EXHIBIT 10.33
CHANGE IN CONTROL
SEVERANCE BENEFITS POLICY
FOR NON-EXECUTIVES
THIS CHANGE IN CONTROL SEVERANCE BENEFITS POLICY FOR NON-EXECUTIVES
(the "POLICY") is adopted this 18th day of July, 1996 by SILICON VALLEY BANK, a
California corporation (the "COMPANY"), a wholly owned subsidiary of Silicon
Valley Bancshares, a California corporation ("BANCSHARES"). This Policy is
intended to provide Eligible Employees with the compensation and benefits
described herein upon the occurrence of specific events.
Certain capitalized terms used in this Policy are defined in Article
VI.
I
ELIGIBLE EMPLOYEES
.1 Eligible Employees are those employees of the Company who
are classified by the Company in Grades 13 and below. Notwithstanding the
foregoing, the employees of any other wholly owned subsidiary of Bancshares also
shall be Eligible Employees under this Policy if such wholly owned subsidiary is
so designated by the Company and agrees in writing to be bound by the terms and
conditions of this Policy.
.2 The rights and obligations of the Eligible Employees and
the Company contained in Articles II through VI shall survive any termination of
an Eligible Employee for twenty-four (24) months following a Change in Control
(as hereinafter defined), or such later period as may be required so that all
benefits to which the Eligible Employee is entitled under this Policy are paid
or otherwise provided to the Eligible Employee.
.3 The Company intends to set forth the compensation and
benefits which an Eligible Employee shall be entitled to receive in the event
that there is a Change in Control or the Eligible Employee's employment with the
Company terminates following a Change in Control under the circumstances
described in Article II of this Policy.
.4 As a condition of receiving benefits under this Policy, an
Eligible Employee shall be required to execute a general waiver and release in
the form provided by the Company and as further described in Section 3.2.
.5 This Policy shall supersede any other policies relating to
any compensation, benefits, severance or other amounts to be paid to an Eligible
Employee in the event of the Eligible Employee's termination of employment
following the occurrence of a Change in Control, but shall not supersede any
agreement between the Eligible Employee and the Company or any personnel
policies of the Company relating to other aspects of the Eligible Employee's
employment
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relationship with the Company, including but not limited to the
Company's personnel policies addressing severance payments to the Eligible
Employee in the event of a termination of the Eligible Employee's employment
which is not proximately related to the occurrence of a Change in Control.
II
SEVERANCE BENEFITS
.1 ENTITLEMENT TO SEVERANCE BENEFITS. If an Eligible
Employee's employment terminates due to an Involuntary Termination or a
Constructive Termination within twenty-four (24) months following a Change in
Control, the termination of employment will be a Covered Termination and the
Company shall pay the Eligible Employee the compensation and benefits described
in this Article II. If the Eligible Employee's employment terminates, but not
due to an Involuntary Termination or a Constructive Termination within twenty-
four (24) months following a Change in Control, or for any reason prior to a
Change in Control or after twenty-four (24) months or more following a Change in
Control, then the termination of employment will not be a Covered Termination
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and Eligible Employee will not be entitled to receive any payments or benefits
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under this Article II.
Payment of any benefits described in this Article II shall be subject
to the restrictions and limitations set forth in Article III.
.2 LUMP SUM SEVERANCE PAYMENT AND BENEFITS. An Eligible
Employee entitled to benefits under this Policy shall receive the lump sum
severance payment and other benefits described in Exhibit A of this Policy.
.3 TAX-QUALIFIED RETIREMENT PLANS. Upon the occurrence of a
Covered Termination, the Eligible Employee's benefits accrued under any pension,
profit sharing, or stock bonus plan intended to satisfy the requirements of
Section 401(a) of the Internal Revenue Code, specifically including, but not
limited to, the Silicon Valley Bank 401(k) and Employee Stock Ownership Plan and
the Silicon Valley Bank Money Purchase Pension Plan, shall become fully vested.
.4 WELFARE BENEFITS. Following a Covered Termination, an
Eligible Employee and his or her covered dependents will be eligible to continue
their Welfare Benefit coverage under any Welfare Benefit plan or program
maintained by the Company only to the extent provided under the terms and
conditions of such Welfare Benefit plan or program. Except for the foregoing,
no continuation of Welfare Benefits shall be provided under this Policy except
to the extent continuation of health insurance coverage is required under the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA").
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This Section 2.4 is not intended to affect, nor does it affect, the
rights of an Eligible Employee, or an Eligible Employee's covered dependents,
under any applicable law with respect to health insurance continuation coverage.
.5 OUTPLACEMENT SERVICES. The Company shall provide an
Eligible Employee with outplacement services under the terms and conditions of
the Company's personnel policies in effect immediately prior to the occurrence
of a Change in Control.
