<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(Mark One)
[X] Quarterly report pursuant to under Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended September 30, 1999.
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from________________to________________________
Commission File Number: 333-43021
VIB Corp
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 33-0780371
- ------------------------------------------------------------------------------
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
1498 MAIN STREET, EL CENTRO, CALIFORNIA 92243
------------------------------------------------------------------------------
(Address of Principal Executive Offices)
(760) 337-3200
------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if changed since Last Report)
Indicate by check mark whether the registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 10,879,845 shares as of October
31, 1999.
<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following Consolidated Statements of Financial Condition, Consolidated
Statements of Income, Consolidated Statement of Stockholders' Equity and
Consolidated Statements of Cash Flows for the period ended September 30, 1999
have been prepared by VIB Corp (the "Company") without audit. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations and
changes in financial condition at or for the period ended September 30, 1999
have been made. The results of operations for the period ended September 30,
1999 are not necessarily indicative of the results that may be expected for the
full year.
1
<PAGE> 3
VIB CORP AND SUBSIDIARIES
Consolidated Statements of Financial Condition
September 30, 1999 and December 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- -------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 27,113,188 $ 32,058,948
Federal funds sold 1,673,598 3,249,316
------------- -------------
Total cash and cash equivalents 28,786,786 35,308,264
Interest bearing deposits 634,253 722,559
Investment Securities (note B) 177,354,897 125,058,559
Loans: (note C)
Commercial 114,173,203 72,319,129
Agricultural 32,530,281 44,331,588
Real estate-construction 86,866,830 61,679,821
real estate-other 345,337,024 276,303,688
Consumer 43,253,168 46,719,192
------------- -------------
Total Loans 622,160,506 501,353,418
Net deferred loan fees (3,439,609) (3,524,697)
Allowance for credit losses (5,195,881) (4,296,414)
------------- -------------
Net Loans 613,525,016 493,532,307
Premises and equipment 12,335,660 12,426,157
Other real estate owned 1,551,725 1,071,064
Cash surrender life insurance 14,009,535 8,642,738
Deferred tax asset 5,969,764 3,175,915
Intangible assets 5,817,989 5,010,833
Accrued interest and other assets 8,217,362 6,279,864
------------- -------------
TOTAL ASSETS $ 868,202,987 $ 691,228,260
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE> 4
VIB CORP AND SUBSIDIARIES
Consolidated Statements of Financial Condition
September 30, 1999 and December 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- -------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $ 146,734,483 $ 162,393,380
Money Market and NOW 134,605,436 142,157,859
Savings 72,843,144 55,148,291
Time deposits under $100,000 189,352,085 124,436,631
Time deposits $100,000 and over 140,440,672 115,522,088
------------- -------------
Total Deposits 683,975,820 599,658,249
Fed funds purchased 86,700,000 25,000,000
Capital lease obligations 2,915,817 2,886,342
Company-obligated mandatorily redeemable
Capital Securities of subsidiary trust holding
solely Subordinated Debentures of the Company 22,400,000 --
Other Borrowings 10,500,000 4,000,000
Accrued interest and other liabilities 5,210,160 4,081,523
------------- -------------
Total Liabilities 811,701,797 635,626,114
Stockholders' Equity:
Preferred shares, no par value;
10,000,000 shares authorized;
issued 0 shares in 1999 and 1998 -- --
Common shares,no par value, Authorized
25,000,000 in 1999 and 1998,
Outstanding: 10,869,837 in 1999 and
10,828,949 in 1998 53,679,208 50,445,799
Undivided Profits 6,112,767 5,052,917
Accumulated other comprehensive
income, net of tax of ($2,287,487) in
1999 and $71,437 in 1998 (3,290,785) 103,430
------------- -------------
Total Stockholders' Equity 56,501,190 55,602,146
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 868,202,987 $ 691,228,260
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 5
VIB CORP AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
For the Three Month For the Nine Month
Periods Ended Periods Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest Income:
Interest and Fees on Loans $14,053,729 $11,075,653 $38,912,135 $31,860,198
Interest on Investment Securities-Taxable 1,845,717 1,240,710 5,356,788 3,742,909
Interest on Investment Securities-Nontaxable 634,473 320,123 1,807,353 831,463
Other Interest Income 64,285 265,029 532,076 448,978
----------- ----------- ----------- -----------
Total Interest Income 16,598,204 12,901,515 46,608,352 36,883,548
Interest Expense:
Interest on Money Market and NOW 855,041 911,941 2,519,421 2,383,305
Interest on Savings Deposits 359,673 303,080 1,158,267 882,212
Interest on Time Deposits 3,948,825 3,180,246 11,612,793 9,258,106
Interest on Other Borrowings 1,595,210 109,525 3,356,144 398,072
----------- ----------- ----------- -----------
Total Interest Expense 6,758,749 4,504,792 18,646,625 12,921,695
----------- ----------- ----------- -----------
Net Interest Income 9,839,455 8,396,723 27,961,727 23,961,853
Provision for Credit Losses 700,000 705,000 2,050,000 2,070,000
----------- ----------- ----------- -----------
Net Interest Income after Provision for Credit Losses 9,139,455 7,691,723 25,911,727 21,891,853
Non-interest Income:
Service Charges and Fees 1,107,770 1,173,264 3,278,998 3,446,102
Gain on Sale of Loans and Servicing Fees 436,853 446,107 1,296,005 1,178,670
Gain/(Loss) on Sale of Securities (4,496) 284,939 1,755 284,939
Other Income 70,744 115,058 258,687 494,882
----------- ----------- ----------- -----------
Total Non-interest Income 1,610,871 2,019,368 4,835,445 5,404,593
Non-interest Expense:
Salaries and Employee Benefits 3,768,241 3,571,092 11,493,054 10,350,802
Occupancy Expenses 672,417 652,703 1,971,226 1,793,655
Furniture and Equipment 657,652 730,936 1,870,533 1,857,001
Other Expenses (note D) 2,995,177 2,620,161 8,949,085 7,405,790
----------- ----------- ----------- -----------
Total Non-interest Expense 8,093,487 7,574,892 24,283,898 21,407,248
----------- ----------- ----------- -----------
Income Before Income Taxes 2,656,839 2,136,199 6,463,274 5,889,198
Income Taxes 945,905 709,105 2,359,501 1,941,725
----------- ----------- ----------- -----------
Net Income $ 1,710,934 $ 1,427,094 $ 4,103,773 $ 3,947,473
Per Share Data: (note E)
Net Income - Basic $ 0.16 $ 0.11 $ 0.38 $ 0.30
Net Income - Diluted $ 0.16 $ 0.11 $ 0.37 $ 0.29
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE> 6
VIB CORP AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
<TABLE>
<CAPTION>
Common Shares Accumulated
------------------------ Other
Number of Undivided Comprehensive
Shares Amount Profits Income Total
---------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Balance January 1,1998 (note F) 10,089,580 $46,590,570 $ 3,170,790 $ 252,269 $50,013,629
Comprehensive Income
Net income 4,868,441 4,868,441
Other comprehensive income
Unrealized gains on securities, net
of taxes of $97,191 139,862 139,862
Less reclassification adjustments for gains
included in net income, net of taxes of $200,622 (288,701) (288,701)
-----------
Total other comprehensive income (148,839)
-----------
Total Comprehensive income 4,719,602
Exercise of warrants 2,496 38,513 38,513
Cash dividends (27,693) (27,693)
Stock dividends 235,559 2,958,621 (2,958,621) 0
Exercise of stock options
Including the realization of
Tax benefits of $180,000 185,908 858,095 858,095
---------- ----------- ---------- ----------- -----------
Balance December 31,1998 10,513,543 50,445,799 5,052,917 103,430 $55,602,146
Comprehensive Income
Net income 4,103,773 4,103,773
Other comprehensive income
Unrealized losses on securities, net
of taxes of ($2,379,118) (3,393,074) (3,393,074)
Less reclassification adjustments for gains
included in net income,net of taxes of $614 (1,141) (1,141)
-----------
Total other comprehensive income (3,394,215)
-----------
Total Comprehensive income 709,558
Cash dividends (17,053) (17,053)
Stock dividend 314,480 3,026,870 (3,026,870) 0
Exercise of stock options 41,804 206,359 206,359
Exercise of stock warrants 10 180 180
---------- ----------- ----------- ----------- -----------
Balance at September 30,1999 10,869,837 $53,679,208 $ 6,112,767 $(3,290,785) $56,501,190
========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE> 7
VIB CORP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the Nine-Month
Periods Ended
September 30,
------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 4,103,773 $ 3,947,473
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 433,917 242,948
Deferred income taxes (366,897) (2,832)
Provision for credit losses 2,050,000 2,070,000
Originations of loans held for sale (56,805,037) (44,050,140)
Proceeds from sale of loans 71,238,539 51,359,359
Net gain on loan sales and securitization (1,013,196) (878,716)
Gain on sale of other real estate owned (49,045) (171,772)
Net increase/(decrease) in cash surrender value of life insurance (5,366,797) (328,328)
Net realized gains in available for sale securities (1,755) (284,939)
Net amortization of premium/discount on available
for sale securities 192,988 63,118
Net change in accrued interest, other assets,
and other liabilities (975,326) (389,873)
------------- -------------
Net cash provided by operating activities 13,441,164 11,576,298
Cash flow from investing activities:
Purchases of investment securities (81,435,858) (66,655,948)
Net cash received from purchase of branches 110,295,948 6,524,474
Proceeds from sales of other real estate owned 620,276 2,917,277
Proceeds from sales of investment securities 2,485,943 7,025,922
Proceeds from maturities of investment securities 20,641,178 46,513,426
Loans granted net of repayments (135,114,392) (41,638,146)
Premises and equipment expenditures (1,480,857) (1,996,002)
Net increase in interest bearing deposits 88,306 (78,095)
------------- -------------
Net cash used by investing activities (83,899,456) (47,387,092)
Cash flow from financing activities:
Net increase/(decrease) in demand deposits and savings (26,069,892) 15,570,250
Net increase/(decrease) in time deposits (812,254) 14,384,009
Net change in capitalized lease obligations 29,475 33,806
Net change in fed funds purchased 61,700,000 --
Net change in other borrowings 6,500,000 3,000,000
Proceeds from capital securities 22,400,000 --
Payments for dividends (17,053) (12,543)
Proceeds from exercise of stock options and warrants 206,538 296,761
------------- -------------
Net cash provided by financing activities 63,936,814 33,272,283
Net change in cash and cash equivalents $ (6,521,478) $ (2,538,511)
============= =============
Cash and cash equivalents:
Beginning of period $ 35,308,264 $ 45,757,468
End of period $ 28,786,786 $ 43,218,957
Supplemental disclosure of cash flow information:
(in Thousands)
Cash paid for interest expense $ 18,679 $ 12,024
Cash paid (received) for income taxes $ 1,930 $ 1,841
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE> 8
VIB CORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(A) General
See note A of Notes to Financial Statements incorporated by reference
in the Company's 1998 Annual Report on Form 10-K for a summary of significant
accounting policies.
The unaudited financial statements included herein were prepared from
the books of the Company in accordance with generally accepted accounting
principles and reflect all adjustments which are, in the opinion of management,
necessary to provide a fair statement of the results of operations and financial
position for the interim periods. Such financial statements generally conform to
the presentation reflected in the Company's 1998 Annual Report to Stockholders,
and reflect adjustments that are solely of a normal, recurring nature. The
current interim periods reported herein are included in the fiscal year subject
to independent audit at the end of the year. The unaudited financial statements
of VIB CORP include the accounts of the Company and its wholly owned
subsidiaries, Valley Independent Bank, The Bank of Stockdale and Valley Capital
Trust. All significant intercompany accounts and transactions have been
eliminated in the consolidated financial statements. Certain items previously
reported have been reclassified to conform to the current period's
classifications.
(B) Investment Securities
The Company's investment securities portfolio at September 30,
1999 had a net unrealized loss of approximately $5,621,000, as compared
with a net unrealized gain of approximately $174,000 at December 31,
1998, a decrease during the nine months beginning January 1, 1999 of
$5,795,000. The change for the period is attributable to a rising
interest rate environment and the recomposition of the portfolio due to
the application of funds received in the acquisition of the Hemet
branch of Freemont Investment and Loan.
Investment Securities
<TABLE>
<CAPTION>
September 30, 1999
------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
($ In 000's) Cost Gains Losses Value
------------ --------- ---------- ---------- --------
<S> <C> <C> <C> <C>
U.S. Treasury Securities $ 585 $ 16 -- $ 601
U.S. Government and
Agency Securities 77,913 12 $ 2,278 75,647
State and Political Subd. 56,826 78 2,690 54,214
Mortgage-Backed Securities 36,887 10 721 36,176
Other Equity 10,765 -- 48 10,717
-------- -------- -------- --------
$182,976 $ 116 $ 5,737 $177,355
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
($ In 000's) Cost Gains Losses Value
------------ --------- ---------- ---------- --------
<S> <C> <C> <C> <C>
U.S. Treasury Securities $ 550 $ 37 $ 587
U.S. Government and
Agency Securities 44,384 114 $ 133 44,365
</TABLE>
7
<PAGE> 9
<TABLE>
<S> <C> <C> <C> <C>
State and Political Subd. 38,052 450 263 38,239
Mortgage-Backed Securities 35,870 98 129 35,839
Other Equity 6,029 -- -- 6,029
-------- -------- -------- --------
$124,885 $ 699 $ 525 $125,059
</TABLE>
Investment securities carried at approximately $122,473,000 and
$72,237,000, at September 30, 1999 and December 31, 1998, respectively, were
pledged to secure public deposits, bank advances and other purposes as required
by law.
(C) Loans
The Company's loan portfolio consists primarily of loans to borrowers
within southern California, Las Vegas, Nevada and Yuma, Arizona. Although the
Company seeks to avoid concentrations of loans to a single industry or based
upon a single class of collateral, real estate and agricultural associated
businesses are among the principal industries in the Company's market area. As a
result, the Company's loan and collateral portfolio are, to some degree,
concentrated in those industries.
The Company also originates real estate related and farmland loans for
sale to governmental agencies and institutional investors. At September 30, 1999
and December 31, 1998 the Company was servicing approximately $130,352,000 and
$121,628,000, respectively, in loans previously sold.
A summary of the changes in the allowance for credit losses follows:
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------ -----------------
($ In 000's)
<S> <C> <C>
Balance at beginning of year $4,296 $3,145
Additions to the allowance charged to expense 2,050 2,704
Recoveries on loans charged off 48 178
Loans charged off 1,198 1,731
------ ------
Balance at end of period $5,196 $4,296
</TABLE>
A summary of nonperforming loans and assets follows:
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------ -----------------
($ In 000's)
<S> <C> <C>
Non-accrual loans $4,943 $4,315
Loans 90 days past due and still accruing 201 567
------ ------
Total nonperforming loans 5,144 4,882
Other Real Estate Owned 1,552 1,071
------ ------
Total nonperforming assets $6,696 $5,953
Nonperforming loans to total ending loans .83% .97%
Nonperforming assets to total loans and
Other Real Estate Owned 1.08% 1.18%
</TABLE>
(D) Other Expenses
Other expenses for the periods indicated are as follows:
8
<PAGE> 10
<TABLE>
<CAPTION>
($ In 000's) September 30, 1999 September 30, 1998
------------------ ------------------
<S> <C> <C>
Data Processing $1,654 $1,213
Advertising 401 406
Legal and Professional 1,577 1,246
Regulatory Assessments 201 229
Insurance 166 161
Amortization of Intangibles 417 357
Office Expenses 1,503 1,399
Promotion 1,142 1,153
Merger Related 682 --
Other 1,206 1,241
------ ------
Total Other Expenses $8,949 $7,406
</TABLE>
(E) Earnings Per Share
Earnings per share are calculated based on the weighted average number
of common shares outstanding during each period as follows: 10,850,338 for the
nine months ended September 30, 1999 and 10,644,352 for the nine months ended
September 30, 1998, respectively; 10,861,282 for the three months ended
September 30, 1999 and 10,702,964 for the three months ended September 30, 1998,
respectively.
Diluted earnings per share for the three month periods ended September
30, 1999 and 1998, are computed by dividing net earnings by the weighted average
common equivalent shares outstanding during the respective periods. Common share
equivalents include dilutive common stock option share equivalents determined by
using the treasury stock method.
(F) Stockholders' Equity
On January 28, 1999 the Bank of Stockdale, F.S.B., Bakersfield,
California, became the Company's wholly-owned subsidiary in a stock-for-stock
merger transaction pursuant to a definitive agreement entered into on September
15, 1998. The Company issued 2,355,334 shares of its common stock for all of the
Bank of Stockdale's issued and outstanding shares of common stock. The Bank of
Stockdale will continue to operate as a separate, wholly owned subsidiary under
its current name and federal savings bank charter. The merger was accounted for
utilizing the pooling of interests method of accounting and all prior period
financial information has been restated to reflect consolidated financial
information. The Bank of Stockdale's total stockholder's equity at the time of
purchase was $9,759,619.
(G) Supplemented Disclosure of Combined Results
The following table summarizes the separate results for the combined entities
for the periods shown prior to the merger with Bank of Stockdale:
<TABLE>
<CAPTION>
Nine months Ended September 30,
(Dollars in Thousands) 1999 1998
-------- --------
<S> <C> <C>
Interest and Noninterest Income:
The Company-Pre-merger $ 3,847 $ 33,261
Bank of Stockdale-Pre-merger 991 9,027
The Company-Post-merger 46,606 --
-------- --------
Total $ 51,444 $ 42,288
Net Income:
The Company-Pre-merger $ 343 $ 3,239
Bank of Stockdale-Pre-merger (423) 708
The Company-Post-merger 4,184 --
-------- --------
Total $ 4,104 $ 3,947
</TABLE>
9
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
This analysis is designed to provide a more complete understanding of the
material changes and trends related to the Company's financial condition,
results of operations, cash flow and capital resources. This discussion should
be read in conjunction with the attached Financial Statements included in Item
1, and the Company's Annual Report on Form 10-K. This document may contain
forward-looking statements that are subject to risks and uncertainties that
could cause actual results to differ materially from those projected. For a
discussion of factors that could cause actual results to differ, please see the
company's publicly available Securities and Exchange Commission filings,
including its annual report on Form 10-K for the year ended December 31, 1998
and particularly the discussion of risk factors within that document.
GENERAL
VIB Corp's financial performance through the third quarter of 1999 continued to
be indicative of the execution of business plans that facilitate the Company's
strategic direction. Improvement in overall efficiency was evident in the
continued integration of VIB Corp's first quarter 1999 acquisition of Bank of
Stockdale, headquartered in Bakersfield, California and the acquisition by the
Company's subsidiary, Valley Independent Bank, of a branch located in Hemet,
California. In addition, strong credit quality and significant business demand
in the markets the Company serves contributed greatly to the results of the
first three quarters.
VIB Corp was incorporated on November 7, 1997 under the Laws of the State of
California at the direction of the Board of Directors of Valley Independent Bank
("VIB") for the purpose of becoming a bank holding company. The holding company
organization was consummated on March 12, 1998, pursuant to a Plan of
Reorganization and Merger Agreement dated November 18, 1997, and each
outstanding share of Valley Independent Bank's Common Stock was converted into
one share of the Company's Common Stock and all outstanding shares of Valley
Independent Bank's Common Stock were transferred to the Company in a transaction
accounted for as a pooling of interests. Further, each outstanding warrant to
purchase Valley Independent Bank's Common Stock, issued in connection with the
Bank's 1997 unit offering, was converted into a warrant to purchase the
Company's Common Stock. As of September 30, 1999, there were 99,149 remaining
warrants outstanding with an exercise expiration date of October 29, 1999.
