SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant X
Filed by a Party other than the Registrant
Check Appropriate Box:
Preliminary Proxy Statement
Confidential, for use of the Commission only (as permitted by Rule 14a-6(e)
(2))
X Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
SJNB Financial Corp.
(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):
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Fee paid previously with preliminary materials
Check box if any part of the fee is offset as provided by Exchange Act Rule
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previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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4) Date Filed:
<PAGE>
Proxy Statement of
SJNB Financial Corp.
Notice of Annual Meeting of Shareholders
May 27, 1998
<PAGE>
April 17, 1998
Dear Shareholder:
You are cordially invited to attend the 1998 Annual Meeting of Shareholders of
SJNB Financial Corp. to be held on May 27, 1998 at 10:00 a.m., in the Main
Dining Room at The San Jose Country Club, 15571 Alum Rock Avenue, San Jose,
California.
It is important that your shares be represented at the meeting. Whether or not
you plan to attend the meeting, you are requested to complete, date, sign and
return the enclosed proxy in the return envelope provided. The Board of
Directors recommends that you vote "for" each of the proposals on the proxy.
Sincerely yours,
S/R.A. Archer S/J.R. Kenny
Robert A. Archer James R. Kenny
Chairman of the Board President & Chief Executive Officer
<PAGE>
SJNB FINANCIAL CORP.
One North Market Street
San Jose, California 95113 (408) 947-7562
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be Held on May 27, 1998
To the Shareholders of SJNB Financial Corp.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of SJNB
Financial Corp. will be held in the Main Dining Room at The San Jose Country
Club, 15571 Alum Rock Avenue, San Jose, California on May 27, 1998 at 10:00
a.m., for the following purposes:
1. To elect the following eleven directors of the Corporation to
serve until the next Annual Meeting of Shareholders and until
their respective successors shall be elected and qualified:
Ray S. Akamine Arthur K. Lund
Robert A. Archer Louis Oneal
Albert V. Bruno Diane P. Rubino
Rod Diridon Douglas L. Shen
F. Jack Gorry Gary S. Vandeweghe
James R. Kenny
2. To approve an amendment to the 1996 Stock Option Plan.
3. To approve an amendment of the Articles of Incorporation concerning
elimination of cumulative voting.
4. To approve an amendment of the Articles of Incorporation restricting
shareholder action by written consent.
5. To ratify the appointment of KPMG Peat Marwick LLP as the
Corporation's independent public accountants for the year ending
December 31, 1998.
6. To consider and transact such other business as may properly come
before the Annual Meeting.
The close of business on April 13, 1998 is the record date for the determination
of shareholders entitled to notice of and to vote at the Annual Meeting or any
adjournments thereof.
Whether or not you plan to attend the Annual Meeting, you may vote by
completing, signing and returning the enclosed proxy promptly. Any shareholder
present at the Annual Meeting may vote personally on all matters brought before
the Annual Meeting, in which event your proxy will not be used.
By Order of the Board of Directors,
S/R.A. Archer S/J.R. Kenny
Robert A. Archer James R. Kenny
Chairman of the Board President & Chief Executive Officer
April 17, 1998
(Approximate mailing date of proxy materials)
<PAGE>
TABLE OF CONTENTS
PAGE
GENERAL INFORMATION 1
Revocability of Proxies 1
Solicitation of Proxies 1
Outstanding Securities and Voting Rights 1
Proposals of Shareholders 3
ELECTION OF DIRECTORS 3
Nominees to the Board of Directors 3
Nominations for Directors 4
Certain Committees of the Board of Directors 5
Compensation of Directors 5
Meetings of the Board of Directors 6
Executive Officers 6
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT 6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS 8
EXECUTIVE COMPENSATION AND TRANSACTIONS WITH DIRECTORS AND OFFICERS 9
Summary Compensation Table 9
Compensation Committee Report 9
Stock Option Plans 10
Employment Agreements 11
Transactions with Directors and Officers 11
Section 16(a) Beneficial Ownership Reporting Compliance 12
APPROVAL OF AMENDMENT OF THE 1996 STOCK OPTION PLAN 12
APPROVAL OF AMENDMENT OF THE ARTICLES OF INCORPORATION
CONCERNING ELIMINATION OF CUMULATIVE VOTING 13
APPROVAL OF AMENDMENT OF THE ARTICLES OF INCORPORATION
RESTRICTING SHAREHOLDER ACTION BY WRITTEN CONSENT 15
INDEPENDENT PUBLIC ACCOUNTANTS 18
STOCK PERFORMANCE CHART 19
ANNUAL REPORT ON FORM 10-K 19
ANNEX A 20
<PAGE>
PROXY STATEMENT
OF
SJNB FINANCIAL CORP.
One North Market Street
San Jose, California 95113
(408) 947-7562
Annual Meeting of Shareholders
May 27, 1998
INTRODUCTION
These proxy materials are furnished in connection with the solicitation of
proxies by the Board of Directors of SJNB Financial Corp. (the "Corporation"), a
California corporation, for use at the Annual Meeting of Shareholders to be held
on May 27, 1998 at 10:00 a.m. in the Main Dining Room at The San Jose Country
Club, 15571 Alum Rock Avenue, San Jose, California, and any postponements or
adjournments thereof (the "Meeting"). These proxy materials were mailed to
shareholders on or about April 17, 1998.
GENERAL INFORMATION
Revocability of Proxies
A proxy for voting your shares at the Meeting is enclosed. Any shareholder
giving the enclosed proxy has the right to revoke it at any time before it is
exercised by filing with the Corporation's Secretary, James R. Kenny, a written
notice of revocation or a duly executed proxy bearing a later date. A
shareholder may also revoke a proxy by attending the Meeting and advising the
Chairman of his or her election to vote in person.
Solicitation of Proxies
This proxy solicitation is made by the Board of Directors of the Corporation and
the cost of the solicitation is being borne by the Corporation. Solicitation is
being made by this Proxy Statement and may also be made by employees or agents
of the Corporation who may communicate with shareholders or their
representatives in person, by telephone or by additional mailings. The
Corporation may, at its discretion, engage the services of a proxy solicitation
firm to assist in the solicitation of proxies. The total expense of this
solicitation will be borne by the Corporation and will include reimbursement
paid to brokerage firms and others for their expenses in forwarding soliciting
material and such expenses as may be paid to any proxy solicitation firm engaged
by the Corporation.
Outstanding Securities and Voting Rights
Only those shareholders of record of the Corporation's common stock as of the
record date, April 13, 1998, will be entitled to notice of and to vote in person
or by proxy at the Meeting or any adjournment thereof, unless a new record date
is set for an adjourned meeting.
As of March 23, 1998, the Corporation has one class of securities issued and
outstanding, consisting of 2,519,057 shares of common stock, no par value. Such
shares are held by approximately 1,600 shareholders. All of the shares are
voting shares and entitled to vote at the annual meeting.
Each share of common stock is entitled to one vote at the Meeting, except that
shareholders may have cumulative voting rights with respect to the election of
directors. In elections for directors, California law provides that, unless the
Corporation's Articles of Incorporation provide otherwise, a shareholder, or his
or her proxy, may cumulate his or her votes. Under cumulative voting rules, each
shareholder is entitled to a number of votes equal to the number of shares owned
by him or her, multiplied by the number of directors to be elected. A
shareholder may cast such votes for a single candidate, or distribute such votes
among as many candidates as he or she deems appropriate; provided, however, that
a shareholder may cumulate votes only as to one or more candidate each of whose
name has been properly placed in nomination prior to the voting. See
"Nominations for Directors" herein. Cumulative voting may be used only if a
shareholder has given notice at the Meeting, prior to the voting, of his or her
intention to cumulate his or her votes. If any one shareholder has given such
notice, all shareholders may cumulate their votes for the candidates in
nomination. The Board of Directors does not, at this time, intend to give such
notice or to cumulate the votes it may hold pursuant to the proxies solicited
herein unless the required notice by a shareholder is given, in which event
votes represented by proxies delivered pursuant to this Proxy Statement may be
cumulated in the discretion of the proxy holders, in accordance with the
recommendations of the Board of Directors. Therefore, discretionary authority to
cumulate votes in such event is solicited in this Proxy Statement.
In the election of directors, the eleven (11) candidates receiving the highest
number of votes will be elected whether or not votes are cumulated.
If a shareholder withholds authority to vote for directors on the enclosed
proxy, or attends the Meeting, elects to vote in person, but abstains from
voting in the election of directors, that shareholder's shares will not be
counted in determining the candidates receiving the highest number of votes. For
shares present at the Meeting in person or by proxy, an abstention with respect
to the ratification of the independent public accountant is treated the same as
a vote against such matter. Broker non-votes (shares as to which brokerage firms
have not received voting instructions from their clients and therefore do not
have the authority to vote the shares at the Meeting) will not be considered in
determining if a quorum is present at the Meeting and will not be voted at the
Meeting.
If the enclosed proxy is completed in the appropriate spaces, signed, dated and
returned, the proxy will be voted as specified in the proxy. If no specification
is made on an executed proxy, it will be voted FOR the election of directors
nominated by the Board, FOR approval of the amendment to the 1996 Stock Option
Plan, FOR approval of the amendment of the Articles of Incorporation concerning
elimination of cumulative voting, FOR approval of the amendment of the Articles
of Incorporation restricting shareholder action by written consent and FOR the
ratification of the selection of KPMG Peat Marwick LLP as the Corporation's
independent public accountants.
The proxy also confers discretionary authority to vote the shares represented
thereby on any matter that was not known at the time this Proxy Statement was
mailed which may properly be presented for action at the Meeting and may
include: approval of minutes of the prior annual meeting which will not
constitute ratification of the actions taken at such meeting; action with
respect to procedural matters pertaining to the conduct of the Meeting; and
election of any person to any office for which a bona fide nominee is named
herein if such nominee is unable to serve or for good cause will not serve.
Management of the Corporation is not aware of any other matters to come before
the Meeting. If, however, any other matters of which the Board is not now aware
are properly presented for action, it is the intention of the proxy holders
named in the enclosed proxy to vote such proxy on such matters in accordance
with their best business judgment.
The Board of Directors recommends that the shareholders vote FOR the election of
the directors nominated by the Board, FOR approval of the amendment to the 1996
Stock Option Plan, FOR approval of the proposed amendments of the Articles of
Incorporation and FOR the ratification of the selection of KPMG Peat Marwick LLP
as the Corporation's independent public accountants.
Proposals of Shareholders
Under certain circumstances, shareholders are entitled to present proposals at
shareholder meetings. For any such proposal to be considered for inclusion in
the proxy statement prepared for next year's Annual Meeting, the proposal must
be received at the Corporation's executive offices at One North Market Street,
San Jose, California 95113 prior to December 17, 1998.
<PAGE>
ELECTION OF DIRECTORS
Nominees to the Board of Directors
The Bylaws of the Corporation provide that the number of directors of the
Corporation shall be no less than nine and no more than seventeen, with the
exact number within such range to be fixed by amendment of the Bylaws adopted by
the shareholders or by the Board of Directors. The number of directors is
presently fixed at eleven.
