<PAGE>
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
WESTERN BANCORP
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials:
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]
4100 NEWPORT PLACE, SUITE 900
NEWPORT BEACH, CALIFORNIA 92660
April 1, 1998
Dear Shareholder:
You are cordially invited to attend the 1998 Annual Meeting of Shareholders
(the "Annual Meeting") of Western Bancorp (the "Company"), to be held at 11:00
a.m. on Thursday, April 30, 1998, at its executive offices, 4100 Newport Place,
Third Floor, Newport Beach, California 92660.
Enclosed are the Secretary's official Notice of the Annual Meeting, a Proxy
Statement and a form of Proxy. As described more fully in the Proxy Statement,
at the Annual Meeting you will be asked to elect nine (9) directors to serve
until the next annual meeting and to approve the amendment and restatement of
the Company's 1993 Stock Option Plan (the "Stock Option Plan"). We will also
report to you on the operations of the Company, and you will have the
opportunity to ask questions about the Company that may be of general interest
to Shareholders.
The enclosed Proxy Statement contains important information concerning the
matters to be voted on at the Annual Meeting. We hope you will take the time to
study it carefully. Your vote is very important, regardless of how many shares
you own. Even if you currently plan to attend our Annual Meeting, please
complete, sign, date and return the enclosed Proxy Card promptly in the
accompanying self-addressed, postage prepaid envelope. If you do join us at the
Annual Meeting and wish to vote in person, you may revoke your Proxy at that
time.
The other members of the Board of Directors and I look forward to seeing you
at the meeting.
Sincerely,
[SIGNATURE]
Hugh S. Smith, Jr.
CHAIRMAN OF THE BOARD
PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY CARD WHETHER OR NOT
YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING.
<PAGE>
WESTERN BANCORP
4100 NEWPORT PLACE, SUITE 900
NEWPORT BEACH, CALIFORNIA 92660
NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 30, 1998
TO THE SHAREHOLDERS OF WESTERN BANCORP:
Notice is hereby given that the 1998 Annual Meeting of Shareholders (the
"Annual Meeting") of Western Bancorp, a California corporation (the "Company"),
will be held at its executive offices, 4100 Newport Place, Third Floor, Newport
Beach, California 92660 on Thursday, April 30, 1998, at 11:00 a.m., local time,
for the following purposes:
1. To elect a board of nine (9) Directors for the Company to hold office
until the next annual meeting of Shareholders and until their respective
successors have been elected and qualified.
2. To approve the amendment and restatement of the Company's 1993 Stock
Option Plan (the "Stock Option Plan") to: (i) increase the maximum number
of shares that may be issued pursuant to the Stock Option Plan from
404,410 shares to a maximum of 1,000,000 shares in the aggregate, (ii)
limit the number of options that may be issued in any year to a single
individual in order to preserve the Company's tax deduction for
compensation paid to certain executive officers by making the grants of
stock options qualify as "performance based compensation," (iii) clarify
the events which may, among other things, cause the acceleration of the
vesting of stock options, (iv) clarify the amendment and termination
procedures, and (v) make certain other technical changes.
3. To consider and transact such other business as may properly come before
the Annual Meeting and at any adjournments or postponements thereof.
Only Shareholders of record on the books of the Company as of the close of
business on March 13, 1998 (the "Record Date"), will be entitled to notice of
and to vote at the Annual Meeting. A list of Shareholders entitled to vote will
be available for inspection at the offices of the Company, 4100 Newport Place,
Suite 900, Newport Beach, California 92660, for ten (10) days prior to the
Annual Meeting.
PLEASE READ THE ENCLOSED PROXY STATEMENT CAREFULLY.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING.
THEREFORE, WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, YOU
ARE REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED SELF-ADDRESSED, POSTAGE PREPAID ENVELOPE. IF YOU LATER FIND THAT YOU
CAN BE PRESENT OR DESIRE TO REVOKE YOUR PROXY FOR ANY REASON, YOU MAY DO SO AT
ANY TIME BEFORE THE VOTING AT THE ANNUAL MEETING.
By Order of the Board of Directors of
the Company
[SIGNATURE]
Julius G. Christensen,
SECRETARY
April 1, 1998
Newport Beach, California
<PAGE>
WESTERN BANCORP
4100 NEWPORT PLACE, SUITE 900
NEWPORT BEACH, CALIFORNIA 92660
PROXY STATEMENT RELATING TO
1998 ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 30, 1998
------------------------
This Proxy Statement is furnished in connection with the solicitation of the
enclosed Proxy by the Board of Directors (the "Board" or "Board of Directors")
of Western Bancorp, a California corporation (the "Company"), for use at the
1998 Annual Meeting of Shareholders of the Company to be held at its executive
offices, 4100 Newport Place, Third Floor, Newport Beach, California 92660, on
Thursday, April 30, 1998, beginning at 11:00 a.m., local time, and at any
adjournment or postponement thereof (the "Annual Meeting"), pursuant to the
accompanying Notice of Annual Meeting. The Shareholders of the Company will
consider (i) the election of nine (9) Directors for the Company who would serve
for the coming year, (ii) the amendment and restatement of the Company's 1993
Stock Option Plan, and (iii) any other business that properly comes before the
Annual Meeting.
------------------------
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING.
THEREFORE, WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, YOU
ARE REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED SELF-ADDRESSED, POSTAGE PREPAID ENVELOPE. IF YOU LATER FIND THAT YOU
CAN BE PRESENT OR DESIRE TO REVOKE YOUR PROXY FOR ANY REASON, YOU MAY DO SO AT
ANY TIME BEFORE THE VOTING AT THE ANNUAL MEETING.
This Proxy Statement is dated April 1, 1998 and, together with the form of
Proxy, shall first be mailed to the Company's Shareholders on or about April 1,
1998.
VOTING RIGHTS AND PROXIES
RECORD DATE AND OUTSTANDING SECURITIES
The Board has fixed the close of business on March 13, 1998, as the record
date (the "Record Date"). Only shareholders of record of the Company's common
stock, without par value (the "Common Stock"), on the books of the Company as of
the close of business on the Record Date will be entitled to notice of and to
vote at the Annual Meeting and any postponements or adjournments thereof. On the
Record Date, the Company had 15,678,960 shares of Common Stock issued and
outstanding and approximately 2,190 Shareholders of record. Each share of Common
Stock outstanding on the Record Date is entitled to one vote at the Annual
Meeting on each matter to be voted on.
QUORUM AND VOTING
The Company has appointed Arnold C. Hahn to function as the inspector of
elections of the Annual Meeting, to tabulate votes, to ascertain whether a
quorum is present and to determine the voting results on all matters presented
to the Shareholders. A majority of all outstanding shares of Common Stock
entitled to vote at the Annual Meeting, represented in person or by proxy,
constitutes a quorum for the transaction of business at the Annual Meeting.
Abstentions and broker non-votes are each included in the determination of the
number of shares present; however, they are not counted for the purpose of
determining the election of each nominee for director and are not counted as
votes in favor of the amendment to the Stock Option Plan.
1
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If a quorum is not obtained, or fewer shares of Common Stock are voted in
favor of the amendment to the Stock Option Plan than a majority of the shares
eligible to vote at the Annual Meeting in person or by proxy, it is expected
that the Annual Meeting will be postponed or adjourned for the purpose of
allowing additional time for obtaining additional proxies or votes, and at any
subsequent reconvening of the Annual Meeting, all proxies will be voted in the
same manner as such proxies would have been voted at the original convening of
the Annual Meeting (except for any proxies which have theretofore effectively
been revoked or withdrawn).
The authorized number of directors of the Company will be nine (9) and the
nominees receiving the highest number of votes at the time of the Annual
Meeting, up to the number of directors to be elected by such votes, will be
elected, assuming a quorum is present. Affirmative votes representing a majority
of shares of Common Stock present in person or represented by proxy at the
Annual Meeting and entitled to vote on the amendment and restatement of the
Stock Option Plan will be required to approve the amendment. The Stock Option
Plan is also is subject to the approval of the California Department of
Corporations.
Each holder of Common Stock will be entitled to one vote, in person or by
the proxy, for each share of Common Stock in his or her name on the books of the
Company as of the Record Date on any matter submitted to the vote of the
Shareholders, except that in connection with the election of directors, the
shares may be voted cumulatively if a candidate's or candidates' name(s) have
been properly placed in nomination prior to the voting and a Shareholder present
at the meeting has given notice of his or her intention to vote his or her
shares cumulatively. If a Shareholder has given such notice, then all
Shareholders entitled to vote for the election of directors may cumulate their
votes, and discretionary authority to cumulate votes, if necessary, is being
solicited. Cumulative voting entitles a Shareholder to give one or more nominees
as many votes as is equal to the number of directors to be elected multiplied by
the number of shares owned by such Shareholder, or to distribute his or her
votes on the same principle between two or more nominees as he or she sees fit.
If cumulative voting occurs, proxies provided to management's proxy holders will
be voted to elect as many of the Company's nominees as possible.
Shares of Common Stock represented by proxies properly executed and received
by the Company in time to be voted at the Annual Meeting will be voted in
accordance with the instructions indicated on the proxies and, if no
instructions are indicated, will be voted "FOR" the amendment to the Stock
Option Plan and, in the case of the election of directors of the Company, will
be voted equally "FOR" each of the nine (9) candidates named in this Proxy
Statement at the Annual Meeting or any adjournment or postponement thereof. All
proxies voted "FOR" such matters, including proxies on which no instructions are
indicated, may, at the discretion of the proxy holder, be voted "FOR" a motion
to adjourn or postpone the Annual Meeting to another time and/or place for the
purpose of soliciting additional proxies or otherwise.
The board is not currently aware of any business to be acted upon at the
Annual Meeting other than as described herein. If, however, other matters are
properly brought before the Annual Meeting, persons appointed as proxies will
have discretion to vote or act thereon in their best judgment.
REVOCATION OF PROXIES AND SOLICITATION OF PROXIES
The presence of a Shareholder at the Annual Meeting (or at any postponement
or adjournment thereof) will not automatically revoke such Shareholder's proxy.
However, a Shareholder may revoke a proxy at any time prior to its exercise by
(a) delivery to the inspector of elections or the Secretary of the Company of a
written notice of revocation prior to the Annual Meeting (or, if the Annual
Meeting is adjourned or postponed, prior to the time the adjourned or postponed
meeting is actually held); (b) delivery to the inspector of elections or the
Secretary of the Company prior the Annual Meeting (or, if the Annual Meeting is
adjourned or postponed, prior to the time the adjourned or postponed meeting is
actually held) of a duly executed proxy bearing a later date; or (c) attending
the Annual Meeting (or, if the
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<PAGE>
Annual Meeting is adjourned or postponed, by attending the adjourned or postpone
meeting) and filing a written notice of revocation with the inspector of
elections or the Secretary prior to the taking of votes on any matter thereat.
Subject to such revocation, all shares represented by valid proxies will be
voted at the Annual Meeting in accordance with the specifications on such
proxies. If no specifications are given by the Shareholder executing the Proxy
Card, valid proxies will be voted to elect the persons nominated for election to
the Board of Directors of the Company listed on the Proxy Card, to approve the
amendment and restatement of the Company's Stock Option Plan, and in the
discretion of the appointed proxies to vote upon such other matters as may
properly come before the Annual Meeting.
Under the Company's Restated Bylaws and Rule 14a-8 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), shareholders may not
present proposals for action, at the Annual Meeting unless written notice
thereof, containing the information required by such Restated Bylaws and Rule
14a-8, was delivered to the Secretary of the Company no later than January 16,
1998. No such shareholder proposals were received by such date.
Proxies may be solicited by mail, personal interview, telephone and telecopy
by Directors, officers and employees of the Company, and its subsidiaries on a
part-time basis and for no additional compensation. The entire cost of
soliciting proxies under this Proxy Statement will be borne by the Company and
will include amounts paid in reimbursement to banks, brokerage firms,
custodians, nominees and others for their expenses in forwarding soliciting
material to the beneficial owners of the Common Stock held of record by such
person.
Any written revocation of Proxy or other related communications in
connection with this Proxy Statement, and requests for additional copies of this
Proxy Statement or the Proxy, should be addressed to Julius G. Christensen,
Secretary, Western Bancorp, 4100 Newport Place, Suite 900, Newport Beach,
California 92660. If you have any questions or need further assistance in voting
your shares, please call the General Counsel of the Company at (714) 863-2459.
ELECTION OF DIRECTORS
(ITEM NO. 1 ON PROXY CARD)
At the Company's Annual Meeting, Shareholders will be asked to vote on the
election of nine (9) Directors who will constitute the full Board of Directors
of the Company. The nine (9) nominees receiving the highest number of votes from
holders of shares of the Common Stock of the Company represented and voting at
the Annual Meeting will be elected to the Board. Unless a nominee other than the
nominees listed below is properly nominated, abstentions and broker non-votes
will not have an effect on the election of the nominees listed below. Each
Director so elected will hold office until the next annual meeting and until his
successor is elected and qualified.
GENERAL
Each Proxy received will be voted for the election of the persons named
below, unless the Shareholder signing such Proxy withholds authority to vote for
one or more of these nominees in the manner described on the Proxy. Each nominee
has consented to being named in this Proxy Statement and to serve if elected.
All of the nominees are currently serving as directors of the Company. Although
it is not contemplated that any nominee named below will decline or be unable to
serve as a Director, in the event any nominee declines or is unable to serve as
a Director, the proxies will be voted by the proxy holders as directed by the
Board of Directors.
There are no family relationships between any Director, nominee or executive
officer and any other Director, nominee or executive officer of the Company.
Except as described in this Proxy Statement, there are no arrangements or
understandings between any Director, nominee or executive officer and any other
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person pursuant to which he has been or will be selected as a Director and/or
executive officer of the Company.
INFORMATION REGARDING THE NOMINEES FOR THE BOARD OF DIRECTORS OF THE COMPANY
The following is a list of and certain biographical information for the nine
(9) persons nominated by the Board of Directors of the Company for election as
Directors of the Company. All of the nominees are currently Directors of the
Company. Directors' ages are as of March 31, 1998.
<TABLE>
<CAPTION>
DIRECTOR
OF
COMPANY
NAME AGE POSITION WITH COMPANY SINCE
- --------------------------------- --- ----------------------------------------------------------------- -------
<S> <C> <C> <C>
Aubrey L. Austin................. 51 Director; Chairman, President and Chief Executive Officer of 1998
Santa Monica Bank
Rice E. Brown.................... 60 Director 1988
John M. Eggemeyer................ 52 Director 1997
William C. Greenbeck............. 50 Director 1997
Robert L. McKay.................. 67 Director 1997
Hugh S. Smith, Jr................ 67 Chairman and Director 1996
Mark H. Stuenkel................. 45 Director; President and Chief Executive Officer of Southern 1997
California Bank
Matthew P. Wagner................ 41 Director; President and Chief Executive Officer 1996
Dale E. Walter................... 63 Director 1996
</TABLE>
AUBREY L. AUSTIN currently serves as Chairman, President and Chief Executive
Officer of Santa Monica Bank (formerly Western Bank), a wholly-owned subsidiary
of the Company (after the acquisition of Santa Monica Bank by the Company,
"SMB"). In 1977 Mr. Austin joined Santa Monica Bank, which merged with and into
Western Bank in January 1998. In January 1990 Mr. Austin was named President of
Santa Monica Bank and in August 1993 was appointed to the additional position of
Chief Executive Officer. Mr. Austin also served on the Board of Directors of
Santa Monica Bank since 1985.
RICE E. BROWN, MSFS is a registered investment advisor, registered principal
and President of the firm Rice Brown Financial Services Inc. which has been in
business for over 35 years. His primary focus is in the area of money management
using fee asset basis and estate planning. He is also the former President of
the National Association of Life Underwriters, a Washington, D.C. based
professional money management group.
JOHN M. EGGEMEYER is an investor and advisor to financial institutions. From
1992 to 1994, Mr. Eggemeyer was a principal of Mabon Securities Corp., an
investment bank. From 1990 to the present, Mr. Eggemeyer has been the President
of Belle Plaine Partners, Inc. He is also the President of Castle Creek Capital
L.L.C., a registered bank holding company, and Belle Plaine Financial L.L.C., a
registered broker/dealer. He currently serves as a Director for each of the
following companies: The Enterprise Fund, Rancho Santa Fe National Bank, TCF
National Bank-Illinois, and TCF Financial Corporation.
WILLIAM C. GREENBECK, a developer and manager of industrial and commercial
real property, is, and since 1975 has been, a Managing General Partner of Downey
Land Limited. Mr. Greenbeck served as a Director and Secretary of SC Bancorp
(which merged with and into the Company in October 1997(the "SCB Merger")) from
1981 to 1997; he also served on the Board of Southern California Bank ("SCB")
from 1982 to 1997 and from 1984 served as its Secretary.
ROBERT L. MCKAY has been a private investor in Orange County, California
since 1981 where he oversees his investments in venture capital and real estate.
