U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO _________
Commission file number 0-27984
Ridgestone Financial Services, Inc.
(Exact name of small business issuer as specified in its charter)
Wisconsin 39-179151
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13925 West North Avenue
Brookfield, Wisconsin 53005
(Address of principal executive offices)
414-789-1011
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date.
Class Outstanding as of September 30, 1998
----- ------------------------------------
Common Stock, no par value 876,055
Transitional Small Business Disclosure Format: Yes No X
<PAGE>
RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY
INDEX
Page
Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements............................................. 1
Consolidated Statements of Financial Condition at
September 30, 1998 and December 31, 1997......................... 1
Consolidated Statements of Income
For the Three and Nine Months Ended September 30,
1998 and 1997.................................................... 2
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 1998 and 1997............ 3
Consolidated Statements of Stockholders' Equity
For the Nine Months Ended September 30, 1998 and 1997............ 4
Notes to Consolidated Financial Statements....................... 5
Item 2. Management's Discussion and Analysis........................ 7
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K........................... 12
SIGNATURES .................................................................. 13
EXHIBIT INDEX ............................................................... 14
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, 1998 and December 31, 1997
September 30, December 31,
1998 1997
(Unaudited)
-------------- --------------
ASSETS
Cash and due from banks $ 2,120,061 $ 2,671,051
Federal funds sold 8,623,000 7,994,000
Interest-bearing deposits 6,655 4,185
------------- -------------
Total cash and cash equivalents 10,749,716 10,669,236
Investments-Held to Maturity 2,042,000 4,253,095
(fair value Sep 1998, $1,999,556
and Dec 1997, $4,298,356)
Investments-Available for Sale 613,225 874,406
Loans receivable 50,559,001 45,557,771
Less: Allowance for estimated loan losses (543,367) (624,740)
------------- -------------
Net loans receivable 49,281,701 44,856,521
Mortgage loans held for sale 1,277,300 701,250
Office building and equipment, net 1,323,619 1,403,082
Other real estate owned 1,202,724 1,774,489
Accrued interest & other assets 2,224,885 495,108
------------- -------------
Total assets $ 69,449,103 $ 65,103,697
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand $ 7,716,575 $ 7,296,264
Savings, NOW and other time
deposits 54,850,642 51,191,361
------------- -------------
Total deposits 62,567,217 58,487,625
------------- -------------
Accrued interest & other liabilities 725,430 752,772
------------- -------------
Total liabilities 63,292,647 59,240,397
------------- -------------
STOCKHOLDERS' EQUITY
Common stock, no par value:
shares authorized:
10,000,000 at Sept 30, 1998, 1,000,000
at Dec 31, 1997;
876,055 issued and outstanding 8,411,732 7,721,399
Retained earnings (deficit) (2,272,745) (1,837,493)
Accumulated other comprehensive
income(loss) 17,469 (20,606)
------------- -------------
Total stockholders' equity 6,156,456 5,863,300
------------- -------------
Total liabilities and stockholders' equity $ 69,449,103 $ 65,103,697
============= =============
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<PAGE>
<TABLE>
RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Three and Nine Months Ended September 30, 1998 and 1997
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
Sept 30, Sept 30, Sept 30, Sept 30,
1998 1997 1998 1997
------------- ------------- ------------- -------------
Interest income:
<S> <C> <C> <C> <C>
Interest and fees on loans $ 1,118,712 $ 802,339 $ 3,127,392 $ 1,905,978
Interest on securities 138,521 62,939 292,327 151,255
Interest on federal funds sold 50,057 95,046 202,252 458,926
Interest on deposits in banks 1,585 3,970 5,945 11,107
------------- ------------- ------------- -------------
Total interest income 1,308,875 964,294 3,627,916 2,527,266
------------- ------------- ------------- -------------
Interest expense:
Interest on deposits 761,269 542,852 2,151,636 1,495,304
------------- ------------- ------------- -------------
Net interest income before
provision for loan losses 547,606 421,442 1,476,280 1,031,962
Provision for loan losses 30,000 0 45,000 0
------------- ------------- ------------- -------------
Net interest income after
provision for loan losses 517,606 421,442 1,431,280 1,031,962
------------- ------------- ------------- -------------
Non-interest income:
Loan fees 35,565 8,051 90,746 16,522
Gain on sale of AFS securities 0 7,587 0 167,659
Service charges on deposit accts 8,596 4,594 26,236 15,749
Miscellaneous 22,120 22,158 56,999 57,408
------------- ------------- ------------- -------------
Total other operating income 66,281 42,390 173,981 257,338
------------- ------------- ------------- -------------
Non-interest expense:
Salaries and employee benefits 298,185 240,630 823,395 704,515
Occupancy and equipment expense 101,831 100,150 277,238 260,548
Loss on sale of AFS securities 0 0 7,687 0
Other expense 132,833 120,159 384,093 287,251
------------- ------------- ------------- -------------
Total other operating expense 532,849 460,939 1,492,413 1,252,314
------------- ------------- ------------- -------------
Income before income taxes 51,038 2,893 112,848 36,986
Income taxes (49,533) 0 (142,233) 1,251
------------- ------------- -------------- -------------
Net income $ 100,571 $ 2,893 $ 255,081 $ 35,735
============= ============= ============== =============
Earnings per share:
Basic $ 0.12 $ 0.00 $ 0.29 $ 0.04
Diluted $ 0.12 $ 0.00 $ 0.29 $ 0.04
Average shares outstanding 876,055 876,055 876,055 876,055
</TABLE>
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<PAGE>
<TABLE>
RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 1998 and 1997
(Unaudited)
<CAPTION>
Nine Months Ended
Sept 30, 1998 Sept 30, 1997
------------- -------------
Cash Flows From Operating Activities:
<S> <C> <C>
Net income $ 255,081 $ 35,735
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation 118,575 133,730
(Gain)loss on sale of investment securities 7,687 (167,659)
Provision for loan losses 45,000 0
Accretion/Amortization of securities-net (452) 0
(Increase)decrease in assets
Interest receivable 11,237 (137,083)
Other assets (1,741,014) (68,805)
Increase(decrease) in liabilities:
Accrued interest 60,410 126,793
Other liabilities (87,751) 0
------------- -------------
Total adjustments (1,586,308) (113,024)
-------------- ------------
Net cash (used in) operating activities (1,331,227) (77,289)
-------------- ------------
Cash Flows From Investing Activities:
Proceeds from sales of available for sale securities 141,316 1,161,046
Purchase of available for sale securities (138,200) (1,385,423)
Proceeds from maturities of held to maturity securities 2,500,000 309,664
Purchase of held to maturity securities 0 (250,000)
Net proceeds on other real estate 449,276 0
Purchases of premises and equipment (39,112) (73,274)
Net increase in loans (5,581,165) (20,965,018)
------------- -------------
Net cash used in investing activities (2,667,885) (21,203,005)
------------- -------------
Cash Flows From Financing Activities:
Net increase in deposits 4,079,592 11,872,940
------------- -------------
Net cash provided by financing activities 4,079,592 11,872,940
------------- -------------
Net increase(decrease) in cash and cash equivalents 80,480 (9,407,354)
Cash and cash equivalents, beginning 10,669,236 14,937,881
------------- -------------
Cash and cash equivalents, ending $ 10,749,716 $ 5,530,527
============= =============
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ 2,091,225 $ 1,335,361
============= =============
Income taxes $ 10,267 $ 1,276
============ =============
Supplemental schedule of noncash investing activities:
Net changes in unrealized gain on securities
available for sale $ 38,075 $ 288,194
============= =============
</TABLE>
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<PAGE>
<TABLE>
RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Nine Months Ended September 30, 1998 and 1997
<CAPTION>
Accumulated
Other
Comprehensive
Common Retained Income
Stock Earnings (Loss)
------------- ------------- ---------------
Balances
<S> <C> <C> <C>
December 31, 1996 as reported $ 7,721,399 $ (1,879,126) $ 25,732
Stock dividend 690,333 (690,333)
------------- ------------- -------------
Balance, December 31, 1996(restated) 8,411,732 (2,569,459) 25,732
Net gain-YTD 1997 35,735
Other comprehensive income-change in
unrealized gain on securities 288,194
Balances
September 30, 1997 $ 8,411,732 $ (2,533,734) $ 313,926
============ ============= =============
Balances
December 31, 1997 $ 8,411,732 $ (2,533,734) $ (20,606)
Net gain-YTD 1998 255,081
Other comprehensive income-change in
unrealized gain on securities 38,075
Balances
September 30, 1998 $ 8,411,732 $ (2,278,653) $ 17,469
============ ============= =============
</TABLE>
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<PAGE>
RIDGESTONE FINANCIAL SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 and 1997
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with instructions to Form 10-QSB. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for the fair presentation have been included. Operating
results for the nine months ended September 30, 1998 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1998. For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1997.
NOTE 2 - PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Ridgestone Financial Services, Inc., (the "Company") and its wholly owned
subsidiary, Ridgestone Bank (the "Bank"). All significant intercompany accounts
and transactions have been eliminated in consolidation.
NOTE 3 - COMPARATIVE DATA
The Company was incorporated in May of 1994, but its primary operating
subsidiary, the Bank, did not commence operations until December 7, 1995.
Comparative statements of income for the three and nine months and cash flows
for the nine months ended September 30, 1998 and September 30, 1997 have been
presented.
NOTE 4 - STOCK DIVIDEND
On May 21, 1998, Ridgestone Financial Services, Inc. paid a 5% stock dividend on
issued and outstanding shares of its common stock. The dividend totaled 41,717
shares. All share, common stock and retained earnings, and earnings per share
information has been restated retroactively to reflect the stock dividend.
NOTE 5 - COMPREHENSIVE INCOME
The Financial Accounting Standards Board (FASB) has issued SFAS No. 130,
"Reporting Comprehensive Income," which is effective for fiscal years beginning
after December 15, 1997. This statement establishes standards for reporting and
display of comprehensive income and its components (revenues, expenses, gains
and losses) in a full set of general purpose financial statements. This
statement requires that all items that are required to be recognized under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. The Company adopted SFAS No. 130 on December 31, 1997 and
all required disclosures will be included in the Company's 1998 Annual Report on
Form 10-KSB.