The persons named below, all of whom are currently members of the Corporation's
Board of Directors, have been nominated for election as directors to serve until
the next Annual Meeting and until their successors are duly elected and
qualified. Votes will be cast in such a way as to effect the election of all
nominees or as many nominees as possible in the event of cumulative voting. If
any nominee should become unable or unwilling to serve as a director, the
proxies will be voted for such substitute nominee as shall be designated by the
Board of Directors. The Board of Directors presently has no knowledge that any
of the nominees will be unable or unwilling to serve. The eleven nominees
receiving the highest number of votes at the Meeting shall be elected.
<TABLE>
<CAPTION>
The following table sets forth certain information with respect to those persons
nominated by the Board of Directors for election as directors, which information
is based on data furnished by each such nominee. Each member of the
Corporation's Board of Directors also serves as a director of San Jose National
Bank ("SJNB" or the "Bank").
First Elected Principal Business Experience
Name a Director(1) Age During the Past Five Years
<S> <C> <C> <C>
Ray S. Akamine 1994 51 Chief Financial Officer of Consolidated Factors in
Monterey, California since November 1995. Prior to
that time, he served as Vice President of Finance for
Mariani Packing Company, a food processing company
located in San Jose, from June 1984 to November 1994.
Robert A. Archer 1982 64 Chairman of the Board of Directors of the Corporation
and SJNB since 1993. President and a principal
stockholder of Coast Counties Truck and Equipment
Company, a heavy duty truck dealership and service
facility in San Jose, which he has owned and operated
for more than 30 years.
Albert V. Bruno 1994 53 Professor of Marketing at Santa Clara University,
where he is also Associate Dean of the Leavey School
of Business. He has been at Santa Clara University
since 1971 where he has served as chairman of the
Marketing Department and Acting Dean.
Rod Diridon 1994 59 Executive Director of the Norman Y. Mineta
International Institute for Surface Transportation
Policy Studies at the College of Business at San Jose
State University since 1994. Prior to that time, he
served as the Supervisor of the 4th District of the
County of Santa Clara, to which he was elected in
1974.
F. Jack Gorry 1988 64 Private consultant since September 1992.
James R. Kenny 1991 53 President, Chief Executive Officer and Secretary of
the Corporation and SJNB since September 1991.
Arthur K. Lund 1982 64 A practicing attorney at law and a member of
Rosenblum, Parish & Isaacs in San Jose since 1993.
Prior to that, he was a member of Rankin, Center,
Luckhardt & Lund. Mr. Lund was the Chairman of the
Board of the Corporation from 1983 through 1992.
Louis Oneal 1982 65 A practicing attorney at law and a member of The Law
Offices of Louis Oneal in San Jose.
Diane P. Rubino 1987 49 President of Hill View Packing Company since 1993.
Previously she was a partner of Valley View Packing
since 1977.
Douglas L. Shen 1994 59 A self employed dentist since 1966. His office is
located in San Jose, California.
Gary S. Vandeweghe 1982 59 A practicing attorney at law with Olimpia, Whalen &
Lively since April 1996. Prior to that, he was a
member of the Law Offices of Gary S. Vandeweghe since
December 1995. Prior to that time, he was a member of
Rankin, Luckhardt, Vandeweghe, Landsness & Lahde in San
Jose
- -------------------
<FN>
(1) Includes service as a director of SJNB prior to the organization of
SJNB Financial Corp. Directors Akamine, Bruno, Diridon and Shen were
directors of Business Bancorp and California Business Bank prior to the
merger.
</FN>
</TABLE>
There is no family relationship among any of the Corporation's executive
officers, directors or nominees for director.
Nominations for Directors
The Corporation's Bylaws provide that nominations for a director may be made by
shareholders, provided that certain informational requirements concerning the
identities of the nominating shareholder and the nominee are complied with in
advance of the meeting. This provision is intended to provide advance notice to
management of any attempt to effect an election contest or a change in control
of the Board of Directors, and may have the effect of precluding third party
nominations if not followed. Specifically, the Bylaws provide that nominations
for directors, other than those made by or on behalf of existing management,
must be made in writing and mailed or delivered to the President of the
Corporation, no less than 14 nor more than 50 days prior to any meeting of
shareholders called for the election of directors, except that if less than 21
days' notice of the meeting is given, such nomination must be mailed or
delivered to the President by the close of business on the seventh day following
the date on which the notice was mailed. The written nomination must include the
following information, to the extent known by the nominating shareholder: (a)
the name and address of each proposed nominee; (b) the principal occupation of
each proposed nominee; (c) the total number of shares of common stock of the
Corporation that will be voted for each proposed nominee; (d) the name and
residence address of the nominating shareholder; and (e) the number of shares of
common stock of the Corporation owned by the nominating shareholder.
The Bylaws provide that nominations not made in accordance with the above
procedure may, at his discretion, be disregarded by the Chairman of the Meeting
and, upon his instructions, the inspectors of election shall disregard all votes
cast for each such nominee.
Certain Committees of the Board of Directors
The Board of Directors of the Corporation and its subsidiary, SJNB, each have
standing Audit, Compensation and Loan and Investment Committees. The Audit
Committee of the Corporation and SJNB is chaired by Rod Diridon and the members
are Ray S. Akamine, F. Jack Gorry, Diane P. Rubino, Douglas L. Shen and Gary S.
Vandeweghe. The Audit Committee met four times in 1997 for the purpose of
reviewing the scope of and planning for the annual audit, and reviewing the
results of internal operations audits of SJNB and SJNB's compliance with
consumer laws, regulatory agency reports and securities reports.
The Compensation Committee is chaired by Albert V. Bruno and the members are
Robert A. Archer, F. Jack Gorry, Arthur K. Lund, Louis Oneal, Douglas L. Shen,
and Gary S. Vandeweghe. The Compensation Committee met two times in 1997 for the
purpose of setting compensation levels of senior officers and directors,
reviewing and approving bonus plans and payments, and reviewing and approving
employee benefit plans, including stock option, insurance and retirement plans.
In addition, the Committee reviews and approves the Corporation's Compensation
Policy.
The Loan and Investment Committee is chaired by Ray S. Akamine and the members
are Robert A. Archer, James R. Kenny, Arthur K. Lund, Louis Oneal, Diane P.
Rubino and Gary S. Vandeweghe. The Loan and Investment Committee met twelve
times in 1997. It is responsible for reviewing the Corporation's and SJNB's loan
and investment policy, approving loans which are greater than $3.6 million,
reviewing the allowance for loan losses, and reviewing criticized and
nonperforming loans.
The Corporation does not have a standing nominating committee. The Board of
Directors of the Corporation performs the functions of such committee.
Nominations by shareholders can be made only by complying with the Corporation's
Bylaws and the notice provisions discussed above. This Bylaw provision is
designed to give the Board of Directors advance notice of competing nominations,
if any, and the qualifications of nominees, and may have the effect of
precluding third-party nominations if not followed.
Compensation of Directors
In 1997, the outside directors of the Corporation, except Chairman Archer, were
paid an annual retainer of $12,000. Mr. Archer was paid an annual retainer of
$15,000. In addition, each director was paid $250 for attendance at each meeting
of standing committees of the Corporation of which he or she is a member.
Directors of the Corporation do not now receive additional fees for attendance
at the Corporation's Board meetings. In addition, the 1996 Stock Option Plan
provides for automatic annual option grants of 5,000 options on March 1 of each
year to each non-employee director.
Meetings of the Board of Directors
The Corporation's Board of Directors held a total of 11 meetings in 1997,
including regular and special meetings. The Board of Directors of SJNB held a
total of 11 meetings in 1997, including regular and special meetings. Every
director attended at least 75% of: (i) the Corporation's 11 Board meetings; and
(ii) all of the meetings of any committee of the Corporation's Board on which
such director served.
Executive Officers
<TABLE>
<CAPTION>
The executive officers of the Corporation and SJNB include James R. Kenny,
President and Chief Executive Officer, about whom information is provided above,
and the following persons:
Principal Occupation During the
Name and Position(s) Age Past Five Years
<S> <C> <C>
Eugene E. Blakeslee 52 Executive Vice President and Chief Financial
Executive Vice President and Chief Officer of the Corporation and SJNB since
Financial Officer of the Corporation September 1991.
and SJNB
Frederic H. Charpiot 51 Senior Vice President and Chief Credit Officer of
Senior Vice President and Chief Credit SJNB since October 1991.
Officer of SJNB
Margo F. Culcasi 50 Senior Vice President/Liability Management of
Senior Vice President/Liability SJNB since February 1993.
Management of SJNB
Judith Doering-Nielsen 52 Senior Vice President and Senior Lending Officer
Senior Vice President and Senior of SJNB since October 1991.
Lending Officer of SJNB
</TABLE>
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table sets forth information as of March 25, 1998 pertaining to
beneficial ownership of the Corporation's common stock by each current director
of the Corporation, each nominee to be elected to the Board of Directors, the
Chief Executive Officer, the four other most highly compensated executive
officers and all directors and officers(1) of the Corporation and SJNB as a
group. The information contained herein has been obtained from the Corporation's
records, from information furnished directly by the individual or entity to the
Corporation, or from various filings made by the named individuals with the
Securities and Exchange Commission (the "SEC").
The table should be read with the understanding that more than one person may be
the beneficial owner or possess certain attributes of beneficial ownership with
respect to the same securities. Therefore, careful attention should be given to
the footnote references set forth in the column "Amount and Nature of Beneficial
Ownership." In addition, shares issuable pursuant to options which may be
exercised within 60 days of April 13, 1998 are deemed to be issued and
outstanding and have been treated as outstanding in calculating the percentage
ownership of those individuals possessing such interest, but not for any other
individuals. Thus, the total number of shares considered to be outstanding for
the purposes of this table may vary depending upon the individual's particular
circumstance.
Percent of
Name and Address of Amount and Nature of Outstanding
Beneficial Owner(2) Beneficial Ownership(3) Common Stock
------------------- ---------------------- -------------
Ray S. Akamine 11,000(4) *
Robert A. Archer 54,584(4)(5) 2.16%
Albert V. Bruno 16,165(4) *
Rod Diridon 5,699(4) *
F. Jack Gorry 11,000(4) *
James R. Kenny 128,048 (6)(7) 5.05%
Arthur K. Lund 69,278(4)(8)(9) 2.75%
Louis Oneal 69,004(4)(8) 2.73%
Diane P. Rubino 17,337(10) *
Douglas L. Shen 68,860(4)(11) 2.73%
Gary S. Vandeweghe 38,503(4) *
Eugene E. Blakeslee 98,436 (6)(12) 3.89%
Frederic H. Charpiot 18,949(13) *
Margo F. Culcasi 10,696(14) *
Judith Doering-Nielsen 24,663(15) *
Directors and Executive Officers as 537,784 (16) 20.52%
a group (15 persons)
* Less than 1% of the outstanding common stock.
