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TABLE OF CONTENTS
As filed with the Securities and Exchange Commission on April 18, 2008
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant ý | ||
Filed by a Party other than the Registrant o |
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Check the appropriate box: |
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
UNIONBANCAL CORPORATION |
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(Name of Registrant as Specified In Its Charter) |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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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):
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials. |
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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. |
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Form, Schedule or Registration Statement No.:
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 22, 2008
To the Stockholders of UnionBanCal Corporation:
The annual meeting of the stockholders of UnionBanCal will be held on Thursday, May 22, 2008 at 8:30 a.m. (local time) in the Boardroom, 51 st Floor, 555 California Street, San Francisco, California, to vote on the following matters:
The close of business on March 28, 2008 is the record date for determining stockholders entitled to vote at the annual meeting. For 10 days prior to the annual meeting, a list of those stockholders will be available for inspection during normal business hours in the Office of the Corporate Secretary of UnionBanCal Corporation, 400 California Street, San Francisco, CA 94104-1302. This list also will be available at the annual meeting.
You may vote through the Internet as well as by telephone or mail. Instructions regarding Internet and telephone voting are on the proxy card. If you elect to vote by mail, please complete, sign, date and return the proxy card in the accompanying postage-paid envelope. The proxy statement explains more about voting, including that your vote is confidential. We look forward to your participation.
By order of the Board of Directors, | |
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Morris W. Hirsch
Assistant Secretary |
April 18,
2008
Registered and 401(k)-participant stockholders may view UnionBanCal's Proxy Statement and Annual Report to Stockholders and vote their Proxy on the Internet at www.envisionreports.com/UB. Beneficial stockholders may view UnionBanCal's Proxy Statement and Annual Report to Stockholders on the Internet at www.edocumentview.com/UB.
TABLE OF CONTENTS
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UnionBanCal Corporation
400 California Street
San Francisco, California 94104-1302
(415) 765-2969
PROXY STATEMENT
INTRODUCTION
The Board of Directors of UnionBanCal Corporation is soliciting proxies from its stockholders to be used at the annual meeting of stockholders on May 22, 2008. This proxy statement contains information related to the annual meeting.
You do not need to attend the annual meeting to vote your shares. Instead, you may vote your shares by telephone or through the Internet or you may complete, sign, date and return the enclosed proxy card in the postage-paid envelope provided. Instructions for voting by telephone or through the Internet can be found on the proxy card.
On April 18, 2008, we began mailing this proxy statement and the accompanying proxy card to stockholders.
VOTING
Principal Stockholders
On March 28, 2008, the record date for the annual meeting, 137,932,345 shares of UnionBanCal common stock were outstanding. To our knowledge, the only stockholders owning more than 5 percent of UnionBanCal's outstanding common stock on that date are shown in the following table:
Name and Address of Beneficial Owner
|
Amount and Nature of
Beneficial Ownership |
Percent
of Class |
|||
---|---|---|---|---|---|
The Bank of Tokyo-Mitsubishi UFJ, Ltd. and affiliates
7-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo 100-8388, Japan |
90,255,980 | (1) | 65.4 | % | |
Barclays Global Investors, N.A. and other entities 45 Fremont Street San Francisco, CA 94105 |
|
10,597,451 |
(2) |
7.7 |
% |
This information is based on a Schedule 13G/A filed by Mitsubishi UFJ Financial Group, Inc. on February 4, 2008.
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THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., INTENDS TO VOTE ITS STOCK FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR, FOR THE INCREASE IN THE NUMBER OF SHARES OF COMMON STOCK THAT MAY BE AWARDED UNDER THE YEAR 2000 UNIONBANCAL CORPORATION MANAGEMENT STOCK PLAN AND FOR THE RATIFICATION OF DELOITTE & TOUCHE LLP AS UNIONBANCAL'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. THEREFORE, STOCKHOLDER APPROVAL OF THESE PROPOSALS IS ASSURED.
Who May Vote
Only record holders of UnionBanCal common stock at the close of business on March 28, 2008 may vote at the annual meeting.
You are entitled to one vote for each share of UnionBanCal common stock that you owned of record at the close of business on March 28, 2008. The accompanying proxy card indicates the number of shares you are entitled to vote at the annual meeting.
Voting Your Proxy
Whether or not you plan to attend the annual meeting, we urge you to vote your proxy promptly.
If you are a stockholder of record (that is, if you hold shares of UnionBanCal common stock in your own name), you may vote your shares by proxy using any of the following methods:
Stockholders may vote their shares by proxy through an electronic transmission authorized by the stockholder. The telephone and Internet voting procedures on the proxy card allow us to authenticate stockholders' identities and permit stockholders to provide their voting instructions and confirm that their instructions have been properly recorded. If you vote by telephone or through the Internet, you do not need to return your proxy card. The deadline to vote through the telephone and Internet is 1:00 a.m. (Central Time) on Tuesday, May 20, 2008.
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If your shares of UnionBanCal common stock are held by a broker, bank or other nominee in "street name," you will receive voting instructions (including instructions, if any, on how to vote by telephone or through the Internet) from the record holder that you must follow in order to have your shares voted at the annual meeting.
Whether you send your voting instructions by mail, telephone or Internet, your UnionBanCal common stock will be voted in accordance with those instructions. If you sign, date and return your proxy card without indicating how you want to vote your shares, the proxy holders will vote your shares as recommended by the Board of Directors FOR the election of all nominees for director, FOR the increase in the number of shares of common stock that may be awarded under the Year 2000 UnionBanCal Corporation Management Stock Plan, and FOR the ratification of Deloitte & Touche LLP as UnionBanCal's independent registered public accounting firm. If any other business is properly presented at the annual meeting, the proxy holders will have discretionary authority to vote in accordance with their judgment on those matters.
Revoking Your Proxy
You may revoke your proxy at any time before it is voted at the annual meeting. To revoke your proxy, you may send a written notice of revocation to UnionBanCal Corporation, Office of the Corporate Secretary, 400 California Street, San Francisco, California 94104-1302. You may also revoke your proxy by submitting another signed proxy with a later date, voting by telephone or through the Internet at a later date, or voting in person at the annual meeting.
Voting in Person
You may attend the annual meeting and vote your shares in person by obtaining and submitting a ballot that will be provided at the meeting. However, if your shares are held by a broker, bank or other nominee in street name, to be able to vote at the meeting you must obtain a proxy, executed in your favor, from the institution that holds your shares, indicating that you were the beneficial owner of the shares at the close of business on March 28, 2008, the record date for voting.
Your Vote is Confidential
All stockholder meeting proxies, ballots, and voting records that identify the vote of a particular stockholder are confidential and will be tabulated and certified by an independent tabulator, inspector of election or other independent parties. The vote of any stockholder will not be disclosed to any of our officers, directors or employees, except:
Quorum and Broker Non-Votes
A quorum of stockholders is necessary to hold a valid meeting. A quorum will exist if a majority of the outstanding shares of UnionBanCal common stock is present in person or by proxy at the annual meeting. Shares present in person at the meeting that are not voted for a director nominee or shares
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present by proxy where the stockholder has withheld authority to vote for a nominee will be counted in determining whether a quorum is present, but will not count toward the election of a nominee. Therefore, checking the box on the proxy card that withholds authority to vote for a nominee is the equivalent of abstaining. Abstentions are not counted for the purpose of electing directors. In the absence of a specific statutory requirement, in all matters other than the election of directors, the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter is necessary for approval. Shares properly voted as "ABSTAIN" on a particular matter are considered as shares present at the meeting and entitled to vote on the matter and, accordingly, will have the practical effect of having been voted against any such matter.
If you hold your UnionBanCal common stock through a nominee, generally the nominee may vote the UnionBanCal common stock that it holds for you only in accordance with your instructions. Brokers who are members of the Financial Industry Regulatory Authority may not vote shares held by them in nominee name unless they are permitted to do so under the rules of any national securities exchange to which they belong. Under New York Stock Exchange rules, a member broker that has sent proxy soliciting materials to a beneficial owner may vote on matters that the exchange has determined to be routine if the beneficial owner has not provided the broker with voting instructions within 10 days of the meeting. If a broker cannot vote on a particular matter because it is not routine, or it involves a stock option or other equity compensation plan and no instruction has been given by the beneficial owner to the broker, then there is a "broker non-vote" on that matter. Shares covered by a broker's proxy which are broker non-votes on a particular matter count for quorum purposes, but are not counted as shares present and entitled to vote on any such matter. Since the proposal to increase the number of shares of common stock that may be awarded under the Year 2000 UnionBanCal Corporation Management Stock Plan involves an equity compensation plan, brokers may not vote on the proposal without voting instructions from the beneficial owner. Therefore, broker non-votes on this proposal will count for quorum purposes, but will be excluded from the number of shares deemed present and entitled to vote on this proposal.
Vote Required for Approval of Proposals
Under Delaware law, directors are elected by a plurality of all the votes cast, so the 19 nominees for director receiving the greatest number of votes will be elected.
The affirmative vote of a majority of the shares represented and entitled to vote at the meeting is required to approve the increase in the number of shares of common stock that may be awarded under the Year 2000 UnionBanCal Corporation Management Stock Plan.
The affirmative vote of a majority of the shares represented and entitled to vote at the meeting is required to ratify the selection of the independent registered public accounting firm.
The Inspector of Election appointed for the annual meeting will tabulate all votes cast in person or by proxy at the meeting.
Solicitation of Proxies
UnionBanCal will pay all costs of soliciting proxies. Our officers and employees may also solicit proxies either personally or by telephone, letter, or other form of communication.
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THE BOARD OF DIRECTORS AND COMMITTEES
Corporate Governance
Our Board of Directors shares with our management a commitment to good corporate governance. The Board has developed a set of corporate governance guidelines to promote the effective functioning of Board activities and to promote a common set of expectations as to how the Board, its committees, individual directors and management should perform their functions. These guidelines are designed with our current business operations, ownership, capital structure and economic conditions in mind and will continue to evolve with changing circumstances.
We have adopted a code of ethics and conduct, entitled the Business Standards for Ethical Conduct, which is applicable to all officers and employees. We have also adopted a Code of Ethics for senior financial officers and a Code of Ethics applicable to our directors. These codes are subject to an annual certification process to review compliance.
The Corporate Governance Guidelines, Codes of Ethics, Business Standards for Ethical Conduct and charters of our Board committees, including the Audit, Corporate Governance and Executive Compensation & Benefits Committees, are posted on our website, www.unionbank.com, or are available, without charge, upon the written request of any stockholder directed to the Secretary of UnionBanCal Corporation, 400 California Street, San Francisco, California 94104-1302. We intend to disclose promptly any amendment to, or waiver from any provision of, the Code of Ethics applicable to senior financial officers, and any waiver from any provision of the Code of Ethics applicable to directors or the Business Standards for Ethical Conduct applicable to executive officers, on our website.
Communicating with our Board of Directors
Our Board of Directors encourages interested parties to make their concerns known to the independent directors. The Board has designated Richard D. Farman, the Lead Director, to receive communications from interested parties, including employees, stockholders and investors, addressed to him or to the independent directors as a group. Such communications should be in writing in care of the Office of the Corporate Secretary, 400 California Street, 16th Floor, San Francisco, California 94104-1302. All such written communications must contain the name and address of the interested party and indicate if the writer is a stockholder of UnionBanCal. All such communications will be delivered directly to the Lead Director, who will determine what action is appropriate. The procedures relating to communications with the Lead Director or the independent directors, as a group, are posted on UnionBanCal's website, www.unionbank.com.
Meetings of the Board
Our Board of Directors has designated Richard D. Farman, the Lead Director, to preside over executive sessions of the Board. If Mr. Farman is absent, the independent directors designate one of the independent directors present to preside at the executive session.
The Board of Directors met nine times in 2007, including one executive session held by telephone conference. In addition, the directors held four executive sessions during the regular meetings of the Board of Directors at which Mr. Farman as Lead Director presided. An additional executive session included only the independent directors. During 2007, all incumbent directors attended at least 75% of the aggregate number of Board meetings and meetings of committees of which they were members, except Mr. Miki.
UnionBanCal has a policy to encourage strongly Board members to attend our annual meetings of stockholders. Fifteen out of seventeen directors attended the 2007 annual meeting of stockholders.
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Committees of the Board
The Board has established committees, including committees with audit, compensation and corporate governance oversight functions, that also met in 2007. Each committee acts under a written charter and reports regularly to the Board of Directors. These charters are posted on our website, www.unionbank.com.
Audit Committee
The Audit Committee oversees relevant accounting, risk assessment, compliance, risk management and regulatory matters. In furtherance of these oversight functions, the Committee, among other things,
After reviewing the independent registered public accounting firm's qualifications, partner rotation and independence, the Audit Committee also makes an annual selection of an independent registered public accounting firm subject to ratification by the stockholders.
The Audit Committee has the authority to select, retain, terminate and approve the fees and other retention terms of special counsel or other experts or consultants as it deems appropriate and necessary to perform its duties. The Audit Committee's Report is set forth below in this proxy statement. At December 31, 2007, directors serving on the Audit Committee, all of whom were independent, were Michael J. Gillfillan (Chair), David R. Andrews, L. Dale Crandall, Murray H. Dashe, Mary S. Metz and Dean A. Yoost. Mr. Crandall has been designated an "audit committee financial expert."
Under the Audit Committee charter, no member of the Audit Committee may serve on the audit committees of more than three public companies without prior approval by the Board. The Board has approved Mr. Crandall's serving on the audit committees of more than three public companies. The Board determined that such simultaneous service does not impair Mr. Crandall's ability to serve effectively on our Audit Committee.
The Audit Committee met fourteen times in 2007, including meetings with management, the general auditor, the general counsel, outside legal counsel and the independent registered public accounting firm to discuss UnionBanCal's quarterly and year-end financial results prior to release of earnings, and meetings to review with management UnionBanCal's quarterly filings with the Securities and Exchange Commission.
The Audit Committee held regular discussions with management and the independent registered public accounting firm on significant issues regarding accounting principles, practices, judgments and any significant changes to UnionBanCal's accounting principles, as well as any items required to be communicated by the independent registered public accounting firm in accordance with Statement on Auditing Standards No. 61. The Audit Committee regularly met, separately, in executive session with management, the internal auditors, the independent registered public accounting firm, the chief compliance officer and the general counsel.
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In connection with the Audit Committee's approval of the retention of Deloitte & Touche LLP as UnionBanCal's independent registered public accounting firm for 2008, subject to ratification by the stockholders, the Audit Committee discussed with the independent registered public accounting firm any relationships or services which may impact Deloitte & Touche LLP's objectivity and independence and the plan for partner rotation. The Audit Committee also reviews, at least annually, reports from the independent registered public accounting firm regarding its internal quality-control procedures. The Audit Committee has adopted a policy by which it must pre-approve all audit and non-audit services provided by Deloitte & Touche LLP to UnionBanCal or its subsidiaries and did so in 2007.
The Audit Committee oversees UnionBanCal's compliance with state and federal laws and regulations, including the Sarbanes-Oxley Act, the rules and regulations of the Securities and Exchange Commission, the Federal Reserve Board and the Office of the Comptroller of the Currency as they apply to UnionBanCal, Union Bank of California, N.A., and their subsidiaries. The Committee receives regular reports from the chief compliance officer on the state of compliance, including compliance with the Bank Secrecy Act and anti-money laundering statutes, regulations and policies. The Committee also reviews with management on a regular basis the internal processes used to prepare the Chief Executive Officer and Chief Financial Officer certifications of UnionBanCal's periodic reports to the Securities and Exchange Commission pursuant to the Sarbanes-Oxley Act.
The Committee has established procedures for: (1) the receipt, retention and treatment of complaints received by UnionBanCal regarding accounting, internal accounting controls or auditing matters; and (2) confidential, anonymous submissions by employees of concerns regarding questionable accounting or auditing matters. Procedures for communicating with our Audit Committee are posted on UnionBanCal's website, www.unionbank.com.
Corporate Governance Committee
The Corporate Governance Committee is the standing nominating committee responsible for identifying qualified candidates to serve on the Board of UnionBanCal and recommending director nominees to be submitted to the stockholders for election at the annual meeting. The functions of the Committee also include:
The Committee has the authority to select, retain, terminate and approve the fees and other retention terms of special counsel or other experts or consultants as it deems appropriate and necessary to perform its duties. At December 31, 2007, directors serving on the Corporate Governance Committee, all of whom were independent, were David R. Andrews (Chair), Aida M. Alvarez, Murray H. Dashe, Richard D. Farman, Christine Garvey and Ronald L. Havner, Jr. The Corporate Governance Committee met eight times in 2007.
Director Nominations
As part of its nominating responsibilities, the Corporate Governance Committee will consider candidates nominated by stockholders for next year's meeting if the nomination is made in writing no
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later than December 19, 2008. Stockholder nominations must be made in accordance with Section 2.1 of UnionBanCal's Bylaws and must be addressed to UnionBanCal Corporation, Office of the Corporate Secretary, 400 California Street, San Francisco, California 94104-1302. The Bylaws of UnionBanCal are posted on UnionBanCal's website, www.unionbank.com.
The Committee believes that the following specific, minimum qualifications must be met by a nominee for the position of director:
The Committee also considers the following qualities and skills when making its determination whether a nominee is qualified for the position of director:
In identifying and evaluating nominees for director, including nominees recommended by stockholders, the Committee reviews annually the appropriate skills and characteristics required of Board members in the context of the current composition of the Board. Nominees for director are evaluated by the Committee, in consultation with the Chief Executive Officer. The Committee has used a third-party search firm for the purpose of identifying and evaluating director nominees, and may use such a firm in the future. The function of this search firm is to assist the Committee in the identification and evaluation of and communication with potential nominees.
The nominees presented for election in this proxy statement have been reviewed by the Committee to determine that they meet the qualifications described above. The Committee believes that the nominees are highly qualified.
Executive Compensation & Benefits Committee
The Executive Compensation & Benefits Committee reviews and approves executive officer compensation programs and award levels and oversees Union Bank of California's employee benefit plans. The Committee approves the compensation of the Chief Executive Officer and other policy-making executive officers of UnionBanCal. In addition, it approves stock awards, stock option and restricted stock grants under the Year 2000 UnionBanCal Corporation Management Stock Plan, and awards under the 1997 UnionBanCal Corporation Performance Share Plan, the Union Bank of California Senior Management Bonus Plan and the Union Bank of California Senior Executive Bonus Plan. The Committee also reviews and recommends directors' compensation to the full Board of Directors.
The Committee reviews reports of all elements of compensation for such levels of senior management as the Committee and the Chief Executive Officer may designate. The Committee also reviews the performance, goals and objectives, and succession planning for policy-making officers and such other members of senior management as the Committee and the Chief Executive Officer may designate. The Chair of the Committee may establish and delegate specific duties to one or more subcommittees and appoint members of the Committee to such subcommittees. The Committee frequently asks for input from management, including the Senior Executive Vice President of Human
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Resources, the Chief Executive Officer, the Chief Operating Officer and the Chief Financial Officer; and from professional employees, including Human Resources compensation staff, accountants, internal auditors, and securities, tax and compensation legal counsel.
