-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RhKE+F4nJMZAt89twv6JVDZmwNzELu2ut0voUWRTegOkxuTm0+FpiPs0nVs1TBdn k8hwVP8x5yJ0cyCN7DiUGw== 0001012870-99-001104.txt : 19990413 0001012870-99-001104.hdr.sgml : 19990413 ACCESSION NUMBER: 0001012870-99-001104 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990525 FILED AS OF DATE: 19990412 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GREATER BAY BANCORP CENTRAL INDEX KEY: 0000775473 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 770387041 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 000-25034 FILM NUMBER: 99592059 BUSINESS ADDRESS: STREET 1: 2860 WEST BAYSHORE ROAD CITY: PALO ALTO STATE: CA ZIP: 94303 BUSINESS PHONE: 4153751555 MAIL ADDRESS: STREET 1: 2860 BAYSHORE ROAD STREET 2: 420 COWPER ST CITY: PALO ALTO STATE: CA ZIP: 943011504 FORMER COMPANY: FORMER CONFORMED NAME: MID PENINSULA BANCORP DATE OF NAME CHANGE: 19941031 FORMER COMPANY: FORMER CONFORMED NAME: SAN MATEO COUNTY BANCORP DATE OF NAME CHANGE: 19920703 DEF 14A 1 DEFINITIVE PROXY STATEMENT SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant [X] Filed by a Party other than the Registrant [_] Check the appropriate box: [_] Preliminary Proxy Statement [_] Confidential, for Use of the Commission Only (as permitted by Rule 14a- 6(e)(2)) [X] Definitive Proxy Statement [_] Definitive Additional Materials [_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12 GREATER BAY BANCORP (Name of Registrant as Specified In Its Charter) ....................................N/A......................................... (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] No fee required [_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6b(i)(2) or Item 22(a)(2) of Schedule 14A. [_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. (1) Title of each class of securities to which transaction applies: ........................................................................... (2) Aggregate number of securities to which transaction applies: ........................................................................... (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): ........................................................................... (4) Proposed maximum aggregate value of transaction: ........................................................................... (5) Total fee paid: ........................................................................... [_] Fee paid previously with preliminary materials. [_] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: ___________ (2) Form, Schedule or Registration Statement No.: ______________ (3) Filing Party: ______________________________________________ (4) Date Filed: _______________________ GREATER BAY BANCORP ---------------- NOTICE OF 1999 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT ---------------- DATE: Tuesday, May 25, 1999 TIME: 6:30 p.m. PLACE: Hotel Sofitel 223 Twin Dolphin Drive Redwood City, California 94065 [GBB LETTERHEAD] April 12, 1999 Dear Shareholder: It is my pleasure to invite you to Greater Bay Bancorp's 1999 Annual Meeting of Shareholders. We will hold the meeting on Tuesday, May 25, 1999, at 6:30 p.m., at the Hotel Sofitel, 223 Twin Dolphin Drive, Redwood City, California 94065. In addition to the formal items of business, I will review the major developments of 1998, answer your questions and discuss our future prospects. This booklet includes the Notice of Annual Meeting and the Proxy Statement. The Proxy Statement describes the business that we will conduct at the meeting and provides information about Greater Bay Bancorp. Your vote is important. Whether or not you plan to attend the meeting, please complete, date, sign and return the enclosed proxy card promptly. If you attend the meeting and prefer to vote in person, you may do so. We look forward to seeing you at the meeting. Sincerely, /s/ David L. Kalkbrenner David L. Kalkbrenner President and Chief Executive Officer GREATER BAY BANCORP _________________ NOTICE OF 1999 ANNUAL MEETING OF SHAREHOLDERS _________________ DATE: TUESDAY, MAY 25, 1999 TIME: 6:30 P.M. PLACE: HOTEL SOFITEL 223 TWIN DOLPHIN DRIVE REDWOOD CITY, CALIFORNIA 94065 Dear Shareholders: At our 1999 Annual Meeting, we will ask you to: . Elect four directors to each serve for a term of three years; . Ratify the selection of PricewaterhouseCoopers L.L.P. as our independent accountants for 1999; and . Transact any other business that may properly be presented at the Annual Meeting. If you were a shareholder of record at the close of business on April 1, 1999, you may vote at the Annual Meeting. Article IV, Section 2 of our Bylaws provides for the nomination of directors in the following manner: "Nomination for election of directors may be made by the Board of Directors or by any holder of any outstanding class of capital stock of the corporation entitled to vote for the election of directors. Notice of intention to make any nominations shall be made in writing and shall be delivered or mailed to the President of the corporation not less than twenty-one (21) days nor more than sixty (60) days prior to any meeting of shareholders called for the election of directors; provided, however, that if less than twenty-one (21) days' notice of the meeting is given to shareholders, such notice of intention to nominate shall be mailed or delivered to the President of the corporation not later than the close of business on the tenth (10th) day following the day on which the notice of meeting was mailed; provided further, that if notice of such meeting is sent by third class mail (if permitted by law), no notice of intention to make nominations shall be required. Such notification shall contain the following information to the extent known to the notifying shareholder: (a) the name and address of each proposed nominee; (b) the principal occupation of each proposed nominee; (c) the number of shares of capital stock of the corporation owned by each proposed nominee; (d) the name and residence address of the notifying shareholder; and (e) the number of shares of capital stock of the corporation owned by the notifying shareholder. Nominations not made in accordance herewith may, in the discretion of the Chairman of the meeting, be disregarded and upon the Chairman's instructions the inspectors of election can disregard all votes cast for each such nominee. A copy of this paragraph shall be set forth in a notice to shareholders of any meeting at which directors are to be elected." IT IS IMPORTANT THAT ALL SHAREHOLDER VOTE. WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE, REGARDLESS OF WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. IF YOU DO ATTEND THE MEETING, YOU MAY THEN WITHDRAW YOUR PROXY AND VOTE IN PERSON. IN ORDER TO FACILITATE THE PROVIDING OF ADEQUATE ACCOMODATIONS, PLEASE INDICATE ON THE PROXY WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. By Order of the Board of Directors /s/ Linda M. Iannone Linda M. Iannone Corporate Secretary Palo Alto, California Dated: April 12, 1999 TABLE OF CONTENTS
Page ---- INFORMATION ABOUT THE ANNUAL MEETING AND VOTING................................................... 1 WHY DID YOU SEND ME THIS PROXY STATEMENT?.................................................... 1 WHO IS ENTITLED TO VOTE?..................................................................... 1 WHAT CONSTITUTES A QUORUM?................................................................... 1 HOW MANY VOTES DO I HAVE?.................................................................... 1 HOW DO I VOTE BY PROXY?...................................................................... 1 MAY I CHANGE MY VOTE AFTER I RETURN MY PROXY?................................................ 2 HOW DO I VOTE IN PERSON?..................................................................... 2 WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL?.............................................. 2 PROPOSAL 1:.................................................................................. 2 PROPOSAL 2:.................................................................................. 2 WHAT ARE THE COSTS OF SOLICITING THESE PROXIES?.............................................. 2 HOW DO I OBTAIN AN ANNUAL REPORT ON FORM 10-K?............................................... 3 INFORMATION ABOUT GREATER BAY STOCK OWNERSHIP..................................................... 3 DOES ANYONE OWN 5% OR MORE OF GREATER BAY'S COMMON STOCK?.................................... 3 HOW MUCH OF GREATER BAY'S COMMON STOCK IS OWNED BY DIRECTORS AND EXECUTIVE OFFICERS?......... 4 INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS................................................ 6 THE BOARD OF DIRECTORS....................................................................... 6 THE COMMITTEES OF THE BOARD.................................................................. 6 COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.................................. 6 SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE BY DIRECTORS AND EXECUTIVE OFFICERS.. 7 HOW WE COMPENSATE DIRECTORS.................................................................. 7 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................................... 7 EXECUTIVE OFFICERS........................................................................... 8 HOW WE COMPENSATE EXECUTIVE OFFICERS......................................................... 10 EMPLOYMENT CONTRACTS, CHANGE IN CONTROL ARRANGEMENTS AND TERMINATION OF EMPLOYMENT........... 13 EXECUTIVE COMMITTEE'S REPORT ON EXECUTIVE COMPENSATION....................................... 16 THE REPORT................................................................................... 16 PERFORMANCE GRAPH............................................................................ 18 DISCUSSION OF PROPOSALS RECOMMENDED BY THE BOARD.................................................. 19 PROPOSAL 1: ELECT FOUR DIRECTORS............................................................ 19 PROPOSAL 2: RATIFY SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS FOR 1999..................... 21 OTHER BUSINESS.................................................................................... 22 INFORMATION ABOUT SHAREHOLDER PROPOSALS........................................................... 22