.6 MITIGATION. Except as otherwise specifically provided
herein, an Eligible Employee shall not be required to mitigate damages or the
amount of any payment provided under this Policy by seeking other employment or
otherwise, nor shall the amount of any payment provided for under this Policy be
reduced by any compensation earned by an Eligible Employee as a result of
employment by another employer or by retirement benefits received after the date
of the Covered Termination, or otherwise.
ARTICLE III
LIMITATIONS AND CONDITIONS ON BENEFITS
.7 WITHHOLDING OF TAXES. The Company shall withhold
appropriate federal, state or local income and employment taxes from any
payments hereunder.
.8 EMPLOYEE AGREEMENT AND RELEASE PRIOR TO RECEIPT OF BENEFITS.
Upon the occurrence of a Covered Termination, and prior to the receipt of any
benefits under this Policy on account of the occurrence of a Covered
Termination, Eligible Employee shall, as of the date of a Covered Termination,
execute an employee agreement and release in the form provided by the Company.
In the event an Eligible Employee does not execute such employee agreement and
release within the time period specified in such employee agreement and release
or if the Eligible Employee revokes such employee agreement and release within
the revocation period provided in such employee agreement and release no
benefits shall be payable under this Policy to such Eligible Employee. The
Company reserves the right to include in the employment agreement and release a
representation regarding non-publication of the terms of this Policy.
.9 LIMITS IMPOSED BY APPLICABLE BANKING LAW. Notwithstanding
any other provision to the contrary, the Company shall not be obligated under
this Policy to pay any benefit to the extent that such payment would violate any
prohibition or limitation on termination payments under any applicable federal
or state statute, rule or regulation promulgated, or effective order issued, by
any federal or state regulatory agency having jurisdiction over the Company or
Bancshares. Without limiting the foregoing, the Company and Eligible Employee
acknowledge and agree that the Federal Deposit Insurance Corporation (the
"FDIC") has issued a regulation that prohibits payment of the benefit under
certain circumstances, unless such payments were approved by the FDIC, the
Federal Reserve Bank of San Francisco (the "FRB") and the California State
Banking Department (the "SBD").
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III
OTHER RIGHTS AND BENEFITS
.1 NONEXCLUSIVITY. Nothing in the Policy shall prevent or
limit an Eligible Employee's continuing or future participation in any benefit,
bonus, incentive or other plans, programs, policies or practices provided by the
Company and for which the Eligible Employee may otherwise qualify, nor, except
as specifically provided herein, shall anything herein limit or otherwise affect
such rights as the Eligible Employee may have under any stock option or other
agreements with the Company. Except as otherwise expressly provided herein,
amounts which are vested benefits or which the Eligible Employee is otherwise
entitled to receive under any plan, policy, practice or program of the Company
at or subsequent to the date of a Covered Termination shall be payable in
accordance with such plan, policy, practice or program.
.2 PARACHUTE PAYMENTS.
(a) In the event that any payment received or to be received by an
Eligible Employee pursuant to this Policy ("Payment") would (i) constitute a
"parachute payment" within the meaning of Section 280G of the Internal Revenue
Code (the "Code") and (ii) but for this subsection (a), be subject to the excise
tax imposed by Section 4999 of the Code (the "Excise Tax"), then, subject to the
provisions of subsection (b) hereof, such Payment shall be reduced, if at all,
to the largest amount which the Eligible Employee, in his or her discretion,
determines would result in maximizing the Eligible Employee's net proceeds with
respect to such Payments (after taking into account the payment of any
appropriate federal, state or local income and employment taxes and the payment
of any Excise Tax imposed on such Payment). The determination by the Eligible
Employee of any required reduction pursuant to this subsection (a) shall be
conclusive and binding upon the Company. The Company shall reduce a Payment in
accordance with this subsection (a) only upon written notice by the Eligible
Employee indicating the amount of such reduction, if any. If the Internal
Revenue Service (the "IRS") determines that a Payment is subject to the Excise
Tax, then subsection (b) hereof shall apply, and the enforcement of subsection
(b) shall be the exclusive remedy to the Company for a failure by the Eligible
Employee to reduce the Payment so that no portion thereof is subject to the
Excise Tax.
(b) If, notwithstanding any reduction described in subsection (a)
hereof (or in the absence of any such reduction), the IRS determines that the
Eligible Employee is liable for the Excise Tax as a result of the receipt of one
or more Payments, then the Eligible Employee shall be obligated to pay back to
the Company, within 30 days after final IRS determination, an amount of such
Payments equal to the "Repayment Amount." The Repayment Amount with respect to
such Payments shall be the smallest such amount, if any, as shall be required to
be paid to the Company so that the Eligible Employee's net proceeds with respect
to such Payments (after taking into account the payment of the Excise Tax
imposed on such Payments) shall be maximized. Notwithstanding the foregoing, the
Repayment Amount with respect to such Payments shall be zero if a Repayment
Amount of more than zero would not eliminate the Excise Tax imposed on such
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Payments. If the Excise Tax is not eliminated pursuant to this subsection (b),
the Eligible Employee shall pay the Excise Tax.