The Committee has the authority to select, retain, terminate and approve the fees and other retention terms of special counsel or other experts or consultants as it deems appropriate and necessary to perform its duties. The Committee has directly retained Semler Brossy Consulting Group, LLC, an executive compensation consulting firm. During 2007, Semler Brossy advised the Committee on executive compensation matters and attended eight out of nine Committee meetings. The consultant reports directly to the Committee, through the Committee chair, and provides the Committee with independent advice on executive compensation matters. The consultant prepares information for the Committee on competitive compensation levels and practices, peer company selection criteria, peer and UnionBanCal performance, incentive plan performance measures, formulas and payouts. In some cases, with prior approval of the Committee chair, the consultant may assist UnionBanCal in developing incentive plans for specialized executives and non-executives as an extension of his work assisting the Committee directly in developing senior executive compensation programs.
Additional information concerning the Committee's processes and procedures for the consideration and determination of executive and director compensation is set forth below under the captions "Director Compensation" and "Executive CompensationCompensation Discussion and Analysis."
The Executive Compensation & Benefits Committee Report is set forth below under the caption "Executive CompensationExecutive Compensation & Benefits Committee Report." At December 31, 2007, directors serving on the Executive Compensation & Benefits Committee, all of whom were independent, were L. Dale Crandall (Chair), Richard D. Farman, Michael J. Gillfillan, Mohan S. Gyani, J. Fernando Niebla and Barbara L. Rambo. The Executive Compensation & Benefits Committee met nine times in 2007.
Finance & Capital Committee
The Finance & Capital Committee's role is to act on behalf of the Board of Directors in overseeing UnionBanCal's financial matters (except those that are specific to the Audit or Executive Compensation & Benefits Committees). The Committee reviews and assesses UnionBanCal's financial planning, financial performance, tax and capital management, and policies regarding investments, dividends, investor relations, asset liability management and liquidity. At December 31, 2007, directors serving on the Finance & Capital Committee were Ronald L. Havner, Jr. (Chair), Aida M. Alvarez, Nicholas B. Binkley, Philip B. Flynn, Mohan S. Gyani, Masashi Oka, Masaaki Tanaka and Dean A. Yoost. The Finance & Capital Committee met six times in 2007.
Public Policy Committee
The Public Policy Committee is responsible for identifying relevant political, social and environmental trends relating to UnionBanCal's business. The Public Policy Committee is a joint committee of UnionBanCal and Union Bank of California. The Public Policy Committee monitors Union Bank of California's programs which carry out the purposes of the Community Reinvestment Act, equal employment opportunity laws and other related federal, state and local programs. The Public Policy Committee also reviews compliance with Union Bank of California's Business Standards for Ethical Conduct. At December 31, 2007, directors serving on the Public Policy Committee were Mary S. Metz (Chair), Murray H. Dashe, J. Fernando Niebla and Barbara L. Rambo. The Public Policy Committee met five times in 2007.
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Other Committees of UnionBanCal and Union Bank of California
Until September 2007, the Audit Committee also served as the Bank Secrecy Act Compliance Committee, which oversaw our compliance program relating to the Bank Secrecy Act and anti-money laundering controls and processes. In September 2007, the Board of Directors of Union Bank of California established a Board Oversight Committee to facilitate the process by which the Board of Directors oversees compliance with the terms of the Consent Order to a Civil Money Penalty and to Cease & Desist entered into with the Office of the Comptroller of the Currency dated September 14, 2007 and the Deferred Prosecution Agreement entered into with the U.S. Department of Justice dated September 17, 2007. Union Bank of California also has a standing Trust, Investment and Brokerage Oversight Committee. In January 2008, our Board of Directors established a CEO Selection Committee to review, at least annually, a proposed plan for Chief Executive Officer succession and to recommend, as and when appropriate, to the full Board a successor Chief Executive Officer in the event that there is a transition of our Chief Executive Officer.
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AUDIT COMMITTEE REPORT
The Audit Committee is composed of six directors and operates under a written charter adopted by the Board of Directors. Each Committee member is independent, as determined by the Board in accordance with the applicable listing standards of the New York Stock Exchange and rules of the Securities and Exchange Commission.
Management is responsible for UnionBanCal's internal controls and financial reporting process. The independent registered public accounting firm is responsible for performing an independent audit of UnionBanCal's consolidated financial statements in accordance with standards of the Public Company Accounting Oversight Board (United States) and to issue a report on these financial statements. The Audit Committee's responsibility is to oversee these activities.
In this context, the Audit Committee has met and held discussions with management and the independent registered public accounting firm. Management represented to the Audit Committee that UnionBanCal's consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States, and the Audit Committee has reviewed and discussed the consolidated financial statements with management and the independent registered public accounting firm. The Audit Committee discussed with the independent registered public accounting firm matters required to be discussed by Statement on Auditing Standards No. 61, "Communication with Audit Committees," as modified or supplemented, including the auditor's judgments about the quality, as well as the acceptability, of UnionBanCal's accounting principles as applied in the financial reporting.
UnionBanCal's independent registered public accounting firm also provided to the Audit Committee the written disclosures required by the Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), and the Audit Committee discussed with the independent registered public accounting firm that firm's independence as well as its internal quality-control procedures.
Based on the Audit Committee's discussions with management and the independent registered public accounting firm and the Audit Committee's review of the representations of management and the report of the independent registered public accounting firm to the Audit Committee, the Audit Committee recommended to the Board of Directors, and the Board has approved, that the audited consolidated financial statements be included in UnionBanCal's Annual Report on Form 10-K for the year ended December 31, 2007, for filing with the Securities and Exchange Commission. The Audit Committee has also approved, subject to stockholder ratification, the selection of UnionBanCal's independent registered public accounting firm for 2008.
AUDIT
COMMITTEE
Michael J. Gillfillan, Chair
David R. Andrews
L. Dale Crandall
Murray H. Dashe
Mary S. Metz
Dean A. Yoost
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SECURITY OWNERSHIP BY MANAGEMENT
The following table indicates the beneficial ownership of UnionBanCal and Mitsubishi UFJ Financial Group common stock, as of March 28, 2008 by (1) all persons who are directors, nominees or executive officers named in the Summary Compensation Table; and (2) all current directors and executive officers of UnionBanCal as a group, based upon information supplied by each of the directors and executive officers. Each of the directors and executive officers named below and all directors and executive officers of UnionBanCal as a group beneficially own less than 1% of either UnionBanCal's or Mitsubishi UFJ Financial Group's outstanding shares of common stock.
Name of Beneficial Owner
(1)
|
UnionBanCal
Corporation Shares Beneficially Owned |
UnionBanCal
Corporation Shares that may be Acquired within 60 Days of March 28, 2008 by Exercise of Options or Conversion of Restricted Stock Units or Stock Units |
Total
|
Mitsubishi UFJ
Financial Group, Inc. Shares Beneficially Owned (2) |
|||||
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Aida M. Alvarez (3) | 814 | 900 | 1,714 | | |||||
David R. Andrews | 2,021 | 15,000 | 17,021 | | |||||
Nicholas B. Binkley (4) | 20 | 310 | 330 | | |||||
JoAnn M. Bourne (5) | 12,706 | 91,689 | 104,395 | | |||||
L. Dale Crandall (6) | 500 | 13,587 | 14,087 | | |||||
Murray H. Dashe (7) | 35 | 1,263 | 1,298 | | |||||
John C. Erickson (8) | 9,111 | 41,266 | 50,377 | | |||||
Richard D. Farman | 3,161 | 18,000 | 21,161 | | |||||
Philip B. Flynn (9) | 47,516 | 271,633 | 319,149 | | |||||
Christine Garvey (10) | 45 | 35 | 80 | | |||||
Michael J. Gillfillan (11) | 1,294 | 7,035 | 8,329 | | |||||
Mohan S. Gyani (12) | 71 | 1,982 | 2,053 | | |||||
Ronald L. Havner, Jr. (13) | 2,779 | 900 | 3,679 | | |||||
Norimichi Kanari (14) | 1,000 | | 1,000 | 41,670 | |||||
David I. Matson (15) | 20,787 | 125,367 | 146,154 | | |||||
Mary S. Metz (16) | 2,342 | 19,304 | 21,646 | | |||||
Shigemitsu Miki | | | | 84,300 | (20) | ||||
Takashi Morimura (14) | 1,000 | | 1,000 | 9,400 | |||||
J. Fernando Niebla (17) | 944 | 19,035 | 19,979 | | |||||
Kyota Omori | | | | 11,700 | |||||
Barbara L. Rambo | 40 | | 40 | | |||||
Masaaki Tanaka (14) | 2,000 | | 2,000 | 3,700 | |||||
Dean A. Yoost (18) | 85 | | 85 | | |||||
All current directors and executive officers as a group (30 persons) (19) | 148,782 | 1,045,001 | 1,193,783 | 141,370 |
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13
ELECTION OF DIRECTORS
Nineteen directors of UnionBanCal are to be elected at the annual meeting to serve for the coming year and until their successors are elected and qualified. All are directors standing for re-election with the exception of Mses. Garvey and Rambo and Mr. Yoost, who were elected by the Board of Directors since the 2007 annual meeting of stockholders. The Board of Directors has nominated the persons listed below for election as directors and recommends that stockholders vote FOR such nominees. Mses. Garvey and Rambo were referred by independent directors and recommended by the Corporate Governance Committee. Mr. Yoost previously served as a director and was initially referred by a third-party search firm. His re-election was recommended by the Corporate Governance Committee. A resolution of the Board currently sets the exact number of directors at nineteen. All nominees, except for Mr. Miki, are also directors of Union Bank of California, our wholly owned subsidiary.
The Board of Directors has adopted a policy which provides that any director who is employed full-time by UnionBanCal or Union Bank of California shall retire from the Board at age 65 and any director who is not employed full-time by UnionBanCal or Union Bank of California, in general, shall not stand for re-election at the annual meeting of stockholders following the director's 72nd birthday. The Board has provided exceptions to this policy for Mr. Miki, who is 73, and Mr. Farman, who is 72.
If one or more nominees become unable or unwilling to accept nomination or election, the proxy holders intend to vote for the election of such other person(s), if any, as the Board of Directors may recommend. The Board of Directors has no reason to believe that any of the nominees will be unable or unwilling to serve.
Director Independence
The Board of Directors has affirmatively determined that each of the following nominees are independent under the rules of the New York Stock Exchange: Aida M. Alvarez, David R. Andrews, Nicholas B. Binkley, L. Dale Crandall, Murray H. Dashe, Richard D. Farman, Christine Garvey, Michael J. Gillfillan, Mohan S. Gyani, Ronald L. Havner, Jr., Mary S. Metz, J. Fernando Niebla, Barbara L. Rambo and Dean A. Yoost; collectively, these director nominees comprise a majority of the Board of Directors. In addition, the Board of Directors determined that Stanley F. Farrar, who served as a director until May 2007, was independent during his service.
In determining the independence of the directors and nominees under our categorical standards described below, the Corporate Governance Committee considered several types of relationships. We made charitable contributions to nonprofit entities on whose board of trustees our directors sit, including a cancer and life-threatening disease research and treatment center on whose board Mr. Crandall sits. In this case, the amount of our contribution did not exceed our categorical standards for independence (which are discussed in the following section) but was in excess of $50,000, which our standards require us to report to the Corporate Governance Committee. We have engaged professional services firms (such as a law firm) where a director or an immediate family member is a partner: an immediate family member of Mr. Farman is a partner in a firm that provided professional services to us and companies affiliated with us, and Mr. Farrar is a partner in a firm that provided professional services to us and companies affiliated with us. We provide non-credit services in the ordinary course of business to members of our Board or entities affiliated with Board members. Dr. Metz and members of her immediate family have ordinary course banking relationships with us.
Categorical Standards of Independence
In addition to reviewing each UnionBanCal director's satisfaction of the specific independence tests set forth in the New York Stock Exchange rules, the Board has established categorical standards to assist it in making independence determinations. UnionBanCal's categorical standards for director
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independence are set forth below and in the Corporate Governance Guidelines posted on our website, www.unionbank.com. For purposes of these standards, the "Company" includes UnionBanCal, its majority stockholder and its direct and indirect consolidated subsidiaries. "Immediate family member" has the meaning set forth in the New York Stock Exchange's independence rules, as they may be amended from time to time.
Banking Relationships. A director will not fail to be independent from management solely as a result of lending relationships, deposit relationships or other banking relationships (including, without limitation, trust department, investment and insurance relationships) between the Company, on the one hand, and the director (or an immediate family member) or an entity which the director (or an immediate family member) controls (within the meaning of Regulation O of the Board of Governors of the Federal Reserve System), on the other hand, provided that
Business Relationships. All payments by the Company to an entity by which a director is employed (or by which an immediate family member is employed as a current executive officer) for goods or services, or other contractual arrangements, must be made in the ordinary course of business and on substantially the same terms as those prevailing at the time for comparable transactions with non-affiliated persons. The following relationships are not considered material relationships that would impair a director's independence:
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Relationships with Not-for-Profit Entities. A director's independence will not be considered impaired solely because the director or an immediate family member is:
Our contributions to such entities in excess of $50,000 must be reported to the Corporate Governance Committee and may be considered by the Board in making independence determinations.
Nominees
Aida M. Alvarez
Ms. Alvarez, 58, served as Administrator of the U.S. Small Business Administration from February 1997 to January 2001. Ms. Alvarez is a director of Wal-Mart Stores, Inc. Ms. Alvarez has been a Director of UnionBanCal since October 2004.
David R. Andrews
Mr. Andrews, 66, is the Founder and Co-Chair of MetaJure, Inc., a consulting company that provides non-legal services to Fortune 500 corporations in the areas of eDiscovery, investigations, due diligence and basic document drafting. Mr. Andrews is retired from PepsiCo, Inc., where he served as Senior Vice President, Governmental Affairs, General Counsel and Secretary from February 2002 to February 2005. Mr. Andrews was a partner of the law firm of McCutchen, Doyle, Brown & Enersen from 1981 to 1997 and from April 2000 to February 2002. He served as legal adviser to the U.S. Department of State from August 1997 to April 2000. Mr. Andrews is a director of Pacific Gas and Electric Company and PG&E Corporation and a director of James Hardie Industries Ltd. Mr. Andrews has been a Director of UnionBanCal since April 2000.
Nicholas B. Binkley
Mr. Binkley, 62, has been a general partner of Forrest Binkley & Brown, a venture capital and private equity firm, since the firm was formed in 1993. Forrest Binkley & Brown serves as general partner for two funds, SBIC Partners, L.P, a venture capital fund formed in 1994, and Forrest Binkley & Brown Capital Partners, LLC, a private equity fund formed in 2001. Mr. Binkley was a member of the Office of the President of Forrest Binkley & Brown Venture Co., a Texas corporation which was the general partner of Forrest Binkley & Brown, L.P., a Texas limited partnership, which in turn was the general partner of SBIC Partners II, L.P., a technology venture capital fund formed in 1998. In March 2005, SBIC Partners II, L.P. entered into a consent judgment whereby the U.S. Small Business Administration, or SBA, was appointed as receiver for SBIC Partners II, L.P. Following the
16
appointment of the SBA as receiver, Forrest Binkley & Brown was appointed as agent to the receiver for the purpose of marshalling and liquidating all of its assets with the goal of maximizing recovery of SBA loans made to SBIC Partners II, L.P. Mr. Binkley's prior experience is in the banking industry where he held various positions at Security Pacific Corporation from 1977 to 1992, including as an executive officer and member of the board of directors, and, following the acquisition of Security Pacific, serving as an executive officer and member of the board of directors of BankAmerica Corporation from 1992-1993. Mr. Binkley has been a Director of UnionBanCal since February 2007.
L. Dale Crandall
Mr. Crandall, 66, serves as President of Piedmont Corporate Advisors, Inc., a private financial consulting firm that he founded. Mr. Crandall is retired from Kaiser Foundation Health Plan, Inc., and Kaiser Foundation Hospitals, where he served as President and Chief Operating Officer from March 2000 to June 2002, and as Senior Vice President and Chief Financial Officer from June 1998 to March 2000. Mr. Crandall is a director of Coventry Health Care, BEA Systems, Ansell Ltd., Covad Communications Group, Inc. and Metavante Technologies, Inc., and serves as trustee for four funds in the Dodge & Cox Funds family of mutual funds. Mr. Crandall has been a Director of UnionBanCal since February 2001.
Murray H. Dashe
Mr. Dashe, 65, is retired from Cost Plus, Inc., where he served as Chairman, Chief Executive Officer and President from February 1998 to March 2005. Mr. Dashe is the Lead Independent Director of Longs Drug Stores Corporation. Mr. Dashe has been a Director of UnionBanCal since July 2006.
Richard D. Farman
Mr. Farman, 72, has been Chairman Emeritus of Sempra Energy since September 2000. Mr. Farman served as Chairman and Chief Executive Officer of Sempra Energy from July 1998 to June 2000. Mr. Farman has been a Director of UnionBanCal since November 1988.
Philip B. Flynn
Mr. Flynn, 50, has served as Vice Chairman and Chief Operating Officer of UnionBanCal and Union Bank of California since March 2005. He served as Vice Chairman and head of the Commercial Financial Services Group from April 2004 to March 2005, as Executive Vice President and Chief Credit Officer from September 2000 to April 2004, and as Executive Vice President and head of Specialized Lending from May 2000 to September 2000. Mr. Flynn has been a Director of UnionBanCal since April 2004.
Christine Garvey
Ms. Garvey, 62, retired, is a real estate consultant, who served as Global Head of Corporate Real Estate and Services for Deutsche Bank AG from May 2001 to May 2004. From December 1999 until April 2001, Ms. Garvey served as Vice President, Worldwide Real Estate and Workplace Resources at Cisco Systems, Inc. Previously, Ms. Garvey held several positions with Bank of America, including Group Executive Vice President and Head of National Commercial Real Estate Services. Ms. Garvey is a director of ProLogis. Ms. Garvey has been a Director of UnionBanCal since October 2007.
Michael J. Gillfillan
Mr. Gillfillan, 60, has been a partner of Meriturn Partners, LLC since December 2002. He was a partner of Neveric, LLC from March 2000 to January 2002. Mr. Gillfillan has been a Director of UnionBanCal since January 2003.
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Mohan S. Gyani
Mr. Gyani, 56, has been Vice Chairman of Roamware, Inc., a provider of voice and data roaming solutions, since December 2005, where he served as Chief Executive Officer & Chairman from May 2005 to December 2005. Prior to this, Mr. Gyani served as President and Chief Executive Officer of AT&T Wireless Mobility Services from March 2000 to January 2003 and Senior Advisor of AT&T Wireless Group from January 2003 to December 2004. Mr. Gyani is a Director of Safeway, Inc., Keynote Systems Incorporated, Mobile TeleSystems OJSC, and SiRF Technology Holdings, Inc. Mr. Gyani has been a Director of UnionBanCal since July 2006.
