Exhibit 10.3
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UNION BANK OF CALIFORNIA
SENIOR MANAGEMENT
BONUS PLAN
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-- EFFECTIVE JANUARY 1, 2000 --
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UNION BANK OF CALIFORNIA
SENIOR MANAGEMENT BONUS PLAN
I. OBJECTIVE
Union Bank of California (the Bank) provides a challenging and rewarding
environment where outstanding performance is encouraged and recognized.
Senior Managers are provided with a base salary and the opportunity to
earn additional compensation based on, and consistent with, their
individual performance.
The objective of the Senior Management Bonus Plan (the Plan) is to reward
Senior managers who assist in achieving and exceeding the Bank's and
their Group's financial goals. In addition, the Plan is designed to help
provide an environment that stimulates high performance, as well as
motivates Senior Managers to exercise initiative, effort, and ingenuity.
II. EFFECTIVE DATE
The Plan is effective as of January 1, 2000.
III. ELIGIBILITY
With the exception of policy-making officers who are Bank Of
Tokyo-Mitsubishi (BTM) expatriates and the Chairman, the following
individuals are eligible to participate in the Plan:
o Vice Chairmen and policy-making EVP's.
o Other Executive Vice Presidents (EVP) and Senior Vice Presidents
(SVP) whose focus and impact are on overall Bank performance and do
not participate in business unit incentive plans.
IV. BASIS FOR PAYMENT
A. Bank Financial Goals
--------------------
The Bank's Plan goals for Return On Average Common Shareholders
Equity Ratio and goal for Net Income will be designated by the
President and CEO in the financial planning process, as follows:
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NORMALIZED RETURN ON NORMALIZED NET INCOME
AVERAGE COMMON ---------------------
SHAREHOLDERS AVERAGE COMMON
EQUITY = SHAREHOLDERS
EQUITY
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B. Incentive Targets
-----------------
Incentive targets with Bank performance at 100% of financial goals
are 30% for SVP's, 45% for EVPs, and 70% for Vice Chairmen.
Group Heads may recommend individual incentive targets that vary
by position within officer level, taking into consideration
competitive market factors and the criticality of the position.
Variances in individual incentive targets and resulting payments
are subject to review and approval of the President and CEO,
provided that the payments do not exceed the approved bonus fund
designated for the respective officer level for each Group.
C. Funding Formula
---------------
The size of the bonus pool will be based on the Bank's performance
against budgeted ROE and Net Income as follows:
<TABLE>
BONUS INCENTIVE PAYOUT MATRIX
(% OF TARGET PAYOUT)
-------------------
NET INCOME
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< 75% 75% 80% 90% 100% 110% 120 > or =
to 125%
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RETURN ON < 80% 0% 0% 5% 15% 25% 35% 45% 50%
EQUITY
----------------------------------------------------------------------------------------------------
80% 0% 25% 30% 40% 50% 60% 70% 75%
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90% 13% 38% 45% 60% 75% 90% 105% 113%
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100% 25% 50% 60% 80% 100% 120% 140% 150%
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110% 37% 63% 75% 100% 125% 145% 165% 175%
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> or = 50% 75% 90% 120% 150% 170% 190% 200%
to 120%
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</TABLE>
o The bonus pool may then be modified by up to +/- 20% of target
according to other performance considerations by the Committee.
o For purposes of interpolating between performance levels,
additional discrete performance levels may be added between the
minimum and maximum for each performance factor.
The President and CEO, in consultation with the CFO, will submit
bonus fund recommendations to the Committee, which may modify the
fund by +/- 20% of target
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(but in no event may the fund exceed two (2) times the target)
based on such factors as:
o The Bank's overall performance in relation to other peer banks;
o Whether absolute Return On Equity and/or Net Income
goals are reasonable in relation to long-term objectives and
the Bank's historical performance;
o Efficiency ratios as compared to peer banks, with recognition
that constant attention must be given to long-term expense
reduction through continuous productivity improvement in order
to support UBOC's competitiveness;
o Effectiveness of risk management;
o General economic or market conditions;
o Achievement of other financial and strategic objectives;
o Normalizing financial data to allow for an acquisition/merger,
other extraordinary circumstances or material events that were
not specifically planned or not directly related to the
performance of Bank executives during the performance year.
