares of the Corporation which are owned
beneficially and of record by such shareholder and such beneficial owner.
Notwithstanding any provision herein to the contrary, no business shall be
conducted at a shareholders meeting except in accordance with the procedures set
forth in this Section 4.
SECTION 5. QUORUM. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
shareholders for the transaction of business. If, however, such quorum shall not
be present or represented at any meeting of the shareholders, the shareholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each shareholder entitled to vote at
the meeting.
SECTION 6. VOTING. Unless otherwise required by law, the Certificate of
Incorporation or these Bylaws, any question brought before any meeting of
shareholders shall be decided by the vote of the holders of a majority of the
stock represented and entitled to vote thereat. Each shareholder represented at
a meeting of shareholders shall be entitled to cast one vote for each share of
the capital stock entitled to vote thereat held by such shareholder. Such votes
may be cast in person or by proxy but no proxy shall be voted on or after three
years from its date, unless such proxy provides for a longer period. The Board
of Directors, in its discretion, or the officer of the Corporation presiding at
a meeting of shareholders, in his or her discretion, may require that any votes
cast at such meeting shall be cast by written ballot.
SECTION 7. LIST OF SHAREHOLDERS ENTITLED TO VOTE. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of shareholders, a complete
list of the shareholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each shareholder and the number
of shares registered in the name of each shareholder. Such list shall be open to
the examination of any shareholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any shareholder of the Corporation who is
present.
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SECTION 8. STOCK LEDGER. The stock ledger of the Corporation shall be the
only evidence as to who are the shareholders entitled to examine the stock
ledger, the list required by Section 7 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of shareholders.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND ELECTION OF DIRECTORS. The Board of Directors shall
consist of not less than eight (8) nor more than fifteen (15) members, the exact
number of which shall initially be eight (8) and thereafter fixed from time to
time by the Board of Directors. Subject to the Certificate of Incorporation, and
except as provided in Section 2 of this Article, directors shall be elected by a
plurality of the votes cast at Annual Meetings of Shareholders, and each
director so elected shall hold office until the next Annual Meeting and until
his or her successor is duly elected and qualified, or until his or her earlier
resignation or removal. Any director may resign at any time upon notice to the
Corporation. Directors need not be shareholders.
SECTION 2. VACANCIES. Subject to the Certificate of Incorporation and
Section 1 of this Article III, vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and the directors so chosen shall hold office until
the next annual election and until their successors are duly elected and
qualified, or until their earlier resignation or removal.
SECTION 3. DUTIES AND POWERS. The business of the Corporation shall be
managed by or under the direction of the Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Certificate of Incorporation or by these Bylaws
directed or required to be exercised or done by the shareholders.
SECTION 4. MEETINGS. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without notice
at such time and at such place as may from time to time be determined by the
Board of Directors. Special meetings of the Board of Directors may be called by
the Chairman, if there be one, the President, or any one director. Notice
thereof stating the place, date and hour of the meeting shall be given to each
director either by mail not less than forty-eight (48) hours before the date of
the meeting, by telephone, facsimile or telegram on twenty-four (24) hours'
notice, or on such shorter notice as the person or persons calling such meeting
may deem necessary or appropriate in the circumstances.
SECTION 5. QUORUM. Except as may be otherwise specifically provided by
law, the Certificate of Incorporation or these Bylaws, at all meetings of the
Board of Directors, a majority of the entire Board of Directors shall constitute
a quorum for the transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors. If a quorum shall not be present at any meeting of the
Board of Directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
SECTION 6. ACTIONS OF BOARD. Unless otherwise provided by the Certificate
of Incorporation or these Bylaws, any action required or permitted to be taken
at any meeting of the Board of Directors or of any committee thereof may be
taken without a meeting, if all the members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 7. MEETINGS BY MEANS OF CONFERENCE TELEPHONE. Unless otherwise
provided by the Certificate of Incorporation or these Bylaws, members of the
Board of Directors of the Corporation, or any committee designated by the Board
of Directors, may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
by means of
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which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this Section 7 shall constitute presence
in person at such meeting.
SECTION 8. COMMITTEES. The Board of Directors may, by resolution passed by
a majority of the entire Board of Directors, designate one or more committees,
each committee to consist of one or more of the directors of the Corporation.
The Board of Directors may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of any such committee. In the absence or disqualification of a member of
a committee, and in the absence of a designation by the Board of Directors of an
alternate member to replace the absent or disqualified member, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any absent or
disqualified member. Any committee, to the extent allowed by law and provided in
the resolution establishing such committee, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the Corporation. Each committee shall keep regular minutes and
report to the Board of Directors when required.
SECTION 9. COMPENSATION. The directors may be paid their expenses, if any,
of attendance at each meeting of the Board of Directors and may be paid a fixed
sum for attendance at each meeting of the Board of Directors or a stated salary
as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
SECTION 10. INTERESTED DIRECTORS. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or her or their
votes are counted for such purpose if (i) the material facts as to his or her or
their relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the Board
of Directors or committee in good faith authorizes the contract or transaction
by the affirmative votes of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; or (ii) the material
facts as to his or her or their relationship or interest and as to the contract
or transaction are disclosed or are known to the shareholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the shareholders; or (iii) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved or ratified, by the
Board of Directors, a committee thereof or the shareholders. Interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.