Ronald L. Havner, Jr.
Mr. Havner, 50, has been Vice Chairman, Chief Executive Officer and a director of Public Storage, Inc. since November 2002, and President since July 2005. Mr. Havner joined Public Storage in 1986 and has held a variety of positions, including Chairman of the Board of Directors for Public Storage's affiliate, PS Business Parks, Inc., a position he had held since March 1988. He is a member of the Board of Governors of the National Association of Real Estate Investment Trusts, Inc. (NAREIT) and the REIT Center Board of Advisors, and a director of GF Acquisition Corp. Mr. Havner has been a Director of UnionBanCal since October 2004.
Norimichi Kanari
Mr. Kanari, 61, has served as Chairman of UnionBanCal and Union Bank of California since February 2007. He served as Deputy President and Chief Executive Officer of the Global Business Unit of The Bank of Tokyo-Mitsubishi UFJ May 2005 to April 2008. He served as President and Chief Executive Officer of UnionBanCal and Union Bank of California from July 2001 to May 2005. He served as Vice Chairman of UnionBanCal and Union Bank of California from July 2000 to July 2001. He has served as a Director of The Bank of Tokyo-Mitsubishi UFJ since June 1997.
Mary S. Metz
Dr. Metz, 70, is retired from the S. H. Cowell Foundation where she served as President from January 1999 until March 2005. Dr. Metz is a director of AT&T Corporation, Longs Drug Stores Corporation, Pacific Gas and Electric Company and PG&E Corporation. Dr. Metz has been a Director of UnionBanCal since November 1988.
Shigemitsu Miki
Mr. Miki, 73, has served as Senior Advisor of The Bank of Tokyo-Mitsubishi UFJ since April 2008. He served as Chairman of the Board of The Bank of Tokyo-Mitsubishi UFJ from June 2004 to April 2008. From June 2000 to June 2004, he was President of The Bank of Tokyo-Mitsubishi. Mr. Miki has been a Director of UnionBanCal since October 2004.
J. Fernando Niebla
Mr. Niebla, 68, has served as President of International Technology Partners, LLC since December 1998 and is the principal owner and managing partner of Siertina Development LLC. He serves on the boards of Integrated Healthcare Holdings, Inc. and Granite Construction Incorporated. Mr. Niebla has been a Director of UnionBanCal since April 1996.
Kyota Omori
Mr. Omori, 60, has served as Senior Managing Officer of the Mitsubishi UFJ Financial Group since April 2008. He served as Senior Managing Executive Officer and Chief Executive Officer for the
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Americas of The Bank of Tokyo-Mitsubishi UFJ from October 2007 to April 2008 and as Resident Managing Officer for the United States for the Mitsubishi UFJ Financial Group from June 2005 to April 2008. From January 2006 to October 2007, Mr. Omori served as Managing Executive Officer and Chief Executive Officer for the Americas of The Bank of Tokyo-Mitsubishi UFJ. From May 2003 to January 2006, Mr. Omori served as Managing Director of The Bank of Tokyo-Mitsubishi. In May 2004, Mr. Omori was appointed as Chief Executive Officer for the Americas. From May 2001 to May 2003, Mr. Omori served as General Manager of the Corporate Planning Office of The Bank of Tokyo-Mitsubishi. Mr. Omori has been a Director of UnionBanCal since May 2007.
Barbara L. Rambo
Ms. Rambo, 55, is currently Vice Chair of Nietech Corporation, a payments technology company, and served as Chief Executive Officer of Nietech Corporation from November 2002 until October 2006. Prior to joining Nietech, Ms. Rambo served as Chair of the Board of OpenClose Technologies, Inc., a financial services company, from June 2001 to December 2001, as President and Chief Executive Officer of that company from January 2000 to June 2001, and as a Director from January 2000 through March 2002. Previously, Ms. Rambo held several executive positions with Bank of America, most recently Group Executive Vice President and Head of National Commercial Banking. Ms. Rambo is a director of Pacific Gas and Electric Company and PG&E Corporation. Ms. Rambo has been a Director of UnionBanCal since October 2007.
Masaaki Tanaka
Mr. Tanaka, 55, has served as President and Chief Executive Officer of UnionBanCal Corporation and Union Bank of California since May 2007. Mr. Tanaka served as Executive Officer and General Manager, Corporate Planning Division of The Bank of Tokyo-Mitsubishi UFJ from January 2006 until April 2007, during which time he also served as Executive Officer and Co-General Manager, Corporate Planning Division of Mitsubishi UFJ Financial Group. From May 2004 to December 2005, Mr. Tanaka served as General Manager of Corporate Business Development for The Bank of Tokyo-Mitsubishi, during which time he also served, prior to July 2004, as General Manager of Corporate Banking Division No. 2 of Corporate Banking Group No. 1, and, beginning in July 2004, as General Manager of Corporate Banking Division No. 3 of the Corporate Banking Group. Mr. Tanaka was appointed Executive Officer of The Bank of Tokyo-Mitsubishi UFJ in June 2004 and Managing Executive Officer in May 2007. From April 2001 to May 2004, he served as General Manager, Corporate Planning Division of the Mitsubishi Tokyo Financial Group and from May 2000 to April 2001, he served as General Manager, Integrated Planning Office of The Bank of Tokyo-Mitsubishi. Mr. Tanaka has been a Director of UnionBanCal since May 2007.
Dean A. Yoost
Dean A. Yoost, 58, retired from PricewaterhouseCoopers in July 2005, where he held various partner positions in Tokyo, Beijing, Los Angeles, New York, Minneapolis, and Irvine since 1974, most recently as the managing partner of the Orange County practice and as the Western Region Leader of the firm's Advisory practice. Mr. Yoost was a full-time Senior Advisor to PricewaterhouseCoopers in Tokyo from early 2006 until June 2007, where he assumed a lead role in the major restructuring of PricewaterhouseCoopers' Japanese operations. Mr. Yoost is a Director of Emulex Corporation and Pacific Life Insurance Company. Mr. Yoost has been a Director of UnionBanCal since July 2007.
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DIRECTOR COMPENSATION
The following table sets forth compensation paid to our Board of Directors in 2007 and should be read in conjunction with the narrative discussion which follows this table.
2007 Director Compensation Table
Name*
|
Fees Earned
or Paid in Cash ($) |
Stock
Awards ($) (1) |
Option
Awards ($) |
All Other
Compensation ($) |
Total ($)
|
|||||
---|---|---|---|---|---|---|---|---|---|---|
Aida M. Alvarez | 78,000 | 70,076 | (11) | | | 148,076 | ||||
David R. Andrews | 144,000 | 66,813 | (11) | | (15) | | 210,813 | |||
Nicholas B. Binkley (2) | 60,167 | 52,765 | (11)(12) | | | 112,932 | ||||
L. Dale Crandall | 172,500 | 72,783 | (11) | | (15) | | 245,283 | |||
Murray H. Dashe | 144,500 | (8) | 93,570 | (11) | | | 238,070 | |||
Richard D. Farman | 204,000 | 58,574 | (11) | | (15) | | 262,574 | |||
Stanley F. Farrar (3) | 32,584 | (9) | 34,569 | | (15) | 25,000 | (16) | 92,153 | ||
Christine Garvey (4) | 17,250 | 18,165 | (13) | | | 35,415 | ||||
Michael J. Gillfillan | 151,500 | 71,430 | (11) | | (15) | 2,500 | (16) | 225,430 | ||
Mohan S. Gyani | 80,500 | 93,570 | (11) | | | 174,070 | ||||
Ronald L. Havner, Jr. | 84,000 | (10) | 70,076 | (11) | | | 154,076 | |||
Norimichi Kanari | | | | | | |||||
Mary S. Metz | 141,000 | 72,783 | (11) | | (15) | | 213,783 | |||
Shigemitsu Miki | | | | | | |||||
J. Fernando Niebla | 92,500 | 72,783 | (11) | | (15) | | 165,283 | |||
Kyota Omori | | | | | | |||||
Barbara L. Rambo (5) | 18,750 | 18,165 | (13) | | | 36,915 | ||||
Tetsuo Shimura (6) | | | | 90,721 | (17) | 90,721 | ||||
Dean A. Yoost (7) | 62,500 | 45,804 | (14) | | | 108,304 |
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Name
|
Number of Shares Underlying Unexercised Options
|
|
---|---|---|
David R. Andrews | 15,000 | |
L. Dale Crandall | 12,000 | |
Richard D. Farman | 18,000 | |
Stanley F. Farrar | 18,000 | |
Michael J. Gillfillan | 6,000 | |
Mary S. Metz | 18,000 | |
J. Fernando Niebla | 18,000 |
Salary
|
Tax Reimbursements
|
Total All Other Compensation
|
||||
---|---|---|---|---|---|---|
$27,491 | $ | 63,230 | (A) | $ | 90,721 |
The following narrative discussion should be read in conjunction with the Director Compensation Table which precedes this discussion.
In July 2007, the Executive Compensation & Benefits Committee reviewed and discussed a report by the Semler Brossy Consulting Group, LLC, its independent compensation consultant, on the competitiveness and reasonableness of UnionBanCal's director compensation. This review included data on competitive practices and trends and a consideration of the responsibilities and commitments required of UnionBanCal's non-employee directors. As a result of this review, no changes were made in the retainers or meeting fees paid to non-employee directors. The grant values of the annual restricted stock unit awards and the parallel initial restricted stock unit awards to new directors were increased from $55,000 to $75,000. For additional information regarding the compensation of non-employee directors, please see "Executive CompensationCompensation Discussion and AnalysisNon-Employee Director Compensation."
Under the compensation program effective since January 1, 2005 and described below, directors who are not full-time officers of UnionBanCal or The Bank of Tokyo-Mitsubishi UFJ or its affiliates receive an annual combined retainer for service on our Board of Directors or the Board of Directors of
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Union Bank of California, meeting fees for attendance at Board and committee meetings and annual restricted stock unit awards. New non-employee directors receive a separate restricted stock unit award upon joining the Board of Directors.
Directors who are full-time officers of UnionBanCal or The Bank of Tokyo-Mitsubishi UFJ or its affiliates do not receive additional compensation for service on the Boards or Board committees of UnionBanCal or Union Bank of California. For additional information regarding the compensation of expatriate policy-making officers who are members of the Board of Directors, please see "Executive CompensationCompensation Discussion and AnalysisPolicy on Expatriate Compensation."
Annual Retainers
The annual combined retainer for service on the Boards of UnionBanCal and Union Bank of California is $35,000. The Lead Director, whose governance role and responsibilities are broad and significant, received an additional annual retainer of $100,000 in 2007. Committee Chairs receive an additional annual combined retainer, as follows:
All annual retainers are pro-rated and payable quarterly in advance.
Per Meeting Fees
Non-employee directors are also paid the following:
Restricted Stock Unit Awards
Each non-employee director receives an annual grant of restricted stock units with a value of approximately $75,000, subject to such terms and conditions of the grant as the Executive Compensation & Benefits Committee determines. Each new non-employee director elected to the Board receives a separate initial grant of restricted stock units with a fair market value of approximately $75,000 on the date of election plus a regular grant of restricted stock units with a fair market value of approximately $75,000 either on that year's regular grant date or on the date of election, both grants subject to such terms and conditions as the Executive Compensation & Benefits Committee determines. Accordingly, each new non-employee director receives grants of restricted stock units with an aggregate fair market value of $150,000 in his or her first calendar year of service. The
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value of both annual and initial grants of restricted stock units for non-employee directors increased from $55,000 to $75,000 effective July 25, 2007. Each restricted stock unit will be redeemed in one share of common stock. The Board considered the importance and difficulty of attracting highly qualified new directors in determining the value of the initial grant upon election to the Board.
Annual grants of restricted stock units to non-employee directors vest on the first anniversary of the date of grant. Initial grants of restricted stock units to new non-employee directors vest in equal one-third installments on each of the first three anniversaries of the date of grant. Regular grants of restricted stock units to new non-employee directors vest in full on the first anniversary of the date of grant. Each grant of restricted stock units will vest earlier in the event of death, disability, retirement or a change of control of UnionBanCal. The Executive Compensation & Benefits Committee has previously accelerated vesting of the regular grant on a pro rata basis for the number of months the non-employee director served when the non-employee director terminated service on the Board prior to the vesting date of the regular grant.
Non-employee directors have the option to defer settlement of all or a portion of the restricted stock units beyond the vesting date. A non-employee director who elects to defer the receipt of their shares until termination of Board service will receive an additional number of shares of common stock equal to 15% of the number of shares subject to the restricted stock units and their associated dividend equivalents provided that the non-employee director does not terminate service on the Board prior to completing five years of Board service, unless due to death or disability or on or after change in control of UnionBanCal.
As of the date on which dividends are paid with respect to common stock, each non-employee director will be credited with additional restricted stock units in an amount equal to:
The additional restricted stock units will be subject to the same vesting schedule as the restricted stock units with respect to which they are credited. Dividend equivalents will be accrued with respect to the premium shares to which the non-employee director is entitled by reason of deferring settlement of the restricted stock units until termination of Board service.
Deferrals of Retainers and Meeting Fees
Non-employee and non-expatriate directors may defer all or any portion of their annual retainers or meeting fees either to stock units or into an unfunded interest-bearing deferred compensation account. Non-employee directors are eligible to defer director fees and retainers for payment at a future date designated by the non-employee directors under the Union Bank of California Deferred Compensation Plan. Funds deferred under this Plan accrue interest based on the average Treasury Constant Maturities Rate, calculated quarterly based on a rolling average for the previous 12 months.
In 2003, the Executive Compensation & Benefits Committee adopted a program under the Year 2000 UnionBanCal Corporation Management Stock Plan pursuant to which non-employee directors may irrevocably elect to defer all or a portion of the cash retainer and/or fee payable to them for services on the Board and its committees in the form of stock units. Stock units are a form of deferred compensation payable in shares of common stock of UnionBanCal. At the time of deferral, a bookkeeping account is established on behalf of the director and credited with a number of fully vested stock units. The director will receive a number of shares of common stock equal to the number of stock units when the deferred compensation is payable. Dividend equivalents are credited to the stock unit accounts. Stock units have no voting rights.
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Review of Director Compensation
The compensation described above is the only compensation non-employee and non-expatriate directors receive from UnionBanCal. It is subject to periodic review and adjustment by the Board of Directors based on recommendations of the Executive Compensation & Benefits Committee, which engages the independent outside consultant in this regard.
Limits on Other Compensation to Audit Committee Members
Members of the Audit Committee may not receive, directly or indirectly, any consulting advisory or other compensatory fee from UnionBanCal or any of its subsidiaries, other than:
Stock Ownership Guidelines
In 1999, to link the interests of non-employee directors directly to stockholder interests, UnionBanCal instituted stock ownership guidelines for its Board of Directors. Within the five-year compliance period, each non-employee, non-expatriate director is expected to own shares of UnionBanCal common stock with a market value of five times the director's annual retainer, which required amount was $175,000 as of December 31, 2007. Stock ownership under these guidelines includes:
Directors are expected to comply with these ownership guidelines within five years of their date of election. Each of the director nominees has met, or is on track to meet, the ownership guidelines.
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EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
We are a California-based commercial bank holding company whose major subsidiary, Union Bank of California, N.A., is a commercial bank. As used in this proxy statement, the term "UnionBanCal" and terms such as "we," "us" and "our" refer to UnionBanCal, Union Bank of California, one or more of their consolidated subsidiaries, or all of them together. The Board of Directors has delegated primary authority for executive compensation to the Executive Compensation & Benefits Committee, referred to below as the "Compensation Committee" or simply the "Committee."
Overview of Company Policy on Executive Compensation
It is our philosophy to compensate executive officers in a manner that promotes the recruitment, motivation and retention of exceptional employees who will help us achieve our strategic business objectives and increase stockholder value. Our executive compensation policy and practice is established by the Compensation Committee. Specific policies and practices relating to each element of non-expatriate named executive officers' compensation are described below. Policies for expatriate compensation, which describes pay for executive officers from The Bank of Tokyo-Mitsubishi UFJ, including compensation of our Chief Executive Officer, are described below under the caption "Policy on Expatriate Compensation" beginning on page 35.
Our compensation policy is to provide our executives with an overall compensation opportunity which is competitive with that offered for similar positions by similar organizations among our peer group, which is discussed below. Generally, this means that base salary, annual incentive targets and long-term incentive target opportunities or stock plan grant values are established around the median of our peer group, as they were in 2007. At any given point in time, individual opportunities might be above or below this general target level for a variety of reasons, including performance, recruiting or retention requirements, recent promotions or internal equity concerns. All of the named executive officers, except our CEO whose pay reflects his expatriate status as described on pages 35-36 and is below the U.S. median, had 2007 target compensation opportunities set around the median of the peer banks. In the case of our named executive officers, our estimates of median competitive pay are made by the Committee's independent executive compensation consultant by matching positions, where possible, and applying other techniques where needed, such as analyzing COO compensation as a percentage of the peer bank CEO compensation, accounting for the particular structure and size of the duties of JoAnn Bourne or the transitional nature of John Erickson's 2007 position as Deputy Chief Risk Officer.
Actual compensation for a given year may vary from the established target opportunity since our incentive plan payouts reflect corporate and individual performance. Similarly, our benefits and perquisites are generally based on a review of typical, median practices of our peer group and such other considerations as our corporate culture and business strategy.
We believe that our total compensation package provides an appropriate mix of fixed and variable compensation with strong emphasis on the pay-for-performance elements for our executive officers.
The Compensation Committee's approach to the total pay package for the executive officers is to view the various elements of the package as a portfolio of rewards, designed to achieve different specific purposes but to balance each other in motivating appropriate behavior, rewarding different
26
aspects of performance or meeting corporate objectives for attracting and retaining the talent needed to lead our company successfully and increase stockholder value.
Our Peer Group
We use a group of U.S. bank holding companies and financial holding companies to compare the primary elements of our compensation and benefit programs for policy-making officers. The Compensation Committee periodically reviews this peer group with its independent executive compensation consultant and management, and makes changes as appropriate better to reflect companies of similar size and business characteristics. Our 2007 compensation peer group includes nine banking companies, many of which are drawn from the KBW Bank Index, published by Keefe, Bruyette & Woods, Inc. These represent U.S. commercial banks generally with assets between about one-half and two times our assets. We use these peer banks for comparison to our financial performance, compensation levels, program design and program cost. In addition to the peer group comparisons, for particular functional responsibilities, the Compensation Committee reviews data on U.S. banking pay practices using surveys of the banking industry, adjusted for size, from Towers Perrin's 2007 Financial Services Industry, Commercial Data Bank-Executive Databases, and from Hewitt's 2007 Total Compensation Measurement, Financial Services Survey. The Committee may also consider information on general corporate practices and trends as provided by its independent consultant where appropriate in making compensation decisions. Our 2007 peer companies were:
BB&T Corporation
Comerica Inc. Commerce Bancorp Inc. Fifth Third Bancorp Huntington Bancshares |
Keycorp
M & T Bank Corporation PNC Financial Services Group Zions Bancorporation |
Five peer companies from 2006 were dropped from the 2007 peer group because they were acquired: AmSouth Bancorporation, Regions Financial Corporation, North Fork Bancorporation Inc., Compass Bancshares Inc. and TD BankNorth Inc. During 2007, Commerce Bancorp, Inc. was acquired by Toronto Dominion Bank but, because its 2007 proxy statement filed with the SEC presented compensation and performance information for fiscal year 2006, we included Commerce Bancorp, Inc. in our 2007 peer group.