i PROXY STATEMENT FOR GREATER BAY BANCORP 1999 ANNUAL MEETING OF SHAREHOLDERS INFORMATION ABOUT THE ANNUAL MEETING AND VOTING WHY DID YOU SEND ME THIS PROXY STATEMENT? We sent you this Proxy Statement and the enclosed proxy card because our Board of Directors is soliciting your proxy to vote at the 1999 Annual Meeting of Shareholders. This Proxy Statement summarizes the information you need to know to cast an informed vote at the Annual Meeting. However, you do not need to attend the Annual Meeting to vote your shares. Instead, you may simply complete, sign and return the enclosed proxy card. Along with this Proxy Statement, we are also sending you the Greater Bay Bancorp ("Greater Bay") 1998 Summary Annual Report and Annual Report on Form 10- K for the year ended December 31, 1998, which includes our financial statements. WHO IS ENTITLED TO VOTE? We will begin sending this Proxy Statement, the attached Notice of Annual Meeting and the enclosed proxy card on April 12, 1999 to all shareholders entitled to vote. Shareholders who owned Greater Bay Common Stock at the close of business on April 1, 1999 are entitled to vote. On this record date, there were 9,733,209 shares of Greater Bay Common Stock outstanding. Greater Bay Common Stock is our only class of outstanding stock. WHAT CONSTITUTES A QUORUM? A majority of our shareholders entitled to vote at the meeting must be present, in person or by proxy, in order to constitute a quorum. We can only conduct the business of the meeting if a quorum has been established. We will include proxies marked as abstentions and broker non-votes in determining the number of shares present at the meeting. HOW MANY VOTES DO I HAVE? Each share of Greater Bay Common Stock that you owned at the close of business on April 1, 1999 entitles you to one vote. The proxy card indicates the number of votes that you have. HOW DO I VOTE BY PROXY? Whether or not you plan to attend the Annual Meeting, we urge you to complete, sign and date the enclosed proxy card and to return it promptly in the envelope provided. Returning the proxy card will not affect your right to attend the Annual Meeting and vote. If you properly fill in your proxy card and send it to us in time to vote, your "proxy" (one of the individuals named on your proxy card) will vote your shares as you have directed. If you sign the proxy card but do not make specific choices, your proxy will vote your shares as recommended by the Board of Directors as follows: . "FOR" the election of all four nominees for director . "FOR" ratification of the selection of independent accountants for 1999 If any other matter is presented, your proxy will vote in accordance with the recommendation of the Board of Directors, or, if no recommendation is given, in accordance with his or her best judgment. At the time this Proxy Statement went to press, we knew of no matters which needed to be acted on at the Annual Meeting, other than those discussed in this Proxy Statement. 1 If you hold your shares of Greater Bay Common Stock in "street name" (that is, through a broker or other nominee) and you fail to instruct your broker or nominee as to how to vote such shares of common stock, your broker or nominee may, in its discretion, vote your shares "FOR" the election of the nominees for director set forth herein, and "FOR" ratification of the appointment of PricewaterhouseCoopers L.L.P. as our independent public accountants for the year ending December 31, 1999. MAY I CHANGE MY VOTE AFTER I RETURN MY PROXY? Yes. If you fill out and return the enclosed proxy card, you may change your vote at any time before the vote is conducted at the Annual Meeting. You may change your vote in any one of three ways: . You may send to Greater Bay's Corporate Secretary another completed proxy card with a later date. . You may notify Greater Bay's Corporate Secretary in writing before the Annual Meeting that you have revoked your proxy. . You may attend the Annual Meeting and vote in person. HOW DO I VOTE IN PERSON? If you plan to attend the Annual Meeting and vote in person, we will give you a ballot form when you arrive. However, if your shares are held in the name of your broker, bank or other nominee, you must bring an account statement or letter from the nominee indicating that you were the beneficial owner of the shares on April 1, 1999, the record date for voting. WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL? PROPOSAL 1: Elect Four Directors The four nominees for director who receive the most votes will be elected. So, if you do not vote for a particular nominee, or you indicate "WITHHOLD AUTHORITY" to vote for a particular nominee on your proxy card, your vote will not count either "for" or "against" the nominee. Our Articles of Incorporation do not permit cumulative voting. PROPOSAL 2: Ratify Selection of Independent Public The affirmative vote of a majority of the votes cast at the Accountants Annual Meeting on this proposal is required to ratify the selection of independent public accountants. So, if you "ABSTAIN" from voting, it has no effect on the outcome of this proposal.
WHAT ARE THE COSTS OF SOLICITING THESE PROXIES? We will pay all the costs of soliciting these proxies. In addition to mailing proxy soliciting material, our directors, officers and employees also may solicit proxies in person, by telephone or by other electronic means of communication for which they will receive no compensation. We will ask banks, brokers and other institutions, nominees and fiduciaries to forward the proxy materials to their principals and to obtain authority to execute proxies. We will then reimburse them for their reasonable expenses. We have hired Kissel-Blake, a division of Shareholder Communications Corporation, to seek the proxies of custodians, such as brokers, who hold shares which belong to other people. This service will cost Greater Bay approximately $2,500. 2 HOW DO I OBTAIN AN ANNUAL REPORT ON FORM 10-K? A COPY OF GREATER BAY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998 IS INCLUDED WITH THIS PROXY STATEMENT. IF YOU DID NOT RECEIVE ONE, WE WILL SEND YOU ONE WITHOUT CHARGE. PLEASE WRITE TO: GREATER BAY BANCORP 2860 WEST BAYSHORE ROAD PALO ALTO, CALIFORNIA 94303 ATTENTION: SHAWN E. SAUNDERS, CONTROLLER INFORMATION ABOUT GREATER BAY STOCK OWNERSHIP DOES ANYONE OWN 5% OR MORE OF GREATER BAY'S COMMON STOCK? Yes. The following table shows, as of April 1, 1999, an individual who beneficially owns 5% or more of Greater Bay's Common Stock. As of April 1, 1999, Greater Bay did not know of any other individual or company which beneficially owned 5% or more of Greater Bay's Common Stock. The Securities and Exchange Commission has defined "beneficial ownership" to mean more than ownership in the usual sense. For example, a person has beneficial ownership of a share not only if he owns it in the usual sense, but also if he has the power to vote, sell or otherwise dispose of the share. Beneficial ownership also includes that number of shares that a person has the right to acquire within 60 days. Two or more persons might count as beneficial owners of the same share.
SHARES BENEFICIALLY OWNED ------------------------------------- NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF PERCENTAGE SHARES OF CLASS - -------------------------------------------------------------------- -------------------- -------------- Leo K.W. Lum, PRB Revocable Trust................................... 964,748 9.91% 344 Pine Street San Francisco, California 94104
3 HOW MUCH OF GREATER BAY'S COMMON STOCK IS OWNED BY DIRECTORS AND EXECUTIVE OFFICERS? The following table shows, as of April 1, 1999, beneficial ownership of Greater Bay Common Stock by each of Greater Bay's directors, nominees for director and executive officers, and for directors and executive officers as a group. Unless otherwise indicated in the table below, no director or executive officer of Greater Bay shares beneficial ownership of the same Greater Bay Common Stock with anyone else.