ARTICLE IV
OFFICERS
SECTION 1. GENERAL. The officers of the Corporation shall be chosen by the
Board of Directors and shall be a President, a Secretary and a Treasurer. The
Board of Directors, in its discretion, may also choose a Chairman of the Board
of Directors (who must be a director) and one or more Vice Presidents, Assistant
Secretaries, Assistant Treasurers and other officers. Any number of offices may
be held by the same person, unless otherwise prohibited by law, the Certificate
of Incorporation or these Bylaws. The officers of the Corporation need not be
shareholders of the Corporation nor, except in the case of the Chairman of the
Board of Directors, need such officers be directors of the Corporation.
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SECTION 2. ELECTION. The Board of Directors at its first meeting held
after each Annual Meeting of Shareholders shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors; and all officers of the Corporation shall hold office until
their successors are chosen and qualified, or until their earlier resignation or
removal. Any officer elected by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the Corporation shall be filled by the Board
of Directors. The salaries of all officers of the Corporation shall be fixed by
the Board of Directors or by such persons as the Board of Directors delegates.
SECTION 3. VOTING SECURITIES OWNED BY THE CORPORATION. Powers of attorney,
proxies, waivers of notice of meeting, consents and other instruments relating
to securities owned by the Corporation may be executed in the name of and on
behalf of the Corporation by the President or any Vice President and any such
officer may, in the name of and on behalf of the Corporation, take all such
action as any such officer may deem advisable to vote in person or by proxy at
any meeting of security holders of any corporation in which the Corporation may
own securities and at any such meeting shall possess and may exercise any and
all rights and power incident to the ownership of such securities and which, as
the owner thereof, the Corporation might have exercised and possessed if
present. The Board of Directors may, by resolution, from time to time confer
like powers upon any other person or persons.
SECTION 4. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the Board
of Directors, if there be one, shall preside at all meetings of the shareholders
and of the Board of Directors. Except where by law the signature of the
President is required, the Chairman of the Board of Directors shall possess the
same power as the President to sign all contracts, certificates and other
instruments of the Corporation which may be authorized by the Board of
Directors. During the absence or disability of the President, the Chairman of
the Board of Directors shall exercise all the powers and discharge all the
duties of the President. The Chairman of the Board of Directors shall also
perform such other duties and may exercise such other powers as from time to
time may be assigned to him or her by these Bylaws or by the Board of Directors.
SECTION 5. PRESIDENT. The President shall, subject to the control of the
Board of Directors and, if there be one, the Chairman of the Board of Directors,
have general supervision of the business of the Corporation and shall see that
all orders and resolutions of the Board of Directors are carried into effect. He
shall execute all bonds, mortgages, contracts and other instruments of the
Corporation requiring a seal, under the seal of the Corporation, except where
required or permitted by law to be otherwise signed and executed and except that
the other officers of the Corporation may sign and execute documents when so
authorized by these Bylaws, the Board of Directors or the President. In the
absence or disability of the Chairman of the Board of Directors, or if there be
none, the President shall preside at all meetings of the shareholders and the
Board of Directors. The President shall also perform such other duties and may
exercise such other powers as from time to time may be assigned to him by these
Bylaws or by the Board of Directors.
SECTION 6. VICE PRESIDENTS. At the request of the President or in his or
her absence or in the event of his or her inability or refusal to act (and if
there be no Chairman of the Board of Directors), the Vice President or the Vice
Presidents if there is more than one (in the order designated by the Board of
Directors) shall perform 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. Each Vice President shall perform such other duties and have such
other powers as the Board of Directors from time to time may prescribe. If there
be no Chairman of the Board of Directors and no Vice President, the Board of
Directors shall designate the officer of the Corporation who, in the absence of
the President or in the event of the inability or refusal of the President to
act, shall perform 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.
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SECTION 7. SECRETARY. The Secretary shall attend all meetings of the Board
of Directors and all meetings of shareholders and record all the proceedings
thereat in a book or books to be kept for that purpose; the Secretary shall also
perform like duties for the standing committees when required. If the Secretary
shall be unable or shall refuse to attend and record the proceedings of all
meetings of the shareholders and special meetings of the Board of Directors, and
if there be no Assistant Secretary, then either the Board of Directors or the
President may choose another officer to cause such notice to be given. The
Secretary shall give, or cause to be given, notice of all meetings of the
shareholders and special meetings of the Board of Directors, and shall perform
such other duties as may be prescribed by the Board of Directors or President,
under whose supervision he shall be. If the Secretary shall be unable or shall
refuse to cause to be given notice of all meetings of the shareholders and
special meetings of the Board of Directors, and if there be no Assistant
Secretary, then either the Board of Directors or the President may choose
another officer to cause such notice to be given. The Secretary shall have
custody of the seal of the Corporation and the Secretary or any Assistant
Secretary, if there be one, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by the signature
of the Secretary or by the signature of any such Assistant Secretary. The Board
of Directors may give general authority to any other officer to affix the seal
of the Corporation and to attest the affixing by his or her signature. The
Secretary shall see that all books, reports, statements, certificates and other
documents and records required by law to be kept or filed are properly kept or
filed, as the case may be.