IV
NON-ALIENATION OF BENEFITS
No benefit hereunder shall be subject to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance or charge, and any attempt to so
subject a benefit hereunder shall be void.
V
DEFINITIONS
For purposes of the Policy, the following terms shall have the
meanings set forth below:
.1 "ANNUAL BASE SALARY" means the amount of compensation
provided by the Company to an Eligible Employee as base salary. Such amount
shall be determined by annualizing the highest base rate in effect for the
Eligible Employee at any time immediately prior to, on, or after the date of the
Change in Control, exclusive of any bonus or other incentive cash compensation,
income from any stock options or other stock awards, supplemental deferred
compensation contributions made by the Company, pension or profit sharing
contributions or distributions (except as provided below), insurance payments or
proceeds, fringe benefits, or other form of additional compensation, but
specifically including any amounts withheld from base salary to provide benefits
pursuant to section 125, 401(k), or 402(g) of the Internal Revenue Code or
pursuant to any other plan or program of deferred compensation.
.2 "CHANGE IN CONTROL" means the consummation of any of the
following transactions:
(a) the shareholders of the Company or Bancshares approve a merger or
consolidation of the Company or Bancshares with any other corporation, other
than a merger or consolidation which would result in beneficial owners of the
total voting power in the election of directors represented by the voting
securities ("Voting Securities") of the Company or Bancshares (as the case may
be) outstanding immediately prior thereto continuing to beneficially own
securities representing (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty percent (50%) of
the total Voting Securities of the Company or Bancshares, or of such surviving
entity, outstanding immediately after such merger or consolidation;
(b) the shareholders of the Company or Bancshares approve a plan of
liquidation or dissolution of the Company or approve an agreement for the sale,
lease, exchange or other
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transfer or disposition by the Company or Bancshares of all or substantially all
of the Company's assets;
(c) any person (as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other
than (A) a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or Bancshares, (B) a corporation owned directly or
indirectly by the shareholders of Bancshares in substantially the same
proportions as their beneficial ownership of stock in Bancshares, or (C)
Bancshares (with respect to Bancshares' ownership of the stock of the Company),
is or becomes the beneficial owner (within the meaning of Rule 13d-3 under the
Exchange Act), directly or indirectly, of the securities of the Company or
Bancshares representing 50% or more of the Voting Securities; or
(d) (A) (1) the shareholders of the Company or
Bancshares approve a merger or consolidation of the Company or Bancshares with
any other corporation, other than a merger or consolidation which would result
in beneficial owners of Voting Securities of the Company or Bancshares (as the
case may be) outstanding immediately prior thereto continuing to beneficially
own securities representing (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than twenty-five
percent (25%) of the total Voting Securities of the Company or Bancshares, or of
such surviving entity, outstanding immediately after such merger or
consolidation, or (2) any person (as such term is used in Sections 13(d) or
14(d) of the Exchange Act), other than (a) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or Bancshares, (b) a
corporation owned directly or indirectly by the shareholders of Bancshares in
substantially the same proportions as their ownership of stock in Bancshares, or
(c) Bancshares (with respect to Bancshares' ownership of the stock of the
Company) is or becomes the beneficial owner (within the meaning or Rule 13d-3
under the Exchange Act), directly or indirectly, of the securities of the
Company or Bancshares representing 25% or more of the Voting Securities of such
corporation, and
(A) within twelve (12) months of the occurrence of such event, a
change in the composition of the Board of Directors of Bancshares occurs as a
result of which sixty percent (60%) or fewer of the directors are Incumbent
Directors.
"INCUMBENT DIRECTORS" shall mean directors who either:
(A) are directors of Bancshares as of the date hereof;
(B) are elected, or nominated for election, to the Board of
Directors of Bancshares with the affirmative votes of at least a majority of the
directors of Bancshares who are Incumbent Directors described in (A) above at
the time of such election or nomination; or
(C) are elected, or nominated for election, to the Board of
Directors of Bancshares with the affirmative votes of at least a majority of the
directors of Bancshares who are Incumbent Directors described in (A) or (B)
above at the time of such election or nomination.
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Notwithstanding the foregoing, "Incumbent Directors" shall not include
an individual whose election or nomination to the Board of Directors of
Bancshares occurs in order to provide representation for a person or group of
related persons who have initiated or encouraged an actual or threatened proxy
contest relating to the election of directors of Bancshares.