SHARES BENEFICIALLY OWNED(2) ------------------------------ NAME AND ADDRESS OF BENEFICIAL OWNER(1) NUMBER OF PERCENTAGE SHARES OF CLASS(3) ------------------------------------------------------------------- ------------ --------------- Susan K. Black (4).......................................... 21,654 .22 George R. Corey............................................. 82,248 .85 John W. Gatto(5)............................................ 37,778 .39 David R. Hood(6)............................................ 51,263 .53 James E. Jackson(7)......................................... 96,628 .99 Gregg A. Johnson(8)......................................... 2,000 .02 David L. Kalkbrenner(9)..................................... 122,667 1.25 Rex D. Lindsay(10).......................................... 77,860 .80 Leo K.W. Lum (11)........................................... 964,748 9.91 George M. Marcus(12)........................................ 75,582 .78 Duncan L. Matteson(13)...................................... 99,734 1.02 Glen McLaughlin(14)......................................... 53,746 .56 Rebecca Q. Morgan........................................... 2,000 .02 Dick J. Randall(15)......................................... 217,188 2.25 Donald H. Seiler(16)........................................ 98,116 1.01 Steven C. Smith(17)......................................... 83,134 .86 Warren R. Thoits(18)........................................ 64,568 .66 All directors and executive officers as a group (17 persons)(19) 2,150,914 22.08
__________________ (1) The address for each of the beneficial owners is care of Greater Bay Bancorp, 2860 West Bayshore Road, Palo Alto, California 94303. (2) Includes shares issuable upon the exercise of stock options exercisable within 60 days of April 1, 1999. (3) Shares of Greater Bay Common Stock issuable upon exercise of stock options exercisable within 60 days of April 1, 1999 are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. (4) Includes 12,754 shares held jointly by Ms. Black and her spouse and 8,900 shares issuable upon the exercise of stock options exercisable within 60 days of April 1, 1999. (5) Includes 33,378 shares held directly by Mr. Gatto and 4,400 shares issuable upon the exercise of options exercisable within 60 days of April 1, 1999. (6) Includes 11,052 shares held in an IRA for Mr. Hood, 16,701 shares held jointly by Mr. Hood and his spouse, 1,744 shares in a 401(k) plan for Mr. Hood and 21,766 shares issuable upon the exercise of options exercisable within 60 days of April 1, 1999. (7) Includes 79,520 shares held jointly by Mr. Jackson and his spouse, 2,982 shares held in an IRA for the benefit of Mr. Jackson's spouse and 14,126 shares held in an IRA for Mr. Jackson. 4 (8) Includes 2,000 shares issuable upon the exercise of stock options exercisable within 60 days of April 1, 1999. (9) Includes 39,738 shares held directly by Mr. Kalkbrenner, 19,994 shares held in an IRA for Mr. Kalkbrenner, 3,935 shares in a 401(k) plan for Mr. Kalkbrenner and 59,000 shares issuable upon the exercise of stock options exercisable within 60 days of April 1, 1999. (10) Includes 63,506 shares held by the Rex D. and Leanor L. Lindsay Family Trust and 14,354 shares issuable upon the exercise of options exercisable within 60 days of April 1, 1999. (11) Represents shares owned by the Leo K.W. Lum PRB Revocable Trust of which Mr. Lum is the sole trustee and beneficiary. (12) Includes 61,448 shares held directly by Mr. Marcus and 14,134 shares issuable upon the exercise of stock options exercisable within 60 days of April 1, 1999. (13) Includes 65,178 shares held jointly with Mr. Matteson's spouse as trustees of the Matteson Family Trust, 22,000 shares held by the Matteson Realty Services, Inc. Defined Benefit Employees' Retirement Trust and 12,556 shares issuable upon the exercise of stock options exercisable within 60 days of April 1, 1999. (14) Includes 37,228 shares held by the McLaughlin Family Foundation and 16,518 shares issuable upon the exercise of options exercisable within 60 days of April 1, 1999. (15) Includes 370 shares held directly by Mr. Randall, 209,982 shares held by the Dick J. and Carolyn L. Randall Trust and 6,836 shares issuable upon the exercise of stock options exercisable within 60 days of April 1, 1999. (15) Includes 95,738 shares held jointly with Mr. Seiler's spouse as trustees of the Seiler Family Trust and 2,378 shares issuable upon the exercise of stock options exercisable within 60 days of April 1, 1999. (17) Includes 5,467 shares held in a 401(k) Plan for Mr. Smith, 12,873 shares held jointly by Mr. Smith and his spouse, 7,532 shares held in an IRA for Mr. Smith, 740 shares held in an IRA for his spouse and 56,522 shares issuable upon the exercise of stock options exercisable within 60 days of April 1, 1999. (18) Includes 27,642 shares held by Mr. Thoits as trustee of the Warren R. Thoits Trust dated December 30, 1983, 11,678 shares held by Thoits Brothers, Inc., 13,992 shares for which Mr. Thoits is the record holding trustee, 4,500 shares held by Mr. Thoits and his spouse as Trustees of the WRT-VBT 1998 Trust dated September 1, 1988 and 6,756 shares issuable upon the exercise of stock options exercisable within 60 days of April 1, 1999. (19) Includes 226,120 shares issuable upon the exercise of stock options exercisable within 60 days of April 1, 1999. 5 INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS THE BOARD OF DIRECTORS The Board of Directors oversees our business and monitors the performance of management. In accordance with corporate governance principles, the Board does not involve itself in day-to-day operations. The directors keep themselves informed through, among other things, discussions with the Co-Chairmen, other key executives and our principal external advisers (legal counsel, outside auditors, investment bankers and other consultants), by reading reports and other materials that we send them and by participating in Board and committee meetings. Greater Bay's Bylaws currently permit the number of Board members to range from 9 to 17, leaving the Board authority to fix the exact number of directors within that range. The Board has fixed the exact number of directors at 14. The Board met 13 times during 1998. Each incumbent director attended at least 75% of the total number of Board meetings plus meetings of the standing committees on which that particular director served. THE COMMITTEES OF THE BOARD The Board may delegate portions of its responsibilities to committees of its members. These "standing committees" of the Board meet at regular intervals to attend to their particular areas of responsibility. Our Board has five standing committees: an Audit Committee, an Executive Committee, a Loan Committee, a Trust Oversight Committee and an Investment/Asset-Liability Management Committee ("Investment/ALCO Committee"). The Audit Committee directs our external auditors to insure that they satisfy the legal and technical requirements necessary for the protection of our shareholders, employees and directors and oversees the internal audit function. The Audit Committee annually recommends a firm of public accountants to serve as external auditors to the Board. It also makes certain that the external auditors have the independence necessary to freely examine all of Greater Bay's books and records. The Audit Committee held six meetings during 1998. Mr. Seiler chairs the Audit Committee and Messrs. McLaughlin, Randall and Thoits are also members. Our Executive Committee also acts as our Executive Compensation Committee and Nominating Committee. In performing its duties as the Executive Compensation Committee, the Executive Committee determines the salary and bonus structure of Greater Bay's executive officers and supervises compensation for our other officers. In performing its duties as the Nominating Committee, the Executive Committee selects management nominees to stand for election as directors. It also considers nominations made to the Board by shareholders, provided such nominations comply with Greater Bay's Bylaws. The Executive Committee held 12 meetings during 1998. Mr. Matteson chairs the Executive Committee and Messrs. Gatto, Kalkbrenner, Lindsay and Seiler also are members. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION None of the members of the Executive Committee (which also acts as an Executive Compensation Committee) serves or has served as an officer or employee of Greater Bay or its subsidiaries, except for Mr. Kalkbrenner, who serves as the President and Chief Executive Officer of Greater Bay. In addition, Mr. Matteson has an interest in a building leased by Mid-Peninsula Bank ("MPB"). See "Certain Relationships and Related Transactions." 