On January 28, 1999, VIB Corp acquired Bank of Stockdale, F.S.B., Bakersfield,
California, pursuant to an Agreement and Plan of Reorganization dated September
15, 1998. Bank of Stockdale continues to operate under its federal stock savings
bank charter. As a result of the merger, the Company acquired total assets of
$144.4 million, comprising $9.1 million in cash and due from banks, $23.5
million in securities and investments, $102.4 million in net loans and $9.4
million in other assets. Total liabilities assumed amounted to $134.6 million,
of which $128.9 million comprised deposits. The remainder represented other
borrowed funds and other liabilities.
10
<PAGE> 12
The Stockdale Merger was accounted for as a pooling of interests. The Company
issued 2,355,430 shares of its Common Stock in exchange for all 1,212,265 shares
of Stockdale's issued and outstanding common stock (at an exchange ratio of
1.943 to 1). Additionally Mr. Ed Hickman, Stockdale's President and Chief
Executive Officer and one of its Directors, was added to the Company's Board of
Directors.
On January 22, 1999 VIB acquired certain of the assets and assumed certain of
the liabilities of Fremont Investment & Loan's Hemet branch office, including
substantially all the deposits of the branch. VIB assumed approximately $112
million in deposits and the lease on the branch premises, and acquired
approximately $27,000 in loans as well as cash on hand and fixtures and
equipment associated with the branch. The consideration paid amounted to
approximately $1.12 million. Goodwill arising from the transaction totaled
approximately $1,139,000.
In connection with the branch acquisition by Valley Independent Bank it was
anticipated that VIB would require additional capitalization. On December 19,
1998, the Company formed a wholly owned business trust subsidiary, Valley
Capital Trust, pursuant to the laws of the state of Delaware. The Company formed
the Trust for the specific purpose of (i) investing in the Company's 9.00
percent Junior Subordinate Debentures (the "Debentures"), due February 5, 2029;
(ii) selling 9.00 percent Cumulative Capital Securities (the "Capital
Securities"), representing a 97 percent beneficial interest in the Debentures
owned by the Trust; and (iii) issuing beneficial interest in the Debentures
owned by the Trust.
On February 5, 1999, the Company issued $23.093 million in Debentures to the
Trust. Concurrently, the Trust issued $22.4 million of the Capital Securities to
the investors is a private placement and $693,000 of Common Securities to the
Company. The Debentures were purchased by the Trust concurrently with the
Trust's issuance of the Capital Securities and Common Securities. The proceeds
to the Company, net of the Placement Agent's fees and other offering expenses,
was approximately $22.4 million, of which approximately $17.4 million is treated
as Tier 1 capital for regulatory purposes. $8.5 and $.5 million of the proceeds
have been used to increase Valley Independent Bank's and Bank of Stockdale's
respective capital, with the balance used for general corporate purposes.
The interest on the Capital Securities is deductible. The Company has the right,
assuming that no default has occurred, to defer interest payments at any time
and for a period of up to twenty consecutive calendar quarters. The Capital
Securities will mature on February 5, 2029, but can be called after February 5,
2009.
On September 7, 1999, VIB Corp, Kings River State Bank and Kings River Bancorp,
headquartered in Reedley, California, entered into an Agreement and Plan of
Reorganization pursuant to which Kings River State Bank will become a
wholly-owned subsidiary of VIB Corp and will continue to operate under its
separate California commercial bank charter. Upon consummation of the merger,
Kings River Bancorp's shareholders will receive approximately $21.9 million in
exchange for their stock, calculated at 2.5 times book value, subject to certain
adjustments.
11
<PAGE> 13
The completion of the merger is subject to receipt of regulatory approvals
including approvals of the Board of Governors of the Federal Reserve System and
the California Department of Financial Institutions. The transaction must also
be approved by holders of a majority of the issued and outstanding shares of
King River Bancorp's stock. The parties anticipate that the transaction will be
completed during the first quarter of 2000.
Consolidated net income for the nine months ended September 30, 1999, adjusted
for merger and related non-recurring costs, was $4.8 million or $.43 per share
fully diluted based upon average shares outstanding of 10,952,777. This compares
with net income of $3.9 million or $.29 per share fully diluted based upon the
average shares outstanding of 11,098,575 for the same period in 1998. After
merger and related non-recurring costs, net income for the period ending
September 30, 1999 was $4.1 million or $.37 per share fully diluted.
Net income for the three months ending September 30, 1999 was $1.7 million or
$.16 per share fully diluted based upon average shares outstanding of
10,931,406. This compared with net earnings of $1.4 million or $.11 per share
fully diluted based upon the average shares outstanding of 11,074,928 for the
same period in 1998.
On March 23, 1999, the Board of Directors approved a 3% stock dividend for
shareholders of record on May 14, 1999. The dividend was paid on June 4, 1999.
All per share figures have been retroactively adjusted for this and previous
stock dividends and splits.
Total gross loans at September 30, 1999 were $618.7 million, which represented
an increase of $120.9 million or 24.3% from December 31, 1998. Since September
30, 1998, total gross loans have increased $172.4 million or 38.6%.
Total deposits at September 30, 1999 increased $84.3 million or 14.1% from
year-end 1998 to $684.0 million. This increase includes the assumption of
deposits acquired from Fremont Investment & Loan, discussed earlier, and the
normal seasonal deposit cycle experienced in the Imperial, Coachella and Central
Valleys as it relates to the local agricultural business cycle. Total deposits,
compared to September 30, 1998, increased $119.3 million or 21.1%.
In future developments the Bank of Stockdale anticipates opening its fourth
branch location in Fresno, California during the first quarter of next year. VIB
during the third quarter opened a loan production office in Fresno, California.
This office will concentrate on addressing the agricultural lending needs of the
Fresno area market. VIB also decided to defer the opening of a loan production
office in Riverside, California to a time to be determined.
YEAR 2000 READINESS COMPLIANCE
Certain computer systems may not properly recognize date sensitive information
when the date changes to the year 2000 ("Y2K"). Computer systems that do not
properly recognize the year 2000 could generate erroneous data or cause the
system to fail. Those computer systems will have to be modified or replaced
prior to the year 2000 in order to remain functional.
12
<PAGE> 14
VALLEY INDEPENDENT BANK
During 1996 VIB began the process of identifying and addressing issues
surrounding the year 2000 and their impact on VIB's operations. That process
continued through 1997 during which VIB conducted a comprehensive review of its
computer systems to identify applications that would be affected by the Y2K
issue and VIB developed an implementation plan to bring VIB's systems into
compliance prior to the year 2000. VIB's compliance program includes review of
bank-wide computer processing systems as well as review of third party vendors'
interface systems and review of large corporate borrowers' systems. During 1997
VIB completed the assessment phase of its program and during 1998, began the
implementation and validation of hardware and software upgrades, system
replacements, vendor certifications and other associated changes. Final
implementation, validation and certification of all internal systems were
accomplished by June 30, 1999. Simultaneously, VIB has conducted an ongoing
evaluation for the impact of Y2K compliance on large corporate customers as well
as the third party vendors. As of September 1999, VIB has updated its assessment
of Y2K risk in this regard and has established a specific reserve of $800,000
within the general reserve for credit losses and liquidity policies to mitigate
this risk. The ongoing assessment on this risk is monitored on a monthly basis
with appropriate adjustments to reserves, as required. While management
considers the $800,000 in reserves adequate as of September 30, 1999, such
amount is subject to change based on an ongoing review. Consequently, the amount
provided at September 30, 1999, should not be interpreted as indicative of
future adequacy.
VIB has established detailed contingency plans for all mission critical and
secondary operating systems. Trigger dates have been established for activating
any required contingency plan. VIB has also established a Business Resumption
Plan specific to Y2K, which is coordinated with VIB's Disaster Recovery Plan. An
additional measure taken by VIB has been to establish a currency contingency
plan, which addresses the potential failure of the commercial payment systems
(electronic funds transfer, automated teller machines, and point of sale
equipment). This plan also addresses the increasing speculation regarding short
and long-term unavailability of certain consumer goods, which may prompt people
to accumulate or hoard cash in quantities sufficient to meet their perceived
needs for a month or more. This plan addresses potential customer fears by
establishing procedures to provide for any extreme demand for cash.
VIB has completed its schedule to implement the systems and programming changes
necessary to address the Y2K issue and does not believe that the costs of such
actions will have a material effect on VIB's results of operations or financial
condition. VIB has expended $407,000 through September 30, 1999 and expects to
spend an additional $122,000 in 1999. There can be no assurance, however, that
there will not be a delay in, or increased costs associated with the
implementations of such changes, and VIB's inability to implement such changes
could have an adverse effect on the Company's future results of operations.
Similarly, there can be no assurance that third party vendors' systems will be
Y2K compliant and, consequently, VIB could incur incremental costs to convert to
other vendors.
13
<PAGE> 15
BANK OF STOCKDALE
Bank of Stockdale engages the services of third-party software vendors and
service providers for substantially all of its electronic data processing. As
such, a primary focus of Stockdale's Y2K compliance program is to monitor the
progress of its software providers toward Y2K compliance and to prepare and test
future-date sensitive data of Stockdale in simulated processing.
Stockdale's Y2K compliance program has been divided into the following phases:
(i) inventorying date-sensitive information technology and other business
systems; (ii) assigning priorities to identified items and assessing the efforts
required for Y2K compliance of those determined to be material to Stockdale:
(iii) upgrading or replacing material items that are determined not to be Y2K
compliant and testing material items; (iv) assessing the status of third party
risks; and (v) designing and implementing contingency and business continuation
plans.
In the first phase of Stockdale's Y2K compliance program, Stockdale conducted a
thorough inventory of current information technology systems, software, and
embedded technologies that could be affected by Y2K issues. Non-information
technology systems such as climate control systems, telephone systems, vault and
building security equipment were also surveyed. This stage of the Y2K compliance
program is complete.
In phase two of Stockdale's Y2K compliance program, results from the inventory
were assessed and evaluated to determine the Y2K impact and necessary actions
required obtaining Y2K compliance. Stockdale divided the results of the
inventory into two principal categories -- those information technology systems
that are considered by Stockdale to be "mission critical" and those that are
not. Stockdale defines a "mission critical system" as a system that is vital to
the successful continuance of Stockdale's core business and/or maintaining
customer account integrity. Stockdale originally identified 16 mission critical
systems that could be affected by Y2K issues. During the second quarter the
number of mission critical systems were analyzed and reduced to seven. To obtain
Y2K compliance for these mission critical systems, Stockdale has remediated or
replaced all such systems that have been determined not to be Y2K compliant.
Phase three of Stockdale's Y2K compliance program included the upgrading,
replacement and/or retirement of systems and testing. Stockdale first addressed
mission critical systems and then non-mission critical systems. This phase of
the Y2K compliance program was completed during the first six months of 1999.
For Stockdale's internal systems, necessary actions primarily consist of
upgrading computer hardware and equipment. Such hardware upgrades should be
completed by November 30, 1999. 100% of Stockdale's third party software
upgrades have been completed. Testing of updated or new systems is ongoing.
"Future-date" testing of upgrades and/or replacements is being conducted along
with tests to ensure integration with Stockdale's overall data processing
environment. As of June 30, 1999, Stockdale's testing of mission critical
systems was completed.
14
<PAGE> 16
The fourth phase of Stockdale's Y2K compliance program, assessing third-party
risks, includes the process of identifying and prioritizing critical suppliers,
borrowers, and customers at the direct interface level as well as other material
relationships with third parties, including various exchanges, clearing houses,
other banks, telecommunications companies and public utilities. This evaluation
includes communicating with the third parties about their plans and progress in
addressing Y2K issues. Detailed evaluations of the most critical third parties
have been initiated. Evaluation of critical Stockdale customers and borrowers
was completed in November 1998 and updated for new customers through September
30, 1999. In this regard a specific reserve of $80,000 within the general
reserve for credit losses was established in 1999. Evaluations of other critical
third parties were completed by June 30, 1999. No problems have been identified
to date. These evaluations will be followed with contingency plans, which are
ongoing and completed in the second quarter 1999, with follow up reviews and
testing scheduled through the remainder of 1999.
The final phase of Stockdale's Y2K compliance program relates to contingency
plans. Stockdale maintains contingency plans in the normal course of business
designed to be deployed in the event of various potential business
interruptions. These plans have been expanded to address Y2K-specific
interruptions such as power and telecommunication infrastructure failures, and
will continue to be supplemented if and when the results of systems and
contingency plan integration testing identify additional business functions at
risk. Such enhancements to existing plans will include remediation of systems,
reinstallation of software, installation of third-party vendor software or some
combination of alternatives.
As Stockdale relies upon third-party software vendors and service providers for
substantially all of its electronic data processing, the primary cost of the Y2K
compliance program has been and will continue to be the reallocation of internal
resources for testing and for the purchase of computer hardware and, therefore,
does not represent incremental expense to Stockdale. The estimated value of
internal resources allocated to the Y2K compliance program and the cost of
computer hardware is approximately $281,000 of which approximately $260,000 had
been expended through September 30, 1999. Stockdale's total costs associated
with required modifications to be Y2K compliant is not expected to be material
to its results of operations, liquidity or capital resources.
NET INTEREST INCOME
Average interest earning assets totaled $739.3 million during the nine months
ending September 30, 1999, an increase of $205.1 million or 38.4% compared to
the same period last year. All comparative areas of earning assets grew
significantly. This growth was highlighted by an increase in average total loans
of $125.8 million or 29.6% to $550.4 million. Average interest bearing
liabilities in the first nine months of 1999 increased $187.6 million or 45.9%
to average $596.7 million as compared to the same period last year. During this
comparative period average interest bearing deposit categories increased $124.9
million or 30.9% to $529.1 million. Average borrowed funds increased $62.7
million or 1,270.0% to $67.7 million during the same time frame. These
comparative changes in average deposits and borrowed funds include the effects
of the branch acquisition and issuance of the Capital Securities, discussed
earlier.
15
<PAGE> 17
Interest income for the nine-month period ending September 30, 1999 was $46.6
million, an increase of $9.7 million or 26.4% compared to the first nine months
in 1998. The increase in interest income was primarily the result of the volume
increases previously discussed. This increase was partially offset by a
decreased interest rate environment. The yield on interest earning assets
decreased 80 basis points to 8.43% for the nine-month period ended September 30,
1999 from 9.23% for the comparative period last year.
Interest expense increased $5.7 million or 44.3% during the nine months ended
September 30, 1999 as compared to the same period last year. The increase in
interest expense was principally the result of volume increases in all
interest-bearing categories as well as a deposit mix shift towards the higher
interest bearing categories. This increase was partially impacted by a lower
interest rate environment. The cost of interest bearing funds decreased 4 basis
points from 4.22% for the nine-months ended September 30, 1998 to 4.18% for the
nine months ended September 30, 1999.
Net interest income was $28.0 million for the nine months ending September 30,
1999, representing an increase of $4.0 million or 16.7% from the same period
ended September 30, 1998. The net interest spread, which represents the
difference between the rate earned on average interest earning assets and the
rate paid on average interest bearing liabilities decreased to 4.25% for the
period ending September 30, 1999, compared to 5.01% for the same period in 1998.
Net interest income as a percentage of average interest earning assets, or the
net interest margin, decreased to 5.06% for the period ending September 30,
1999, compared to 6.00% for the period ending September 30, 1998. A lower
interest rate environment and a shift in the deposit mix towards the higher
interest bearing categories and the issuance of the Capital Securities, offset
by the relatively greater increases in interest earning assets than in interest
bearing liabilities and the greater proportionate growth in loans, the highest
yielding assets, were the primary reasons for the comparative decrease in yield
for both the net interest spread and the net interest margin.
Interest income for the third quarter ended September 30, 1999 was $16.6
million, which represented an increase of $3.7 million or 28.7% to the
comparative period ending September 30, 1998. Interest expense was $6.8 million
for the three-month period ending September 30, 1999, in increase or $2.3
million or 50.0% compared to the same period in 1998. Net interest income during
the third quarter ending September 30, 1999 was $9.8 million, an increase of
$1.4 million or 17.2% for the comparative period ending September 30, 1998. The
same factors affecting the first nine month periods also apply to the second
quarter comparison of 1999 to 1998.
PROVISION FOR CREDIT LOSSES
The allowance for credit losses at September 30, 1999 was $5.2 million, compared
to $3.9 million at September 30, 1998, an increase of $1.3 million or 34.9%. As
a percent of total loans, the allowance was .84% at September 30, 1999, compared
to .86% at September 30, 1998 and .86% at December 31, 1998.
The provision for credit losses was $2.0 million for the first nine months of
1999, compared with $2.1 million provided for the nine months ended September
30, 1998, a
16
<PAGE> 18
decrease of 1.0%. The provision was $700,000 for the third quarter
of 1999 compared to $705,000 for the third quarter of 1998, a decrease of $5,000
or .1%
Total non-performing loans as of September 30, 1999 were $5.1 million as
compared to $6.0 million at September 30, 1998 and $4.9 million at December 31,
1998. Non-performing loans increased $.2 million during the nine months ended
September 30, 1999.
Net charge-offs were $1.1 million for the nine months ended September 30, 1999.
This represents a decrease of $.3 million when compared to $1.4 million in net
charge offs for the same period in 1998. During the third quarter ending
September 30, 1999, $.5 million was recorded in net charge-offs compared to $.4
million net charge-offs in the third quarter of 1998.
The subsidiary banks have an established standard process for assessing the
adequacy of the allowance for credit losses. In addition to reviewing the
inherent risks of their respective loan portfolios, consideration is given to
exposures such as economic conditions, credit concentrations, collateral
coverage, the composition of the loan portfolio and trends in delinquencies.
Specific allocations are identified by individual loans with general allocations
assigned to the various loan categories. Loans classified by the subsidiary
bank's internal review or by the regulatory authorities are included in the
process of assessing the adequacy of the allowance for credit losses. This
process seeks to maintain an allowance level adequate to provide for potential
losses.
Management of the Company believes the consolidated allowance at September 30,
1999, was adequate based on present economic conditions and its ongoing
evaluation of the risks inherent in the subsidiary banks' loan portfolios.
NON-INTEREST INCOME
Total non-interest income amounted to $4.8 million for the nine months ended
September 30, 1999 representing a decrease of $.6 million or 10.5% compared with
the same period in the prior year. A $167,000 decrease in service charges on
deposits, a $192,000 decrease in other income related to a one-time prior period
insurance recovery in 1998, a $67,000 decrease in the gain on sale of other real
estate owned and a $283,000 decrease in the gain on sale of investment
securities, partially offset by an increase of $117,000 in the gain on sale of
small business government guaranteed loans were the primary reasons for the
decrease in non-interest income.
Total other income for the third quarter of 1999 was $1.6 million, a decrease of
$ .4 million or 20.2% from the third quarter of 1998. The decrease resulted from
a $3,300 decrease in gains on the sale of Small Business Administration loans, a
$47,000 decrease in gains on sale of other real estate owned, a $66,000 decrease
in service charges on deposits and a $289,000 decrease in gains on the sale of
investment securities.
17
<PAGE> 19
NON-INTEREST EXPENSE
Total non-interest expense for the nine months ended September 30, 1999 was
$24.3 million, an increase of $2.9 million or 13.4% as compared to the same
period in 1998. After adjusting for $.7 million in merger and one-time related
expenses non-interest expense for the nine months ended September 30, 1999 was
$23.6 million, an increase of $2.2 million or 10.3%.