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<PAGE>
The Company's comprehensive income for the three and nine months ended September
30, 1998 and September 30, 1997 is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept 30, Sept 30, Sept 30, Sept 30,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income $ 100,571 $ 2,893 $ 255,081 $ 35,735
Other comprehensive income, net of taxes:
Unrealized gains arising during period 9,541 281,111 32,694 405,555
Less reclassified adjustment for
gains (losses) included in net income 0 (5,310) 5,381 (117,360)
----------- ----------- ----------- -----------
Total other comprehensive income 9,541 275,801 38,075 288,195
----------- ----------- ----------- -----------
Comprehensive income $ 110,112 $ 278,694 $ 293,156 $ 323,930
=========== =========== =========== ===========
</TABLE>
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<PAGE>
Item 2. Management's Discussion and Analysis
General
Ridgestone Financial Services, Inc. (the "Company") was formed in May 1994 under
the laws of the State of Wisconsin for the purpose of becoming the bank holding
company of Ridgestone Bank (the "Bank").
The Bank was capitalized on December 6, 1995, and commenced operation on
December 7, 1995. The Bank was organized as a Wisconsin chartered commercial
bank with depository accounts insured by the Federal Deposit Insurance
Corporation. The Bank provides full service commercial and consumer banking
services in Brookfield, Wisconsin, and adjacent communities.
The following is a discussion of the Company's Financial Condition and Results
of Operations for the three and nine months ended September 30, 1998.
Financial Condition
Total Assets. Total assets of the Company as of September 30, 1998 were
$69,449,103 compared to $65,103,697 as of December 31, 1997.
Loans. Total loans prior to the allowance for estimated loan losses were
$50,559,001 as of September 30, 1998, compared to $45,557,771 as of December 31,
1997.
At September 30, 1998, the mix of the loan portfolio included Commercial loans
of $21,777,745 or 43% of total loans; Commercial Real Estate loans of
$13,832,398 or 27% of total loans; Residential Real Estate loans of $11,141,611
or 22% of total loans; and Consumer loans of $3,807,247 or 8% of total loans.
Allowance for Loan Losses. The allowance for estimated loan losses was $543,367
or 1.07 % of gross loans on September 30, 1998. In accordance with FASB
Statements 5 and 114, the allowance is provided for losses that have potentially
been incurred based on the Bank's outstanding loan balance as of the balance
sheet date. The Bank evaluates the adequacy of the loan loss reserve based on
past events and current economic conditions, and does not include the effects of
potential losses on specific loans or groups of loans that are related to future
events or changes in economic conditions which are then unknown to the Bank. For
additional information regarding the Company's allowance for loan losses, see
"Results of Operations - Provision for Loan Losses' below.
In the first nine months of 1998, the Bank charged $3,884 against the loan loss
reserve. The Bank also reduced Other Real Estate Owned by $122,489 and charged
this amount against the loan loss reserve in order to reduce the value of Other
Real Estate Owned to the appraised value as received on December 30, 1997. In
the first nine months of 1998, the Bank further reduced Other Real Estate Owned
by $449,276 as a result of the sale of real estate assets owned by the Bank.
Cash and Cash Equivalents. Cash and cash equivalents were $10,749,716 as of
September 30, 1998 compared to $10,669,236 as of December 31, 1997, an increase
of $80,480. Cash and cash equivalents represent cash maintained at the Bank and
funds that the Bank and the Company have deposited in other financial
institutions.
-7-
<PAGE>
Investment Securities. The Bank's investment portfolio consists of (i)
securities purchased with the intent to hold the securities until they mature
and (ii) securities placed in the available for sale category which may be
liquidated to provide cash for operating or financing purposes. The securities
held-to-maturity portfolio was $2,042,000 at September 30, 1998 compared to
$4,253,095 at December 31, 1997. The securities available-for-sale portfolio was
$613,225 at September 30, 1998 compared to $874,406 at December 31, 1997.
Deposits. As of September 30, 1998, total deposits were $62,567,217 compared to
$58,487,625 at December 31, 1997.
Asset/Liability Management. Closely related to liquidity management is the
management of interest-earning assets and interest-bearing liabilities. The
Company manages its rate sensitivity position to avoid wide swings in net
interest margins and to minimize risk due to changes in interest rates.
Changes in net interest income, other than volume related changes, arise when
interest rates on assets reprice in a time frame or interest rate environment
that is different from the repricing period for liabilities. Changes in net
interest income also arise from changes in the mix of interest earning assets
and interest-bearing liabilities.
The Company currently does not expect to experience any material fluctuations in
its net interest income in the short-term as a consequence of changes in
interest rates.
Liquidity. For banks, liquidity generally represents the ability to meet
withdrawals from deposits and the funding of loans. The assets that provide
liquidity are cash, federal funds sold and short-term loans and securities.
Liquidity needs are influenced by economic conditions, interest rates and
competition. Although loan growth can negatively affect short-term liquidity,
management believes the Bank will be able to meet liquidity demands as the
Bank's loan growth continues.
Results of Operations
For the three-month period ended September 30, 1998, the Company reported net
income of $100,571 as compared to a profit of $2,893 in the same period of 1997.
For the nine month period ended September 30, 1998, the Company reported net
income of $255,081 which compares favorably to a profit of $35,735 for the nine
months ended September 30, 1997. The increased earnings is attributed to
increased loan growth, improved margins and increased fee generation in loans.
Additionally, a tax benefit related to a tax loss carryforward accounted for
$50,000 and $150,000 of net income for the three and nine months ended September
30, 1998, respectively.
Net Interest Income. Net interest income before provision for loan losses for
the three and nine months ended September 30, 1998 was $547,606 and $1,476,280
compared to $421,442 and $1,031,962 for the same periods in 1997, an improvement
of 30% and 43%, respectively. The increase was due primarily to greater average
outstanding balances in interest bearing assets, primarily loans. Total interest
income for the three and nine months ended September 30, 1998 increased by
$344,581 and $1,100,650 as compared with the same periods in 1997, while total
interest expense rose by $218,417 and $656,332.
-8-
<PAGE>
Provision for Loan Losses. The provision for loan losses is based on
management's evaluation of factors such as the local and national economy and
the risks associated with the loans in the portfolio.
During the nine-month period ended September 30, 1998, a $45,000 provision was
made to the loan loss reserve to ensure that the loan loss reserve is maintained
at adequate levels.
Non-Interest Income and Expense. Total other operating income (excluding gains
and losses on the sale of securities) was $66,281 for the three months ended
September 30, 1998 compared to $34,803 for the same period in 1997, an increase
of $31,478. Total other operating income (excluding gains and losses on the sale
of securities) was $173,981 for the nine months ended September 30, 1998
compared to $89,679 for the same period in 1997, an increase of 94%. Greater fee
income from loans accounted for the majority of this increase.
Total other operating expenses were $532,849 for the three months ended
September 30, 1998 compared to $460,939 for the same period in 1997, an increase
of 16%. For the three month period ending September 30, 1998, salaries and
benefit expense was $298,185 or 56% of total operating expenses and occupancy
and equipment expense was $101,831 or 19% of total operating expenses. Payroll
and occupancy expense increased by $59,236 over the same period in 1997. Other
expense increased by $12,674 from the same period in 1997.
Total other operating expenses were $1,492,413 for the nine months ended
September 30, 1998 compared to $1,252,314 for the same period in 1997, an
increase of 19% from the prior period in 1997. For the nine months ended
September 30, 1998, salaries and employee benefit expense was $823,395 or 55% of
total operating expenses, and occupancy and equipment expense was $277,238 or
19% of total operating expenses. Other expense increased by $96,842 from the
same period in 1997.
Year 2000 Impact
Existing computer programs generally recognize dates and perform calculations by
using only the last two digits of any given year. These computer programs may
not recognize a year that begins with "20" instead of "19." As a result, the
functions of computer software, hardware and embedded systems at many
businesses, including the Bank, may experience failures or produce incorrect
results when the calendar changes to January 1, 2000. Systems failures or
miscalculations at the Bank or the Bank's vendors or customers may result in
disruption of operations, including a failure to process information or a
reduced likelihood of collecting loan payments on a timely basis.
The Bank's Readiness. To determine whether and to what extent it may experience
disruptions as a result of the turning of the Year 2000 ("Y2K"), the Bank has
established a committee to oversee the assessment process and report
periodically to Bank management. The Bank is currently in the process of
assessing (i) the Y2K status of its own internal systems, including computer
equipment (hardware), applications (software), and other electronically
controlled equipment that does not process data (embedded systems); (ii) the Y2K
status of its vendors' systems; and (iii) the Y2K status of its customers'
systems.
The Bank has completed testing or received manufacturer certification of Y2K
compliance with respect to 100% of its internal hardware and embedded systems.
All such systems appear to be Y2K compliant. The Bank spent approximately $1,500
on testing these systems to date and does not expect to incur additional
material costs in testing internal computer hardware or embedded systems.
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<PAGE>
The following chart displays the current status of the Bank's mission-critical
software with respect to Y2K compliance. Of these systems, one is currently
being installed and should be in place and Y2K compliant by January 31, 1999 at
a cost of $2,500. One system has not been vendor-certified as Y2K compliant and
is scheduled to be replaced in the first quarter of 1999 at a cost of about
$2,000. Testing has been completed satisfactorily on five of the nine systems.
Two other systems are currently being tested with satisfactory results to date.
<TABLE>
<CAPTION>
- - ------------------------------------------ ----------------- ---------------------------------------------------------------
Internal Mission-critical Software Vendor-certified
Category Compliant Status of Testing/Replacement
- - ------------------------------------------ ----------------- ---------------------------------------------------------------
<S> <C> <C>
Operating systems Yes Testing complete - satisfactory
- - ------------------------------------------ ----------------- ---------------------------------------------------------------
Banking platform applications Yes Testing in process - Phase 1 completed with satisfactory
results, Phase 2 scheduled for completion in the first
quarter of 1999
- - ------------------------------------------ ----------------- ---------------------------------------------------------------
On-line PC banking Yes Testing in process - satisfactory to date
- - ------------------------------------------ ----------------- ---------------------------------------------------------------
Telephone banking No Replacement scheduled for the first quarter of 1999
- - ------------------------------------------ ----------------- ---------------------------------------------------------------
Loan documentation Yes New system being installed
- - ------------------------------------------ ----------------- ---------------------------------------------------------------
Document management Yes Testing complete - satisfactory
- - ------------------------------------------ ----------------- ---------------------------------------------------------------
Contact management Yes Testing complete - satisfactory
- - ------------------------------------------ ----------------- ---------------------------------------------------------------
General office applications Yes Testing complete - satisfactory
- - ------------------------------------------ ----------------- ---------------------------------------------------------------
Data warehousing Yes Testing complete - satisfactory
- - ------------------------------------------ ----------------- ---------------------------------------------------------------
</TABLE>
The Bank may experience loan collection or other credit-related problems if
significant customers are not Y2K compliant before the turn of the century. In
order to assess their Y2K compliance, the Bank has sent Y2K surveys to a
majority of its commercial customers. Many of these customers have responded to
the Bank's inquiries and continue to update the Bank as new data becomes
available. The Bank intends to continue surveying new customers as appropriate
to assess their Y2K readiness. To date, the Bank has received satisfactory
responses from most of its major commercial customers, and management currently
does not anticipate the Bank will experience material adverse effects on
operations as a result of customer non-compliance.