6 SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE BY DIRECTORS AND EXECUTIVE OFFICERS Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers to file reports with the Securities and Exchange Commission and The Nasdaq Stock Market on changes in their beneficial ownership of Greater Bay Common Stock, and to provide Greater Bay with copies of the reports. Based solely on our review of these reports or of certifications to us that no report was required to be filed, we believe that all of our directors and executive officers, except Roger V. Smith, complied with all Section 16(a) filing requirements applicable to them during the 1998 fiscal year. Mr. Smith, a director of Greater Bay until January 13, 1999, failed to file on a timely basis one report on Form 4 required by Section 16(a) regarding one transaction. Mr. Smith filed the report on Form 4 on September 20, 1998. HOW WE COMPENSATE DIRECTORS Greater Bay has a policy of compensating directors for their service on the Board and for their attendance at committee meetings. In 1998, Duncan Matteson, as the Co-Chairman of the Board, received an annual retainer of $5,500 and John Gatto, as Co-Chairman of the Board, received an annual retainer of $5,000. All other non-officer directors received annual retainers of $3,200. Mr. Kalkbrenner's compensation is discussed below in the section entitled "How We Compensate Executive Officers." The total compensation for the Greater Bay Board of Directors in 1998 was $209,000. In 1998, committee members received annual retainers as follows: (i) Audit Committee, $2,000; (ii) Executive Committee, $6,000; (iii) Loan Committee, $6,000; (iv) Trust Oversight Committee, $3,000; and (v) Investment/ALCO Committee, $2,000. Members of the Boards of Directors of Greater Bay's subsidiary banks received fees in 1998 as follows: (i) Cupertino National Bank ("CNB") and MPB, $1,800; (ii) Peninsula Bank of Commerce ("PBC"), $26,700; and (iii) Golden Gate Bank ("Golden Gate"), $15,000. Beginning in January 1999, PBC directors will receive annual retainers of $1,800. Beginning in June 1999, Golden Gate directors will receive annual retainers of $1,800. In addition, directors are eligible to participate in Greater Bay's 1996 Stock Option Plan and the Greater Bay 1997 Elective Deferred Compensation Plan. All stock options granted to non-officer directors vest in equal annual installments over five-year periods beginning on the date of grant, subject to continued service on the Board of Directors. Directors are also entitled to the protection of certain indemnification provisions in Greater Bay's Articles of Incorporation and Bylaws CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Greater Bay, through its subsidiaries, has had and expects in the future to have banking transactions in the ordinary course of business with our directors and officers or associates of our directors and officers. We may also have banking transactions with corporations of which our directors or officers may own a controlling interest, or also serve as directors or officers. Such transactions have taken place and will take place on substantially the same terms, including interest and collateral, as those prevailing for comparable transactions with others. We believe that such transactions involving loans did not present more than normal risk of noncollectibility or present other unfavorable features. The Federal Reserve Act, as amended, limits the loans to our executive officers by amount and purpose. MPB leases its offices at 420 Cowper Street, Palo Alto, California 94301 from MPB Associates, a tenant-in-common arrangement. Three directors of Greater Bay, Messrs. Matteson, Seiler and Thoits, and four other directors of MPB, together own an approximately 51% interest in MPB Associates. The acquisition of MPB's leased premises by MPB Associates did not result in a change in the terms of MPB's lease. 7 The lease, which originally expired in May 1993, has been extended through January 2000. MPB pays an annual rental of $560,000 for the entire leased space. Additionally, MPB pays real property taxes, utilities, and building insurance, to the extent they exceed, on an annual basis, $1.40 per rentable square foot, $1.60 per rentable square foot, and $0.17 per rentable square foot, respectively. MPB received a rent adjustment on June 1, 1998, and will receive similar adjustments every following 12 months, based on the change in the immediately preceding year over 1992 in the Consumer Price Index for All Urban Consumers, San Francisco/Oakland Metropolitan Area, All-Items (1967 = 100) as published by the U.S. Department of Labor, Bureau of Labor Statistics. The lease also contains a provision granting MPB a right of first refusal to purchase the building during the term of the lease upon the same terms and conditions that the landlord is willing to accept from a third party. EXECUTIVE OFFICERS Set forth below are the names and five-year biographies of Greater Bay's executive officers.
NAME AND AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE - -------------------------------- ----------------------------------------------------------------------------- David L. Kalkbrenner President, Chief Executive Officer and a director of Greater Bay since 1994. (59) Mr. Kalkbrenner also serves as a director of MPB, CNB, PBC and Golden Gate. He a was founder of MPB and was appointed President and Chief Executive Officer when the bank was chartered in 1987, positions he held through March 1998. He was employed by Crocker National Bank from 1963 to 1986 and held positions as First Vice President, Regional Manager and Regional Vice President. He is currently a member of the Board of Directors of the College of Notre Dame. Steven C. Smith Executive Vice President, Chief Operating Officer and Chief Financial (47) Officer of Greater Bay since November 1996. Mr. Smith is a certified public accountant who joined Cupertino National Bancorp and CNB in December 1993 as Senior Vice President and Chief Financial Officer, and in 1995 was named Executive Vice President and Chief Operating Officer of Cupertino National Bancorp and CNB. David R. Hood Executive Vice President and Chief Lending Officer of Greater Bay since (54) November 1996. Since November 1998, he has served as President Chief Operating Officer and a director of CNB. From April 1995 until November 1998, he served as Executive Vice President and Chief Lending Officer of CNB. From April 1985 to March 1995, he held the positions of Executive Vice President, Senior Loan Officer, and President of University Bank & Trust. Susan K. Black Executive Vice President of Greater Bay since November 1998. She has also (49) served as President and Chief Executive Officer of MPB since April 1998. Ms. Black joined MPB in October 1987 as Vice President and Director of Marketing. In 1993, she became Senior Vice President and in 1996 Executive Vice President of MPB. Ms. Black was one of the organizers of Lenders for Community Development and served two terms as Chairman of the Board. She currently serves as a director of that organization.
8
NAME AND AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE - -------------------------------- ----------------------------------------------------------------------------- Gregg A. Johnson Executive Vice President, Business and Technology Services of Greater Bay (49) since April 1998. From April 1997 to December 1997, Mr. Johnson was Vice President of Development and Customer Service at Computer Sciences Corporation. From April 1996 to April 1997, Mr. Johnson was Vice President of Information Systems at First Plus Financial. Before joining First Plus, Mr. Johnson was employed as Senior Vice President and Chief Information Officer at San Francisco Federal Bank, a federal savings bank, from February 1995 to February 1996. Mr. Johnson also served as Senior Vice President and Chief Information Officer at Fidelity Federal from December 1990 to February 1995.
9 HOW WE COMPENSATE EXECUTIVE OFFICERS The following table summarizes information about compensation paid to or earned by our Chief Executive Officer, David L. Kalkbrenner. It also summarizes the compensation paid to or earned by our four other most highly compensated officers who earned salary and bonus compensation in excess of $100,000 during 1998. In all cases, the officers concerned earned all the compensation shown for their services, in all their capacities, to Greater Bay, its predecessors, or its subsidiaries during the years 1998, 1997 and 1996. SUMMARY COMPENSATION TABLE
LONG-TERM ANNUAL COMPENSATION COMPENSATION ------------------------------------- ------------ SECURITIES OTHER ANNUAL UNDERLYING ALL OTHER SALARY BONUS COMPENSATION OPTIONS/SARS COMPENSATION NAME AND PRINCIPAL POSITION YEAR (1) ($) (2) ($) (3) ($) (4) (#) (5) ($) - --------------------------- ---- --------- --------- ------------- ------------ ------------ David L. Kalkbrenner........................ 1998 $298,164 $275,000 $8,400 31,500 $74,111 President and CEO 1997 261,028 225,000 8,400 30,000 96,138 1996 182,083 124,000 8,400 40,000 71,054 Steven C. Smith ............................ 1998 201,069 150,000 6,000 23,700 33,935 Executive Vice President, COO 1997 164,386 130,268 6,000 22,500 39,060 and CFO 1996 139,020 70,860 6,000 18,262 28,501 David R. Hood............................... 1998 177,017 125,000 6,000 15,800 49,696 Executive Vice President and Chief 1997 150,823 110,000 6,000 15,000 45,471 Lending Officer 1996 124,120 62,490 6,000 14,262 31,354 Susan K. Black.............................. 1998 156,598 110,000 6,000 15,800 43,915 Executive Vice President 1997 129,240 90,000 6,000 10,000 42,193 1996 107,030 65,000 6,000 12,000 13,230 Gregg A. Johnson (6)........................ 1998 102,935 62,800 4,500 17,100 38,339 Executive Vice President, Business and 1997 -- -- -- -- -- Technology Services 1996 -- -- -- -- --