SECTION 8. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his or her transactions as Treasurer and of the financial condition of the
Corporation. if required by the Board of Directors, the Treasurer shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his or her office and for the restoration to the Corporation, in case
of his or her death, resignation, retirement or removal from office, of all
books, papers, vouchers, money and other property of whatever kind in his or her
possession or under his or her control belonging to the Corporation.
SECTION 9. ASSISTANT SECRETARIES. Except as may be otherwise provided in
these Bylaws, Assistant Secretaries, if there be any, shall perform such duties
and have such powers as from time to time may be assigned to them by the Board
of Directors, the President, any Vice President, if there be one, or the
Secretary, and in the absence of the Secretary or in the event of his or her
disability or refusal to act, shall perform the duties of the Secretary, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the Secretary.
SECTION 10. ASSISTANT TREASURERS. Assistant Treasurers, if there be any,
shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Vice President,
if there be one, or the Treasurer, and in the absence of the Treasurer or in the
event of his or her disability or refusal to act, shall perform the duties of
the Treasurer, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the Treasurer. If required by the Board of
Directors, an Assistant Treasurer shall give the Corporation a bond in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his or her office and
for the restoration to the Corporation, in case of his or her death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his or her possession or under his
or her control belonging to the Corporation.
SECTION 11. OTHER OFFICERS. Such other officers as the Board of Directors
may choose shall perform such duties and have such powers as from time to time
may be assigned to them by the Board of Directors.
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The Board of Directors may delegate to any other officer of the Corporation the
power to choose such other officers and to prescribe their respective duties and
powers.
ARTICLE V
STOCK
SECTION 1. FORM OF CERTIFICATES. Every holder of stock in the Corporation
shall be entitled to have a certificate signed, in the name of the Corporation
(i) by the Chairman of the Board of Directors, the President or a Vice President
and (ii) by the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of the Corporation, certifying the number of shares owned by
him in the Corporation.
SECTION 2. SIGNATURES. Where a certificate is countersigned by (i) a
transfer agent other than the Corporation or its employee, or (ii) a registrar
other than the Corporation or its employee, any other signature on the
certificate may be a 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 he were such officer, transfer agent or registrar at the date of issue.
SECTION 3. LOST CERTIFICATES. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his or her legal representative, to advertise the same in such
manner as the Board of Directors shall require and/or to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
SECTION 4. TRANSFERS. Stock of the Corporation shall be transferable in
the manner prescribed by law and in these Bylaws. Transfers of stock shall be
made on the books of the Corporation only by the person named in the certificate
or by his or her attorney lawfully constituted in writing and upon the surrender
of the certificate therefor, which shall be canceled before a new certificate
shall be issued.
SECTION 5. RECORD DATE. In order that the Corporation may determine the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board of Directors may fix, in advance, a record
date, which shall not be more than sixty days nor less than ten days before the
date of such meeting, nor more than sixty days prior to any other action. A
determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
SECTION 6. BENEFICIAL OWNERS. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
law.
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ARTICLE VI
NOTICES
SECTION 1. NOTICES. Whenever written notice is required by law, the
Certificate of Incorporation or these Bylaws, to be given to any director,
member of a committee or shareholder, such notice may be given by mail,
addressed to such director, member of a committee or shareholder, at his or her
address as it appears on the records of the Corporation, with postage thereon
prepaid, and such notice shall be deemed to be given at the time when the same
shall be deposited in the United States mail. Written notice may also be given
personally or by telegram, telex or cable.
SECTION 2. WAIVERS OF NOTICE. Whenever any notice is required by law, the
Certificate of Incorporation or these Bylaws, to be given to any director,
member of a committee or shareholder, a waiver thereof in writing, signed, by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, and may be
paid in cash, in property, or in shares of the capital stock. Before payment of
any dividend, there may be set aside out of any funds of the Corporation
available for dividends such sum or sums as the Board of Directors from time to
time, in its absolute discretion, deems proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for any proper purpose, and the Board of
Directors may modify or abolish any such reserve.
SECTION 2. DISBURSEMENTS. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
SECTION 3. FISCAL YEAR. The fiscal year of the Corporation shall be fixed
by resolution of the Board of Directors.
SECTION 4. CORPORATE SEAL. The corporate seal shall have inscribed thereon
the name of the Corporation, the year of its organization and the word
"Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
SECTION 1. POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS OTHER THAN
THOSE BY OR IN THE RIGHT OF THE CORPORATION. Subject to Section 3 of this
Article VIII, the 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, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful. The termination of any action, suit or 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
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did not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his or
her conduct was unlawful.
SECTION 2. POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS BY OR IN THE
RIGHT OF THE CORPORATION. Subject to Section 3 of this Article VIII, the
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 or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation; except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
SECTION 3. AUTHORIZATION OF INDEMNIFICATION. Any indemnification under
this Article VIII (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Section 1 or Section 2 of this Article VIII, as the case may be. Such
determination shall be made (i) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (iii) by the shareholders. To the extent, however, that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding described
above, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith, without the necessity of authorization
in the specific case.