From 1966 to 1981, Mr. McKay was President of Taco Bell, Inc. From 1992 to 1997,
Mr. McKay served as a Director of California Commercial Bankshares ("CCB").
4
<PAGE>
HUGH S. SMITH, JR. currently serves as the Chairman of the Board of the
Company and on the Board of Directors of each of the Company's bank
subsidiaries. From September 1996 to December 1997, Mr. Smith also served as
Chief Executive Officer of the Company. Prior to September 30, 1996, Mr. Smith
was Chairman of the Board and Chief Executive Officer of Western Bank, a
position he held for 23 years.
MARK H. STUENKEL currently serves as President and Chief Executive Officer
of SCB and is a member of the Board of Directors of SCB. Mr. Stuenkel joined
National Bank of Southern California ("NBSC"), a wholly owned subsidiary of CCB
and the Company prior to its merger with and into SCB, as a Senior Credit
Officer in 1982. In 1988, he was named President of NBSC and in 1997 was named
to the additional position of Chief Executive Officer. Mr. Stuenkel also served
as Senior Vice President of CCB from 1982 to 1991 and as Executive Vice
President from 1991 to 1997. Prior to joining CCB and NBSC in 1982, Mr. Stuenkel
held various positions with Security Pacific National Bank.
MATTHEW P. WAGNER is the President and Chief Executive Officer of the
Company. Mr. Wagner also serves on the Board of Directors of each of the
Company's bank subsidiaries. In October 1996, Mr. Wagner was elected President
and Chief Executive Officer of Western Bank, positions he held until January
1998. In February 1997, Mr. Wagner was appointed to the post of President of the
Company, and in December 1997 he was appointed Chief Executive Officer of the
Company. Prior to joining the Company in 1996, Mr. Wagner was an Executive Vice
President with U.S. Bancorp in Minneapolis, Minnesota since 1991 and Senior Vice
President since 1985.
DALE E. WALTER has over 35 years of banking experience having served as
Chief Executive Officer of several Southern California independent banks: Mr.
Walter served as President and Chief Executive Officer of the Bank of Industry
from 1980 to June 1992; as Chairman and Chief Executive Officer of Commerce
Bancorp from January 1993 to July 1994; and as President and Chief Executive
Officer of Guardian Bank from October 1994 to February 1995. From February 1996
to the present, Mr. Walter has operated a wholesale golf travel company. Mr.
Walter currently serves as a Director of First Community Bank of the Desert.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM NO. 1
ELECTION OF THE NOMINEES LISTED ABOVE AS DIRECTORS.
CERTAIN INFORMATION CONCERNING THE BOARD OF
DIRECTORS AND ITS COMMITTEES
During the fiscal year ended December 31, 1997 ("Fiscal 1997"), the Board of
Directors held sixteen (16) regularly scheduled and special meetings. All
Directors attended at least 75% of the meetings of the Board of Directors during
the time they were Directors of the Company. In Fiscal 1997, the Company had two
(2) committees of the Board of Directors: the Executive Committee and the Audit
Committee. These committees meet both formally and informally, and the members
of the committees speak frequently with each other.
The Executive Committee currently consists of John M. Eggemeyer, William C.
Greenbeck, Hugh S. Smith, Jr., Matthew P. Wagner and Dale E. Walter. The
Executive Committee has all the powers of the full Board, except that it is not
authorized to: (i) take any action, the approval of which, under the CGCL
requires shareholder approval; (ii) fill vacancies on the Board of Directors or
any committee thereof; (iii) fix the compensation of the directors of members of
any committee thereof; (iv) amend or repeal the bylaws or adopt new bylaws; (v)
amend or repeal any resolution of the Board of Directors which by its express
terms is not amendable or repealable; (vi) make distributions to shareholders,
except at a rate or in periodic amounts or within a price range determined by
the Board of Directors; or (vii) appoint any other committee of the Board of
Directors or member of any committees. The Executive Committee had no formal
meetings in Fiscal 1997.
5
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The Audit Committee currently consists of Rice E. Brown, John M. Eggemeyer,
Robert L. McKay, John W. Rose, and Dale E. Walter. The Audit Committee
recommends to the Board for its approval a certified public accounting firm to
conduct the Company's annual audit. The Audit Committee will also (i) confer
from time to time with the Company's certified public accountants regarding
their audit work and the details thereof, (ii) review management letters of the
Company's certified public accounting firm, (iii) meet and consult with the
Company's executive and financial officers to discuss accounting policies,
internal controls and procedures and implement recommendations of the Board
relating to financial matters, (iv) review staffing of the Company's accounting
and financial departments and make recommendations to the Board relating to
these departments, and (v) provide assistance and recommendations to the Board
with respect to the general financial needs, policies and practices of the
Company. The Audit Committee had three (3) formal meetings in Fiscal 1997.
New committees may be added, existing committees may be disbanded, and the
charter or composition of any committee may be modified at any time in the
discretion of the Board.
COMPENSATION OF DIRECTORS
The Board of Directors of the Company approved the following fees to be paid
to outside directors of the Company:
<TABLE>
<S> <C>
Annual Retainer: $5,000 and options equal to $15,000 divided by the
market price of Company Common Stock at the time
of grant
Regular Meeting Fee: $750
Special Meeting Fee: $300
Committee Meeting Fee: $300
</TABLE>
During 1997, directors fees were paid and options granted according to the
above schedule.
On May 16, 1995, the Board of Directors approved the 1995 Directors Deferred
Compensation Plan (the "Plan") which was approved by shareholders on July 17,
1995. The Plan is effective for fees earned on and after July 1, 1995. No
compensation has been awarded under the Plan.
All Directors are entitled to receive reimbursement for expenses incurred in
connection with service on the Board or Board committees. In addition, all
Directors are eligible to participate in and receive option grants under the
Stock Option Plan.
EXECUTIVE OFFICERS OF THE COMPANY
Each of the Executive Officers of the Company holds office at the pleasure
of the Board of Directors, subject to any rights he or she may have under any
employment agreement.
6
<PAGE>
The following table sets forth, as to each of the persons who currently
serves as an Executive Officer of the Company, such person's age, such person's
current position with the Company, and the period during which the person has
served in such position:
<TABLE>
<CAPTION>
YEAR
HIRED
BY
NAME AGE POSITION WITH COMPANY COMPANY
- --------------------------------- --- ----------------------------------------------------------------- -------
<S> <C> <C> <C>
Robert M. Borgman................ 50 Executive Vice President and Chief Credit Officer 1997
Suzanne R. Brennan............... 47 Executive Vice President--Operations 1997
Julius G. Christensen............ 32 Executive Vice President, General Counsel and Secretary 1997
Arnold C. Hahn................... 46 Executive Vice President and Chief Financial Officer 1996
Matthew P. Wagner................ 41 President and Chief Executive Officer 1996
</TABLE>
ROBERT M. BORGMAN is currently the Chief Credit Officer of the Company. Mr.
Borgman also serves on the Board of Directors of each of the Company's bank
subsidiaries. Prior to joining the Company in August 1997, Mr. Borgman was the
founder and President and Chief Executive Officer of National Business Finance,
Inc., a national commercial finance and factoring organization headquartered in
Denver, Colorado from 1987 to 1997. During the period from 1978 to 1987, Mr.
Borgman held the position of Senior Vice President and Manager of Commercial
Lending at First Interstate Bank of Denver.
SUZANNE R. BRENNAN has served as Executive Vice President Operations of the
Company since July 1997. Prior to joining the Company, Ms. Brennan was the
Senior Vice President of Corporate Trust Operations at U.S. Bancorp in
Minneapolis, Minnesota from October 1994. From November 1986 to October 1994,
Ms. Brennan managed securities processing for U.S. Bancorp. She also has
managerial operations experience with the Federal Reserve Bank of Minneapolis
and the University of Minnesota.
JULIUS G. CHRISTENSEN has served as Executive Vice President and General
Counsel of the Company since September 1997 and as Secretary of the Company
since October 1997. Mr. Christensen also serves on the Board of Directors of
each of the Company's bank subsidiaries. Prior to joining the Company, Mr.
Christensen spent two years in practice with the law firm of Sullivan & Cromwell
engaged in merger and acquisitions and securities law practice. From 1992 to
1995, Mr. Christensen was a candidate for a Juris Doctorate degree from Harvard
Law School.
ARNOLD C. HAHN has served as Executive Vice President and Chief Financial
Officer of the Company since November 1996. Mr. Hahn also serves on the Board of
Directors of each of the Company's bank subsidiaries. Mr. Hahn served as
Secretary of the Company from November 1996 to October 1997. Prior to joining
the Company, Mr. Hahn spent six years as a Senior Vice President of Finance for
U.S. Bancorp in Minneapolis, Minnesota. Prior to joining U.S. Bancorp, Mr. Hahn
was a partner with Ernst & Young.
MATTHEW P. WAGNER is the President and Chief Executive Officer of the
Company. Mr. Wagner also serves on the Board of Directors of the Company and
each of the Company's bank subsidiaries. In October 1996, Mr. Wagner was elected
President and Chief Executive Officer of Western Bank, positions he held until
January 1998. In February 1997, Mr. Wagner was appointed to the post of
President of the Company, and in December 1997 he was appointed to the
additional post of Chief Executive Officer of the Company. Prior to joining the
Company in 1996, Mr. Wagner was Executive Vice President with U.S. Bancorp in
Minneapolis, Minnesota since 1991 and Senior Vice President since 1985.
7
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EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following Compensation Table reflects all compensation for: Mr. Hugh
Smith, Jr., the Company's former chief executive officer, Mr. Matthew P. Wagner,
the Company's current chief executive officer, and the four (4) other most
highly compensated executive officers receiving a total annual salary and bonus
of $100,000 or more.
COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------
AWARDS
ANNUAL COMPENSATION ------------------------ PAYOUTS
------------------------------------- (G) ---------
(E) (F) SECURITIES (I)
OTHER RESTRICTED UNDERLYING (H) ALL
(A) (B) (C) (D) ANNUAL STOCK OPTIONS/ LTIP OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMP($)(1) AWARD($) SARS PAYOUTS COMP($)
- ----------------------------- --------- ----------- ----------- ----------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Hugh S. Smith, Jr.(2) ....... 1997 187,000 40,000 23,529
Chairman and Former 1996 188,260 50,000
Chief Executive Officer 1995 186,292 100,000
Matthew P. Wagner ........... 1997 175,000 175,000 21,000 200,000(3)
President and Chief 1996 43,750 100,000 58,823
Executive Officer
Aubrey L. Austin(4) ......... 1997 237,756 119,597 4,500
President and Chief 1996 237,748 96,162 3,517
Executive Officer of SMB 1995 224,200 17,840
Mark H. Stuenkel(5) ......... 1997 163,414 83,738 32,647 1,318
President and Chief 1996 161,027 76,125 1,062
Executive Officer of SCB 1995 144,333
Arnold C. Hahn .............. 1997 150,000 120,000 15,000
Executive Vice President 1996 25,029 100,000 15,882
and Chief Financial Officer
Suzanne R. Brennan .......... 1997 63,179 40,000 9,188
Executive Vice President--
Operations
</TABLE>
- --------------------------
(1) None of the named officers had other annual compensation in excess of
$50,000 or 10 percent of the total annual salary and bonus reported for any
of the years shown.
(2) Mr. Smith's compensation for 1996 and 1995 includes amounts received from
Western Bank prior to the Company's acquisition of Western Bank by the
Company on September 30, 1996.
(3) The amount reflects reimbursement of costs incurred in connection with Mr.
Wagner's relocation to California.
(4) Mr. Austin joined the Company on January 27, 1998 as Chairman, President and
Chief Executive Officer of Santa Monica Bank. Mr. Austin's compensation
reflects amounts paid to him by Santa Monica Bank prior to the acquisition
of Santa Monica Bank by the Company (the "SMB Acquisition"). Other Annual
Compensation includes Santa Monica Bank's matching 401(k) contribution. All
Other Compensation represents amounts contributed by Santa Monica Bank to
the Profit Sharing Plan and allocated to Mr. Austin's vested or unvested
account under such plan.
(5) Mr. Stuenkel joined the Company as President and Chief Executive Officer of
NBSC on June 4, 1997 as part of the merger between the Company and CCB (the
"CCB Merger"). His compensation includes amounts received from CCB prior to
the CCB Merger. Other Annual Compensation includes the CCB's matching 401(k)
contribution. All Other Compensation for Mr. Stuenkel represents the
executives' portion of amount contributed to CCB's Stock Bonus Plan, which
was 100 percent funded by the CCB. The contributions were made at the
discretion of the Board of Directors of CCB. The distributions are made 2
years after the earlier of termination, retirement, death or disability. Mr.
Stuenkel's 1996 compensation included $16,000 of vacation pay.
8
<PAGE>
OPTION/SAR GRANTS DURING FISCAL 1997
The following table lists the stock options granted to the executive
officers of the Company during Fiscal 1997:
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SAR APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(B)
OPTIONS/SAR EMPLOYEES IN PRICE PER EXPIRATION --------------------
NAME GRANTED(#) FISCAL YEAR SHARE DATE 5%($) 10%($)
- ------------------------------------- ------------- --------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Matthew P. Wagner.................... 21,000 11.3% $ 32.375 12/23/2002 187,837 415,070
Mark H. Stuenkel(1).................. 17,647 17.5% $ 19.64 6/4/2007 501,393 1,003,680
15,000 $ 32.375 12/23/2002 134,169 296,479
Arnold C. Hahn....................... 15,000 8.0% $ 32.375 12/23/2002 134,169 296,479
Robert M. Borgman.................... 5,000 6.4% $ 32.00 8/19/2002- 65,362 156,676
7,000 $ 32.375 8/19/2007 62,612 138,357
12/23/2002
Suzanne R. Brennan................... 2,188 4.9% $ 32.00 8/19/2002 19,344 42,745
7,000 $ 32.375 12/23/2002 62,612 138,357
Julius G. Christensen................ 3,000 4.3% $ 29.875 10/10/2002 24,762 54,717
5,000 $ 32.375 12/23/2002 44,723 98,826
No stock options were granted to Hugh S. Smith, Jr. or Aubrey L. Austin in 1997.
</TABLE>
- --------------------------
(1) On June 4, 1997, the effective date of the CCB Merger, Mr. Stuenkel was
granted 17,647 options at an exercise price of $19.64, the market price of
Company Common Stock on December 19, 1996, the day the Company executed the
definitive agreement pursuant to which the CCB Merger was effected. On June
4, 1997, the market price of Company Common Stock was $29.50, resulting in a
value to Mr. Stuenkel of $173,999 at 0% market appreciation.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-
OPTIONS/SARS AT THE-MONEY OPTIONS/SARS
FY-END AT FY-END($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- ------------------------------------------ ----------------- ----------- --------------- -----------------------
<S> <C> <C> <C> <C>
Hugh S. Smith, Jr......................... 7,130 129,231 713/15,686 13,533/297,720
Aubrey L. Austin.......................... N/A N/A 0/0 0/0
Mark H. Stuenkel.......................... 7,500 138,600 32,916/35,981 882,324/333,490
Arnold C. Hahn............................ 0 5,294/25,588 100,480/210,335
Matthew P. Wagner......................... 0 19,608/60,215 372,160/757,426
Robert M. Borgman......................... 0 0/12,000 0/9,375
Suzanne R. Brennan........................ 0 0/9,188 0/6,563
Julius G. Christensen..................... 0 0/8,000 0/12,500
</TABLE>
9
<PAGE>
EMPLOYMENT AGREEMENTS AND CHANGE-IN-CONTROL ARRANGEMENTS
The company has entered into or assumed through acquisitions certain
employment contracts, including the following:
MARK H. STUENKEL
In 1988 NBSC entered into an Executive Salary Continuation Agreement with
Mr. Stuenkel (the "Salary Continuation Agreement") the terms of which the
Company agreed to honor as part of the CCB Merger. Pursuant to the Salary
Continuation Agreement, Mr. Stuenkel is entitled to receive benefits upon his
retirement, death or disability or upon termination of service with SCB prior
thereto unless Mr. Stuenkel's employment with SCB is terminated either (i)
voluntarily by Mr. Stuenkel, other than for "good reason" (as defined in the
Salary Continuation Agreement) or (ii) by SCB for "cause" (as defined in the
Salary Continuation Agreement), in which case no benefits or payments will be
paid pursuant to the Salary Continuation Agreement. Mr. Stuenkel's retirement
benefits are fully vested in the Salary Continuation Agreement.
Under the terms of the Salary Continuation Agreement, Mr. Stuenkel or his
estate will be entitled to receive $62,500 annually, for a period of fifteen
years after his retirement from SCB or upon his death. If Mr. Stuenkel's
employment with SCB is terminated because of disability prior to retirement, Mr.