- ------------------------
(1) As used throughout this Proxy Statement, the terms "officer" and
"executive officer" refer to the Corporation and SJNB's President and
Chief Executive Officer, and Executive Vice President and Chief
Financial Officer, and SJNB's Chief Credit Officer, Senior Lending
Officer and Senior Vice President/Liability Management.
(2) The address for all persons is c/o the Corporation, One North Market
Street, San Jose, California 95113.
(3) Includes shares beneficially owned, directly and indirectly, together
with associates. Subject to applicable community property laws and
shared voting or investment power with a spouse, the persons listed
have sole voting and investment power with respect to such shares
unless otherwise noted.
(4) Includes 5,000 shares underlying stock options.
(5) Includes 3,720 shares owned of record by a trust of which Mr. Archer is
a trustee and beneficiary.
(6) Includes 52,549 shares held in the SJNB Cash or Deferred Profit Sharing
Plan (the "401(k)") of which Messrs. Kenny and Blakeslee are trustees
and beneficiaries and with regard to which shares Mr. Kenny and Mr.
Blakeslee have sole or shared voting power. Mr Kenny and Mr.
Blakeslee disclaim beneficial ownership of the 401(k) shares, other
than such shares allocated to their respective personal accounts in the
401(k).
(7) Includes 15,000 shares underlying stock options
(8) Includes 51,884 shares owned of record by a trust of which Messrs. Lund
and Oneal are trustees.
(9) Includes 3,782 shares owned of record by a trust of which Mr. Lund is
the trustee and beneficiary.
(10) Includes 3,000 shares underlying stock options
(11) Includes 30,816 shares owned of record by a trust of which Dr. Shen is
a trustee and beneficiary.
(12) Includes 12,000 shares underlying stock options.
(13) Includes 10,560 shares underlying stock options.
(14) Includes 8,000 shares underlying stock options.
(15) Includes 6,000 shares underlying stock options.
(16) Includes 99,560 shares underlying stock options
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Information herein regarding ownership of the Corporation's Common Stock by
entities or persons known by the Corporation to be the beneficial owner of more
than 5% of the Corporation's Common Stock is based solely on copies of Schedules
provided to the Corporation made by such entities or persons with the SEC.
According to a Schedule 13D filed with the SEC on February 13, 1998, Banc Fund
III L.P., Bank Fund III Trust, Banc Fund IV L.P. and Banc Fund IV Trust, 208 S.
LaSalle Street, Chicago IL, 60604, collectively reported beneficial ownership of
170,833 shares of the Corporation's common stock, or 6.78% of shares outstanding
as of February 27, 1998. Each of such entities reported that it had sole voting
and investment power with respect to the following shares of Corporation common
stock: Banc Fund III L.P., 19,234 shares; Bank Fund III Trust, 58,957 shares;
Banc Fund IV L.P., 21,233 shares; and Banc Fund IV Trust, 71,409 shares.
Pine Capital Management, Inc. 353 Sacramento Street, San Francisco, CA 94111,
provided a copy of a Schedule 13G dated February 13, 1998, reporting their
beneficial ownership of 144,833 shares of the Corporation's common stock, or
5.70% of shares outstanding as of February 27, 1998. Pine Capital Management,
Inc. is an investment advisor and has received power of attorney for investment
purposes from their clients.
Other than the above described entities and Mr. James R. Kenny, whose ownership
of shares is described in the table under "Security Ownership of Directors and
Management", the Corporation knows of no other person who beneficially owned
more than five percent of the Corporation's common stock as of February 27,
1998.
<PAGE>
EXECUTIVE COMPENSATION AND TRANSACTIONS WITH DIRECTORS AND OFFICERS
Summary Compensation Table
<TABLE>
<CAPTION>
he following table sets forth the cash compensation paid to or allocated for
the Chief Executive Officer of the Corporation and the four other most highly
compensated executive officers for services rendered in all capacities to the
Corporation and SJNB during 1997, 1996 and 1995.
Summary Compensation Table
Long-Term
Compensation-
Annual Compensation Securities All Other
Name and Principal Position Year Salary(1) Bonus Underlying Options Compensation(2)
<S> <C> <C> <C> <C> <C>
James R. Kenny 1997 $160,000 $145,000 0 $6,176
President, Chief Executive 1996 $160,000 $125,000 0 $6,176
Officer and Secretary of the 1995 $160,000 $90,000 25,000 $6,046
Corporation and SJNB
Eugene E. Blakeslee 1997 $107,000 $105,000 0 $4,750
Executive Vice President and 1996 $107,000 $90,000 0 $4,750
Chief Financial Officer 1995 $107,000 $70,000 20,000 $4,620
of the Corporation and SJNB
Frederic H. Charpiot 1997 $80,000 $80,000 0 $4,750
Senior Vice President and Chief 1996 $80,000 $70,000 0 $4,750
Credit Officer of SJNB 1995 $80,000 $50,000 10,000 $4,166
Margo F. Culcasi 1997 $75,000 $80,000 0 $4,750
Senior Vice President/ 1996 $75,000 $62,525 0 $4,750
Liability Management of SJNB 1995 $75,000 $27,710 15,000 $4,365
Judith Doering-Nielsen 1997 $85,000 $80,000 0 $4,750
Senior Vice President and 1996 $85,000 $70,000 0 $4,750
Senior Lending Officer of SJNB 1995 $85,000 $40,000 10,000 $4,197
- ------------------------
<FN>
(1) The executive officers received perquisites in addition to their
salaries. The value of such perquisites did not exceed the lesser of
$50,000 or 10% of the total annual salary and bonus reported for each
such executive officer. Salary amounts include compensation deferred at
the election of the executive in the year earned.
(2) Consists of SJNB's contributions to vested and unvested defined
contribution plans. Mr. Kenny's total also includes a life insurance
premium of $1,426 paid by SJNB each year.
</FN>
</TABLE>
Compensation Committee Report
The Corporation's compensation program and policies applicable to its executive
officers are administered by the Compensation Committee of the Board of
Directors. The Compensation Committee is made up entirely of non-employee
directors. The programs and policies are designed to enhance stockholder value
by aligning the financial interests of the executive officers of the Corporation
with those of its stockholders.
It is the Corporation's policy generally to qualify compensation paid to
executive officers for deductibility under section 162(m) of the Internal
Revenue Code. Section 162(m) generally prohibits the Corporation from deducting
the compensation of executive officers that exceeds $1,000,000 unless that
compensation is based on the satisfaction of objective performance goals. At the
1996 Annual Meeting, the Corporation obtained stockholder approval of the 1996
Stock Option Plan of SJNB Financial Corporation which contains limitations
necessary to qualify awards under such plan as performance-based compensation
and to maximize the tax deductibility of such awards. However, the Corporation
reserves the discretion to pay compensation to its executive officers that may
not be deductible.
There are three primary components of executive compensation: Base Salary,
Bonuses and Stock Options.
Base Salary
Base salaries for fiscal 1997 reported herein were determined by the
Compensation Committee. The Compensation Committee reviews salaries recommended
by the Chief Executive Officer for executive officers other than the Chief
Executive Officer. In conducting its review, the Compensation Committee takes
into consideration the overall performance of the Company and the Chief
Executive Officer's evaluation of individual executive officer performance.
Final decisions on base salary adjustments for executives other than the Chief
Executive Officer are made in conjunction with the Chief Executive Officer. The
Compensation Committee independently determines the base salary for the Chief
Executive Officer by: (a) examining the Corporation's performance against its
preset goals, (b) examining the Corporation's performance within the banking
industry, (c) evaluating the overall performance of the Chief Executive Officer
and (d) comparing the base salary of the Chief Executive Officer to that of
other chief executive officers in the banking industry. Based upon the data and
performance, the Chief Executive Officer's base salary remained at $160,000 for
1997.
Bonuses
The Incentive Bonus Plan is a cash-based incentive bonus program. The Incentive
Bonus Plan provides for payment of an incentive cash bonus to each named
executive officer that is related to a percentage of the Corporation's pre-tax
net earnings provided that such net earnings bear a certain relationship to the
Corporation's assets. Under the Bonus Plan, the Chief Executive Officer was
awarded a bonus of $145,000 in 1998 for performance in 1997.
Stock Options
The Compensation Committee annually grants options under the 1996 Stock Option
Plan with an exercise price equal to or greater than the fair market value on
the date of grant. The grants are intended to retain and motivate key executives
and to provide a direct link with the interests of the stockholders of the
Corporation. The Compensation Committee, in making its determination as to grant
levels, takes into consideration: (i) prior award levels, (ii) total awards
received to date by the individual executive, (iii) the total stock award to be
made and the executive's percentage participation in the award, (iv) the
executive's direct ownership of the Corporation's shares, (v) the number of
options vested and nonvested, and (vi) the options outstanding as a percentage
of total shares outstanding. The 1996 Stock Option Plan limits the total number
of shares subject to options that may be granted to a participant in any year to
not more than 100,000 shares. The Compensation Committee did not award the Chief
Executive Officer any options to purchase shares of stock in 1997.
The foregoing report has been furnished by the Compensation Committee of the
Board of Directors of SJNB Financial Corp.:
Robert A. Archer
Albert V. Bruno (Chair)
F. Jack Gorry
Arthur K. Lund
Louis Oneal
Douglas L. Shen
Gary S. Vandeweghe
Stock Option Plans
<TABLE>
<CAPTION>
The following table sets forth the stock options exercised in 1997 and the
December 31, 1997 unexercised value of both vested and unvested stock options
for the Corporation's Chief Executive Officer and the four other most highly
compensated executive officers.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options (1)
Acquired Value Options at 12/31/97 at 12/31/97
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
($)
<S> <C> <C> <C> <C> <C> <C>
James R. Kenny 0 - 15,000 10,000 $362,813 $241,875
Eugene E. Blakeslee 0 - 12,000 8,000 $290,250 $193,500
Frederic H. Charpiot 5,000 $73,150 10,560 4,000 $273,375 $96,750
Margo F. Culcasi 0 - 8,000 6,000 $211,313 $145,125
Judith Doering-Nielsen 0 - 6,000 4,000 $145,125 $96,750
<FN>
(1) Fair market value of the Corporation's common stock on December 31, 1997 was $33.50.
</FN>
</TABLE>
Employment Agreements
Mr. Kenny is employed by the Corporation and SJNB pursuant to an employment
agreement dated March 27, 1996 which provides an annual salary of $160,000. The
term of the agreement is three years, with annual one year extensions each year
thereafter. In addition, Mr. Kenny is to receive an incentive bonus of 1.5% of
the Corporation's pre-tax, pre-bonus net earnings before extraordinary items,
provided that SJNB's net earnings before extraordinary items in any year during
the term of the Agreement are equal to or exceed 1% of average assets. Mr. Kenny
may also receive stock options. Pursuant to the Agreement, the Corporation
provides an automobile for Mr. Kenny, as well as public liability and property
damage insurance. Mr. Kenny also receives $250,000 in term life insurance
coverage. In the event that Mr. Kenny is involuntarily terminated for reasons
other than dishonesty or malfeasance, he is entitled to receive a lump sum
payment equal to twenty-four months' salary (plus incentive or bonus payments
accrued, if any). In the event of a "change in control", Mr. Kenny will receive
a lump sum payment in an amount equal to two times his average annual
compensation for the five years immediately preceding the change in control
(plus incentive or bonus payments accrued, if any).