SECTION 4. GOOD FAITH DEFINED. For purposes of any determination under
Section 3 of this Article VIII, a person shall be deemed to have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his or her conduct was
unlawful, if his action is based on the records or books of account of the
Corporation or another enterprise, or on information supplied to him by the
officers of the Corporation or another enterprise in the course of their duties,
or on the advice of legal counsel for the Corporation or another enterprise or
on information or records given or reports made to the Corporation or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Corporation or another
enterprise. The term if another enterprise" as used in this Section 4 shall mean
any other corporation or any partnership, joint venture, trust, employee benefit
plan or other enterprise of which such person is or was serving at the request
of the Corporation as a director, officer, employee or agent. The provisions of
this Section 4 shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
standard of conduct set forth in Sections 1 or 2 of this Article VIII, as the
case may be.
SECTION 5. INDEMNIFICATION BY A COURT. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VIII, and
notwithstanding the absence of any determination thereunder, any director,
officer, employee or agent may apply to any court of competent jurisdiction in
the State
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of Delaware for indemnification to the extent otherwise permissible under
Sections 1 and 2 of this Article VIII. The basis of such indemnification by a
court shall be a determination by such court that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
has met the applicable standards of conduct set forth in Sections 1 or 2 of this
Article VIII, as the case may be. Neither a contrary determination in the
specific case under Section 3 of this Article VIII nor the absence of any
determination thereunder shall be a defense to such application or create a
presumption that the director, officer, employee or agent seeking
indemnification has not met any applicable standard of conduct. Notice of any
application for indemnification pursuant to this Section 5 shall be given to the
Corporation promptly upon the filing of such application. If successful, in
whole or in part, the director, officer, employee or agent seeking
indemnification shall also be entitled to be paid the expense of prosecuting
such application.
SECTION 6. EXPENSES PAYABLE IN ADVANCE. Expenses incurred in defending or
investigating a threatened or pending action, suit or proceeding may be paid by
the Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director,
officer, employee or agent to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article VIII.
SECTION 7. NONEXCLUSIVITY OF INDEMNIFICATION AND ADVANCEMENT OF
EXPENSES. The indemnification and advancement of expenses provided by or
granted pursuant to this Article VIII shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any By-Law, agreement, contract, vote of shareholders or
disinterested directors or pursuant to the direction (howsoever embodied) of any
court of competent jurisdiction or otherwise, both as to action in his or her
official capacity and as to action in another capacity while holding such
office, it being the policy of the Corporation that indemnification of the
persons specified in Sections 1 and 2 of this Article VIII shall be made to the
fullest extent permitted by law. The provisions of this Article VIII shall not
be deemed to preclude the indemnification of any person who is not specified in
Sections 1 or 2 of this Article VIII but whom the Corporation has the power or
obligation to indemnify under the provisions of the General Corporation Law of
the State of Delaware, or otherwise.
SECTION 8. INSURANCE. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his or her status as such, whether or not the Corporation would have the power
or the obligation to indemnify him against such liability under the provisions
of this Article VIII.
SECTION 9. CERTAIN DEFINITIONS. For purposes of this Article VIII,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was a director or officer of the Corporation serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, shall stand in the same position under the provisions of this
Article VIII with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued. For purposes of this Article VIII, references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an
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employee benefit plan shall be deemed to have acted in a manner "not opposed to
the best interests of the Corporation" as referred to in this Article VIII.
SECTION 10. SURVIVAL OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES. The
indemnification and advancement of expenses provided by, or granted pursuant to,
this section shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
ARTICLE IX
AMENDMENTS
SECTION 1.1 These Bylaws may be altered, amended or repealed, in whole or
in part, or new Bylaws may be adopted by the shareholders or by the Board of
Directors; provided, however, that notice of such alteration, amendment, repeal
or adoption of new Bylaws be contained in the notice of such meeting of
shareholders or Board of Directors, as the case may be. All such amendments must
be approved by either the holders of a majority of the outstanding capital stock
entitled to vote thereon or by a majority of the entire Board of Directors then
in office.
SECTION 2. ENTIRE BOARD OF DIRECTORS. As used in this Article IX and in
these Bylaws generally, the term "entire Board of Directors" means the total
number of directors which the Corporation would have if there were no vacancies.
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SILICON VALLEY BANCSHARES
1999 EMPLOYEE STOCK PURCHASE PLAN
ADOPTED BY THE BOARD OF DIRECTORS ON _________, 1999
APPROVED BY THE STOCKHOLDERS ON __________, 1999
EFFECTIVE DATE ___________, 1999
1. PURPOSE.
(a) The purpose of this 1999 Employee Stock Purchase Plan (the "Plan") is
to provide a means by which employees of Silicon Valley Bancshares, a California
corporation (the "Company"), and its Affiliates, as defined in subparagraph
1(b), which are designated as provided in subparagraph 2(b), may be given an
opportunity to purchase stock of the Company. This 1999 Employee Stock Purchase
Plan is intended to replace the Silicon Valley Bancshares 1988 Employee Stock
Purchase Plan.
(b) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company, as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
(the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of its
employees, to secure and retain the services of new employees, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company.