Salary expense during the nine months ended September 30, 1999 was $8.8 million,
an increase of $.8 million or 9.1% over the comparable period in 1998. The
growth in salary expense is attributable to staffing additions related to the
1998 Palm Springs, California branch acquisition from Palm Desert National Bank,
the previously discussed Hemet, California branch acquisition from Fremont
Investment & Loan, merit increases, paid commissions and performance incentives.
Employee benefits expense was $2.7 million for the period ending September 30,
1999, an increase of $290,000 or 10.7% from the same period in the prior year.
The increase in benefits expense is attributable to the previously discussed
staffing additions, increased 401K and ESOP funding costs and increases in
medical insurance expense.
Occupancy expense was $2.0 million for the nine month period ended September 30,
1999, an increase of $.2 million or 9.9% as compared to the first nine months in
1998. Furniture and equipment expense was $1.9 million for the nine month period
ended September 30, 1999, an increase of $13,500 or .1% from the same period in
1998. These increases were primarily the result of the acquisitions previously
discussed, increased depreciation expense on planned additions to computer
hardware and software expenditures.
Other operating expense amounted to $8.9 million during the nine-month period
ended September 30, 1999, an increase of $1.5 million or 20.8% from the same
period in the prior year. Increases in data processing as well as $682,000 in
merger and related non-recurring expenses were the primary causes for the
increase in this category.
For the third quarter of 1999, total non-interest expenses were $8.1 million, an
increase of $.5 million or 6.8% from $7.6 million for the third quarter of 1998.
The increase in each category were for the same reasons as noted above for the
comparable nine month periods with the exception of the merger costs discussed
previously.
INCOME TAXES
Income tax expense for the nine months ending September 30, 1999 was $2.4
million as compared with $1.9 million for the same period in 1998. The increase
in expense was primarily attributable to a $1.2 million increase in taxable
operating income adjusted for $682,000 in non-tax deductible merger and related
non-recurring costs. The Company's adjusted effective tax rate was 33.0% for the
nine months ended September 30, 1999 as was the tax rate for the nine months
ended September 30, 1998. The effective tax rate remained steady primarily as
the result of a $1.0 million increase in non-taxable investment interest income.
18
<PAGE> 20
Income taxes for the third quarter were $.9 million, an increase of $.2 million
or 33.4% from the third quarter of 1998. The increase in expense was primarily
related to a $.5 million increase in the Company's taxable operating income, and
a slight increase in the effective tax rate from 33.2% for the nine months ended
September 30, 1998 to 35.6% for the nine months ended September 30, 1999. The
effective tax rate increase was primarily the result of a $104,000 write off of
non-tax deductible organization costs offset slightly by a $.4 million increase
in non-taxable income from municipal securities.
CAPITAL RESOURCES
Total stockholders' equity as of September 30, 1999 was $56.5 million, which
represented an increase of $.9 million from December 31, 1998, and $2.7 million
from September 30, 1998. The increase since December 31, 1998 included $4.1
million in net income and a $3.4 million decrease in the cumulative unrealized
gain on securities classified as available for sale. The increase since
September 30, 1998 included $5.4 million in net income and a $3.8 million
decrease in the cumulative unrealized gain on securities classified as available
for sale.
Under regulatory guidelines, capital adequacy is measured as a percentage of
risk-adjusted assets in which risk percentages are applied to assets on as well
as off the balance sheet. Tier 1 capital consists of common stock, a qualifying
percentage of the Capital Securities, and retained earnings and total capital
includes a portion of the allowance for credit losses. At September 30, 1999 the
Tier 1 and total risk based capital ratios were 10.96% and 12.09% respectively,
compared to 9.81% and 10.55% respectively, at September 30, 1998. The current
minimum regulatory guidelines for Tier 1 and total risk-based capital ratios are
4.0% and 8.0%, respectively. The leverage ratio, which is a measure of Tier 1
capital to adjusted average assets, was 8.78% at September 30, 1999, compared to
7.76% at September 30, 1998. The Company's leverage ratio also exceeds the
current regulatory minimum of 3.0%. Accordingly, the Company's capital ratios
exceed all regulatory minimums and support future planned growth, but may not be
adequate to support additional acquisitions.
LIQUIDITY AND ASSET/LIABILITY MANAGEMENT
The Company's consolidated liquidity position, enhanced by the Fremont
Investment & Loan branch acquisition, remained adequate to meet future
contingencies. At September 30, 1999 the Company had $100.0 million in net
federal funds purchased and FHLB advances outstanding. This compared to $5.9
million in net federal funds outstanding at September 30, 1998. Since December
31, 1998, net Federal Funds purchased and FHLB advances have increased $96.0
million. The Company's consolidated liquidity ratio at September 30, 1999 was
22.39%. This ratio represented a decrease from 23.72% at September 30, 1998 and
an increase from 22.38% at December 31, 1998.
The Company's subsidiary banks' Asset/Liability Committees ("ALCO") function to
manage the maintenance of liquidity and the preservation of net interest income
when subjected to fluctuations in market interest rates. The ability to meet
existing and future funding commitments is the measure of liquidity. Liquidity
is also needed to meet borrowing needs, deposit withdrawals and asset growth.
The subsidiaries develop
19
<PAGE> 21
liquidity through deposit growth, maturities and repayments of loans and
investments, net interest income, fee income and access to purchase funds
through correspondent banks or other entities.
The subsidiaries' ALCO manage the interest rate sensitivity or repricing
characteristics of their assets and liabilities. The primary source of earnings
for the subsidiaries is net interest income, which is subject to movements in
interest rates. To minimize the effect of changes in rates, the balance sheet
requires structuring in order that the repricing opportunities for both assets
and liabilities exist in nearly equivalent amounts and at approximately similar
time intervals. Interval differences may exist at times creating interest
sensitivity gaps, which represent the difference between interest sensitive
assets and interest sensitive liabilities. These gaps are static in nature and
do not consider future activity. As such, these gap measurements serve best as
an indicator for potential interest rate exposure.
The sensitivity to interest rate fluctuations is measured in several time
frames. Various strategies such as liability cost administration and
redeployment of asset maturities are utilized to preserve interest income from
the effect of changes in interest rates. The gap positions are monitored as a
function of the asset and liability management process. The monitoring process
includes the use of periodic simulated business forecasts, which incorporate
various interest rate environments. Financial modeling is utilized to assist
management in maintaining consistent earnings in an environment of changing
interest rates.
The Company's subsidiaries do not maintain a trading account for any class of
financial instrument nor do they engage in hedging activities or purchase
high-risk derivative instruments. Furthermore, the subsidiaries are not subject
to foreign currency exchange rate risk or commodity price risk.
In addition to gap measurement, the subsidiaries' ALCO are further responsible
for the measurement of interest rate risk, i.e., the risk of loss in value due
to changes in interest rates. The subsidiaries' ALCO monitor and consider
methods of managing interest rate risk by monitoring changes in net portfolio
value ("NPV") and net interest income under various interest rate scenarios. The
subsidiaries' ALCO attempts to manage the various components of their respective
balance sheets to minimize the impact of sudden and sustained changes in
interest rates on NPV and net interest income.
The subsidiary banks' exposure to interest rate risk is reviewed on a periodic
basis by their respective Boards of Directors and the ALCO. If potential changes
to NPV and net interest income resulting from hypothetical interest rate swings
are not within the limits established by the Board, the Board may direct
management to adjust its assets and liability mix to bring interest rate risk
within Board-approved limits.
The subsidiary banks utilize interest rate sensitivity analysis to measure
interest rate risk by computing estimated changes in NPV of its cash flows from
assets and liabilities within a range of assumed changes in market interest
rates. NPV represents the market value of portfolio equity and is equal to the
market value of assets minus the market value of liabilities. This analysis
assesses the risk of loss in market rate sensitive instruments in the event of
sudden and sustained increases and decreases in
20
<PAGE> 22
market interest rates ranging from one hundred to three hundred basis points.
The subsidiary banks' Boards of Directors have adopted interest rate risk
policies, which establish a maximum limit of decrease in the NPV in the event of
sudden and sustained increases, and decreases in market interest rates. The
following tables present VIB's projected changes in NPV and net interest income
for the various rate shock levels as of September 30, 1999 and Bank of
Stockdale's as of June 30, 1999.
Valley Independent Bank
Change in Net Portfolio Value
at September 30, 1999
<TABLE>
<CAPTION>
NET PORTFOLIO ACTUAL PERCENTAGE
CHANGE IN INTEREST RATES VALUE CHANGE CHANGE
- ------------------------ ------------- ------ ---------
(Dollars in Thousands)
<S> <C> <C> <C>
300 basis point rise $63,931 ($19,858) -23.70%
200 basis point rise 70,210 (13,579) -16.21%
100 basis point rise 77,095 (6,694) -7.99%
Base Rate Scenario 83,789 -- --
100 basis point decline 91,951 8,162 9.74%
200 basis point decline 97,474 13,685 16.33%
300 basis point decline 104,098 20,309 24.24%
</TABLE>
Change in Net Interest Income
at September 30, 1999
<TABLE>
<CAPTION>
NET INTEREST ACTUAL PERCENTAGE
CHANGE IN INTEREST RATES INCOME (000's) CHANGE (000's) CHANGE (000's)
- ------------------------ -------------- -------------- --------------
(Dollars in Thousands)
<S> <C> <C> <C>
300 basis point rise $28,084 ($2,435) -7.98%
200 basis point rise 28,930 (1,589) -5.21%
100 basis point rise 29,744 (775) -2.54%
Base Rate Scenario 30,519 -- --
100 basis point decline 31,007 488 1.60%
200 basis point decline 30,789 270 0.88%
300 basis point decline 29,948 (571) -1.87%
</TABLE>
21
<PAGE> 23
Bank of Stockdale
Change in net Portfolio Value
at June 30, 1999
<TABLE>
<CAPTION>
NET INTEREST ACTUAL PERCENTAGE
CHANGE IN INTEREST RATES INCOME CHANGE CHANGE
- ------------------------ ------------ ------ ----------
(Dollars in Thousands)
<S> <C> <C> <C>
300 basis point rise $ 6,403 ($7,153) -52.77%
200 basis point rise 8,834 (4,722) -34.83%
100 basis point rise 11,255 (2,301) -16.97%
Base Rate Scenario 13,556 -- --
100 basis point decline 15,467 1,911 14.10%
200 basis point decline 17,322 3,766 27.78%
300 basis point decline 19,362 5,807 42.84%
</TABLE>
Change in Net Interest Income
at June 30, 1999
<TABLE>
<CAPTION>
NET INTEREST ACTUAL PERCENTAGE
CHANGE IN INTEREST RATES INCOME CHANGE CHANGE
- ------------------------ ------------ ------ ----------
(Dollars in Thousands)
<S> <C> <C> <C>
300 basis point rise $7,393 ($263) -3.43%
200 basis point rise 7,585 (71) -0.93%
100 basis point rise 7,696 40 0.52%
Base Rate Scenario 7,656 -- --
100 basis point decline 7,813 157 2.05%
200 basis point decline 7,746 90 1.18%
300 basis point decline 7,708 52 0.70%
</TABLE>
Certain shortcomings are inherent in the method of analysis presented in the
computation of NPV. Although certain assets and liabilities may have similar
maturities or periods within which they will reprice, they may react differently
to changes in market interest rates. The interest rates on certain types of
assets and liabilities may fluctuate in advance of changes in market interest
rates, while interest rates on other types may lag behind changes in market
rates. There may also be repayment risk if interest rates rise on loans.
Computation of forecasted effects of hypothetical interest rate changes should
not be relied upon as indicative of actual future results. Further, the
computations do not contemplate any actions the ALCO could undertake in response
to change in interest rates.
The Company is a legal entity, separate and distinct from its subsidiaries.
Although there exists the ability to raise capital on its own behalf (such as
the recent private placement of Capital Securities) or borrow from external
sources, the Company may obtain additional funds through dividends paid by, and
fees for services provided to, its subsidiaries. Regulations limit the amount of
dividends as well as service fees paid by
22
<PAGE> 24
subsidiaries. The Company's expenses have been primarily covered by fees charged
to and dividends received from VIB and it is anticipated that the Company will
be able to continue to rely on dividends from its subsidiaries to fund its
separate operations and obligations. The Company may not always be able to rely
solely on its current or future subsidiaries to meet its obligations, including
obligations under the Capital Securities, or to maintain its separate liquidity.
Under such circumstances, the Company would be forced to seek other means to
raise capital.
At September 30, 1999 the Company had adequate liquidity to meet its anticipated
funding needs.
INFLATION
The impact of inflation on a financial institution differs significantly from
that exerted on an industrial company, primarily because its assets and
liabilities consist largely of monetary items. The relatively low ratio of fixed
assets to total assets of 1.4% at September 30, 1999 reduces the potential for
inflated earnings resulting from understated depreciation changes. However,
financial institutions are affected by inflation's impact on non-interest
expenses, such as salaries and occupancy expense, and to some extent, by the
inflative impact on interest rates.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Information in response to this item is included in ITEM 2 -- MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
23
<PAGE> 25
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
To the best of the Company's knowledge, there are no pending legal
proceedings to which the Company is a party and which may have a materially
adverse effect upon the Company's property or business.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
The following exhibits are filed as a part of this report:
<TABLE>
<CAPTION>
Regulation S-K
Exhibit No. Description Page
- -------------- ----------- ----
<S> <C> <C>
3.1 Articles of Incorporation of VIB Corp, ___
as amended September 27, 1999
10.16 Valley Independent Bank form of ___
Executive Supplemental Compensation
Agreement
10.17 Bank of Stockdale, F.S.B. form of ___
Executive Supplemental Compensation
Agreement
10.18 Bank of Stockdale, F.S.B. form of Life ___
Insurance Endorsement Method Split
Dollar Plan Agreement (executive
officers)
10.19 Bank of Stockdale, F.S.B. form of ___
Director Supplemental Compensation
Benefits Agreement
</TABLE>
<PAGE> 26
<TABLE>
<CAPTION>
Regulation S-K
Exhibit No. (cont.) Description Page
- -------------- ----------- ----
<S> <C> <C>
10.20 Bank of Stockdale, F.S.B. form of Life ___
Insurance Endorsement Method Split
Dollar Agreement (directors)
27 Financial Data Schedule ___
</TABLE>
(b) Current Reports on Form 8-K:
During the quarter ended September 30, 1999 the Company filed the
following Current Report on Form 8-K:
Description Date of Report
----------- --------------
Signing of Agreement and Plan of Reorganization September 16, 1999
dated September 7, 1999 to acquire Kings River
State Bank
<PAGE> 27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VIB CORP
Date: November 12, 1999
/s/ Dennis L. Kern
-----------------------------------------
Dennis L. Kern,
President and Chief Executive Officer
/s/ Harry G. Gooding, III
-----------------------------------------
Harry G. Gooding, III,
Executive Vice President and Chief
Financial Officer
<PAGE> 1
Exhibit 3.1
ARTICLES OF INCORPORATION
OF
VIB CORP
[as amended September 27, 1999]
ARTICLE I: NAME
The name of this corporation is:
VIB CORP
ARTICLE II: PURPOSE
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III: AGENT
The name and complete business address in the State of California of this
corporation's initial agent for service of process is:
S. Alan Rosen, Esq.
Horgan, Rosen, Beckham & Coren, L.L.P.
21700 Oxnard Street, Suite 1400
Woodland Hills, California 91365
ARTICLE IV: CAPITAL
(a) The corporation is authorized to issue two classes of shares designated
"Preferred Stock" and "Common Stock," respectively. The number of shares of
Preferred Stock authorized to be issued is 10,000,000 and the number of shares
of Common Stock, no par value per share, authorized to be issued is 20,000,000.
(b) The Preferred Stock may be divided into such number of series as the
Board of Directors may determine. The Board of Directors is authorized to
determine and alter the rights, preferences, privileges and restrictions granted
to and imposed upon any wholly unissued series of Preferred Stock, and to fix
the number of shares of any series of Preferred Stock and the designation of any
such series of Preferred Stock. The Board of Directors, within the limits and
restrictions stated in any resolution or resolutions of the Board of Directors
originally fixing the number of shares constituting any series, may increase or
decrease (but not below the number of
<PAGE> 2
shares of such series then outstanding) the number of shares of any series
subsequent to the issue of shares of that series.
ARTICLE V: RANGE OF DIRECTORS
(a) The business and affairs of the corporation shall be managed under the
direction of the Board of Directors. The authorized number of directors of the
corporation shall be not less than six (6) nor more than ten (10). The exact
number of directors shall be determined within the limits specified above by a
bylaw or by a resolution duly adopted by the Board of Directors or by the
shareholders.
(b) Notwithstanding any other provisions of these Articles of
Incorporation, the range of authorized directors of the corporation set forth in
Section (a) of Article V may only be amended by the vote of at least sixty-six
and two-thirds percent (66 2/3%) of the outstanding shares entitled to vote
thereon; provided, however, that an amendment reducing the minimum number of
directors to a number less than five (5) cannot be adopted if the votes cast
against its adoption at a meeting, or the shares not consenting in the case of
an action by written consent, are equal to more than sixteen and two-thirds
percent (16 2/3%) of the outstanding shares entitled to vote thereon.
ARTICLE VI: LIABILITY OF DIRECTORS
(a) The liability of directors of the corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
(b) The corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) through Bylaw
provisions, agreements with agents, vote of shareholders or disinterested
directors, or otherwise, to the fullest extent permissible under California law.
(c) The corporation is authorized to purchase and maintain insurance on
behalf of its agents against any liability asserted against or incurred by the
agent in such capacity or arising out of the agent's status as such from a
company, the shares of which are owned in whole or in part by the corporation,
provided that any policy issued by such company is limited to the extent
provided by applicable law.
(d) Any amendment, repeal or modification of any provision of this Article
VI shall not adversely affect any right or protection of an agent of this
corporation existing at the time of such amendment, repeal or modification.
ARTICLE VII: FAIR PRICE PROTECTION
(a) Definitions. For the purposes of this Article VII:
2
<PAGE> 3
1. The term "Beneficial Owner" and correlative terms shall have the meaning
as set forth in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, or any similar successor Rule. Without limitation and in addition to
the foregoing, any Voting Stock of this corporation which any Major Shareholder
has the right to vote or to acquire: (i) pursuant to any agreement; (ii) by
reason of tenders of shares by shareholders of the corporation in connection
with or pursuant to a tender offer made by such Major Shareholder (whether or
not any tenders have been accepted, but excluding tenders which have been
rejected); or (iii) upon the exercise of conversion rights, warrants, options or
otherwise, shall be deemed "beneficially owned" by such Major Shareholder.
2. The term "Business Combination" shall mean:
A. Any merger or consolidation (whether in a single transaction or a
series of related transactions, including a series of separate transactions with
a Major Shareholder, any Affiliate or Associate thereof, or any Person acting in
concert therewith) of this corporation or any Subsidiary with or into a Major
Shareholder or of a Major Shareholder with or into this corporation or a
Subsidiary;
B. Any sale, lease, exchange, transfer, distribution to shareholders
or other disposition, including without limitation, a mortgage, pledge or any
other security device, to or with a Major Shareholder by the corporation or any
of its Subsidiaries (in a single transaction or a series of related
transactions) of all, substantially all or any Substantial Part of the assets of
this corporation or a Subsidiary (including, without limitation, any securities
of a Subsidiary);
C. The purchase, exchange, lease or other acquisition by the
corporation or any of its Subsidiaries (in a single transaction or a series of
related transactions) of all, substantially all or any Substantial Part of the
assets or business of a Major Shareholder;
D. The issuance of any securities, or of any rights, warrants or
options to acquire any securities, of this corporation or a Subsidiary, eighty
percent (80%) or more of which are issued to a Major Shareholder, or the
acquisition by this corporation or a Subsidiary of any securities, or of any
rights, warrants or options to acquire any securities, of a Major Shareholder;
E. Any reclassification of Voting Stock, recapitalization or other
transaction (other than a redemption in accordance with the terms of the
security redeemed) which has the effect, directly or indirectly, of increasing
the proportionate amount of Voting Stock of the corporation or any Subsidiary
thereof which is beneficially owned by a Major Shareholder, or any partial
liquidation, spin off, split off or split up of the corporation or any
Subsidiary thereof; provided, however, that this Section (a)2.E of Article VII
shall not relate to any transaction of the types specified herein that has been
approved by eighty percent (80%) of the Board of Directors; and
3
<PAGE> 4
F. Any Agreement, contract or other arrangement providing for any of
the transactions described herein.