Stuenkel (or his estate) will be entitled to receive his benefits under the
Salary Continuation Agreement upon retirement or death or to elect to receive a
disability benefit in an amount equal to the present value of Mr. Stuenkel's
retirement benefits under his Salary Continuation Agreement. The Salary
Continuation Agreement also had provisions which became effective upon the
occurrence of a Change in Control (as defined therein) of CCB or NBSC. In such
event, the Salary Continuation Agreement provided that it would become an
employment agreement with a three-year term. The CCB Merger constituted a Change
of Control; therefore, the Salary Continuation Agreement became an employment
Agreement with a three-year term pursuant to which, during such period of
employment Mr. Stuenkel is entitled to receive $165,000 per year as annual base
salary, as well as regular bonuses and other benefits. Such amount is in
addition to the amounts that he would be paid under the Salary Continuation
Agreement upon retirement. The Salary Continuation Agreement also provides for
Mr. Stuenkel to receive salary and bonus increases annually and all non-cash
forms of compensation and benefits which he received prior to the Change in
Control during such term.
If Mr. Stuenkel either terminates his employment for "good reason" or is
terminated by SCB for any reason other than "cause," then SCB is required to pay
cash compensation to Mr. Stuenkel during his remaining term; provided that Mr.
Stuenkel will receive no less than two times the annual compensation to which he
otherwise would be entitled. Moreover, all employee benefit plans and programs
in which Mr. Stuenkel is entitled to participate will continue for the remainder
of Mr. Stuenkel's term and Mr. Stuenkel will continue to be entitled to receive
his retirement, death and disability benefits as provided in the Salary
Continuation Agreement.
AUBREY L. AUSTIN
In connection with the SMB Acquisition, the Company, SMB and Mr. Austin
entered into an Employment Agreement, dated as of December 31, 1997, pursuant to
which SMB agreed to employ Mr. Austin as Chairman, President and Chief Executive
Officer of SMB for a period of three years. SMB agreed to pay Mr. Austin a base
salary equal to the base annual salary paid to Mr. Austin as of July 30, 1997,
subject to increase annually at the discretion of SMB. Mr. Austin will also be
considered annually by SMB for a discretionary bonus in accordance with the
compensation policies and practices of SMB.
Mr. Austin's employment agreement also provides that if SMB should terminate
the Period of Employment (as defined therein) for other than Breach or Just
Cause (each as defined therein), or if Mr. Austin should terminate the Period of
Employment for Good Cause (as defined therein), SMB will
10
<PAGE>
pay to Mr. Austin an amount equal to the sum of (a) the result of multiplying
(I) the base annually salary payable to Mr. Austin under the Employment
Agreement as of the date of termination of the Period of Employment by (ii) the
number of years (and fractions thereof) then remaining in the Period of
Employment and (b) the result of multiplying (i) the average of the bonuses
payable to Mr. Austin pursuant to his employment agreement during the three
fiscal years immediately preceding the date of termination of the Period of
Employment by (ii) the number of years (and fractions thereof) then remaining in
the Period of Employment.
If Mr. Austin is terminated for Breach or Just Cause, Mr. Austin agreed that
from January 27, 1998 until the second anniversary of the date of the
termination of the Period of Employment (the "Non-Competition Period") Mr.
Austin will not (i) engage in the banking business other than on behalf of SMB
within the Designated Area (as defined therein), (ii) directly or indirectly
own, manage, operate, control, be employed by, or provide management or
consulting services in any capacity to any firm, corporation or other entity
(other than SMB) engaged in the banking business in the Designated Area (as
defined therein) or (iii) directly or indirectly solicit or otherwise
intentionally cause any employee, officer, or member of the respective boards of
directors of SMB or the Company to engage in any action prohibited under (i) or
(ii); provided that the ownership by Mr. Austin as an investor of not more than
1 percent of the outstanding shares of stock of any corporation whose stock is
listed for trading on any securities exchange or is quoted on the automated
quotation system of the National Association of Securities Dealers, Inc., or the
shares of any investment company as defined in Section 3 of the Investment Act
of 1940, as amended, will not in itself constitute a violation of Mr. Austin's
obligations under his employment agreement.
EXECUTIVE SEVERANCE PLAN
On March 19, 1998, the Company adopted the Company Executive Severance Plan
(the "Severance Plan") pursuant to which certain executives of the Company and
the subsidiary banks, including the named executive officers of the Company,
will be entitled to receive a severance payment from the Company if within 24
months after a Change of Control (as defined in the Severance Plan) an eligible
executive's employment with the Company or one of its subsidiaries terminates
for any reason other than (i) death, (ii) disability, (iii) termination by the
Company or one of its subsidiaries for Just Cause (as defined in the Severance
Plan), (iv) retirement in accordance with the normal policy of the Company, (v)
voluntary termination by such executive for other than Good Reason (as defined
in the Severance Plan), or (iv) the sale by the Company of the Subsidiary which
employed the executive before such sale, if the executive has been offered
employment with the purchaser on substantially the same terms and conditions
under which such executive was employed prior to the sale. The amount of the
Severance Payment (as defined in the Severance Plan) under the Severance Plan
will be equal to such executive's Compensation (as defined in the Severance
Plan) multiplied by a multiplier ranging from 1 to 3 depending on the
executive's employee grade. In addition, if an executive becomes eligible for a
Severance Payment, such executive will also be entitled to welfare benefits for
the Severance Period (as defined in the Severance Plan) applicable to such
executive. In order to become eligible for Severance Payments under the
Severance Plan, the executive must execute and deliver a Release (as defined in
the Severance Plan).
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
It is the duty of the Board of Directors of the Company to administer the
Company's compensation program and various incentive plans, including its Stock
Option Plan and annual bonus plan. In addition, the Board of Directors reviews
compensation levels of members of management, evaluates the performance of
management, considers management succession and related matters. Because the
composition of the Board of Directors changed substantially during fiscal 1997,
a substantial number of the compensation decisions were made before the current
Board of Directors was fully constituted. At the Company's 1997 Annual Meeting
held June 2, 1997, the following individuals were elected to the Company's Board
of
11
<PAGE>
Directors: Rice E. Brown, Joseph J. Digange, John M. Eggemeyer, John W. Rose,
Hugh S. Smith, Jr., Matthew P. Wagner, and Dale E. Walter. Upon consummation of
the CCB Merger, William H. Jacoby, Robert L. McKay and Mark H. Stuenkel were
appointed to the Board of Directors of the Company. Upon consummation of the SCB
Merger, Harold A. Beisswenger, Larry D. Hartwig, William C. Greenbeck and Donald
E. Wood were appointed to the Board of Directors of the Company. Upon
consummation of the SMB Acquisition, Aubrey L. Austin was appointed to the Board
of Directors of the Company.
Largely as a result of the acquisition activity in which the Company has
engaged in the last 18 months, the Company has grown from a Company with
approximately $60 million in assets at June 30, 1996 to a Company with close to
$1.4 billion in assets at December 31, 1997, with much of the growth taking
place in fiscal 1997. In connection with this growth, most of the senior
management of the Company was hired (in connection with strategic transactions
or otherwise) during 1997, and the compensation package for each such member of
senior management was individually negotiated based in large part on market
conditions. In particular, the compensation of Mr. Stuenkel and Mr. Austin was
negotiated and approved by the Board of Directors in connection with the CCB
Merger and SMB Acquisition, respectively. The Board of Directors has reviewed
the compensation for each of the five (5) highest paid officers for the period
during Fiscal 1997 for which such officers were employed by the Company, and in
the Board of Directors' opinion, the compensation of all officers is reasonable
in view of the Company's consolidated performance and the contribution of those
officers to that performance. With its senior management now in place, the
current Board of Directors, many of whom became directors during fiscal 1997,
intends to establish a compensation committee which will administer the
Company's compensation policies commencing with the 1998 fiscal year. The
compensation committee will develop specific policies that will apply to the
determination of compensation for all executives, including the chief executive
officer.
PERFORMANCE GRAPH
The Common Stock trades on The Nasdaq National Market-Registered Trademark-
under the symbol "WEBC." Prior to June 3, 1997, trading in the Common Stock
occurred solely "over the counter," and was not extensive. Consequently, sales
price information prior to that date consists largely of quotations by dealers
making a market in the Common Stock and may not represent actual transactions.
In addition, trading in Common Stock prior to June 3, 1997 was limited in volume
and may not be a reliable indication of its market value. As a result, the sales
price information for Common Stock in the following graph for 1993 and 1994
reflects inter-dealer prices, without adjustments for mark-ups, mark-downs or
commissions, and may not represent actual transactions. The sales price
information for 1995 and 1996 reflects the sales price of Common Stock in
certain private placements, which the Company believes is the most reliable
indicator of the value of Common Stock available at the time. The sales price
information for 1997 reflects trades of Company Common Stock on The Nasdaq
National Market-Registered Trademark-.
12
<PAGE>
The following graph shows the cumulative total return on the Common Stock
with a comparable return on the indicated indices for the last five fiscal
years. The total return on the Common Stock is determined based on the change in
the price of the Common Stock and assumes reinvestment of all dividends and an
original investment of $100. The total return on the indicated indices also
assume reinvestment of dividends and an original investment in each index of
$100 on December 31, 1992.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NASDAQ BANKS NASDAQ INDEX WEBC
<S> <C> <C> <C>
1992 100 100 100
1993 114 115 100
1994 114 112 100
1995 169 159 113
1996 223 195 138
1997 377 240 324
</TABLE>
SECTION 16 REPORTING
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and the beneficial owners of more than ten percent of Common
Stock to file with the Securities and Exchange Commission reports of initial
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Because of the complexity of the reporting rules, the
Company has assumed responsibility for preparing and filing all reports required
to be filed under Section 16(a) by the directors and executive officers. The
Company believes that during the last fiscal year all Section 16(a) filing
requirements applicable to its directors and executive officers were complied
with, except for the failure to (a) file a Form 3 for Larry D. Hartwig, a
director of the Company as of October 10, 1997 and (b) file a Form 4 for each
director and executive officer who exercised stock options in the fourth quarter
of 1997. Once the omissions were discovered the relevant forms were filed
promptly.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The shares of Company Common Stock constitute the only outstanding class of
voting securities of the Company. As of the Record Date, there were 15,678,960
shares of Common Stock outstanding and entitled to vote and approximately 2,190
shareholders of record.
The following table lists any known shareholders with beneficial ownership
of five percent (5%) or more of the outstanding Common Stock and the beneficial
ownership of Common Stock of all directors and executive officers of the Company
and all current executive officers and directors of the Company as a group.
Information with respect to beneficial ownership is based upon the Company's
records and data supplied to the Company by its shareholders as of the Record
Date. All shares are Common Stock, the only class of security outstanding.
13
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) PERCENT OF CLASS
- ------------------------------------------------------------------------- ---------------------- -----------------
<S> <C> <C>
Castle Creek Capital Partners Fund I L.P.(2) ............................ 2,289,889 14.6%
4370 La Jolla Village Drive, Suite 400
San Diego, California
Franklin Mutual Advisors, Inc.(3) ....................................... 1,297,183 8.3%
51 John F. Kennedy Parkway
Short Hills, New Jersey
Wellington Management Company, LLP(4) ................................... 928,654 5.9%
75 State Street
Boston, Massachusetts
Hugh S. Smith, Jr.(5)(8) ................................................ 23,357 0.1%
1251 Westwood Boulevard
Los Angeles, California
Matthew P. Wagner(5)(9) ................................................. 48,886 0.3%
1251 Westwood Boulevard
Los Angeles, California
Mark H. Stuenkel(5)(10) ................................................. 58,415 0.4%
4100 Newport Place, Suite 900
Newport Beach, California
Aubrey L. Austin(5) ..................................................... 21,640 0.1%
1251 4th Street
Santa Monica, California
John M. Eggemeyer(6)(11) ................................................ 2,388,232 15.1%
4370 LaJolla Village Drive, Suite 400
San Diego, California
Rice E. Brown(6)(12) .................................................... 2,347 *
27127 Calle Arroyo,
Suite 1907
Laguna Niguel, California
Robert L. McKay(6)(13) .................................................. 766,337 4.9%
11551 Plantero Drive,
Santa Ana, California
William C. Greenbeck(6)(14) ............................................. 64,307 0.4%
9530 East Imperial Highway,
Downey, California
Dale E. Walter(6)(15) ................................................... 12,142 0.1%
50096 Calle Rosarita
La Quinta, California
Arnold C. Hahn(7)(16) ................................................... 12,272 0.1%
4100 Newport Place, Suite 900
Newport Beach, California
Directors and Executive Officers as a group.............................. 3,446,722 21.8%
All nine (9) directors as a group(4)..................................... 3,434,450 21.7%
</TABLE>
- ------------------------
* Less than 0.1 percent
14
<PAGE>
(1) Beneficial owner of a security includes any person who, directly or
indirectly, through any contract, arrangement, understanding, relationship,
or otherwise has or shares: (a) voting power, which includes the power to
vote, or to direct the voting power, of such security; and/or (b)
investment power, which includes the power to dispose, or to direct the
disposition of, such security. Beneficial owner also includes any person
who has the right to acquire beneficial ownership of such security as
defined above within 60 days of the record date for the 1998 Annual
Meeting. Ownership includes vested stock options and warrants.
(2) Castle Creek Capital Partners Fund-I, L.P. (the "Fund") is the beneficial
owner of 2,256,332 shares of Common Stock and 33,557 warrants. Mr.
Eggemeyer, a Director, is a principal of the Fund.
(3) Shares of Common Stock beneficially owned by Franklin Mutual Advisors, Inc.
are held in various investment funds.
(4) Shares of Common Stock beneficially owned by Wellington Management Company,
LLP are held in various investment funds.
(5) Director and Executive Officer.
(6) Director.
(7) Executive Officer.
(8) Includes 713 shares of Common Stock which may be purchased on the exercise
of stock options.
(9) Includes 19,608 shares of Common Stock which may be purchased on the
exercise of stock options.
(10) Includes 21,666 shares of Common Stock which may be purchased on the
exercise of stock options.
(11) Includes 588 shares of Common Stock which may be purchased on the exercise
of stock options, 57,755 shares of Company Stock which may be purchased on
the exercise of warrants and 2,256,332 shares and 33,557 warrants owned by
the Fund of which Mr. Eggemeyer is a principal. Mr. Eggemeyer disclaims
any beneficial ownership of the shares of Common Stock held by the Fund
except to the extent of his interest in the Fund.
(12) Includes 784 shares of Common Stock which may be purchased on the exercise
of stock options.
(13) Includes 455 shares of Common Stock which may be purchased on the exercise
of stock options.
(14) Includes 462 shares of Common Stock which may be purchased on the exercise
of stock options.
(15) Includes 784 shares of Common Stock which may be purchased on the exercise
of stock options.
(16) Includes 5,294 shares of Common Stock which may be purchased on the
exercise of stock options.
15
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
BANKING TRANSACTIONS
Some of the directors and executive officers of the Company and its
subsidiaries, and the companies with which they are associated, are customers
of, and have had banking transactions with, the bank subsidiaries in the
ordinary course of the banks' business, and the banks expect to have banking
transactions with such persons in the future.
In the opinion of management of the Company, all loans and commitments to
lend included in such transactions were made in compliance with applicable laws
on substantially the same terms, including interest rates and collateral, as
those prevailing for comparable transactions with other persons of similar
creditworthiness, and did not involve more than a normal risk of collectibility
or present other unfavorable features. The amount of all such loans and credit
extensions, to all executive officers, directors, and principal shareholders of
the Company, together with their associates, was $1.1 million on December 31,
1997, constituting approximately 0.9 percent of the Company's equity capital
accounts on that date.
INSURANCE CONTRACTS
Certain of the Company's life insurance policies have been contracted, based
on a competitive bid, through Rice Brown Financial; Mr. Brown is an insurance
broker and a director of the Company.
INVESTMENT BANKING SERVICES
Belle Plaine Partners, Inc. and Belle Plaine Financial, L.L.C. are entities
related to the Fund which held 14.6% percent of the outstanding Company Common
Stock. John M. Eggemeyer, a director of the Company, is a principal of the Fund,
Belle Plaine Partners, Inc. and Belle Plaine Financial L.L.C.
Belle Plaine Partners, Inc. serves as a financial advisor to the Company
under an engagement letter dated May 17, 1995. In that capacity, Belle Plaine
Partners, Inc. was paid fees of $3.2 million and $1.4 in 1997 and 1996,
respectively, for evaluating and identifying potential acquisitions, including
the Western Acquisition which closed on September 30, 1996, the CCB Merger which
closed on June 4, 1997 and the SCB Merger which closed on October 10, 1997.
In addition, Belle Plaine Financial L.L.C. was paid approximately $863,000
in 1996 for services rendered in connection with certain capital raising
transactions related to the Company's strategic evolution.