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D. Bonus Pool Allocation
---------------------
The pool will be allocated based on corporate and unit/individual
performance as follows:
<TABLE>
<S> <C> <C>
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Target Senior Management Bonus Pool
Established by Sum of Target Awards for
all Participants
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|
|
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Actual Size of Bonus Pool Varies According
to Corporate Performance Relative to Goals
(e.g., Net Income & ROE vs. Budget)
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|
| --------------------------------
|---------------------Modify the Bonus Pool by up to
| +/- .20X Target According to
| Strategic, Organizational, Other
| Financial Performance
| --------------------------------
|
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Bonus Pool Allocated Based on Corporate
and Unit/Individual Performance
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|
|
|
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| |
| |
-------------------------- --------------------------------
Award Varies Based on Unit Corporate Portion
and Individual Performance
-------------------------- --------------------------------
| |
| |
| |
-------------------------------------------------------------
|
|
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Total Awards
(Total Payouts Subject to Overall Pool
Available)
------------------------------------------
</TABLE>
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UNION BANK OF CALIFORNIA
SENIOR MANAGEMENT BONUS PLAN
E. Determining Individual Awards
-----------------------------
1. Individual bonus awards will be based on performance criteria
established at the beginning of the year and are determined in
the following manner:
a. The President and CEO will recommend awards for eligible
Vice Chairmen and policy-making officers to the
Committee, which will then review and approve these
awards, with or without modification.
b. The President and CEO will allocate the remaining funds
for non-policy-making officers to Group Heads based on
aggregate individual incentive award targets and Group
performance. Any adjustments to allocations, based on
Group performance, must be made within the approved
bonus funding limits. The President and CEO will also
issue guidelines for Group Heads to develop individual
bonus award recommendations.
c. Group Heads will submit individual EVP and eligible SVP
bonus award recommendations for review and approval by
the President and CEO.
d. The Committee may request a report on bonuses awarded to
executives other than policy-making officers.
2. Individual awards may range from zero (0) times to two (2)
times target awards.
3 Vacation, sick pay, and all other employee benefit plans
excluding the 401(k) plan and retirement are based on the base
salary rate and do not include Senior Management Bonus
payments.
V. ADMINISTRATION
A. The final authority and responsibility for administration of the
Plan resides exclusively with the Committee.
B. The Chief Financial Officer will have responsibility for
calculating the bonus funds including the application of any fund
limitations specified by the Committee. The bonus funds will be
rounded to the nearest thousand dollars and individual awards will
be rounded to the nearest one hundred dollars.
C. The Director of Human Resources will have responsibility for
providing the Chief Financial Officer with information on
bonus-eligible executives and salaries, processing award payments,
and keeping records of activities related to the Plan.
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UNION BANK OF CALIFORNIA
SENIOR MANAGEMENT BONUS PLAN
D. Participants must be employed by the Bank, Bank of
Tokyo-Mitsubishi Group or a subsidiary or affiliate through the
end of the performance year in order to receive payment. In the
case of retirement, death, permanent disability, or exceptional
circumstances, deviations from eligibility may be approved at the
sole discretion of the President and CEO for non-policy making
EVPs and eligible SVP's and at the sole discretion of the
Committee for policy-making officers.
E. The award payments will be made as soon as administratively
practical after the end of the fiscal year.
VI. STAFF CHANGES
A. New employees will be eligible to participate in the Plan immedi-
ately. Awards may be prorated based on the time in the Plan and
the contribution of the participant.
B. Plan participants who are transferred to another Bank position not
covered by this Plan or who are on Leave of Absence during the
year will be eligible for an award that will be calculated on a
prorated basis. Incentive payments will be calculated according to
the provisions described in this Plan and paid on the established
schedule for other Plan participants.
VII. GENERAL PROVISIONS
A. No Contract of Employment
-------------------------
Neither the actions of the Bank in establishing this Plan or its
provisions, nor any action taken according to those provisions,
will be construed as giving the right to a participant to continue
in the employ of the Bank. The Plan is not a contract of
employment. No rights in the Plan will accrue to any person
whether or not he/she is selected to participate in the Plan, and
no person will, because of the Plan acquire any right to an
accounting or to examine the books or the affairs of the Bank.
B. Assignment
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No funds, assets or other property of the Bank, and no obligation
or liability of the Bank under this Plan, will be subject to any
claim of any participant, nor will any participant have any right
or power to pledge, encumber or assign any incentive award
provided for in the Plan.
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UNION BANK OF CALIFORNIA
SENIOR MANAGEMENT BONUS PLAN
C. Sole and Entire Plan
--------------------
No Bank director, officer, employee or other person has the
authority to enter into any agreement, either written or oral,
with any person or participant concerning an award or payment of
an incentive award, or to make any representation or warranty with
respect to any incentive award under this plan. Only the Director
of Human Resources with the written concurrence of the Chief
Executive Officer will have such authority. This Plan supersedes
any prior oral or written understanding on this subject.
D. Contingency
-----------
The Plan is contingent in character and, therefore, no rights will
vest in any individual participant under the Plan until all
conditions of the Plan are satisfied.