3. The term "Major Shareholder" shall mean any Person which, together with
its "Affiliates" and "Associates" (as defined in Rule 12b-2 of the Securities
Exchange Act of 1934, as amended, or any similar successor Rule) and any Person
acting in concert therewith, is the beneficial owner of shares possessing ten
percent (10%) or more of the voting power of the Voting Stock of this
corporation, and any Affiliate or Associate of a Major Shareholder, including a
Person acting in concert therewith. The term "Major Shareholder" shall not
include a Subsidiary of this corporation.
4. The term "other consideration to be received" shall include, without
limitation, Voting Stock of this corporation retained by its existing
shareholders in the event of a Business Combination which is a merger or
consolidation in which this corporation is the surviving corporation.
5. The term "Person" shall mean any individual, corporation, partnership or
other person, group or entity (other than this corporation, any Subsidiary of
this corporation or a trustee holding stock for the benefit of employees of this
corporation or its Subsidiaries, or any one of them, pursuant to one or more
employee benefit plans or arrangements). When two or more Persons act as a
partnership, limited partnership, syndicate, association or other group for the
purpose of acquiring, holding or disposing of shares of stock, such partnership,
syndicate, association or group will be deemed a "Person."
6. The term "Subsidiary" shall mean any business entity fifty percent (50%)
or more of which is beneficially owned by this corporation.
7. The term "Substantial Part," as used in reference to the assets of the
corporation, of any Subsidiary or of any Major Shareholder means assets having a
value of more than five percent (5%) of the total consolidated assets of the
corporation and its Subsidiaries as of the end of the corporation's most recent
fiscal year ending prior to the time the determination is made.
8. The term "Voting Stock" shall mean stock or other securities entitled to
vote upon any action to be taken in connection with any Business Combination or
entitled to vote generally in the election of directors, and shall also include
stock or other securities convertible into Voting Stock.
(b) Notwithstanding any other provisions of these Articles of
Incorporation and except as set forth in Section (c) of Article VII, neither the
corporation nor any Subsidiary shall be party to a Business Combination unless:
1. The Business Combination was approved by the Board of
Directors of the corporation prior to the Major Shareholder involved in the
Business Combination becoming such; or
4
<PAGE> 5
2. The Major Shareholder involved in the Business Combination
sought and obtained the unanimous prior approval of the Board of Directors to
become a Major Shareholder and the Business Combination was approved by not less
than eighty percent (80%) of the Board of Directors; or
3. The Business Combination was approved by not less than ninety
percent (90%) of the Board of Directors of the corporation.
(c) The approval requirements of Section (b) of Article VII shall not
apply if the Business Combination is approved by the vote of at least sixty-six
and two-thirds percent (66 2/3%) of the shares of the Voting Stock of this
corporation and all of the following conditions are satisfied:
1. The aggregate of the cash and the fair market value of other
consideration to be received per share (as adjusted for stock splits, stock
dividends, reclassification of shares into a lesser number and similar events)
by holders of the Voting Stock of this corporation in the Business Combination
is not less than the higher of: (i) the highest per share price (including
brokerage commissions, soliciting dealers' fees, dealer-management compensation,
and other expenses, including, but not limited to, costs of newspaper
advertisements, printing expenses and attorneys' fees) paid by the Major
Shareholder in acquiring any of this corporation's Voting Stock; or (ii) an
amount which bears the same or a greater percentage relationship to the market
price of this corporation's Voting Stock immediately prior to the announcement
of such Business Combination as the highest per share price determined in (i)
above bears to the market price of this corporation's Voting Stock immediately
prior to the commencement of acquisition of this corporation's Voting Stock by
such Major Shareholder;
2. The consideration to be received in such Business Combination
by holders of the Voting Stock of this corporation shall be, except to the
extent that a shareholder agrees otherwise as to all or a part of his or her
shares, in the same form and of the same kind as paid by the Major Shareholder
in acquiring his Voting Stock of the corporation;
3. After becoming a Major Shareholder and prior to consummation
of such Business Combination: (i) such Major Shareholder shall not have acquired
any newly-issued shares of capital stock, directly or indirectly, from this
corporation or a Subsidiary (except upon conversion of convertible securities
acquired by it prior to becoming a Major Shareholder or upon compliance with the
provisions of this Article VII or as a result of a pro rata share dividend or
share split); and (ii) such Major Shareholder shall not have received the
benefit, directly or indirectly (except proportionately as a shareholder), of
any loans, advances, guarantees, pledges or other financial assistance or tax
credits provided by this corporation or a Subsidiary, or made any major changes
in this corporation's business or equity capital structure; and
4. A proxy statement responsive to the requirements of the
Securities Exchange Act of 1934 and Rules promulgated thereunder, whether or not
this corporation is then subject to such requirements, shall be mailed to all
shareholders of this corporation for the purpose of soliciting shareholders'
approval of such Business Combination and shall contain at the front
5
<PAGE> 6
thereof, in a prominent place: (i) any recommendations as to the advisability
(or inadvisability) of the Business Combination which any one or more members of
Board of Directors may choose to state; and (ii) the opinion of a reputable
national investment banking firm as to the fairness (or lack thereof) of the
terms of such Business Combination, from the point of view of the remaining
shareholders of this corporation (such investment banking firm to be engaged
solely on behalf of the remaining shareholders, to be paid a reasonable fee for
their services by this corporation upon receipt of such opinion, to be one of
the so-called major bracket investment banking firms which has not previously
been associated with such Major Shareholder and to be selected by the Board of
Directors).
(d) The affirmative vote required by this Article VII is in addition
to the vote of the holders of any class or series of stock of the corporation
otherwise required by law, these Articles of Incorporation, or any resolution
which has been adopted by the Board of Directors providing for the issuance of a
class or series of Preferred Stock.
(e) Nothing contained in this Article VII shall be construed as
relieving any Major Shareholder or any Affiliate or Associate thereof from any
fiduciary obligation imposed by law.
(f) The fact that any action or transaction complies with the
provisions of this Article VII shall not be construed as imposing any fiduciary
duty, obligation or responsibility on the Board of Directors or any member
thereof to approve such action or transaction or recommend its adoption or
approval to the shareholders of the corporation, nor shall such compliance
limit, prohibit or otherwise restrict in any manner the Board of Directors, or
any member thereof, with respect to evaluations of, or action and responses
taken with respect to, such action or transaction.
(g) Any amendment, change or repeal of this Article VII or any other
amendment of these Articles of Incorporation which would have the effect of
modifying or permitting circumvention of the provisions of this Article VII
shall require approval by at least a sixty-six and two-thirds percent (66 2/3%)
vote of the Voting Stock of the corporation.
ARTICLE VIII: CLASSIFICATION OF DIRECTORS
(a) This Article VIII shall become effective only when the corporation
becomes a listed corporation within the meaning of Section 301.5 of the
Corporations Code, which provision refers to a corporation whose shares are
traded on the New York Stock Exchange, American Stock Exchange, or Nasdaq
National Market System.
(b) In the event the authorized number of directors shall be fixed at
nine (9) or more, the Board of Directors shall be classified into three (3)
classes, the members of each class to serve for a term of three (3) years. In
the event the authorized number of directors shall be fixed at six (6) or more,
but less than nine (9), the Board of Directors shall be classified into two (2)
classes, the members of each class to serve for a term of two (2) years.
6
<PAGE> 7
(c) The election of directors by the shareholders shall not be by
cumulative voting. At each election of directors, each shareholder entitled to
vote may vote all the shares held by that shareholder for each of several
nominees for director up to the number of directors to be elected. The
shareholder may not cast more votes for any single nominee than the number of
shares held by that shareholder.
(d) At the first annual meeting of shareholders held after the
corporation qualifies as a listed corporation within the meaning of Section
301.5 of the Corporations Code the nominees elected as directors will be
classified on the basis of the number of votes received; the nominees receiving
the highest number of votes will be elected to the class(es) with the longest
initial terms, as follows: (i) if there shall be three (3) classes one-third
(1/3) of the directors shall be elected for a term of three (3) years, one-third
(1/3) of the directors shall be elected for a term of two (2) years, and
one-third (1/3) of the directors shall be elected for a term of one (1) year. If
the number of directors is not divisible by three (3), the first extra director
shall be elected for a term of three (3) years and a second extra director, if
any, shall be elected for a term of two (2) years; and (ii) if there shall be
two (2) classes, one-half (1/2) of the directors shall be elected for a term of
two (2) years and one-half (1/2) of the directors shall be elected for a term of
one (1) year. If the number of directors is not divisible by two (2), the first
extra director shall be elected for a term of two (2) years.
(e) Subject to the provisions of Section (a) of Article V providing
for a change in the authorized number of directors, at subsequent annual
meetings of shareholders, a number of directors shall be elected equal to the
number of directors with terms expiring at that annual meeting. If there shall
be three (3) classes, at each subsequent annual meeting the directors elected
shall be elected for a term of three (3) years. If there shall be two (2)
classes, at each subsequent annual meeting the directors elected shall be
elected for a term of two (2) years. In the event the authorized number of
directors changes necessitating a change in the number of classes, the directors
of the corporation shall be reclassified in accordance with California law and
the principles of Section (d) of this Article VIII; provided, however, any
change in the number of classes shall not operate to shorten the term of any
director.
(f) If the number of directors is changed, any increase or decrease
shall be apportioned among the classes so as to maintain the number of directors
in each class as nearly equal as possible, and any additional directors of any
class elected to fill a vacancy resulting from an increase in such class shall
hold office for a term that shall coincide with the remaining term of that
class, but in no case will a decrease in the number of directors shorten the
term of any incumbent director. A director shall hold office until the annual
meeting for the year in which his term expires and until his successor shall be
elected and shall qualify, subject, however, to prior death, resignation,
retirement, disqualification or removal from office. Any vacancy on the Board of
Directors, howsoever resulting, may be filled by a majority of the directors
then in office, even if less than a quorum, or by a sole remaining director. Any
director elected to fill a vacancy shall hold office for a term that shall
coincide with the term of the class to which such director shall have been
elected.
7
<PAGE> 8
(g) Notwithstanding the foregoing provisions of this Article VIII,
whenever the holders of any one or more classes or series of Preferred Stock
issued by the corporation shall have the right, voting separately by class or
series, to elect directors at an annual or special meeting of shareholders, the
election, term of office, filling of vacancies and other features of such
directorships shall be governed by the terms of these Articles of Incorporation
or the resolution or resolutions adopted by the Board of Directors pursuant to
Article IV applicable thereto, and such directors so elected shall not be
divided into classes pursuant to this Article VIII unless expressly provided by
such terms.
(h) Notwithstanding any other provision of these Articles of
Incorporation, any amendment, change or repeal of this Article VIII shall
require the vote of at least sixty-six and two-thirds percent (66 2/3%) of the
outstanding shares entitled to vote thereon.
/s/ S. Alan Rosen
---------------------------------
S. Alan Rosen, Incorporator
8
<PAGE> 1
EXHIBIT 10.16
VALLEY INDEPENDENT BANK
EXECUTIVE SUPPLEMENTAL COMPENSATION AGREEMENT
This Executive Supplemental Compensation Agreement (the "Agreement")
is made and entered into as of June 1,1999 by and between Valley Independent
Bank a subsidiary of VIB Corp with its principal offices located in the City of
El Centro, Imperial County, California (the "Employer"), and _________________,
an individual residing in the State of California (the "Executive").
RECITALS
WHEREAS, the Executive has been an employee of the Employer since
___________________, and is currently serving as its ___________________; and
WHEREAS, the Employer desires to establish a compensation benefit
program as a fringe benefit for executive officers of the Employer in order to
attract and retain individuals with extensive and valuable experience; and
WHEREAS, the Executive's experience and knowledge of the affairs of
the Employer and its industry are extensive and valuable; and
WHEREAS, it is deemed to be in the best interests of the Employer to
provide the Executive with certain fringe benefits, on the terms and conditions
set forth herein, in order to reasonably induce the Executive to remain in the
Employer's employment and to compensate the Executive for valuable services
heretofore rendered to the Employer; and
WHEREAS, the Executive and the Employer wish to specify in writing
the terms and conditions upon which this additional compensatory incentive will
be provided to the Executive, or to the Executive's spouse or the Executive's
designated beneficiaries, as the case may be.
NOW, THEREFORE, in consideration of the services to be performed by
the Executive in the future, as well as the mutual promises and covenants
contained herein, the Executive and the Employer agree as follows:
AGREEMENT
1. Terms and Definitions.
1.1. Administrator. The Employer shall be the "Administrator" and,
solely for the purposes of ERISA as defined in subparagraph
1.9 below, the "fiduciary" of this Agreement where a fiduciary
is required by ERISA.
<PAGE> 2
1.2. Applicable Percentage. The term "Applicable Percentage" shall
mean that percentage listed on Schedule "A" attached hereto
which is adjacent to the number of calendar years which shall
have elapsed from the date of the Executive's commencement of
service to the Employer. Notwithstanding the foregoing or the
percentage set forth on Schedule A, but subject to all other
terms and conditions set forth herein, the "Applicable
Percentage shall be: (i) provided payments have not yet begun
hereunder, one hundred percent (100%) upon the occurrence of a
"Change in Control" as defined in subparagraph 1.4 below, or
the Executive's death, or Disability (as defined in
subparagraph 1.6 below); and (ii) notwithstanding subclause
(i) of this subparagraph 1.2, zero percent (0%) in the event
the Executive takes any intentional action which prevents the
Employer from collecting the proceeds of any life insurance
policy which the Employer may happen to own at the time of the
Executive's death and of which the Employer is the designated
beneficiary. Furthermore, notwithstanding the foregoing, or
anything contained in this Agreement to the contrary, in the
event the Executive takes any intentional action which
prevents the Employer from collecting the proceeds of any life
insurance policy which the Employer may happen to own at the
time of the Executive's death and of which the Employer is the
designated beneficiary: (1) the Executive's estate or
designated beneficiary shall no longer be entitled to receive
any of the amounts payable under the terms of this Agreement,
and (2) the Employer shall have the right to recover from the
Executive's estate all of the amounts paid to the Executive's
estate (with respect to amounts paid prior to the Executive's
death or paid to the Executive's estate) or designated
beneficiary (with respect to amounts paid to the designated
beneficiary) pursuant to the terms of this Agreement prior to
and after Executive's death.
1.3. Beneficiary. The term "beneficiary" or "designated
beneficiary" shall mean the person or persons whom the
Executive shall designate in a valid Beneficiary Designation,
a copy of which is attached hereto as Schedule "C," to receive
the benefits provided hereunder. A Beneficiary Designation
shall be valid only if it is in the form attached hereto and
made a part hereof, is completed and signed by the Executive,
and is received by the Administrator prior to the Executive's
death.
1.4. Change in Control. The term "Change in Control" shall mean the
occurrence of any of the following events with respect to the
Employer (with the term "Employer", for purposes of this
Paragraph 1.4, being deemed to include any parent holding
company owning, directly or indirectly, substantially all of
the outstanding voting capital stock of the Employer): (i) the
consummation of a merger pursuant to which shares of the
Employer's capital stock are converted into cash, securities
or other property (other than a merger of the Employer in
which the holders of the Employer's capital stock immediately
prior to the merger have the same proportionate ownership of
the common stock of the surviving corporation immediately
after the merger); (ii) the consummation of any sale or other
transfer of all or substantially all the assets of the
Employer; or (iii) any "person" (as defined in Sections 13(d)
and 14(d) of the Securities Exchange Act
<PAGE> 3
of 1934, as amended (the "Exchange Act")) shall become the
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of forty-nine percent
(49%) or more of the Employer's outstanding capital stock.
1.5. The Code. The "Code" shall mean the Internal Revenue Code of
1986, as amended (the "Code").
1.6. Disability/Disabled. The term "Disability" or "Disabled" shall
have the same meaning given such terms in any policy of
disability insurance maintained by the Employer for the
benefit of employees including the Executive. In the absence
of such a policy which extends coverage to the Executive in
the event of disability, the terms shall mean the Executive
suffering a sickness, accident or injury which, in the
judgment of a physician satisfactory to the Employer, prevents
the Executive from performing substantially all of the
Executive's normal duties for the Employer. As a condition to
any benefits, the Employer may require the Executive to submit
to such physical or mental evaluations and tests as the
Employer's Board of Directors deems appropriate.
1.7. Early Retirement Date. The term "Early Retirement Date" shall
mean the Retirement, as defined below, of the Executive on a
date which occurs prior to the Executive attaining sixty-two
(62) years of age, but after the Executive has attained
fifty-five (55) years of age.
1.8. Effective Date. The term "Effective Date" shall mean the date
first written above.
1.9. ERISA. The term "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended.
1.10. Executive Benefits. The term "Executive Benefits" shall mean
the benefits determined in accordance with Schedule "B", and
reduced or adjusted to the extent: (i) required under the
other provisions of this Agreement, including, but not limited
to, Paragraphs 5, 6 and 7 hereof; (ii) required by reason of
the lawful order of any regulatory agency or body having
jurisdiction over the Employer; or (iii) required in order for
the Employer to properly comply with any and all applicable
state and federal laws, including, but not limited to, income,
employment and disability income tax laws (e.g., FICA, FUTA,
SDI).
1.11 Final Average Compensation. The term "Final Average
Compensation" means the Executives average monthly gross cash
compensation from the Employer paid to the Executive over the
twelve (12) month period prior to the Executives termination
of employment with the Employer.
1.12 Plan Year . The term "Plan Year" shall mean the Employer's
fiscal year.
1.13 Retirement. The term "Retirement" or "Retires" shall refer to
the date which the Executive acknowledges in writing to
Employer to be the last day he will provide
<PAGE> 4
any significant personal services, whether as an employee or
independent consultant or contractor, to Employer. For
purposes of this Agreement, the phrase "significant personal
services" shall mean more than ten (10) hours of personal
services rendered to one or more individuals or entities in
any thirty (30) day period.
1.14 Surviving Spouse. The term "Surviving Spouse" shall mean the
person, if any, who shall be legally married to the Executive
on the date of the Executive's death.
1.15 Termination for Cause. The term "Termination for Cause" shall
mean termination of the employment of the Executive by reason
of any of the following:
(a) The willful, intentional and material breach or
habitual and continued neglect by the Executive of
his/her responsibilities and duties;
(b) The continuous mental or physical incapacity of the
Executive subject to disability rights under this
Agreement;
(c) The determination by a state or federal agency or
other governmental authority having jurisdiction over
the Employer that the Executive is not suitable to
act in the capacity for which he/she is employed by
the Employer;
(d) The Executive's conviction of any felony or a crime
involving moral turpitude or the Executive's willful
and intentional commission of a fraudulent or
dishonest act;
(e) The Executive's willful and intentional disclosure,
without authority, of any secret or confidential
information not otherwise publicly available
concerning the Employer or taking any action which
the Employer's Board of Directors determines, in its
sole discretion and subject to good faith, fair
dealing and reasonableness, constitutes unfair
competition with or inducement of any customer to
breach any contract with the Employer; or
(f) The Executive's willful and intentional violation of
any federal banking or securities laws, or of the
Bylaws, rules, policies or resolutions of the
Employer, or the rules or regulations of the Federal
Deposit Insurance Corporation, the Federal; Reserve,
the California Department of Financial Institutions,
or any other regulatory agency or governmental
authority having jurisdiction over the Employer,
which has a material adverse effect upon the
Employer.