THE 1998 PRIVATE PLACEMENT
In order to raise a portion of the capital necessary to fund the payment of
the cash consideration paid in the SMB Acquisition, in November 1997 the Company
entered into Standby Stock Purchase Agreements with the certain "accredited
investors" within the meaning of Rule 501(a) under the Securities Act of 1933,
as amended (the "Private Placement Investors"), pursuant to which the Private
Placement Investors committed to purchase a minimum of approximately 1,982,000
shares of Common Stock and to standby to purchase up to approximately 2,311,500
additional shares of Common Stock if requested to do so by the Company (the
"Private Placement Shares"). The purchase price of the Private Placement Shares
was $28.00 per share. The Private Placement Investors agreed to pay the purchase
price of the Private Placement Shares prior to the effective time of the SMB
Acquisition. In this private placement, the Company issued a total of 2,327,550
shares of Common Stock for $65,171,400 in the aggregate. The Private Placement
Shares were not registered under the Securities Act; however, pursuant to the
Standby Agreements, the Company agreed to file under the Securities Act a
"shelf" Registration Statement providing for the registration of the Private
Placement Shares no later than 120 days after the effective date of the SMB
Acquisition.
16
<PAGE>
Certain directors, executive officers and shareholders holding more than 5
percent of the outstanding Company Common Stock participated in this private
placement. The following table sets forth the number and the dollar value of
Private Placement Shares purchased by each such person:
<TABLE>
<CAPTION>
1998 PRIVATE PLACEMENT INVESTOR SHARES DOLLARS
- ------------------------------------------------------------------ ---------- -------------
<S> <C> <C>
Castle Creek Capital Partners Fund I-L.P.......................... 528,900 $ 14,809,200
Digange, Joseph J................................................. 4,450 124,600
Eggemeyer, John M................................................. 5,900 65,200
Franklin Mutual Advisers, Inc..................................... 528,900 14,809,200
Hahn, Arnold C.................................................... 4,700 131,600
Jacoby, William H................................................. 4,300 120,400
McKay Robert L.................................................... 41,500 1,162,000
Rose, John W...................................................... 5,900 165,200
Smith, Hugh S., Jr................................................ 5,900 165,200
Wagner, Matthew P................................................. 9,500 266,000
Walter, Dale E.................................................... 4,300 120,400
Wellington Management Company, LLP................................ 424,000 11,872,000
---------- -------------
TOTAL......................................................... 1,568,250 $ 43,911,000
---------- -------------
---------- -------------
</TABLE>
AMENDMENT AND RESTATEMENT OF THE COMPANY'S 1993 STOCK OPTION PLAN
(ITEM NO. 2 ON PROXY CARD)
The Shareholders of the Company are being asked to approve the amendment and
restatement of the Company's 1993 Stock Option Plan (the "Stock Option Plan"),
which was originally adopted by the Board of Directors of the Company on March
16, 1993 and approved at the 1993 Annual Meeting of Shareholders. On May 23,
1995 and May 15, 1996 the Board of Directors amended the Stock Option Plan,
which amendments were approved by the Shareholders at the 1995 Annual Meeting of
Shareholders and the 1996 Annual Meeting of Shareholders, respectively.
On March 19, 1998, the Board of Directors approved the amendment and
restatement of the Stock Option Plan (the "1998 Amendment") to: (i) increase the
maximum number of shares that may be issued pursuant to the Stock Option Plan
from 404,410 shares to a maximum of 1,000,000 shares in the aggregate; (ii)
limit the number of options that may be issued in any year to a single
individual in order to preserve the Company's tax deduction for compensation
paid to certain executive officers by making the grants of stock options qualify
as "performance-based compensation"; (iii) clarify the events which may, among
other things, cause the acceleration of the vesting of stock options; (iv)
clarify the amendment and termination procedures; and (v) make certain other
technical changes. The amendments reflected in the Stock Option Plan and the
reasons for such amendments are as follows.
INCREASE IN AGGREGATE NUMBER OF SHARES
Pursuant to the rules and regulations of the California Commissioner of
Corporations, the Company is entitled to have up to thirty percent (30%) of its
issued and outstanding shares contained in its stock option plan. Based on the
15,678,960 shares of Common Stock issued and outstanding as of the Record Date,
the Company would be allowed to have 4,703,688 shares of Common Stock reserved
for grants under its stock option plans. Prior to the 1998 Amendment, the Stock
Option Plan limited the maximum number of shares that may be issued upon
exercise of stock options to ten percent (10%) of the issued and outstanding
shares of the Company up to a maximum of 404,410, after giving effect to the
adjustment for the 8.5 to 1 reverse stock split (the "Reverse Stock Split")
which occurred on June 3, 1997, in connection with the CCB Merger. The Company
desires to increase the maximum number from 404,410 to 1,000,000
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which represents approximately 6.4% of the 15,678,960 shares of Common Stock
issued and outstanding on the Record Date.
The Board of Directors believes that it is necessary to increase the number
of shares of Common Stock available for issuance under the Stock Option Plan in
order to ensure that the Company maintains the ability in the future to continue
to utilize the Stock Option Plan to attract and retain highly qualified officers
and other employees by providing adequate incentives through the issuance of
stock options. As of the Record Date, the Company had issued options (either
exercised or still outstanding) covering 355,606 shares, leaving 48,804 shares
available for issuance pursuant to options that may be granted in the future
(including pursuant to ratification of option grants made in the ordinary course
to new employees). The Board believes that the number of shares currently
available for future option grants is not sufficient for its purposes, and, as a
result, the 1998 Amendment increases the shares of Common Stock available for
issuance to 1,000,000. Based on the closing price of the Company's Common Stock
on The Nasdaq National Market-Registered Trademark- on the Record Date, such
shares had an aggregate market value of approximately $39.1 million
(approximately $23.3 million of which related to the additional 595,590 shares
of Common Stock authorized for issuance under the 1998 Amendment).
PRESERVATION OF THE COMPANY'S TAX DEDUCTION FOR COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally disallows tax deductions to a publicly-traded corporation for
compensation paid to certain executive officers in excess of $1,000,000 per
officer per year. However, the deduction limit does not apply to "performance-
based compensation," as defined in Section 162(m). The 1998 Amendment limits the
number of options that can be granted to any participant in any fiscal year of
the Company to 100,000 shares of Common Stock. This limitation is designed to
enable the grants of stock options to qualify as "performance-based
compensation," and therefore preserve the Company's tax deductions. Any options
which are canceled or terminated or which expire unexercised will continue to be
counted against the 100,000 share limitation.
Section 162(m) also requires that, for grants of stock options to qualify as
"performance-based compensation," the Stock Option Plan must be administered by
a committee all of whose members are "outside directors" within the meaning of
Section 162(m) of the Code. Accordingly, the Company's tax deduction may not be
preserved if the Stock Option Plan is not administered by a committee composed
entirely of "outside directors."
CLARIFICATION OF THE ACCELERATION PROVISIONS
The Stock Option Plan has been amended to clarify the events constituting a
"Terminating Event," which would trigger an acceleration of the vesting of the
stock options in the event of a Terminating Event. Prior to the 1998 Amendment,
in the event of a Terminating Event, the optionee had the right to exercise the
stock options then outstanding at such time prior to the consummation of the
Terminating Event and for a period of not less than 30 days. The 1998 Amendment,
in addition to clarifying the circumstances that constitute Terminating Events,
enables the Board of Directors to cancel such stock options for a cash payment
equal to the excess of the fair market value of the Common Stock as of the
Terminating Event over the exercise price of such stock options. As defined in
the 1998 Amendment, a Terminating Event under the Stock Option Plan, as amended,
means: (i) the consummation of a plan of dissolution or liquidation of the
Company; (ii) the individuals who, as of the 1998 Annual Meeting, are members of
the Board of Directors (the "Incumbent Board"), cease for any reason to
constitute at least two-thirds of the members of the Board; provided, however,
that if the election, or nomination for election by the Company's shareholders,
of any new director was approved by a vote of at least two-thirds of the
Incumbent Board, such new director will, for purposes of the Stock Option Plan,
be considered as a member of the Incumbent Board; provided, further, however,
that no individual will be considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an actual or
threatened "Election Contest" as described in Rule 14a-11 promulgated under the
Exchange Act, or other
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actual or threatened solicitation of proxies or contests by or on behalf of a
person other than the Board of Directors ("Proxy Contest"), including by reason
of any agreement intended to avoid or settle any Election Contest or Proxy
Contest; (iii) the consummation of a plan of reorganization, merger or
consolidation involving the Company, except for a reorganization, merger or
consolidation where (A) the shareholders of the Company immediately prior to
such reorganization, merger or consolidation own directly or indirectly at least
70% of the combined voting power of the outstanding voting securities of the
corporation resulting from such reorganization, merger or consolidation (the
"Surviving Corporation") in substantially the same proportion as their ownership
of voting securities of the Company immediately prior to such reorganization,
merger or consolidation and (B) the individuals who are members of the Incumbent
Board immediately prior to the execution of the agreement providing for such
reorganization, merger or consolidation constitute at least two-thirds of the
members of the board of directors of the Surviving Corporation, or a corporation
beneficially directly or indirectly owning a majority of the voting securities
of the Surviving Corporation; (iv) the sale of all or substantially all of the
assets of the Company to another Person (as defined in the Stock Option Plan);
or (v) the acquisition of beneficial ownership of stock representing more than
50% of the voting power of the Company then outstanding by another Person (as
defined in the Stock Option Plan).
CLARIFICATION OF THE AMENDMENT AND TERMINATION PROCEDURES
Prior to the 1998 Amendment, the Board of Directors could at any time and
from time to time suspend, amend or terminate the Stock Option Plan and could,
with the consent of the optionee, make such modifications of the terms and
conditions of a stock option as it deemed advisable; provided that, except in
the event of a Terminating Event, no amendment or modification could be adopted
without the Company having first obtained all necessary regulatory approvals and
approvals of the holders of a majority of the shares of Common Stock if the
amendment or modification would: (a) materially increase the benefits accruing
to a participant; (b) materially increase the number of securities that may be
issued; (c) materially modify the requirements as to eligibility for
participation; (d) increase or decrease the exercise price of any stock options
granted; (e) increase the maximum term of stock options; (f) permit stock
options to be granted to any person who was not an Eligible Participant (as
defined); or (g) change any provision which would affect the qualification as an
Incentive Stock Option. The 1998 Amendment simplifies and reduces the types of
amendments and modifications that are subject to shareholder vote to: (a) any
increase of the number of shares of Common Stock which may be issued under the
Stock Option Plan and (b) any change to any provision which would affect the
qualification as an Incentive Stock Option or (c) any other change for which
shareholder approval is required pursuant to the provisions of Section 162(m) of
the Code. With the 1998 Amendment, the Stock Option Plan conforms to the
shareholder approval requirements under Section 162(m) of the Code.
CERTAIN TECHNICAL CHANGES
The 1998 Amendment also amends certain technical matters which the Board
believes are not material.
REQUIRED VOTE
Affirmative votes representing a majority of shares of Common Stock present
in person or represented by proxy at the Annual Meeting and entitled to vote on
this proposal will be required to approve this proposal and the amendment is
subject to the approval of the California Department of Corporations. The Board
of Directors reserves the right to modify the proposed amendments to comply with
any requirements of the California Department of Corporations. Abstentions will
count as votes against this proposal because they will be counted as present at
the meeting and entitled to vote on (but not for) this proposal. However, broker
non-votes will not be so considered and thus will not affect the determination
as to whether the requisite majority approval has been obtained with respect to
this proposal.
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SUMMARY OF THE STOCK OPTION PLAN, AS AMENDED BY THE 1998 AMENDMENT
The principal features of the Stock Option Plan, as amended by the 1998
Amendment, are summarized below. This summary, however, is not intended to be a
complete discussion of all of the terms of the Stock Option Plan and is subject
to and qualified in its entirety by the full text of the Stock Option Plan a
copy of which (marked to show changes) is attached hereto as Exhibit A. A copy
of the Stock Option Plan, as amended, is also available for inspection at the
Company.
The purpose of the Stock Option Plan is to strengthen the Company (including
its subsidiaries) by providing an additional means of attracting and retaining
competent managerial personnel and by providing to participants an added
incentive for high levels of performance and for unusual efforts to increase the
earnings and performance of the Company and to allow consultants, business
associates and others with an important business relationship with the Company,
an opportunity to participate in the ownership of the Company and thereby have
an interest in the success and increased value of the Company. The Board of
Directors believes that the Stock Option Plan has assisted and will continue to
assist in accomplishing these objectives by providing a means whereby all
directors, full time officers, full time key employees, consultants, business
associates and others with an important business relationship with the Company
("Eligible Participants"), may purchase shares of the Common Stock of the
Company pursuant to options granted in accordance with the Stock Option Plan.
ADMINISTRATION OF THE STOCK OPTION PLAN
The Stock Option Plan is administered by the Board of Directors or by a
stock option committee designated and selected by the Board (the "Committee")
consisting of at least two (2) and no more than five (5) persons, at least two
(2) of whom must be Directors of the Company. Regardless of whether a Committee
is selected, the Board of Directors may act as the Committee and any action
taken by the Board as such will be deemed to be action taken by the Committee.
The Board of Directors will have the right, in its sole and absolute discretion,
to remove or replace any person from or on the Committee at any time for any
reason whatsoever. In the event of any conflict between any action taken by the
Board and the Committee, the action taken by the Board will be controlling and
the action taken by the Committee will be disregarded. The terms of the Stock
Option Plan do not require the stock option committee to be composed solely of
"outside directors" within the meaning of Section 162(m) of the Code.
Any action of the Committee with respect to the administration of the Stock
Option Plan will be taken pursuant to a majority vote, or pursuant to the
unanimous written consent, of its members. Any such action taken by the
Committee in the administration of the Stock Option Plan will be valid and
binding, so long as the same is in conformity with the terms and conditions
therein. Subject to compliance with each of the terms, conditions and
restrictions set forth in the Stock Option Plan, the Committee will have the
exclusive right, in its sole and absolute discretion, to establish the terms and
conditions of any stock options granted under the Plan. The Committee, in its
sole and absolute discretion, may grant stock options to Eligible Participants
and exercisable for such number of shares of Common Stock, at such price(s) and
time(s), and on such terms and conditions as it deems advisable and specifies in
the respective grants.
SHARES SUBJECT TO THE STOCK OPTION PLAN
Prior to the 1998 Amendment, 404,410 shares of Common Stock of the Company
were authorized for issuance to Eligible Participants under the Stock Option
Plan, and as of the Record Date, an aggregate of 355,606 shares of Common Stock
have been granted under the Stock Option Plan. If the 1998 Amendment is
approved, up to an aggregate of 1,000,000 shares of Common Stock will be
authorized for issuance under the Stock Option Plan.
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If any stock option is canceled, surrendered or expire for any reason
without having been exercised, the unpurchased shares represented thereby will
be again available for grants of stock options. Shares that are not issued
before the expiration or termination of an option will thereafter be available
for future options under the Stock Option Plan. The aggregate number of shares
available under the Stock Option Plan and the number of shares subject to
outstanding options will be increased or decreased to reflect any changes in the
outstanding Common Stock of the Company by reason of any reorganization, merger,
recapitalization, reclassification, stock split, stock dividend, stock
consolidation, or other similar transaction without consideration to the
Company.
TYPE OF OPTIONS
Two types of options may be granted under the Stock Option Plan: options
intended to qualify as incentive stock options under Section 422 of the Code
("ISOs"), and options not so qualified for favorable federal income tax
treatment ("NSOs"). Each option granted will be subject to a stock option
agreement, between the participant and the Company. Such agreements will contain
such terms and provisions as the Committee may determine in its discretion, and
need not be uniform.
ELIGIBILITY AND PARTICIPATION
All directors, full-time officers, full-time key employees, consultants,
business associates and others with an important business relationship with the
Company or any subsidiary are eligible for selection to participate in the Stock
Option Plan, subject to two restrictions: (1) no ISO may be granted to any
person who, at the time of grant, is not a regular employee of the Company, and
(2) no participant may receive grants of options with respect to more than
100,000 shares of Common Stock (subject to adjustment in the event of a
reorganization, merger, recapitalization, reclassification, stock dividend,
stock split, stock consolidation, or other similar transaction without
consideration to the Company) during any fiscal year of the Company or portion
thereof. If an option is canceled, the canceled option continues to be counted
against the maximum number of shares for which options may be granted to a
participant during a fiscal year of the Company or portion thereof. Subject to
such limitations, an individual who has been granted an option may, if such
individual is otherwise eligible, be granted additional options as the Committee
may determine.
OPTION PRICE; EXERCISABILITY OF OPTIONS
The purchase price for shares of Common Stock covered by each option will be
determined by the Committee, but will not be less than one hundred percent
(100%) of the fair market value of such shares on the date of grant, or, if an
ISO is granted to a Shareholder owning 10% or more of the total combined voting
power of the Company (measured by ownership of all classes of capital stock),
not less than 110% of the fair market value of such shares on the date of grant.