Mr. Blakeslee is employed by the Corporation and SJNB pursuant to an employment
agreement dated March 27, 1996 which provides an annual salary of $107,000. The
term of the agreement is one year, with automatic extensions each year
thereafter. In addition, Mr. Blakeslee is entitled to participate in the
Corporation's bonus plan, pool, stock option plan or other arrangements
authorized and approved by the Board of Directors. Mr. Blakeslee's agreement
also requires that the Corporation provide an automobile for Mr. Blakeslee, as
well as public liability and property damage insurance. In the event that Mr.
Blakeslee is involuntarily terminated for reasons other than dishonesty or
malfeasance, he is entitled to receive a lump sum payment equal to twelve
months' salary (plus incentive or bonus payments accrued, if any). In the event
of a "change in control", Mr. Blakeslee will receive severance pay in an amount
equal to one times his average annual compensation for the five years
immediately preceding the change in control (plus incentive or bonus payments
accrued, if any).
Transactions with Directors and Officers
SJNB has had in the ordinary course of business, and expects to have in the
future, banking transactions with directors, officers, shareholders and their
associates, including transactions with corporations of which such persons are
directors, officers or controlling shareholders. In the opinion of management of
SJNB, all loans and commitments to lend included in such transactions have been
and will be entered into with such persons in the ordinary course of business,
on substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with other persons of
similar creditworthiness, and on terms not involving more than a normal risk of
collectibility or presenting other unfavorable features.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") requires the Corporation's directors, executive officers and any persons
beneficially owning ten percent or more of the Corporation's common stock to
timely file initial reports of ownership and reports of changes in that
ownership with the SEC and the Nasdaq National Market. Such persons are required
by SEC regulation to send copies of such reports to the Corporation. Based
solely on a review of the copies of such reports furnished to the Corporation
and written representations that no other reports were required, during the
fiscal year ended December 31, 1997 all such filing requirements applicable to
its directors, executive officers and ten percent shareholders were met, except
as set forth below.
In October 1997, Ray S. Akamine inadvertently failed to timely file a Form 4
with respect to the sale of 3,377 shares of the Corporation's common stock. A
Form 5 reporting this transaction was filed on February 9, 1998 . Between 1986
and 1989, Arthur K. Lund inadvertently failed to timely report the acquisition
of an aggregate of 172 shares of the Corporation's common stock, issued to his
wife through the Corporation's stock dividend plans during such period. A Form 5
reporting these transactions was filed on February 12, 1998.
APPROVAL OF AMENDMENT OF THE 1996 STOCK OPTION PLAN
Summary of the 1996 Stock Option Plan
The Corporation's 1996 Stock Option Plan (the "Plan"), which was approved by the
shareholders in May of 1996, provides for awards in the form of options, (which
may constitute incentive stock options or non-statutory stock options) to key
employees and outside directors. The Compensation Committee of the Board of
Directors (the "Committee") selects the key employees of the Corporation or any
subsidiary who will receive awards, determines the size of any award and
establishes any vesting or other conditions. Grants of options to outside
directors are subject to the restrictions in the Plan. At the date of this proxy
statement, there were 88 individuals (other than non-employee directors)
eligible for awards of options under the Plan. The fair market value of the
Company's Common Stock subject to such awards on March 31, 1998 was $35.50 per
share. As of March 31, 1998, 403,460 options have been granted of which 148,000
have been granted to non-employee directors, which are still outstanding under
the Plan.
The total number of shares of Common Stock available for grant under the Plan is
310,000. In addition, if awards under the 1992 Employee Plan ("1992 Plan") are
forfeited or terminated before being exercised or vested, the corresponding
common shares shall become available for awards under the Plan. The total number
of shares available for grant under the Plan is subject to adjustment in the
event of stock splits, stock dividends and other similar recapitalization
transactions. No individual may receive option grants in a single year covering
more than 100,000 shares. If any options are forfeited, or if options terminate
for any other reason prior to exercise, then such options again become available
for awards.
The above summary description of the Plan is qualified in its entirety by
reference to the 1996 Stock Option Plan, a copy of which is available upon
written request to the Corporate Secretary, SJNB Financial Corp., One North
Market Street, San Jose, CA 95113.
Shareholders are urged to read the Plan in its entirety.
Proposed Amendment
The purpose of the Plan is to promote the long-term success of the Corporation
and the creation of shareholder value by (a) encouraging key employees and
outside directors to focus on critical long-range objectives, (b) encouraging
the attraction and retention of key employees and outside directors with strong
qualifications, including key executives that may join the Corporation in the
future as a result of acquisitions, and (c) linking key employees and outside
directors directly to shareholder interests through increased stock ownership.
In this regard the Corporation has found that in order to fulfill the purposes
of this Plan it is necessary to provide sufficient options to award new and
existing employees to continue to provide appropriate incentives in 1998 and
beyond. Under the proposed amendment, an additional 150,000 shares of Common
Stock would be added to the shares currently authorized under the Plan, bringing
the total number of shares of Common Stock available for grant under the Plan to
460,000, plus any additional options which become available due to forfeitures
or terminations under the 1992 Plan.
The amendment, which is subject to shareholder approval, would amend and restate
Section 3.1 of the Plan to read as follows:
"3.1 BASIC LIMITATION. The aggregate number of Options awarded under the Plan
shall not exceed 460,000, subject to Section 3.2. No grants shall be made under
the Predecessor Plan after May 22, 1996. The limitation of this Section shall be
subject to all adjustment pursuant to Article 7."
Federal Income Tax Consequences
The proposed amendment of the Plan to increase the number of shares of Common
Stock available for grant under the Plan will have no effect upon the tax
consequences to either participants or the Corporation of option grants or
exercises.
Amended Plan Benefits
The Committee has full discretion to determine the number of options to be
granted to employees under the Plan; provided, however, that no individual may
receive options grants in a single calendar year covering more than 100,000
shares. Therefore, the aggregate benefits and amounts that will be received by
each of the officers named in the Summary Compensation Table, the executive
officers as a group and all other employees under the amended Plan are not
presently determinable. Details on awards granted during the last year to the
executive officers named in the Summary Compensation Table are presented in such
table. Until the Board directs otherwise or a director who is not an employee of
the Corporation of any of its subsidiaries (an "Outside Director") ceases to
serve as a director, each Outside Director will receive an annual automatic
grant of 5,000 options.
Required Approval
The adoption of the proposed amendment to the Plan requires the affirmative vote
of not less than a majority of the shares of Common Stock present in person or
represented and voting at the Meeting. The Board of Directors recommends that
the shareholders vote FOR the adoption of the amendment to the Corporation's
1996 Stock Option Plan.
APPROVAL OF AMENDMENT OF THE ARTICLES OF INCORPORATION
CONCERNING ELIMINATION OF CUMULATIVE VOTING
Introduction
Effective on January 1, 1990, the California General Corporation Law ("GCL") was
amended to permit California corporations with widely traded securities to
provide, with the approval of their shareholders, for majority rule voting in
electing directors in lieu of cumulative voting. California law specifically
allows a corporation with its common stock quoted on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq National Market System and
with at least 800 shareholders of record to eliminate cumulative voting by an
amendment to its Bylaws or Articles of Incorporation. Prior to such legislation,
cumulative voting in electing directors was mandatory for California
corporations upon proper notice by any shareholder of the Corporation. By
permitting shareholders of California corporations to provide for majority rule
voting in electing directors, the new law substantially conforms California
corporate law with the corporate laws of a majority of other states (including
Delaware, Illinois, Michigan, New Jersey, New York, Ohio, Pennsylvania and
Texas) which either provide that cumulative voting is optional or make no
provision for cumulative voting at all. Only a small minority of states still
require that shareholders be permitted to invoke cumulative voting.
Cumulative Voting
Cumulative voting in the election of directors may currently be invoked by any
shareholder of the Corporation who complies with statutory notice requirements.
Cumulative voting entitles shareholders to a number of votes per share of common
stock equal to the number of directors to be elected, and all nominees are voted
upon simultaneously. Holders of shares may cast all of their votes for a single
nominee or distribute them among two to more nominees.
As a consequence of cumulative voting, a shareholder with a relatively small
number of voting shares may be able to elect one or more directors. For example,
if a shareholder were to give the appropriate notice and properly nominate a
nominee, and nine directors were to be elected at an annual meeting, a
shareholder holding 10% of the voting shares could elect one director by
cumulating and casting his or her votes for one candidate. This is true even if
shareholders holding 90% of the voting shares are opposed to the election of
that candidate and cast their votes to elect nine other nominees.
Absent cumulative voting, a nominee cannot be elected without relatively wide
support, as shareholders are entitled to only one vote per share with the
nominee receiving the greatest number of votes being elected. Consequently, the
holder or holders of a majority of the shares entitled to vote in an election of
directors will be able to elect all directors of the Corporation, and holders of
less than a majority of the shares may not be able to elect any directors.
For the reasons set forth below, the Board believes that the Corporation's
Articles of Incorporation (the "Articles") should be amended to eliminate
cumulative voting.
Reasons for the Amendment
The Board believes that the elimination of cumulative voting is advantageous to
the Corporation and its shareholders because each director of a publicly-held
corporation has a duty to represent the interests of all shareholders rather
than any specific shareholder or group of shareholders. The presence on the
Board of Directors of one or more directors representing the interests of a
minority shareholder or group of shareholders could disrupt the management of
the Corporation and prevent it from operating in the most effective manner.
Furthermore, the election of directors who view themselves as representing a
particular minority constituency could introduce an element of discord on the
Board of Directors, impair the ability of the directors to work effectively and
discourage qualified independent individuals from serving as directors.
Providing for majority rule voting in the election of directors by eliminating
cumulative voting will help ensure that each director acts in the best interests
of all shareholders.
Other Effects
Approval of the proposed amendment may render more difficult any attempt by a
holder or group of holders of a significant number of voting shares, but less
than a majority, to change or influence the management or policies of the
Corporation. In addition, under certain circumstances, the proposed amendment,
along with other measures that may be viewed as having anti-takeover effects,
may discourage an unfriendly acquisition or business combination involving the
Corporation that a shareholder might consider to be in such shareholder's best
interest, including an unfriendly acquisition or business combination that might
result in payment of a premium over the market price for the shares held by the
shareholder. For example, the proposed amendment may discourage the accumulation
of large minority shareholdings (as a prelude to an unfriendly acquisition or
business combination proposal or otherwise) by persons who would not make that
acquisition without being assured of representation on the Board of Directors.
Text of Amendment
At the Meeting, the Corporation's shareholders will be asked to approve an
amendment of the Corporation's Articles to add a new Article Eight, Section (a),
to read as follows:
EIGHT
a. No holder of any class of stock of the corporation shall be
entitled to cumulate votes in connection with any election of
directors of the corporation.