The Role of the Compensation Committee and Management in Determining Executive Compensation
For compensation purposes, our senior executive officers are 13 policy-making officers, plus the manager of our Independent Risk Monitoring Group, of which the executives named in the summary compensation table are a sub-group.
Included among the policy-making officers for 2007 were three expatriate officers serving on rotational assignments from The Bank of Tokyo-Mitsubishi UFJ, our majority stockholder: Mr. Tanaka, who has been our CEO since May 2007; Mr. Morimura, who was our CEO prior to his return to The Bank of Tokyo-Mitsubishi UFJ in May 2007; and Mr. Oka, our Vice Chairman and Chief Risk Officer until April 1, 2008.
The Compensation Committee approves all key elements of our executive compensation and benefit programs for the named executive officers and the other policy-making officers, and oversees the design and implementation of management incentive and equity plans, subject to stockholder approval where required or appropriate. The Committee also reviews compensation for the non-management, non-expatriate directors, and makes recommendations to the full Board of Directors regarding changes as appropriate.
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In addition, the Compensation Committee approves corporate performance targets for policy-making officer incentive plans and assesses our performance results in determining awards under the plans, compared to both internal goals and peer performance. Finally, the Compensation Committee approves all salary increases, annual or long-term incentive plan targets and payouts, all equity grants, employment, severance, or change of control agreements and all benefit programs as they apply to the non-expatriate policy-making officers.
Management provides the Compensation Committee with reports on the compensation and benefits programs for officers below the policy-making level and may recommend to the Committee specific compensation actions for individuals or groups of officers or changes in policies or programs. Recommendations regarding compensation for individual policy-making officers, other than the CEO, are typically made by the CEO and the immediate superior, if the immediate superior is not the CEO. All decisions affecting policy-making officers are made by the Compensation Committee. The decision process for expatriate policy-making officers' compensation is described below on pages 35-36.
Compensation Policy Regarding Policy-Making Officers (Including Named Executive Officers)
Each element of compensation for policy-making officers is described below. Generally, the mix of pay elements, including salary and annual incentive opportunity, long-term incentive and equity opportunity, benefits and perquisites, is designed to reflect the competitive marketplace, primarily our peer group as described above. We review the mix and allocation of pay elements to individuals against the marketplace regularly, but maintain a flexible policy to deliver compensation that motivates, retains and rewards our executives. In executing this policy, the Committee considers a variety of factors, applying its collective judgment where appropriate, against a frame of reference that the total pay opportunity should generally be competitive, around the peer median in target opportunity. While 2007 compensation opportunities for our non-expatriate named executive officers were established around the competitive median, our performance was below our goals, and actual annual bonuses were paid below target, as described below.
Base Salaries
In general, we target base salaries to be at the median competitive levels relative to comparable positions in our peer group. Where the responsibilities of executive positions are different from those typically found among other bank holding companies or where executives are new to their responsibilities or play a particularly critical role, we may target base salaries above or below median competitive levels. In determining salaries, the Compensation Committee also may take into account individual leadership and vision, experience and performance, as well as internal equity relative to other positions, and specific issues particular to UnionBanCal and the position involved. The non-expatriate named executive officers' salaries reported in the Summary Compensation Table were all around the estimated competitive median.
Annual Incentives
In 2006, our stockholders approved our Senior Executive Bonus Plan, which contains a new annual incentive funding formula applicable to named executive officers. This formula limits their individual annual incentive payments to 0.3% of our income before tax, excluding discontinued operations and extraordinary items. The Compensation Committee has discretion to lower actual awards below this stockholder-approved level, but not to increase them above it.
For 2007, the Committee determined the awards for the named executive officers by reference to a pre-assigned target percentage of salary for each executive position, which represents what, in the Compensation Committee's view, constitutes a generally competitive level of bonus opportunity for corporate and individual performance at target. This percentage of salary is set for each individual and
28
position so that, along with base salary, the executive's total cash pay opportunity will be generally around the median of our peer group opportunity when performance also is at target. 2007 annual incentive targets as a percentage of base salary were 100% for the Chief Operating Officer, 80% for the Chief Financial Officer, and 70% for all other non-expatriate named executive officers. As an expatriate officer, our Chief Executive Officer does not participate in our Senior Executive Bonus Plan.
Annual Incentive Performance Goals and Measures
At the beginning of each year, our Board of Directors approves our business plan. The Compensation Committee reviews this business plan and establishes the annual performance targets for corporate performance under our annual incentive plans. Historically and in 2007, these targets were established as internal goals for annual net income and return on average equity (ROE), based on our financial plans for the year. The Committee believes these measures are two important drivers of stockholder value.
For 2007 annual incentives, the target performance goals established by the Committee were $651 million net income and 14.2% ROE. The Committee also established minimum and maximum performance goals and corresponding incentive funding levels, so that performance below minimum would earn no award and performance at or above maximum would earn twice the target award. Minimum net income was set at 80% of target net income and maximum net income was set at 130% of target. Similarly, minimum ROE was set at 11.2% and maximum, at 17.2%.
As in prior years, the Committee also established three strategic adjustment factors that could be used to qualitatively assess 2007 results after year-end. These strategic adjustment factors included our company's risk positioning, strategic positioning and quality of earnings, including ROE.
Based on its assessment of our performance for the year relative to the pre-established goals, the appropriate effect of any of the strategic adjustment factors and any individual performance adjustments, the Compensation Committee, with the advice of its independent consultant, makes a decision on the actual bonus to be paid to each non-expatriate policy-making officer for the year. The actual bonus may be less, but not more, than the stockholder-approved formula would produce. Typically, this amount will range from zero to 200% of the pre-established target for any individual policy-making officer position. The Committee bases these decisions in part upon recommendations made by the CEO.
Awards for 2007 Performance
Named executive officers eligible for incentives under our plan exclude the CEO and other expatriate officers who are not eligible for our incentives. In 2007, our results against our two pre-established goals for net income and ROE were below the target level, and the corporate funding level was established by the Committee at 70% of the target amount for all participants, including the non-expatriate policy-making officers. In setting this payout level, the Committee considered a number of factors, including the strategic adjustment factors and our performance versus our peers, but these more judgmental factors had only a minor effect on overall funding. The Committee also considered the CEO's recommendations for individual performance adjustments for the non-expatriate named executive officers, and these individual adjustments also were minor.
Policy on Adjustments to Incentives for Adjustments or Restatements of Financial Results
The Compensation Committee always retains the discretion to adjust awards not yet finalized downward based on its judgment of the actual performance results of UnionBanCal for a given performance period and, when appropriate, has adjusted for one-time events (such as the sale of a business or a tax settlement for prior periods) in the past. We have a written policy, adopted by the Board of Directors, that the Compensation Committee will review any previously made cash or equity
29
awards on a case by case basis if the performance measures used to determine those awards are later restated or adjusted in a way that would have resulted in a lower award for the executive.
Long-Term Incentive Awards
We provide long-term incentives through the UnionBanCal Performance Share Plan and the UnionBanCal Management Stock Plan, both of which were approved by our stockholders. The Compensation Committee sets long-term compensation opportunities for policy-making officers in the form of two separate awards, with new grants made each year:
In February 2007, the Committee approved grants of stock options and performance shares to our executive officers as described in the Grants of Plan Based Awards Table and accompanying narrative on pages 41-45. These grants were generally around the median competitive level measured by the fair market value at grant for the stock options and at the target number of shares and grant price for the performance shares, which is how we measure the opportunity value.
Stock Options
The Compensation Committee intends that the stock option portion of the long-term incentive award generally account for approximately 50% of the total long-term opportunity value awarded annually to each policy-making officer as measured by the fair value of the option or performance share award at grant under FAS 123R. The Compensation Committee believes that the stock option grant links executive compensation to the interests of our stockholders and provides performance incentives to the recipients since the value they will be able to realize from this award is solely dependent on the increase in our stock price over the term of the options (which is currently set at seven years), after which the options expire. Options vest ratably over three years.
Our stock option and other equity awards are always approved in advance of their grant date. Grants to existing executives and other awardees, including those to lower level officers as described below, are typically made on a pre-established common date each year or on a pre-established quarterly date for new hires, promotions or special retention considerations. The Committee has delegated to the Chief Executive Officer or, in his absence, any Vice Chairman, the authority to make selected equity awards to employees below the policy-making officer level subject to specific requirements. These lower level officer grants are made under guidelines pre-established by the Committee, including target and maximum amounts by level, and a requirement for reports to the Committee of all actions taken under this delegation, and any exceptions must be approved by the Committee. We do not select stock option grant dates for executives in coordination with the release of material, non-public information, or time the release of such information because of option grant dates.
Performance Shares
The Performance Share Plan portion of the long-term incentive award generally accounts for approximately 50% of the total long-term opportunity value awarded annually to policy-making officers when measured at target performance and grant date fair value under FAS 123R. The Compensation Committee believes that assessing the value of this award opportunity at its target value is appropriate, given that this value is achieved only when our ROE is at the median of the peer banks, on average, for the three years. This target value is not the amount shown in the Summary Compensation Table,
30
but is the amount shown in the Grants of Plan-Based Awards Table on page 41. Performance shares are designed to reward executives for maintaining strong ROE relative to peers, which supports our strategic objectives and also in our view links payouts to long-term value creation for our stockholders. The plan fixes the contribution to each cycle's final award each year, using one-third of the overall cycle target as the baseline for a single year's contribution, as follows:
For each three-year cycle, we add together three annual contributions to determine the payout.
The Committee believes that providing a portion of equity compensation in the form of full value stock (or the equivalent value in cash), and only if performance goals are met over three-year periods, helps balance the awarding of part of equity compensation in stock options, which do not depend on any performance measures other than stock price, but only have value if our stock price increases.
As part of its "portfolio" approach to executive compensation, the Committee views stock options and performance shares as complementary, and views the annual incentive performance hurdles based on performance against internal goals as complementary to the performance share measurement of performance relative to peers. The Committee regularly reviews this "portfolio" approach for continued appropriateness.
Beginning with the 2006-2008 performance cycle and continuing with the 2007-2009 cycle, awards pay out in shares of common stock (previously, awards were paid out in cash). By paying in stock, the fair value of the performance-based award is based on stock price at grant and the accounting charge is based on the number of shares of common stock ultimately earned.
In February 2008, the Committee also reviewed our performance against pre-established goals for the 2005-2007 performance share grant cycle. The Committee determined that under the established terms of the Performance Share Plan, the 2005 grant would be paid at 200% of target in accordance with the pre-established formula for this plan, since our ROE exceeded the 75 th percentile of the peer group's reported ROE for each of the three years of the cycle, 2005, 2006 and 2007. Payments for the 2005 grant were made in cash, but based on the average month-end closing price of our common stock for the six-month period immediately preceding the end of the performance cycle.
Historically and in 2007, the peer group for ROE comparison in the Performance Share Plan has been the same as the compensation peer group.
Restricted Stock
We use restricted stock grants primarily for employees below the executive vice president level. Policy-making officers may in rare circumstances receive such an award, usually for special hiring or retention purposes. No restricted stock grants were made to policy-making officers in 2007.
Equity Grants to Lower Level Officers in December 2007
In November and December 2007, the Committee considered factors relating to the need to retain, and the accomplishments of, its officers and senior staff below the executive vice president level in a challenging environment, and agreed with management's recommendation to make the equity grant to these employees earlier than normal, in December 2007, rather than April 2008. This is the same accelerated timing as for the 2006 grant made to these officers. No policy-making officer received these accelerated grants. The proposal was made and the date of grant established in November, and the acceleration was based only on internal employee appropriateness. The grants were restricted stock or a combination of restricted stock and stock options consistent with pre-established guidelines, by level.
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Policy on Post-Employment Benefits
Our policy on executive post-employment benefits is intended to reflect the overall approach to our employee population, as well as generally competitive executive practice and to assist in attraction and retention of talented executives to careers at UnionBanCal.
The Committee reviewed our policies and potential payouts to our named executive officers in 2007 in various termination situations. The Committee believes that our current policies represent comparable practice among our peer group and provide generally appropriate treatment in a variety of termination situations. These benefits and the different kinds of termination that trigger them, are provided in the Potential Post-Employment Payments Tables and accompanying discussion. The Committee believes these policies, the triggering events required for them to be applied (such as termination resulting from a reorganization or termination following a change in control or retirement), and the structure and the amount of benefits provided are appropriate and in the best interest of stockholders. The Committee believes that each provision is reasonable and within the bounds of common competitive practice at peer banks and in general industry.
Change of Control Termination Policies
The Committee believes that our current change of control agreements with the policy-making officers are in keeping with typical peer group practices. Providing such protection in an industry that has experienced significant consolidations over the past decade and for a company which has itself undergone a number of mergers over the past 20 years is an important aspect of attracting and retaining the talent we need to lead UnionBanCal and minimizing any potential distractions from a potential acquisition. Further detail regarding these agreements is provided in the Potential Post-Employment Payments Tables and accompanying discussion.
Retirement Plan
Non-expatriate policy-making officers including named executive officers are eligible to participate in the Union Bank of California Retirement Plan, which we refer to as our "retirement plan." This is the same plan that is available to all full-time and certain other employees. Benefits are determined by compensation and years of service. Further detail regarding the retirement plan is provided in the Pension Benefits Table and accompanying discussion.
Supplemental Executive Retirement Plan for Policy Making Officers
Non-expatriate policy-making officers are also eligible to participate in the Union Bank of California, N.A. Supplemental Executive Retirement Plan for Policy Making Officers, which we refer to as our "supplemental retirement plan." The supplemental retirement plan has the same provisions as our retirement plan, but without the Internal Revenue Code limits on the pension accruals for any year for higher paid employees. The Compensation Committee reviewed the plan provisions in 2006 and again in 2007 and believes that our supplemental retirement plan benefits are in line with competitive practice and views them as an important part of the compensation for our policy-making officers. Further detail regarding the supplemental retirement plan is provided in the Pension Benefits Table and accompanying discussion.
Deferred Compensation
Non-expatriate policy-making officers including named executives are eligible to participate in our Nonqualified Deferred Compensation Plan. This plan is available to all employees at the senior vice president level and above and is designed to allow executives to defer base salary and annual incentives until a future date. The interest rates at which these deferrals accrue are market-based and, in our view, conservative. Further detail on the interest rates we pay is provided in the Nonqualified Deferred
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Compensation Table and accompanying discussion. In order to encourage executives to hold the shares they earn through the Performance Share Plan under the Management Stock Plan without selling some stock to pay taxes upon vesting, they will also be able to defer receipt of share units earned in the future under the terms of these plans, with dividend equivalents credited, until the stock is actually issued at the end of the deferral period.
Perquisites
We provide a limited number of perquisites to some or all of our policy-making officers, including financial counseling, car allowances, club memberships and luncheon clubs, which are used for business purposes but may have some element of personal use as well. The Compensation Committee believes the type and value of these perquisites are generally conservative when compared to our peer group. Information regarding individual perquisites for the named executive officers is provided in the Summary Compensation Table and related footnotes.
Executive Stock Ownership Guidelines
In 1999, to link the interests of policy-making officers directly to stockholder interests, we instituted stock ownership guidelines for our non-expatriate policy-making officers. We expect the guidelines to be met within five years of the date of election or appointment to a policy-making officer position. Within the five-year compliance period, each non-expatriate policy-making officer, except for our COO and CFO, is expected to own common stock with a market value of two times the officer's annual salary. The COO and CFO are expected to own common stock with a market value of four times annual salary. Stock ownership under these guidelines includes:
Each of the non-expatriate policy-making officers has met, or is on track to meet, the ownership guidelines.
Non-Employee Director Compensation
In 2007, the Committee reviewed the competitiveness of its non-employee director compensation program, which has been unchanged since 2005. The Committee recommended to the Board no changes in retainers or meeting fees. However, the value of the annual equity grants was no longer competitive with median peer practices and as a result the total package was no longer competitive. The Committee recommended to the full Board, and the Board approved an increase in non-employee director stock awards as described on page 22. The Compensation Committee believes that UnionBanCal needs a competitive director compensation program to attract and retain high quality, experienced independent directors. The program is designed to provide compensation opportunity for non-employee directors that is around the median compared to the peer group for attending the same number of board and committee meetings. When UnionBanCal directors devote more time to their duties preparing for and attending more board and committee meetings than their peers, their actual pay may be higher than that of their peers who attend fewer meetings.
Directors who serve as Committee Chairs have substantial extra responsibility and time commitments and are paid a supplementary retainer for this additional work, as is the Lead Director, whose extra responsibilities are significant.
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Further detail regarding director compensation is provided in the Director Compensation Table and accompanying discussion.
Tax Considerations
Section 162(m) of the Internal Revenue Code disallows a tax deduction for compensation in excess of $1 million paid to our CEO and up to three additional executives not including the CFO whose total compensation is required to be reported in our proxy statement. However, performance-based compensation that satisfies the requirements of Section 162(m) is deductible.
Stock options granted under the Year 2000 UnionBanCal Corporation Management Stock Plan are performance-based and deductible under the tax code. Awards under the 1997 UnionBanCal Corporation Performance Share Plan and under the Union Bank of California Senior Executive Bonus Plan also qualify as performance-based compensation and are deductible. To qualify as performance- based, both the Amended and Restated 1997 UnionBanCal Corporation Performance Share Plan and the Union Bank of California Senior Executive Bonus Plan must be approved by stockholders periodically. These plans were submitted to and approved by stockholders on April 26, 2006. Grants of restricted stock under the Year 2000 UnionBanCal Corporation Management Stock Plan are not considered performance-based and are therefore not deductible to the extent the $1 million annual limit is exceeded.
We intend to establish and administer executive officer compensation programs that are deductible. However, we may award compensation from time to time that is not fully tax deductible if we determine that such awards are consistent with our philosophy and in the best interests of our stockholders.
Section 409A of the Internal Revenue Code provides that amounts deferred under nonqualified deferred compensation plans are included in an employee's income unless specified requirements are met. If these requirements are not met, employees are also subject to an additional income tax and interest penalties. Our nonqualified deferred compensation plans are intended to meet these requirements, which became effective in 2005. Although not required to do so until 2008, we amended our plan documents to incorporate the Section 409A requirements during 2007. As a result, our employees should be subject to income tax when the deferred compensation is actually paid to them and we should be entitled to a tax deduction at that time.