However, the aggregate fair market value of shares of Common Stock (determined
at the date of grant) for which ISOs (whenever granted) are exercisable for the
first time by a participant during any calendar year must not exceed $100,000.
Any stock options granted in excess of this limitation shall be NSOs. The
purchase price of shares on the exercise of an option must be paid in full at
the time of exercise in cash or by check payable to the order of the Company,
or, subject to the prior written approval of the Committee, by the delivery of
shares of Common Stock already owned by the participant (as described in the
following paragraph) or by the participant's execution and delivery of a secured
promissory note. Each option will be exercisable according to the rate
determined by the Board or committee, except that options will be exercisable at
a minimum rate of 20% per year over a five year period.
Subject to the prior written approval of the Committee, an optionee may
exercise an option by surrendering a portion of the option being exercised and
apply the appreciated value of the shares subject to the surrendered portion of
the option to payment of the exercise price. The appreciated value is the excess
of the fair market value of the surrendered shares at the time of exercise over
the exercise price of
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the shares. The Board of Directors believes that this additional method of
exercise will encourage optionees to retain the shares of Common Stock upon
exercise of the option which would continue to provide the optionee with an
interest in the success of the Company.
DURATION OF OPTION
Unless previously terminated by the Board of Directors, the Stock Option
Plan terminates ten (10) years from the date the Stock Option Plan was adopted
by the Board of Directors of the Company, or March 16, 2003. Each option will
expire on the date specified by the Committee, but all options will expire
within ten (10) years of the date of grant. ISOs granted to Shareholders owning
10% or more of the total combined voting power of the Company (measured by
ownership of all classes of capital stock) will expire within five (5) years
from the date of grant.
TERMINATING EVENTS
Not less than thirty (30) days prior to an occurrence of any Terminating
Event, the Committee or the Board will notify each optionee of the pendency of
the Terminating Event. Upon the effective date of the Terminating Event, the
Stock Option Plan will automatically terminate and all stock options theretofore
granted will terminate, unless provision is made to continue the Stock Option
Plan or assume or substitute the stock options granted under the Stock Option
Plan. If the Stock Option Plan and unexercised stock options terminate pursuant
to a Terminating Event, all optionees will have the right to exercise the stock
options then outstanding prior to the consummation of such Terminating Event,
unless the Board of Directors have provided for the cancellation of such stock
options in exchange for a cash payment equal to the excess of the fair market
value of the Common Stock as of the date of the Terminating Event over the
exercise price of such stock option.
TERMINATION OF EMPLOYMENT; DEATH OR DISABILITY
If a participant ceases to be an Eligible Participant for any reason other
than death or disability, the participant's vested stock options will expire on
the earlier of the expiration date therefor or the date which is three months
(unless otherwise determined by the Committee in an individual option agreement)
after the participant's status as an Eligible Participant is terminated. If a
participant dies or becomes disabled, the participant's vested stock options
will expire on the earlier of the expiration date therefor or the date which is
12 months (unless otherwise determined by the Committee in an individual option
agreement) after the date of death or disability. After a participant's death,
any stock options which remained exercisable on the date of death may be
exercised by the person or persons to whom the participant's rights pass by will
or the laws of descent and distribution. In no event may the option be exercised
after the end of the original option term.
RIGHTS AS A SHAREHOLDER; ASSIGNABILITY
The recipient of an option will have no rights as a shareholder with respect
to shares of Common Stock covered by the option until the date such recipient
becomes a holder of record of such shares pursuant to exercise of such options.
Options granted under the Stock Option Plan are not transferable by the
optionee other than by will or the laws of descent and distribution, and will be
exercisable during the optionee's lifetime only by such optionee or his guardian
or legal representative. Under the current terms of the Stock Option Plan, in
the event of termination of employment as a result of the optionee's disability
or in the event of an employee's death during the exercise period, the option
will, to the extent exercisable, remain exercisable for up to one (1) year (but
not beyond the end of the original option term) by the disabled optionee or, in
the event of death, by the person or persons to whom rights under the option
have passed by will or the laws of descent and distribution.
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AMENDMENT AND TERMINATION OF THE STOCK OPTION PLAN
The Board reserves the right to suspend, amend, or terminate the Stock
Option Plan, and, with the consent of the optionee, make such modifications of
the terms and conditions of his or her option, as it deems advisable, except
that the Board may not, without further approval of a majority of the shares of
the Company's Common Stock then outstanding, increase the maximum number of
shares covered by the Stock Option Plan or change any provision of the Plan
which would affect the qualification as an ISO under the Stock Option Plan or
make any other change for which shareholder approval is required pursuant to
Section 162(m) of the Code.
MISCELLANEOUS PROVISIONS
No shares of Common Stock will be issued by the Company upon exercise of any
stock option, and an optionee will have no rights or claim to such shares,
unless and until: (a) payment in full for the stock option has been received by
the Company; (b) all applicable registration requirements of the Securities Act
of 1933, all applicable listing requirements of securities exchanges or
associations on which the Common Stock is then listed or traded, and all other
requirements of law or regulatory body have been fully complied with; and (c)
any applicable income tax withholding requirements have been complied with.
Shares of the Company's Common Stock to be issued upon exercise of stock
options need not be registered with the SEC. However, the Company has applied or
will apply for a permit from the California Commissioner of Corporations, and
the Company intends to register the Common Stock reserved for issuance under the
Plan with the SEC prior to issuing any of its Common Stock upon exercise
thereof.
IF THE CHANGES EFFECTED BY THE PROPOSED AMENDMENTS ARE APPROVED BY THE
SHAREHOLDERS OF THE COMPANY AND THE CALIFORNIA DEPARTMENT OF CORPORATIONS, THE
COMPANY MAY MODIFY THE OUTSTANDING OPTIONS UNDER THE STOCK OPTION PLAN
CONSISTENT WITH THE PROPOSED AMENDMENTS.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion of federal income tax consequences does not purport
to be a complete analysis of all of the potential tax effects of the Stock
Option Plan. It is based upon laws, regulations, rulings and decisions now in
effect, all of which are subject to change. The recently enacted Taxpayer Relief
Act of 1997 has changed various tax rules, including the rules governing the
taxation of capital gains, and there is some uncertainty regarding the impact of
the Taxpayer Relief Act of 1997 on the Stock Option Plan. No information is
provided with respect to persons who are not citizens or residents of the United
States, or as to foreign, state or local tax laws, or estate and gift tax
considerations. In addition, the tax consequences to a particular participant
may be affected by matters not discussed herein. ACCORDINGLY, EACH PARTICIPANT
IS URGED TO CONSULT HIS TAX ADVISOR CONCERNING THE TAX CONSEQUENCES TO HIM OF
THE STOCK OPTION PLAN, INCLUDING THE EFFECTS OF STATE, LOCAL, FOREIGN AND OTHER
TAX LAWS AND OF CHANGES IN THE TAX LAWS.
The Stock Option Plan is not subject to any of the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA") and is not qualified
under Section 401(a) of the Code.
NON-QUALIFIED STOCK OPTIONS
Under current federal income tax law, the grant of an NSO has no tax effect
on the Company or the optionee to whom it is granted. If the shares of Common
Stock received on the exercise of an NSO are not subject to restrictions on
transfer or risk of forfeiture, the exercise of the NSO will result in ordinary
income to the optionee equal to the excess of the fair market value of the
shares at the time of exercise over the option price. The optionee's tax basis
in the shares will be equal to the aggregate exercise price paid by the optionee
plus the amount of taxable income recognized upon the exercise of the option.
Upon
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any subsequent disposition of the shares, any gain or loss recognized by the
optionee will be treated as capital gain or loss and will be long-term capital
gain or loss if the shares are held for the applicable period after exercise. At
the time of recognition of ordinary income by the optionee upon exercise, the
Company will normally be allowed to take a deduction for federal income tax
purposes in an amount equal to such recognized income.
INCENTIVE STOCK OPTIONS
The federal income tax consequences associated with ISOs are generally more
favorable to the optionee and less favorable to the Company than those
associated with NSOs. Under current federal income tax law, the grant of an ISO
does not result in income to the optionee or in a deduction for the Company at
the time of the grant. Generally, the exercise of an ISO will not result in
income for the optionee if the optionee does not dispose of the shares within
two years after the date of grant nor within one year after the date of
exercise. If these requirements are met, the basis of the shares of Common Stock
upon a later disposition will be the option price, any gain or loss on the later
disposition will be taxed to the optionee as capital gain or loss (which will be
long-term capital gain or loss if the shares are held for the applicable period
after exercise), and the Company will not be entitled to a deduction. The excess
of the market value on the exercise date over the option price is an adjustment
to regular taxable income in determining alternative minimum taxable income,
which could cause the optionee to be subject to the alternative minimum tax.
Under the Taxpayer Relief Act of 1997, the alternative minimum tax rate may be
higher than the rate on long-term capital gains. If the optionee disposes of the
shares before the expiration of either of the holding periods described above (a
"Disqualifying Disposition"), the optionee will have compensation taxable as
ordinary income, and the Company will normally be entitled to a deduction, equal
to the lesser of (a) the fair market value of the shares on the exercise date
minus the option price, or (b) the amount realized on the disposition minus the
option price. If the price realized in any such Disqualifying Disposition of the
shares exceeds the fair market value of the shares on the exercise date, the
excess will be treated as long-term or short-term capital gain, depending on the
optionee's holding period for the shares. The Company is not entitled to any
deduction corresponding to any capital gains realized by a participant.
$1,000,000 LIMIT ON DEDUCTIBLE COMPENSATION
Section 162(m) of the Code provides that any publicly-traded corporation
will be denied a deduction for compensation paid to certain executive officers
to the extent that the compensation exceeds $1,000,000 per officer per year.
However, the deduction limit does not apply to "performance-based compensation,"
as defined in Section 162(m). Compensation is performance-based compensation if
(i) the compensation is payable on account of the attainment of one or more
performance goals; (ii) the performance goals are established by a compensation
committee of the board of directors consisting of "outside directors"; (iii) the
material terms of the compensation and the performance goals are disclosed to
and approved by the shareholders in a separate vote; and (iv) the compensation
committee certifies that the performance goals have been satisfied. The Company
believes that, if the shareholders approve the Stock Option Plan and the stock
option committee is composed entirely of "outside directors" the stock options
granted under the Stock Option Plan will satisfy the requirements to be treated
as performance-based compensation, and accordingly will not be subject to the
deduction limit of Section 162(m) of the Code.
EXCESS PARACHUTE PAYMENTS
Under Section 4999 of the Code, certain officers, shareholders, and
highly-compensated individuals ("Disqualified Individuals") will be subject to
an excise tax (in addition to federal income taxes) of 20% of the amount of
certain "excess parachute payments" which they receive as a result of a change
in control of the Company. Furthermore, Section 280G of the Code prevents the
Company from taking a deduction for any "excess parachute payments." The cash
out or acceleration of the vesting of stock options upon a
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Terminating Event may cause the holders of such stock options who are
Disqualified Individuals to recognize certain amounts as "excess parachute
payments" on which they must pay the 20% excise tax, and for which the Company
will be denied a tax deduction.
SPECIAL RULES; WITHHOLDING OF TAXES
Special tax rules may apply to a participant who is subject to Section 16 of
the Exchange Act as an officer, director or shareholder of the Company. Other
special tax rules will apply if a participant exercises a stock option by
delivering shares of Common Stock which he or she already owns, or through a
"cashless exercise."
The Company may take whatever steps the Committee deems appropriate to
comply with any applicable withholding tax obligation, including requiring any
participant to pay the amount of any applicable withholding tax to the Company
in cash. The Committee may, in its discretion, authorize "cashless withholding."
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" ITEM NO. 2
THE AMENDMENT AND RESTATEMENT OF THE STOCK OPTION PLAN.
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of KPMG Peat Marwick LLP ("KPMG") has served as the Company's
independent certified public accountants for Fiscal 1997. Representatives of
KPMG are expected to be present at the Annual Meeting and will be available to
respond to appropriate questions and to make any statements they desire.
OTHER BUSINESS
The Company does not know of any other business to be presented at the
Annual Meeting and does not intend to bring any other matters before the Annual
Meeting. However, if any other matters properly come before the Annual Meeting,
the persons named in the accompanying proxy are empowered, in the absence of
contrary instructions, to vote according to their best judgment.
ANNUAL REPORT
The Annual Report to Shareholders of the Company for the year ended December
31, 1997 is being mailed concurrently with this Proxy Statement to all
shareholders of record on the Record Date. The Annual Report is not to be
regarded as proxy solicitation materials or as a communication by means of which
any solicitation is to be made.
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SHAREHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
In order to be eligible for inclusion in the Company's proxy statement and
proxy card for the next Annual Meeting of Shareholders pursuant to Rule 14a-8
under the Exchange Act, shareholder proposals must be received by the Secretary
of the Company at its principal executive offices no later than December 2,
1998. However, in order for such shareholder proposals to be eligible to be
brought before the shareholders at the next annual meeting, the shareholder
submitting such proposals must also comply with the procedures, including the
deadlines, required by Article II of the Company's Bylaws. Shareholder
nominations of Directors are not shareholder proposals within the meaning of
Rule 14a-8 and are not eligible for inclusion in the Company's proxy statement.
By Order of the Board Directors
[SIGNATURE]
Julius G. Christensen,
SECRETARY
Newport Beach, California
April 1, 1998
PLEASE PROMPTLY VOTE, DATE, SIGN AND RETURN THE ENCLOSED PROXY, WHETHER OR NOT
YOU EXPECT TO ATTEND THE MEETING. A RETURN SELF-ADDRESSED ENVELOPE IS ENCLOSED
FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
A PROMPT RESPONSE IS HELPFUL AND YOUR COOPERATION WILL BE APPRECIATED. AT ANY
TIME BEFORE A VOTE AT THE ANNUAL MEETING YOU MAY REVOKE YOUR PROXY BY (1) A
LATER DATED PROXY OR A WRITTEN NOTICE OF REVOCATION DELIVERED TO THE INSPECTOR
OF ELECTIONS OR THE SECRETARY OF THE COMPANY OR (2) ADVISING THE INSPECTOR OF
ELECTIONS OR THE SECRETARY OF THE COMPANY AT THE MEETING THAT YOU ELECT TO VOTE
IN PERSON. ATTENDANCE AT THE MEETING WILL NOT IN AND OF ITSELF REVOKE A PROXY.
THE ANNUAL MEETING IS ON APRIL 30, 1998. PLEASE RETURN YOUR PROXY IN TIME.
26
<PAGE>
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EXHIBIT A
WESTERN BANCORP
1993 STOCK OPTION PLAN
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<PAGE>
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FOR EDGAR FILING, LANGUAGE THAT WILL BE ADDED IS PRECEDED BY A "<*>" AND
FOLLOWED BY A "</*>". LANGUAGE THAT WILL BE ELIMINATED IS PRECEDED BY A "<#>"
AND FOLLOWED BY A "</#>".
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<#>MONARCH</#> <*>WESTERN</*> BANCORP
1993 STOCK OPTION PLAN
<*>(</*>ADOPTED MARCH 16, 1993 <*>AS THE MONARCH BANCORP</*>
<*>1993 STOCK OPTION PLAN)</*>
<*>(</*>AMENDED MAY 23, 1995<*>)</*>
<*>(</*>AMENDED MAY 15, 1996<*>)</*>
<*>(AMENDED MARCH 19, 1998)</*>
1. PURPOSE<*>.</*>
The purpose of the <#>Monarch</#> <*>Western</*> Bancorp 1993 Stock Option
Plan (the "Plan") is to strengthen <#>Monarch</#> <*>Western</*> Bancorp (the
"Corporation") and those corporations which are or hereafter become subsidiary
corporations by providing <*>an</*> additional means of attracting and retaining
competent managerial personnel and by providing to participating directors,
officers, and key employees added incentives for high levels of performance and
for unusual efforts to increase the earnings of the Corporation and any
Subsidiary <#>corporations</#> <*>as defined herein</*>; and to allow
consultants, business associates and others with business relationships with the
<*>Corporation, an</*> opportunity to participate in the ownership of the
Corporation and thereby have an interest in the success and increased value of
the Corporation. The Plan seeks to accomplish these purposes and achieve these
results by providing a means whereby such directors, officers, key employees,
consultants, business associates and others may purchase shares of Common Stock
<*>as defined herein</*> of the Corporation pursuant to Stock Options <*>as
defined herein</*> granted in accordance with this Plan.
Stock Options granted pursuant to this Plan are intended to be<*>,</*>
Incentive Stock Options <*>as defined herein</*> or Non-Qualified Stock Options
<*>as defined herein</*>, as shall be determined and designated by the Stock
Option Committee <*>as defined herein</*> upon the grant of each Stock Option
hereunder.
<*>The provisions of the Plan as amended shall apply to all Options
previously issued pursuant to the Plan.</*>
2. DEFINITIONS, ETC.
For the purposes of this Plan, the following terms shall have the following
meanings:
<#>a.</#><*>(a)</*> "COMMON STOCK." This term shall mean shares of the
Corporation's no par value common stock, subject to adjustment pursuant to
<#>Paragraph 14</#> <*>Section 13</*> (Adjustment Upon Changes in
Capitalization) hereunder.