Conforming ByLaw Amendment
If this Proposal is adopted by the shareholders, in order to make the Bylaws
consistent with the amendment of the Articles set forth in this Proposal, upon
effectiveness of the filing of the Certificate of Amendment of the Articles of
Incorporation with the Secretary of State of the State of California, Section 8
of the Bylaws shall be amended to read as set forth in Annex A which is
incorporated herein by reference.
Required Approval
The adoption of the proposed amendment of the Articles requires the affirmative
vote of not less than a majority of the outstanding shares of Common Stock. The
Board of Directors unanimously recommends that the shareholders vote FOR the
adoption of the amendment of the Corporation's Articles of Incorporation.
APPROVAL OF AMENDMENT OF THE ARTICLES OF INCORPORATION
RESTRICTING SHAREHOLDER ACTION BY WRITTEN CONSENT
Introduction
Since 1977 the GCL has provided that, unless otherwise provided in the articles
of incorporation, any action which may be taken at any annual or special meeting
of shareholders may be taken without a shareholder meeting and generally without
prior notice, if a written consent setting forth the action to be taken is
signed by the holders of shares of outstanding stock having the requisite number
of votes that would be necessary to authorize such action at a meeting of
shareholders at which all shares entitled to vote thereon were present and
voted.
Shareholder Action by Written Consent
The Articles do not presently contain any provision limiting the ability of
shareholders of the Corporation to act by written consent, and the Bylaws of the
Corporation currently authorize action by written consent of the shareholders.
For the reasons set forth below, Section (b) to proposed Article Eight of the
Articles would permit shareholders of the Corporation to act by written consent
only if the Board of Directors had previously approved the action, which would
prevent shareholders of the Corporation from using the written consent procedure
to take shareholder action without a shareholders' meeting. The Board of
Directors approved the proposed amendment in its March 1998 regular Board
meeting.
Reasons for the Amendment
The Board is seeking approval of the amendment because it believes, in a
corporate democracy where the majority rules, all shareholders should have the
opportunity to meet, listen to competing views and make a decision at a duly
noticed meeting of shareholders (unless the Board approves by resolution the
taking of action without a meeting).
The Board of Directors recommends adoption of this proposed amendment because it
believes it is in the best interest of the Corporation and its shareholders to
assure that all shareholders of the Corporation entitled to vote on a proposed
significant corporate action have the opportunity to participate in determining
if such action is appropriate through the normal meeting process, except in
cases where the Board of Directors has approved such action by written consent.
The Board of Directors believes that in most instances it is inappropriate for
shareholders to take corporate action without prior notice to all other
shareholders, even if a majority of the shareholders favor such action. The
Board of Directors believes that the orderly process which is normally used when
actions are proposed at meetings is generally preferable to the consent
procedure, unless the Board of Directors has approved such action. If action by
written consent without a meeting and without the approval of the Board of
Directors is permitted, a majority of the shareholders could consent in writing
to a corporate action without advance notice to other shareholders. Advance
notification to shareholders of proposed corporate actions provides all
shareholders the opportunity to express their views on the proposed action and
to persuade other shareholders and management of their support or opposition.
Additionally, management is provided with an opportunity to review and respond
to proposed actions, as appropriate. It is the Board of Directors' view that
shareholder decisions reached after all shareholders have received notice and an
opportunity to express their views will be informed decisions and more
consistent with the Board of Directors' notion of corporate democracy. Also, the
Board of Directors believes that the proposed amendment is an effective method
of avoiding the disenfranchisement of minority shareholders through the use of
written consent solicitation.
Other Effects
If this Proposal is adopted it may have the effect of discouraging an attempt by
another person or entity to gain control of the Corporation or take action which
might facilitate gaining control of the Corporation, after the acquisition of a
substantial percentage of the shares of the Corporation's outstanding stock. The
effect of the proposed amendment would be to encourage any person intending such
a change of control to negotiate with the Board of Directors rather than to take
unilateral action without notice to the Board of Directors or other
shareholders. The Board of Directors believes that such an orderly procedure is
in the best interest of the shareholders. However, the proposed amendment could
limit shareholders' participation in certain types of transactions (other than
at a shareholders' meeting) that might be proposed whether or not such
transactions were favored by a majority of the shareholders, and could enhance
the ability of officers and directors to retain their positions by precluding
changes in control through the written consent procedure. The proposed
amendment, if adopted, could render it more difficult or discourage a merger or
proxy contest, the assumption of control by a holder of a larger block of the
Corporation's securities and the removal of incumbent management.
Action by written consent may, in some circumstances, permit shareholders to
take action opposed by the Board of Directors more rapidly than would be
possible if a meeting were required. Proposed Article Eight Section (b) would
have the effect of making more difficult shareholder actions that do not have
the support of the Board of Directors. This proposed amendment also could have
the effect of discouraging a person from making a tender offer or otherwise
attempting to gain control of the Corporation if such person were unwilling to
submit its proposals to a vote of the shareholders at a meeting. For example,
the prohibition would prevent a person from attempting to gain approval of a
merger without a shareholder meeting. The Board of Directors nonetheless
believes that it is important that it be able to give advance notice of and
consideration to any such shareholder action and that shareholders be able to
discuss at a meeting matters that may affect their rights. In addition, the
Corporation's shareholders will still have the ability to initiate action
independent of the Board of Directors because California law and the
Corporation's Bylaws provide that the holders of not less than 10% of the shares
entitled to vote have the power to call a special meeting of the shareholders.
However, the proposed amendment would have an adverse impact on shareholders who
may want to participate in a consent solicitation rather than a shareholder
meeting and are unable to gather 10% of the shares necessary in order to call a
special meeting.
This proposal restricting shareholder action by written consent is not being
made in response to any effort by a minority shareholder or group of
shareholders to attain representation on the Board of Directors or acquire
greater influence in the management of the Corporation's business, nor is the
Corporation aware of any such effort. Furthermore, such proposal is not being
made in response to any attempt to acquire control of the Corporation, nor is
the Corporation aware of any such attempt.
The Board of Directors does not currently contemplate recommending to the
shareholders for their approval any further measures that would affect the
ability of third parties to change control of the Corporation. At the
Corporation's 1989 annual meeting, the shareholders approved an amendment of the
Articles which requires the affirmative vote or written consent of two-thirds of
the outstanding shares of the principal terms of a reorganization if such
reorganization is not approved by 80% or more of the authorized number of
directors. If 80% or more of the authorized number of directors approve of such
reorganization, then the affirmative vote or written consent of the majority of
outstanding shares is required. In addition, the Corporation's Bylaws currently
contain a provision requiring advance notice of nomination of a candidate for
election to the Board of Directors of the Corporation when the nomination is
made by a person other than the nominating committee of the Board, which
procedure is set forth herein in the Section entitled "Nominations for
Directors." Other than as described in the preceding portion of this paragraph,
the Board of Directors is not currently considering any other anti-takeover
measures that do not require shareholder approval under California law. The
Board of Directors does not believe that the Articles or Bylaws of the
Corporation currently contain any other provisions which should be viewed as
anti-takeover devices.
The overall effect of the proposed amendment would be to make it more likely
that a proposed transaction would be discussed with the Board of Directors. This
proposed amendment, together with the proposed amendment concerning the
elimination of cumulative voting, would make it more difficult for a single
shareholder or small group of shareholders to obtain the 80% approval of the
Board of Directors required to allow for mere majority (as opposed to
two-thirds) approval of the shareholders for a reorganization.
Text of Amendment
At the Meeting, the Corporation's shareholders will be asked to approve an
amendment of the Corporation's Articles to add a new Article Eight Section (b)
to read as follows:
EIGHT
b. Any action required to be taken at any annual or special
meeting of shareholders of this corporation, or any action
which may be taken at any annual or special meeting of
shareholders, may be taken without a meeting and without prior
notice, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock
having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and
voted, provided that the board of directors of this
corporation, by resolution, shall have previously approved any
such action.
Conforming ByLaw Amendment
If this Proposal is adopted by the shareholders, in order to make the Bylaws
consistent with the amendment of the Articles set forth in this Proposal, upon
effectiveness of the filing of the Certificate of Amendment of the Articles of
Incorporation with the Secretary of State of the State of California, Section 12
of the Bylaws shall be amended to read as set forth in Annex A which is
incorporated herein by reference.
Required Approval
The adoption of the proposed amendment of the Articles requires the affirmative
vote of not less than a majority of the outstanding shares of Common Stock. The
Board of Directors recommends that the shareholders vote FOR the adoption of the
amendment of the Corporation's Articles of Incorporation.
IF BOTH THE PROPOSAL CONCERNING ELIMINATION OF CUMULATIVE VOTING AND THE
PROPOSAL RESTRICTING ACTION OF SHAREHOLDERS WITHOUT A MEETING ARE ADOPTED, THE
ARTICLES OF INCORPORATION WILL BE AMENDED TO ADD A NEW ARTICLE EIGHT, SECTIONS
(A) AND (B). IF ONLY ONE OF THE PROPOSALS IS ADOPTED, THE ARTICLES OF
INCORPORATION WILL BE AMENDED TO ADD A NEW ARTICLE EIGHT CONTAINING ONLY THE
PROVISION ADOPTED BY THE SHAREHOLDERS.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected KPMG Peat Marwick LLP to serve as
independent public accountants for the Corporation and its subsidiary for the
year ending December 31, 1998. KPMG Peat Marwick LLP examined the financial
statements of the Corporation and its subsidiary for the year ended December 31,
1997. KPMG Peat Marwick LLP has informed the Corporation that it has had no
connection during the past three years with the Corporation or its subsidiary in
the capacity of promoter, underwriter, voting trustee, director or employee.
In recognition of the important role of the independent public accountants, the
Board of Directors has determined that its selection of the independent public
accountants should be submitted to the shareholders for review and ratification
on an annual basis.
In the event the appointment is not ratified by the shareholders, the adverse
vote will be deemed to be an indication to the Board of Directors that it should
consider selecting other independent public accountants for 1999. Because of the
difficulty and expense of making any substitution of accounting firms after the
beginning of the current year, it is the intention of the Board of Directors
that the appointment of KPMG Peat Marwick LLP for the year 1998 will stand
unless for other reasons the Board of Directors deems it necessary or
appropriate to make a change. The Board of Directors also retains the power to
appoint another independent public accounting firm to replace an accounting firm
ratified by the shareholders in the event the Board of Directors determines that
the interests of the Corporation require such a change.
It is anticipated that representatives of KPMG Peat Marwick LLP will be present
at the Meeting and will have an opportunity to make a statement if they desire
to do so, and will be available to respond to appropriate questions.
The affirmative vote of a majority of the shares represented and voting at the
Meeting is required for ratification of KPMG Peat Marwick LLP as the
Corporation's independent public accountants. The Board of Directors recommends
that the shareholders vote FOR the ratification of the selection of KPMG Peat
Marwick to serve as independent public accountants.
STOCK PERFORMANCE CHART
[GRAPHIC OMITTED]
(1) Assumes $100 invested on December 31,1992 in the Corporation's common
stock, the NASDAQ-Total U.S. index and the NASDAQ-Banks index, with
reinvestment of dividends.