Similarly, the Bank is receiving regular updates from almost all of the vendors
who provide mission-critical products and services. The Bank is making efforts
to contact those vendors who have not yet provided information regarding their
Y2K readiness. Of those vendors whose compliance status is known to the Bank,
all are either already compliant or appear to be making satisfactory progress
toward compliance.
Y2K Compliance Costs. The Bank outsources a majority of its information
processing, and its internal computer systems generally rely on software
provided by third-party vendors. As a result, the Bank has incurred very little
cost to date, less than $5,000, in assessing its internal readiness. The Bank
will incur additional remediation costs which are not expected to be material,
generally in connection with (i) its continuing dialogue with vendors
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<PAGE>
and customers to assess their readiness, (ii) the installation of one new system
and the replacement of one old system, and (iii) contingency planning and status
updates. The Bank currently expects that such additional costs will not exceed
$15,000.
Y2K Risks. The most significant Y2K risks to the Bank are associated with the
potential non-compliance of its third-party vendors who provide mission-critical
services. Since the Bank outsources most of its information processing to
third-party vendors, such a failure could result in higher operating costs,
increased staffing needs or the temporary inability to provide needed services
to customers. Likewise, the failure of those vendors providing critical
infrastructure services, specifically, power and communications, could result in
temporary operational difficulties at the Bank.
Y2K failures of the Bank's significant commercial customers could result in the
inability of those customers to make timely payments on loans, potentially
resulting in a loss of revenue, adjustments to the Bank's loan loss reserves,
reduced deposit balances or increased cash requirements.
The Bank does not anticipate material failures of its embedded systems, since
virtually none of these systems rely on date-based control systems.
Contingency Plans. The Bank is currently developing contingency plans to deal
with potential business interruptions caused by Y2K non-compliance of its
vendors, customers or internal systems. These plans address a wide range of
potential problems. The Bank expects to have a complete contingency plan in
place sometime in the second quarter of 1999.
Forward-Looking Statements. This Form 10-QSB contains certain "forward-looking
statements" regarding year 2000 ("Y2K') issues. These statements are intended to
qualify for the safe harbors from liability provided by the Private Securities
Litigation Reform Act of 1995. They can generally be identified because the
context of such statements will include words such as "believes," "anticipates,"
"expects" or words of similar import. Whether or not these forward-looking
statements will be accurate in the future will depend on certain risks and
factors, including those associated with (i) Y2K readiness of the vendors who
supply the Bank with critical information processing, credit delivery and other
services; (ii) Y2K readiness of the Bank's key commercial customers; (iii)
unanticipated expenses associated with ongoing assessment or remediation of
potential internal Y2K problems which could affect the Bank's operations; (iv)
the potential inadequacy or failure of the testing procedures used by the Bank
in performing its internal Y2K assessments; (v) the inaccuracy of Y2K compliance
certification received by the Bank from certain outside vendors regarding those
vendors' systems which are used by the Bank; and (vi) the failure of the Bank to
design adequate contingency plans in the event of internal or external Y2K
non-compliance. Readers are cautioned to consider these risks and factors and
the impact they may have when evaluating these forward-looking statements. These
statements are based only on management's knowledge and expectations on the date
of this Form 10-QSB. Neither the Company nor the Bank will necessarily update
these statements or other information in the Form 10-QSB based on future events
or circumstances.
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<PAGE>
Item 6. Exhibits and Reports on Form 8-K
1. Exhibits
10.1 Salary Continuation Agreement, dated October 20, 1998, by and
between Ridgestone Bank and Paul E. Menzel.
10.2 Split Dollar Agreement, dated October 20, 1998, by and between
Ridgestone Bank and Paul E. Menzel.
10.3 Split Dollar Agreement, dated October 20, 1998, by and between
Ridgestone Bank and Paul E. Menzel.
10.4 Form of Executive Incentive Retirement Agreement, dated October
20, 1998, by and between Ridgestone Bank and each of Christine V.
Lake and William R. Hayes.
10.5 Form of Split Dollar Agreement, dated October 20, 1998, by and
between Ridgestone Bank and each of Christine V. Lake and William
R. Hayes.
27 Financial Data Schedule
(EDGAR version only)
2. Reports on Form 8-K
The Company did not file a Current Report on Form 8-K during the
quarter ended September 30, 1998
-12-
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
RIDGESTONE FINANCIAL SERVICES, INC.
Date: November 13, 1998 /s/ Paul E. Menzel
Paul E. Menzel
President
Date: November 13, 1998 /s/ William R. Hayes
William R. Hayes
Vice President and Treasurer
-13-
<PAGE>
EXHIBIT INDEX
Exhibit Number
10.1 Salary Continuation Agreement, dated October 20, 1998, by and between
Ridgestone Bank and Paul E. Menzel.
10.2 Split Dollar Agreement, dated October 20, 1998, by and between
Ridgestone Bank and Paul E. Menzel.
10.3 Split Dollar Agreement, dated October 20, 1998, by and between
Ridgestone Bank and Paul E. Menzel.
10.4 Form of Executive Incentive Retirement Agreement, dated October 20,
1998, by and between Ridgestone Bank and each of Christine V. Lake and
William R. Hayes.
10.5 Form of Split Dollar Agreement, dated October 20, 1998, by and between
Ridgestone Bank and each of Christine V. Lake and William R. Hayes.
27 Financial Data Schedule
(EDGAR version only)
-14-
Exhibit 10.1
RIDGESTONE BANK
SALARY CONTINUATION AGREEMENT
THIS AGREEMENT is made this 20th day of October, 1998, by and between
Ridgestone Bank, a state, commercial bank located in Brookfield, Wisconsin (the
"Company") and Paul Menzel (the "Executive").
INTRODUCTION
To encourage the Executive to remain an employee of the Company, the
Company is willing to provide salary continuation benefits to the Executive. The
Company will pay the benefits from its general assets.
AGREEMENT
The Executive and the Company agree as follows:
Article 1
Definitions
1.1 Definitions. Whenever used in this Agreement, the following words and
phrases shall have the meanings specified:
1.1.1 ""Cause" means (i) the willful and continued failure by
Executive to substantially perform Executive's duties with the Company
(other than a failure resulting from Executive's incapacity due to
Disability or physical or mental illness) after a written
1
<PAGE>
demand for substantial performance is delivered to Executive by the Company,
which demand specifically identifies the manner in which the Company believes
that Executive has not substantially performed Executive's duties; (ii) any
willful act of misconduct by Executive which is injurious to the Company,
monetarily or otherwise; (iii) criminal conviction of Executive for any act
involving dishonesty, breach of trust or a violation of the banking laws of the
State of Wisconsin or the United State; (iv) criminal conviction of Executive
for the commission of any felony; or (v) final action by a bank regulatory
agency prohibiting Executive from participating in the affairs of Ridgestone
Bank. For purposes of this definition, no act, or failure to act on Executive's
part shall be deemed "willful" unless done or admitted to be done by Executive
not in good faith and without reasonable belief that the action or omission was
in the best interest of the Company.
1.1.2 "Change of Control" means the date that, as a result of a
transaction or series of transactions (i) any person (other than a member
of Executive's immediate family) acting in concert, becomes the beneficial
owner, directly or indirectly, of securities of the Company representing
25% or more of the combined voting power of the then outstanding securities
of the Company; (ii) the Company is combined (by merger, share exchange,
consolidation, or otherwise) with another entity and as a result of such
combination less than 75% of the outstanding securities of the surviving or
resulting corporation are owned in the aggregate by the former shareholders
of the Company; or (iii) the Company sells, leases, or otherwise transfers
all or substantially all of the properties or assets of the Company not in
the ordinary course of business to another person or entity. Executive's
immediate family is Executives children and spouse.
1.1.3 "Code" means the Internal Revenue Code of 1986, as amended.
1.1.4 "Disability" means, if the Executive is covered by a Company
sponsored disability policy, total disability as defined in such policy
without regard to any waiting
2
<PAGE>
period. In the event there is no such disability policy, Disability shall mean
Executive's inability, as a result of physical or mental incapacity, to
substantially perform Executive's duties with the Company for a period of six
(6) consecutive months. Any question as to the existence of Executive's
Disability upon which Executive and the company cannot agree shall be determined
by a qualified independent physician mutually agreeable to Executive and the
Company or, if the parties are unable to agree upon a physician within 10 days
after notice from the Company or Executive to the other suggesting a physician,
by a physician designated by the then president of the medical society for the
county in which Executive maintains his principal residence, upon the request of
either party. Costs of any such medical examination shall be paid by the
Company.
1.1.5 "Early Termination" means the Termination of Employment before
Normal Retirement Age for reasons other than death, Disability, Termination
for Cause or following a Change of Control.
1.1.6 "Early Termination Date" means the month, day and year in which
Early Termination occurs.
1.1.7 "Normal Retirement Age" means the Executive's 70th birthday.
1.1.8 "Normal Retirement Date" means the later of the Normal
Retirement Age or Termination of Employment.
1.1.9 "Plan Year" means a twelve-month period commencing on January
and ending on December of each year. The initial Plan Year shall commence
on the effective date of this Agreement.
3
<PAGE>
1.1.10 "Termination of Employment" means that the Executive ceases to
be employed by the Company for any reason whatsoever other than by reason
of a leave of absence which is approved by the Company. For purposes of
this Agreement, if there is a dispute over the employment status of the
Executive or the date of the Executive's Termination of Employment, the
Company shall have the sole and absolute right to decide the dispute.