_______________ (1) Annual salary includes cash compensation earned and received by executive officers as well as amounts earned but deferred at the election of those officers under Greater Bay's 401(k) Plan. (2) Amounts indicated as bonus payments were earned for performance during 1998, 1997, and 1996 but paid in the first quarters of 1999, 1998, and 1997, respectively. Also included in amounts indicated as bonus payments are any amounts deferred at the election of those officers under Greater Bay's Deferred Compensation Plan. (3) No executive officer received perquisites or other personal benefits in excess of the lesser of $50,000 or 10% of each such officer's total annual salary and bonus during 1998, 1997 or 1996. Amounts shown are for automobile allowances. (4) Under the Greater Bay Bancorp 1996 Stock Option Plan, options and restricted stock may be granted to directors and key, full-time salaried officers and employees of Greater Bay or its subsidiaries. Options granted under the 1996 Stock Option Plan are either incentive options or non- statutory options. Options granted under the 1996 Stock Option Plan become exercisable in accordance with a vesting schedule established at the time of grant. Vesting may not extend beyond ten years from the date of grant. Options and restricted stock granted under the 1996 Stock Option Plan are adjusted to protect against dilution in the event of certain changes in Greater Bay's capitalization, including stock splits and stock dividends. All options granted to executive officers 10 were incentive stock options and have an exercise price equal to the fair market value of Greater Bay's Common Stock on the date of grant. (5) Amounts shown for Mr. Kalkbrenner include (a) for 1998, $6,185 in 401(k) plan matching contributions, $64,488 accrued under Greater Bay's Supplemental Executive Retirement Plan (the "SERP"), $2,088 in long term disability insurance premiums and $1,350 in group term life insurance premiums; (b) for 1997, $6,063 in 401(k) plan matching contributions, $82,237 accrued under the SERP, $6,544 in long term disability insurance premiums and $1,294 in group term life insurance premiums; and (c) for 1996, $7,125 in 401(k) plan matching contributions, $50,529 accrued under his former Executive Salary Continuation Agreement, $11,000 in long term disability insurance premiums and $2,400 in director fees. Amounts shown for Mr. Smith include (a) for 1998, $6,250 in 401(k) plan matching contributions, $25,764 accrued under the SERP, $522 in group term life insurance premiums and $1,399 in long term disability insurance premiums; (b) for 1997, $6,063 in 401(k) plan matching contributions, $31,775 under the SERP; $700 in long term disability insurance premiums and $522 in group term life insurance premiums; and (c) for 1996, $4,750 in 401(k) plan matching contributions and $23,751 to fund retirement benefits in 1996. Amounts shown for Mr. Hood include (a) for 1998, $6,250 in 401(k) plan matching contributions, $41,304 accrued under the SERP, $864 in group term life insurance premiums and $1,278 in long term disability insurance premiums; (b) for 1997, $6,063 in 401(k) plan matching contributions, $37,905 accrued under the SERP, $639 in long term disability insurance premiums and $864 in group term life insurance premiums; and (c) for 1996, $4,750 in 401(k) plan matching contributions and $26,604 to fund his retirement benefits. Amounts shown for Ms. Black include (a) for 1998, $6,250 in 401(k) plan matching contributions and $36,000 accrued under the SERP, $1,143 in long term disability insurance premiums and $522 in group term life insurance premiums; (b) for 1997, $6,063 in 401(k) plan matching contributions, $35,000 accrued under the SERP, $651 in long term disability insurance premiums and $479 in group term life insurance premiums; and (c) for 1996, $4,750 in 401(k) plan matching contributions, $7,946 accrued under the SERP, $254 in long term disability insurance premiums and $280 in group term life insurance premiums. Amounts shown for Mr. Johnson include, for 1998, $1,969 in 401(k) plan matching contributions, $36,000 accrued under the SERP and $370 in group term life insurance premiums. Amounts accrued under the SERP represent the estimated present value of future benefits to be paid, which is accrued over the vesting period of the participants. Depending on the SERP agreement, Greater Bay and the participants are beneficiaries of life insurance policies that have been purchased as a method of financing these benefits. Accordingly, the expense associated with the accrual is generally offset by a corresponding increase in the cash surrender value of these policies. (6) Amounts shown for Mr. Johnson, who joined Greater Bay in April 1998, are amounts earned from the period April 6, 1998 through December 31, 1998. 11 Option Grants in 1998 The following table sets forth information concerning stock options granted during the year ended December 31, 1998 to the persons named in the Summary Compensation Table. OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS IN FISCAL 1998 ------------------------------------------------------------------------------------ POTENTIAL REALIZABLE VALUE AT ASSUMED NUMBER OF ANNUAL RATES OF STOCK SECURITIES % OF TOTAL PRICE APPRECIATION FOR UNDERLYING OPTIONS/SARS EXERCISE OPTION TERM(1) OPTIONS/SARS GRANTED TO TREES EXPIRATION -------------------- NAME GRANTED(2) EMPLOYEES ($/SH) DATE @5%($) @10%($) - ------------------------ ------------------------------------------------------------------------------------ David L. Kalkbrenner....................... 31,500 6.87% 33.500 12/15/08 $ 663,641 $ 1,681,797 Steven C. Smith............................ 23,700 5.17% 33.500 12/15/08 499,311 1,265,352 David R. Hood.............................. 15,800 3.45% 33.500 12/15/08 332,874 843,568 Susan K. Black............................. 15,800 3.45% 33.500 12/15/08 332,874 843,568 Gregg A. Johnson........................... 7,100 1.55% 33.500 12/15/08 149,583 379,072 ........................... 10,000 2.18% 29.375 04/07/08 184,738 468,162
_______________ (1) Potential gains are net of exercise price, but before taxes associated with exercise. These amounts represent certain assumed rates of appreciation only, based on Securities and Exchange Commission rules. Actual gains, if any, on stock option exercises are dependent on the future performance of the Common Stock, overall market conditions and the option holders' continued employment through the vesting period. The amounts reflected in this table may not necessarily be achieved. One share of stock purchased in 1998 at $33.50 would yield profits of $21.07 per share at 5% appreciation over ten years, or $53.39 per share at 10% appreciation over the same period. One share of stock purchased in 1998 at $29.375 would yield profits of $18.47 per share at 5% appreciation over ten years, or $46.82 per share at 10% appreciation over the same period. (2) Generally, options granted under the 1996 Stock Option Plan vest at the rate of 20% of the options granted for each full year of the optionee's continuous employment with Greater Bay and are exercisable to the extent vested. See also "Employment Contracts, Change in Control Arrangements and Termination of Employment." (3) All options listed were granted at the estimated fair market value on the date of grant. 12 Aggregated Option Exercises and Option Values The following table sets forth the specified information concerning exercises of options to purchase Greater Bay Common Stock in the fiscal year ended December 31, 1998 and unexercised options held as of December 31, 1998 by the persons named in the Summary Compensation Table.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1998 AND FISCAL YEAR-END OPTION VALUES NUMBER OF SECURITIES VALUE OF UNEXERCISED IN- SHARES UNDERLYING UNEXERCISED THE-MONEY OPTIONS AT ACQUIRED ON VALUE OPTIONS AT 12/31/98 (#) 12/31/98 ($)(1) NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ---------------------------------------------------------------------------------------------------------------------------------- David L. Kalkbrenner............... 8,918 $172,920 48,624 85,000 $1,165,620 $963,438 Steven C. Smith.................... 0 0 56,522 50,700 1,487,374 378,300 David R. Hood...................... 6,000 132,360 29,166 34,400 746,705 265,925 Susan K. Black..................... 2,214 42,663 11,224 32,900 253,763 304,863 Gregg A. Johnson................... 0 0 0 17,100 0 45,525
_______________ (1) Based on the closing price of Greater Bay Common Stock on December 31, 1998, the last trading day in 1998, which was $33.75. EMPLOYMENT CONTRACTS, CHANGE IN CONTROL ARRANGEMENTS AND TERMINATION OF EMPLOYMENT Employment Contracts Effective January 1, 1999, Greater Bay entered into a five-year employment agreement with its President and Chief Executive Officer, David L. Kalkbrenner. The agreement, provides for, among other things (a) a base salary of $360,000 per year, which the Board may adjust annually at its discretion; (b) a discretionary annual bonus based upon Greater Bay's pre-tax net profits; (c) in the event that Mr. Kalkbrenner becomes disabled so that he cannot perform his duties, payment to him of his base salary for one year, reduced by any amounts received by him from state disability insurance, worker's compensation, or similar insurance provided by Greater Bay; (d) five weeks annual vacation; (e) a $500,000 life insurance policy; (f) an automobile allowance; (g) supplemental retirement benefits (see "Supplemental Executive Retirement Plan" below); and (h) reimbursement for ordinary and necessary expenses incurred by Mr. Kalkbrenner in connection with his employment. Greater Bay may terminate the agreement with or without cause. Upon Mr. Kalkbrenner's involuntary termination of employment for any reason, Mr. Kalkbrenner will be entitled to receive severance benefits equal to 36 months of salary at the rate in effect immediately preceding the termination and the amount of any bonus due him. In the event of a termination of his employment following a change in control of Greater Bay, Mr. Kalkbrenner will be entitled to receive severance pay equal to 2.99 times his average annual compensation for the five years immediately preceding the change in control. If any portions of this amount constitute "excess parachute payments" under the Internal Revenue Code of 1986, Greater Bay will increase the amount payable to Mr. Kalkbrenner to account for any excise tax that may be imposed on him. The benefits provided to Mr. Kalkbrenner under the agreement supersede any benefits to which he may otherwise be entitled under Greater Bay's Termination and Layoff Plan for Key Executives and Change in Control Plan for Key Executives (as described below) to the extent they exceed the benefits otherwise payable under these plans. 