(2) Source: SNL Securities
ANNUAL REPORT ON FORM 10-K
A copy of the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1997 is included in the Corporation's Annual Report to
Shareholders.
<PAGE>
ANNEX A
Conforming Bylaw Amendments
Section 8. Voting. The shareholders entitled to notice of any meeting or to vote
at any such meeting shall be only persons in whose name shares stand on the
stock records of the corporation on the record date determined in accordance
with Section 9 of this Article.
Voting shall in all cases be subject to the provisions of Section 702 through
704, inclusive, of the California General Corporation Law (relating to voting
shares held by a fiduciary, in the name of a corporation, or in joint
ownership).
The shareholders' vote may be by voice or ballot; provided, however, that any
election for directors must be by ballot if demanded by any shareholder before
the voting has begun. On any matter other than elections of directors, any
shareholder may vote part of the shares in favor of the proposal and refrain
from voting the remaining shares or vote them against the proposal (other than
the election of directors), but, if the shareholder fails to specify the number
of shares which the shareholder is voting affirmatively, it will be conclusively
presumed that the shareholder's approving vote is with respect to all shares
that the shareholder is entitled to vote. If a quorum is present, the
affirmative vote of the majority of the shares represented at the meeting and
entitled to vote on any matter (other than the election of directors) shall be
the act of the shareholders, unless the vote of a greater number or voting by
classes is required by the California General Corporation Law or by the Articles
of Incorporation.
No shareholder shall be entitled to cumulate votes for any candidate or
candidates.
In any election of directors, the candidates receiving the highest number of
votes of the shares entitled to be voted for them up to the number of directors
to be elected, shall be elected.
Section 12. Action by Written Consent Without a Meeting. Subject to the
Corporation's Articles of Incorporation and Section 603 of the California
General Corporation Law, any action which may be taken at any annual or special
meeting of shareholders may be taken without a meeting and without prior notice
if a consent in writing, setting forth the action so taken, is signed by the
holders of the outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted, or their
proxies; provided, however, that the board of directors of this corporation, by
resolution, shall have previously approved any such action. All such consents
shall be filed with the Secretary of the corporation and shall be maintained in
the corporate records. Provided, however, that (1) unless the consents of all
shareholders entitled to vote have been solicited in writing, notice of any
shareholder approval without a meeting by less than unanimous written consent
shall be given, as provided by Section 603(b) of the California Corporations
Code, and (2) in the case of election of directors, such a consent shall be
effective only if signed by the holders of all outstanding shares entitled to
vote for the election of directors; provided, however, that subject to
applicable law, a director may be elected at any time to fill a vacancy on the
Board of Directors that has not been filled by the directors, by the written
consent of the holders of a majority of the outstanding shares entitled to vote
for the election of directors. Any written consent may be revoked by a writing
received by the Secretary of the corporation prior to the time that written
consents of the number of shares required to authorize the proposed action have
been filed with the Secretary.
Unless a record date for voting purposes be fixed as provided in Section 10 of
the Article, the record date for determining shareholders entitled to give
consent pursuant to this Section 12, when no prior action by the Board has been
taken, shall be the day on which the first written consent is given.
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
SJNB FINANCIAL CORP.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Shareholders of SJNB Financial Corp., a California corporation (the
"Corporation") dated April 16, 1998, and revoking any proxy heretofore given,
hereby constitutes and appoints Douglas L. Shen, Diane P. Rubino and F. Jack
Gorry, or any of them, with full power of substitution, as attorney and proxy to
appear and vote all of the shares of common stock of the Corporation standing in
the name of the undersigned which the undersigned could vote if personally
present and acting at the Annual Meeting of Shareholders of the Corporation to
be held in the Main Dining Room at The San Jose Country Club, 15571 Alum Rock
Avenue, San Jose, California on May 27, 1998 at 10:00 a.m. local time, or at any
adjournments thereof, upon the following items as set forth in the Notice of
Annual Meeting and more fully described in the Proxy Statement.
1. Election of Directors.
FOR ALL nominees(except as marked to the contrary below) __
WITHHOLD AUTHORITY __
R.S. Akamine, R.A. Archer, A.V. Bruno, R. Diridon, F.J. Gorry, J.R. Kenny,
A.K. Lund, L. Oneal, D.P. Rubino, D. L. Shen, G.S. Vandeweghe
(Instructions: To withhold a vote for one or more nominees, strike a line
through that nominee's name. To vote for all nominees except one whose name is
struck, check "FOR." To vote against all nominees named above, check "WITHHOLD
AUTHORITY.")
2. Approval of Amendment to 1996 Stock Option Plan
FOR __ AGAINST __ ABSTAIN __
3. Approval of Amendment to Articles of Incorporation concerning shareholder
action by written consent and elimination of cumulative voting.
FOR __ AGAINST __ ABSTAIN __
4. Ratification of Accountants. To ratify the appointment of KPMG Peat Marwick
LLP as independent certified public accountants for the Company for 1998.
FOR __ AGAINST __ ABSTAIN __
5. Other Business. The proxies are authorized to vote in their discretion on
such other matters as may properly come before the meeting of any adjournment
thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER HEREIN SPECIFIED
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS INDICATED, THIS PROXY WILL BE
VOTED FOR ALL NOMINEES LISTED IN PROPOSAL 1, IN FAVOR OF PROPOSAL 2, IN FAVOR OF
PROPOSAL 3, IN FAVOR OF PROPOSAL 4 AND IN ACCORDANCE WITH THE DISCRETION OF
THE PROXIES ON ANY OTHER MATTERS TO COME BEFORE THE ANNUAL MEETING.
Dated , 1998
(Signature)
(Signature)
(This proxy should be marked,dated, signed by the shareholder(s)
exactly as his or her name appears hereon and returned promptly
in the enclosed evelope. Executors, administrators, guardians,
officers of the corporation and others signing in a fiduciary
capacity should state their full titles as such. If shares are
held joint tenants or as community property, both should sign.)
DO NOT FOLD, STAPLE OR MUTILATE
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO MARK,
SIGN, DATE AND PROMPTLY RETURN THIS PROXY, USING THE ENCLOSED ENVELOPE.
<PAGE>
APPENDIX A
1996 STOCK OPTION PLAN OF
SJNB FINANCIAL CORP.
(Adopted Effective May 22, 1996)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
ARTICLE 1. INTRODUCTION................................................ 1
ARTICLE 2. ADMINISTRATION.............................................. 1
2.1 Committee Composition....................................... 1
2.2 Committee Responsibilities.................................. 1
ARTICLE 3. SHARES AVAILABLE FOR GRANTS................................. 1
3.1 Basic Limitation............................................ 1
3.2 Additional Shares........................................... 1
ARTICLE 4. ELIGIBILITY................................................. 1
4.1 General Rules............................................... 1
4.2 Outside Directors........................................... 2
4.3 Incentive Stock Options..................................... 2
ARTICLE 5. OPTION GRANTS............................................... 2
5.1 Stock Option Agreement...................................... 2
5.2 Number of Shares............................................ 3
5.3 Exercise Price.............................................. 3
5.4 Exercisability and Term..................................... 3
5.5 Effect of Change in Control................................. 3
5.6 Modification or Assumption of Options....................... 3
ARTICLE 6. PAYMENT FOR OPTION SHARES................................... 3
6.1 General Rule................................................ 3
6.2 Surrender of Stock.......................................... 3
6.3 Exercise/Sale............................................... 3
6.4 Exercise/Pledge............................................. 3
6.5 Promissory Note............................................. 3
6.6 Other Forms of Payment...................................... 4
ARTICLE 7. PROTECTION AGAINST DILUTION................................. 4
7.1 Adjustments................................................. 4
7.2 Reorganizations............................................. 4
ARTICLE 8. PAYMENT OF DIRECTOR'S FEES IN OPTIONS....................... 4
8.1 Effective Date.............................................. 4
8.2 Elections to Receive NSOs................................... 4
8.3 Number and Terms of NSOs.................................... 4
ARTICLE 9. LIMITATION ON RIGHTS........................................ 4
9.1 Retention Rights............................................ 4
9.2 Shareholders' Rights........................................ 4
9.3 Regulatory Requirements..................................... 4
ARTICLE 10. LIMITATION ON PAYMENTS...................................... 5
10.1 Basic Rule.................................................. 5
10.2 Reduction of Payments....................................... 5
10.3 Overpayments and Underpayments.............................. 5
10.4 Related Corporations........................................ 5
ARTICLE 11. WITHHOLDING TAXES........................................... 6
11.1 General..................................................... 6
11.2 Share Withholding........................................... 6
ARTICLE 12. ASSIGNMENT OR TRANSFER OF OPTIONS........................... 6
ARTICLE 13. FUTURE OF THE PLAN.......................................... 6
13.1 Term of the Plan............................................ 6
13.2 Amendment or Termination.................................... 6
ARTICLE 14. DEFINITIONS................................................. 6
ARTICLE 15. EXECUTION................................................... 8
</TABLE>
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1996 STOCK OPTION PLAN OF
SJNB FINANCIAL CORP.
ARTICLE 1. INTRODUCTION.
The Plan was adopted by the Board on March 27, 1996, effective as of May 22,
1996. The Plan replaces the SJNB Financial Corp. 1992 Employee Stock Option Plan
and the SJNB Financial Corp. 1992 Director Stock Option Plan.
The purpose of the Plan is to promote the long-term success of the Company
and the creation of shareholder value by (a) encouraging Key Employees to focus
on critical long-range objectives, (b) encouraging the attraction and retention
of Key Employees with exceptional qualifications and (c) linking Key Employees
directly to shareholder interests through increased stock ownership. The Plan
seeks to achieve this purpose with grants of Options, which may constitute
incentive stock options or nonstatutory stock options.
The Plan shall be governed by, and construed in accordance with, the laws of
the State of California (except their choice-of-law provisions).
ARTICLE 2. ADMINISTRATION.
2.1 COMMITTEE COMPOSITION. The Plan shall be administered by the
Committee. The Committee shall consist exclusively of two or more directors of
the Company, who shall be appointed by the Board. In addition, the composition
of the Committee shall satisfy:
(a) Such requirements as the Securities and Exchange Commission may
establish for administrators acting under plans intended to qualify for
exemption under Rule 16b-3 (or its successor) under the Exchange Act; and
(b) Such requirements as the Internal Revenue Service may establish for
outside directors acting under plans intended to qualify for exemption under
section 162(m)(4)(C) of the Code.
The Board may also appoint one or more separate committees of the Board, each
consisting of two or more directors of the Company who need not satisfy the
foregoing requirements. Such committees may administer the Plan with respect to
Key Employees who are not subject to section 16 of the Exchange Act or section
162(m) of the Code, may grant Options under the Plan to such Key Employees and
may determine all terms of such Options.
2.2 COMMITTEE RESPONSIBILITIES. The Committee shall (a) select the Key
Employees who are to receive Options under the Plan, (b) determine the type,
number, vesting requirements and other features and conditions of such Options,
(c) interpret the Plan and (d) make all other decisions relating to the
operation of the Plan. The Committee may adopt such rules or guidelines as it
deems appropriate to implement the Plan. The Committee's determinations under
the Plan shall be final and binding on all persons.