1.1.11 "Unforeseeable Financial Emergency" means a severe financial
hardship to the Executive resulting from (i) a sudden and unexpected
illness or accident of the Executive or a dependent (as defined in section
152 of the Code) of the Executive; (ii) loss of the Executive's property
due to casualty; or (iii) other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the
Executive.
Article 2 Termination
Benefits
2.1 Normal Retirement Benefit. Upon Termination of Employment on or after
the Normal Retirement Age for reasons other than death, the Company shall pay to
the Executive the benefit described in this Section 2.1 in lieu of any other
benefit under this Agreement.
2.1.1 Amount of Benefit. The annual benefit under this Section 2.1 is
$120,100 (One hundred and twenty thousand and one hundred dollars).
2.1.2 Payment of Benefit. The Company shall pay the benefit to the
Executive in 12 equal monthly installments on the first day of each month
commencing with the month following the Executive's Normal Retirement Date
and continuing for the life of the Executive, but in any event, until a
total of 179 additional monthly payments have been made to the Executive or
to the Executive's beneficiary.
4
<PAGE>
2.1.3 Benefit Increases. Commencing on the first anniversary of the
first benefit payment, and continuing on each subsequent anniversary, the
Company's Board of Directors, in its sole discretion, may increase the
benefit, however, any increase shall require the recalculation of Schedule
A.
2.2 Early Termination Benefit. Upon Early Termination, the Company shall
pay to the Executive the benefit described in this Section 2.2 in lieu of any
other benefit under this Agreement.
2.2.1 Amount of Benefit. The benefit under this Section 2.2 is the
annual benefit amount set forth in Schedule A for the Plan Year ending
immediately prior to the Early Termination Date.
2.2.2 Payment of Benefit. The Company shall pay the annual benefit to
the Executive in 12 equal monthly installments payable on the first day of
each month commencing with the month following the Normal Retirement Age
and continuing for 179 additional months.
2.2.3 Benefit Increases. Benefit payments may be increased as provided
in Section 2.1.3.
2.3 Disability Benefit. If the Executive terminates employment due to
Disability prior to Normal Retirement Age, the Company shall pay to the
Executive the benefit described in this Section 2.3 in lieu of any other benefit
under this Agreement.
2.3.1 Amount of Benefit. The benefit under this Section 2.3 is the
annual benefit amount set forth in Schedule A for the Plan Year ending
immediately prior to the date in which the Termination of Employment
occurs.
5
<PAGE>
2.3.2 Payment of Benefit. The Company shall pay the annual benefit
amount to the Executive in 12 equal monthly installments payable on the
first day of each month commencing with the month following the Termination
of Employment and continuing for 179 additional months.
2.3.3 Benefit Increases. Benefit payments may be increased as provided
in Section 2.1.3
2.4 Change of Control Benefit. In the event that Company terminates
Executive's employment (other than for Cause) within twelve months following a
Change of Control, the Company shall pay to the Executive the benefit described
in this Section 2.4 in lieu of any other benefit under this Agreement.
2.4.1 Amount of Benefit. The annual benefit under this Section 2.4 is
the amount set forth in Schedule A at Termination of Employment.
2.4.2 Payment of Benefit. The Company shall pay the annual benefit
amount to the Executive in 12 equal monthly installments payable on the
first day of each month commencing with the month following the Termination
of Employment and continuing for 179 additional months.
2.4.3 Benefit Increases. Benefit payments may be increased as provided
in Section 2.1.3.
6
<PAGE>
Article 3
Death Benefits
3.1 Death During Active Service. If the Executive dies while in the active
service of the Company, the Company shall pay to the Executive's beneficiary the
benefit described in the Split Dollar Agreement of even date herewith between
the Company and the Executive; provided, however, the Company shall not pay any
benefit under this Section 3.1 if the Executive has received any of the
Termination Benefits under Article 2.
3.2 Death During Benefit Period. If the Executive dies after the benefit
payments have commenced under this Agreement but before receiving all such
payments, the Company shall pay the remaining benefits to the Executive's
beneficiary at the same time and in the same amounts they would have been paid
to the Executive had the Executive survived.
3.3 Death Following Termination of Employment But Before Benefits
Commence. If the Executive is entitled to benefits under this Agreement, but
dies prior to receiving said benefits, the Company shall pay to the Executive's
beneficiary the same benefits, in the same manner, that would have been paid to
the Executive had the Executive survived; provided however, said benefit
payments will commence upon the Executive's death.
3.4 Death of Beneficiary. In the event of the death of the beneficiary
prior to receipt of all amounts due under the terms of Section 3.1, 3.2 or 3.3,
the remaining benefits due shall be paid as a lump sum to the beneficiary's
estate as soon as practicable following the death of the beneficiary.
7
<PAGE>
Article 4
Beneficiaries
4.1 Beneficiary Designations. The Executive shall designate a beneficiary
by filing a written designation with the Company. The Executive may revoke or
modify the designation at any time by filing a new designation. However,
designations will only be effective if signed by the Executive and accepted by
the Company during the Executive's lifetime. The Executive's beneficiary
designation shall be deemed automatically revoked if the beneficiary predeceases
the Executive, or if the Executive names a spouse as beneficiary and the
marriage is subsequently dissolved. If the Executive dies without a valid
beneficiary designation, all payments shall be made to the Executive's estate.
4.2 Facility of Payment. If a benefit is payable to a minor, to a person
declared incapacitated, or to a person incapable of handling the disposition of
his or her property, the Company may pay such benefit to the guardian, legal
representative or person having the care or custody of such minor, incapacitated
person or incapable person. The Company may require proof of incapacity,
minority or guardianship as it may deem appropriate prior to distribution of the
benefit. Such distribution shall completely discharge the Company from all
liability with respect to such benefit.
Article 5
General Limitations
Notwithstanding any provision of this Agreement to the contrary, the
Company shall not pay any benefit under this Agreement:
5.1 Excess Parachute Payment. To the extent the benefit would create an
excise tax under the excess parachute rules of Section 280G of the Code.
8
<PAGE>
5.2 Termination for Cause. If the Company terminates the Executive's
employment for Cause.
5.3 Competition After Termination of Employment. No benefits shall be
payable and all payments hereunder shall cease if the Executive ceases to
receive severance payments from the Company as a result of the Executive's
violation of the noncompetition provision contained in the Executive's
employment agreement with the Company as in effect on the date of the
Executive's termination of employment with the Company.
5.4 Suicide or Misstatement. No benefits shall be payable if the Executive
commits suicide within two years after the date of this Agreement, or if the
Executive has made any material misstatement of fact on any application for life
insurance purchased by the Company.
Article 6
Claims and Review Procedures
6.1 Claims Procedure. The Company shall notify any person or entity that
makes a claim against the Agreement (the "Claimant") in writing, within ninety
(90) days of Claimant's written application for benefits, of his or her
eligibility or noneligibility for benefits under the Agreement. If the Company
determines that the Claimant is not eligible for benefits or full benefits, the
notice shall set forth (1) the specific reasons for such denial, (2) a specific
reference to the provisions of the Agreement on which the denial is based, (3) a
description of any additional information or material necessary for the Claimant
to perfect his or her claim, and a description of why it is needed, and (4) an
explanation of the Agreement's claims review procedure and other appropriate
information as to the steps to be taken if the Claimant wishes to have the claim
reviewed. If the Company determines that there are special circumstances
requiring additional time to make a decision, the Company shall notify the
Claimant of the special circumstances and the date by which a decision is
expected to be made, and may extend the time for up to an additional ninety-day
period.
9
<PAGE>
6.2 Review Procedure. If the Claimant is determined by the Company not to
be eligible for benefits, or if the Claimant believes that he or she is entitled
to greater or different benefits, the Claimant shall have the opportunity to
have such claim reviewed by the Company by filing a petition for review with the
Company within sixty (60) days after receipt of the notice issued by the
Company. Said petition shall state the specific reasons which the Claimant
believes entitle him or her to benefits or to greater or different benefits.
Within sixty (60) days after receipt by the Company of the petition, the Company
shall afford the Claimant (and counsel, if any) an opportunity to present his or
her position to the Company orally or in writing, and the Claimant (or counsel)
shall have the right to review the pertinent documents. The Company shall notify
the Claimant of its decision in writing within the sixty-day period, stating
specifically the basis of its decision, written in a manner calculated to be
understood by the Claimant and the specific provisions of the Agreement on which
the decision is based. If, because of the need for a hearing, the sixty-day
period is not sufficient, the decision may be deferred for up to another
sixty-day period at the election of the Company, but notice of this deferral
shall be given to the Claimant.
Article 7
Amendments and Termination
This Agreement may be amended or terminated only by a written agreement
signed by the Company and the Executive (or the Executive's beneficiary after
the Executive's death).
Article 8
Miscellaneous
8.1 Binding Effect. This Agreement shall bind the Executive and the
Company, and their beneficiaries, survivors, executors, successors or assigns,
administrators and transferees.
10
<PAGE>
8.2 No Guarantee of Employment. This Agreement is not an employment policy
or contract. It does not give the Executive the right to remain an employee of
the Company, nor does it interfere with the Company's right to discharge the
Executive. It also does not require the Executive to remain an employee nor
interfere with the Executive's right to terminate employment at any time.
8.3 Non-Transferability. Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached or encumbered in any manner.
8.4 Reorganization. The Company shall not merge or consolidate into or with
another company, or reorganize, or sell substantially all of its assets to
another company, firm, or person unless such succeeding or continuing company,
firm, or person agrees to assume and discharge the obligations of the Company
under this Agreement. Upon the occurrence of such event, the term "Company" as
used in this Agreement shall be deemed to refer to the successor or survivor
company.
8.5 Tax Withholding. The Company shall withhold any taxes that are required
to be withheld from the benefits provided under this Agreement.
8.6 Applicable Law. The Agreement and all rights hereunder shall be
governed by the laws of the State of Wisconsin, except to the extent preempted
by the laws of the United States of America.
8.7 Unfunded Arrangement. The Executive and beneficiary are general
unsecured creditors of the Company for the payment of benefits under this
Agreement. The benefits represent the mere promise by the Company to pay such
benefits. The rights to benefits are not subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors. Any insurance on the Executive's life
11
<PAGE>
is a general asset of the Company to which the Executive and beneficiary have no
preferred or secured claim.