(d) The Company intends that the rights to purchase stock of the Company
granted under the Plan be considered options issued under an "employee stock
purchase plan" as that term is defined in Section 423(b) of the Code.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors (the "Board")
of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(i) To determine when and how rights to purchase stock of the
Company shall be granted and the provisions of each offering of such rights
(which need not be identical).
(ii) To designate from time to time which Affiliates of the Company
shall be eligible to participate in the Plan.
<PAGE>
(iii) To construe and interpret the Plan and rights granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 13.
(v) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company and its Affiliates and to carry out the intent that the Plan be treated
as an "employee stock purchase plan" within the meaning of Section 423 of the
Code.
(c) The Board may delegate administration of the Plan to a Committee
composed of one (1) or more members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
(d) Any interpretation of the Plan by the Board of any decision made by it
under the Plan shall be final and binding on all persons.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 12 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to rights granted under
the Plan shall not exceed in the aggregate two hundred thousand (200,000) shares
of the Company's common stock (the "Common Stock"), plus an annual increase to
be added on the first day of the Company's fiscal year beginning in 2000 equal
to the least of the following amounts (i) two hundred thousand (200,000) shares,
(ii) two percent (2%) of the Company's outstanding shares on such date (rounded
to the nearest whole share) or (iii) an amount determined by the Board. If any
right granted under the Plan shall for any reason terminate without having been
exercised, the Common Stock not purchased under such right shall again become
available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. GRANT OF RIGHTS; OFFERING.
(a) The Board or the Committee may from time to time grant or provide for
the grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee. Each Offering shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall deem
appropriate, which shall comply with the requirements of Section 423(b)(5) of
the Code that all employees granted rights to purchase stock under the Plan
shall have the same rights and privileges. The terms and conditions of an
Offering shall be incorporated by reference into the Plan and treated as part of
the Plan. The provisions of
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separate Offerings need not be identical, but each Offering shall include
(through incorporation of the provisions of this Plan by reference in the
document comprising the Offering or otherwise) the period during which the
Offering shall be effective, which period shall not exceed twenty-seven (27)
months beginning with the Offering Date, and the substance of the provisions
contained in paragraphs 5 through 8, inclusive.
(b) If an employee has more than one (1) right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder, a right with a lower exercise price (or an earlier-granted right if
two (2) rights have identical exercise prices), will be exercised to the fullest
possible extent before a right with a higher exercise price (or a later-granted
right if two (2) rights have identical exercise prices) will be exercised.
5. ELIGIBILITY.
(a) Rights may be granted only to employees of the Company or, as the
Board or the Committee may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company. Except as provided in subparagraph
5(b), an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan unless, on the Offering Date, such employee has
been in the employ of the Company or any Affiliate for such continuous period
preceding such grant as the Board or the Committee may require, but in no event
shall the required period of continuous employment be greater than two (2)
years. In addition, unless otherwise determined by the Board or the Committee
and set forth in the terms of the applicable Offering, no employee of the
Company or any Affiliate shall be eligible to be granted rights under the Plan
unless, on the Offering Date, such employee's customary employment with the
Company or such Affiliate is for at least twenty (20) hours per week and at
least five (5) months per calendar year.
(b) The Board or the Committee may provide that each person who, during
the course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering. Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:
(i) the date on which such right is granted shall be the "Offering
Date" of such right for all purposes, including determination of the exercise
price of such right;
(ii) the period of the Offering with respect to such right shall
begin on its Offering Date and end coincident with the end of such Offering; and
(iii) the Board or the Committee may provide that if such person
first becomes an eligible employee within a specified period of time before the
end of the Offering, he or she will not receive any right under that Offering.
(c) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company
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or of any Affiliate. For purposes of this subparagraph 5(c), the rules of
Section 424(d) of the Code shall apply in determining the stock ownership of
any employee, and stock which such employee may purchase under all
outstanding rights and options shall be treated as stock owned by such
employee.
(d) An eligible employee may be granted rights under the Plan only if such
rights, together with any other rights granted under "employee stock purchase
plans" of the Company and any Affiliates, as specified by Section 423(b)(8) of
the Code, do not permit such employee's rights to purchase stock of the Company
or any Affiliate to accrue at a rate which exceeds twenty five thousand dollars
($25,000) of fair market value of such stock (determined at the time such rights
are granted) for each calendar year in which such rights are outstanding at any
time.
(e) Officers of the Company and any designated Affiliate shall be eligible
to participate in Offerings under the Plan; provided, however, that the Board
may provide in an Offering that certain employees who are highly compensated
employees within the meaning of Section 423(b)(4)(D) of the Code shall not be
eligible to participate.
6. RIGHTS; PURCHASE PRICE.
(a) On each Offering Date, each eligible employee, pursuant to an Offering
made under the Plan, shall be granted the right to purchase up to the number of
shares of Common Stock of the Company purchasable with a percentage designated
by the Board or the Committee not exceeding fifteen percent (15%) of such
employee's Earnings (as defined in subparagraph 7(a)) during the period which
begins on the Offering Date (or such later date as the Board or the Committee
determines for a particular Offering) and ends on the date stated in the
Offering, which date shall be no later than the end of the Offering. The Board
or the Committee shall establish one (1) or more dates during an Offering (the
"Purchase Date(s)") on which rights granted under the Plan shall be exercised
and purchases of Common Stock carried out in accordance with such Offering.