<#>b.</#><*>(b)</*> "CORPORATION." This term shall mean <#>Monarch</#>
<*>Western</*> Bancorp, a California corporation.
<#>c.</#><*>(c)</*> "ELIGIBLE PARTICIPANT." This term shall mean: (i)
all directors of the Corporation or any Subsidiary; (ii) all full time
officers (whether or not they are also directors) of the Corporation or any
Subsidiary; (iii) all full time key employees (as such persons may be
determined by the Stock Option Committee from time to time) of the
Corporation or any Subsidiary<#>,</#><*>;</*> and (iv) consultants, business
associates or others with important business relationships with the
Corporation.
<#>d.</#><*>(d)</*> "FAIR MARKET VALUE." This term shall mean<*>, as of
any date,</*> the fair market value of the Corporation's Common Stock <#>as
determined in accordance with the Commissioner of Corporations Regulation
Section 260.140.50, which generally provides that in determining whether the
price is fair, predominant weight will be given to the following: (a) if
securities of the same class are publicly traded on an active market of
substantial depth, the recent market price of such securities; (b) if the
securities of the same class have not been so publicly traded, the price at
which securities of reasonable comparable corporations (if any) in the same
industry are being traded, subject to
<PAGE>
appropriate adjustments for the dissimilarities between the corporations
being compared; or (c) in</#> <*>determined as follows:</*>
<*>(i)</*> <*>If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation, the
National Market System of the National Association of Securities Dealers,
Inc. Automated Quotation ("NASDAQ") System, the Fair Market Value of a
share of Common Stock shall be the closing sales price for such stock (or
the closing bid, if no sales are reported) as quoted on such system or
exchange (or the exchange with the greatest volume of trading in the
Common Stock) on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other
source as the Stock Option Committee deems reliable;</*>
<*>(ii)</*> <*>If the Common Stock is quoted on the NASDAQ System
(but not on the National Market System thereof) or is regularly quoted by
recognized securities dealers but selling prices are not reported, the
Fair Market Value of a share of Common Stock shall be the mean between
the high bid and low asked prices for the Common Stock on the last market
trading day prior to the day of determination, as reported in the Wall
Street journal or such other source as the Stock Option Committee deems
reliable;</*>
<*>(iii)</*> <*>In</*> the absence of any <*>established market for
the Common Stock, the Fair Market Value shall be determined in good faith
by the Stock Option Committee</*> <#>reliable indicator under subsection
(a) or (b), the earnings history, book value and prospect of the issuer
in light of market conditions generally.</#>
<#>e.</#><*>(e)</*> "INCENTIVE STOCK OPTION." This term shall mean a
Stock Option which is an "Incentive Stock Option" within the meaning of
Section <#>422A</#> <*>422</*> of the Internal Revenue Code of 1986, as
amended <*>(the "Code")</*>.
<#>f.</#><*>(f)</*> "NON-QUALIFIED STOCK OPTION." This term shall mean a
Stock Option which is not an Incentive Stock <#>option</#> <*>Option</*>.
<#>g.</#><*>(g)</*> "OPTION SHARES." This term shall mean shares of
Common Stock which are covered by and subject to any outstanding unexercised
Stock Option granted pursuant to this Plan.
<#>h.</#><*>(h)</*> "OPTIONEE." This term shall mean any Eligible
Participant to whom a stock option has been granted pursuant to this Plan,
provided that at least part of the Stock Option is outstanding and
unexercised.
<#>i.</#><*>(i)</*> "PLAN." This term shall mean the <#>Monarch</#>
<*>Western</*> Bancorp 1993 Stock Option Plan <*>(originally adopted as the
Monarch Bancorp 1993 Stock Option Plan)</*> as embodied herein and as may be
amended from time to time in accordance with the terms hereof and applicable
law.
<#>j.</#><*>(j)</*> "STOCK OPTION." This term shall mean the right to
purchase from the Corporation a specified number of shares of Common Stock
under the Plan at a price and upon terms and conditions determined by the
Stock Option Committee.
<#>k.</#><*>(k)</*> "STOCK OPTION COMMITTEE." The Board of Directors of
the Corporation may select and designate a stock option committee consisting
of at least <#>three</#> <*>two</*> and not more than five persons, at least
two of whom are directors, having full authority to act in the matters.
Regardless of whether a Stock Option Committee is selected, the Board of
Directors may act as the Stock Option Committee and any action taken by the
Board of Directors as such shall be deemed to be action taken by the Stock
Option Committee. All references in the Plan to the "Stock Option Committee"
shall be deemed references to the Board of Directors acting as a stock
option committee and to a duly appointed Stock Option Committee, if there be
one. In the event of any conflict between any action taken by the Board of
Directors acting as a Stock Option Committee and any action taken by a duly
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<PAGE>
appointed Stock Option Committee, the action taken by the Board of Directors
shall be controlling and the action taken by the duly appointed Stock Option
Committee shall be disregarded.
<#>1.</#><*>(l)</*> "SUBSIDIARY." This term shall mean any subsidiary
corporation of the Corporation as such term is defined in Section
<#>425(f)</#> <*>424(f)</*> of the Internal Revenue Code of 1986, as
amended.
<*>(m)</*> <*>"TERMINATING EVENT." </*><*>This term shall mean:</*>
<*>(i)</*> <*>the consummation of a plan of dissolution or
liquidation of the Corporation;</*>
<*>(ii)</*> <*>the individuals who, as of the 1998 Annual Meeting of
Shareholders of the Corporation, are members of the Board of Directors of
the Corporation ("Incumbent Board"), cease for any reason to constitute
at least two-thirds of the members of the Board; provided, however, that
if the election, or nomination for election by the Corporation's
shareholders, of any new director was approved by a vote of at least
two-thirds of the Incumbent Board, such new director shall, for purposes
of this Plan, be considered as a member of the Incumbent Board; provided,
further, however, that no individual shall be considered a member of the
Incumbent Board if such individual initially assumed office as a result
of either an actual or threatened "Election Contest" (as described in
Rule 14a-11 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) or other actual or threatened solicitation
of proxies or consents by or on behalf of a "Person" (as the term person
is used for purposes of Section 13(d) or 14(d) of the Exchange Act) other
than the Board of Directors (a "Proxy Contest") including by reason of
any agreement intended to avoid or settle any Election Contest or Proxy
Contest;</*>
<*>(iii)</*> <*>the consummation of a plan of reorganization, merger
or consolidation involving the Corporation, except for a reorganization,
merger or consolidation where (A) the shareholders of the Corporation
immediately prior to such reorganization, merger or consolidation own
directly or indirectly at least 70% of the combined voting power of the
outstanding voting securities of the corporation resulting from such
reorganization, merger or consolidation (the "Surviving Corporation") in
substantially the same proportion as their ownership of voting securities
of the Corporation immediately prior to such reorganization, merger or
consolidation, and (B) the individuals who were members of the Incumbent
Board immediately prior to the execution of the agreement providing for
such reorganization, merger or consolidation constitute at least two-
thirds of the members of the board of directors of the Surviving
Corporation, or a corporation beneficially directly or indirectly owning
a majority of the voting securities of the Surviving Corporation;</*>
<*>(iv)</*> <*>the sale of all or substantially all the assets of
the Corporation to another Person; or</*>
<*>(v)</*> <*>the acquisition of beneficial ownership of stock
representing more than fifty percent (50%) of the voting power of the
Corporation then outstanding by another Person.</*>
<*>(n)</*> <*>"VESTING EVENT." </*><*>This term shall mean the approval
by the shareholders of the corporation of any matter, plan or transaction
which would constitute a Terminating Event, or if any Terminating Event
occurs without shareholder approval, the occurrence of such Terminating
Event.</*>
<*>In addition, all share numbers are stated in this Plan after giving
effect to the adjustment required by Section 13 hereof to reflect the 8.5
for 1 reverse stock split effected by the Corporation on June 3 1997.</*>
3. ADMINISTRATION<*>.</*>
<#>a.</#><*>(a)</*> STOCK OPTION COMMITTEE. This Plan shall be
administered by the Stock Option Committee. The Board of Directors of the
Corporation shall have the right, in its sole and absolute discretion, to remove
or replace any person from or on the Stock Option Committee at any time for any
reason whatsoever.
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<PAGE>
<#>b.</#><*>(b)</*> ADMINISTRATION OF THE PLAN. Any action of the Stock
Option Committee with respect to the administration of the Plan shall be taken
pursuant to a majority vote, or pursuant to the unanimous written consent, of
its members. Any such action taken by the Stock Option Committee in the
administration of this Plan shall be valid and binding, so long as the same is
in conformity with the terms and conditions of this Plan. Subject to compliance
with each of the terms, conditions and restrictions set forth in this Plan,
including, but not limited to, those set forth in Section 6(a)<#>(ii)</#>
hereof, the Stock Option Committee shall have the exclusive right, in its sole
and absolute discretion, to establish the terms and conditions of any Stock
Options granted under the Plan, including, without limitation, the power to: (i)
establish the number of Stock Options, if any, to be granted hereunder, in the
aggregate and with regard to any individual Eligible Participant; (ii) determine
the time or times when such Stock Options, or any parts thereof, may <*>vest
or</*> be exercised; (iii) determine and designate which Stock Options granted
under the Plan shall be Incentive Stock Options and which shall be Non-Qualified
Stock Options; (iv) determine the Eligible Participants, if any, to whom Stock
Options are granted; (v) determine the duration and purposes, if any, of leaves
of absence which may be permitted to holders of unexercised, unexpired Stock
Options without such constituting a termination of employment under the Plan;
(vi) prescribe and amend the terms, provisions and form of any instrument or
agreement setting forth the terms and conditions of every Stock Option granted
hereunder <*>(such terms and conditions to include, without limitation, the
exercise price, the time or times when Stock Options may vest or be exercised
(which may be based on performance criteria), any vesting acceleration or waiver
of forfeiture restrictions, and any restriction or limitation regarding any
Stock Option or the Option Shares relating thereto);</*> and (vii) make loans to
or guarantee any obligations of any Optionees, except directors, in connection
with the exercise of Stock Options as specified in Section <#>8(d)</#>
<*>8(c)</*> hereof, whenever the Stock Option Committee determines that such
loan or guarantee may reasonably be expected to benefit the corporation, subject
to the provisions of Section 315(b) of the California General Corporations Law
of 1977, as amended and subject to Regulations G, U and T promulgated by the
Board of Governors of the Federal Reserve System pursuant to Section 7 of the
Securities Exchange Act of 1934, if the Option Shares are listed on a stock
exchange or are contained in the list of over-the-counter margin securities
published by the Federal Reserve Board.
<#>c.</#><*>(c)</*> DECISIONS AND DETERMINATIONS. Subject to the express
provisions of the Plan, the Stock Option Committee shall have the authority to
construe and interpret the Plan, to define the terms used therein, to prescribe,
amend, and rescind rules <#>and</#><*>,</*> regulations <*>and policies</*>
relating to the administration of the Plan, and to make all other determinations
necessary or advisable for administration of the Plan. Determinations of the
Stock Option Committee on matters referred to in this Section 3 shall be final
and conclusive so long as the same are in conformity with the terms of this
Plan.
4. SHARES SUBJECT TO THE PLAN<*>.</*>
Subject to adjustments as provided in Section <#>14</#> <*>13</*> hereof,
the maximum number of shares of Common Stock which may be issued upon exercise
of Stock Options granted under this Plan <#>is limited to 10% of the issued and
outstanding shares of the Corporation up to a maximum of 3,437,482</#> <*>shall
be 1,000,000</*> shares in the aggregate<#>, following the acquisition of
Western Bank</#> <*>(including the shares of Common Stock issuable upon exercise
of Stock Options previously granted under the Plan)</*>. If any Stock Option
shall be canceled, surrendered, or expire for any reason without having been
exercised in full, the unpurchased Option Shares represented thereby shall again
be available for grants of Stock Options under this Plan.
5. ELIGIBILITY<*>.</*>
Only Eligible Participants shall be eligible to receive grants of Stock
Options under this Plan.
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<PAGE>
6. GRANTS OF STOCK OPTIONS<*>.</*>
<#>a.</#><*>(a)</*> GRANT. Subject to the express provisions and
limitations of the Plan, the Stock Option Committee, in its sole and absolute
discretion, may grant Stock Options to Eligible Participants <#>of the
Corporation</#> <*>exercisable</*>, for a number of Option Shares, at the
price(s) and time(s), on the terms and conditions and to such Eligible
Participants as it deems advisable and specifies in the respective grants.
Subject to the limitations and restrictions set forth in the Plan, an Eligible
Participant who has been granted a Stock Option may, if otherwise eligible, be
granted additional Stock Options if the Stock Option Committee shall so
determine. The Stock Option Committee shall designate in each grant of a Stock
Option whether the Stock Option is an Incentive Stock Option or a Non-Qualified
Stock Option. <*>No Eligible Participant shall be granted in any fiscal year of
the Corporation Stock Options to purchase more than 100,000 Option Shares. If a
Stock Option expires or terminates for any reason without having been exercised
in full, the unpurchased shares subject to such expired or terminated option
will continue to count against the maximum number of shares for which Stock
Options may be granted to an Eligible Participant in any fiscal year of the
Corporation or portion thereof. The limitations set forth in the two preceding
sentences are intended to satisfy the requirements applicable to Stock Options
such that they qualify as "performance-based compensation" (within the meaning
of Section 162(m) of the Internal Revenue Code of 1986, as amended).</*>
<#>b.</#><*>(b)</*> DATE OF GRANT AND RIGHTS OF OPTIONEE. The
determination of the Stock Option Committee to grant a Stock Option shall not in
any way constitute or be deemed to constitute an obligation of the Corporation,
or a right of the Eligible Participant who is the proposed subject of the grant,
and shall not constitute or be deemed to constitute the grant of a Stock Option
hereunder unless and until both the Corporation and the Eligible Participant
have executed and delivered the form of stock option agreement then required by
the Stock Option Committee as evidencing the grant of the Stock Option, together
with such other instruments as may be required by the Stock Option Committee
pursuant to this Plan; provided, however, that the Stock Option Committee may
fix the date of grant as any date on or after the date of its final
determination to grant the Stock Option (or if no such date is fixed, then the
date of grant shall be the date on which the determination was <#>finally</#>
made by the Stock Option Committee to grant the Stock Option), and such date
shall be set forth in the stock option agreement. The date of grant as so
determined shall be deemed the date of grant of the Stock Option for purposes of
this Plan.
<#>c.</#><*>(c)</*> SHAREHOLDER-EMPLOYEES. Notwithstanding anything to the
contrary contained elsewhere herein, <#>a</#> <*>an Incentive</*> Stock Option
shall not be granted hereunder to an Eligible Participant who owns, directly or
indirectly, at the date of the grant of the <*>Incentive</*> Stock Option, more
than ten percent (10%) of the total combined voting power of all classes of
capital stock of the Corporation or a Subsidiary corporation, unless the
purchase price of the Option Shares subject to said <*>Incentive</*> Stock
Option is at least <#>110%</#> <*>one hundred and ten percent (110%)</*> of the
Fair Market Value of the Option Shares, determined as of the date said Stock
Option is granted.
<#>d.</#> <#>MAXIMUM VALUE OF STOCK OPTIONS.</#> <#>Except as provided in
paragraph (e) of this Section 6, the maximum aggregate Fair Market Value of
Option Shares (determined as of the respective Stock Option grant dates) for
which an Eligible Participant may be granted incentive Stock Options in any
calendar year shall not exceed $100,000, plus any "unused carryover amount." The
unused carryover amount, determined on a yearly basis, shall be equal to
one-half (1/2) of the difference between $100,000 and</#>
<*>(d)</*> <*>MAXIMUM VALUE OF INCENTIVE STOCK OPTIONS.</*> <*>To the
extent that</*> the aggregate Fair Market Value (determined <#>as of</#>
<*>at</*> the <#>respective</#> <*>time the</*> Stock Option <#>grant dates) of
all of the Option Shares subject to</#> <*>is granted) of Option Stock which are
designated as</*> Incentive Stock Options <#>granted to the Optionee during the
calendar year under the Plan. The provisions of Section 422A(c)(4) of the
Internal Revenue Code of 1986, as amended, are incorporated herein by this
reference for the purpose of the determination and application of the unused
carryover amount. The aggregate fair market value (determined at the time the
option is granted) of the stock with respect to which incentive stock
options</#> are exercisable for the first
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<PAGE>
time by <#>such individual under</#> <*>an Eligible Participant pursuant to</*>
the terms of the Plan during any calendar year <#>is limited to $100,000, but
the value of stock for which options may be granted to an employee in a given
year may exceed $100,000.</#> <*>exceeds One Hundred Thousand Dollars
($100,000), such excess Stock Options shall be treated as Non-Qualified Stock
Options.</*>
<#>e.</#><*>(e)</*> NON-QUALIFIED STOCK OPTIONS. All Stock Options granted
by the Stock Option Committee which: (i) are designated at the time of grant as
Incentive Stock Options but do not so qualify under the provisions of Section
<#>422A</#> <*>422</*> of the Code or any regulations or rulings issued by the
Internal Revenue Service for any reason; (ii) are in excess of the <#>fair
market value limitations</#> <*>Fair Market Value limitation</*> set forth in
Section 6(d); or (iii) are designated at the time of grant as Non-Qualified
Stock Options, shall be deemed Non-Qualified Stock Options under this Plan.