8.8 Recovery of Estate Taxes. If the Executive's gross estate for federal
estate tax purposes includes any amount determined by reference to and on
account of this Agreement, and if the beneficiary is other than the Executive's
estate, then the Executive's estate shall be entitled to recover from the
beneficiary receiving such benefit under the terms of the Agreement, an amount
by which the total estate tax due by the Executive's estate, exceeds the total
estate tax which would have been payable if the value of such benefit had not
been included in the Executive's gross estate. If there is more than one person
receiving such benefit, the right of recovery shall be against each such person.
In the event the beneficiary has a liability hereunder, the beneficiary may
petition the Company for a lump sum payment in an amount not to exceed the
beneficiary's liability hereunder.
8.9 Entire Agreement. This Agreement constitutes the entire agreement
between the Company and the Executive as to the subject matter hereof. No rights
are granted to the Executive by virtue of this Agreement other than those
specifically set forth herein.
8.10 Administration. The Company shall have powers which are necessary to
administer this Agreement, including but not limited to:
8.10.1 Interpreting the provisions of the Agreement;
8.10.2 Establishing and revising the method of accounting for the
Agreement;
8.10.3 Maintaining a record of benefit payments; and
8.10.4 Establishing rules and prescribing any forms necessary or
desirable to administer the Agreement.
12
<PAGE>
8.11 Designated Fiduciary. For purposes of the Employee Retirement Income
Security Act of 1974, if applicable, the Company shall be the named fiduciary
and plan administrator under the Agreement. The named fiduciary may delegate to
others certain aspects of the management and operation responsibilities of the
plan including the employment of advisors and the delegation of ministerial
duties to qualified individuals.
IN WITNESS WHEREOF, the Executive and a duly authorized Company officer
have signed this Agreement.
EXECUTIVE: COMPANY:
RIDGESTONE BANK
/s/ Paul Menzel By /s/ William R. Hayes
PAUL MENZEL Title Vice President, Cashier and Controller
13
Exhibit 10.2
RIDGESTONE BANK
SPLIT DOLLAR AGREEMENT
THIS AGREEMENT is made and entered into this 20th day of October, 1998 by
and between Ridgestone Bank (the "Company"), and Paul Menzel.
INTRODUCTION
WHEREAS, in recognition of the fact that Paul Menzel ("Executive") has
contributed substantially to the success of the Company, the Company, as a
fringe benefit, is willing to divide the death proceeds of a life insurance
policy on the Executive's life. The Company will pay life insurance premiums
from its general assets.
Article 1
General Definitions
The following terms shall have the meanings specified:
1.1 "Insured" means the Executive.
1.2 "Insurer" means Transamerica Assurance Company.
1.3 "Normal Retirement Date" means the Executive attaining age 70.
1.4 "Policy" means insurance policy number 5033948 issued by the Insurer.
1.5 "Termination of Employment" means the Executive's ceasing to be
employed by the Company for any reason whatsoever, voluntary or
involuntary, other than by reason of an approved leave of absence.
Article 2
Policy Ownership/Interests
2.1 Company Ownership. The Company is the sole owner of the Policy and
shall have
<PAGE>
the right to exercise all incidents of ownership. The Company shall be the
direct beneficiary of an amount of death proceeds equal to the greater of (1)
the cash surrender value of the policy, or (2) the aggregate premiums paid on
the Policy by the Company less any outstanding indebtedness to the Insurer.
2.2 Beneficiaries Interest. The Executive shall have the right to designate
a beneficiary to receive $480,000 of the net life insurance proceeds (the
"Beneficiary"). The Executive shall also have the right to elect and change
settlement options that may be permitted.
2.3 Option to Purchase. The Company shall not sell, surrender or transfer
ownership of the policy while this Agreement is in effect without first giving
the Executive or it=s transferee, the option to purchase the Policy for a period
of sixty (60) days from written notice of such intention. The purchase price
shall be an amount equal to the cash surrender value of the Policy. This
provision shall not impair the right of the Company to terminate this Agreement.
Article 3
Premiums
3.1 Premium Payment. The Company shall pay any premiums due on the Policy.
3.2 Imputed Income. The Company shall impute income to the Executive in an
amount equal to the current term rate for the Executive's age multiplied by the
aggregate death benefit payable to the Executive's beneficiary. The "current
term rate" is the minimum amount required to be imputed under Revenue Rulings
64-328 and 66-110, or any subsequent applicable authority.
Article 4
Assignment
The Executive may assign without consideration all interests in the Policy
and in this Agreement to any person, or entity. In the event the Executive shall
transfer all of it's interest
<PAGE>
in the Policies, then all of the Executive's interest in the Policies and in the
Agreement shall be vested in it=s transferee, who shall be substituted as a
party hereunder, and the Executive shall have no further interest in the Policy
or in this Agreement.
Article 5
Insurer
The Insurer shall be bound only by the terms of the Policy. Any payments
the Insurer makes or actions it takes in accordance with the Policy shall fully
discharge it from all claims, suits and demands of all entities or persons. The
Insurer shall not be bound by or be deemed to have notice of the provisions of
this Agreement.
Article 6
Claims Procedure
6.1 Claims Procedure. The Company shall notify the Beneficiary in writing,
within ninety (90) days of its written application for benefits, of its
eligibility or noneligibility for benefits under this Agreement. If the Company
determines that the Executive or its assignee, is not eligible for benefits or
full benefits, the notice shall set forth (1) the specific reasons for such
denial, (2) a specific reference to the provisions of this Agreement on which
the denial is based, (3) a description of any additional information or material
necessary for the claimant to perfect his or her claim, and a description of why
it is needed, and (4) an explanation of this Agreement's claims review procedure
and other appropriate information as to the steps to be taken if the Executive
or it=s assignee wishes to have the claim reviewed. If the Company determines
that there are special circumstances requiring additional time to make a
decision, the Company shall notify the Executive or its assignee of the special
circumstances and the date by which a decision is expected to be made, and may
extend the time for up to an additional ninety-day period.
6.2 Review Procedure. If the Executive or its assignee is determined by the
Company not to be eligible for benefits, or if the Executive or its assignee
believes that he or she is
<PAGE>
entitled to greater or different benefits, the Executive or its assignee shall
have the opportunity to have such claim reviewed by the Company by filing a
petition for review with the Company within sixty (60) days after receipt of the
notice issued by the Company. Said petition shall state the specific reasons
which the Executive or its assignee believes entitle him or her to benefits or
to greater or different benefits. Within sixty (60) days after receipt by the
Company of the petition, the Company shall afford the Executive or its assignee
(and counsel, if any) an opportunity to present his or her position to the
Company orally or in writing, and the Executive or its assignee (or counsel)
shall have the right to review the pertinent documents. The Company shall notify
the Executive or its assignee of its decision in writing within the sixty-day
period, stating specifically the basis of its decision, written in a manner
calculated to be understood by the Executive or its assignee and the specific
provisions of this Agreement on which the decision is based. If, because of the
need for a hearing, the sixty-day period is not sufficient, the decision may be
deferred for up to another sixty-day period at the election of the Company, but
notice of this deferral shall be given to the Executive or its assignee.
Article 7
Amendments and Termination
The Company may amend this Agreement at any time prior to the Executive's death
only with written consent of the Executive. Either party may terminate this
Agreement at any time prior to the Executive's death by written notice to the
other party. This agreement will automatically terminate upon the earlier to
occur of the Executive's Termination of Employment (other than as a result of
Executive's death) or the Executive's Normal Retirement Date.
Article 8
Miscellaneous
8.1 Binding Effect. This Agreement shall bind the Executive and the
Company, their beneficiaries, survivors, executors, administrators and
transferees, successors and assigns, and any Policy beneficiary.
<PAGE>
8.2 No Guaranty of Employment. This Agreement is not an employment policy
or contract. It does not give the Executive the right to remain an employee of
the Company, nor does it interfere with the Company's right to discharge the
Executive. It also does not require the Executive to remain an employee nor
interfere with the Executive's right to terminate employment at any time.
8.3 Applicable Law. The Agreement and all rights hereunder shall be
governed by and construed according to the laws of Wisconsin, except to the
extent preempted by the laws of the United States of America.
8.4 Notice. Any notice, consent or demand required or permitted to be given
under the provisions of this Split Dollar Agreement by one party to another
shall be in writing, shall be signed by the party giving or making the same, and
may be given either by delivering the same to such other party personally, or by
mailing the same, by United States certified mail, postage prepaid, to such
party, addressed to his/her last known address as shown on the records of the
Company. The date of such mailing shall be deemed the date of such mailed
notice, consent or demand.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
EXECUTIVE: COMPANY:
Paul Menzel Ridgestone Bank
By: /s/ Paul Menzel By: /s/ William R. Hayes
Title: Vice President, Cashier and Controller
Exhibit 10.3
RIDGESTONE BANK
SPLIT DOLLAR AGREEMENT
THIS AGREEMENT is made and entered into this 20th day of October, 1998 by
and between Ridgestone Bank (the "Company"), and Paul Menzel.
INTRODUCTION
WHEREAS, in recognition of the fact that Paul Menzel ("Executive") has
contributed substantially to the success of the Company, the Company, as a
fringe benefit, is willing to divide the death proceeds of a life insurance
policy on the Executive's life. The Company will pay life insurance premiums
from its general assets.
Article 1
General Definitions
The following terms shall have the meanings specified:
1.1 "Insured" means the Executive.
1.2 "Insurer" means Jefferson - Pilot Life Insurance Company.
1.3 "Normal Retirement Date" means the Executive attaining age 70.
1.4 "Policy" means insurance policy number JP5031953 issued by the Insurer.
1.5 "Termination of Employment" means the Executive's ceasing to be
employed by the Company for any reason whatsoever, voluntary or
involuntary, other than by reason of an approved leave of absence.
Article 2
Policy Ownership/Interests
2.1 Company Ownership. The Company is the sole owner of the Policy and
shall have
<PAGE>
the right to exercise all incidents of ownership. The Company shall be the
direct beneficiary of an amount of death proceeds equal to the greater of (1)
the cash surrender value of the policy, or (2) the aggregate premiums paid on
the Policy by the Company less any outstanding indebtedness to the Insurer.
2.2 Beneficiaries Interest. The Executive shall have the right to designate
a beneficiary to receive $540,000 of the net life insurance proceeds (the
"Beneficiary"). The Executive shall also have the right to elect and change
settlement options that may be permitted.