Section 280G of the Internal Revenue Code disallows a company's tax deduction for what are defined as "excess parachute payments" following a change of control, and Section 4999 imposes a 20% excise tax on any person who receives excess parachute payments. As discussed in the Other Potential Post-Employment Payments section of this proxy statement, the named executive officers are entitled to certain payments upon termination of their employment, including termination following a change of control of our company. Under the terms of the change of control agreements, the named executive officers (as described below in "Executive CompensationOther Potential Post-Employment Payments") are entitled to tax gross-up payments for the excise tax in the event that the aggregate value of all covered payments exceeds the maximum amount which can be paid to the executive without the executive incurring an excise tax; however, the tax gross-up payment will not be made to the named executive officer unless the payments exceed 110% of the payments that could have been made to him or her without the imposition of an excise tax.
Our stock awards accelerate in the event of a change of control and qualifying termination of employment. This acceleration could contribute to potential excess parachute payments.
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Accounting Considerations
Stock options, restricted stock, and performance shares are accounted for based on their grant date fair value, as determined under FAS 123R. We consider the accounting expense as well as the cash expense of all programs as part of our design and review criteria.
Policy on Expatriate Compensation
Historically, our Chief Executive Officer, Chairman of the Board and some of our executive officers and directors have been recommended by The Bank of Tokyo-Mitsubishi UFJ, our majority stockholder. We refer to these executive officers and directors as expatriates because they serve or served previously as employees, executive officers and/or members of the board of directors of The Bank of Tokyo-Mitsubishi UFJ, their home country is Japan and, unless they have fully retired from The Bank of Tokyo-Mitsubishi UFJ, they are expected to return there after their service at UnionBanCal. All of our executive officers, including expatriates, are appointed by our Board of Directors, and all of our directors, including expatriates, are elected by our stockholders at our annual meetings, and in the case of a vacancy, may be initially elected by our Board of Directors.
In 2007, the following expatriate policy-making executive officers were either current or retired executive officers of The Bank of Tokyo-Mitsubishi UFJ:
In February 2007, Mr. Kanari became Chairman of the Board. Mr. Kanari serves as a non-resident, non-executive officer of UnionBanCal.
The compensation and other benefits paid to expatriate officers are determined in keeping with the policies and practices of The Bank of Tokyo-Mitsubishi UFJ and our service agreement with The Bank of Tokyo-Mitsubishi UFJ. Under the service agreement, we pay a portion of each expatriate officer's base salary directly to the officer and the remainder, which we reimburse, is paid by The Bank of Tokyo-Mitsubishi UFJ. As with all policy-making officers, our Compensation Committee approves the compensation and other benefits of expatriate officers.
Expatriate officers are not eligible to receive bonus awards under our Senior Executive Bonus Plan or Senior Management Bonus Plan, grants of options or restricted stock under our Year 2000 UnionBanCal Corporation Management Stock Plan or grants of performance shares under our Performance Share Plan. In addition, expatriate officers are not eligible to participate in our retirement or supplemental retirement plans.
Under the service agreement, we either provide directly to the expatriate officers, or reimburse The Bank of Tokyo-Mitsubishi UFJ for, the following benefits, if incurred, which expatriate officers are eligible to receive under The Bank of Tokyo-Mitsubishi UFJ programs:
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The Bank of Tokyo-Mitsubishi UFJ may provide to expatriate officers life insurance premiums, a portion of medical insurance premiums in Japan (including family) and storage space in Japan while they are serving at UnionBanCal. We do not reimburse for these amounts. In 2007, The Bank of Tokyo-Mitsubishi UFJ discontinued its retirement program under which its executive officers received discretionary benefits at retirement. Starting in July 2007, its executive officers serving in the U.S. receive instead an increase in monthly salary and an annual discretionary cash payment in the following July of each year. The President of The Bank of Tokyo-Mitsubishi UFJ retains full discretion as to the final amount paid, including whether to pay them at all. Under our service agreement with The Bank of Tokyo-Mitsubishi UFJ, we will reimburse The Bank of Tokyo-Mitsubishi UFJ for both the salary increase and the annual cash payment. In 2007, our only named executive officer eligible to receive this discretionary cash payment is Mr. Tanaka. The Compensation Committee reviewed and approved this new compensation arrangement. The Committee believed that this new arrangement was in keeping with the policies and practices of The Bank of Tokyo-Mitsubishi UFJ and our service agreement with The Bank of Tokyo-Mitsubishi UFJ.
All reportable compensation provided to expatriate officers named in this proxy statement attributable to service to us, whether we or The Bank of Tokyo-Mitsubishi UFJ pay, and whether or not we reimburse for them, is reflected in the Summary Compensation Table or Director Compensation Table, as applicable. Generally, compensation received by expatriate officers directly from The Bank of Tokyo-Mitsubishi UFJ is denominated in Japanese Yen and, as a result, exchange rate fluctuations may yield differing dollar denominated compensation levels from year to year. In this proxy statement, all compensation has been reported in United States dollars. The compensation and benefits information with respect to expatriates reported below and in "Director Compensation" that is paid by The Bank of Tokyo-Mitsubishi UFJ is based on information provided to us by The Bank of Tokyo-Mitsubishi UFJ.
Chief Executive Officer
As discussed above, as an expatriate officer, the compensation and other benefits we paid to our current Chief Executive Officer, Mr. Tanaka, and our former Chief Executive Officer, Mr. Morimura, while approved by our Compensation Committee, were recommended by and in keeping with the policies and practices of The Bank of Tokyo-Mitsubishi UFJ. The Compensation Committee believes that the long-term relationships that The Bank of Tokyo-Mitsubishi UFJ has had with both Mr. Tanaka and Mr. Morimura demonstrated ample motivation and indirectly tied their respective compensation to the performance of UnionBanCal from year to year. The Compensation Committee also reviewed Mr. Tanaka's compensation in comparison with peer group chief executive officers. Mr. Tanaka's total compensation as an expatriate is significantly below the median of the U.S. peer group CEOs.
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Non-Employee Expatriate Directors
Expatriate directors who are not officers of UnionBanCal, such as Messrs. Kanari, Miki and Omori, do not receive any retainers or meeting fees from us or The Bank of Tokyo-Mitsubishi UFJ for service on our Board or serving as Chairman of the Board. Business travel expenses to attend board meetings are paid or reimbursed by The Bank of Tokyo-Mitsubishi UFJ to non-employee expatriate directors and are not reimbursed by us.
Executive Compensation & Benefits Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis set forth in this proxy statement with our management; and
Based on such review and discussions the Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into our 2007 Annual Report on Form 10-K.
EXECUTIVE
COMPENSATION & BENEFITS COMMITTEE
L. Dale Crandall, Chairman
Richard D. Farman
Michael J. Gillfillan
Mohan S. Gyani
J. Fernando Niebla
Barbara L. Rambo
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The following tables should be read in conjunction with the Compensation Discussion and Analysis and the narrative discussion that follows the Grants of Plan-Based Awards Table.
2007 Summary Compensation Table
Name and Principal Position
|
Year
|
Salary
($) |
Bonus
($) |
Stock
Awards (1) ($) |
Option
Awards (2) ($) |
Non-Equity
Incentive Plan Compensation (3) ($) |
Change in
Person Value and Nonqualified Deferred Compensation Earnings (4) ($) |
All Other
Compensation (5) ($) |
Total
($) |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Masaaki Tanaka (6) President and Chief Executive Officer |
|
2007 |
|
172,247 |
|
(7) |
|
|
|
|
|
|
|
|
(8) |
351,525 |
|
523,772 |
Takashi Morimura (6) Former President and Chief Executive Officer |
|
2007 2006 |
|
101,978 233,373 |
|
|
|
|
|
|
|
|
|
|
(8) (8) |
249,496 364,818 |
|
351,474 598,191 |
David I. Matson Vice Chairman and Chief Financial Officer |
|
2007 2006 |
|
480,385 461,539 |
|
|
|
918,621 459,967 |
|
516,264 400,980 |
|
240,000 210,000 |
|
124,000 292,000 |
|
46,934 48,223 |
|
2,326,204 1,872,709 |
Philip B. Flynn Vice Chairman of the Board and Chief Operating Officer |
|
2007 2006 |
|
669,231 638,462 |
|
|
|
1,597,244 773,853 |
|
841,355 695,907 |
|
500,000 340,000 |
|
614,000 588,000 |
|
65,219 60,115 |
|
4,287,049 3,096,337 |
JoAnn M. Bourne Senior Executive Vice President |
|
2007 2006 |
|
347,692 334,231 |
|
|
|
577,348 668,549 |
|
194,847 230,820 |
|
160,000 110,000 |
|
254,000 233,000 |
|
46,961 50,099 |
|
1,580,848 1,626,699 |
John C. Erickson (9) Vice Chairman and Chief Risk Officer |
|
2007 |
|
361,154 |
|
|
|
398,156 |
|
128,117 |
|
230,000 |
|
178,000 |
|
29,104 |
|
1,324,531 |
In addition, amounts shown in the Stock Awards column represent the following compensation costs under FAS 123R during the 2007 fiscal year for the unvested portion of previously granted outstanding restricted stock awards to three named executives: Mr. Flynn, $11,754; Ms. Bourne, $253,554; and Mr. Erickson, $170,017. Compensation costs for restricted stock are based on the grant date fair value of the restricted stock awards under FAS 123R, amortized over the applicable
38
service requirement. For restricted stock awards, the service requirement is generally the earlier of either four years from the date of grant or reaching retirement eligibility determined as the earlier of age 60 with 10 years of service or age 62 with five years of service. Holders of restricted stock awards receive dividends on the subject shares at the same rate as those paid on UnionBanCal common stock. Our FAS 123R calculation assumes that the market price reflects expected future dividend streams on our common stock.
The increases in the stock award values shown in the Summary Compensation Table above for Messrs. Matson and Flynn are primarily driven by the FAS 123R accrual methodology (which includes regular estimates of expected performance multiples and truing up of prior accruals against current expectations and year-end results). The secondary driver of the increase is a result of the increase in the grant amounts themselves.
Name
|
Perquisites
and Other Personal Benefits ($) |
Tax Reimbursements
(A)
($)
|
Company Contributions
to Defined Contribution Plans ($) |
Total All
Other Compensation ($) |
||||
---|---|---|---|---|---|---|---|---|
Masaaki Tanaka | 175,813 | (B) | 175,712 | | 351,525 | |||
Takashi Morimura | 124,763 | (C) | 124,733 | | 249,496 | |||
David I. Matson | 29,212 | (D) | 9,397 | 8,325 | 46,934 | |||
Philip B. Flynn | 46,212 | (E) | 10,682 | 8,325 | 65,219 | |||
JoAnn M. Bourne | 30,334 | (F) | 8,302 | 8,325 | 46,961 | |||
John C. Erickson | 18,180 | (G) | 2,599 | 8,325 | 29,104 |
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40
2007 Grants of Plan-Based Awards Table
|
|
|
Estimated Possible
Payouts Under Non-Equity Incentive Plan Awards (1)(2) |
Estimated Future
Payouts Under Equity Incentive Plan Awards (3) |
All Other
Option Awards: Number of Securities Underlying Options (#) |
|
|
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
|
Exercise
or Base Price of Option Awards ($/Sh) |
Grant
Date Fair Value of Stock and Option Awards ($) (6) |
||||||||||||||||||
Name
|
Grant
Date |
Approval
Date (4) |
Threshold
($) |
Target
($) |
Max
($) |
Threshold
(#) |
Target
(#) |
Max
(#) |
||||||||||||||
Masaaki Tanaka (5) | | | | | | | | | | | | |||||||||||
Takashi Morimura (5) | | | | | | | | | | | | |||||||||||
David I. Matson |
|
04/01/07 |
|
02/27/07 |
|
135,800 |
|
388,000 |
|
776,000 |
|
2,025 |
|
8,100 |
|
16,200 |
|
58,800 |
|
63.42 |
|
513,702 516,264 |
Philip B. Flynn |
04/01/07 |
02/27/07 |
236,250 | 675,000 | 1,350,000 |
4,050 |
16,200 |
32,400 |
117,600 |
63.42 |
1,027,404 1,032,528 |
|||||||||||
JoAnn M. Bourne |
|
04/01/07 |
|
02/27/07 |
|
85,750 |
|
245,000 |
|
490,000 |
|
700 |
|
2,800 |
|
5,600 |
|
20,300 |
|
63.42 |
|
177,576 178,234 |
John C. Erickson |
04/01/07 |
02/27/07 |
98,000 | 280,000 | 560,000 |
700 |
2,800 |
5,600 |
20,300 |
63.42 |
177,576 178,234 |
41
The following narrative discussion should be read in conjunction with the Compensation Discussion and Analysis, Summary Compensation Table and Grants of Plan-Based Awards Table above.
Named Executive Officers
The Summary Compensation Table, Grants of Plan-Based Awards Table and the tables that follow provide compensation information for Mr. Tanaka as President and Chief Executive Officer, Mr. Morimura as former President and Chief Executive Officer, Mr. Matson as Vice Chairman and Chief Financial Officer, and the three most highly compensated executive officers of UnionBanCal who were serving as executive officers at the end of 2007, who were Mr. Flynn, Ms. Bourne and Mr. Erickson.
Compensation for purposes of determining the most highly compensated officers is determined with reference to all compensation disclosed in the Summary Compensation Table excluding amounts under the Change in Pension Value and Nonqualified Deferred Compensation Earnings column.
Salary
The annual salaries of the named executive officers are reflected under the Salary column of the Summary Compensation Table. Salaries are paid in cash to our executives on a bi-weekly basis. Mr. Tanaka's compensation is discussed in greater detail above in Compensation Discussion and Analysis under the caption "Policy on Expatriate CompensationChief Executive Officer."
Senior Executive Bonus Plan Awards
All named executive officers except Messrs. Tanaka and Morimura received a bonus for the 2007 fiscal year under the Senior Executive Bonus Plan. This bonus is reflected under the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table because the bonus is tied to the financial performance of UnionBanCal.
The Senior Executive Bonus Plan was approved by the Compensation Committee and UnionBanCal stockholders in 2006 to replace the Senior Management Bonus Plan for executives who may be subject to Section 162(m) of the tax code. The Committee has also adopted a policy that executives who may be subject to Section 162(m) will no longer be eligible for awards under the Senior Management Bonus Plan.
42
The 2007 awards under the Senior Executive Bonus Plan were based on pre-established target awards based on a percentage of each named executive officer's salary. The targets were as follows: Mr. Flynn, 100% of salary; Mr. Matson, 80% of salary; and 70% of salary for the remaining non-expatriate named executive officers. The Compensation Committee used these targets as a reference point for determining the annual incentive payouts of these awards. These awards were made under a stockholder-approved formula under which the individual's annual incentive is set at a maximum of 0.3% of UnionBanCal's income before tax, excluding discontinued operations and extraordinary items for that year (but not to exceed $5 million). This 0.3% of earnings serves as the maximum award, with the Compensation Committee using its allowed downward discretion under the plan to determine the final award amount.
Generally, eligible participants must be employed by Union Bank of California or its subsidiaries through the end of a performance year in order to receive a bonus award payment. In the case of retirement, death, permanent disability or exceptional circumstances, the participant may be entitled to a pro rata portion of the earned award at the sole discretion of the Compensation Committee. Individual awards earned under the plan are made in cash. Award payments are made within two and one-half months after the end of the applicable fiscal year. The Board may at any time amend, suspend or terminate the Plan, subject to stockholder approval to the extent required under Section 162(m).
Stock Option Awards
In 2007, all named executive officers except for Messrs. Tanaka and Morimura received grants of options under the Year 2000 UnionBanCal Corporation Management Stock Plan. The numbers and grant date fair values of these awards under FAS 123R are set forth in the Grants of Plan-Based Awards Table.
The amounts, if any, actually realized by the named executive officers for the 2007 awards will vary depending on the vesting of the award and the price of UnionBanCal's common stock in relation to the exercise price at the time of exercise. Detail regarding the number of exercisable and unexercisable options held by each named executive officer at year-end is set forth in the Outstanding Equity Awards at Fiscal Year-End Table below. Detail regarding option exercises for each named executive officer during 2007 is set forth in the Option Exercises and Stock Vested Table below.
In 2007, the Compensation Committee determined the term of each stock option grant would be seven years from the date of grant. The exercise price was the fair market value of UnionBanCal's common stock on the grant date. In general, the options vest or become exercisable over three years, provided that the named executive officer has completed the specified continuous service requirement, or earlier if the employee dies or is permanently and totally disabled or retires or has their employment terminated under certain conditions.
Performance Share Awards
In 2007, all named executive officers except Messrs. Tanaka and Morimura received grants of performance shares under the Amended and Restated 1997 UnionBanCal Corporation Performance Share Plan.
The 2007 awards will be valued and paid only after the performance cycle ending December 31, 2009. The amounts, if any, actually realized by the named executive officers will vary depending on the named executive officer remaining an employee through the end of the performance cycle (except in the case of qualified retirement or other special termination circumstances described under "Other Potential Post-Employment Payments") and on two performance factors: (1) the market price of UnionBanCal's common stock; and (2) financial performance as measured for 2007 grants by average return on equity ranking relative to our peer group. In addition, the Compensation Committee retains
43
the discretion to decrease, but not to increase, the number of performance shares actually earned by the named executive officers pursuant to the plan's formula.
The threshold, target and maximum numbers of performance shares which may ultimately be earned under these performance share awards are set forth in the Grants of Plan-Based Awards Table under the Estimated Future Payouts under Equity Incentive Plan Awards columns. The grant date fair value under FAS 123R of these awards is shown based on earning a target number of shares for the 2007 grant in this Table.
Detail regarding the number of performance shares held by each named executive officer at year-end is set forth in the Outstanding Equity Awards at Fiscal Year-End Table following this narrative. In this case, the number and dollar value of all outstanding performance shares is shown as if each outstanding grant earned the maximum possible number of shares, which was required to be assumed because our performance last year would have resulted in a target or better payout. Actual payouts may be less than this amount based on the factors described in this section. Detail regarding performance share payouts for each named executive officer during 2007 is set forth in the Option Exercises and Stock Vested Table following this narrative.
The Performance Share Plan permits the Compensation Committee, in its discretion, to provide for the payment of earned awards in cash and/or shares of UnionBanCal common stock issued under the Year 2000 UnionBanCal Corporation Management Stock Plan. Under the terms of the 2007 performance share awards, the performance shares will be paid in shares of UnionBanCal common stock after the end of the performance cycle. Pursuant to the Performance Share Plan, the Committee sets performance goals and participants will only earn and be paid for performance shares upon the attainment of such performance goals. In addition, to receive payment the participant must have been an employee in good standing throughout the performance period, although payment for performance shares may be made in the case of death, permanent disability, or retirement or involuntary termination under certain conditions.