2. Scope, Purpose and Effect
2.1. Contract of Employment. Although this Agreement is intended to
provide the Executive with an additional incentive to remain
in the employ of the Employer,
<PAGE> 5
this Agreement shall not be deemed to constitute a contract of
employment between the Executive and the Employer nor shall
any provision of this Agreement restrict or expand the right
of the Employer to terminate the Executive's employment. This
Agreement shall have no impact or effect upon any separate
written Employment Agreement which the Executive may have with
the Employer, it being the parties' intention and agreement
that unless this Agreement is specifically referenced in said
Employment Agreement (or any modification thereto), this
Agreement (and the Employer's obligations hereunder) shall
stand separate and apart from, and shall have no effect on or
be affected by, the terms and provisions of said Employment
Agreement.
2.2. Fringe Benefit. The benefits provided by this Agreement are
granted by the Employer as a fringe benefit to the Executive
and are not a part of any salary reduction plan or any
arrangement deferring a bonus or a salary increase. The
Executive has no option to take any current payments or bonus
in lieu of the benefits provided by this Agreement.
3. Payments Upon Early Retirement or Retirement and After Retirement.
3.1. Payments Upon Early Retirement. The Executive shall have the
right to Retire on a date which constitutes an Early
Retirement Date as defined in subparagraph 1.7 above.
(a) If the Executive elects to Retire on a date which
constitutes an Early Retirement Date, the Executive
shall be entitled to be paid the Applicable
Percentage of the Executive Benefits, in
substantially equal monthly installments on the first
day of each month, beginning with the month following
the month in which the Early Retirement Date occurs,
and continuing for one hundred and eighty (180)
months.
3.2. Payments Upon Retirement.
(a) If the Executive remains in the employment of the
Employer until attaining sixty-two (62) years of age,
the Executive shall be entitled to be paid the
Applicable Percentage of the Executive Benefits, in
substantially equal monthly installments on the first
day of each month, beginning with the month following
the month in which the Executive retires or upon such
later date as may be mutually agreed upon by the
Executive and the Employer in advance of said
Retirement date, payable for the period of one
hundred eighty (180) months. At the Employer's sole
and absolute discretion, the Employer may increase
the Executive Benefits as and when the Employer
determines the same to be appropriate.
3.3. Payments in the Event of Death After Retirement.
(a) If the Executive Retires, but shall die before
receiving all of the Executive
<PAGE> 6
Benefits, the Employer will pay to the Executive's
designated beneficiary(ies) the Applicable Percentage
of the balance, if any, of the Executive's Benefits
in up to one hundred eighty (180) monthly installment
payments in the amounts that otherwise would have
been paid to the Executive if still alive, if any,
minus the number of annual installment payments made
to the Executive prior to the Executive's death.
(b) If the Executive retires, the Executive shall be
entitled to receive the payments specified in
subparagraph 3.3 above.
(c) If a valid Beneficiary Designation is not in effect,
then the remaining amounts due to the Executive under
the terms of this Agreement shall be paid to the
Executive's Surviving Spouse. If the Executive leaves
no Surviving Spouse, the remaining amounts due to the
Executive under the terms of this Agreement shall be
paid to the duly qualified personal representative,
executor or administrator of the Executive's estate.
4. Payments in the Event Death Prior to Retirement.
4.1. Payments in the Event of Death Prior to Retirement.
(a) If the Executive dies at any time after the Effective
Date of this Agreement but prior to Retirement, the
Employer agrees to pay to the Executive's designated
beneficiary(ies) the Applicable Percentage of the
benefit up to one hundred eighty (180) monthly
installment payments in the amounts that otherwise
would have been paid to the Executive if still alive.
(b) If a valid Beneficiary Designation is not in effect,
then the remaining amounts due to the Executive under
the terms of this Agreement shall be paid to the
Executive's Surviving Spouse. If the Executive leaves
no Surviving Spouse, the remaining amounts due to the
Executive under the terms of this Agreement shall be
paid to the duly qualified personal representative,
executor or administrator of the Executive's estate.
5. Payments in the Event Employment is Terminated Prior to Retirement. As
indicated in subparagraph 2.1 above, the Employer reserves the right to
terminate the Executive's employment, with or without cause but subject
to any written employment agreement which may then exist at any time
prior to the Executive's Retirement. In the event that the employment
of the Executive shall be terminated, other than by reason of death,
Disability or Retirement, prior to the Executive's attaining sixty-two
(62) years of age, then this Agreement shall terminate upon the date of
such termination of employment; provided, however, that the Executive
shall be entitled to the following benefits as may be applicable
depending upon the circumstances surrounding the Executive's
termination:
5.1. Termination Without Cause. If the Executive's employment is
terminated by the
<PAGE> 7
Employer without cause, and such termination is not subject to
the provisions of subparagraph 5.4 below, the Executive shall
be entitled to be paid the Applicable Percentage of the
Executive Benefits, as defined above, in substantially equal
monthly installments on the first day of each month, beginning
with the month following the month in which the Executive
attains fifty-five (55) years of age or any month thereafter,
as requested in writing by the Executive and delivered to the
Employer or its successor thirty (30) days prior to the
commencement of installment payments; provided, however, that
in the event the Executive does not request a commencement
date as specified, such installments shall be paid on the
first day of each month, beginning with the month following
the month in which the Executive attains sixty-two (62) years
of age. The installments shall be payable monthly for one
hundred eighty (180) months.
5.2. Voluntary Termination by the Executive. If the Executive's
employment is terminated by voluntary resignation and such
resignation is not subject to the provisions of subparagraph
5.4 below, the Executive shall be entitled to be paid the
Applicable Percentage of the Executive Benefits, as defined
above, in substantially equal monthly installments on the
first day of each month, beginning with the month following
the month in which the Executive attains fifty-five (55) years
of age or any month thereafter, as requested in writing by the
Executive and delivered to the Employer or its successor
thirty (30) days prior to the commencement of installment
payments; provided, however, that in the event the Executive
does not request a commencement date as specified, such
installments shall be paid on the first day of each month,
beginning with the month following the month in which the
Executive attains sixty-two (62) years of age. The
installments shall be payable monthly for one hundred eighty
(180) months.
5.3. Termination for Cause. If the Executive's employment with the
Employer is terminated "for cause" based on Paragraph 1. 15 of
this Agreement, and such termination is not subject to the
provisions of Paragraph 5.4 below, the Executive shall forfeit
all Executive Benefits.
5.4. Termination by the Employer on Account of or After a Change in
Control. In the event that there has been a Change of Control
and subsequently there has occurred (without the prior written
consent of the Executive) of (i) the permanent assignment of
the Executive by the Employer employing the Executive to
duties materially inconsistent with, or which substantially or
materially alter the nature or status of, the Executive's
responsibilities immediately prior to a Change in Control of
the Employer; (ii) reduction by the Employer in the
Executive's base salary as in effect on the date of a Change
in Control of the Employer as the same may be increased from
time to time during the term of this Agreement; (iii) any
failure by the Employer to continue in effect without
substantial change any compensation, incentive, welfare or
benefit plan or arrangement, or any plan or arrangement
whereby the Executive may acquire securities of the Employer,
in which the Executive is participating at the time of a
Change in Control of the Employer (or any other plans
providing the Executive with substantially similar
<PAGE> 8
benefits, including, but not limited to, the Employer's
Management Incentive Plan, Employees' Stock Option Plan,
retirement income plan, automobile benefits and life
insurance, medical, dental, accident and disability plans)
(collectively, "Benefit Plans"), or the taking of any action
by the Employer that would adversely affect the Executive's
participation in or materially reduce the Executive's benefits
under any such Benefit Plan or deprive the Executive of any
material fringe benefit enjoyed by the Executive at the time
of the Change in Control of the Employer, unless an equitable
substitute arrangement (embodied in an ongoing substitute or
alternative Benefit Plan) has been made for the benefit of the
Executive with respect to the Benefit Plan in question; (iv)
the Employer requires the Executive to relocate, to any place
other than the El Centro, California, metropolitan area; (v)
any material breach by the Employer of any provision of this
Agreement; (vi) any failure by the Employer to obtain the
assumption of this Agreement by any successor or assign of the
Employer; (vii) any purported termination of the Executive's
employment that is not effected pursuant to a notice of
termination given in accordance with requirements for notices
described at Paragraph 11.4 of this Agreement and which shall
indicate those specific termination provisions in this
Agreement relied upon and sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for
termination of the Executive's employment; or (viii) the
Employer requires the Executive to travel a substantial amount
of time, except for travel related to corporate meetings and
temporary assignments, to an extent substantially inconsistent
with the Executive's business travel obligations at the time
of a Change in Control of the Employer, then, the Executive
may elect to terminate the Executive's employment by the
Employer and shall thereupon be entitled to be paid the
Applicable Percentage of the Executive Benefits, as defined
above in Paragraph 1.2, in substantially equal monthly
installments on the first day of each month, beginning with
the month following the month in which the Executive elects to
terminate the Executives employment with the employer or any
month thereafter, as requested in writing by the Executive and
delivered to the Employer or its successor thirty (30) days
prior to the commencement of installment payments; provided,
however, that in the event the Executive does not request a
commencement date as specified, such installments shall be
paid on the first day of each month, beginning with the month
following the month in which the Executive attains sixty-two
(62) years of age. The installments shall be payable for the
period of one hundred eighty (180) months.
5.5. Payments in the Event of Death Following Termination. If the
Executive shall die prior to receiving all of the applicable
benefits described in this Paragraph 5 to which the Executive
is entitled, then the Employer will make such payments to the
Executive's designated beneficiary. If a valid Beneficiary
Designation is not in effect, then the remaining amounts due
to the Executive shall be paid to the Executive's Surviving
Spouse. If the Executive leaves no Surviving Spouse, the
remaining amounts due to the Executive shall be paid to the
duly qualified personal representative, executor or
administrator of the Executive's estate.
<PAGE> 9
6. Section 280G Adjustment. The Executive acknowledges and agrees that the
parties have entered into this Agreement based upon certain financial
and tax accounting assumptions. Accordingly, with full knowledge of the
potential consequences, the Executive agrees that, notwithstanding
anything contained herein to the contrary, in the event that any
payment or benefit received or to be received by the Executive, whether
payable pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Employer (together with the Executive
Benefits, the "Total Payments"), will not be deductible (in whole or in
part) as a result of Code Section 280G or other applicable provisions
of the Code, the Total Payments shall be reduced until no portion of
the Total Payments is nondeductible as a result of Section 280G or such
other applicable provisions of the Code. For purposes of this
limitation:
(a) No portion of the Total Payments, the receipt or
enjoyment of which the Executive shall have
effectively waived in writing prior to the date of
payment of any future Executive Benefits payments,
shall be taken into account;
(b) No portion of the Total Payments shall be taken into
account, which in the opinion of the tax counsel
selected by the Employer and acceptable to the
Executive, does not constitute a "parachute payment"
within the meaning of Section 280G of the Code;
(c) Any reduction of the Total Payments shall be applied
to reduce any payment or benefit received or to be
received by the Executive pursuant to the terms of
this Agreement and any other plan, arrangement or
agreement with the Employer in the order determined
by mutual agreement of the Employer and the
Executive;
(d) Future payments shall be reduced only to the extent
necessary so that the Total Payments (other than
those referred to in clauses (a) or (b) above in
their entirety) constitute reasonable compensation
for services actually rendered within the meaning of
Section 28OG of the Code, in the opinion of tax
counsel referred to in clause (b) above; and
(e) The value of any non-cash benefit or any deferred
payment or benefit included in the Total Payments
shall be determined by independent auditors selected
by the Employer and acceptable to the Executive in
accordance with the principles of Section 28OG of the
Code.
7. Right To Determine Funding Methods. The Employer reserves the right to
determine, in its sole and absolute discretion, whether, to what extent
and by what method, if any, to provide for the payment of the amounts
which may be payable to the Executive, the Executive's spouse or the
Executive's beneficiaries under the terms of this Agreement. In the
event that the Employer elects to fund this Agreement, in whole or in
part, through the use of life insurance or annuities, or both, the
Employer shall determine the ownership and beneficial interests of any
such policy of life insurance or annuity.
<PAGE> 10
The Employer further reserves the right, in its sole and absolute
discretion, to terminate any such policy, and any other device used to
fund its obligations under this Agreement, at any time, in whole or in
part. Consistent with Paragraph 9 below, neither the Executive, the
Executive's spouse nor the Executive's beneficiaries shall have any
right, title or interest in or to any funding source or amount utilized
by the Employer pursuant to this Agreement, and any such funding source
or amount shall not constitute security for the performance of the
Employer's obligations pursuant to this Agreement. In connection with
the foregoing, the Executive agrees to execute such documents and
undergo such medical examinations or tests which the Employer may
request and which may be reasonably necessary to facilitate any funding
for this Agreement including, without limitation, the Employer's
acquisition of any policy of insurance or annuity. Furthermore, a
refusal by the Executive to consent to, participate in and undergo any
such medical examinations or tests shall result in the immediate
termination of this Agreement and the immediate forfeiture by the
Executive, the Executive's spouse and the Executive's beneficiaries of
any and all rights to payment hereunder.
8. Claims Procedure. The Employer shall, but only to the extent necessary
to comply with ERISA, be designated as the named fiduciary under this
Agreement and shall have authority to control and manage the operation
and administration of this Agreement. Consistent therewith, the
Employer shall make all determinations as to the rights to benefits
under this Agreement. Any decision by the Employer denying a claim by
the Executive, the Executive's spouse, or the Executive's beneficiary
for benefits under this Agreement shall be stated in writing and
delivered or mailed, via registered or certified mail, to the
Executive, the Executive's spouse or the Executive's beneficiary, as
the case may be. Such decision shall set forth the specific reasons for
the denial of a claim. In addition, the Employer shall provide the
Executive, the Executive's spouse or the Executive's beneficiary with a
reasonable opportunity for a full and fair review of the decision
denying such claim.
9. Status as an Unsecured General Creditor. Notwithstanding anything
contained herein to the contrary: (i) neither the Executive, the
Executive's spouse or the Executive's designated beneficiaries shall
have any legal or equitable rights, interests or claims in or to any
specific property or assets of the Employer as a result of this
Agreement; (ii) none of the Employer's assets shall be held in or under
any trust for the benefit of the Executive, the Executive's spouse or
the Executive's designated beneficiaries or held in any way as security
for the fulfillment of the obligations of the Employer under this
Agreement; (iii) all of the Employer's assets shall be and remain the
general unpledged and unrestricted assets of the Employer; (iv) the
Employer's obligation under this Agreement shall be that of an unfunded
and unsecured promise by the Employer to pay money in the future; and
(v) the Executive, the Executive's spouse and the Executive's
designated beneficiaries shall be unsecured general creditors with
respect to any benefits which may be payable under the terms of this
Agreement.
Notwithstanding subparagraphs (i) through (v) above, the Employer and
the Executive acknowledge and agree that, in the event of a Change in
Control, and at the written request of the Executive, or in the
Employer's discretion if the Executive does not so
<PAGE> 11
request and the Employer nonetheless deems it appropriate, the Employer
shall establish, not later than the effective date of the Change in
Control, a Rabbi Trust or Multiple Rabbi Trusts (the "Trust" or
"Trusts") upon such terms and conditions as the Employer, in its sole
discretion, deems appropriate and in compliance with applicable
provisions of the Code, in order to permit the Employer to make
contributions and/or transfer assets to the Trust or Trusts to
discharge its obligations pursuant to this Agreement. The principal of
the Trust or Trusts and any earnings thereon shall be held separate and
apart from other funds of the Employer to be used exclusively for
discharge of the Employer's obligations pursuant to this Agreement and
shall continue to be subject to the claims of the Employer's general
creditors until paid to the Executive or its beneficiaries in such
manner and at such times as specified in this Agreement.
10. Discretion of Board to Accelerate Payout. Notwithstanding any of the
other provisions of this Agreement, the Board of Directors of the
Employer may, if determined in its sole and absolute discretion to be
appropriate, accelerate the payment of the amounts due under the terms
of this Agreement, provided that Executive (or Executive's spouse or
designated beneficiaries): (i) consents to the revised payout terms
determined appropriate by the Employer's Board of Directors; and (ii)
does not negotiate or in anyway influence the terms of proposed
altered/accelerated payout (said decision to be made solely by the
Employer's Board of Directors and offered to the Executive [or
Executive's spouse or designated beneficiaries] on a "take it or leave
it basis").
11. Miscellaneous.
11.1. Opportunity To Consult With Independent Advisors. The
Executive acknowledges that he has been afforded the
opportunity to consult with independent advisors of his
choosing including, without limitation, accountants or tax
advisors and counsel regarding both the benefits granted to
him under the terms of this Agreement and the (i) terms and
conditions which may affect the Executive's right to these
benefits and (ii) personal tax effects of such benefits
including, without limitation, the effects of any federal or
state taxes, Section 280G of the Code, and any other taxes,
costs, expenses or liabilities whatsoever related to such
benefits, which in any of the foregoing instances the
Executive acknowledges and agrees shall be the sole
responsibility of the Executive notwithstanding any other term
or provision of this Agreement. The Executive further
acknowledges and agrees that the Employer shall have no
liability whatsoever related to any such personal tax effects
or other personal costs, expenses, or liabilities applicable
to the Executive and further specifically waives any right for
the Executive, himself, and his heirs, beneficiaries, legal
representatives, agents, successors, and assigns to claim or
assert liability on the part of the Employer related to the
matters described above in this subparagraph 11. 1. The
Executive further acknowledges and agrees that he has read,
understands and consents to all of the terms and conditions of
this Agreement, and that he enters into this Agreement with a
full understanding of its terms and conditions.
<PAGE> 12
11.2. Arbitration of Disputes. All claims, disputes and other
matters in question arising out of or relating to this
Agreement or the breach or interpretation thereof, other than
those matters which are to be determined by the Employer in
its sole and absolute discretion, shall be resolved by binding
arbitration before a representative member, selected by the
mutual agreement of the parties, of the Judicial Arbitration
and Mediation Services, Inc. ("JAMS"). In the event JAMS is
unable or unwilling to conduct the arbitration provided for
under the terms of this Paragraph, or has discontinued its
business, the parties agree that a representative member,
selected by the mutual agreement of the parties, of the
American Arbitration Association ("AAA"), shall conduct the
binding arbitration referred to in this Paragraph. Notice of
the demand for arbitration shall be filed in writing with the
other party to this Agreement and with JAMS (or AAA, if
necessary). In no event shall the demand for arbitration be
made after the date when institution of legal or equitable
proceedings based on such claim, dispute or other matter in
question would be barred by the applicable statute of
limitations. The arbitration shall be subject to such rules of
procedure used or established by JAMS, or if there are none,
the rules of procedure used or established by AAA. Any award
rendered by JAMS or AAA shall be final and binding upon the
parties, and as applicable, their respective heirs,
beneficiaries, legal representatives, agents, successors and
assigns, and may be entered in any court having jurisdiction
thereof. The obligation of the parties to arbitrate pursuant
to this clause shall be specifically enforceable in accordance
with, and shall be conducted consistently with, the provisions
of Title 9 of Part 3 of the California Code of Civil
Procedure. Any arbitration hereunder shall be conducted in El
Centro, California, unless otherwise agreed to by the parties.