.3 "COMPANY" means Silicon Valley Bank, a California
corporation, and any successor thereto.
.4 "CONSTRUCTIVE TERMINATION" means that an Eligible Employee
voluntarily terminates his or her employment after any of the following are
undertaken without the Eligible Employee's express written consent:
(a) the material, involuntary reduction in the Eligible Employee's
responsibilities, authorities or functions as an employee of the Company as in
effect immediately prior to a Change in Control, except in connection with the
termination of the Eligible Employee's employment for death, disability,
retirement, fraud, misappropriation, embezzlement or any listed exclusion from
the definition of Involuntary Termination;
(b) a reduction in the Eligible Employee's Annual Base Salary;
(c) a reduction in the Eligible Employee's Total Compensation to less
than 85% of the amount provided to the Eligible Employee for the last full
calendar year immediately preceding the occurrence of a Change in Control; or
(d) a relocation of the Eligible Employee to a location more than
fifty (50) miles from the location at which the Eligible Employee performed the
Eligible Employee's duties prior to a Change in Control, except for required
travel by the Eligible Employee on the Company's business to an extent
substantially consistent with the Eligible Employee's business travel
obligations at the time of a Change in Control.
.5 "COVERED TERMINATION" means an Involuntary Termination or a
Constructive Termination within twenty-four (24) months following a Change in
Control. No other event shall be a Covered Termination for purposes of this
Policy.
.6 "ELIGIBLE EMPLOYEE" means each employee of the Company who
meets the requirements of Section 1.1.
.7 "INVOLUNTARY TERMINATION" means an Eligible Employee's
dismissal or discharge by the Company (or, if applicable, by the successor
entity) for reasons other than for one of the following reasons:
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(a) the commission by the Eligible Employee of an act of deliberately
criminal or fraudulent misconduct in the line of duty to the Company or
Bancshares (including, but not limited to, the willful violation of any material
law, rule, regulation, or cease and desist order applicable to the Eligible
Employee, the Company or Bancshares), a deliberate act that constitutes a
conflict of interest with the Company, Bancshares, or Bancshares' shareholders,
or a deliberate breach of a fiduciary duty owed by the Eligible Employee to the
Company, Bancshares, or Bancshares' shareholders;
(b) the Eligible Employee's habitual absence from work, intentional
failure to perform stated duties, gross negligence, or gross incompetence in the
performance of stated duties;
(c) the Eligible Employee's chronic alcohol or drug abuse that results
in a material impairment of the Eligible Employee's ability to perform his or
her duties as an employee of the Company after reasonable accommodation;
(d) the rendering of a verdict of guilty against the Eligible Employee
for any criminal offense (other than a law relating to a traffic violation or
similar offense), whether or not in the line of duty; or
(e) the Eligible Employee's removal from his or her office with the
Company or Bancshares pursuant to an effective order under Section 8(e) of the
Federal Deposit Insurance Act 12 U.S.C.(S) 1818(e).
The termination of an Eligible Employee's employment will not be
deemed to be an "Involuntary Termination" if such termination occurs as a result
of the death or disability of the Eligible Employee.
.8 "POLICY" means this Change in Control Severance Benefits
Policy for Non-Executives.
.9 "TOTAL COMPENSATION" means the amount of compensation paid
by the Company to an Eligible Employee with respect to the calendar year
immediately preceding the occurrence of a Change in Control. Such amount shall
include the following amounts paid with respect to such calendar year: the
Eligible Employee's Annual Base Salary, any annual incentive compensation, if
applicable, most recently declared (whether or not actually paid, and
specifically including any amounts which may be transferred into Executive's
incentive reserve), and any amounts withheld from the Eligible Employee's base
salary or bonus to provide benefits pursuant to section 125, 401(k), or 402(g)
of the Internal Revenue Code or pursuant to any other plan or program of
deferred compensation. Such amount shall exclude any bonus declared or paid
from the warrant incentive plan of the Company, overtime pay, any income from
any stock options or other stock awards, supplemental deferred compensation
contributions made by the Company, pension or profit sharing contributions or
distributions (except included above), insurance payments or proceeds, fringe
benefits, and other forms of additional compensation. Notwithstanding the
foregoing, any
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annual incentive compensation declared for the calendar year immediately
preceding the occurrence of a Change in Control shall relate to the Eligible
Employee's performance in the preceding calendar year.
.10 "WELFARE BENEFITS" means benefits providing for coverage or
payment in the event of an Eligible Employee's death, disability, illness or
injury that were provided to the Eligible Employee immediately before a Change
in Control, whether taxable or non-taxable and whether funded through insurance
or otherwise.