13 Change in Control Plans Effective January 1, 1998, the Greater Bay Board of Directors adopted the Greater Bay Bancorp Change in Control Pay Plan and the Greater Bay Bancorp Change in Control Pay Plan for Key Executives (collectively, the "Change in Control Plans") to provide eligible employees of Greater Bay and its subsidiaries and certain key executives of Greater Bay, respectively, with severance benefits upon their termination of employment on account of a change in control. The Change in Control Plans provide that a change in control occurs when Greater Bay is sold or otherwise transferred in ownership to new ownership. The Change in Control Plans generally provide each participant with a base benefit based on the participant's pay, full years of service with Greater Bay or a subsidiary, and his or her title or position at Greater Bay or the subsidiary as of the date he or she terminates employment, and an added benefit based on the participant's pay and his or her full years of service as of the date of his termination of employment. "Pay" for purposes of the Change in Control Plans means the total annual compensation paid to an employee, including base wages and average bonus paid to the employee in the three most recent years. Under the Change in Control Plan for Key Executives, Mr. Kalkbrenner would be entitled to receive a base benefit equal to 25 months of pay and an added benefit of 2 weeks of pay for each full year of service for a maximum severance of up to 3 years of pay; Mr. Smith would be entitled to receive a base benefit equal to 20 months of pay and an added benefit of 2 weeks of pay for each full year of service, for a maximum severance of up to 2 1/2 years of pay; and Mr. Hood, Ms. Black and Mr. Johnson would each be entitled to receive a base benefit equal to 18 months of pay and an added benefit of 2 weeks of pay for each full year of service, for a maximum severance benefit of up to 2 years of pay. Termination and Layoff Plans The Greater Bay Board has also adopted the Greater Bay Bancorp Termination and Layoff Pay Plan and the Greater Bay Bancorp Termination and Layoff Pay Plan for Key Executives (collectively, the "Termination Plans"), effective January 1, 1998, to provide severance benefits to eligible employees of Greater Bay or its subsidiaries and certain key executives of Greater Bay, respectively, upon the termination of their employment because of circumstances which the Termination Plans define. The Termination Plans also provide each participant with a severance benefit based on the participant's pay, full years of service with Greater Bay or a subsidiary, and his or her title or position in Greater Bay or the subsidiary as of the date of his or her involuntary termination of employment or layoff. "Pay" for purposes of the Termination Plans means the total annual compensation paid to an employee, including base wages and average bonus paid to the employee in the three most recent years. Under the Termination and Layoff Plan for Key Executives, Mr. Kalkbrenner would be entitled to receive a severance benefit equal to 25 months of pay; Mr. Smith would be entitled to receive a severance benefit equal to 20 months of pay; and Mr. Hood, Ms. Black and Mr. Johnson would each be entitled to receive a severance benefit equal to 18 months of pay. Greater Bay's Stock Option Plan The Greater Bay Board of Directors adopted the Greater Bay Bancorp 1996 Stock Option Plan in 1996, as amended in 1998 (the "Option Plan"). The Option Plan allows Greater Bay to offer selected employees, directors and consultants an opportunity to purchase Greater Bay Common Stock or to receive grants of restricted stock. Through this plan, the Board hopes to motivate such individuals by giving them an ownership interest in Greater Bay's success. Options granted under the Option Plan contain a provision that takes effect upon a "change in control" of Greater Bay. Prior to the happening of any such change in control, all options granted under the Option Plan will become immediately exercisable. 14 Supplemental Executive Retirement Plan In December 1997, the Greater Bay Board of Directors approved the implementation of the Greater Bay Bancorp Supplemental Executive Retirement Plan ("SERP"), which provides supplemental retirement benefits to a select group of management or highly compensated employees of Greater Bay and its subsidiaries who have titles of senior vice president or above. Greater Bay's management designates those employees who are eligible to participate in the SERP. The SERP replaces all prior agreements to provide supplemental retirement benefits between employees and Greater Bay or its subsidiaries. Benefits under the SERP include income generally payable commencing upon a designated retirement date for the life of the participant and a death benefit for the participant's designated beneficiaries. The income benefits consist of accruals to a benefit account during the participant's employment and a benefit determined after termination of employment. The benefit account accruals are determined annually based upon annual earnings (or loss) and certain investment opportunity costs related to life insurance contracts. SERP benefits for the persons named in the Summary Compensation Table vest at a rate of approximately 20% after 5 years of service and 20% each year thereafter. Vesting accelerates to 100% upon a change in control of Greater Bay to the extent any portion of such benefits remains unvested at such time. Upon a termination of employment for "cause", the participant forfeits all benefits. The participant is entitled to all vested benefits in the case of a termination without "cause"; however, if a participant voluntarily resigns prior to becoming 100% vested, his or her benefits are reduced by amounts ranging from a total forfeiture to approximately 40% of benefits. As of December 31, 1998, Mr. Kalkbrenner was credited with 11 years of services under the SERP; Mr. Smith was credited with 9 years of service under the SERP; Mr. Hood was credited with 8 years of service under the SERP; Ms. Black was credited with 8 years of service under the SERP; and Mr. Johnson was credited with 1 year of service under the SERP At normal retirement age of 62, Mr. Kalkbrenner will be entitled to receive a projected benefit under the SERP that is equal to 43.62% of his 1998 total compensation; Mr. Smith will be entitled to receive a projected benefit of 60.00% of his 1998 total compensation; Mr. Hood will be entitled to receive a projected benefit of 45.36% of his 1998 total compensation; Ms. Black will be entitled to receive a projected benefit of 63.96% of her 1998 total compensation; and Mr. Johnson will be entitled to receive a projected benefit of 70.40% of his 1998 annualized total compensation. 15 EXECUTIVE COMMITTEE'S REPORT ON EXECUTIVE COMPENSATION Set forth below is a report of our Executive Committee addressing the compensation policies for 1998 applicable to our executive officers. The Report of the Executive Committee of the Board of Directors shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent that Greater Bay specifically incorporates the information contained in the report by reference, and shall not otherwise be deemed filed under such acts. THE REPORT The Executive Committee of the Board of Directors acts as our Executive Compensation Committee. The Executive Committee establishes our overall compensation and employee benefits and approves specific compensation levels for executive officers. It is a goal of the Executive Committee to implement executive officer compensation programs that further our business objectives and that attract, retain and motivate the best qualified executive officers. Currently, the members of the Executive Committee are John M. Gatto, Duncan L. Matteson, David L. Kalkbrenner, Rex D. Lindsay and Donald H. Seiler. Each member of the Executive Committee is a non-employee director, except for Mr. Kalkbrenner. Greater Bay's executive compensation policies and specific executive compensation programs are adopted and administered in accordance with the principal goal of maximizing return on shareholders' equity. The Executive Committee believes that this performance goal, and the long-term interests of our shareholders generally, are best achieved by attracting and retaining management of high quality, and that such management will require commensurate compensation. The Executive Committee believes that our executive officer compensation policies are consistent with this policy. In addition, the Executive Committee believes that while our compensation programs should reflect the philosophy that executive compensation levels be linked to Greater Bay's performance, such compensation programs should also be competitive and consistent with those provided to others holding positions of similar responsibility in the banking and financial services industry. Our compensation plans are designed to assist Greater Bay in attracting and retaining qualified employees critical to Greater Bay's long-term success, while enhancing employees' incentives to perform to their fullest abilities to increase profitability and maximize shareholder value. Annual compensation levels for executive officers and compensation levels to be implemented from time to time in written employment agreements with executive officers are determined by the Executive Committee based primarily on its review and analysis of the following factors: (i) the responsibilities of the