11.3. Attorney Fees. In the event of any arbitration or litigation
concerning any controversy, claim or dispute between the
parties hereto, arising out of or relating to this Agreement
or the breach hereof, or the interpretation hereof, the
prevailing party shall be entitled to recover from the
non-prevailing party reasonable expenses, attorneys' fees and
costs incurred in connection therewith or in the enforcement
or collection of any judgment or award rendered therein. The
"prevailing party" means the party determined by the
arbitrator(s) or court, as the case may be, to have most
nearly prevailed, even if such party did not prevail in all
matters, not necessarily the one in whose favor a judgment is
rendered.
11.4. Notice. Any notice required or permitted of either the
Executive or the Employer under this Agreement shall be deemed
to have been duly given, if by personal delivery, upon the
date received by the party or its authorized representative;
if by facsimile, upon transmission to a telephone number
previously provided by the party to whom the facsimile is
transmitted as reflected in the records of the party
transmitting the facsimile and upon reasonable confirmation of
such transmission; and if by mail, on the third day after
mailing via U.S. first class mail, registered or certified,
postage prepaid and return receipt requested, and addressed to
the party at the address given below for the receipt of
notices, or such changed address as may be requested in
writing by a party.
<PAGE> 13
If to the Employer
Valley Independent Bank
1498 Main Street
El Centro, CA 92243
If to the Executive:
______________________________
______________________________
______________________________
11.5. Assignment. Neither the Executive, the Executive's spouse, nor
any other beneficiary under this Agreement shall have any
power or right to transfer, assign, anticipate, hypothecate,
modify or otherwise encumber any part or all of the amounts
payable hereunder, nor, prior to payment in accordance with
the terms of this Agreement, shall any portion of such amounts
be: (i) subject to seizure by any creditor of any such
beneficiary, by a proceeding at law or in equity, for the
payment of any debts, judgments, alimony or separate
maintenance obligations which may be owed by the Executive,
the Executive's spouse, or any designated beneficiary; or (ii)
transferable by operation of law in the event of bankruptcy,
insolvency or otherwise. Any such attempted assignment or
transfer shall be void and shall terminate this Agreement, and
the Employer shall thereupon have no further liability
hereunder.
11.6. Binding Effect/Merger or Reorganization. This Agreement shall
be binding upon and inure to the benefit of the Executive and
the Employer and, as applicable, their respective heirs,
beneficiaries, legal representatives, agents, successors and
assigns. Accordingly, the Employer shall not merge or
consolidate into or with another corporation, or reorganize or
sell substantially all of its assets to another corporation,
firm or person, unless and until such succeeding or continuing
corporation, firm or person agrees to assume and discharge the
obligations of the Employer under this Agreement. Upon the
occurrence of such event, the term "Employer" as used in this
Agreement shall be deemed to refer to such surviving or
successor firm, person, entity or corporation.
11.7. Nonwaiver . The failure of either party to enforce at any time
or for any period of time any one or more of the terms or
conditions of this Agreement shall not be a waiver of such
term(s) or condition(s) or of that party's right thereafter to
enforce each and every term and condition of this Agreement.
11.8. Partial Invalidity. If any term, provision, covenant, or
condition of this Agreement is determined by an arbitrator or
a court, as the case may be, to be invalid, void, or
unenforceable, such determination shall not render any other
term, provision, covenant or condition invalid, void or
unenforceable, and the Agreement shall remain in full force
and effect notwithstanding such partial invalidity.
<PAGE> 14
11.9. Entire Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties
with respect to the subject matter of this Agreement and
contains all of the covenants and agreements between the
parties with respect thereto. Each party to this Agreement
acknowledges that no other representations, inducements,
promises, or agreements, oral or otherwise, have been made by
any party, or anyone acting on behalf of any party, which are
not set forth herein, and that no other agreement, statement,
or promise not contained in this Agreement shall be valid or
binding on either party.
11.10. Modifications. Any modification of this Agreement shall be
effective only if it is in writing and signed by each party or
such party's authorized representative.
11.11. Paragraph Headings. The paragraph headings used in this
Agreement are included solely for the convenience of the
parties and shall not affect or be used in connection with the
interpretation of this Agreement.
11.12. No Strict Construction. The language used in this Agreement
shall be deemed to be the language chosen by the parties
hereto to express their mutual intent, and no rule of strict
construction will be applied against any person.
11.13. Governing Law. The laws of the State of California, other than
those laws denominated choice of law rules, shall govern the
validity, interpretation, construction and effect of this
Agreement.
IN WITNESS WHEREOF, the Employer and the Executive have executed
this Agreement on the date first above-written in the City of El Centro,
Imperial County, California.
THE EMPLOYER THE EXECUTIVE
VALLEY INDEPENDENT BANK
By:_____________________________ ______________________________________
Its:____________________________
<PAGE> 15
SCHEDULE A
<TABLE>
<CAPTION>
CALENDAR YEAR APPLICABLE PERCENTAGE
------------- ---------------------
<S> <C>
July 15, 1974 to December 31, 1998 60%
December 31, 1999 70%
December 31, 2000 80%
December 31, 2001 90%
December 31, 2002 100%
</TABLE>
<PAGE> 16
SCHEDULE B
1. EXECUTIVE BENEFIT DETERMINATION
The Executive Benefits shall be determined based on the following:
(a) The Executive Benefit hereunder when calculated as a one
hundred eighty (180) month annuity for the Executive beginning
at the Benefit Commencement Date using reasonable actuarial
assumptions (as determined by the Employer in its discretion)
shall equal seventy percent (70%) of the Executives final
average compensation.
<PAGE> 17
SCHEDULE C
BENEFICIARY DESIGNATION
To the Administrator of the Valley Independent Bank Executive
Supplemental Compensation Agreement:
Pursuant to the Provisions of my Executive Supplemental Compensation
Agreement with Valley Independent Bank, permitting the designation of a
beneficiary or beneficiaries by a participant, I hereby designate the following
persons and entities as primary and secondary beneficiaries of any benefit under
said Agreement payable by reason of my death:
PRIMARY BENEFICIARY
- ----------------------- --------------------- ----------------------
Name Address Relationship
SECONDARY (CONTINGENT)
BENEFICIARY:
- ----------------------- --------------------- ----------------------
Name Address Relationship
THE RIGHT TO REVOKE OR CHANGE ANY BENEFICIARY DESIGNATION IS HEREBY
RESERVED. ALL PRIOR DESIGNATIONS, IF ANY, OF PRIMARY BENEFICIARIES AND
SECONDARY BENEFICIARIES ARE HEREBY REVOKED.
The Administrator shall pay all sums payable under the Agreement by
reason of my death to the Primary Beneficiary, if he or she survives me, and if
no Primary Beneficiary shall survive me, then to the Secondary Beneficiary, and
if no named beneficiary survives me, then the Administrator shall pay all
amounts in accordance with the terms of my Executive Supplemental Compensation
Agreement. In the event that a named beneficiary survives me and dies prior to
receiving the entire benefit payable under said Agreement, then and in that
event, the remaining unpaid benefit payable according to the terms of my
Executive Supplemental Compensation Agreement.
Dated
--------------------------- ---------------------------------
CONSENT OF THE EXECUTIVE'S SPOUSE TO THE ABOVE BENEFICIARY DESIGNATION:
I ___________________________________ being the spouse of ____________________,
after being afforded the opportunity to consult with independent counsel of my
choosing, do hereby acknowledge that I have read, agree and consent to the
foregoing Beneficiary Designation which relates to the Executive Supplemental
Compensation Agreement entered into by my spouse effective as of
____________________________, 1999. I understand that the above Beneficiary
Designation may affect certain rights which I may have in the benefits provided
for under the terms of the Executive Supplemental Compensation Agreement and in
which I may have a marital property interest.
<PAGE> 18
Dated
--------------------------- ---------------------------------
<PAGE> 1
EXHIBIT 10.17
EXECUTIVE SUPPLEMENTAL COMPENSATION AGREEMENT
This Executive Supplemental Compensation Agreement (the "Agreement") is
made and entered into effective as of __________, 1999 by and between Bank of
Stockdale, F.S.B. with its principal offices located in the City of Bakersfield,
Kern County, California (the "Employer"), and [INSERT EXECUTIVE NAME], an
individual residing in the State of California (the "Executive").
R E C I T A L S
WHEREAS, the Executive has been an employee of the Employer since
[INSERT DATE], and is currently serving as its Executive Vice President and
Chief Lending Officer;
WHEREAS, the Employer desires to establish a compensation benefit
program as a fringe benefit for executive officers of the Employer in order to
attract and retain individuals with extensive and valuable experience in the
banking industry;
WHEREAS, the Executive's experience and knowledge of the affairs of the
Employer and the banking industry are extensive and valuable;
WHEREAS, it is deemed to be in the best interests of the Employer to
provide the Executive with certain fringe benefits, on the terms and conditions
set forth herein, in order to reasonably induce the Executive to remain in the
Employer's employment and to compensate the Executive for valuable services
heretofore rendered to the Employer; and
WHEREAS, the Executive and the Employer wish to specify in writing the
terms and conditions upon which this additional compensatory incentive will be
provided to the Executive, or to the Executive's spouse or the Executive's
designated beneficiaries, as the case may be.
NOW, THEREFORE, in consideration of the services to be performed by the
Executive in the future, as well as the mutual promises and covenants contained
herein, the Executive and the Employer agree as follows:
A G R E E M E N T
1. TERMS AND DEFINITIONS.
1.1. ADMINISTRATOR. The Employer shall be the "Administrator"
and, solely for the purposes of ERISA as defined in subparagraph 1.9 below, the
"fiduciary" of this Agreement where a fiduciary is required by ERISA.
<PAGE> 2
1.2. APPLICABLE PERCENTAGE. The term "Applicable Percentage"
shall mean that percentage listed on Schedule "A" attached hereto which is
adjacent to the number of calendar years which shall have elapsed from the date
of the Executive's commencement of service to the Employer. Notwithstanding the
foregoing or the percentage set forth on Schedule "A," but subject to all other
terms and conditions set forth herein, the "Applicable Percentage" shall be: (i)
provided payments have not yet begun hereunder, one hundred percent (100%) upon
the occurrence of a "Change in Control" as defined in subparagraph 1.4 below, or
the Executive's death, or Disability (as defined in subparagraph 1.6 below); and
(ii) notwithstanding subclause (i) of this subparagraph 1.2, zero percent (0%)
in the event the Executive takes any intentional action which prevents the
Employer from collecting the proceeds of any life insurance policy which the
Employer may happen to own at the time of the Executive's death and of which the
Employer is the designated beneficiary. Furthermore, notwithstanding the
foregoing, or anything contained in this Agreement to the contrary, in the event
the Executive takes any intentional action which prevents the Employer from
collecting the proceeds of any life insurance policy which the Employer may
happen to own at the time of the Executive's death and of which the Employer is
the designated beneficiary: (1) the Executive's estate or designated beneficiary
shall no longer be entitled to receive any of the amounts payable under the
terms of this Agreement, and (2) the Employer shall have the right to recover
from the Executive's estate all of the amounts paid to the Executive's estate
(with respect to amounts paid prior to the Executive's death or paid to the
Executive's estate) or designated beneficiary (with respect to amounts paid to
the designated beneficiary) pursuant to the terms of this Agreement prior to and
after Executive's death.
1.3. BENEFICIARY. The term "beneficiary" or "designated
beneficiary" shall mean the person or persons whom the Executive shall designate
in a valid Beneficiary Designation, a copy of which is attached hereto as
Schedule "C," to receive the benefits provided hereunder. A Beneficiary
Designation shall be valid only if it is in the form attached hereto and made a
part hereof, is completed and signed by the Executive, and is received by the
Administrator prior to the Executive's death.
1.4. CHANGE IN CONTROL. The term "Change in Control" shall
mean the occurrence of any of the following events with respect to the Employer
(with the term "Employer", for purposes of this Paragraph 1.4, being deemed to
include any parent holding company owning, directly or indirectly, substantially
all of the outstanding voting capital stock of the Employer): (i) the
consummation of a merger pursuant to which shares of the Employer's capital
stock are converted into cash, securities or other property (other than a merger
of the Employer in which the holders of the Employer's capital stock immediately
prior to the merger have the same proportionate ownership of the common stock of
the surviving corporation immediately after the merger); (ii) the consummation
of any sale or other transfer of all or substantially all the assets of the
Employer; or (iii) any "person" (as defined in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") shall become
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of forty-nine percent (49%) or more of the Employer's
outstanding capital stock.
-2-
<PAGE> 3
Notwithstanding the foregoing, a "Change of Control" shall not be deemed to
exist as a result of the acquisition of the Employer by merger pursuant to the
Agreement and Plan of Reorganization, dated September 15, 1998, with VIB Corp.
1.5. THE CODE. The "Code" shall mean the Internal Revenue
Code of 1986, as amended (the "Code").
1.6. DISABILITY/DISABLED. The term "Disability" or "Disabled"
shall have the same meaning given such terms in any policy of disability
insurance maintained by the Employer for the benefit of employees including the
Executive. In the absence of such a policy which extends coverage to the
Executive in the event of disability, the terms shall mean the Executive
suffering a sickness, accident or injury which, in the judgment of a physician
satisfactory to the Employer, prevents the Executive from performing
substantially all of the Executive's normal duties for the Employer. As a
condition to any benefits, the Employer may require the Executive to submit to
such physical or mental evaluations and tests, as the Employer's Board of
Directors deems appropriate.
1.7 EARLY RETIREMENT DATE. The term "Early Retirement Date"
shall mean the Retirement, as defined below, of the Executive on a date which
occurs prior to the Executive attaining [INSERT RETIREMENT AGE], but after the
Executive has attained fifty-five (55) years of age.
1.8. EFFECTIVE DATE. The term "Effective Date" shall mean the
date first written above.
1.9. ERISA. The term "ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as amended.
1.10. EXECUTIVE BENEFITS. The term "Executive Benefits" shall
mean the benefits determined in accordance with Schedule "B", and reduced or
adjusted to the extent: (i) required under the other provisions of this
Agreement, including, but not limited to, Paragraphs 5, 6 and 7 hereof; (ii)
required by reason of the lawful order of any regulatory agency or body having
jurisdiction over the Employer; or (iii) required in order for the Employer to
properly comply with any and all applicable state and federal laws, including,
but not limited to, income, employment and disability income tax laws (e.g.,
FICA, FUTA, SDI).
1.11. PLAN YEAR. The term "Plan Year" shall mean the
Employer's fiscal year.
1.12. RETIREMENT. The term "Retirement" or "Retires" shall
refer to the date which the Executive acknowledges in writing to Employer to be
the last day he will provide any significant personal services, whether as an
employee or independent consultant or contractor, to Employer. For purposes of
this Agreement, the phrase "significant personal services" shall mean
-3-
<PAGE> 4
more than ten (10) hours of personal services rendered to one or more
individuals or entities in any thirty (30) day period.
1.13. SURVIVING SPOUSE. The term "Surviving Spouse" shall
mean the person, if any, who shall be legally married to the Executive on the
date of the Executive's death.
1.14. TERMINATION FOR CAUSE. The term "Termination for Cause"
shall mean termination of the employment of the Executive by reason of and of
the following:
(a) The willful, intentional and material breach
or habitual and continued neglect by the Executive of his responsibilities and
duties;
(b) The continuous mental or physical incapacity
of the Executive, subject to disability rights under this Agreement;
(c) The Executive's willful and intentional
violation of any federal banking or securities laws, or of the Bylaws, rules,
policies or resolutions of the Employer, or the rules or regulations of the
Federal Deposit Insurance Corporation, Office of Thrift Supervision, or any
other regulatory agency or governmental authority having jurisdiction over the
Employer, which has a material adverse effect upon the Employer;
(d) The determination by a state or federal
banking agency or other governmental authority having jurisdiction over the
Employer that the Executive is not suitable to act in the capacity for which he
is employed by the Employer;
(e) The Executive's conviction of any felony or a
crime involving moral turpitude or the Executive's willful and intentional
commission of a fraudulent or dishonest act; or
(f) The Executive's willful and intentional
disclosure, without authority, of any secret or confidential information not
otherwise publicly available concerning the Employer or taking any action which
the Employer's Board of Directors determines, in its sole discretion and subject
to good faith, fair dealing and reasonableness, constitutes unfair competition
with or inducement of any customer to breach any contract with the Employer.
2. SCOPE, PURPOSE AND EFFECT.
2.1. CONTRACT OF EMPLOYMENT. Although this Agreement is
intended to provide the Executive with an additional incentive to remain in the
employ of the Employer, this Agreement shall not be deemed to constitute a
contract of employment between the Executive and the Employer nor shall any
provision of this Agreement restrict or expand the right of the Employer to
terminate the Executive's employment. This Agreement shall have no impact or
effect upon any separate written Employment Agreement which the Executive may
have with
-4-
<PAGE> 5
the Employer, it being the parties' intention and agreement that unless this
Agreement is specifically referenced in said Employment Agreement (or any
modification thereto), this Agreement (and the Employer's obligations hereunder)
shall stand separate and apart from, and shall have no effect on or be affected
by, the terms and provisions of said Employment Agreement.
2.2. FRINGE BENEFIT. The benefits provided by this Agreement
are granted by the Employer as a fringe benefit to the Executive and are not a
part of any salary reduction plan or any arrangement deferring a bonus or a
salary increase. The Executive has no option to take any current payments or
bonus in lieu of the benefits provided by this Agreement.
3. PAYMENTS UPON EARLY RETIREMENT OR RETIREMENT AND AFTER
RETIREMENT.
3.1. PAYMENTS UPON EARLY RETIREMENT. The Executive shall have
the right to Retire on a date which constitutes an Early Retirement Date as
defined in subparagraph 1.7 above. If the Executive elects to Retire on a date
which constitutes an Early Retirement Date, the Executive shall be entitled to
be paid the Applicable Percentage of the Executive Benefits, in substantially
equal monthly installments on the first day of each month, beginning with the
month following the month in which the Early Retirement Date occurs, payable (i)
for the period designated in Schedule "D" in the case of the balance in the
Benefit Account and (ii) until death in the case of the Index Benefit defined in
Schedule "B".
3.2. PAYMENTS UPON RETIREMENT. If the Executive remains in
the employment of the Employer until attaining sixty-two (62) years of age, the
Executive shall be entitled to be paid the Applicable Percentage of the
Executive Benefits, in substantially equal monthly installments on the first day
of each month, beginning with the month following the month in which the
Executive Retires or upon such later date as may be mutually agreed upon by the
Executive and the Employer in advance of said Retirement date, payable (i) for
the period designated in Schedule "D" in the case of the balance in the Benefit
Account and (ii) until death in the case of the Index Benefit defined in
Schedule "B". At the Employer's sole and absolute discretion, the Employer may
increase the Executive Benefits as and when the Employer determines the same to
be appropriate.
3.3. PAYMENTS IN THE EVENT OF DEATH AFTER RETIREMENT. The
Employer agrees that if the Executive Retires, but shall die before receiving
all of the Executive Benefits Payments specified in Schedule "B", the Employer
agrees to pay the Applicable Percentage of the Executive Benefits to the
Executive's designated beneficiary in lump sum. If a valid Beneficiary
Designation is not in effect, then the remaining amounts due to the Executive
under the terms of this Agreement shall be paid to the Executive's Surviving
Spouse. If the Executive leaves no Surviving Spouse, the remaining amounts due
to the Executive under the terms of this Agreement shall be paid to the duly
qualified personal representative, executor or administrator of the Executive's
estate.