VI
GENERAL PROVISIONS
.1 EMPLOYMENT STATUS. This Policy does not constitute a
contract of employment or impose on an Eligible Employee any obligation to
remain as an employee, or impose on the Company any obligation (i) to retain an
Eligible Employee as an employee, (ii) to change the status of an Eligible
Employee as an at-will employee, or (iii) to change the Company's policies
regarding termination of employment.
.2 PAYMENTS. Any payments made by the Company to an Eligible
Employee under the terms of this Policy shall be delivered to the Eligible
Employee either in person or at his or her address as listed in the Company's
payroll records.
.3 SEVERABILITY. Whenever possible, each provision of this
Policy will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Policy is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Policy will be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or
unenforceable provisions had never been contained herein.
.4 WAIVER. If either the Company or an Eligible Employee
should waive any breach of any provisions of this Policy, such party shall not
thereby be deemed to have waived any preceding or succeeding beach of the same
or any other provision of this Policy.
.5 COMPLETE AGREEMENT. This Policy, including Exhibits A and B
and any other written agreements specifically referred to in this Policy,
constitutes the entire agreement between an Eligible Employee and the Company,
and it is the complete, final, and exclusive embodiment of their agreement with
regard to this subject matter. No promise or representation other than those
expressly contained herein shall alter the terms of this Policy.
.6 BASIS OF PAYMENTS. All benefits under the Policy shall be
paid by the Company. The Policy shall be unfunded, and benefits hereunder shall
be paid only from the general assets of the Company.
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.7 AMENDMENT OR TERMINATION OF POLICY. This Policy may be
changed or terminated only by the Company. A change or termination of this
Policy must be signed by an executive officer of the Company after such change
or termination has been approved by an authorized committee of the Company's
Board of Directors. Notwithstanding the foregoing, no amendment or termination
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shall affect the right to any unpaid benefit of any Eligible Employee whose
employment with the Company terminated prior to the amendment or termination of
the Policy; and further provided, that for the period of twenty-four (24) months
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following a Change in Control, the Policy shall not be amended and no Eligible
Employee shall be reclassified in any manner that would adversely affect the
interests of the Eligible Employee without the written consent of the Eligible
Employee so affected.
.8 HEADINGS. The headings of the Articles and Sections hereof
are inserted for convenience only and shall not be deemed to constitute a part
hereof nor to affect the meaning thereof.
.9 SUCCESSORS AND ASSIGNS. This Policy is intended to bind and
inure to the benefit of and be enforceable by an Eligible Employee and the
Company, and their respective successors, assigns, heirs, executors and
administrators, except that an Eligible Employee may not assign any of his or
her duties hereunder and he may not assign any of his or her rights hereunder
without the written consent of the Company, which consent shall not be withheld
unreasonably.
.10 ARBITRATION. Any and all disputes or controversies, arising
from or regarding the interpretation, performance, enforcement or termination of
this Policy shall be resolved by final and binding arbitration under the
procedures set forth in the Arbitration Procedure attached hereto as Exhibit B
and the then existing Judicial Arbitration and Mediation Services, Inc. ("JAMS")
Rules of Practice and Procedure or the rules of practice and procedure of any
successor entity to JAMS (except insofar as they are inconsistent with the
procedures set forth in the enclosed Arbitration Procedure). Nothing in this
section is intended to prevent either the Company or an Eligible Employee from
obtaining either injunctive relief in court to prevent irreparable harm pending
the conclusion of any such arbitration or in lieu of arbitration or from
utilizing any judicial court system to seek enforcement of an arbitration award.
.11 ATTORNEY FEES. In the event of any arbitration or any other
action or proceeding relating to the interpretation, performance, enforcement or
termination of this Policy, the prevailing party shall be entitled to an award
requiring payment by the other party of such prevailing party's reasonable fees
and costs, including reasonable attorneys' fees incurred as a result of such
action or proceeding.
.12 TRANSFER OF SERVICES TO AFFILIATE. This Policy shall not
prohibit the Company from transferring an Eligible Employee's services to an
affiliate of the Company, provided that the rights and obligations of the
parties hereto shall not terminate in the event of such transfer, and provided
further that the new entity for which the Eligible Employee is performing
services also
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shall be bound hereby without the need for further written agreement and without
release of the Company.
.13 NO VIOLATION OF GOVERNING BANKING LAW. Nothing in this
Policy is intended to require or shall be construed as requiring the Company to
do or fail to do any act in violation of applicable law, rule, regulation or
order. The Company's inability, pursuant to court or regulatory order, to
perform its obligations under this Policy or the modification of this Policy by
the FRB, the SBD or other bank regulatory agency through administrative action
shall not constitute a breach of this Policy. Except to the extent provided in
Section 3.3, the provisions of this Policy shall be severable. If this Policy
or any portion hereof shall be invalidated on any ground by any court of
competent jurisdiction, then the Company shall nevertheless perform its
obligations hereunder to the full extent permitted by any applicable portion of
this Policy that shall not have been invalidated, and the balance of this Policy
not so invalidated shall be enforceable in accordance with its terms.