2.3 Option to Purchase. The Company shall not sell, surrender or transfer
ownership of the policy while this Agreement is in effect without first giving
the Executive or it's transferee, the option to purchase the Policy for a period
of sixty (60) days from written notice of such intention. The purchase price
shall be an amount equal to the cash surrender value of the Policy. This
provision shall not impair the right of the Company to terminate this Agreement.
Article 3
Premiums
3.1 Premium Payment. The Company shall pay any premiums due on the Policy.
3.2 Imputed Income. The Company shall impute income to the Executive in an
amount equal to the current term rate for the Executive's age multiplied by the
aggregate death benefit payable to the Executive's beneficiary. The "current
term rate" is the minimum amount required to be imputed under Revenue Rulings
64-328 and 66-110, or any subsequent applicable authority.
Article 4
Assignment
The Executive may assign without consideration all interests in the Policy
and in this
<PAGE>
Agreement to any person, or entity. In the event the Executive shall transfer
all of it's interest in the Policies, then all of the Executive's interest in
the Policies and in the Agreement shall be vested in it's transferee, who shall
be substituted as a party hereunder, and the Executive shall have no further
interest in the Policy or in this Agreement.
Article 5
Insurer
The Insurer shall be bound only by the terms of the Policy. Any payments
the Insurer makes or actions it takes in accordance with the Policy shall fully
discharge it from all claims, suits and demands of all entities or persons. The
Insurer shall not be bound by or be deemed to have notice of the provisions of
this Agreement.
Article 6
Claims Procedure
6.1 Claims Procedure. The Company shall notify the Beneficiary in writing,
within ninety (90) days of its written application for benefits, of its
eligibility or noneligibility for benefits under this Agreement. If the Company
determines that the Executive or its assignee, is not eligible for benefits or
full benefits, the notice shall set forth (1) the specific reasons for such
denial, (2) a specific reference to the provisions of this Agreement on which
the denial is based, (3) a description of any additional information or material
necessary for the claimant to perfect his or her claim, and a description of why
it is needed, and (4) an explanation of this Agreement's claims review procedure
and other appropriate information as to the steps to be taken if the Executive
or it's assignee wishes to have the claim reviewed. If the Company determines
that there are special circumstances requiring additional time to make a
decision, the Company shall notify the Executive or its assignee of the special
circumstances and the date by which a decision is expected to be made, and may
extend the time for up to an additional ninety-day period.
6.2 Review Procedure. If the Executive or its assignee is determined by the
Company
<PAGE>
not to be eligible for benefits, or if the Executive or its assignee believes
that he or she is entitled to greater or different benefits, the Executive or
its assignee shall have the opportunity to have such claim reviewed by the
Company by filing a petition for review with the Company within sixty (60) days
after receipt of the notice issued by the Company. Said petition shall state the
specific reasons which the Executive or its assignee believes entitle him or her
to benefits or to greater or different benefits. Within sixty (60) days after
receipt by the Company of the petition, the Company shall afford the Executive
or its assignee (and counsel, if any) an opportunity to present his or her
position to the Company orally or in writing, and the Executive or its assignee
(or counsel) shall have the right to review the pertinent documents. The Company
shall notify the Executive or its assignee of its decision in writing within the
sixty-day period, stating specifically the basis of its decision, written in a
manner calculated to be understood by the Executive or its assignee and the
specific provisions of this Agreement on which the decision is based. If,
because of the need for a hearing, the sixty-day period is not sufficient, the
decision may be deferred for up to another sixty-day period at the election of
the Company, but notice of this deferral shall be given to the Executive or its
assignee.
Article 7
Amendments and Termination
The Company may amend this Agreement at any time prior to the Executive's death
only with written consent of the Executive. Either party may terminate this
Agreement at any time prior to the Executive's death by written notice to the
other party. This agreement will automatically terminate upon the earlier to
occur of the Executive's Termination of Employment (other than as a result of
Executive's death) or the Executive's Normal Retirement Date.
Article 8
Miscellaneous
8.1 Binding Effect. This Agreement shall bind the Executive and the
Company, their beneficiaries, survivors, executors, administrators and
transferees, successors and assigns, and
<PAGE>
any Policy beneficiary.
8.2 No Guaranty of Employment. This Agreement is not an employment policy
or contract. It does not give the Executive the right to remain an employee of
the Company, nor does it interfere with the Company's right to discharge the
Executive. It also does not require the Executive to remain an employee nor
interfere with the Executive's right to terminate employment at any time.
8.3 Applicable Law. The Agreement and all rights hereunder shall be
governed by and construed according to the laws of Wisconsin, except to the
extent preempted by the laws of the United States of America.
8.4 Notice. Any notice, consent or demand required or permitted to be given
under the provisions of this Split Dollar Agreement by one party to another
shall be in writing, shall be signed by the party giving or making the same, and
may be given either by delivering the same to such other party personally, or by
mailing the same, by United States certified mail, postage prepaid, to such
party, addressed to his/her last known address as shown on the records of the
Company. The date of such mailing shall be deemed the date of such mailed
notice, consent or demand.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
EXECUTIVE: COMPANY:
Paul Menzel Ridgestone Bank
By: /s/ Paul Menzel By: /s/ William R. Hayes
Title: Vice President, Cashier and Controller
Exhibit 10.4
RIDGESTONE BANK
EXECUTIVE INCENTIVE RETIREMENT AGREEMENT
THIS AGREEMENT is made this 20th day of October, 1998, by and between
Ridgestone Bank, a state commercial bank, located in Brookfield, Wisconsin (the
"Company"), and _______________________ (the "Executive").
INTRODUCTION
To encourage the Executive to remain an employee of the Company, the
Company is willing to provide to the Executive a deferred incentive opportunity.
The Company will pay the benefits from its general assets.
AGREEMENT
The Executive and the Company agree as follows:
Article 1
Definitions
1.1 Definitions. Whenever used in this Agreement, the following words and
phrases shall have the meanings specified:
1.1.1 "Cause" means (i) the willful and continued failure by Executive
to substantially perform Executive's duties with the Company (other than a
failure resulting from Executive's incapacity due to Disability or physical
or mental illness) after a written demand for substantial performance is
delivered to Executive by the Company, which demand specifically identifies
the manner in which the Company believes that Executive has not
substantially performed Executive's duties; (ii) any willful act of
misconduct by Executive which is injurious to the Company, monetarily or
otherwise; (iii) criminal conviction of Executive for any act involving
dishonesty, breach of trust or a violation of the banking laws of the State
of Wisconsin or the United State; (iv) criminal conviction of Executive for
the commission of any felony; or (v) final action by a bank regulatory
agency prohibiting Executive from participating in the affairs of
Ridgestone Bank. For purposes of this definition, no act, or failure to act
on Executive's part shall be deemed "willful" unless done or admitted to be
done by Executive not in good faith and without reasonable belief that the
action or omission was in the best interest of the Company.
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1.1.2 "Change of Control" means the date that, as a result of a
transaction or series of transactions (i) any person (other than a member
of Executive's immediate family) acting in concert, becomes the beneficial
owner, directly or indirectly, of securities of the Company representing
25% or more of the combined voting power of the then outstanding securities
of the Company; (ii) the Company is combined (by merger, share exchange,
consolidation, or otherwise) with another entity and as a result of such
combination less than 75% of the outstanding securities of the surviving or
resulting corporation are owned in the aggregate by the former shareholders
of the Company; or (iii) the Company sells, leases, or otherwise transfers
all or substantially all of the properties or assets of the Company not in
the ordinary course of business to another person or entity. Executive's
immediate family is Executives children and spouse.
1.1.3 "Code" means the Internal Revenue Code of 1986, as amended.
1.1.4 "Disability" means, if the Executive is covered by a Company
sponsored disability policy, total disability as defined in such policy
without regard to any waiting period. In the event there is no such
disability policy, Disability shall mean Executive's inability, as a result
of physical or mental incapacity, to substantially perform Executive's
duties with the Company for a period of six (6) consecutive months. Any
question as to the existence of Executive's Disability upon which Executive
and the company cannot agree shall be determined by a qualified independent
physician mutually agreeable to Executive and the Company or, if the
parties are unable to agree upon a physician within 10 days after notice
from the Company or Executive to the other suggesting a physician, by a
physician designated by the then president of the medical society for the
county in which Executive maintains his principal residence, upon the
request of either party. Costs of any such medical examination shall be
paid by the Company.
1.1.5 "Early Termination" means the Termination of Employment before
Normal Retirement Age for reasons other than death, Disability, Termination
for Cause or following a Change of Control.
1.1.6 "Early Termination Date" means the month, day and year in which
Early Termination occurs.
1.1.7 "Normal Retirement Age" means the Executive's 65th birthday.
1.1.8 "Normal Retirement Date" means the later of the Normal
Retirement Age or Termination of Employment.
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1.1.9 "Plan Year" means a twelve-month period commencing on January
and ending on December of each year. The initial Plan Year shall commence
on the effective date of this Agreement.
1.1.10 "Termination of Employment" means that the Executive ceases to
be employed by the Company for any reason whatsoever other than by reason
of a leave of absence which is approved by the Company. For purposes of
this Agreement, if there is a dispute over the employment status of the
Executive or the date of the Executive's Termination of Employment, the
Company shall have the sole and absolute right to decide the dispute.
1.1.11 "Unforeseeable Financial Emergency" means a severe financial
hardship to the Executive resulting from (i) a sudden and unexpected
illness or accident of the Executive or a dependent (as defined in section
152 of the Code) of the Executive; (ii) loss of the Executive's property
due to casualty; or (iii) other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the
Executive.
Article 2
Incentive
2.1 Incentive Award. On December 31 of each Plan Year, the Company shall
credit to the Deferral Account the Executive's Incentive Award for such year.
The Incentive Award shall be an amount equal to ____ percent of the Executive's
beginning annual base salary, which shall be $_________ for the first Plan Year
and shall increase each Plan Year thereafter by four percent. Notwithstanding
the foregoing, the Incentive Award is subject to change at the sole discretion
of the Board.
Article 3
Deferral Account
3.1 Establishing and Crediting. The Company shall establish a Deferral
Account on its books for the Executive, and shall credit to the Deferral Account
the following amounts:
3.1.1 Deferrals. The Incentive Deferral as determined under Article 2.
3.1.2 Interest. The Interest as set forth in Schedule A.
3.2 Statement of Accounts. The Company shall provide to the Executive, by
April 1 of each plan year this Agreement is in effect, a statement setting forth
the Deferral Account balance.