-5-
<PAGE> 6
4. PAYMENTS IN THE EVENT DEATH OR DISABILITY OCCURS PRIOR TO
RETIREMENT.
4.1. PAYMENTS IN THE EVENT OF DEATH PRIOR TO RETIREMENT. If
the Executive dies at any time after the Effective Date of this Agreement, but
prior to Retirement, the Employer agrees to pay the Applicable Percentage of the
Executive Benefits which the Executive may be entitled to receive to the
Executive's designated beneficiary in lump sum. If a valid Beneficiary
Designation is not in effect, then the remaining amounts due to the Executive
under the terms of this Agreement shall be paid to the Executive's Surviving
Spouse. If the Executive leaves no Surviving Spouse, the remaining amounts due
to the Executive under the terms of this Agreement shall be paid to the duly
qualified personal representative, executor or administrator of the Executive's
estate.
4.2. PAYMENTS IN THE EVENT OF DISABILITY PRIOR TO RETIREMENT.
In the event the Executive becomes Disabled at any time after the Effective Date
of this Agreement but prior to Retirement, the Executive shall be paid the
Applicable Percentage of the Executive Benefits which the Executive may be
entitled to receive, in substantially equal monthly installments on the first
day of each month, beginning with the month following the month in which the
Executive becomes Disabled, payable (i) for the period designated in Schedule
"D" in the case of the balance in the Benefit Account and (ii) until death in
the case of the Index Benefit defined in Schedule "B".
5. PAYMENTS IN THE EVENT EMPLOYMENT IS TERMINATED PRIOR TO
RETIREMENT. As indicated in subparagraph 2.1 above, the Employer reserves the
right to terminate the Executive's employment, with or without cause but subject
to any written employment agreement which may then exist, at any time prior to
the Executive's Retirement. In the event that the employment of the Executive
shall be terminated, other than by reason of death, Disability or Retirement,
prior to the Executive's attaining sixty-two (62) years of age, then this
Agreement shall terminate upon the date of such termination of employment;
provided, however, that the Executive shall be entitled to the following
benefits as may be applicable depending upon the circumstances surrounding the
Executive's termination:
5.1. TERMINATION WITHOUT CAUSE. If the Executive's employment
is terminated by the Employer without cause, and such termination is not subject
to the provisions of subparagraph 5.4 below, the Executive shall be entitled to
be paid the Applicable Percentage of the Executive Benefits, as defined above,
in substantially equal monthly installments on the first day of each month,
beginning with the month following the month in which the Executive attains
fifty-five (55) years of age or any month thereafter, as requested in writing by
the Executive and delivered to the Employer or its successor thirty (30) days
prior to the commencement of installment payments; provided, however, that in
the event the Executive does not request a commencement date as specified, such
installments shall be paid on the first
-6-
<PAGE> 7
day of each month, beginning with the month following the month in which the
Executive attains sixty-two (62) years of age. The installments shall be payable
(i) for the period designated in Schedule "D" in the case of the balance in the
Benefit Account and (ii) until death in the case of the Index Benefit defined in
Schedule "B".
5.2. VOLUNTARY TERMINATION BY THE EXECUTIVE. If the
Executive's employment is terminated by voluntary resignation and such
resignation is not subject to the provisions of subparagraph 5.4 below, the
Executive shall be entitled to be paid the Applicable Percentage of the
Executive Benefits, as defined above, in substantially equal monthly
installments on the first day of each month, beginning with the month following
the month in which the Executive attains fifty-five (55) years of age or any
month thereafter, as requested in writing by the Executive and delivered to the
Employer or its successor thirty (30) days prior to the commencement of
installment payments; provided, however, that in the event the Executive does
not request a commencement date as specified, such installments shall be paid on
the first day of each month, beginning with the month following the month in
which the Executive attains sixty-two (62) years of age. The installments shall
be payable (i) for the period designated in Schedule "D" in the case of the
balance in the Benefit Account and (ii) until death in the case of the Index
Benefit defined in Schedule "B".
5.3. TERMINATION FOR CAUSE. If the Executive's employment
with the Employer is terminated "for cause" based upon Paragraph 1.14 of this
Agreement, and such termination is not subject to the provisions of Paragraph
5.4 below, the Executive shall forfeit all Executive Benefits.
5.4. TERMINATION BY THE EMPLOYER ON ACCOUNT OF OR AFTER A
CHANGE IN CONTROL. In the event (without the prior written consent of the
Executive) of (i) the permanent assignment of the Executive by the Employer
employing the Executive to duties materially inconsistent with, or which
substantially or materially alter the nature or status of, the Executive's
responsibilities immediately prior to a Change in Control of the Employer; (ii)
reduction by the Employer in the Executive's base salary as in effect on the
date of a Change in Control of the Employer as the same may be increased from
time to time during the term of this Agreement; (iii) any failure by the
Employer to continue in effect without substantial change any compensation,
incentive, welfare or benefit plan or arrangement, or any plan or arrangement
whereby the Executive may acquire securities of the Employer, in which the
Executive is participating at the time of a Change in Control of the Employer
(or any other plans providing the Executive with substantially similar benefits,
including, but not be limited to, the Employer's Management Incentive Plan,
Employees Stock Option Plan, retirement income plan, automobile benefits and
life insurance, medical, dental, accident and disability plans) (collectively,
"Benefit Plans"), or the taking of any action by the Employer that would
adversely affect the Executive's participation in or materially reduce the
Executive's benefits under any such Benefit Plan or deprive the Executive of any
material fringe benefit enjoyed by the Executive at the time of the Change in
Control of the Employer, unless an equitable substitute arrangement (embodied in
an ongoing substitute or alternative Benefit Plan) has been made for the benefit
of the Executive
-7-
<PAGE> 8
with respect to the Benefit Plan in question; (iv) the Employer's requiring the
Executive to relocate, or the assignment to the Executive of duties that
reasonably require the Executive to relocate, to any place other than the
Bakersfield, California, metropolitan area; (v) any material breach by the
Employer of any provision of this Agreement; (vi) any failure by the Employer to
obtain the assumption of this Agreement by any successor or assign of the
Employer; (vii) any purported termination of the Executive's employment that is
not effected pursuant to a notice of termination given in accordance with
requirements for notices described at Paragraph 11.4 of this Agreement and which
shall indicate those specific termination provisions in this Agreement relied
upon and sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment; or (viii) the
Employer's requiring the Executive to travel a substantial amount of time,
except for travel related to corporate meetings and temporary assignments, to an
extent substantially inconsistent with the Executive's business travel
obligations at the time of a Change in Control of the Employer, then the
Executive may elect to terminate the Executive's employment by the Employer and
shall thereupon be entitled to be paid the Applicable Percentage of the
Executive Benefits, as defined above, in substantially equal monthly
installments on the first day of each month, beginning with the month following
the month in which the Executive attains fifty-five (55) years of age or any
month thereafter, as requested in writing by the Executive and delivered to the
Employer or its successor thirty (30) days prior to the commencement of
installment payments; provided, however, that in the event the Executive does
not request a commencement date as specified, such installments shall be paid on
the first day of each month, beginning with the month following the month in
which the Executive attains sixty-two (62) years of age. The installments shall
be payable (i) for the period designated in Schedule "D" in the case of the
balance in the Benefit Account and (ii) until death in the case of the Index
Benefit defined in Schedule "B".
5.5. PAYMENTS IN THE EVENT OF DEATH FOLLOWING TERMINATION. If
the Executive shall die prior to receiving all of the applicable benefits
described in this Paragraph 5 to which the Executive is entitled, then the
Employer will make such payments to the Executive's designated beneficiary. If a
valid Beneficiary Designation is not in effect, then the remaining amounts due
to the Executive shall be paid to the Executive's Surviving Spouse. If the
Executive leaves no Surviving Spouse, the remaining amounts due to the Executive
shall be paid to the duly qualified personal representative, executor or
administrator of the Executive's estate.
6. SECTION 280G ADJUSTMENT. The Executive acknowledges and
agrees that the parties have entered into this Agreement based upon certain
financial and tax accounting assumptions. Accordingly, with full knowledge of
the potential consequences, the Executive agrees that, notwithstanding anything
contained herein to the contrary, in the event that any payment or benefit
received or to be received by the Executive, whether payable pursuant to the
terms of this Agreement or any other plan, arrangement or agreement with the
Employer (together with the Executive Benefits, the "Total Payments"), will not
be deductible (in whole or in part) as a result of Code Section 280G or other
applicable provisions of the Code, the Total
-8-
<PAGE> 9
Payments shall be reduced until no portion of the Total Payments is
nondeductible as a result of Section 280G or such other applicable provisions of
the Code. For purposes of this limitation:
(a) No portion of the Total Payments, the receipt
or enjoyment of which the Executive shall have effectively waived in writing
prior to the date of payment of any future Executive Benefits payments, shall be
taken into account;
(b) No portion of the Total Payments shall be
taken into account, which in the opinion of the tax counsel selected by the
Employer and acceptable to the Executive, does not constitute a "parachute
payment" within the meaning of Section 280G of the Code;
(c) Any reduction of the Total Payments shall be
applied to reduce any payment or benefit received or to be received by the
Executive pursuant to the terms of this Agreement and any other plan,
arrangement or agreement with the Employer in the order determined by mutual
agreement of the Employer and the Executive;
(d) Future payments shall be reduced only to the
extent necessary so that the Total Payments (other than those referred to in
clauses (a) or (b) above in their entirety) constitute reasonable compensation
for services actually rendered within the meaning of Section 280G of the Code,
in the opinion of tax counsel referred to in clause (b) above; and
(e) The value of any non-cash benefit or any
deferred payment or benefit included in the Total Payments shall be determined
by independent auditors selected by the Employer and acceptable to the Executive
in accordance with the principles of Section 280G of the Code.
7. RIGHT TO DETERMINE FUNDING METHODS. The Employer reserves the
right to determine, in its sole and absolute discretion, whether, to what extent
and by what method, if any, to provide for the payment of the amounts which may
be payable to the Executive, the Executive's spouse or the Executive's
beneficiaries under the terms of this Agreement. In the event that the Employer
elects to fund this Agreement, in whole or in part, through the use of life
insurance or annuities, or both, the Employer shall determine the ownership and
beneficial interests of any such policy of life insurance or annuity. The
Employer further reserves the right, in its sole and absolute discretion, to
terminate any such policy, and any other device used to fund its obligations
under this Agreement, at any time, in whole or in part. Consistent with
Paragraph 9 below, neither the Executive, the Executive's spouse nor the
Executive's beneficiaries shall have any right, title or interest in or to any
funding source or amount utilized by the Employer pursuant to this Agreement,
and any such funding source or amount shall not constitute security for the
performance of the Employer's obligations pursuant to this Agreement. In
connection with the foregoing, the Executive agrees to execute such documents
and undergo such medical examinations or tests which the Employer may request
and which may be reasonably necessary to facilitate any funding for this
Agreement including, without limitation,
-9-
<PAGE> 10
the Employer's acquisition of any policy of insurance or annuity. Furthermore, a
refusal by the Executive to consent to, participate in and undergo any such
medical examinations or tests shall result in the immediate termination of this
Agreement and the immediate forfeiture by the Executive, the Executive's spouse
and the Executive's beneficiaries of any and all rights to payment hereunder.
8. CLAIMS PROCEDURE. The Employer shall, but only to the extent
necessary to comply with ERISA, be designated as the named fiduciary under this
Agreement and shall have authority to control and manage the operation and
administration of this Agreement. Consistent therewith, the Employer shall make
all determinations as to the rights to benefits under this Agreement. Any
decision by the Employer denying a claim by the Executive, the Executive's
spouse, or the Executive's beneficiary for benefits under this Agreement shall
be stated in writing and delivered or mailed, via registered or certified mail,
to the Executive, the Executive's spouse or the Executive's beneficiary, as the
case may be. Such decision shall set forth the specific reasons for the denial
of a claim. In addition, the Employer shall provide the Executive, the
Executive's spouse or the Executive's beneficiary with a reasonable opportunity
for a full and fair review of the decision denying such claim.
9. STATUS AS AN UNSECURED GENERAL CREDITOR. Notwithstanding
anything contained herein to the contrary: (i) neither the Executive, the
Executive's spouse or the Executive's designated beneficiaries shall have any
legal or equitable rights, interests or claims in or to any specific property or
assets of the Employer as a result of this Agreement; (ii) none of the
Employer's assets shall be held in or under any trust for the benefit of the
Executive, the Executive's spouse or the Executive's designated beneficiaries or
held in any way as security for the fulfillment of the obligations of the
Employer under this Agreement; (iii) all of the Employer's assets shall be and
remain the general unpledged and unrestricted assets of the Employer; (iv) the
Employer's obligation under this Agreement shall be that of an unfunded and
unsecured promise by the Employer to pay money in the future; and (v) the
Executive, the Executive's spouse and the Executive's designated beneficiaries
shall be unsecured general creditors with respect to any benefits which may be
payable under the terms of this Agreement.
Notwithstanding subparagraphs (i) through (v) above, the
Employer and the Executive acknowledge and agree that, in the event of a Change
in Control, and at the written request of the Executive, or in the Employer's
discretion if the Executive does not so request and the Employer nonetheless
deems it appropriate, the Employer shall establish, not later than the effective
date of the Change in Control, a Rabbi Trust or multiple Rabbi Trusts (the
"Trust" or "Trusts") upon such terms and conditions as the Employer, in its sole
discretion, deems appropriate and in compliance with applicable provisions of
the Code, in order to permit the Employer to make contributions and/or transfer
assets to the Trust or Trusts to discharge its obligations pursuant to this
Agreement. The principal of the Trust or Trusts and any earnings thereon shall
be held separate and apart from other funds of the Employer to be used
exclusively for discharge of the Employer's obligations pursuant to this
Agreement and shall continue to be
-10-
<PAGE> 11
subject to the claims of the Employer's general creditors until paid to the
Executive or its beneficiaries in such manner and at such times as specified in
this Agreement.
10. DISCRETION OF BOARD TO ACCELERATE PAYOUT. Notwithstanding any
of the other provisions of this Agreement, the Board of Directors of the
Employer may, if determined in its sole and absolute discretion to be
appropriate, accelerate the payment of the amounts due under the terms of this
Agreement, provided that Executive (or Executive's spouse or designated
beneficiaries): (i) consents to the revised payout terms determined appropriate
by the Employer's Board of Directors; and (ii) does not negotiate or in anyway
influence the terms of proposed altered/accelerated payout (said decision to be
made solely by the Employer's Board of Directors and offered to the Executive
[or Executive's spouse or designated beneficiaries] on a "take it or leave it
basis").
11. MISCELLANEOUS.
11.1. OPPORTUNITY TO CONSULT WITH INDEPENDENT ADVISORS. The
Executive acknowledges that he has been afforded the opportunity to consult with
independent advisors of his choosing including, without limitation, accountants
or tax advisors and counsel regarding both the benefits granted to him under the
terms of this Agreement and the (i) terms and conditions which may affect the
Executive's right to these benefits and (ii) personal tax effects of such
benefits including, without limitation, the effects of any federal or state
taxes, Section 280G of the Code, and any other taxes, costs, expenses or
liabilities whatsoever related to such benefits, which in any of the foregoing
instances the Executive acknowledges and agrees shall be the sole responsibility
of the Executive notwithstanding any other term or provision of this Agreement.
The Executive further acknowledges and agrees that the Employer shall have no
liability whatsoever related to any such personal tax effects or other personal
costs, expenses, or liabilities applicable to the Executive and further
specifically waives any right for the Executive, himself, and his heirs,
beneficiaries, legal representatives, agents, successors, and assigns to claim
or assert liability on the part of the Employer related to the matters described
above in this subparagraph 11.1. The Executive further acknowledges and agrees
that he has read, understands and consents to all of the terms and conditions of
this Agreement, and that he enters into this Agreement with a full understanding
of its terms and conditions.
11.2. ARBITRATION OF DISPUTES. All claims, disputes and other
matters in question arising out of or relating to this Agreement or the breach
or interpretation thereof, other than those matters which are to be determined
by the Employer in its sole and absolute discretion, shall be resolved by
binding arbitration before a representative member, selected by the mutual
agreement of the parties, of the Judicial Arbitration and Mediation Services,
Inc. ("JAMS"), located in San Francisco, California. In the event JAMS is unable
or unwilling to conduct the arbitration provided for under the terms of this
Paragraph, or has discontinued its business, the parties agree that a
representative member, selected by the mutual agreement of the parties, of the
American Arbitration Association ("AAA"), located in San Francisco, California,
shall conduct the binding arbitration referred to in this Paragraph. Notice of
the demand for
-11-
<PAGE> 12
arbitration shall be filed in writing with the other party to this Agreement and
with JAMS (or AAA, if necessary). In no event shall the demand for arbitration
be made after the date when institution of legal or equitable proceedings based
on such claim, dispute or other matter in question would be barred by the
applicable statute of limitations. The arbitration shall be subject to such
rules of procedure used or established by JAMS, or if there are none, the rules
of procedure used or established by AAA. Any award rendered by JAMS or AAA shall
be final and binding upon the parties, and as applicable, their respective
heirs, beneficiaries, legal representatives, agents, successors and assigns, and
may be entered in any court having jurisdiction thereof. The obligation of the
parties to arbitrate pursuant to this clause shall be specifically enforceable
in accordance with, and shall be conducted consistently with, the provisions of
Title 9 of Part 3 of the California Code of Civil Procedure. Any arbitration
hereunder shall be conducted in Bakersfield, California, unless otherwise agreed
to by the parties.
11.3. ATTORNEYS' FEES. In the event of any arbitration or
litigation concerning any controversy, claim or dispute between the parties
hereto, arising out of or relating to this Agreement or the breach hereof, or
the interpretation hereof, the prevailing party shall be entitled to recover
from the non-prevailing party reasonable expenses, attorneys' fees and costs
incurred in connection therewith or in the enforcement or collection of any
judgment or award rendered therein. The "prevailing party" means the party
determined by the arbitrator(s) or court, as the case may be, to have most
nearly prevailed, even if such party did not prevail in all matters, not
necessarily the one in whose favor a judgment is rendered.
11.4. NOTICE. Any notice required or permitted of either the
Executive or the Employer under this Agreement shall be deemed to have been duly
given, if by personal delivery, upon the date received by the party or its
authorized representative; if by facsimile, upon transmission to a telephone
number previously provided by the party to whom the facsimile is transmitted as
reflected in the records of the party transmitting the facsimile and upon
reasonable confirmation of such transmission; and if by mail, on the third day
after mailing via U.S. first class mail, registered or certified, postage
prepaid and return receipt requested, and addressed to the party at the address
given below for the receipt of notices, or such changed address as may be
requested in writing by a party.
If to the Employer: If to the Executive:
Bank of Stockdale, F.S.B. [INSERT NAME]
5151 Stockdale Highway [ADDRESS]
Bakersfield, California 93309 [CITY, STATE ZIP]
Attn: [INSERT NAME]
11.5. ASSIGNMENT. Neither the Executive, the Executive's
spouse, nor any other beneficiary under this Agreement shall have any power or
right to transfer, assign, anticipate, hypothecate, modify or otherwise encumber
any part or all of the amounts payable
-12-
<PAGE> 13
hereunder, nor, prior to payment in accordance with the terms of this Agreement,
shall any portion of such amounts be: (i) subject to seizure by any creditor of
any such beneficiary, by a proceeding at law or in equity, for the payment of
any debts, judgments, alimony or separate maintenance obligations which may be
owed by the Executive, the Executive's spouse, or any designated beneficiary; or
(ii) transferable by operation of law in the event of bankruptcy, insolvency or
otherwise. Any such attempted assignment or transfer shall be void and shall
terminate this Agreement, and the Employer shall thereupon have no further
liability hereunder.