(b) In connection with each Offering made under the Plan, the Board or the
Committee may specify a maximum number of shares that may be purchased by any
employee as well as a maximum aggregate number of shares that may be purchased
by all eligible employees pursuant to such Offering. In addition, in connection
with each Offering that contains more than one (1) Purchase Date, the Board or
the Committee may specify a maximum aggregate number of shares which may be
purchased by all eligible employees on any given Purchase Date under the
Offering. If the aggregate purchase of shares upon exercise of rights granted
under the Offering would exceed any such maximum aggregate number, the Board or
the Committee shall make a pro rata allocation of the shares available in as
nearly a uniform manner as shall be practicable and as it shall deem to be
equitable.
(c) The purchase price of stock acquired pursuant to rights granted under
the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Offering Date; or
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(ii) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Purchase Date.
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) An eligible employee may become a participant in the Plan pursuant to
an Offering by delivering an enrollment agreement to the Company within the time
specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board or the Committee of such employee's Earnings during the
Offering. "Earnings" is defined as an employee's regular salary or wages
(including amounts thereof elected to be deferred by the employee, that would
otherwise have been paid, under any arrangement established by the Company that
is intended to comply with Section 125, Section 401(k), Section 402(e)(3),
Section 402(h) or section 403(b) of the Code, and also including any deferrals
under a non-qualified deferred compensation plan or arrangement established by
the Company), and also, if determined by the Board or the Committee and set
forth in the terms of the Offering, may include any or all of the following: (i)
overtime pay, (ii) commissions, (iii) bonuses, incentive pay, profit sharing and
other remuneration paid directly to the employee, and/or (iv) other items of
remuneration not specifically excluded pursuant to the Plan. Earnings shall not
include the cost of employee benefits paid for by the Company or an Affiliate,
education or tuition reimbursements, imputed income arising under any group
insurance or benefit program, traveling expenses, business and moving expense
reimbursements, income received in connection with stock options, contributions
made by the Company or an Affiliate under any employee benefit plan, and similar
items of compensation, as determined by the Board or the Committee.
Notwithstanding the foregoing, the Board or Committee may modify the definition
of "Earnings" with respect to one or more Offerings as the Board or Committee
determines appropriate. The payroll deductions made for each participant shall
be credited to an account for such participant under the Plan and shall be
deposited with the general funds of the Company. A participant may reduce
(including to zero) or increase such payroll deductions, and an eligible
employee may begin such payroll deductions, after the beginning of any Offering
only as provided for in the Offering. A participant may make additional
payments into his or her account only if specifically provided for in the
Offering and only if the participant has not had the maximum amount withheld
during the Offering.
(b) At any time during an Offering, a participant may terminate his or her
payroll deductions under the Plan and withdraw from the Offering by delivering
to the Company a notice of withdrawal in such form as the Company provides.
Such withdrawal may be elected at any time prior to the end of the Offering
except as provided by the Board or the Committee in the Offering. Upon such
withdrawal from the Offering by a participant, the Company shall distribute to
such participant all of his or her accumulated payroll deductions (reduced to
the extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's
interest in that Offering shall be automatically terminated. A participant's
withdrawal from an Offering will have no effect upon such participant's
eligibility to participate in any other Offerings under the Plan but such
participant will be required to deliver a new enrollment agreement in order to
participate in subsequent Offerings under the Plan.
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(c) Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of any participating employee's employment with the
Company and any designated Affiliate, for any reason, and the Company shall
distribute to such terminated employee all of his or her accumulated payroll
deductions (reduced to the extent, if any, such deductions have been used to
acquire stock for the terminated employee), under the Offering, without
interest.
(d) Rights granted under the Plan shall not be transferable by a
participant other than by will or the laws of descent and distribution, or by a
beneficiary designation as provided in paragraph 14, and during a participant's
lifetime, shall be exercisable only by such participant.
8. EXERCISE.
(a) On each Purchase Date specified therefor in the relevant Offering,
each participant's accumulated payroll deductions and other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of whole shares of stock of the Company, up to
the maximum number of shares permitted pursuant to the terms of the Plan and the
applicable Offering, at the purchase price specified in the Offering. No
fractional shares shall be issued upon the exercise of rights granted under the
Plan. The amount, if any, of accumulated payroll deductions remaining in each
participant's account after the purchase of shares which is less than the amount
required to purchase one share of Common Stock on the final Purchase Date of an
Offering shall be held in each such participant's account for the purchase of
shares under the next Offering under the Plan, unless such participant withdraws
from such next Offering, as provided in subparagraph 7(b), or is no longer
eligible to be granted rights under the Plan, as provided in paragraph 5, in
which case such amount shall be distributed to the participant after such final
Purchase Date, without interest. The amount, if any, of accumulated payroll
deductions remaining in any participant's account after the purchase of shares
which is equal to the amount required to purchase one or more whole shares of
Common Stock on the final Purchase Date of an Offering shall be distributed in
full to the participant after such Purchase Date, without interest.