Non-Qualified Stock Options granted or substituted hereunder shall be so
designated in the stock option agreement entered into between the Corporation
and the Optionee.
7. STOCK OPTION EXERCISE PRICE.
<#>a.</#><*>(a)</*> MINIMUM PRICE. The exercise price of any <*>Stock
Options for</*> Option Shares shall be determined by the Stock Option Committee,
in its sole and absolute discretion, upon the grant of a Stock Option. Except as
provided elsewhere herein, said exercise price shall not be less than one
hundred percent (100%) of the Fair Market Value of the Common Stock represented
by the Option Share on the date of grant of the related Stock Option.
<#>b.</#><*>(b)</*> EXCHANGED STOCK OPTIONS. Where the outstanding shares
of stock of another corporation are changed into or exchanged for shares of
Common Stock of the Corporation without monetary consideration to that other
corporation, then, subject to the approval of the Board or Directors of the
Corporation, Stock Options may be granted in exchange for unexercised, unexpired
stock options of the other corporation, and the exercise price of the Option
Shares subject to each Stock Option so granted may be fixed at a price less than
one hundred percent (100%) of the Fair Market Value of the Common Stock at the
time such Stock Option is granted if said exercise price has been computed to be
not less than the exercise price set forth in the stock option of the other
corporation, with appropriate adjustment to reflect the exchange ratio of the
shares of stock of the other corporation into the shares of Common Stock of the
Corporation.
8. EXERCISE OF STOCK OPTIONS.
<#>a.</#><*>(a)</*> EXERCISE. Except as otherwise provided elsewhere
herein, each Stock Option shall be exercisable in such increments, which need
not be equal, and upon such contingencies as the Stock Option Committee shall
determine at the time of grant of the Stock Option; provided, however, (i) that
if an Optionee shall not in any given period exercise any part of a Stock Option
which has become exercisable during that period, the Optionee's right to
exercise such part of the Stock Option shall continue until expiration of the
Stock Option or any part thereof as may be provided in the related stock option
agreement, and (ii) a minimum of <#>20%</#> <*>twenty percent (20%)</*> of the
Stock Option shall be exercisable in each year over a five year period from the
date the <#>option</#> <*>Stock Option</*> is granted. No Stock Option or part
thereof shall be exercisable except with respect to whole shares of Common
Stock, and fractional share interests shall be disregarded except that they may
be accumulated.
<#>b.</#> <#>PRIOR OUTSTANDING INCENTIVE STOCK OPTIONS.</#> <#>Incentive
Stock Options granted to an Optionee may be exercisable while such Optionee has
outstanding and unexercised any Incentive Stock Option previously granted (or
substituted) to him or her pursuant to this Plan. The Stock Option Committee
shall determine if such options shall be exercisable if there are any Incentive
Stock Options previously granted (or substituted) to him or her pursuant to this
Plan, and such determination shall be evidenced in the Agreement executed by the
Optionee and Company. An Incentive Stock Option shall be treated as outstanding
until it is exercised in full or expires by reason of lapse of time.</#>
A-6
<PAGE>
<#>c.</#><*>(b)</*> NOTICE AND PAYMENT. Stock Options granted hereunder
shall be exercised by written notice delivered to the Corporation specifying the
number of Option Shares with respect to which the Stock Option is being
exercised, together with concurrent payment in full of the exercise price as
hereinafter provided in Section <#>8(d)</#> <*>8(c)</*> hereof. If the Stock
Option is being exercised by any person or persons other than the Optionee, said
notice shall be accompanied by proof, satisfactory to counsel for the
Corporation, of the right to such person or persons to exercise the Stock
Option. The Corporation's receipt of a notice of exercise without concurrent
receipt of the full amount of the exercise price shall not be deemed an exercise
of a Stock Option by an Optionee, and the Corporation shall have no obligation
to an Optionee for any Option Shares unless and until full payment of the
exercise price is received by the Corporation in accordance with Section
<#>8(d)</#> <*>8(c)</*> hereof, and all of the terms and provisions of the Plan
and the related stock option agreement have been complied with.
<#>d.</#><*>(c)</*> PAYMENT OF EXERCISE PRICE. The exercise price of any
<*>Stock Option for</*> Option Shares purchased upon the proper exercise of a
Stock Option shall be paid in full at the time of each exercise of a Stock
Option in cash and/or, with the prior written approval of the Stock Option
Committee, in Common Stock of the Corporation which, when added to the cash
payment, if any, has an aggregate Fair Market Value equal to the full amount of
the exercise price of the Stock Option, or part thereof, then being exercised
and/or, with the prior written approval of the Stock Option Committee, on a
deferred basis evidenced by a promissory note, containing such terms and subject
to such security as the Stock Option Committee shall determine to be fair and
reasonable from time to time, for the total option price for the number of
<#>shares</#> <*>Option Shares</*> so purchased. In addition, the Optionee shall
have the right upon the exercise of <#>this</#> <*>the</*> Stock Option<*>,</*>
in the manner set forth above to surrender for cancellation a portion of
<#>this</#> <*>the</*> Stock Option to the Company for the number of shares (the
"Surrendered Shares") specified in the holder's notice of exercise, by delivery
to the Company with such notice written instructions from such holder to apply
the Appreciated Value (as defined below) of the Surrendered Shares to payment of
the exercise price for <#>shares</#> <*>Option Shares</*> subject to this Stock
Option that are being acquired upon such exercise. The term "Appreciated Value"
for each <#>share</#> <*>Option Share</*> subject to <#>this</#> <*>a</*> Stock
Option shall mean the excess of the Fair Market Value thereof over the exercise
price then in effect. No director, consultant or business associate may purchase
any Stock Option on a deferred basis <*>unless</*> evidenced by a promissory
note. Unless payment is on a deferred basis, payment by an Optionee as provided
herein shall be made in full concurrently with the Optionee's notification to
the Corporation of his intention to exercise all or part of a Stock Option. If
all or part of payment is made in shares of Common Stock as heretofore provided,
such payment shall be deemed to have been made only upon receipt by the
Corporation of all required share certificates, and all stock powers and other
required transfer documents necessary to transfer the shares of Common Stock to
the Corporation.
<#>e.</#><*>(d)</*> REORGANIZATION. Notwithstanding any provision in any
stock option agreement pertaining to the time of exercise of a Stock Option, or
part thereof, upon <#>adoption by the requisite holders of the Corporation's
outstanding shares of Common Stock of any plan of dissolution, liquidation,
reorganization, merger, consolidation or sale of all or substantially all of the
assets of the Corporation to another corporation, or the acquisition of stock
representing more than 50% of the voting power of the Corporation then
outstanding, by another corporation or person, which would, upon consummation,
result in termination of a Stock Option in accordance with Section 15 hereof</#>
<*>the occurrence of a Vesting Event</*>, the Stock Option shall become
immediately exercisable as to all <#>vested Option Shares for such period of
time as may be determined by the Stock Option Committee, but in any event not
less than 30 days prior to the adoption of the plan of dissolution, liquidation,
reorganization, merger, consolidation, sale, or acquisition on the condition
that the terminating event described in Section 15 hereof is consummated. Any
Option Shares not exercised will be terminated. If such Terminating Event is not
consummated, Stock Options granted pursuant to the Plan shall be exercisable in
accordance with their respective terms</#> <*>Option Shares (whether or not
previously vested)</*>.
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<PAGE>
<#>f.</#><*>(e)</*> MINIMUM EXERCISE. Not less than ten (10) Option Shares
may be purchased at any one time upon exercise of a Stock Option unless the
number of shares purchased is the total number which remains to be purchased
under the Stock Option.
<#>g.</#><*>(f)</*> COMPLIANCE WITH LAW. No shares of Common Stock shall
be issued by the Corporation upon exercise of any Stock Option, and an Optionee
shall have no rights or claim to such shares, unless and until: (a) payment in
full as provided in Section <#>8(d)</#> <*>8(c)</*> hereof has been received by
the Corporation; (b) in the opinion of the counsel for the Corporation, all
applicable registration requirements of the Securities Act of 1933, all
applicable listing requirements of securities exchanges or associations on which
the Corporation's Common Stock is then listed or traded, and all other
requirements of law and of regulatory bodies having jurisdiction over such
issuance and delivery, have been fully complied with; and (c) if required by
federal or state law or regulation, the Optionee shall have paid to the
Corporation the amount, if any, required to be withheld on the amount deemed to
be compensation to the Optionee as a result of the exercise of his or her Stock
Option, or made other arrangements satisfactory to the Corporation, in its sole
discretion, to satisfy applicable income tax withholding requirements.
9. NONTRANSFERABILITY OF STOCK OPTIONS.
Each Stock Option shall, by its terms, be nontransferable by the Optionee
other than by will or the laws of descent and distribution, and shall be
exercisable during the Optionee's lifetime only by the Optionee or his or her
guardian or legal representative.
10<#>.</#> <#>CONTINUATION OF EMPLOYMENT.</#> <#>Each Optionee other than
directors, consultants and business associates, agree, as part of the acceptance
of the option that he/she will remain, within the employ of the Corporation, or
any subsidiary corporation, for at least one (1) year from the date the option
is granted subject to prior termination, leave of absence or vacation issued by
the Board of Directors, subject to any employment agreements to the contrary
which shall govern. Nothing contained in the Plan (or in any stock option
agreement) shall obligate the Corporation or any Subsidiary corporation to
employ or continue to employ or continue the service as a director of any
Optionee or any Eligible Participant for any period of time or interfere in any
way with the right of the Corporation or a Subsidiary corporation to reduce or
increase the Optionee's or Eligible Participant's compensation.</#>
<#>11</#>. CESSATION OF EMPLOYMENT.
Except as provided in Sections <#>8(e),</#> <*>11,</*> 12<#>, 13,</#>
<*>or</*> 14 <#>or 15</#> hereof, <#>except if Optionee is granted an option as
a consultant, business associate or other person or entity with important
business relationships with the Corporation,</#> if, for any reason, an
Optionee's status as an Eligible Participant is terminated, the Stock Options
granted to such Optionee shall expire on the expiration dates specified for said
Stock Options at the time of their initial grant, or three (3) months after the
Optionee's status as an Eligible Participant is terminated, whichever is
earlier. During such period <#>after</#> <*>Stock</*> Options shall be
exercisable only as to those increments, if any, which had become exercisable as
of the date on which such Optionee's status as an Eligible Participant
terminated, and any Stock Options or increments which had not become exercisable
as of such date shall expire and terminate automatically on such date. <#>If
Optionee is granted an option as a consultant, business associate or other
person or entity with important business relationships with the Corporation,
this Stock Option shall not expire as a result of consultant, business associate
or other person or entity with important business relationships with the
Corporation no longer doing business or otherwise terminating his or its
business relationship with the Corporation.</#>
<#>12</#><*>11</*>. DEATH OF OPTIONEE.
<#>Except if Optionee is granted an option as a consultant, business
associate or other person or entity with important business relationships with
the Corporation, if</#> <*>If</*> an Optionee loses his status as an Eligible
Participant by reason of death, or if an Optionee dies during the three-month
period referred to in Section <#>11</#> <*>10</*> hereof, the Stock Options
granted to such Optionee shall expire on the expiration dates specified for said
Stock Options at the time of their initial grant, or one (1) year after the date
of such
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<PAGE>
death, whichever is earlier. <#>If Optionee is granted an option as a
consultant, business associate or other person or entity with important business
relationships with the Corporation, this Stock Option shall not expire as a
result of such Optionee's death.</#> After such death but before such
expiration, subject to the terms and provisions of the Plan and the related
stock option agreements, the person or persons to whom such Optionee's rights
under the Stock Options shall have passed by will or by the applicable laws of
descent and distribution, or the executor or administrator of the Optionee's
estate, shall have the right to exercise such Stock Options to the extent that
increments, if any, had become exercisable as of the date on which the
<#>Optionee's status as an Eligible Participant had been lost.</#> <*>Optionee
died.</*>
<#>13</#><*>12</*>. DISABILITY OF OPTIONEE<*>.</*>
<#>Except if Optionee is granted an option as a consultant, business
associate or other person or entity with important business relationships with
the Corporation, if</#> <*>If</*> an Optionee is disabled while employed by or
while serving as a director of the Corporation or a Subsidiary or during the
three-month period referred to in Section <#>11</#> <*>10</*> hereof, the Stock
Options granted to such Optionee shall expire on the expiration dates specified
for said Stock Options at the time of their initial grant, or one (1) year after
the date of such disability, whichever is earlier. <#>If Optionee is granted an
option as a consultant, business associate or other person or entity with
important business relationships with the Corporation, this Stock Option shall
not expire as a result of such Optionee's disability.</#> After such disability
but before such expiration, the Optionee or a guardian or conservator of the
Optionee's estate, as duly appointed by a court of competent jurisdiction, shall
have the right to exercise such Stock Options to the extent that increments, if
any, had become exercisable as of the date on which the Optionee became disabled
or ceased to be employed by the Corporation or a Subsidiary as a result of the
disability. For the purpose of this Section <#>13</#> <*>12</*>, an Optionee
shall be deemed to have become "disabled" if it shall appear to the Stock Option
Committee, upon written certification delivered to the Corporation by a
qualified licensed physician, that the Optionee has become permanently and
totally unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death, or which has lasted or can be expected to last for a continuous
period of not less than <#>12</#> <*>twelve (12)</*> months.
<#>14</#><*>13</*>. ADJUSTMENT UPON CHANGES IN CAPITALIZATION<*>.</*>
If the outstanding shares of Common Stock of the Corporation are increased,
decreased, or changed into or exchanged for a different number or kind of shares
or securities of the Corporation, through a reorganization, merger,
recapitalization, reclassification, stock split, stock dividend, stock
consolidation, or otherwise, without consideration to the Corporation, an
appropriate and proportionate adjustment shall be made in the number and kind of
shares as to which Stock Options may be granted. A corresponding adjustment
changing the number or kind of Option Shares and the exercise prices per share
allocated to unexercised Stock Options, or portions thereof, which shall have
been granted prior to any such change, shall likewise be made. Any such
adjustment, however, in an outstanding Stock Option shall be made without change
in the total price applicable to the unexercised portion of the Stock Option,
but with a corresponding adjustment in the price for each Option Share subject
to the Stock Option. Any adjustment under this Section shall be made by the
Stock Option Committee, whose determination as to what adjustments shall be
made, and the extent thereof, shall be final and conclusive. No fractional
shares of stock shall be issued or made available under the Plan on account of
any such adjustment, and fractional share interests shall be disregarded and the
fractional share interest shall be rounded down to the nearest whole number.