E. Minimum Personal Performance
----------------------------
Bank management in its absolute discretion retains the right to
reduce or eliminate incentive awards which are not yet paid for a
participant whose personal performance level is unsatisfactory,
regardless of the Bank's or Group's performance. Unsatisfactory
personal performance shall be determined by the Bank in its
absolute discretion and may include, but only as examples and not
as an exhaustive list, such factors as misconduct, poor
performance appraisal rating, poor credit management, poor account
management, disruptive behavior, failure to adhere to Bank
policies and procedures, failure to abide by Bank compliance
standards, poor audits, failure to control or monitor risk, or
other relevant factors.
F. No Vesting
----------
The right to receive any payment of an incentive award shall not
vest in any employee, or the estate of the employee, until such
payment is actually made in accordance with the terms and
conditions of the Plan.
G. Administration
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Bank management shall determine in its absolute discretion all
elements and goals of the Plan. All determinations made by the
Bank shall be binding. At any time prior to the date the awards
are paid, the Bank reserves the right to adjust any elements or
goals of the Plan.
H. Amendment
---------
Bank management may at any time, revise, amend, suspend, or
terminate in whole or in part, any or all provisions of this Plan.
I. Other Incentive Plans
---------------------
An individual may not participate in this Plan if he/she is
participating in any business unit incentive plan.
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UNION BANK OF CALIFORNIA
SENIOR MANAGEMENT BONUS PLAN
J. Tax Related Liabilities
-----------------------
Participants are responsible for determining the tax consequences
of incentive awards and arranging for appropriate withholding and
payment of all taxes due. The Bank will not be responsible for and
will be held harmless from liability for payments, interest,
penalties, costs or expenses incurred as a result of not arranging
for sufficient withholding or deductions from incentive awards.
K. Arbitration
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This Plan is made, and shall in all respects be interpreted,
enforced and governed by and under the laws of the United States,
as appropriate, and the State of California. Any dispute arising
out of or relating to this Plan including its meaning or
interpretation will be resolved solely by arbitration before an
experienced employment arbitrator selected in accordance with the
model employment arbitration procedures of the American
Arbitration Association. The locations of the arbitration will be
in San Francisco, Los Angeles or San Diego as selected by the Bank
in good faith. The provisions of this paragraph are exclusive for
all purposes and applicable to any and all disputes between a
participant and the Plan. Any decision or award by an arbitrator
shall affect the Plan solely as to its obligations to the
participant who requests arbitration. The arbitrator's decision
will have no impact on the Plan's relationship to any other
participant, nor will it require the Bank to interpret the Plan in
any particular manner.
L. Exceptions
----------
Bank management recognizes that occasionally unique or unusual
circumstances including, but not limited to, internal
reorganizations, dual responsibilities or special and
extraordinary efforts by participants will arise that may require
consideration of exceptions to Plan provisions. Accordingly, on a
case-by-case basis, exceptions to any provision in this incentive
plan may be made with the recommendation and approval of the Group
Head, the Director of Human Resources and the Chief Executive
Officer or his designee. The Committee has the sole discretion to
approve exceptions applicable to policy-making officers. This
approval may be sought at the time incentive payments are
submitted for approval. Any approved exceptions will affect the
Plan solely as to the participant involved and will have no impact
on other Bank employees or participants in the Plan.
M. Form and Timing or Payment
--------------------------
Incentive awards will be paid in cash, less applicable employment
taxes and federal, state and foreign withholding taxes. Incentive
awards will be calculated and paid as provided in the Plan. In
order to induce continued employment with the Bank, however,
participants must be actively employed by the Bank on the last day
of the performance period in order to be paid the incentive award.
Thus, participants who terminate before the end of the performance
period shall forfeit such award. Nevertheless, based on the Bank's
absolute discretion, participants whose employment is terminated
during the performance period due to death, disability,
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UNION BANK OF CALIFORNIA
SENIOR MANAGEMENT BONUS PLAN
retirement or as a result of an organizational structure, office/
unit closure or reduction in force may receive a prorated award.
Such awards will be calculated and paid according to the normal
procedures set forth in the Plan. All awards paid shall be final.
N. Benefits Unfunded and Unsecured
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The rights of a participant, or any designated beneficiary of the
participant, shall be solely those of an unsecured general
creditor of the Bank, and the Bank's obligation shall be an
unfunded and unsecured promise to pay.
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UNION BANK OF CALIFORNIA
SENIOR MANAGEMENT BONUS PLAN
ACKNOWLEDGMENT
I acknowledge receipt and have read and understand the terms and
conditions of the Union Bank of California Senior Management Bonus Plan.
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Employee Signature Date
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Print Name
PLEASE RETURN TO:
CORPORATE COMPENSATION
1-001-10C