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<PAGE>
3.3 Accounting Device Only. The Deferral Account is solely a device for
measuring amounts to be paid under this Agreement. The Deferral Account is not a
trust fund of any kind. The Executive is a general unsecured creditor of the
Company for the payment of benefits. The benefits represent the mere Company
promise to pay such benefits. The Executive's rights are not subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by the Executive's creditors.
Article 4
Termination Benefits
4.1 Normal Retirement Benefit. If the Executive terminates employment on or
after the Normal Retirement Age for reasons other than death, the Company shall
pay to the Executive the benefit described in this Section 4.1 in lieu of any
other benefit under this Agreement.
4.1.1 Amount of Benefit. The benefit under this Section 4.1 is the
Deferral Account balance at the Executive's Normal Retirement Date.
4.1.2 Payment of Benefit. The Company shall pay the benefit to the
Executive in 12 equal monthly installments commencing on the first day of
the month following the Executive's Normal Retirement Date and continuing
for the life of the Executive, but in any event, until a total of 179
additional monthly payments have been made to the Executive or to the
Executive's beneficiary. The Company shall credit interest at the annual
rate of 8.5%, compounded monthly, on the remaining account balance during
any applicable installment period.
4.2 Early Termination Benefit. If the Executive terminates employment
before the Normal Retirement Age, and for reasons other than death or
Disability, the Company shall pay to the Executive the benefit described in this
Section 4.2 in lieu of any other benefit under this Agreement .
4.2.1 Amount of Benefit. The benefit under this Section 4.2 is the
Deferral Account balance at the Executive's Termination of Employment.
4.2.2 Payment of Benefit. The Company shall pay the benefit to the
Executive in 180 equal monthly installments commencing on the first day of
the month following the Executive's Termination of Employment. The Company
shall credit interest at the annual rate of 8.5%, compounded monthly, on
the remaining account balance during any applicable installment period.
4
<PAGE>
4.3 Disability Benefit. If the Executive terminates employment for
Disability prior to the Normal Retirement Age, the Company shall pay to the
Executive the benefit described in this Section 4.3 in lieu of any other benefit
under this Agreement.
4.3.1 Amount of Benefit. The benefit under this Section 4.3 is the
Deferral Account balance at Termination of Employment.
4.3.2 Payment of Benefit. The Company shall pay the benefit to the
Executive in 180 equal monthly installments commencing on the first day of
the month following the Termination of Employment. The Company shall credit
interest at the annual rate of 8.5%, compounded monthly, on the remaining
account balance during any applicable installment period.
4.4 Change of Control Benefit. In the event that the Company terminate
Executive's employment (other than for Cause) within twelve months following a
Change of Control, the Company shall pay to the Executive the benefit described
in this Section 4.4 in lieu of any other benefit under this Agreement.
4.4.1 Amount of Benefit. The benefit under this Section 4.4 is the
Deferral Account balance at Termination of Employment.
4.4.2 Payment of Benefit. The Company shall pay the benefit to the
Executive in a lump sum within 60 days after Termination of Employment.
4.5 Hardship Distribution. Upon the Company's determination (following
petition by the Executive) that the Executive has suffered an Unforeseeable
Financial Emergency, the Company shall distribute to the Executive all or a
portion of the Deferral Account balance as determined by the Company, but in no
event shall the distribution be greater than is necessary to relieve the
financial hardship, and shall not be paid to the extent such hardship is or may
be relieved (i) through reimbursement or compensation by insurance or otherwise,
or (ii) by liquidation of the Executive's assets, to the extent the liquidation
of such assets would itself not cause severe financial hardship.
Article 5
Death Benefits
5.1 Death During Active Service. If the Executive dies while in the active
service of the Company, the Company shall pay to the Executive's beneficiary the
benefit described in the Split Dollar Agreement of even date herewith between
the Company and the Executive; provided, however, the Company shall not pay any
benefit under this Section 5.1 if the Executive has received any of the
Retirement Benefits under Article 4.
5
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5.2 Death During Benefit Period. If the Executive dies after benefit
payments have commenced under this Agreement but before receiving all such
payments, the Company shall pay the remaining benefits to the Executive's
beneficiary at the same time and in the same amounts that would have been paid
to the Executive had the Executive survived.
5.3 Death After Termination of Employment But Before Benefit Payments
Commence. If the Executive is entitled to benefit payments under this Agreement,
but dies prior to the commencement of said benefit payments, the Company shall
pay the benefit payments to the Executive's beneficiary that the Executive was
entitled to prior to death except that the benefit payments shall commence on
the first day of the month following the date of the Executive's death.
5.4 Death of Beneficiary. In the event of the death of the beneficiary
prior to receipt of all amounts due under the terms of Section 5.1, 5.2 and 5.3,
the remaining balance of the Deferral Account shall be paid as a lump sum to the
beneficiary's estate as soon as practicable following the death of the
beneficiary.
Article 6
Beneficiaries
6.1 Beneficiary Designations. The Executive shall designate a beneficiary
by filing a written designation with the Company. The Executive may revoke or
modify the designation at any time by filing a new designation. However,
designations will only be effective if signed by the Executive and accepted by
the Company during the Executive's lifetime. The Executive's beneficiary
designation shall be deemed automatically revoked if the beneficiary predeceases
the Executive, or if the Executive names a spouse as beneficiary and the
marriage is subsequently dissolved. If the Executive dies without a valid
beneficiary designation, all payments shall be made to the Executive's estate.
6.1 Facility of Payment. If a benefit is payable to a minor, to a person
declared incompetent, or to a person incapable of handling the disposition of
his or her property, the Company may pay such benefit to the guardian, legal
representative or person having the care or custody of such minor, incompetent
person or incapable person. The Company may require proof of incompetence,
minority or guardianship as it may deem appropriate prior to distribution of the
benefit. Such distribution shall completely discharge the Company from all
liability with respect to such benefit.
6
<PAGE>
Article 7
General Limitations
Notwithstanding any provision of this Agreement to the contrary, the
Company shall not pay any benefit under this Agreement:
7.1 Excess Parachute Payment. To the extent the benefit would create an
excise tax under the excess parachute rules of Section 280G of the Code.
7.2 Termination for Cause. If the Company terminates the Executive's
employment for Cause.
7.3 Suicide. If the Executive commits suicide within two years after the
date of this Agreement, or if the Executive has made any material misstatement
of fact on any application for life insurance purchased by the Company.
Article 8
Claims and Review Procedures
8.1 Claims Procedure. The Company shall notify any person or entity that
makes a claim against the Agreement (the "Claimant") in writing, within ninety
(90) days of Claimant's written application for benefits, of his or her
eligibility or noneligibility for benefits under the Agreement. If the Company
determines that the Claimant is not eligible for benefits or full benefits, the
notice shall set forth (1) the specific reasons for such denial, (2) a specific
reference to the provisions of the Agreement on which the denial is based, (3) a
description of any additional information or material necessary for the Claimant
to perfect his or her claim, and a description of why it is needed, and (4) an
explanation of the Agreement's claims review procedure and other appropriate
information as to the steps to be taken if the Claimant wishes to have the claim
reviewed. If the Company determines that there are special circumstances
requiring additional time to make a decision, the Company shall notify the
Claimant of the special circumstances and the date by which a decision is
expected to be made, and may extend the time for up to an additional ninety-day
period.
8.2 Review Procedure. If the Claimant is determined by the Company not to
be eligible for benefits, or if the Claimant believes that he or she is entitled
to greater or different benefits, the Claimant shall have the opportunity to
have such claim reviewed by the Company by filing a petition for review with the
Company within sixty (60) days after receipt of the notice issued by the
Company. Said petition shall state the specific reasons which the Claimant
believes entitle him or her to benefits or to greater or different benefits.
Within sixty (60) days after receipt by the Company of the petition, the Company
shall afford the Claimant (and counsel, if any) an opportunity to present his or
her position to the Company orally or in writing, and the Claimant (or counsel)
shall have the right to review the pertinent documents.
6
<PAGE>
The Company shall notify the Claimant of its decision in writing within the
sixty-day period, stating specifically the basis of its decision, written in a
manner calculated to be understood by the Claimant and the specific provisions
of the Agreement on which the decision is based. If, because of the need for a
hearing, the sixty-day period is not sufficient, the decision may be deferred
for up to another sixty-day period at the election of the Company, but notice of
this deferral shall be given to the Claimant.
Article 9
Amendments and Termination
This Agreement may be amended or terminated only by a written agreement
signed by the Company and the Executive (or the Executive's beneficiary after
the Executive's death).
Article 10
Miscellaneous
10.1 Binding Effect. This Agreement shall bind the Executive and the
Company, and their beneficiaries, survivors, executors, successors or assigns,
administrators and transferees.
10.2 No Guarantee of Employment. This Agreement is not an employment policy
or contract. It does not give the Executive the right to remain an employee of
the Company, nor does it interfere with the Company's right to discharge the
Executive. It also does not require the Executive to remain an employee nor
interfere with the Executive's right to terminate employment at any time.
10.3 Non-Transferability. Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached or encumbered in any manner.
10.4 Reorganization. The Company shall not merge or consolidate into or
with another company, or reorganize, or sell substantially all of its assets to
another company, firm, or person unless such succeeding or continuing company,
firm, or person agrees to assume and discharge the obligations of the Company
under this Agreement. Upon the occurrence of such event, the term "Company" as
used in this Agreement shall be deemed to refer to the successor or survivor
company.
10.5 Tax Withholding. The Company shall withhold any taxes that are
required to be withheld from the benefits provided under this Agreement.
10.6 Applicable Law. The Agreement and all rights hereunder shall be
governed by the laws of the State of Wisconsin, except to the extent preempted
by the laws of the United States of America.
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<PAGE>
10.7 Unfunded Arrangement. The Executive and beneficiary are general
unsecured creditors of the Company for the payment of benefits under this
Agreement. The benefits represent the mere promise by the Company to pay such
benefits. The rights to benefits are not subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors. Any insurance on the Executive's life is a general
asset of the Company to which the Executive and beneficiary have no preferred or
secured claim.