<#>15.</#><*>14.</*> TERMINATING EVENTS<*>.</*>
Not less than thirty (30) days prior to <#>consummation of a plan of
dissolution or liquidation of the Corporation, or consummation of a plan of
reorganization, merger or consolidation of the Corporation with one or more
corporations, as a result of which the Corporation is not the surviving
corporation and the outstanding securities of the class then subject to options
hereunder are changed or exchanged for cash or property or securities not of the
Corporation's issue, or upon the sale of all or substantially all the assets
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<PAGE>
of the Corporation to another corporation, or the acquisition of stock
representing more than fifty percent (50%) of the voting power of the
Corporation then outstanding by another corporation or person (the "Terminating
Event")</#> <*>the occurrence of any Terminating Event</*>, the Stock Option
Committee or the Board of Directors shall notify each Optionee of the pendency
of the Terminating Event. Upon the effective date of the Terminating Event, the
Plan shall automatically terminate and all Stock Options theretofore granted
shall terminate, unless provision is made in connection with such transaction
for the continuance of the Plan and/or assumption of Stock Options theretofore
granted, or substitution for such Stock Options with new stock options covering
stock of a successor employer corporation,<*> or a parent or subsidiary
corporation thereof, solely at the discretion of such successor corporation,</*>
or parent or subsidiary corporation, with appropriate adjustments as to number
and kind of shares and prices, in which event the Plan and options theretofore
granted shall continue in the manner and under the terms so provided. If the
Plan and unexercised <#>options</#> <*>Stock Options</*> shall terminate
pursuant to the foregoing sentence, all persons shall have the right to exercise
the <#>vested portions of options</#> <*>Stock Options</*> then outstanding and
not exercised<#>, shall have the right,</#> <*>(including those vested pursuant
to Section 8(d) hereof)</*> at such time prior to the consummation of the
transaction causing such termination as the Corporation shall designate <#>and
for a period of not less than 30 days, to exercise the vested portions of their
options</#><*>, unless the Board of Directors shall have provided for the
cancellation of such Stock Options in exchange for a cash payment equal to the
excess of the Fair Market Value of the Common Stock as of the date of the
Terminating Event over the exercise price of such Stock Options.</*>
<#>16</#><*>15</*>. AMENDMENT AND TERMINATION<*>.</*>
The Board of Directors of the Corporation may at any time and from
time<*>-</*>to<*>-</*>time suspend, amend, or terminate the Plan and may, with
the consent of Optionee, make such modifications of the terms and conditions of
a Stock Option as it shall deem advisable; provided that, except as permitted
under the provisions of Section <#>15</#> <*>14</*> hereof, no amendment or
modification may be adopted without the Corporation having first obtained all
necessary regulatory approvals and approval of the holders of a majority of the
Corporation's shares of Common Stock present, <*>or</*> represented, and
entitled to vote at a duly held meeting of shareholders of the Corporation if
the amendment or modification would:
<#>a.</#> <#>materially increase the benefits accruing to participants
under the Plan; b. materially</#><*>(a)</*> increase the number of
<#>securities</#> <*>Shares of Common Stock</*> which may be issued under
the Plan;
<#>c.</#> <#>materially modify the requirements as to eligibility for
participation in the Plan;</#>
<#>d.</#> <#>increase or decrease the exercise price of any Stock
Options granted under the Plan;</#>
<#>e.</#> <#>increase the maximum term of Stock Options provided for
herein;</#>
<#>f.</#> <#>permit Stock Options to be granted to any person who is
not an Eligible Participant; or</#>
<#>g.</#><*>(b)</*> change any provision of the Plan which would affect
the qualification as an Incentive Stock Option under the Plan<#>.</#><*>;
or</*>
<*>(c)</*> <*>make any other change for which shareholder approval is
required pursuant to the provisions of Section 162(m) of the Internal
Revenue Code of 1986, as amended.</*>
No Stock Option may be granted during any suspension of the Plan or after
termination of the Plan. Amendment, suspension, or termination of the Plan shall
not (except as otherwise provided in Section <#>16</#> <*>8(d) or Section 14</*>
hereof), without the consent of the Optionee, alter or impair any rights or
obligations under any Stock Option theretofore granted.
<#>17</#><*>16</*>. RIGHTS OF ELIGIBLE PARTICIPANTS AND OPTIONEES<*>.</*>
Neither any Eligible Participant, any Optionee or any other person shall
have any claim or right to be granted any Stock Option under this Plan, and
neither this Plan nor any action taken hereunder shall be deemed or construed as
giving any Eligible Participant, Optionee or any other person any right to be
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<PAGE>
retained in the employ of the Corporation or any subsidiary of the Corporation.
Without limiting the generality of the foregoing, there is no vesting of any
right in the classification of any person as an Eligible Participant or
Optionee, such classification being used solely to define and limit those
persons who are eligible for consideration of the grant of Stock Options under
the Plan.
<#>18</#><*>17.</*> PRIVILEGES OF STOCK OWNERSHIP<#>;</#><*>:</*>
SECURITIES LAW COMPLIANCE<#>;</#><*>:</*> NOTICE OF SALE<*>.</*>
No Optionee shall be entitled to the privileges of stock ownership as to any
Option Shares not actually issued and delivered. No Option Shares may be
purchased upon the exercise of a Stock Option unless and until all then
applicable requirements of all regulatory agencies having jurisdiction and all
applicable requirements of securities exchanges upon which the stock of the
Corporation is listed (if any) shall have been fully complied with. The
Corporation will diligently endeavor to comply with all applicable securities
laws before any options are granted under the Plan and before any stock is
issued pursuant to options. The Optionee shall, not more than five (5) days
after each sale or other disposition of shares of Common Stock acquired pursuant
to the exercise of Stock Options, give the Corporation notice in writing of such
sale or other disposition. <#>The Corporation will provide to each Optionee its
Annual Report as required by Section 260.140.46 of the regulations of the
California Commissioner of Corporations.</#>
<#>19</#><*>18.</*> EFFECTIVE DATE OF THE PLAN<*>.</*>
The Plan <#>shall be deemed</#> <*>was originally</*> adopted as of March
16, 1993<#>,</#><*>. The Plan was adopted</*> as amended <*>on March 19,
1998,</*> and shall be effective immediately, subject to approval of the Plan by
the holders of at least a majority of the corporation's outstanding shares of
Common Stock <#>and approval of the Plan by the California Commissioner of
Corporations.</#>
<#>20.</#><*>19.</*> TERMINATION<*>.</*>
Unless previously terminated as aforesaid, the Plan shall terminate ten (10)
years from the earliest date of (i) adoption of the Plan by the Board of
<#>Governors,</#> <*>Directors, or</*> (ii) approval of the Plan by holders of
at least a majority of the Corporation's outstanding shares of Common Stock<#>,
or (iii) approval of the Plan by the California Commissioner of
Corporations</#>. No Stock Options shall be granted under the Plan thereafter,
but such termination shall not affect any Stock Option theretofore granted.
<#>21.</#><*>20.</*> OPTION AGREEMENT<*>.</*>
Each Stock Option granted under the Plan shall be evidenced by a written
stock option agreement executed by the Corporation and the Optionee, and shall
contain each of the provisions and agreements herein specifically required to be
contained therein, and such other terms and conditions as are deemed desirable
by the Stock Option Committee and are not inconsistent with the Plan.
<#>22</#><*>21</*>. STOCK OPTION PERIOD<*>.</*>
Each Stock Option and all rights and obligations thereunder shall expire on
such date as the Stock Option Committee may determine, but not later than ten
(10) years from the date such Stock Option is granted, and shall be subject to
earlier termination as provided elsewhere in the Plan.
<#>23</#><*>22</*>. EXCULPATION AND INDEMNIFICATION OF STOCK OPTION
COMMITTEE<*>.</*>
In addition to such other rights of indemnification which they may have as
<*>officers or members of the board of</*> directors of the Corporation or as
members of <#>the Stock Option Committee</#> <*>any committee thereof</*>, the
present and former members of the Stock Option Committee, <#>and each of
them,</#> shall be indemnified by the Corporation <#>for and against all costs,
judgments, penalties and reasonable expenses, including reasonable attorney's
fees, actually and necessarily incurred by them in connection with any action,
suit or proceeding, or in connection with any appeal thereof, to which they or
any of them may be a party by reason of any act or omission of any member</#>
<*>in accordance with Article Six of the Restated Articles of Incorporation and
to the full extent permitted under Article VI of the Bylaws and Section 317 of
the California General Corporation Law. The Corporation has the power to
purchase and maintain
A-11
<PAGE>
insurance on behalf of any person who is or was a director, officer, agent or
employee of the Corporation, including members</*> of the Stock Option Committee
<#>under or in connection with the Plan or any Stock Option granted thereunder;
provided, however, that a member of the Stock Option Committee shall not be
entitled to any indemnification whatsoever pursuant to this Section for or as a
result of any act or omission of such member which was not taken in good faith
and which constituted willful misconduct or gross negligence by such member;
provided further, that any amounts paid by any member of the Stock Option
Committee in settlement of any action, suit or proceeding for which
indemnification may be sought pursuant to this Section shall be first approved
in writing by independent legal counsel selected by the Corporation; and,
provided further, that within thirty (30) days after institution of any action,
suit or proceeding against any member with respect to which such member is
entitled to indemnification hereunder, such member shall, in writing, offer the
Corporation the opportunity, at its own expense, to handle (including settle)
and conduct the defense thereof</#><*>, whether or not the Corporation would
have the power to indemnify such person under the provisions of Article VI of
the Bylaws</*>. The provisions of this Section shall apply to the estate,
executor and administrator of each member of the Stock Option Committee.
<#>24</#><*>23</*>. AGREEMENT AND REPRESENTATIONS OF OPTIONEE<*>.</*>
Unless the shares of Common Stock covered by this Plan have been registered
with the Securities and Exchange Commission pursuant to Section 5 of the
Securities Act of 1933, each Optionee shall by and upon accepting a Stock
Option, represent and agree in writing, for himself or herself and his or her
transferees by will or the laws of descent and distribution, that <#>he or she
is a bona fide California resident, that the</#> <*>all such</*> Option Shares
<#>are being</#> <*>will be</*> acquired for investment purposes and not for
resale or distribution<#>, and</#><*>. Upon the exercise of a Stock Option, or a
part thereof, the person entitled to exercise the same shall, unless waived by
the Corporation, furnish evidence satisfactory to the Corporation, including
written and signed representations, to the effect</*> that the Option Shares
<#>being acquired shall not be sold otherwise transferred to any individual or
entity not a resident of the State of California</#><*> are being acquired for
investment purposes and not for resale or distribution</*>. Furthermore, the
Corporation, at its sole discretion, to assure itself that any sale or
distribution by the Optionee complies with this Plan and any applicable federal
or state securities laws, may take all reasonable steps, including placing stop
transfer instructions with the corporation's transfer agent prohibiting
transfers in violation of the Plan and affixing the following legend (and/or
such other legend or legends as the Stock Option Committee shall require) on
certificates evidencing the shares:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS
OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S
RULES."
and
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR OFFERED FOR SALE IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO
THEM UNDER THE ACT OR A DETERMINATION BY <#>____________</#>
<*>WESTERN</*> BANCORP <*>(OR ANY SUCCESSOR ENTITY)</*> THAT
REGISTRATION IS NOT REQUIRED."
At any time that an Optionee contemplated the disposition of any of the Option
Shares (whether by sale, exchange, gift or other form of transfer) he or she
shall first notify the Corporation of such proposed disposition and shall
thereafter cooperate with the Corporation in complying with all applicable
requirements of law which, in the opinion of counsel for the Corporation, must
be satisfied prior to the making of
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<PAGE>
such disposition. Before consummating such disposition, <#>Monarch</#>
<*>Western</*> Bancorp <*>(or any successor entity)</*> shall determine that
such disposition will not result in a violation of any state or federal
securities law or regulations. The Corporation shall remove any legend affixed
to certificates for Option Shares pursuant to this Section if and when all of
the restrictions on the transfer of the Option Shares, whether imposed by this
Plan or federal or state law, have terminated. An Optionee who thereafter sells
or disposes of his shares of Common Stock will be required to notify the
Corporation of such sale or disposition within five (5) days after the sale or
disposition.
<#>25.</#><*>24.</*> NOTICES<*>.</*>
All notices and demands of any kind which the Stock Option Committee, any
Optionee, Eligible Participant, or any other person may be required or desires
to serve under the terms of this Plan shall be in writing and shall be served by
personal service upon the respective person or by leaving a copy of such notice
or demand at the address of such person as may be reflected in the records of
the Corporation, or in the case of the Stock Option Committee, with the
Secretary of the Corporation, or by mailing a copy thereof by certified or
registered mail, postage prepaid, with return receipt requested. In the case of
service by mail, it shall be deemed complete at the expiration of the third day
after the day of mailing, except for notice of the exercise of any Stock Option
and payment of the Stock Option exercise price, both of which must be actually
received by the Corporation.
<#>26</#><*>25</*>. LIMITATION OF OBLIGATIONS OF THE CORPORATION<*>.</*>
Any obligation of the Corporation arising under or as a result of this Plan
or any Stock Option granted hereunder shall constitute the general unsecured
obligation of the Corporation, and not of the Board of Directors of the
Corporation, or any members thereof, the Stock Option Committee, or any member
thereof, any officer of the Corporation, or any other person or
<#>subsidiary</#> <*>any Subsidiary</*>, and none of the foregoing, except the
Corporation, shall be liable for any debt, obligation, cost or expense
hereunder.
<#>27</#><*>26</*>. LIMITATION OF RIGHTS<*>.</*>
The Stock Option Committee, in its sole and absolute discretion, is entitled
to determine who, if anyone, is an Eligible Participant under this Plan, and
which, if any, Eligible Participant shall receive any grant of a Stock Option.
No oral or written agreement by any person on behalf of the Corporation relating
to this Plan or any Stock Option granted hereunder is authorized, and such
agreement may not bind the Corporation <#>of</#> <*>or</*> the Stock Option
Committee to grant any Stock Option to any person.
<#>28.</#><*>27.</*> SEVERABILITY<*>.</*>
If any provision of this Plan as applied to any person or to any
circumstances shall be adjudged by a court of competent jurisdiction to be void,
invalid, or unenforceable, the same shall in no way effect any other provision
hereof, the application of any such provision in any other circumstances, or the
validity of enforceability hereof.
<#>29.</#><*>28.</*> CONSTRUCTION<*>.</*>
Where the context or construction requires, all words applied in the plural
shall be deemed to have been used in the singular and vice versa, and the
masculine gender shall include the feminine and the neuter.
<#>30.</#><*>29.</*> HEADINGS<*>.</*>
The headings of the several paragraphs of this Plan are inserted solely for
convenience of reference and are not intended to form a part of and are not
intended to govern, limit or aid in the construction of any term or provision
hereof.
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<PAGE>
<#>31.</#><*>30.</*> SUCCESSORS<*>.</*>
This Plan shall be binding upon the respective successors, assigns, heirs,
executors, administrators, guardians and personal representatives of the
Corporation and any Optionee.
<#>32.</#><*>31.</*> GOVERNING LAW<*>.</*>
This Plan shall be governed by and construed in accordance with the laws of
the State of California.
<#>33.</#><*>32.</*> CONFLICT<*>.</*>
In the event of any conflict between the terms and provisions of this Plan,
and any other document, agreement or instrument, including, without limitation,
any stock option agreement, the terms and provisions of this Plan shall control.
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<PAGE>
PROXY
WESTERN BANCORP
4100 NEWPORT PLACE, SUITE 900
NEWPORT BEACH, CALIFORNIA 92660
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF WESTERN BANCORP FOR
ANNUAL MEETING OF SHAREHOLDERS APRIL 30, 1998
The undersigned hereby constitutes and appoints Hugh S. Smith, Jr. and
Arnold C. Hahn, or either of them, with full power of substitution, attorneys
and proxies of the undersigned, to represent the undersigned and vote all shares
of the common stock of Western Bancorp ("Western") which the undersigned would
be entitled to vote if personally present at Western's Annual Meeting of
Shareholders to be held at 4100 Newport Place, Third Floor, Newport Beach,
California 92660 on April 30, 1998 at 11:00 a.m. and at any postponement or
adjournment thereof, in the following manner:
1. ELECTION OF DIRECTORS / / FOR all nominees listed / / WITHHOLD
below AUTHORITY
(EXCEPT AS MARKED TO THE TO VOTE FOR ALL
CONTRARY BELOW) NOMINEES LISTED
BELOW
Aubrey L. Austin, Rice E. Brown, John M. Eggemeyer, William C. Greenbeck, Robert
L. McKay,
Hugh S. Smith, Jr., Mark H. Stuenkel, Matthew P. Wagner, and Dale E. Walter
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE
THAT NOMINEE'S NAME BELOW)
- --------------------------------------------------------------------------------
2. APPROVAL OF THE AMENDMENT TO WESTERN'S STOCK OPTION PLAN / / FOR / /
AGAINST / / ABSTAIN
(CONTINUED ON REVERSE SIDE)
<PAGE>
WHEN THIS PROXY IS PROPERLY EXECUTED AND RETURNED, THE SHARES IT REPRESENTS
WILL BE VOTED AT THE MEETING IN ACCORDANCE WITH THE CHOICES SPECIFIED ABOVE. IF
NO CHOICES ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR PROPOSALS ONE AND TWO AND
IN ACCORDANCE WITH THE BEST JUDGMENT OF THE DESIGNATED INDIVIDUALS WITH RESPECT
TO MATTERS INCIDENT TO THE CONDUCT OF THE MEETING AND ANY OTHER MATTERS WHICH
MAY PROPERLY COME BEFORE THE MEETING. IF ANY OF THE NOMINEES FOR DIRECTOR IS
UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE, THE PROXY HOLDER WILL VOTE FOR
SUCH OTHER PERSON OR PERSONS AS THE BOARD OF DIRECTORS MAY RECOMMEND. Further,
if cumulative voting rights for the election of directors are exercised, the
Proxies, unless otherwise instructed, will cumulatively vote their shares as
provided in the Proxy Statement.
Please date and sign exactly as your name or names appear hereon. If more
than one owner, all should sign. When signing as attorney, executor,
administrator, trustee or guardian, give your full title as such. If the
signatory is a corporation or partnership, sign the full corporate or
partnership name by a duly authorized officer or partner.
Dated: _____________________, 1998
__________________________________
Signature
__________________________________
Signature
__________________________________
Type or Print
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND RETURN THIS PROXY USING THE ENCLOSED
ENVELOPE