Restricted Stock Awards
During 2007, Mr. Flynn, Ms. Bourne and Mr. Erickson held unvested shares of restricted stock from grants in prior years. The number of shares of restricted stock vested for each named executive officer and the value realized on vesting is set forth in the Option Exercises and Stock Vested Table below.
Employment Agreements
Union Bank of California entered into an employment agreement with Mr. Matson, effective as of January 1, 1998, in connection with his appointment as Executive Vice President and Chief Financial Officer, and an amendment to the employment agreement effective as of May 1, 2005, in connection with his appointment as Vice Chairman and Chief Financial Officer. This employment agreement, as amended, provided for an initial annual base salary of $450,000 retroactive to March 15, 2005, and entitled Mr. Matson to participate in Union Bank of California's Senior Management Bonus Plan (succeeded in 2006 by the Senior Executive Bonus Plan for named executive officers) with a target bonus for 2005 of 80% of base salary. In addition, this employment agreement, as amended, made Mr. Matson eligible for long-term incentive awards available to policy-making officers, including grants of stock options and restricted stock and the award of performance shares, with a target long-term incentive award of 200% of annual salary. Mr. Matson's compensation is subject to annual review and increases as determined by the Executive Compensation & Benefits Committee of the Board of Directors. This employment agreement also provided for eligibility of Mr. Matson to participate in our supplemental retirement plan and the Union Bank Executive Supplemental Benefit Plan, a frozen
44
grandfathered plan from a previous acquisition. In addition, this agreement provided for relocation expenses commencing upon Mr. Matson's relocation to the San Francisco area.
Mr. Matson is entitled to severance benefits under specified circumstances, including termination by Union Bank of California without cause. These severance benefits are described in "Other Potential Post-Employment Payments."
In February 2004, Union Bank of California entered into an employment agreement with Mr. Flynn, effective as of his appointment as Vice Chairman and head of the Commercial Financial Services Group of Union Bank of California and UnionBanCal on April 1, 2004, and an amendment to the employment agreement, effective as of May 1, 2005, in connection with his appointment as Vice Chairman and Chief Operating Officer. The agreement is for an initial three-year period, and is extended automatically at the end of each year for an additional one year unless UnionBanCal delivers written notice to Mr. Flynn, at least 60 days prior to the anniversary of the effective date of the agreement, that the agreement will not be extended. This employment agreement, as amended, provided for an initial annual base salary of $600,000 retroactive to March 15, 2005, entitled Mr. Flynn to continue to participate in Union Bank of California's Senior Management Bonus Plan (succeeded in 2006 by the Senior Executive Bonus Plan for named executive officers) with a target bonus for 2005 of 100% of base salary and provided Mr. Flynn continued eligibility for long-term incentive awards, including grants of stock options and restricted stock and the award of performance shares, with a target long-term incentive award of 250% of base salary. Mr. Flynn is also entitled to continue to participate in our supplemental retirement plan and the Union Bank Executive Supplemental Benefit Plan, a frozen grandfathered plan from a previous acquisition. Mr. Flynn's compensation is subject to annual review and adjustment, based on (1) competitive market analysis, (2) the recommendation of the Chief Executive Officer, and (3) approval by the Executive Compensation & Benefits Committee.
Mr. Flynn is entitled to severance benefits under specified circumstances, including termination without cause. These severance benefits are described in "Other Potential Post-Employment Payments."
We have entered into change of control agreements with our non-expatriate policy-making officers, including each of our named executive officers except Messrs. Tanaka and Morimura. These agreements are described in "Other Potential Post-Employment PaymentsChange of Control Agreements."
45
2007 Outstanding Equity Awards at Fiscal Year-End
|
Option Awards
|
|
Stock Awards
|
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name
|
Number of Securities Underlying Options (#) Exercisable
|
Number of Securities Underlying Unexercised Options (#) Unexercisable
|
Option Exercise Price ($)
|
Option Expiration Date
|
|
Number of Shares or Units of Stock That Have Not Vested (#)
|
Market Value of Shares of Units of Stock That Have Not Vested ($)
(1)
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)
(2)
|
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (1)(2) |
||||||||
Masaaki Tanaka(3) | | | | | | | | | |||||||||
Takashi Morimura(3) | | | | | | | | | |||||||||
David I. Matson |
25,000
7,334 20,000 12,000 9,133 10,866 0 |
0
0 0 6,000 4,567 21,734 58,800 |
(4) (4) (5) (6) |
43.39
39.80 52.66 60.65 62.42 70.16 63.42 |
04/01/12
04/01/13 04/01/14 04/01/12 06/01/12 04/01/13 04/01/14 |
| | 29,200 | (9) | 1,428,172 | |||||||
Philip B. Flynn |
30,000
35,000 30,000 36,000 20,000 15,400 24,166 0 |
0
0 0 0 10,000 7,700 48,334 117,600 |
(4) (4) (5) (6) |
29.73
43.39 39.80 52.66 60.65 62.42 70.16 63.42 |
02/01/11
04/01/12 04/01/13 04/01/14 04/01/12 06/01/12 04/01/13 04/01/14 |
| | 61,400 | (10) | 3,003,074 | |||||||
JoAnn M. Bourne |
2,500
4,090 20,000 15,000 19,000 10,000 4,666 0 |
0
0 0 0 0 5,000 9,334 20,300 |
(4) (5) (6) |
44.56
29.73 43.39 39.80 52.66 60.65 70.16 63.42 |
12/01/09
02/01/11 04/01/12 04/01/13 04/01/14 04/01/12 04/01/13 04/01/14 |
7,500 | (7) | 366,825 | 11,100 | (11) | 542,901 | ||||||
John C. Erickson |
5,000
7,500 8,000 5,333 3,000 0 |
0
0 0 2,667 6,000 20,300 |
(4) (5) (6) |
43.39
39.80 52.66 60.65 70.16 63.42 |
04/01/12
04/01/13 04/01/14 04/01/12 04/01/13 04/01/14 |
7,500 | (8) | 366,825 | 9,100 | (12) | 445,081 |
46
three years of each cycle. The number of shares earned and the values which would be reflected in the table above at target would be 1 / 2 those shown aboveand earning that target value would still require our ROE to equal the median of the peer group on average for each of the three years of each cycle.
47
2007 Option Exercises and Stock Vested
|
Option Awards
|
Stock Awards
|
||||||
---|---|---|---|---|---|---|---|---|
Name
|
Number of Shares Acquired on Exercise
(#) |
Value Realized on Exercise
($) |
Number of Shares Acquired on Vesting
(#) |
Value Realized on Vesting
($) |
||||
Masaaki Tanaka(1) | | | | | ||||
Takashi Morimura(1) | | | | | ||||
David I. Matson | | | 15,600 | (2) | 856,284 | |||
Philip B. Flynn | | |
1,500
25,800 |
(3)
(2) |
88,170
1,416,162 |
|||
JoAnn M. Bourne | | |
3,750
6,400 |
(4)
(2) |
193,575
351,296 |
|||
John C. Erickson | 5,000 | 121,044 |
2,500
4,000 |
(5)
(2) |
153,800
219,560 |
48
2007 Pension Benefits
Name
|
Plan Name
|
Number of Years of Credited Service (#)
|
Present Value of Accumulated Benefit($)
|
|||
---|---|---|---|---|---|---|
Masaaki Tanaka (1) | | | | |||
Takashi Morimura (1) | | | | |||
David I. Matson |
Union Bank of California Retirement Plan
Union Bank of California, N.A. Supplemental Executive Retirement Plan for Policy Making Officers Union Bank Executive Supplemental Benefit Plan |
30
30 |
1,307,000
3,277,000 167,000 |
|||
Philip B. Flynn |
Union Bank of California Retirement Plan
Union Bank of California, N.A. Supplemental Executive Retirement Plan for Policy Making Officers Union Bank Executive Supplemental Benefit Plan |
28
28 |
698,000
2,867,000 79,000 |
|||
JoAnn M. Bourne |
Union Bank of California Retirement Plan
Union Bank of California, N.A. Supplemental Executive Retirement Plan for Policy Making Officers |
27
27 |
836,000
1,357,000 |
|||
John C. Erickson |
Union Bank of California Retirement Plan
Union Bank of California, N.A. Supplemental Executive Retirement Plan for Policy Making Officers |
24
24 |
480,000
810,000 |
Union Bank of California offers all full-time and certain other employees a qualified defined benefit plan that targets benefits of 50% to 60% of final average base pay plus bonus (subject to federal limits) for a 30-year employee. We believe that this type and level of benefit is relatively typical in our industry. In addition, senior executives receive benefits from a nonqualified supplemental plan that extends this target benefit beyond federal restrictions on the company-wide plan. We believe that this supplemental plan is also typical in our industry. Finally, a few executives receive small benefits under a grandfathered plan dating from a previous acquisition. These plans are described immediately below:
Union Bank of California Retirement Plan
This plan, which we refer to as our "retirement plan," provides annual pension benefits (paid monthly) equal to 2% times 5-year final average earnings times years of service up to 30, reduced by a small factor reflecting Social Security coverage. Earnings reflect base compensation plus bonuses, subject to federal limits. Benefits are payable in full at age 62 with five years of service, or age 60 with 20 years of service. Benefits payable before this age and after age 55 are reduced 3% per year for early commencement. A range of annuity options with beneficiary protection is available to retiring executives, but lump sum payments are not available. This plan covers all full-time and certain other employees who complete one year of service, and is subject to IRS limitations on maximum includible compensation ($225,000 in 2007) and benefits payable (in 2007, $180,000 per year commencing at age 62).
49
Union Bank of California, N.A. Supplemental Executive Retirement Plan for Policy Making Officers
This plan, which we refer to as our "supplemental retirement plan," provides annual pension benefits (paid monthly) under a formula that mirrors the retirement plan described above, but includes compensation and benefits without federal limitations. In 2007, this plan covered compensation (base plus bonus) in excess of $225,000, and annual benefits in excess of $180,000 commencing on or after age 62. Payments under this plan will be deferred as necessary to comply with Section 409A of the Internal Revenue Code. The purpose of the plan is to keep executives whole for benefits that would be payable to all employees were it not for federal limits. This plan is only available to policy-making officers. We have occasionally enhanced benefits under this plan through individual executive contracts; however, none of the named executive officers has such enhancements.
Union Bank Executive Supplemental Benefit Plan
This plan applied only to executives of a bank acquired in 1988 and all benefit accruals were frozen at December 31, 1989. It provides 10 annual payments equal to 20% of the covered executive's 1989 compensation. Annual payments under this plan are typically around $20,000 per executive. Payments commence at the later of age 55 or termination of employment and are made on a monthly basis. Payments under this plan will be deferred as necessary to comply with Section 409A of the Internal Revenue Code. Messrs. Flynn and Matson are covered under this plan.
2007 Nonqualified Deferred Compensation
Name
|
Executive
Contributions In 2007($) |
Registrant
Contributions in 2007($) |
Aggregate
Earnings in 2007($) |
Aggregate
Withdrawals/ Distributions($) |
Aggregate
Balance at December 31, 2007($) |
|||||
---|---|---|---|---|---|---|---|---|---|---|
Masaaki Tanaka | | | | | | |||||
Takashi Morimura | | | | | | |||||
David I. Matson | | | 9,279 | | 206,037 | |||||
Philip B. Flynn | | | | | | |||||
JoAnn M. Bourne | | | 19,794 | | 439,494 | |||||
John C. Erickson | | | | | |
Senior Vice Presidents and above are eligible to defer base salary and incentives for payment at a future date designated by the executive officers under the Union Bank of California Deferred Compensation Plan. Funds deferred under this plan accrue interest based on the average U.S. Treasury Constant Maturities Rate, calculated quarterly based on a rolling average for the previous 12 months. For deferrals of less than 36 months, accounts are credited with the rolling one year U.S. Treasury rate. Deferrals greater than 36 months are credited with the rolling five year U.S. Treasury rate. Distribution dates and forms of payment are elected at the time of deferral. Elections are irrevocable. Payments may be taken as a lump sum or annual installments over a period of either four or 10 years.
Other Potential Post-Employment Payments
As discussed above in "Executive CompensationCompensation Discussion and Analysis," we have entered into various arrangements with our named executive officers which provide for certain benefits in the event of their termination under a variety of circumstances. For the purpose of this discussion, we describe benefits under the following types of termination: voluntary termination, retirement, involuntary separation, change of control, death and disability. Where applicable we discuss the specific arrangements we have with our named executive officers, including under our Senior Executive Bonus Plan, Deferred Compensation Plan, Separation Pay Plan, retirement plan, supplemental retirement plan, provisions in employment agreements, change of control, stock option agreements, restricted stock agreements, and performance share agreements. Forms of each of these
50
agreements except for the retirement plan have been filed as exhibits to our SEC reports and the following summary discussion is qualified by reference to these exhibits. For presentation purposes, all of the benefits outlined in the Potential Post-Employment Payment Tables assume that the event of termination occurred on the last business day of the fiscal year, December 31, 2007. Further details regarding other potential post-employment benefits are set forth above in the Pension Benefits Table and Nonqualified Deferred Compensation Table.
Voluntary Termination
Even in a voluntary termination, an employee may be entitled to receive benefits, primarily those that have vested or otherwise been earned. Payments to which our named executive officers are entitled if termination occurred on December 31, 2007, consist of, to the extent applicable:
Mr. Matson was of qualified retirement age as of December 31, 2007, and therefore any voluntary termination would be considered a qualified retirement. Potential post-employment payments under voluntary termination for Mr. Flynn, Ms. Bourne and Mr. Erickson are shown in the tables below.
Union Bank of California Deferred Compensation Plan
Named executive officers are entitled to their deferred compensation accounts in all types of termination. No increased benefits are triggered by an executive's termination under our Deferred Compensation Plan. However, an executive's termination can trigger early payment of the deferred amounts prior to the time originally specified by the executive in the executive's election form.
If the participant is not eligible for early retirement, all amounts credited in the deferral account will be paid as soon as practicable (and within the requirements of Internal Revenue Code Section 409A) after termination and any accounts being paid in installments will be accelerated with the remaining installments paid in a lump sum. If the participant is eligible for early retirement, then we will follow the participant's election. In the case of death, the balance of an executive's account will be paid in a single lump sum payment. Payments will be made prior to the payment date specified in the executive's election form in cases of disability and financial hardship.
Union Bank of California Senior Executive Bonus Plan
Our Senior Executive Bonus Plan generally provides that participants must be employed for the entire fiscal year to receive an award under this plan. The Compensation Committee has discretion to make limited exceptions to these provisions. There are exceptions to this forfeiture clause if the termination is due to death, retirement, permanent disability or in exceptional circumstances. Under
51
these circumstances, the executive (or the executive's estate in the event of death) may be eligible to receive a pro-rata award.
Retirement
Our named executive officers receive certain benefits upon qualified retirement. In the case of normal retirement (age 62 with five years of service or age 60 with 20 years of service), our named executive officers become eligible to receive the following benefits:
Our named executive officers become eligible for early retirement after the age of 55. If they retire early, their pension benefits are reduced 3% for each year of early commencement.
Three of our named executive officers, Mr. Flynn, Ms. Bourne and Mr. Erickson, were not of retirement age (including early retirement) as of December 31, 2007 and therefore would not have been entitled to any retirement benefits. Potential post-employment payments under retirement for Mr. Matson, who is currently eligible for retirement, are shown in the tables below.
Involuntary Separation
Our named executive officers may receive termination benefits for involuntary separation either under the Separation Pay Plan (which applies to our named executive officers and employees generally) or in accordance with an employment agreement (which applies only to Mr. Flynn and Mr. Matson). Further detail is provided below under the captions "Separation Pay Plan," which provides for termination benefits upon job elimination or other special circumstances, and "Employment Agreements," which, in addition to the provisions described under "Separation Pay Plan," provide benefits if the named executive officers leave for "good reason" (referred to in the agreements as "termination by the executive for cause").
If the officer becomes entitled to receive severance benefits under the Separation Pay Plan or an employment agreement, he or she will receive:
52
Separation Pay Plan
The Union Bank of California, N.A. Separation Pay Plan, adopted effective April 1, 2005, is maintained and operated as an employee welfare benefit plan under the Employee Retirement Income Security Act of 1974, commonly known as ERISA. The Separation Pay Plan provides salary continuation pay to any executive officer or other employee of Union Bank of California, or its designated subsidiaries or affiliates, eligible under the plan who is discharged under the circumstances stated in the plan and who is not a participant in or eligible to receive severance benefits under any other severance plan or arrangement. These circumstances include the termination of employment resulting from restructure or elimination of the executive officer or employee's group, division, department, branch or position because of any of the following events, as determined by UnionBanCal in its sole discretion:
Policy-making officers, including the named executive officers, are eligible to receive two years of salary continuation regardless of the number of years of service. For policy-making officers and specified other executive officers who participate in an incentive pay plan, the Senior Management Bonus Plan or Senior Executive Bonus Plan, as applicable, we will add an amount equal to 1 / 52 of the average of the last three annual incentive payments the employee actually received to weekly base pay for each week the employee receives salary continuation, up to a maximum of 100% of annual base pay. We make salary continuation payments on a bi-weekly basis.
The payments under the Separation Pay Plan may be reduced, forfeited or required to be returned if the payments alone or in the aggregate would be nondeductible by Union Bank of California, the subsidiary or affiliate employer for purposes of federal income taxes under Section 280G of the tax code or otherwise, in the sole discretion of Union Bank of California.
The payments under the Separation Pay Plan are reduced by the amount of any payments made under our retirement plan and our supplemental retirement plan during the period of salary continuation. Supplemental retirement plan payments are required to commence upon termination of employment. Retirement plan payments commence at the election of the executive.
Payments under the Separation Pay Plan will be deferred as necessary to comply with Section 409A of the Internal Revenue Code.
53
Employment Agreements
Additionally, we have entered into employment agreements with Messrs. Matson and Flynn which, in addition to the severance provisions as described above under the caption "Separation Pay Plan," provide for severance benefits in the event of termination without cause and in the event of termination by the executive for cause, which is essentially a "good reason" voluntary termination.
Mr. Matson
Under the terms of his agreement, we may not terminate Mr. Matson without triggering severance benefits unless Mr. Matson:
In addition, under the terms of his agreement, Mr. Matson may terminate his employment for cause (for a "good reason") and trigger severance benefits if he has incurred a material reduction of his duties, title or responsibility, a reduction in his annual base salary or a reduction in his overall compensation package below the median package for comparable executive positions at banks of similar size and focus. Payments under this agreement will be deferred as necessary to comply with Section 409A of the Internal Revenue Code.
Mr. Flynn
Under the terms of his agreement, we may not terminate Mr. Flynn without triggering severance benefits unless Mr. Flynn:
In addition, under the terms of his agreement, Mr. Flynn may terminate his employment for cause (for a "good reason") and trigger severance benefits upon the occurrence of any of the following:
54
For Mr. Flynn, these severance benefits would be substantially the same as under the Separation Pay Plan. Payments under this agreement will be deferred as necessary to comply with Section 409A of the Internal Revenue Code.