.14 CONSTRUCTION OF POLICY. In the event of a conflict between
the text of the Policy and any Summary Plan Description, summary, description or
other information regarding the Policy, the text of the Policy shall control.
This Policy is intended to governed by and shall be construed in accordance with
the Employee Retirement Income Security Act of 1974 ("ERISA") and, to the extent
not preempted by ERISA, the laws of the State of California.
IN WITNESS WHEREOF, to record the adoption of this Policy as set forth
herein, effective as of the day and year written above, Silicon Valley Bank has
caused its duly authorized officer to execute the same this ______ day of
___________, 1996.
SILICON VALLEY BANK,
a California corporation
By:
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Name:
--------------------------------
Title:
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Exhibit A: CIC Benefit Table
Exhibit B: Arbitration Procedure
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EXHIBIT A
SCHEDULE OF BENEFITS
ELIGIBLE EMPLOYEE GRADE 8 OR ABOVE
LUMP SUM SEVERANCE PAYMENT. Within sixty (60) days following a Covered
Termination, an Eligible Employee classified by the Company at Grade 8 or above
as of the date of the Covered Termination shall receive a lump sum payment
determined by the Eligible Employee's Total Compensation multiplied by the
appropriate factor applied from the attached table (which factor shall be based
upon (1) the Eligible Employee's grade within the Company and (2) the
relationship between the valuation of the Company at the time of the transaction
(or series of related transactions) causing the occurrence of a Change in
Control and the Book Value of the Company at that time). This lump sum payment
shall be called the Eligible Employee's "CIC Benefit."
If the Eligible Employee's Covered Termination occurs on or before the
expiration of twelve (12) months from the occurrence of a Change in Control, the
Eligible Employee shall be entitled to receive 100% of his or her CIC Benefit.
If the Eligible Employee's Covered Termination occurs after the expiration of
twelve (12) months from the occurrence of a Change in Control, the Eligible
Employee shall be entitled to receive a CIC Benefit based upon the following
table:
NUMBER OF MONTHS PERCENTAGE OF CIC BENEFIT
FOLLOWING CHANGE IN CONTROL
15 75%
18 50%
21 25%
24 0%
In the event that an Eligible Employee's Covered Termination occurs on
a date between two of these quarterly benchmarks, then the percentage of the CIC
Benefit to which the Eligible Employee shall be entitled shall be equal to the
sum of two percentages (rounded to the nearest whole percentage): (1) the
Percentage of CIC Benefit for the quarterly benchmark next following the
occurrence of the Covered Termination, and (2) twenty five percent (25%)
multiplied by a fraction, the numerator of which is the number of days after
the date of Covered Termination and on or before the date on which the
subsequent quarterly benchmark falls, and the denominator of which is ninety one
(91). For example, if the date on which a Change of Control occurs is September
1, 1996 and the Eligible Employee incurs a Covered Termination on November 15,
1997, then the Percentage of CIC Benefit to which the Eligible Employee is
entitled shall be 79% (75% + (16/91 x 25%)) or (75% + 4.4%) or 79.4%, as rounded
to the nearest whole percentage. An Eligible Employee's CIC Benefit may be
further reduced as a result of the limits on payment of aggregate CIC Benefits
described in this Exhibit A.
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EVA PLAN PAYMENT. In addition to the CIC Benefit, within ninety (90)
days of the occurrence of a Covered Termination, an Eligible Employee classified
in Grade 8 to 13 shall receive a lump sum payment of the entire amount of
Eligible Employee's incentive reserve under the EVA Plan, as determined under
the terms of the Company's Incentive Plan at Silicon Valley Bank (known as the
"EVA Plan") or under other, similar incentive or bonus plans that preceded the
EVA Plan or that may replace the EVA Plan.
STOCK OPTION VESTING. All stock options held by the Eligible Employee
with respect to Bancshares stock that are unvested at the time of a Change in
Control shall become fully vested and exercisable upon a Change in Control
(regardless of whether a Covered Termination occurs) and all Bancshares stock
held by the Eligible Employee that is unvested at the time of a Change in
Control shall become fully vested upon a Change in Control (regardless of
whether a Covered Termination occurs). The Company shall take all actions
necessary to amend all stock option agreements evidencing outstanding stock
options granted to an Eligible Employee to provide for full vesting of stock
options upon a Change in Control or to otherwise conform such stock agreements,
as necessary, to the terms of this Policy.