(b) No rights granted under the Plan may be exercised to any extent unless
the shares to be issued upon such exercise under the Plan (including rights
granted thereunder) are covered by an effective registration statement pursuant
to the Securities Act of 1933, as amended (the "Securities Act") and the Plan is
in material compliance with all applicable state, foreign and other securities
and other laws applicable to the Plan. If on a Purchase Date in any Offering
hereunder the Plan is not so registered or in such compliance, no rights granted
under the Plan or any Offering shall be exercised on such Purchase Date, and the
Purchase Date shall be delayed until the Plan is subject to such an effective
registration statement and such compliance, except that the Purchase Date shall
not be delayed more than twelve (12) months and the Purchase Date shall in no
event be more than twenty-seven (27) months from the Offering Date. If on the
Purchase Date of any Offering hereunder, as delayed to the maximum extent
permissible, the Plan is not registered and in such compliance, no rights
granted under the Plan or any Offering shall be exercised and all payroll
deductions accumulated during the Offering (reduced to the extent, if any, such
deductions have been used to acquire stock) shall be distributed to the
participants, without interest.
6
<PAGE>
9. COVENANTS OF THE COMPANY.
(a) During the terms of the rights granted under the Plan, the Company
shall keep available at all times the number of shares of Common Stock required
to satisfy such rights.
(b) The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of stock upon exercise of
the rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such rights unless and until
such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to rights granted under the Plan
shall constitute general funds of the Company.
11. RIGHTS AS A STOCKHOLDER.
A participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's shareholdings acquired upon
exercise of rights under the Plan are recorded in the books of the Company (or
its transfer agent).
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding rights will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding rights. Such adjustments shall be made by the Board or
the Committee, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a "transaction not involving the receipt of consideration by
the Company.")
(b) In the event of: (1) a dissolution or liquidation of the Company;
(2) a sale of all or substantially all of the assets of the Company; (3) a
merger or consolidation in which the Company is not the surviving corporation;
(4) a reverse merger in which the Company is the surviving corporation but the
shares of the Company's Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise; (5) the acquisition by any person, entity
or group within the meaning of Section 13(d) or 14(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or any comparable successor
provisions (excluding any employee benefit plan, or related trust, sponsored or
maintained by the Company or any Affiliate of the Company) of the beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
7
<PAGE>
Act, or comparable successor rule) of securities of the Company representing
at least fifty percent (50%) of the combined voting power entitled to vote in
the election of directors; or (6) the individuals who, as of the date of the
adoption of this Plan, are members of the Board (the "Incumbent Board"; (if
the election, or nomination for election by the Company's stockholders, of a
new director was approved by a vote of at least fifty percent (50%) of the
members of the Board then comprising the Incumbent Board, such new director
shall upon his or her election be considered a member of the Incumbent Board)
cease for any reason to constitute at least fifty percent (50%) of the Board;
then the Board in its sole discretion may take any action or arrange for the
taking of any action among the following: (i) any surviving or acquiring
corporation may assume outstanding rights or substitute similar rights for
those under the Plan, (ii) such rights may continue in full force and effect,
or (iii) all participants' accumulated payroll deductions may be used to
purchase Common Stock immediately prior to or within a reasonable period of
time following the transaction described above and the participants' rights
under the ongoing Offering terminated.
13. AMENDMENT OF THE PLAN OR OFFERINGS.
(a) The Board at any time, and from time to time, may amend the Plan or
the terms of one or more Offerings. However, except as provided in paragraph 12
relating to adjustments upon changes in stock, no amendment shall be effective
unless approved by the stockholders of the Company within twelve (12) months
before or after the adoption of the amendment, where the amendment will:
(i) Increase the number of shares reserved for rights under the
Plan;
(ii) Modify the provisions as to eligibility for participation in
the Plan or an Offering (to the extent such modification requires stockholder
approval in order for the Plan to obtain employee stock purchase plan treatment
under Section 423 of the Code or to comply with the requirements of Rule 16b-3
promulgated under the Exchange Act, or any comparable successor rule ("Rule
16b-3"); or
(iii) Modify the Plan or an Offering in any other way if such
modification requires stockholder approval in order for the Plan to obtain
employee stock purchase plan treatment under Section 423 of the Code or to
comply with the requirements of Rule 16b-3.
It is expressly contemplated that the Board may amend the Plan or an Offering in
any respect the Board deems necessary or advisable to provide eligible employees
with the maximum benefits provided or to be provided under the provisions of the
Code and the regulations promulgated thereunder relating to employee stock
purchase plans and/or to bring the Plan and/or rights granted under an Offering
into compliance therewith.
(b) The Board may, in its sole discretion, submit any amendment to the
Plan or an Offering for stockholder approval.
(c) Rights and obligations under any rights granted before amendment of
the Plan or Offering shall not be impaired by any amendment of the Plan, except
with the consent of the person to whom such rights were granted, or except as
necessary to comply with any laws or
8
<PAGE>
governmental regulations, or except as necessary to ensure that the Plan
and/or rights granted under an Offering comply with the requirements of
Section 423 of the Code.
14. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who is
to receive any shares and cash, if applicable, from the participant's account
under the Plan in the event of such participant's death subsequent to the end of
an Offering but prior to delivery to the participant of such shares and cash.