Change of Control
In the event that control of our company changes, as described below under "Change of Control Agreements," our named executive officers are entitled to benefits if they are terminated without cause or quit for a good reason during the 30-month period following a change of control. Under the "good reason" provision, the named executive officers will have an opportunity to leave for any reason in the 30-day period immediately following the first anniversary of the date of change of control. If a named executive officer becomes entitled to receive benefits under the plan, he or she will receive:
55
Payments under these agreements will be deferred as necessary to comply with Section 409A of the Internal Revenue Code.
Change of Control Agreements
We have entered into change of control agreements with our non-expatriate policy-making officers, including each of our named executive officers except Messrs. Tanaka and Morimura. The agreements are for an initial thirty-month period and are extended automatically at the end of each year for an additional one year unless we deliver written notice to the officer, at least 60 days prior to the annual renewal date that the agreement will not be extended. Pursuant to this provision, the change of control agreements were automatically extended for an additional one-year period in 2007.
The agreement becomes effective only in the event of a change of control. The agreement defines a change of control as:
except where, in either case, at least 30% of the common stock and voting power of the resulting entity is owned by The Bank of Tokyo-Mitsubishi UFJ (or specified affiliates), and no individual, entity or group owns a larger percentage of common stock than The Bank of Tokyo-Mitsubishi UFJ (or those affiliates).
If a change of control occurs, we will continue the executive's employment for a period of 30 months from the date of the change of control. During this period:
If the officer dies or becomes disabled during the employment period, the officer or his or her beneficiary will receive accrued obligations, including salary, pro rata bonus, deferred compensation and vacation pay, and death or disability benefits.
If the Internal Revenue Service subjects any payment to the officer under this agreement to an excise tax under Section 4999 of the Internal Revenue Code, the officer will receive an additional payment so that the amount he or she receives equals the amount he or she would receive under the
56
agreement if an excise tax were not imposed. However, this additional payment will not be made to the officer unless the payment exceeds 110% of the payments that could have been made to him or her without the imposition of an excise tax.
Death
In the case of death, the named executive officer's beneficiary will become eligible to receive the following benefits:
In the case of death, the balance of an executive's deferred compensation account will be paid in a single lump sum payment.
Disability
In the event a named executive officer becomes disabled, he or she becomes eligible to receive the following benefits:
In the case of disability, payments from the named executive officer's deferred compensation accounts may be accelerated by the Executive Compensation & Benefits Committee.
For the purposes of the Potential Post-Employment Payments Tables below, we have assumed that Mr. Matson would forgo short-term disability and long-term disability payments in lieu of more valuable pension benefits. We have assumed Mr. Flynn, Ms. Bourne and Mr. Erickson would remain on short-term disability and then long-term disability until they accrue the maximum 30 years of service and reach the unreduced payment age of 60 under normal retirement.
57
Treatment of Equity Upon Termination
Stock Option Agreements
Our stock option award agreements generally provide for forfeiture of all unvested stock options upon termination. There are exceptions to this forfeiture clause. The stock option award agreements provide for immediate vesting of outstanding options granted at least six months prior to termination in the following circumstances:
In the case of retirement and involuntary separation, options are exercisable for the earlier of three years from termination or the expiration of the option. Under death and disability, options are exercisable for the earlier of one year from the date of death or disability or expiration of the option.
The stock option award agreements of our named executive officers under the Year 2000 UnionBanCal Management Stock Plan provide that all outstanding options will vest and become immediately exercisable upon consummation of a change of control. Under the stock option agreements, a "change of control" is generally defined as described above under the caption "Change of Control Agreements."
For the purpose of our Potential Post-Employment Payments Tables below, we have shown the intrinsic value of unvested options that would vest upon termination, which represents the difference between the amount by which the closing price of our common stock on December 31, 2007, the last business day of the year, exceeded the exercise price of the options.
Restricted Stock Agreements
Our restricted stock award agreements generally provide for forfeiture of all unvested restricted stock upon termination. There are exceptions to this forfeiture clause. The restricted stock award agreements under the Year 2000 UnionBanCal Management Stock Plan provide for immediate vesting of restricted stock granted at least six months prior to termination in the following circumstances:
For the purpose of our Potential Post-Employment Payments Tables below, we have shown the intrinsic value of unvested restricted stock awards that would vest upon termination, which represents the closing price of our common stock on December 31, 2007 for each share of unvested restricted stock.
58
Performance Share Plan Awards
Our 1997 UnionBanCal Corporation Performance Share Plan generally provides that termination of employment prior to the end of a performance cycle will result in forfeiture of an executive's opportunity to receive an earned award under this plan. There are exceptions under this plan for the following types of termination:
In these cases of termination, the executive (or the executive's estate in the event of death) would be eligible to receive a pro rata earned award based on the time the executive was employed during the performance cycle. In addition, the Compensation Committee is given sole discretion to authorize any combination of continued participation, pro-ration or early distribution of earned awards which would otherwise be forfeited.
In such circumstances, for any performance cycle older than nine months still running, the named executive officer (or executive's beneficiary or estate in the event of death) will be eligible to receive an earned award equal to the sum of:
Under the 2007 and 2006 performance share awards, payment of these earned awards will be made in shares of common stock or deferred stock units credited to the executive's account, if applicable, within two and one-half months following the termination date. Under the terms of the 2005 award, the value payable for an earned award was calculated based upon the average month-end price of our common stock for the six months immediately preceding the end of the cycle. The 2005 awards were paid in cash, or credited to the executive's deferred compensation account, if applicable.
For the purpose of our Potential Post-Employment Payments Tables below, we have shown the intrinsic value of unvested performance share awards that would vest upon termination, which represent for any cycle older than nine months still running, the actual value earned under the performance formula for completed years of still running cycles, plus the target value for uncompleted years of still running cycles. The 2005 awards were valued at the average month-end closing price of our common stock during the six-month period ended on December 31, 2007. The 2006 and 2007 awards were valued at the closing price of our common stock on December 31, 2007.
59
Potential Post-Employment Payment Tables
The amount of compensation payable to each named executive officer in each termination situation is listed in the tables below as of December 31, 2007.
David I. Matson
|
Type of Termination
|
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Voluntary
($) (1) |
Qualified
Retirement ($) |
Death
($) |
Disability
($) |
Involuntary
($) |
Change of
Control ($) |
||||||||
Type of Payment | ||||||||||||||
2007 Bonus Under Senior Executive Bonus Plan (2) | 240,000 | 240,000 | 240,000 | 240,000 | 240,000 | 240,000 | ||||||||
2005 - 2007 Completed Performance Cycle (3) | 856,300 | 856,300 | 856,300 | 856,300 | 856,300 | 856,300 | ||||||||
Deferred Compensation Balance | 206,037 | 206,037 | 206,037 | 206,037 | 206,037 | 206,037 | ||||||||
Pension | ||||||||||||||
Vested Retirement Plan (4) | 1,307,000 | 1,307,000 | 1,173,000 | 1,307,000 | (17) | 1,307,000 | (18) | 1,307,000 | ||||||
Additional Retirement Plan Credit (5) | | | | | | 65,000 | (20) | |||||||
Vested Supplemental Executive Retirement Plan | 3,277,000 | 3,277,000 | 1,609,000 | 3,277,000 | (17) | 3,277,000 | (18) | 3,277,000 | ||||||
Additional Supplemental Retirement Plan Credit (5) | | | | | 286,000 | 435,000 | ||||||||
Executive Supplemental Benefits Plan (6) | 167,000 | 167,000 | 418,000 | 167,000 | 167,000 | 167,000 | ||||||||
Severance | ||||||||||||||
Severance Payment (7) | | | | | 747,067 | (19) | 1,382,250 | (21) | ||||||
Estimated Change of Control Excise-Tax Gross-Up | | | | | | | ||||||||
Other Benefits | ||||||||||||||
Perquisites (8) | 45,011 | (13) | 45,011 | (13) | | (15) | | 91,411 | 128,476 | |||||
Healthcare Benefits (9) | | | (14) | | (16) | | 22,492 | 33,739 | ||||||
Disability Benefits | ||||||||||||||
Short-Term Disability | | | | | (17) | | | |||||||
Long-Term Disability | | | | | (17) | | | |||||||
|
|
|
|
|
|
|||||||||
Total Payments | 6,098,348 | 6,098,348 | 4,502,337 | 6,053,337 | 7,200,307 | 8,097,802 | ||||||||
Value of Unvested Equity That Vests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested Option Spread (10) | | | | | | | ||||||||
Unvested Restricted Stock (11) | | | | | | | ||||||||
Performance Shares (unvested) (12) | 1,058,100 | 1,058,100 | 1,058,100 | 1,058,100 | 1,058,100 | 1,058,100 | ||||||||
|
|
|
|
|
|
|||||||||
Grand Total of Payments and Value of Unvested Equity That Vests Upon Termination | 7,156,448 | 7,156,448 | 5,560,437 | 7,111,437 | 8,258,407 | 9,155,902 | ||||||||
|
|
|
|
|
|
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61
62
Philip B. Flynn
|
Type of Termination
|
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Voluntary
($) |
Qualified
Retirement ($) (1) |
Death
($) |
Disability
($) |
Involuntary
($) |
Change of
Control ($) |
||||||||
Type of Payment | ||||||||||||||
2007 Bonus Under Senior Executive Bonus Plan (2) | 500,000 | | 500,000 | 500,000 | 500,000 | 500,000 | ||||||||
2005 - 2007 Completed Performance Cycle (3) | 1,416,200 | | 1,416,200 | 1,416,200 | 1,416,200 | 1,416,200 | ||||||||
Deferred Compensation Balance | | | | | | | ||||||||
Pension | ||||||||||||||
Vested Retirement Plan (4) | 502,000 | | 248,000 | 748,000 | (16) | 502,000 | 502,000 | |||||||
Additional Retirement Plan Credit (5) | | | | | 62,000 | 55,000 | (18) | |||||||
Vested Supplemental Retirement Plan (6) | | | | 3,650,000 | (16) | | | |||||||
Additional Supplemental Retirement Plan Credit (5) | | | | | (17) | (17) | ||||||||
Executive Supplemental Benefits Plan (7) | 84,000 | | 351,000 | 90,000 | 84,000 | 84,000 | ||||||||
Severance | ||||||||||||||
Severance Payment (8) | | | | | 2,376,667 | 4,050,000 | ||||||||
Estimated Change of Control Excise-Tax Gross-Up | | | | | | | ||||||||
Other Benefits | ||||||||||||||
Perquisites (9) | | | (14) | | 91,411 | 128,476 | ||||||||
Healthcare Benefits (10) | | | (15) | | 27,379 | 41,069 | ||||||||
Disability Benefits | ||||||||||||||
Short-Term Disability | | | | 441,100 | (16) | | | |||||||
Long-Term Disability | | | | 653,000 | (16) | | | |||||||
|
|
|
|
|
|
|||||||||
Total Payments | 2,502,200 | | 2,515,200 | 7,498,300 | 5,059,657 | 6,776,745 | ||||||||
Value of Unvested Equity That Vests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested Option Spread (11) | | | | | | | ||||||||
Unvested Restricted Stock (12) | | | | | | | ||||||||
Performance Shares (unvested) (13) | | | 2,238,500 | 2,238,500 | 2,238,500 | 2,238,500 | ||||||||
|
|
|
|
|
|
|||||||||
Grand Total of Payments and Value of Unvested Equity That Vests Upon Termination | 2,502,200 | | 4,753,700 | 9,736,800 | 7,298,157 | 9,015,245 | ||||||||
|
|
|
|
|
|
63
64
JoAnn M. Bourne
|
Type of Termination
|
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Voluntary
($) |
Qualified
Retirement ($) (1) |
Death
($) |
Disability
($) |
Involuntary
($) |
Change of
Control ($) |
||||||||
Type of Payment | ||||||||||||||
2007 Bonus Under Senior Executive Bonus Plan (2) | 160,000 | | 160,000 | 160,000 | 160,000 | 160,000 | ||||||||
2005 - 2007 Completed Performance Cycle (3) | 351,300 | | 351,300 | 351,300 | 351,300 | 351,300 | ||||||||
Deferred Compensation Balance | 439,494 | | 439,494 | 439,494 | 439,494 | 439,494 | ||||||||
Pension | ||||||||||||||
Vested Retirement Plan (4) | 592,000 | | 241,000 | 928,000 | (15) | 592,000 | 592,000 | |||||||
Additional Retirement Plan Credit (5) | | | | | 75,000 | 84,000 | (17) | |||||||
Vested Supplemental Executive Retirement Plan (6) | | | | 1,700,000 | (15) | | | |||||||
Additional Supplemental Retirement Plan Credit (5) | | | | | | (16) | | (16) | ||||||
Severance | ||||||||||||||
Severance Payment (7) | | | | | 1,073,333 | 1,785,000 | ||||||||
Estimated Change of Control Excise-Tax Gross-Up | | | | | | | ||||||||
Other Benefits | ||||||||||||||
Perquisites (8) | | | | (13) | | 89,011 | 124,876 | |||||||
Healthcare Benefits (9) | | | | (14) | | 27,379 | 41,069 | |||||||
Disability Benefits | ||||||||||||||
Short-Term Disability | | | | 229,200 | (15) | | | |||||||
Long-Term Disability | | | | 489,900 | (15) | | | |||||||
|
|
|
|
|
|
|||||||||
Total Payments | 1,542,794 | | 1,191,794 | 4,297,894 | 2,807,517 | 3,577,739 | ||||||||
Value of Unvested Equity That Vests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested Option Spread (10) | | | | | | | ||||||||
Unvested Restricted Stock (11) | | | 366,825 | 366,825 | 366,825 | 366,825 | ||||||||
Performance Shares (unvested) (12) | | | 406,800 | 406,800 | 406,800 | 406,800 | ||||||||
|
|
|
|
|
|
|||||||||
Grand Total of Payments and Value of Unvested Equity That Vests Upon Termination | 1,542,794 | | 1,965,419 | 5,071,519 | 3,581,142 | 4,351,364 | ||||||||
|
|
|
|
|
|
65
66
John C. Erickson
|
Type of Termination
|
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Voluntary
($) |
Qualified
Retirement ($) (1) |
Death
($) |
Disability
($) |
Involuntary
($) |
Change of
Control ($) |
||||||||
Type of Payment | ||||||||||||||
2007 Bonus Under Senior Executive Bonus Plan (2) | 230,000 | | 230,000 | 230,000 | 230,000 | 230,000 | ||||||||
2005 - 2007 Completed Performance Cycle (3) | 219,600 | | 219,600 | 219,600 | 219,600 | 219,600 | ||||||||
Deferred Compensation Balance | | | | | | | ||||||||
Pension | ||||||||||||||
Vested Retirement Plan (4) | 344,000 | | 173,000 | 600,000 | (15) | 344,000 | 344,000 | |||||||
Additional Retirement Plan Credit (5) | | | | | 47,000 | 51,000 | (17) | |||||||
Vested Supplemental Executive Retirement Plan (6) | | | | 958,000 | (15) | | | |||||||
Additional Supplemental Retirement Plan Credit (5) | | | | | | (16) | | (16) | ||||||
Severance | ||||||||||||||
Severance Payment (7) | | | | | 1,273,333 | 2,040,000 | ||||||||
Estimated Change of Control Excise-Tax Gross-Up | | | | | | | ||||||||
Other Benefits | ||||||||||||||
Perquisites (8) | | | | (13) | | 94,296 | 130,161 | |||||||
Healthcare Benefits (9) | | | | (14) | | 27,379 | 41,069 | |||||||
Disability Benefits | ||||||||||||||
Short-Term Disability | | | | 238,100 | (15) | | | |||||||
Long-Term Disability | | | | 835,800 | (15) | | | |||||||
|
|
|
|
|
|
|||||||||
Total Payments | 793,600 | | 622,600 | 3,081,500 | 2,235,608 | 3,055,830 | ||||||||
Value of Unvested Equity That Vests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested Option Spread (10) | | | | | | | ||||||||
Unvested Restricted Stock (11) | | | 366,825 | 366,825 | 366,825 | 366,825 | ||||||||
Performance Shares (unvested) (12) | | | 325,300 | 325,300 | 325,300 | 325,300 | ||||||||
|
|
|
|
|
|
|||||||||
Grand Total of Payments and Value of Unvested Equity That Vests Upon Termination | 793,600 | | 1,314,725 | 3,773,625 | 2,927,733 | 3,747,955 | ||||||||
|
|
|
|
|
|
67
68
TRANSACTIONS WITH RELATED PERSONS
Related Person Transactions Policy
In March 2007, the Board of Directors adopted a written policy that the Audit Committee will review, and when appropriate, approve or ratify all related person transactions as defined in and in accordance with the written policy.
Our related person transactions policy requires people covered by the policy to seek the approval of the Audit Committee of the Board of Directors prior to entering into a related person transaction with us. People whom the related person transactions policy covers have the primary responsibility for compliance with the policy.
What is covered. A related person transaction is any contract, arrangement or relationship (or a similar series of them) in which UnionBanCal or any of its subsidiaries is a participant, where the amount involved exceeds $120,000 and in which any related person has a direct or indirect material interest.
We do not consider some transactions that might otherwise fall under the broad description above to be related person transactions that require Audit Committee approval, including:
In addition, this policy does not apply to transactions that are covered by our other related party policies, which are described below.
Who is covered. People or entities that would be covered as related persons include UnionBanCal's directors, policy-making officers and nominees for director and any person or entity that owns more than 5% of our stock. The term also includes the immediate family members of those covered people, as well as companies by which they are employed or in which they have a significant ownership interest.
Procedures for review, approval and ratification. The policy provides the following procedures for review, approval and ratification of related person transactions:
69
Other related party policies. Additionally, because our industry is highly regulated, we also have written policies that cover other aspects of related party and affiliate transactions, which are summarized below.
70
account that already holds affiliate securities or obligations, it is the policy of Union Bank of California to liquidate the position in the security unless divestment would be detrimental to the account. These decisions are validated by the appropriate fiduciary committee of Union Bank of California.