ARTICLE 3. SHARES AVAILABLE FOR GRANTS.
3.1 BASIC LIMITATION. The aggregate number of Options awarded under the
Plan shall not exceed 310,000, subject to Section 3.2. No grants shall be made
under the Predecessor Plan after May 22, 1996. The limitation of this Section
3.1 shall be subject to adjustment pursuant to Article 7.
3.2 ADDITIONAL SHARES. If an Option granted under this Plan or the
Predecessor Plan is forfeited or terminates for any other reason before being
exercised in full, then the Common Shares corresponding to the unexercised
portion of such Option shall become available for new grants under this Plan.
ARTICLE 4. ELIGIBILITY.
4.1 GENERAL RULES. Only Key Employees shall be eligible for designation as
Optionees by the Committee. Key Employees who are Outside Directors shall only
be eligible for the grant of the NSOs described in Section 4.2 and for making an
election described in Article 8.
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<PAGE>
4.2 OUTSIDE DIRECTORS. Any other provision of the Plan notwithstanding,
the participation of Outside Directors in the Plan shall be subject to the
following conditions:
(a) Outside Directors shall receive no Options except as described in
this Section 4.2 and Article 8.
(b) Each Outside Director who serves as a member of the Board on June 1,
1996, shall receive a one-time grant of an NSO covering 5,000 Common Shares
(subject to adjustment under Article 7). Such NSO shall be granted on June
1, 1996.
(c) Each Outside Director who serves as a member of the Board on March 1
of any year after 1996 shall receive an NSO covering 5,000 Shares (subject
to adjustment under Article 7).
(d) Each NSO granted to an Outside Director under this Section 4.2 shall
become exercisable in four installments at 12-month intervals over the
48-month period following the date of grant. The first installment shall
consist of 40% of the Common Shares subject to such NSO, and each of the
three subsequent installments shall consist of 20% of the Common Shares
subject to such NSO. All NSOs granted to an Outside Director under this
Section 4.2 shall become exercisable in full in the event of:
(i) The termination of such Outside Director's service because of
death, total and permanent disability or retirement at or after age 70;
or
(ii) A Change in Control with respect to the Company.
(e) The Exercise Price under all NSOs granted to an Outside Director
under this Section 4.2 shall be equal to 100% of the Fair Market Value of a
Common Share on the date of grant, payable in one of the forms described in
Sections 6.1, 6.2, 6.3 and 6.4.
(f) All NSOs granted to an Outside Director under this Section 4.2
shall terminate on the earliest of:
(i) The 10th anniversary of the date of grant;
(ii) The date three months after the termination of such Outside
Director's service for any reason other than death or total and permanent
disability; or
(iii) The date 12 months after the termination of such Outside
Director's service because of death or total and permanent disability.
4.3 INCENTIVE STOCK OPTIONS. A Key Employee who owns more than 10% of the
total combined voting power of all classes of outstanding stock of the Company
or any of its Parents or Subsidiaries shall not be eligible for the grant of an
ISO unless the requirements set forth in Section 422(c)(6) of the Code are
satisfied.
ARTICLE 5. OPTION GRANTS.
5.1 STOCK OPTION AGREEMENT. Each grant of an Option under the Plan shall
be evidenced by a Stock Option Agreement between the Optionee and the Company.
Such Option shall be subject to all applicable terms of the Plan and may be
subject to any other terms that are not inconsistent with the Plan. The Stock
Option Agreement shall specify whether the Option is an ISO or an NSO. The
provisions of the various Stock Option Agreements entered into under the Plan
need not be identical. Options may be granted in consideration of a cash payment
or in consideration of a reduction in the Optionee's other compensation. A Stock
Option Agreement may provide that new Options will be granted automatically to
the Optionee when he or she exercises the prior Options and pays the exercise
price in the form described in Section 6.2.
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<PAGE>
5.2 NUMBER OF SHARES. Each Stock Option Agreement shall specify the number
of Common Shares subject to the Option and shall provide for the adjustment of
such number in accordance with Article 7. Options granted to any Optionee in a
single calendar year shall in no event cover more than 100,000 Common Shares,
subject to adjustment in accordance with Article 7.
5.3 EXERCISE PRICE. Each Stock Option Agreement shall specify the Exercise
Price; provided that the Exercise Price under an ISO shall in no event be less
than 100% of the Fair Market Value of a Common Share on the date of grant. In
the case of an NSO, a Stock Option Agreement may specify an Exercise Price that
varies in accordance with a predetermined formula while the NSO is outstanding.
5.4 EXERCISABILITY AND TERM. Each Stock Option Agreement shall specify the
date when all or any installment of the Option is to become exercisable. The
Stock Option Agreement shall also specify the term of the Option; provided that
the term of an ISO shall in no event exceed 10 years from the date of grant. A
Stock Option Agreement may provide for accelerated exercisability in the event
of the Optionee's death, disability or retirement or other events and may
provide for expiration prior to the end of its term in the event of the
termination of the Optionee's service.
5.5 EFFECT OF CHANGE IN CONTROL. The Committee may determine, at the time
of granting an Option or thereafter, that such Option shall become fully
exercisable as to all Common Shares subject to such Option in the event that a
Change in Control occurs with respect to the Company.
5.6 MODIFICATION OR ASSUMPTION OF OPTIONS. Within the limitations of the
Plan, the Committee may modify, extend or assume outstanding options or may
accept the cancellation of outstanding options (whether granted by the Company
or by another issuer) in return for the grant of new options for the same or a
different number of shares and at the same or a different exercise price. The
foregoing notwithstanding, no modification of an Option shall, without the
consent of the Optionee, alter or impair his or her rights or obligations under
such Option.
ARTICLE 6. PAYMENT FOR OPTION SHARES.
6.1 GENERAL RULE. The entire Exercise Price of Common Shares issued upon
exercise of Options shall be payable in cash at the time when such Common Shares
are purchased, except as follows:
(a) In the case of an ISO granted under the Plan, payment shall be made
only pursuant to the express provisions of the applicable Stock Option
Agreement. The Stock Option Agreement may specify that payment may be made
in any form(s) described in this Article 6.
(b) In the case of an NSO, the Committee may at any time accept payment
in any form(s) described in this Article 6.
6.2 SURRENDER OF STOCK. To the extent that this Section 6.2 is applicable,
payment for all or any part of the Exercise Price may be made with Common Shares
which have already been owned by the Optionee for more than six months. Such
Common Shares shall be valued at their Fair Market Value on the date when the
new Common Shares are purchased under the Plan.
6.3 EXERCISE/SALE. To the extent that this Section 6.3 is applicable,
payment may be made by the delivery (on a form prescribed by the Company) of an
irrevocable direction to a securities broker approved by the Company to sell
Common Shares and to deliver all or part of the sales proceeds to the Company in
payment of all or part of the Exercise Price and any withholding taxes.
6.4 EXERCISE/PLEDGE. To the extent that this Section 6.4 is applicable,
payment may be made by the delivery (on a form prescribed by the Company) of an
irrevocable direction to pledge Common Shares to a securities broker or lender
approved by the Company, as security for a loan, and to deliver all or part of
the loan proceeds to the Company in payment of all or part of the Exercise Price
and any withholding taxes.
6.5 PROMISSORY NOTE. To the extent that this Section 6.5 is applicable,
payment may be made with a full-recourse promissory note.
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<PAGE>
6.6 OTHER FORMS OF PAYMENT. To the extent that this Section 6.6 is
applicable, payment may be made in any other form that is consistent with
applicable laws, regulations and rules.
ARTICLE 7. PROTECTION AGAINST DILUTION.
7.1 ADJUSTMENTS. In the event of a subdivision of the outstanding Common
Shares, a declaration of a dividend payable in Common Shares, a declaration of a
dividend payable in a form other than Common Shares in an amount that has a
material effect on the price of Common Shares, a combination or consolidation of
the outstanding Common Shares (by reclassification or otherwise) into a lesser
number of Common Shares, a recapitalization, a spinoff or a similar occurrence,
the Committee shall make such adjustments as it, in its sole discretion, deems
appropriate in one or more of (a) the number of Options available for future
grants under Article 3, (b) the limitation set forth in Section 5.2, (c) the
number of NSOs to be granted to Outside Directors under Section 4.2, (d) the
number of Common Shares covered by each outstanding Option or (e) the Exercise
Price under each outstanding Option. Except as provided in this Article 7, an
Optionee shall have no rights by reason of any issue by the Company of stock of
any class or securities convertible into stock of any class, any subdivision or
consolidation of shares of stock of any class, the payment of any stock dividend
or any other increase or decrease in the number of shares of stock of any class.
7.2 REORGANIZATIONS. In the event that the Company is a party to a merger
or other reorganization, outstanding Options shall be subject to the agreement
of merger or reorganization. Such agreement may provide, without limitation, for
the assumption of outstanding Options by the surviving corporation or its
parent, for their continuation by the Company (if the Company is a surviving
corporation), for accelerated vesting and accelerated expiration, or for
settlement in cash.
ARTICLE 8. PAYMENT OF DIRECTOR'S FEES IN OPTIONS.
8.1 EFFECTIVE DATE. No provision of this Article 8 shall be effective
unless and until the Board has determined to implement such provision.
8.2 ELECTIONS TO RECEIVE NSOS. An Outside Director may elect to receive
his or her annual retainer payments and meeting fees from the Company in the
form of cash or NSOs, or a combination thereof, as determined by the Board. Such
NSOs shall be issued under the Plan. An election under this Article 8 shall be
filed with the Company on the prescribed form.
8.3 NUMBER AND TERMS OF NSOS. The number of NSOs to be granted to Outside
Directors in lieu of annual retainers and meeting fees that would otherwise be
paid in cash shall be calculated in a manner determined by the Board. The terms
of such NSOs shall also be determined by the Board.
ARTICLE 9. LIMITATION ON RIGHTS.
9.1 RETENTION RIGHTS. Neither the Plan nor any Option granted under the
Plan shall be deemed to give any individual a right to remain an employee or
director of the Company, a Parent or a Subsidiary. The Company and its Parents
and Subsidiaries reserve the right to terminate the service of any employee or
director at any time, with or without cause, subject to applicable laws, the
Company's certificate of incorporation and by-laws and a written employment
agreement (if any).
9.2 SHAREHOLDERS' RIGHTS. An Optionee shall have no dividend rights,
voting rights or other rights as a shareholder with respect to any Common Shares
covered by his or her Option prior to the issuance of a stock certificate for
such Common Shares. No adjustment shall be made for cash dividends or other
rights for which the record date is prior to the date when such certificate is
issued, except as expressly provided in Article 7.
9.3 REGULATORY REQUIREMENTS. Any other provision of the Plan
notwithstanding, the obligation of the Company to issue Common Shares under the
Plan shall be subject to all applicable laws, rules and regulations and such
approval by any regulatory body as may be required. The Company reserves the
right to restrict, in whole or in part, the delivery of Common Shares pursuant
to any Option prior to the satisfaction of all legal requirements relating to
the issuance of such Common Shares, to their registration, qualification or
listing or to an exemption from registration, qualification or listing.