*** For purposes of the attached table, the following definitions shall apply:
VII "Book Value" shall mean the amount of the Company's
stockholders' equity, as determined in accordance with generally accepted
accounting principles, as of the date immediately preceding a Change in Control,
excluding the Company's allowance for loan losses.
VIII "Selling Price" shall mean the valuation of the Company as
determined by the Company in good faith at the time of the occurrence of the
transaction (or series of related transactions) as a result of which a Change in
Control occurs.
Furthermore, notwithstanding any provision in this Exhibit A and any
personnel policy of the Company to the contrary, the cumulative CIC Benefit paid
to all employees of the Company shall not exceed 5.8% of the difference between
the Selling Price and the Book Value assuming one-third (1/3rd) of the Company's
employees at the time of a Change in Control incur a Covered Termination, shall
not exceed 11.7% of the difference between the Selling Price and the Book Value
assuming two-thirds (2/3rds) of the Company's employees at the time of a Change
in Control incur a Covered Termination, and in no event shall exceed 17.5% of
the difference between the Selling Price and the Book Value. For purposes of
the potential reduction in CIC Benefits provided for in this paragraph, the
determination shall be made at the time of the Change in Control and the
determination of whether the cumulative CIC Benefit to be paid exceeds the
relevant limits specified herein also shall be determined at the time of the
Change in Control. If, at the time of the Change in Control, it is determined
that the limits specified in this paragraph are exceeded, then the potential CIC
Benefits of all employees of the Company incurring a Covered Termination shall
be proportionately decreased such that the resulting potential aggregate payouts
will not exceed the relevant limit.
13
CIC BENEFIT/1/
Selling Price Multiple of Total Cash Compensation
Multiple of ------------------------------------------------
Book Value Grade 13 Grades 11-12 Grades 10-8
- --------------------------------------------------------------------
1.00 0.000 0.000 0.000
1.05 0.075 0.050 0.025
1.10 0.150 0.100 0.050
1.15 0.225 0.150 0.075
1.20 0.300 0.200 0.100
1.25 0.375 0.250 0.125
1.30 0.450 0.300 0.150
1.35 0.525 0.350 0.175
1.40 0.600 0.400 0.200
1.45 0.675 0.450 0.225
1.50 0.750 0.500 0.250
1.55 0.825 0.550 0.275
1.60 0.900 0.600 0.300
1.65 0.975 0.650 0.325
1.70 1.050 0.700 0.350
1.75 1.125 0.750 0.375
1.80 1.200 0.800 0.400
1.85 1.275 0.850 0.425
1.90 1.350 0.900 0.450
1.95 1.425 0.950 0.475
2.00 1.500 1.000 0.500
2.05 1.575 1.050 0.525
2.10 1.650 1.100 0.550
2.15 1.725 1.150 0.575
2.20 1.800 1.200 0.600
2.25 1.875 1.250 0.625
2.30 1.950 1.300 0.650
2.35 2.025 1.350 0.675
2.40 2.100 1.400 0.700
2.45 2.175 1.450 0.725
2.50 2.250 1.500 0.750
2.55 2.325 1.550 0.775
2.60 2.400 1.600 0.800
2.65 2.475 1.650 0.825
2.70 2.550 1.700 0.850
2.75 2.625 1.750 0.875
2.80 2.700 1.800 0.900
2.85 2.775 1.850 0.925
2.90 2.850 1.900 0.950
2.95 2.925 1.950 0.975
3.00 3.000 2.000 1.000
/1/ This table reflects CIC benefits for sales up to 3.00 times SVB's
then book value. For sales above this, the multiples (of total cash
compensation) must appropriatesly be extrapolated from the multiples (of
total cash compensation) shown.
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EXHIBIT A
SCHEDULE OF BENEFITS
ELIGIBLE EMPLOYEE GRADE 7 AND BELOW
Subject to the limitations specified below, within sixty (60) days
following a Covered Termination, an Eligible Employee classified at Grade 7 or
below as of the date of the Covered Termination shall receive a lump sum payment
in an amount equal to one week of Total Compensation for each full year of
service with the Company, but not to exceed a maximum of fifteen (15) weeks of
Total Compensation. This lump sum payment shall be called the Eligible
Employee's CIC Benefit. Notwithstanding the foregoing, (i) Eligible Employees
-----------------------------
who are classified as Grade 7 or below who are not officers of the Company will
receive a minimum of two (2) weeks of Total Compensation as the Eligible
Employee's CIC Benefit, and (ii) Eligible Employees who are classified at Grade
7 or below who are officers of the Company will receive a minimum of four (4)
weeks of Total Compensation as the Eligible Employee's CIC Benefit.