position, (ii) the performance of the individual and his or her general experience and qualifications, (iii) the overall financial performance (including return on equity, levels of general and administrative expense and budget variances) of Greater Bay for the previous year and the contributions to such performance measures by the individual or his or her department, (iv) the officers' total compensation during the previous year, (v) compensation levels paid by comparable companies in similar industries, (vi) the officer's length of service with Greater Bay, and (vii) the officer's effectiveness in dealing with external and internal audiences. The Executive Committee believes that the base compensation of the executive officers is competitive with companies of similar size and with comparable operating results in similar industries. The base salary of our Chief Executive Officer was determined primarily on the terms of his employment agreement dated March 3, 1992, which was entered into prior to the merger of Mid-Peninsula Bancorp and Cupertino National Bancorp (see "Employment Contracts, Change in Control Arrangements and Termination of Employment" for a discussion of Mr. Kalkbrenner's new employment agreement). The agreement provided for a base salary, subject to annual adjustments by the Board of Directors, and for a discretionary annual bonus based upon the pre-tax net profits of Greater Bay. In addition, the Chief Executive 16 Officer's compensation for 1998 was based in part on his progress in achieving certain additional criteria. These criteria included completing the acquisition of Golden Gate and Pacific Business Funding Corporation, results in meeting Greater Bay's strategic business plan, total return to shareholders and leadership abilities. Based on the foregoing, and a review of compensation paid to chief executive officers in Greater Bay's peer group (institutions with assets of $1-5 billion), in 1998 Mr. Kalkbrenner received a base salary of $298,164 and a bonus of $275,000. Mr. Kalkbrenner did not participate in the Executive Committee's deliberations concerning his compensation. While the Executive Committee establishes salary and bonus levels based on the above described criteria, the Executive Committee also believes that encouraging equity ownership by executive officers further aligns the interests of the officers with the performance objectives of our shareholders and enhances our ability to attract and retain highly qualified personnel on a basis competitive with industry practices. Stock options granted by Greater Bay pursuant to the 1996 Stock Option Plan help achieve this objective, and provide additional compensation to the officers to the extent that the price of the Common Stock increases over fair market value on the date of grant. Stock options have been granted to each of the executive officers and to other officers or key employees of Greater Bay. Through the 1996 Stock Option Plan, there will be an additional direct relationship between Greater Bay's performance and benefits to plan participants. In addition, through Greater Bay's Employee Stock Purchase Plan, eligible employees of Greater Bay and its subsidiaries who are scheduled to work at least 20 hours a week may acquire an interest in our growth and productivity. Under this plan, participants may purchase shares of Greater Bay Common Stock through payroll deductions. The purchase price per share generally equals 85% of the lesser of the fair market value of a share on the first or last day of the offering period. Offering periods are for three months, commencing the first day of each calendar quarter. Certain key employees participate in Greater Bay's Supplemental Executive Retirement Plan. This plan provides supplemental retirement benefits to a select group of management or highly compensated employees who have titles of senior vice president or higher. Upon vesting, participants in the plan receive lifetime retirement income benefits and death benefits. Eligible employees are also able to participate in Greater Bay's 401(k) Plan. The 401(k) Plan permits participants to make 401(k) contributions on a pretax basis. All employees of Greater Bay and its subsidiaries who are at least age 21 are eligible to participate in the 401(k) Plan on the first day of the month following their date of hire. Participants can contribute up to 15% of their pretax compensation to the 401(k) Plan annually, subject to certain legal limitations. The 401(k) Plan also provides that Greater Bay and its subsidiaries will make a matching contribution on behalf of each eligible participant equal to 62.5% of the 401(k) contributions made by such participants, up to 8% of their individual compensation. Finally, our Board of Directors adopted the Greater Bay Bancorp 1997 Elective Deferred Compensation Plan at its December 1997 meeting (the "Deferred Compensation Plan"). The Deferred Compensation Plan is an unfunded Plan that provides deferred compensation benefits to directors and a select group of management and highly compensated employees who contribute materially to the continued growth, development and future business success of Greater Bay and its subsidiaries. Through these various compensation programs, the Executive Committee believes that Greater Bay furthers its objectives of attracting, retaining and motivating the best qualified executive officers and employees, and ultimately will serve to increase Greater Bay's profitability and maximize shareholder value. EXECUTIVE COMMITTEE Dated: April 1, 1999 Duncan L. Matteson, Chairman John M. Gatto David L. Kalkbrenner Rex D. Lindsay Donald H. Seiler 17 PERFORMANCE GRAPH The following graph compares, for the period December 31, 1993 through December 31, 1998, the yearly percentage change in Greater Bay's cumulative total return on its common stock with the cumulative total return of (i) the NASDAQ - Total US (formerly called the "NASDAQ Total Return Index"), an index consisting of Nasdaq-listed U.S.-based companies; and (ii) the SNL $1B-$5B Bank Asset-Size Index, an index composed of a survey of banks and bank holding companies having between $1 billion and $5 billion in total assets. The graph shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent that Greater Bay specifically incorporates this information by reference, and shall not otherwise be deemed filed under such acts. - -------------------------------------------------------------------------------- GREATER BAY BANCORP - -------------------------------------------------------------------------------- [GRAPH APPEARS HERE]
PERIOD ENDING ----------------------------------------------------------------- INDEX 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 - ------------------------------------------------------------------------------------------------------ Greater Bay Bancorp 100.00 187.71 254.90 378.95 759.07 1,080.59 NASDAQ - Total US 100.00 97.75 138.26 170.01 208.58 293.21 SNL $1B-$5B Bank Asset-Size Index 100.00 105.28 141.58 183.54 306.09 305.38
18 DISCUSSION OF PROPOSALS RECOMMENDED BY THE BOARD PROPOSAL 1: ELECT FOUR DIRECTORS The Board has nominated four persons for election as Class II Directors at the Annual Meeting. If you elect them, they will hold office until the election of their successors at the Annual Meeting in 2002, or until they resign. We know of no reason why any nominee may be unable to serve as a director. If any nominee is unable to serve, your proxy may vote for another nominee proposed by the Board. If for any reason these nominees prove unable or unwilling to stand for election, the Board will nominate alternates. The Board has no reason to believe that its nominees would prove unable to serve if elected. The following table sets forth the names and five-year biographies of the four persons nominated by the Board to serve as Class II Directors. The table also sets forth the names and five-year biographies of our Class I Directors whose terms expire in 2001 and Class III Directors whose terms expire in 2000.
NAME AND AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE - ------------------------------------------------------------------------------- CLASS II NOMINEES - ----------------- George R. Corey Director of Greater Bay since December 1997. (65) Mr.Corey served as Chairman of the Board of PBC, from September 1981 until December 1997 and continues to serve as a board member of PBC. Mr. Corey is an attorney and partner with the law firm of Corey, Luznich, Manos &Pliska of Millbrae, California, Mr.Corey is also a former mayor of San Bruno, California. John M. Gatto Co-Chairman of Greater Bay since November 1996. He (61) was a director of Cupertino since 1984 and a director of MPB since 1996. Mr. Gatto has been the sole proprietor of Maria Enterprises, a development consulting company, since December 1993. From 1984 to 1993, Mr. Gatto was an architect for Cypress Properties, a real estate development company. Dick J. Randall Director of Greater Bay since November 1996. He (67) served as a director of Cupertino since 1984. Mr. Randall has been a private investor and rancher since 1993. From 1962 until his retirement in 1993, Mr. Randall served as president of The William Lyon Co., a real estate development and construction company. Mr. Randall was one of the founding directors of the New Children's Shelter in San Jose, California. Donald H. Seiler Director of Greater Bay since 1994 and of MPB from (70) 1987 to 1998. He is the Accountants, in Redwood City and San Francisco. He has been a certified public accountant in San Francisco and the Peninsula area since 1952. He is presently a director of Ross Stores, Inc. and the Peninsula Community Foundation and serves on the audit committee of Stanford Health Services.