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<PAGE>
ARTICLE 10. LIMITATION ON PAYMENTS.
10.1 BASIC RULE. Any provision of the Plan to the contrary
notwithstanding, in the event that the independent auditors most recently
selected by the Board (the "Auditors") determine that any payment or transfer by
the Company under the Plan to or for the benefit of an Optionee (a "Payment")
would be nondeductible by the Company for federal income tax purposes because of
the provisions concerning "excess parachute payments" in section 280G of the
Code, then the aggregate present value of all Payments shall be reduced (but not
below zero) to the Reduced Amount; provided that the Committee, at the time of
granting an Option or at any time thereafter, may specify in writing that such
Option shall not be so reduced and shall not be subject to this Article 10. For
purposes of this Article 10, the "Reduced Amount" shall be the amount, expressed
as a present value, which maximizes the aggregate present value of the Payments
without causing any Payment to be nondeductible by the Company because of
Section 280G of the Code.
10.2 REDUCTION OF PAYMENTS. If the Auditors determine that any Payment
would be nondeductible by the Company because of Section 280G of the Code, then
the Company shall promptly give the Optionee notice to that effect and a copy of
the detailed calculation thereof and of the Reduced Amount, and the Optionee may
then elect, in his or her sole discretion, which and how much of the Payments
shall be eliminated or reduced (as long as after such election the aggregate
present value of the Payments equals the Reduced Amount) and shall advise the
Company in writing of his or her election within 10 days of receipt of notice.
If no such election is made by the Optionee within such 10-day period, then the
Company may elect which and how much of the Payments shall be eliminated or
reduced (as long as after such election the aggregate present value of the
Payments equals the Reduced Amount) and shall notify the Optionee promptly of
such election. For purposes of this Article 10, the present value shall be
determined in accordance with Section 280G(d)(4) of the Code. All determinations
made by the Auditors under this Article 10 shall be binding upon the Company and
the Optionee and shall be made within 60 days of the date when a Payment becomes
payable or transferable. As promptly as practicable following such determination
and the elections hereunder, the Company shall pay or transfer to or for the
benefit of the Optionee such amounts as are then due to him or her under the
Plan and shall promptly pay or transfer to or for the benefit of the Optionee in
the future such amounts as become due to him or her under the Plan.
10.3 OVERPAYMENTS AND UNDERPAYMENTS. As a result of uncertainty in the
application of Section 280G of the Code at the time of an initial determination
by the Auditors hereunder, it is possible that Payments will have been made by
the Company which should not have been made (an "Overpayment") or that
additional Payments which will not have been made by the Company could have been
made (an "Underpayment"), consistent in each case with the calculation of the
Reduced Amount hereunder. In the event that the Auditors, based upon the
assertion of a deficiency by the Internal Revenue Service against the Company or
the Optionee which the Auditors believe has a high probability of success,
determine that an Overpayment has been made, such Overpayment shall be treated
for all purposes as a loan to the Optionee which he or she shall repay to the
Company, together with interest at the applicable federal rate provided in
Section 7872(f)(2) of the Code; provided, however, that no amount shall be
payable by the Optionee to the Company if and to the extent that such payment
would not reduce the amount which is subject to taxation under Section 4999 of
the Code. In the event that the Auditors determine that an Underpayment has
occurred, such Underpayment shall promptly be paid or transferred by the Company
to or for the benefit of the Optionee, together with interest at the applicable
federal rate provided in Section 7872(f)(2) of the Code.
10.4 RELATED CORPORATIONS. For purposes of this Article 10, the term
"Company" shall include affiliated corporations to the extent determined by the
Auditors in accordance with Section 280G(d)(5) of the Code.
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<PAGE>
ARTICLE 11. WITHHOLDING TAXES.
11.1 GENERAL. To the extent required by applicable federal, state, local
or foreign law, an Optionee or his or her successor shall make arrangements
satisfactory to the Company for the satisfaction of any withholding tax
obligations that arise in connection with the Plan. The Company shall not be
required to issue any Common Shares until such obligations are satisfied.
11.2 SHARE WITHHOLDING. The Committee may permit an Optionee to satisfy
all or part of his or her withholding or income tax obligations by having the
Company withhold all or a portion of any Common Shares that otherwise would be
issued to him or her or by surrendering all or a portion of any Common Shares
that he or she previously acquired. Such Common Shares shall be valued at their
Fair Market Value on the date when taxes otherwise would be withheld in cash.
Any payment of taxes by assigning Common Shares to the Company may be subject to
restrictions, including any restrictions required by rules of the Securities and
Exchange Commission.
ARTICLE 12. ASSIGNMENT OR TRANSFER OF OPTIONS.
Except as provided in Article 11, an Option granted under the Plan shall not
be anticipated, assigned, attached, garnished, optioned, transferred or made
subject to any creditor's process, whether voluntarily, involuntarily or by
operation of law. An Option may be exercised during the lifetime of the Optionee
only by him or her or by his or her guardian or legal representative. Any act in
violation of this Article 12 shall be void. However, this Article 12 shall not
preclude an Optionee from designating a beneficiary who will receive any
outstanding Options in the event of the Optionee's death, nor shall it preclude
a transfer of Options by will or by the laws of descent and distribution.
ARTICLE 13. FUTURE OF THE PLAN.
13.1 TERM OF THE PLAN. The Plan, as set forth herein, was adopted on March
27, 1996, subject to the approval of the Company's shareholders at the 1996
annual meeting. The Plan shall become effective on May 22, 1996. The Plan shall
remain in effect until it is terminated under Section 13.2, except that no ISOs
shall be granted after May 21, 2006.
13.2 AMENDMENT OR TERMINATION. The Board may, at any time and for any
reason, amend or terminate the Plan, except that the provisions of Section 4.2
relating to the amount, price and timing of Option grants to Outside Directors
shall not be amended more often than permitted by Rule 16b-3 under the Exchange
Act. An amendment of the Plan shall be subject to the approval of the Company's
shareholders only to the extent required by applicable laws, regulations or
rules. No Options shall be granted under the Plan after the termination thereof.
The termination of the Plan, or any amendment thereof, shall not affect any
Option previously granted under the Plan.
ARTICLE 14. DEFINITIONS.
14.1 "BOARD" means the Company's Board of Directors, as constituted from
time to time.
14.2 "CHANGE IN CONTROL" shall mean the occurrence of any of the following
events:
(a) Approval by the shareholders of the Company of a merger or
consolidation of the Company with or into another entity or any other
corporate reorganization, if either:
(A) The Company is not the continuing or surviving entity; or
(B) More than 50% of the combined voting power of the Company's
securities outstanding immediately after such merger, consolidation or
other reorganization is owned by persons who were not shareholders of the
Company immediately prior to such merger, consolidation or other
reorganization;
(b) A change in the composition of the Board, as a result of which fewer
than one-half of the incumbent directors are directors who either:
(A) Had been directors of the Company 24 months prior to such change;
or
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(B) Were elected, or nominated for election, to the Board with the
affirmative votes of at least a majority of the directors who had been
directors of the Company 24 months prior to such change and who were
still in office at the time of the election or nomination; or
(c) Any "person" (as such term is used in sections 13(d) and 14(d) of
the Exchange Act) by the acquisition or aggregation of securities is or
becomes the beneficial owner, directly or indirectly, of securities of the
Company representing 25% or more of the combined voting power of the
Company's then outstanding securities ordinarily (and apart from rights
accruing under special circumstances) having the right to vote at elections
of directors (the "Base Capital Stock"); except that any change in the
relative beneficial ownership of the Company's securities by any person
resulting solely from a reduction in the aggregate number of outstanding
shares of Base Capital Stock, and any decrease thereafter in such person's
ownership of securities, shall be disregarded until such person increases in
any manner, directly or indirectly, such person's beneficial ownership of
any securities of the Company.
14.3 "CODE" means the Internal Revenue Code of 1986, as amended.
14.4 "COMMITTEE" means a committee of the Board, as described in Article
2.
14.5 "COMMON SHARE" means one share of the common stock of the Company.
14.6 "COMPANY" means SJNB Financial Corp., a California corporation.
14.7 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
14.8 "EXERCISE PRICE" means the amount for which one Common Share may be
purchased upon exercise of an Option, as specified in the applicable Stock
Option Agreement.
14.9 "FAIR MARKET VALUE" means the market price of Common Shares,
determined by the Committee as follows:
(a) If the Common Shares are traded over-the-counter on the date in
question but are not classified as a national market issue, then the Fair
Market Value shall be equal to the mean between the last reported
representative bid and asked prices quoted by the Nasdaq system for such
date;
(b) If the Common Shares are traded over-the-counter on the date in
question and are classified as a national market issue, then the Fair Market
Value shall be equal to the last-transaction price quoted by the Nasdaq
system for such date;
(c) If the Common Shares are traded on a stock exchange on the date in
question, then the Fair Market Value shall be equal to the closing price
reported by the applicable composite transactions report for such date; and
(d) If none of the foregoing provisions is applicable, then the Fair
Market Value shall be determined by the Committee in good faith on such
basis as it deems appropriate.
Whenever possible, the determination of Fair Market Value by the Committee shall
be based on the prices reported in the Western Edition of THE WALL STREET
JOURNAL. Such determination shall be conclusive and binding on all persons.
14.10 "ISO" means an incentive stock option described in Section 422(b) of
the Code.
14.11 "KEY EMPLOYEE" means (a) a common-law employee of the Company, a
Parent or a Subsidiary or (b) an Outside Director. Service as an Outside
Director shall be considered employment for all purposes of the Plan, except as
provided in Sections 4.2 and 4.3.
14.12 "NSO" means a stock option not described in sections 422 or 423 of
the Code.
14.13 "OPTION" means an ISO or NSO granted under the Plan and entitling
the holder to purchase one Common Share.
14.14 "OPTIONEE" means an individual or estate who holds an Option.
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14.15 "OUTSIDE DIRECTOR" shall mean a member of the Board who is not a
common-law employee of the Company, a Parent or a Subsidiary.
14.16 "PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain. A corporation that attains the status of a Parent on
a date after the adoption of the Plan shall be considered a Parent commencing as
of such date.
14.17 "PLAN" means this 1996 Stock Option Plan of SJNB Financial Corp., as
amended from time to time.
14.18 "PREDECESSOR PLAN" means the SJNB Financial Corp. 1992 Employee
Stock Option Plan and 1992 Director Stock Option Plan.
14.19 "STOCK OPTION AGREEMENT" means the agreement between the Company and
an Optionee which contains the terms, conditions and restrictions pertaining to
his or her Option.
14.20 "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain. A corporation that attains
the status of a Subsidiary on a date after the adoption of the Plan shall be
considered a Subsidiary commencing as of such date.
ARTICLE 15. EXECUTION.
To record the adoption of the Plan by the Board, the Company has caused its
duly authorized officer to affix the corporate name and seal hereto.
SJNB FINANCIAL CORP.
By
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