In addition, a participant may file a written designation of a beneficiary who
is to receive any cash from the participant's account under the Plan in the
event of such participant's death during an Offering.
(b) Such designation of beneficiary may be changed by the participant at
any time by written notice in the form prescribed by the Company. In the event
of the death of a participant and in the absence of a beneficiary validly
designated under the Plan who is living (or if an entity, is otherwise in
existence) at the time of such participant's death, the Company shall deliver
such shares and/or cash to the executor or administrator of the estate of the
participant, or if no such executor or administrator has been appointed (to the
knowledge of the Company), the Company, in its sole discretion, may deliver such
shares and/or cash to the spouse or to any one (1) or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may determine.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board in its discretion, may suspend or terminate the Plan at any
time. The Plan shall automatically terminate if all the shares subject to the
Plan pursuant to subparagraph 3(a) are issued. No rights may be granted under
the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any rights granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except as
expressly provided in the Plan or with the consent of the person to whom such
rights were granted, or except as necessary to comply with any laws or
governmental regulation, or except as necessary to ensure that the Plan and/or
rights granted under an Offering comply with the requirements of Section 423 of
the Code.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on the same day on which the Company's
shareholders approve the Plan pursuant to vote of the shareholders held at the
duly noticed Annual Shareholders Meeting in 1999.
17. CHOICE OF LAW.
All questions concerning the construction, validity and interpretation of
this Plan shall be governed by the law of the State of California, without
regard to such state's conflict of laws rules.
9
<PAGE>
SILICON VALLEY BANCSHARES
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
THURSDAY, APRIL 15, 1999
The undersigned appoints JOHN C. DEAN and A. CATHERINE NGO, or either of
them, with full power of substitution for himself or herself, as the Proxy
Holder of the undersigned to vote and otherwise represent all of the shares
registered in the name of the undersigned at the Annual Meeting of Shareholders
of Silicon Valley Bancshares to be held on Thursday, April 15, 1999, at 4:00
p.m. at the SANTA CLARA CONVENTION CENTER, GREAT AMERICA BALLROOM, 5001 GREAT
AMERICA PARKWAY, SANTA CLARA, CALIFORNIA 95054 and any postponements or
adjournments thereof, with the same effect as if the undersigned were present
and voting such shares, on the following matters and in the following manner.
1. To elect directors to serve for the ensuing year and until their successors
are elected.
/ / FOR all nominees listed below, with the discretionary authority to
cumulate votes, except votes withheld
/ / WITHHOLD AUTHORITY to vote for all nominees listed below
IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THAT NOMINEE'S NAME APPEARING IN THE LIST BELOW:
Gary K. Barr, James F. Burns, Jr., John C. Dean, David M. deWilde, Stephen E.
Jackson, Daniel J. Kelleher, James R. Porter, and Ann R. Wells
2. Approve a change in Silicon Valley Bancshares' state of incorporation from
California to Delaware by means of a merger of Silicon Valley Bancshares
into a wholly-owned Delaware subsidiary of Silicon Valley Bancshares.
/ / FOR / / AGAINST / / ABSTAIN
3. To ratify and approve the Silicon Valley Bancshares 1999 Employee Stock
Purchase Plan.
/ / FOR / / AGAINST / / ABSTAIN
4. To ratify the appointment of KPMG LLP as the Company's independent auditors.
/ / FOR / / AGAINST / / ABSTAIN
5. To vote or otherwise represent the shares on any other business that may
properly come before the meeting and any postponements or adjournments
thereof, according to the Proxy Holders' decision and in their discretion.
/ / FOR / / AGAINST / / ABSTAIN
(CONTINUED ON OTHER SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE. IF NO SPECIFICATIONS ARE MADE, THE SHARES REPRESENTED BY
THIS PROXY WILL BE VOTED FOR EACH OF THE ABOVE NOMINEES AND PROPOSALS, AND WITH
RESPECT TO SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING AND ANY
POSTPONEMENTS OR ADJOURNMENTS THEREOF, AS THE SAID PROXY HOLDERS DEEM ADVISABLE.
___________________________________
(SHAREHOLDER SIGNATURE)
___________________________________
(NAME TYPED OR PRINTED)
DATED _______________________, 1999
I PLAN TO ATTEND THE MEETING.
/ / YES / / NO
SIGN EXACTLY AS YOUR NAME(S)
APPEAR(S) ON YOUR STOCK
CERTIFICATE. AN ENTITY (SUCH AS A
CORPORATION OR PARTNERSHIP) IS
REQUESTED TO SIGN ITS NAME BY A
DULY AUTHORIZED SIGNATORY, WITH THE
CAPACITY IN WHICH SIGNED
DESIGNATED. EXECUTORS,
ADMINISTRATORS, TRUSTEES, AND
SIMILAR FIDUCIARIES ARE REQUESTED
TO SO INDICATE WHEN SIGNING. IF
STOCK IS REGISTERED IN TWO NAMES,
BOTH SHOULD SIGN.
SHAREHOLDERS SHOULD MARK, SIGN AND
DATE THIS PROXY PROMPTLY AND RETURN
IT IN THE ENCLOSED ENVELOPE.