19
NAME AND AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE - -------------------------------------------------------------------------------- CLASS I DIRECTORS - ----------------- James E. Jackson Director of Greater Bay since November 1996. He (64) served as a director of Cupertino since 1984. Mr. Jackson has been an attorney-at-law with the law firm of Jackson & Abdalah, a Professional Corporation, since 1963. Leo K.W. Lum Director of Greater Bay since May 1998. Mr. Lum (57) has served as Chairman of the acquisition of Golden Gate, Mr. Lum was the sole shareholder of Pacific Rim Bancorporation, the former holding company of Golden Gate. Mr. Lum has been a private international investor and consultant since 1988. Previously, Mr. Lum served as President and Chief Executive Officer of Global Union Bank, New Yor k. George M. Marcus Director of Greater Bay since 1998. He has (57) served as a director of MPB since 1987. Mr. Marcus is the founder of The Marcus & Millichap Company, the nation's fourth largest commercial real estate brokerage firm, and currently serves as a director of such firm. He also serves as director of Essex Property Trust, a real estate investment trust company. Mr. Marcus is an advisor to the University of California, Berkeley Center for Real Estate and Urban Economics, and serves on the Board of Trustees of the Fine Arts Museums of San Francisco. Duncan L. Matteson (64) Co-Chairman of the Board of Directors of Greater Bay since November 1996. He served as Chairman of the Board of Mid-Peninsula Bancorp from 1994 until November 1996 and has served as Chairman of the Board of MPB since 1987. Mr. Matteson has served as director of Golden Gate since May 1998. Mr. Matteson also serves as President of the Matteson Companies, a diversified group of real estate investment and property management corporations located in Redwood City. He has actively involved himself in the real estate investment and securities industries in the Palo Alto/Menlo Park Area since 1959. Mr. Matteson is a member of the Executive Committee of the Stanford Heart Council, and serves as a trustee of the Palo Alto Medical Foundation. As an appointee of the Governor, Mr. Matteson is Vice President of the Board of Directors of the Cow Palace. Rebecca Q. Morgan Director of Greater Bay since July 1998. In December 1998, Ms. Morgan retired as President and Chief Executive Officer of Joint Venture: Silicon Valley Network, a non-profit organization devoted to regional economic and community issues. Ms. Morgan served in that position since September 1993. Ms. Morgan also serves as a director of PG&E Corporation.
20
NAME AND AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE - -------------------------------------------------------------------------------- CLASS III DIRECTORS - ------------------- David L. Kalkbrenner President, Chief Executive Officer and a (59) director of Greater Bay since 1994. Mr. Kalkbrenner also serves as a director of MPB, CNB, PBC and Golden Gate. He was a founder of MPB and was appointed President and Chief Executive Officer when the bank was chartered in 1987, positions he held through March 1998. He was employed by Crocker National Bank from 1963 to 1986 and held positions as First Vice President, Regional Manager and Regional Vice President. He is currently a member of the Board of Directors of the College of Notre Dame. Rex D. Lindsay Vice-Chairman of the Board of Directors of (73) Greater Bay since November 1996. He served as a director of Cupertino National Bancorp from 1984 until November 1996 and has served as a director of CNB since 1984. For approximately the past seven years, Mr. Lindsay has been a rancher and a private investor. Glen McLaughlin Director of Greater Bay since November 1996. He served as a director of Cupertino National Bancorp from 1984 until November 1996 and has served as a director of CNB since 1984. Mr. McLaughlin has also served as the President and Chief Executive Officer of Venture Leasing Associates, an equipment leasing company, since December 1986. Warren R. Thoits Director of Greater Bay since 1994 and of MPB (76) since 1987. He is a partner with the Palo Alto law firm of Thoits, Love, Hershberger & McLean. He is a native of Palo Alto and a graduate of Stanford University and its School of Law. Mr. Thoits has been very active in community and charitable organizations, having served as President of the Palo Alto Chamber of Commerce, the Palo Alto Rotary Club and as Chairman of the Palo Alto Area Chapter of the American Red Cross.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF ALL FOUR CLASS II NOMINEES FOR DIRECTOR. PROPOSAL 2: RATIFY SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS FOR 1999 The Board of Directors has appointed PricewaterhouseCoopers L.L.P. ("PwC") as our independent public accountants for the year ending December 31, 1999, and shareholders are being asked to ratify the appointment. The appointment was recommended by the Audit Committee. PwC, our accountants for the year ended December 31, 1998, performed audit services for 1998 which included the examination of the consolidated financial statements and services related to filings with the Securities and Exchange Commission. All professional services rendered by PwC during 1998 were furnished at customary rates and terms. Representatives of PwC will be present at the Annual Meeting and will be available to respond to appropriate questions from shareholders. THE BOARD RECOMMENDS THAT YOU VOTE "FOR" RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS L.L.P. AS INDEPENDENT PUBLIC ACCOUNTANTS FOR 1999. 21 OTHER BUSINESS We know of no other business which will be presented for consideration at the Annual Meeting other than as stated in the Notice of Meeting. If, however, other matters are properly brought before the meeting, it is the intention of the persons named as proxies in the enclosed proxy card to vote the shares represented thereby in accordance with their best judgment and in their discretion, and authority to do so is included in the proxy. INFORMATION ABOUT SHAREHOLDER PROPOSALS Under certain circumstances, shareholders are entitled to present proposals at shareholder meetings. If you wish to submit a proposal to be included in our 2000 proxy statement, we must receive it, in a form which complies with the applicable securities laws, on or before December 13, 1999. Please address your proposals to: Greater Bay Bancorp, 400 Emerson Street, Palo Alto, California 94301, Attention: Corporate Secretary. In addition, in the event a shareholder proposal is not submitted to Greater Bay prior to February 26, 2000, the proxy to be solicited by the Board of Directors for the 2000 Annual Meeting of Shareholders will confer authority on the holders of the proxy to vote the shares in accordance with their best judgment and discretion if the proposal is presented at the 2000 Annual Meeting of Shareholders without any discussion of the proposal in the proxy statement for such meeting. By Order of the Board of Directors, /s/ Linda M. Iannone Linda M. Iannone Corporate Secretary April 12, 1999 22
- --------------------------------------------------------Please detach here---------------------------------------------------------- THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2 1. Election of directors: 01 George R. Corey 02 John M. Gatto [_] Vote FOR [_] Vote WITHHELD 03 Dick J. Randall 04 Donald H. Seiler all nominees from all nominees
-------------------------------------------- (INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE, -------------------------------------------- WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.)
2. Ratification of Appointment of PricewaterhouseCoopers L.L.P. [_] For [_] Against [_] Abstain as independent public accountants for the year ending December 31, 1999.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL. --- Address Change? Mark Box [_] Date ________________________ Indicate changes below: - -------------------------------------------- ----------------------------- ----------------------------- Signature(s) in Box Please sign exactly as your name(s) appear on Proxy. If held in joint tenancy, all persons must sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the proxy. - -------------------------------------------- I (WE) WILL__ WILL NOT__ ATTEND THE MEETING IN PERSON [LOGO] [MAP] Annual Meeting of Shareholders Tuesday, May 25, 1999 6:30 p.m. Hotel Sofitel 223 Twin Dolphin Drive Redwood City, California (650) 598-9000 [LOGO] 2860 West Bayshore Road Palo Alto, California 94303 PROXY - -------------------------------------------------------------------------------- THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL MEETING ON MAY 25, 1999. The shares of stock you hold in your account or in a dividend reinvestment account will be voted as you specify on this proxy. IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED "FOR" ITEMS 1 AND 2. By signing the proxy, you revoke all prior proxies and appoint David L. Kalkbrenner, Steven C. Smith, and Linda M. Iannone, and each of them, with full power of substitution, to vote your shares on the matters shown on the reverse side and any other matters which may come before the Annual Meeting and all adjournments. The Board of Directors at present knows of no other business to be presented by or on behalf of Greater Bay Bancorp or the Board of Directors at the meeting. See reverse for voting instructions -----END PRIVACY-ENHANCED MESSAGE-----