Transactions with Related Persons
UnionBanCal and Union Bank of California have had, and expect to have in the future, banking and other transactions in the ordinary course of business with The Bank of Tokyo-Mitsubishi UFJ and with its affiliates. During 2007, these transactions included, but were not limited to, extensions of credit, participation, servicing and remarketing of loans and leases, purchase and sale of acceptances, interest rate derivatives and foreign exchange transactions, funds transfers, custodianships, electronic data processing, investment advice and management, customer referrals, facility leases, deposits and trust services. Union Bank of California also maintains traditional correspondent bank accounts with The Bank of Tokyo-Mitsubishi UFJ. In the opinion of management, these transactions were made at prevailing rates, terms and conditions and did not involve more than the normal risk of collectibility or present other unfavorable features for UnionBanCal or Union Bank of California. The Bank of Tokyo-Mitsubishi UFJ was the holder of UnionBanCal's $200 million of floating-rate subordinated debt which matured in 2007. These notes bore interest at 0.325 percent above the 3-month London Interbank Offered Rate. At December 31, 2007, we had recorded interest expense of $6.6 million for the year then ended relating to the subordinated debt and other correspondent bank accounts. At December 31, 2007, we had derivative contracts totaling $1.3 billion in notional balances with $9.5 million in net unrealized losses with The Bank of Tokyo Mitsubishi UFJ and its affiliates. Additionally, for the year ended December 31, 2007, UnionBanCal recorded income of $2.1 million and expenses of $0.7 million for fees and revenue sharing arrangements and income of $3.8 million and expenses of $3.1 million relating to facility and staff training arrangements. In 2007, pursuant to a service agreement, we reimbursed The Bank of Tokyo-Mitsubishi UFJ for compensation and other benefits totaling approximately $2.13 million provided under The Bank of Tokyo-Mitsubishi UFJ, Ltd. Expatriate Pay Program to all expatriate officers for services rendered to us. The amount reimbursed was in addition to compensation and benefits we paid to these expatriate officers for services they rendered to us. Amounts received by expatriate officers pursuant to our policy on expatriate compensation are included in the Summary Compensation Table for those officers named in the table and described in "Executive CompensationCompensation Discussion and AnalysisPolicy on Expatriate Compensation." In 2007, Union Bank of California purchased a membership interest in a U.S. payment services company for $1.4 million from The Bank of Tokyo-Mitsubishi UFJ. In addition, Mitsubishi UFJ Financial Group will reimburse us for expenditures that we are incurring for Basel II projects that we would not have undertaken for our own risk management purposes.
Certain directors and executive officers and corporations and other organizations associated with them and members of their immediate families were customers of and had banking transactions, including loans, with Union Bank of California in the ordinary course of business in 2007. These loans are exempt from the loan prohibitions of the Sarbanes-Oxley Act and were made on substantially the
71
same terms, including interest rates and collateral, as those available at the time for similar transactions with other persons. These loans did not involve more than the normal risk of collectability or have other unfavorable features.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Crandall, Farman, Gillfillan, Gyani and Niebla and Ms. Rambo were the members of our Compensation Committee during 2007. None of them is a current or former officer or employee. See "Transactions with Related Persons" for a description of certain banking transactions between directors and UnionBanCal.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires UnionBanCal's directors, executive officers and holders of more than 10% of a registered class of UnionBanCal's equity securities to file with the Securities and Exchange Commission reports of ownership and changes in ownership of any equity securities of UnionBanCal. Officers, directors and greater than 10% stockholders are required by SEC regulations to furnish UnionBanCal with copies of all Section 16(a) forms they file. Based solely on its review of the copies of such forms received by it, or written representations from certain reporting persons that all required forms were filed, UnionBanCal believes that all Section 16 filing requirements applicable to its officers, directors and greater than 10% stockholders were complied with.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information relating to our equity compensation plans as of December 31, 2007:
|
Number of securities to be issued upon exercise of outstanding options, warrants, and rights (a)
(1)
|
Weighted-average exercise price of outstanding options, warrants, and rights (b)
(2)
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column a)
(c) |
||||
---|---|---|---|---|---|---|---|
Equity compensation approved by stockholders | 9,956,876 | $ | 51.14 | 1,095,526 | |||
Equity compensation not approved by stockholders | | | | ||||
|
|
|
|||||
Total | 9,956,876 | $ | 51.14 | 1,095,526 |
All equity compensation plans have been approved by our stockholders. At December 31, 2007, there were 1,095,526 shares of common stock available for future issuance under the Year 2000 UnionBanCal Corporation Management Stock Plan as stock options, restricted stock or shares of common stock issued upon the vesting and settlement of performance shares settled in common stock and restricted stock units, as well as upon the settlement of stock units.
72
PROPOSAL TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK
THAT MAY BE AWARDED UNDER THE YEAR 2000 UNIONBANCAL CORPORATION
MANAGEMENT STOCK PLAN
Subject to stockholder approval, the Board of Directors has amended the Year 2000 UnionBanCal Corporation Management Stock Plan to increase the aggregate number of shares of our common stock which may be issued under the Plan from 20,000,000 to 27,000,000. A copy of the Year 2000 UnionBanCal Corporation Management Stock Plan as proposed to be amended is attached as Appendix A .
The Board of Directors believes the approval of this amendment to the Plan is in the best interests of UnionBanCal and its stockholders, as the availability of an adequate number of shares reserved for issuance under the Plan and the ability to grant awards under the Plan is an important factor in attracting, motivating and retaining qualified personnel essential to our success. As of March 28, 2008, we had 1,059,906 shares remaining and available for future grants under the Plan. The number of shares remaining for future awards takes into account outstanding stock options, restricted stock, performance shares (calculated at maximum payout), restricted stock units and stock units.
Description of the Plan
The Plan currently authorizes awards of up to 20,000,000 shares of our common stock. These awards can take the form of grants or sales of stock, restricted stock, stock units, restricted stock units, incentive stock options, nonqualified stock options, stock appreciation rights, and shares issued upon vesting and settlement of performance shares. The purposes of the Plan are to provide competitive long-term compensation that will attract and retain key employees, non-employee directors and/or consultants who contribute to the financial success of UnionBanCal and further align stockholder and management interests through increased employee stock ownership. The Plan is administered by the Executive Compensation & Benefits Committee of the Board of Directors.
Employees, non-employee Directors and/or consultants of UnionBanCal and its subsidiaries are eligible for awards under the Plan. The number of eligible persons currently in each category are approximately 9,800 employees and 14 non-employee directors. We do not currently intend to grant awards to consultants. The Executive Compensation & Benefits Committee determines which employees, non-employee directors or consultants will be granted awards, the timing of awards, the terms and the number of shares to be subject to each award. The Executive Compensation & Benefits Committee is authorized to make all determinations necessary or advisable to administer the Plan.
Stock options are granted at an exercise price of no less than the fair market value of our common stock on the date of grant. As of March 28, 2008, the market value of our common stock was $48.73 per share. Options granted under the Plan may have a term of no more than ten years and will vest either immediately upon grant or over time. Other conditions or provisions (not inconsistent with the Plan) may also be imposed by the Executive Compensation & Benefits Committee. If any option is intended to qualify as an incentive stock option under the Internal Revenue Code, the option will also contain the provisions required under the Code. Common stock may also be issued under the Plan to eligible persons as compensation for services rendered to UnionBanCal or its subsidiaries, subject to provisions determined by the Executive Compensation & Benefits Committee. The consideration to be received by UnionBanCal for the exercise of stock options is generally cash, although the Executive Compensation & Benefits Committee may permit payment of the option exercise price, in whole or in part, by delivery of previously owned UnionBanCal common stock.
The affirmative vote of a majority of the shares represented and voting on the matter at the meeting is required for any amendment to the Plan which increases the number of shares for which options or stock grants/sales may be awarded or changes the standards of eligibility under the Plan. In other cases, the Board of Directors may amend or terminate the Plan without stockholder approval.
73
However, neither the Board of Directors nor the stockholders may alter or impair a recipient's rights under any option or stock grant/sale previously awarded under the Plan without the recipient's consent. The Plan provides that it will terminate on January 1, 2010.
The following is only a summary of the federal income tax rules governing stock options and stock awards under the Plan. The rules on this area are complex and subject to frequent change.
Options granted under the Plan may either be "incentive stock options" as defined under Section 422 of the Internal Revenue Code or "non-qualified stock options." If an incentive stock option is granted, the optionee will recognize no income upon grant of the incentive stock option and incur no tax liability upon the exercise, unless the optionee is subject to alternative minimum tax. UnionBanCal will not be allowed a deduction for federal income tax purposes upon the exercise of an incentive stock option regardless of the applicability of the alternative minimum tax. Gains from a sale or exchange of the shares more than two years after the grant of the option and one year after the receipt of the shares by the optionee (due to the exercise of the option), will be treated as long-term capital gain. If these holding periods are not satisfied, the optionee will recognize ordinary income equal to the difference between the exercise price and the lower of the fair market value of the stock at the date of the option exercise or the sale price of the stock. UnionBanCal will generally be entitled to an income tax deduction in the same amount as the ordinary income recognized by the optionee. Any gain recognized on such premature disposition of the shares in excess of the amount treated as ordinary income will be characterized as long-term or short-term capital gain depending on how long the optionee held the stock.
All options that do not qualify as incentive stock options are referred to as "non-qualified" options. An optionee will not recognize any taxable income at the time he/she is granted a non-qualified option. Upon exercising a non-qualified option, an optionee will recognize ordinary income for tax purposes measured by the excess of the then fair market value of the shares over the option price. Upon resale of such shares by the optionee, any difference between the sales price and the fair market value of the shares at the date of exercise, will be treated as capital gain or loss, and will qualify for long term capital gain or loss treatment if the shares have been held for the requisite holding period. For non-qualified stock options, UnionBanCal will generally receive an income tax deduction for the amount of ordinary income recognized by the optionee.
Restricted stock awards are generally subject to ordinary income tax at the time the restrictions lapse, unless the recipient elects to accelerate recognition as of the date of the grant. Stock unit awards are generally subject to ordinary income tax at the time stock is issued in settlement of the award. In each case, UnionBanCal will generally be entitled to a corresponding income tax deduction at the same time the participant recognizes ordinary income.
UnionBanCal's deduction of compensation paid to certain executives may be subject to a $1,000,000 annual limit under Section 162(m) of the Internal Revenue Code. Grants of stock options and shares issued under the Plan upon satisfaction of performance goals under the 1997 UnionBanCal Performance Share Plan are generally exempt from this limitation, and grants of restricted stock are generally subject to this limitation.
Vote Required
The affirmative vote of a majority of shares of UnionBanCal common stock represented and entitled to vote at the meeting is needed to approve the proposal to increase the number of shares of common stock that may be awarded under the Year 2000 UnionBanCal Management Stock Plan. The Board of Directors recommends that stockholders vote FOR the proposal to increase the number of shares of common stock that may be awarded under the Year 2000 UnionBanCal Corporation Management Stock Plan.
74
RATIFICATION OF SELECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Stockholders will also vote at the annual meeting to ratify the selection by the Audit Committee of Deloitte & Touche LLP, certified public accountants, as the independent registered public accounting firm of UnionBanCal for 2008. Deloitte & Touche LLP or its predecessors have examined the financial statements of UnionBanCal each year since 1996. Arrangements have been made for a representative of Deloitte & Touche LLP to attend the annual meeting. The representative will be available to answer appropriate questions and to make a statement if he or she wishes.
Audit Fees
The following is a description of the fees billed to UnionBanCal by Deloitte & Touche LLP for each of the last two fiscal years. All fees for 2006 and 2007 were approved by the Audit Committee.
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2006
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Audit Fees (1) | $ | 3,419,053 | $ | 3,202,161 | ||
Audit-Related Fees (2) | 553,911 | 890,841 | ||||
Tax Fees (3) | 153,432 | 230,011 | ||||
All Other Fees (4) | | | ||||
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Total | $ | 4,126,396 | $ | 4,323,013 |
The Audit Committee also considered whether the provision of the services other than audit services is compatible with maintaining Deloitte & Touche LLP's independence. All of the services described above were approved by the Audit Committee in accordance with the following policy.
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Pre-approval of Services by Deloitte & Touche LLP
The Audit Committee has adopted a policy for pre-approval of audit and permitted non-audit services by Deloitte & Touche LLP. The Audit Committee will consider annually and, if appropriate, approve the provision of audit services by its independent registered public accounting firm and consider and, if appropriate, pre-approve the provision of certain defined audit and non-audit services; provided, however, that:
The Audit Committee will also consider on a case-by-case basis and, if appropriate, approve, specific engagements that are not otherwise pre-approved.
Any proposed engagement that does not fit within the definition of a pre-approved service may be presented to the Audit Committee for consideration at its next regular meeting or, if earlier consideration is required, to the Audit Committee Chair. The Chair reports any specific approval of services at the Audit Committee's next regular meeting. The Audit Committee regularly reviews summary reports detailing all services being provided by its independent registered public accounting firm.
Vote Required
The affirmative vote of a majority of the shares of UnionBanCal common stock represented and entitled to vote at the meeting is needed to ratify the selection of the independent registered public accounting firm. The Board of Directors recommends that stockholders vote FOR the proposal to ratify the selection of the independent registered public accounting firm.
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STOCKHOLDER PROPOSALS FOR 2009 ANNUAL MEETING
UnionBanCal's Bylaws govern the submission of nominations for director or other business proposals that a stockholder wishes to have considered at a meeting of stockholders, but which are not included in UnionBanCal's proxy statement for that meeting. Under the Bylaws, nominations for director or other business proposals to be addressed at UnionBanCal's next annual meeting may be made by a stockholder entitled to vote who has delivered a notice to the Secretary of UnionBanCal Corporation, 400 California Street, San Francisco, CA 94104-1302, no later than December 19, 2008. However, if the date of the 2009 annual meeting is set more than 30 days from the date of this year's meeting, the notice must be received by the Secretary of the Corporation not later than the close of business on the later of (1) 120 days prior to such annual meeting, or (2) seven days after the day on which public announcement of the date of such meeting is first made. The notice must contain the information required by the Bylaws.
If a stockholder wishes to present a proposal to be included in UnionBanCal's proxy statement for the 2009 annual meeting of stockholders, the proponent and the proposal must comply with the proxy proposal submission rules of the Securities and Exchange Commission. One of the requirements is that the proposal be received by UnionBanCal's Secretary no later than December 19, 2008. Proposals received after that date will not be included in the proxy statement. Stockholders are urged to submit proposals by Certified MailReturn Receipt Requested.
OTHER MATTERS
The Board of Directors does not know of any business to be presented for action at the annual meeting other than that set forth in the Notice of Annual Meeting of Stockholders. However, if other business properly comes before the meeting, the persons named in the accompanying form of proxy intend to vote on such matters in accordance with their judgment.
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APPENDIX A
YEAR 2000 UNIONBANCAL CORPORATION MANAGEMENT STOCK PLAN
1. Establishment, Purpose and Definitions.
A-1
2. Administration of the Plan.
A-2
3. Stock Subject to the Plan.
6. Terms and Conditions of Options.
A-3
options are exercisable for the first time by the Optionee in any calendar year (under the Plan and any other plans of UNBC or its Subsidiaries) shall not exceed $100,000.
11. Amendment, Suspension or Termination of the Plan.
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Plan in the following respects without the consent of UNBC's shareholders then sufficient to approve the Plan in the first instance:
A-5
MR A SAMPLE |
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Electronic Voting Instructions
You can vote by Internet or telephone!
Available 24 hours a day, 7 days a week!
Instead of mailing your proxy, you may choose one of the two voting methods outlined below to vote your proxy.
VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
Proxies submitted by the Internet or telephone must be received by 1:00 a.m., Central Time, on Tuesday, May 20, 2008.
Vote by Internet |
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Log on to the Internet and go to www.envisionreports.com/UB |
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Follow the steps outlined on the secured website. |
Vote by telephone |
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Call toll free 1-800-652-VOTE (8683) within the United States, Canada & Puerto Rico any time on a touch tone telephone. There is NO CHARGE to you for the call. |
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Follow the instructions provided by the recorded message. |
Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. |
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Annual Meeting Proxy Card |
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IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
A Election of Directors The Board of Directors recommends a vote FOR the listed nominees.
1. Nominees: |
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01 - Aida M. Alvarez |
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08 - Christine Garvey |
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15 - J. Fernando Niebla |
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02 - David R. Andrews |
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09 - Michael J. Gillfillan |
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16 - Kyota Omori |
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03 - Nicholas B. Binkley |
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10 - Mohan S. Gyani |
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17 - Barbara L. Rambo |
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04 - L. Dale Crandall |
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11 - Ronald L. Havner, Jr. |
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18 - Masaaki Tanaka |
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05 - Murray H. Dashe |
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12 - Norimichi Kanari |
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19 - Dean A. Yoost |
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06 - Richard D. Farman |
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13 - Mary S. Metz |
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07 - Philip B. Flynn |
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14 - Shigemitsu Miki |
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B Other Matters The Board of Directors recommends a vote FOR Proposals 2 and 3.
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To increase the number of shares of common stock that may be awarded under the Year 2000 UnionBanCal Corporation Management Stock Plan. |
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To ratify the selection of UnionBanCal Corporations independent registered public accounting firm, Deloitte & Touche LLP, for 2008. |
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C Non-Proposal
Consent to Electronic Delivery: By marking this box, I consent to access future Annual Reports and Proxy Statements of UnionBanCal Corporation electronically over the Internet. I understand that unless I request otherwise or revoke my consent, UnionBanCal Corporation will notify me when any such communications are available and how to access them. I understand that costs associated with the use of the Internet will be my responsibility. To revoke my consent, I can contact UnionBanCal Corporations transfer agent, Computershare Investor Services, at 1-877-588-4179. |
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MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE |
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IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
Proxy UnionBanCal Corporation
Proxy Solicited by the Board of Directors
Annual Meeting of Stockholders
May 22, 2008
John Rice or Michelle Crandall, or either of them, each with the power of substitution, is hereby authorized to represent and to vote the Common Stock of the undersigned at the Annual Meeting of Stockholders of UnionBanCal Corporation, to be held at 8:30 a.m. (local time) on Thursday, May 22, 2008, in the Boardroom, 555 California Street, 51st Floor, San Francisco, California, or any adjournment or postponement as follows:
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS INDICATED ON THE REVERSE SIDE, BUT IF NO CHOICES ARE INDICATED, THIS PROXY WILL BE VOTED FOR ALL NOMINEES LISTED ON THE REVERSE SIDE, FOR PROPOSALS 2 AND 3, AND WITH RESPECT TO ANY OTHER BUSINESS PROPERLY BROUGHT BEFORE THE MEETING OR ANY ADJOURNMENT OR POSTPONEMENT, IN ACCORDANCE WITH THE DISCRETION OF THE PROXIES.
You may view UnionBanCals Proxy Statement and Annual Report to Stockholders on the Internet at www.envisionreports.com/UB.
D Non-Voting Items
Change of Address Please print your new address below. |
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Meeting Attendance Mark the box to the right if you plan to attend the Annual Meeting. |
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E Authorized Signatures This section must be completed for your instructions to be executed.
Please sign exactly as name(s) appears on your stock certificate and this proxy. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.
Date (mm/dd/yyyy) Please print date below. |
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Signature 1 Please keep signature within the box. |
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Signature 2 Please keep signature within the box. |
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IF VOTING BY MAIL, YOU MUST COMPLETE SECTIONS A E ON BOTH SIDES OF THIS CARD.
1 Year Unionbancal Chart |
1 Month Unionbancal Chart |
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