For purposes of determining CIC Benefits for an Eligible Employee
classified at Grade 7 or below, such Eligible Employee's Total Compensation
shall be divided by 52 in order to determine the amount of one week of Total
Compensation.
However, notwithstanding any provision in this Exhibit A and any personnel
policy of the Company to the contrary, the cumulative CIC Benefit paid to all
employees of the Company shall not exceed 5.8% of the difference between the
Selling Price and the Book Value assuming one-third (1/3rd) of the Company's
employees at the time of a Change in Control incur a Covered Termination, shall
not exceed 11.7% of the difference between the Selling Price and the Book Value
assuming two-thirds (2/3rds) of the Company's employees at the time of a Change
in Control incur a Covered Termination, and in no event shall exceed 17.5% of
the difference between the Selling Price and the Book Value. For purposes of
the potential reduction in CIC Benefits provided for in this paragraph, the
determination shall be made at the time of the Change in Control and the
determination of whether the cumulative CIC Benefit to be paid exceeds the
relevant limits specified herein also shall be determined at the time of the
Change in Control. If, at the time of the Change in Control, it is determined
that the limits specified in this paragraph are exceeded, then the potential CIC
Benefits of all employees of the Company incurring a Covered Termination shall
be proportionately decreased such that the resulting potential aggregate payouts
will not exceed the relevant limit.
*** For purposes of this Exhibit A, the following definitions shall apply:
IX "Book Value" shall mean the amount of the Company's stockholders'
equity, as determined in accordance with generally accepted accounting
principles, as of the date immediately preceding a Change in Control, excluding
the Company's allowance for loan losses.
15
X "Selling Price" shall mean the valuation of the Company as determined by
the Company in good faith at the time of the occurrence of the transaction (or
series of related transactions) as a result of which a Change in Control occurs.
16
EXHIBIT B
ARBITRATION PROCEDURE
XI The parties agree that any dispute that arises in connection
with the payment of benefits under this Policy or the termination of this Policy
shall be resolved by binding arbitration in the manner described below.
XII A party intending to seek resolution of any dispute under the
Policy by arbitration shall provide a written demand for arbitration to the
other party, which demand shall contain a brief statement of the issues to be
resolved.
XIII The arbitration shall be conducted in Santa Clara County,
California, by a mutually acceptable retired judge from the panel of Judicial
Arbitration and Mediation Services, Inc. or any entity performing the same type
of services that succeeds to its business ("JAMS"). At the request of either
party, arbitration proceedings will be conducted in the utmost secrecy and, in
such case, all documents, testimony and records shall be received, heard and
maintained by the arbitrator in secrecy under seal, available for inspection
only by the parties to the arbitration, their respective attorneys, and their
respective expert consultants or witnesses who shall agree, in advance and in
writing, to receive all such information confidentially and to maintain such
information in secrecy, and make no use of such information except for the
purposes of the arbitration, unless compelled by legal process.
XIV The arbitrator is required to disclose any circumstances that
might preclude the arbitrator from rendering an objective and impartial
determination. In the event the parties cannot mutually agree upon the
selection of a JAMS arbitrator, the President of JAMS shall designate the
arbitrator.
XV The party demanding arbitration shall promptly request that
JAMS conduct a scheduling conference within fifteen (15) days of the date of
that party's written demand for arbitration or on the first available date
thereafter on the arbitrator's calendar. The arbitration hearing shall be held
within thirty (30) days after the scheduling conference or on the first
available date thereafter on the arbitrator's calendar. Nothing in this
paragraph shall prevent a party from at any time seeking temporary equitable
relief, from JAMS or any court of competent jurisdiction, to prevent irreparable
harm pending the resolution of the arbitration.
XVI Discovery shall be conducted as follows: (a) prior to the
arbitration any party may make a written demand for lists of the witnesses to be
called and the documents to be introduced at the hearing; (b) the lists must be
served within fifteen days of the date of receipt of the demand, or one day
prior to the arbitration, whichever is earlier; and (c) each party may take no
more than two depositions (pursuant to the procedures set forth in the
California Code of Civil Procedure) with a
17
maximum of five hours of examination time per deposition, and no other form of
pre-arbitration discovery shall be permitted.
XVII It is the intent of the parties that the Federal Arbitration
Act ("FAA") shall apply to the enforcement of this provision unless it is held
inapplicable by a court with jurisdiction over the dispute, in which event the
California Arbitration Act ("CAA") shall apply.
XVIII The arbitrator shall apply California law, including the
California Evidence Code, and shall be able to decree any and all relief of an
equitable nature, including but not limited to such relief as a temporary
restraining order, a preliminary injunction, a permanent injunction, or replevin
of Company property. The arbitrator shall also be able to award actual, general
or consequential damages, but shall not award any other form of damage (e.g.,
punitive damages).
18