10.8 Recovery of Estate Taxes. If the Executive's gross estate for federal
estate tax purposes includes any amount determined by reference to and on
account of this Agreement, and if the beneficiary is other than the Executive's
estate, then the Executive's estate shall be entitled to recover from the
beneficiary receiving such benefit under the terms of the Agreement, an amount
by which the total estate tax due by the Executive's estate, exceeds the total
estate tax which would have been payable if the value of such benefit had not
been included in the Executive's gross estate. If there is more than one person
receiving such benefit, the right of recovery shall be against each such person.
In the event the beneficiary has a liability hereunder, the beneficiary may
petition the Company for a lump sum payment in an amount not to exceed the
beneficiary's liability hereunder.
10.9 Entire Agreement. This Agreement constitutes the entire agreement
between the Company and the Executive as to the subject matter hereof. No rights
are granted to the Executive by virtue of this Agreement other than those
specifically set forth herein.
10.10 Administration. The Company shall have powers which are necessary to
administer this Agreement, including but not limited to:
10.10.1 Interpreting the provisions of the Agreement;
10.10.2 Establishing and revising the method of accounting for the
Agreement;
10.10.3 Maintaining a record of benefit payments; and
10.10.4 Establishing rules and prescribing any forms necessary or
desirable to administer the Agreement.
10.11 Designated Fiduciary. For purposes of the Employee Retirement Income
Security Act of 1974, if applicable, the Company shall be the named fiduciary
and plan administrator under the Agreement. The named fiduciary may delegate to
others certain aspects of the management and operation responsibilities of the
plan including the employment of advisors and the delegation of ministerial
duties to qualified individuals.
9
<PAGE>
IN WITNESS WHEREOF, the Executive and a duly authorized Company officer
have signed this Agreement.
EXECUTIVE: COMPANY:
RIDGESTONE BANK
_______________________________ By ___________________________________
Title ________________________________
Exhibit 10.5
RIDGESTONE BANK
SPLIT DOLLAR AGREEMENT
THIS AGREEMENT is made and entered into this 20th day of October, 1998 by
and between Ridgestone Bank (the "Company"), and ___________________.
INTRODUCTION
WHEREAS, in recognition of the fact that ___________________ ("Executive")
has contributed substantially to the success of the Company, the Company, as a
fringe benefit, is willing to divide the death proceeds of a life insurance
policy on the Executive's life. The Company will pay life insurance premiums
from its general assets.
Article 1
General Definitions
The following terms shall have the meanings specified:
1.1 "Insured" means the Executive.
1.2 "Insurer" means West Coast Life Insurance Company.
1.3 "Normal Retirement Date" means the Executive attaining age 65.
1.4 "Policy" means insurance policy number ULA354634 issued by the
Insurer.
1.5 "Termination of Employment" means the Executive's ceasing to be
employed by the Company for any reason whatsoever, voluntary or
involuntary, other than by reason of an approved leave of
absence.
Article 2
Policy Ownership/Interests
2.1 Company Ownership. The Company is the sole owner of the Policy and
shall have the right to exercise all incidents of ownership. The Company shall
be the direct beneficiary
<PAGE>
of an amount of death proceeds equal to the greater of (1) the cash surrender
value of the policy, or (2) the aggregate premiums paid on the Policy by the
Company less any outstanding indebtedness to the Insurer.
2.2 Beneficiaries Interest. The Executive shall have the right to designate
a beneficiary to receive $____________ of the net life insurance proceeds (the
"Beneficiary"). The Executive shall also have the right to elect and change
settlement options that may be permitted.
2.3 Option to Purchase. The Company shall not sell, surrender or transfer
ownership of the policy while this Agreement is in effect without first giving
the Executive or it's transferee, the option to purchase the Policy for a period
of sixty (60) days from written notice of such intention. The purchase price
shall be an amount equal to the cash surrender value of the Policy. This
provision shall not impair the right of the Company to terminate this Agreement.
Article 3
Premiums
3.1 Premium Payment. The Company shall pay any premiums due on the Policy.
3.2 Imputed Income. The Company shall impute income to the Executive in an
amount equal to the current term rate for the Executive's age multiplied by the
aggregate death benefit payable to the Executive's beneficiary. The "current
term rate" is the minimum amount required to be imputed under Revenue Rulings
64-328 and 66-110, or any subsequent applicable authority.
<PAGE>
Article 4
Assignment
The Executive may assign without consideration all interests in the Policy
and in this Agreement to any person, or entity. In the event the Executive shall
transfer all of it's interest in the Policies, then all of the Executive's
interest in the Policies and in the Agreement shall be vested in it's
transferee, who shall be substituted as a party hereunder, and the Executive
shall have no further interest in the Policy or in this Agreement.
Article 5
Insurer
The Insurer shall be bound only by the terms of the Policy. Any payments
the Insurer makes or actions it takes in accordance with the Policy shall fully
discharge it from all claims, suits and demands of all entities or persons. The
Insurer shall not be bound by or be deemed to have notice of the provisions of
this Agreement.
Article 6
Claims Procedure
6.1 Claims Procedure. The Company shall notify the Beneficiary in writing,
within ninety (90) days of its written application for benefits, of its
eligibility or noneligibility for benefits under this Agreement. If the Company
determines that the Executive or its assignee, is not eligible for benefits or
full benefits, the notice shall set forth (1) the specific reasons for such
denial, (2) a specific reference to the provisions of this Agreement on which
the denial is based, (3) a description of any additional information or material
necessary for the claimant to perfect his or her claim, and a description of why
it is needed, and (4) an explanation of this Agreement's claims review procedure
and other appropriate information as to the steps to be taken if the Executive
or it's assignee wishes to have the claim reviewed. If the Company determines
that there are special circumstances requiring additional time to make a
decision, the Company shall notify the Executive or its assignee of the special
circumstances and the date by which a decision is expected to be made, and may
extend the time for up to an additional ninety-day period.
<PAGE>
6.2 Review Procedure. If the Executive or its assignee is determined by the
Company not to be eligible for benefits, or if the Executive or its assignee
believes that he or she is entitled to greater or different benefits, the
Executive or its assignee shall have the opportunity to have such claim reviewed
by the Company by filing a petition for review with the Company within sixty
(60) days after receipt of the notice issued by the Company. Said petition shall
state the specific reasons which the Executive or its assignee believes entitle
him or her to benefits or to greater or different benefits. Within sixty (60)
days after receipt by the Company of the petition, the Company shall afford the
Executive or its assignee (and counsel, if any) an opportunity to present his or
her position to the Company orally or in writing, and the Executive or its
assignee (or counsel) shall have the right to review the pertinent documents.
The Company shall notify the Executive or its assignee of its decision in
writing within the sixty-day period, stating specifically the basis of its
decision, written in a manner calculated to be understood by the Executive or
its assignee and the specific provisions of this Agreement on which the decision
is based. If, because of the need for a hearing, the sixty-day period is not
sufficient, the decision may be deferred for up to another sixty-day period at
the election of the Company, but notice of this deferral shall be given to the
Executive or its assignee.
Article 7
Amendments and Termination
The Company may amend this Agreement at any time prior to the Executive's death
only with written consent of the Executive. Either party may terminate this
Agreement at any time prior to the Executive's death by written notice to the
other party. This agreement will automatically terminate upon the earlier to
occur of the Executive's Termination of Employment (other than as a result of
Executive's death) or the Executive's Normal Retirement Date.
<PAGE>
Article 8
Miscellaneous
8.1 Binding Effect. This Agreement shall bind the Executive and the
Company, their beneficiaries, survivors, executors, administrators and
transferees, successors and assigns, and any Policy beneficiary.
8.2 No Guaranty of Employment. This Agreement is not an employment policy
or contract. It does not give the Executive the right to remain an employee of
the Company, nor does it interfere with the Company's right to discharge the
Executive. It also does not require the Executive to remain an employee nor
interfere with the Executive's right to terminate employment at any time.
8.3 Applicable Law. The Agreement and all rights hereunder shall be
governed by and construed according to the laws of Wisconsin, except to the
extent preempted by the laws of the United States of America.
8.4 Notice. Any notice, consent or demand required or permitted to be given
under the provisions of this Split Dollar Agreement by one party to another
shall be in writing, shall be signed by the party giving or making the same, and
may be given either by delivering the same to such other party personally, or by
mailing the same, by United States certified mail, postage prepaid, to such
party, addressed to his/her last known address as shown on the records of the
Company. The date of such mailing shall be deemed the date of such mailed
notice, consent or demand.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
EXECUTIVE: COMPANY:
Ridgestone Bank
By______________________ By_________________________
Title _____________________
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS OF RIDESTONE FINANCIAL SERVICES, INC. AS OF
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND IS QULAIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,120,061
<INT-BEARING-DEPOSITS> 6,655
<FED-FUNDS-SOLD> 8,623,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 613,225
<INVESTMENTS-CARRYING> 2,042,000
<INVESTMENTS-MARKET> 1,999,556
<LOANS> 50,559,001
<ALLOWANCE> 543,367
<TOTAL-ASSETS> 69,449,103
<DEPOSITS> 62,567,217
<SHORT-TERM> 0
<LIABILITIES-OTHER> 725,430
<LONG-TERM> 0
0
0
<COMMON> 8,411,732
<OTHER-SE> (2,272,745)
<TOTAL-LIABILITIES-AND-EQUITY> 69,449,103
<INTEREST-LOAN> 3,127,392
<INTEREST-INVEST> 292,327
<INTEREST-OTHER> 208,197
<INTEREST-TOTAL> 3,627,916
<INTEREST-DEPOSIT> 2,151,636
<INTEREST-EXPENSE> 2,151,636
<INTEREST-INCOME-NET> 1,476,580
<LOAN-LOSSES> 126,373
<SECURITIES-GAINS> (7,687)
<EXPENSE-OTHER> 1,487,726
<INCOME-PRETAX> 112,848
<INCOME-PRE-EXTRAORDINARY> 112,848
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 112,848
<EPS-PRIMARY><F1> 0.29
<EPS-DILUTED><F1> 0.29
<YIELD-ACTUAL> 8.15
<LOANS-NON> 700,522
<LOANS-PAST> 4,038,934
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 624,740
<CHARGE-OFFS> 126,373
<RECOVERIES> 543,367
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 360,980
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 182,387
<FN>
<F1>On May 21, 1998, Ridgestone Financial Services, Inc. paid a 5% stock
dividend on issued and outstanding shares of its common stock. Prior
Financial Data Schedules have not been restated to reflect this dividend.
</FN>
</TABLE>