11.6. BINDING EFFECT/MERGER OR REORGANIZATION. This Agreement
shall be binding upon and inure to the benefit of the Executive and the Employer
and, as applicable, their respective heirs, beneficiaries, legal
representatives, agents, successors and assigns. Accordingly, the Employer shall
not merge or consolidate into or with another corporation, or reorganize or sell
substantially all of its assets to another corporation, firm or person, unless
and until such succeeding or continuing corporation, firm or person agrees to
assume and discharge the obligations of the Employer under this Agreement. Upon
the occurrence of such event, the term "Employer" as used in this Agreement
shall be deemed to refer to such surviving or successor firm, person, entity or
corporation.
11.7. NONWAIVER. The failure of either party to enforce at
any time or for any period of time any one or more of the terms or conditions of
this Agreement shall not be a waiver of such term(s) or condition(s) or of that
party's right thereafter to enforce each and every term and condition of this
Agreement.
11.8. PARTIAL INVALIDITY. If any term, provision, covenant,
or condition of this Agreement is determined by an arbitrator or a court, as the
case may be, to be invalid, void, or unenforceable, such determination shall not
render any other term, provision, covenant or condition invalid, void or
unenforceable, and the Agreement shall remain in full force and effect
notwithstanding such partial invalidity.
11.9. ENTIRE AGREEMENT. This Agreement supersedes any and all
other agreements, either oral or in writing, between the parties with respect to
the subject matter of this Agreement and contains all of the covenants and
agreements between the parties with respect thereto. Each party to this
Agreement acknowledges that no other representations, inducements, promises, or
agreements, oral or otherwise, have been made by any party, or anyone acting on
behalf of any party, which are not set forth herein, and that no other
agreement, statement, or promise not contained in this Agreement shall be valid
or binding on either party.
11.10. MODIFICATIONS. Any modification of this Agreement
shall be effective only if it is in writing and signed by each party or such
party's authorized representative.
-13-
<PAGE> 14
11.11. PARAGRAPH HEADINGS. The paragraph headings used in
this Agreement are included solely for the convenience of the parties and shall
not affect or be used in connection with the interpretation of this Agreement.
11.12. NO STRICT CONSTRUCTION. The language used in this
Agreement shall be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction will be applied
against any person.
11.13. GOVERNING LAW. The laws of the State of California,
other than those laws denominated choice of law rules, and, where applicable,
the rules and regulations of the Office of Thrift Supervision and the Federal
Deposit Insurance Corporation, shall govern the validity, interpretation,
construction and effect of this Agreement.
11.14. WAIVER OF PRIOR PLAN BENEFIT. To the extent that the
Executive is a party to that certain Amended and Restated Salary Continuation
Agreement made with the Employer which affords the Executive benefits in the
event of the Executive's retirement, death, disability, termination or change in
control, it is an express condition precedent to the effectiveness of this
Agreement that the Executive execute and deliver the Waiver of Prior Plan
Benefit attached as Schedule "E" to this Agreement.
IN WITNESS WHEREOF, the Employer and the Executive have executed this
Agreement on the date first above-written in the City of Bakersfield, Kern
County, California.
THE EMPLOYER THE EXECUTIVE
BANK OF STOCKDALE, F.S.B.
By:____________________________ ___________________________________
[INSERT BANK OFFICER NAME] [EXECUTIVE NAME]
[TITLE]
-14-
<PAGE> 15
SCHEDULE A
<TABLE>
<CAPTION>
CALENDAR YEAR APPLICABLE PERCENTAGE
------------- ---------------------
<S> <C>
[INSERT HIRE DATE] to December 31, 199_.......... [% Vested]
December 31, 199_ ............................... %
December 31, ____ ............................... %
December 31, ____ ............................... %
December 31, ____ ............................... %
December 31, ____ ............................... [until 100%]
</TABLE>
-15-
<PAGE> 16
SCHEDULE B
EXECUTIVE BENEFITS
1. Executive Benefits Determination.
The Executive Benefits shall be determined based on the following:
a. Benefit Account:
A Benefit Account shall be established as a liability reserve
account on the books of the Employer for the benefit of the
Executive. Prior to the date on which the Executive becomes
eligible to receive payments under the Agreement, such
Benefit Account shall be increased (or decreased) each Plan
Year (including the Plan Year in which the Executive ceases
to be employed by the Employer) by an amount equal to the
annual earnings or loss for that Plan Year determined by the
Index (described in subparagraph c below), less the
Opportunity Cost (described in subparagraph d below) for that
Plan Year.
The Benefit Account shall also be credited with the amount of
any accrued account balance payable to or for the benefit of
the Executive under any other benefit plan of the Employer in
which the Executive participated and which is supplemented or
replaced by this Executive Supplemental Compensation
Agreement.
b. Index Benefit:
After the date on which the Executive becomes eligible to
receive payments under the Agreement, the Index Benefit for
the Executive for any Plan Year shall be determined by
subtracting the Opportunity Cost for that Plan Year from the
earnings, if any, established by the Index.
c. Index:
The Index for any Plan Year shall be the aggregate annual
after-tax income from the life insurance contracts described
hereinafter as defined by FASB Technical Bulletin 85-4. This
Index shall be applied as if such insurance contracts were
purchased on the Effective Date.
-16-
<PAGE> 17
Insurance Company: [INSERT POLICY INFORMATION]
Policy Number:
Participant:
Option: Face Amount:
Policy Form: Premiums Paid:
Policy Name: Annual or Single Premium:
Insured's Age and Sex: F/M Assumed Purchase Date:
Riders: None
Ratings: [According to health of Insured]
Insurance Company: [INSERT POLICY INFORMATION]
Policy Number:
Participant:
Option: Face Amount:
Policy Form: Premiums Paid:
Policy Name: Annual or Single Premium:
Insured's Age and Sex: F/M Assumed Purchase Date:
Riders: None
Ratings: [According to health of Insured]
If such contracts of life insurance are actually purchased by
the Employer, then the actual policies as of the dates
purchased shall be used in calculations to determine the
Index and Opportunity Cost. If such contracts of life
insurance are not purchased or are subsequently surrendered
or lapsed, then the Employer shall receive and use annual
policy illustrations that assume the above described policies
were purchased from the above named insurance company(ies) on
the Effective Date to calculate the amount of the Index and
Opportunity Cost.
d. Opportunity Cost:
The Opportunity Cost for any Plan Year shall be calculated by
multiplying (a) the sum of (i) the total amount of premiums
set forth in the insurance policies described above, (ii) the
amount of any Index Benefits (described at subparagraph b
above), and (iii) the amount of all previous years after-tax
Opportunity Costs; by (b) the average annualized after-tax
cost of funds calculated using a one-year U.S. Treasury Bill
as published in the Wall Street Journal. The applicable tax
rate used to calculate the Opportunity Cost shall be the
Employer's marginal tax rate until the Executive's
Retirement, or other termination of service (including a
Change in Control). Thereafter, the Opportunity Cost shall be
calculated with the assumption of a marginal forty-two
-17-
<PAGE> 18
percent (42%) corporate tax rate each year regardless of
whether the actual marginal tax rate of the Employer is
higher or lower.
<TABLE>
<CAPTION>
EXAMPLE
INDEX EXECUTIVE BENEFITS
Assume Initial Insurance = $1,000,000
[n] [A] [B] [C]
END OF CASH SURRENDER INDEX OPPORTUNITY COST BENEFIT ACCOUNT
YEAR VALUE OF LIFE [Annual Policy [After-Tax One Year [Cumulative]
INSURANCE POLICY Income] U.S. Treasury Yield] B-C
A(n)-A(n-1)
<S> <C> <C> <C> <C>
0 $1,000,000 -- -- --
1 $1,050,000 $50,000 $(30,000) $20,000
2 $1,102,500 $52,500 $(31,500) $41,000
3 $1,157,625 $55,125 $(33,075) $63,050
.
.
.
</TABLE>
2. Executive Benefits Payments.
The Executive shall be entitled to payment of the Applicable Percentage
of (i) the balance in the Benefit Account in installments upon the terms
as specified in the Agreement, and (ii) the Index Benefit for each Plan
Year payable in installments until the Executive's death.
-18-
<PAGE> 19
SCHEDULE C
BENEFICIARY DESIGNATION
To the Administrator of the Bank of Stockdale Executive Supplemental
Compensation Agreement:
Pursuant to the Provisions of my Executive Supplemental Compensation
Agreement with Bank of Stockdale, permitting the designation of a beneficiary or
beneficiaries by a participant, I hereby designate the following persons and
entities as primary and secondary beneficiaries of any benefit under said
Agreement payable by reason of my death:
PRIMARY BENEFICIARY:
- ---------------------- ----------------------- --------------------------
Name Address Relationship
SECONDARY (CONTINGENT)
BENEFICIARY:
- ---------------------- ----------------------- --------------------------
Name Address Relationship
THE RIGHT TO REVOKE OR CHANGE ANY BENEFICIARY DESIGNATION IS HEREBY RESERVED.
ALL PRIOR DESIGNATIONS, IF ANY, OF PRIMARY BENEFICIARIES AND SECONDARY
BENEFICIARIES ARE HEREBY REVOKED.
<PAGE> 20
The Administrator shall pay all sums payable under the Agreement by reason of my
death to the Primary Beneficiary, if he or she survives me, and if no Primary
Beneficiary shall survive me, then to the Secondary Beneficiary, and if no named
beneficiary survives me, then the Administrator shall pay all amounts in
accordance with the terms of my Executive Supplemental Compensation Agreement.
In the event that a named beneficiary survives me and dies prior to receiving
the entire benefit payable under said Agreement, then and in that event, the
remaining unpaid benefit payable according to the terms of my Executive
Supplemental Compensation Agreement shall be payable to the personal
representatives of the estate of said beneficiary who survived me but died prior
to receiving the total benefit provided by my Executive Supplemental
Compensation Agreement.
Dated: ____________, 1999 _____________________________________________
[EXECUTIVE NAME]
CONSENT OF THE EXECUTIVE'S SPOUSE
TO THE ABOVE BENEFICIARY DESIGNATION:
I, _[Spouse Name]____________, being the spouse of [INSERT EXECUTIVE
NAME], after being afforded the opportunity to consult with independent counsel
of my choosing, do hereby acknowledge that I have read, agree and consent to the
foregoing Beneficiary Designation which relates to the Executive Supplemental
Compensation Agreement entered into by my spouse effective as of
_______________, 1999. I understand that the above Beneficiary Designation may
affect certain rights which I may have in the benefits provided for under the
terms of the Executive Supplemental Compensation Agreement and in which I may
have a marital property interest.
Dated: ______________, 1999
- ------------------------------------------
[Insert Spouse Name]
<PAGE> 21
SCHEDULE D
DISTRIBUTION ELECTION
Pursuant to the Provisions of my Executive Supplemental Compensation Agreement
with Bank of Stockdale, F.S.B., I hereby elect to have any distribution of the
balance in my Benefit Account paid to me in installments as designated below:
____ Thirty-six (36) monthly installments with the amount of each
installment determined as of each installment date by dividing
the entire amount in my Benefit Account by the number of
installments then remaining to be paid, with the final
installment to be the entire remaining balance in the Benefit
Account.
____ Sixty (60) monthly installments with the amount of each
installment determined as of each installment date by dividing
the entire amount in my Benefit Account by the number of
installments then remaining to be paid, with the final
installment to be the entire remaining balance in the Benefit
Account.
____ One hundred twenty (120) monthly installments with the amount
of each installment determined as of each installment date by
dividing the entire amount in my Benefit Account by the number
of installments then remaining to be paid, with the final
installment to be the entire remaining balance in the Benefit
Account.
____ One hundred eighty (180) monthly installments with the amount
of each installment determined as of each installment date by
dividing the entire amount in my Benefit Account by the number
of installments then remaining to be paid, with the final
installment to be the entire remaining balance in the Benefit
Account.
Dated:____________, 1999
Signed:_____________________________
[Executive Name]
<PAGE> 22
SCHEDULE E
WAIVER OF PRIOR PLAN BENEFITS
In consideration for the Executive Benefits made available to the
Executive by this Executive Supplemental Compensation Agreement (the
"Agreement"), the Executive acknowledges and agrees as follows:
(a) The Executive is a party to that certain Bank of Stockdale Amended
and Restated Salary Continuation Agreement made with the Employer dated
____________, 19__. Such Agreement, and all amendments, modifications,
interpretations and understandings thereof or with respect thereto are referred
to as the "Prior Plan Agreement".
(b) This Agreement and the Executive Benefits hereunder are provided as
a complete substitute for the Prior Plan Agreement and the benefits provided
thereunder. The Prior Plan Agreement and the benefits thereunder are hereby
terminated effective as of the Effective Date of this Agreement.
(c) The Executive hereby waives and relinquishes for himself or herself,
and his or her heirs, beneficiaries, legal representatives, agents, successors
and assigns, any and all right, entitlement and interest that the Executive has
or may have pursuant to the Prior Plan Agreement and the benefits thereunder,
and accepts the Executive Benefits afforded by this Agreement in full and
complete substitution for the benefits otherwise provided by the Prior Plan
Agreement.
(d) Without limiting the scope and effect of subparagraph 11.1 of the
Agreement, the Executive (i) has had an opportunity to consult with advisors of
the Executive's own choice in determining to enter into this Agreement and this
Waiver, (ii) understands that the effect of this Waiver is to terminate, waive
and relinquish forever all rights, entitlements and interests that the Executive
has or may have under the Prior Plan Agreement and the benefits thereunder as a
condition to receiving the Executive Benefits under this Agreement; and (iii)
the Executive is entering into this Agreement and this Waiver voluntarily and
with full appreciation of the effect of doing so.
Dated:_______________, 1999 _________________________________________
[Executive Name]
I consent to and agree to be bound by the foregoing Waiver:
_________________________________________
<PAGE> 1
EXHIBIT 10.18
LIFE INSURANCE
ENDORSEMENT METHOD SPLIT DOLLAR PLAN
AGREEMENT
Insurer(s)/Policy Number(s): [INSERT INSURANCE COMPANY/POLICY NUMBER]
Bank: Bank of Stockdale, F.S.B.
Insured: [EXECUTIVE NAME]
Relationship of Insured to Bank: [INSERT EMPLOYEE OR EXECUTIVE]
Date: [INSERT EFFECTIVE DATE OF POLICY]
The respective rights and duties of the Bank and the Insured in the above
policy(ies) (the "Policy") shall be as follows:
I. DEFINITIONS
Refer to the Policy provisions for the definition of all terms in
this Agreement.
II. POLICY TITLE AND OWNERSHIP
Title and ownership shall reside in the Bank for its use and for the
use of the Insured all in accordance with this Agreement. The Bank
alone may, to the extent of its interest, exercise the right to
borrow or withdraw the Policy cash values. Where the Bank and the
Insured (or beneficiary[ies] or assignee[s], with the consent of the
Insured) mutually agree to exercise the right to increase the
coverage under the subject split dollar Policy, then, in such event,
the rights, duties and benefits of the parties to such increased
coverage shall continue to be subject to the terms of this
Agreement.
III. BENEFICIARY DESIGNATION RIGHTS
The Insured (or beneficiary[ies] or assignee[s]) shall have the
right and power to designate a beneficiary or beneficiaries to
receive his or her share of the proceeds payable upon the death of
the Insured, and to elect and change a payment option for such
beneficiary, subject to any right or interest the Bank may have in
such proceeds, as provided in this Agreement.
-1-
<PAGE> 2
IV. PREMIUM PAYMENT METHOD
The Bank shall pay an amount equal to the planned premiums and any
other premium payments that might become necessary to maintain the
Policy in force.
V. TAXABLE BENEFIT
Annually the Insured will receive a taxable benefit equal to the
assumed cost of insurance as required by the Internal Revenue
Service. The Bank (or its administrator) will report to the Insured
the amount of imputed income received each year on Form W-2 or its
equivalent.
VI. DIVISION OF DEATH PROCEEDS
Subject to Paragraph VII herein, the division of the death proceeds
of the Policy is as follows:
A. The Insured's beneficiary(ies), designated in accordance
with Paragraph III, shall be entitled to an amount equal
to eighty percent (80%) of the net at risk insurance
portion of the proceeds. The net at risk insurance
portion is the total proceeds less the cash value of the
Policy.
B. The Bank shall be entitled to the remainder of such
proceeds.
C. The Bank and the Insured (or beneficiary[ies] or
assignee[s]) shall share in any interest due on the
death proceeds on a pro rata basis in the ratio that the
proceeds due the Bank and the Insured, respectively,
bears to the total proceeds, excluding any such
interest.
D. In the event that either the Policy is terminated or the
proceeds of the Policy are insufficient to provide the
benefit specified herein, other than as a result of (i)
a termination of this Agreement pursuant to paragraph X
or (ii) any intentional act of the Insured which results
in the termination of the Policy, then the Bank shall
pay to the Insured's beneficiary(ies) an amount which,
when combined with the proceeds of the Policy actually
received, will provide a total death benefit equal to
$586,000, after tax.
-2-
<PAGE> 3
VII. DIVISION OF CASH SURRENDER VALUE
The Bank shall at all times be entitled to an amount equal to the
Policy's cash value, as that term is defined in the Policy, less any
Policy loans and unpaid interest or cash withdrawals previously
incurred by the Bank and any applicable Policy surrender charges.
Such cash value shall be determined as of the date of surrender of
the Policy or death of the Insured as the case may be.
VIII. PREMIUM WAIVER
If the Policy contains a premium waiver provision, any such waived
amounts shall be considered for all purposes of this Agreement as
having been paid by the Bank.
IX. RIGHTS OF PARTIES WHERE POLICY ENDOWMENT OR ANNUITY ELECTION EXISTS
In the event the Policy involves an endowment or annuity element,
the Bank's right and interest in any endowment proceeds or annuity
benefits shall be determined under the provisions of this Agreement
by regarding such endowment proceeds or the commuted value of such
annuity benefits as the Policy's cash value. Such endowment proceeds
or annuity benefits shall be treated like death proceeds for the
purposes of division under this Agreement.
X. TERMINATION OF AGREEMENT
This Agreement shall terminate at the option of the Bank following
thirty (30) days written notice to the Insured upon the happening of
any one of the following:
1. The Insured's right to receive benefits pursuant to the
terms and conditions of that certain Executive
Supplemental Compensation Agreement effective as of
___________, 19__, shall terminate for any reason other
than the Insured's death; or
2. The Insured shall be discharged from service with the
Bank as a result of a termination for cause. The term
"termination for cause" shall have the meaning given to
such term in the Insured Executive Supplemental
Compensation Agreement, effective as of ___________,
19__.
Upon such termination, the Insured (or beneficiary[ies] or
assignee[s]) shall have a ninety (90) day option to receive from the
Bank an absolute assignment of the Policy in consideration of a cash
payment to the Bank, whereupon this Agreement shall terminate.
Such cash payment shall be the greater of:
-3-
<PAGE> 4
1. The Bank's share of the cash value of the Policy on the
date of such assignment, as defined in this Agreement.
2. The amount of the premiums which have been paid by the
Bank prior to the date of such assignment.
Should the Insured (or beneficiary[ies] or assignee[s]) fail to
exercise this option within the prescribed ninety (90) day period,
the Insured (or beneficiary[ies] or assignee[s]) agrees that all of
his or her rights, interest and claims in the Policy shall terminate
as of the date of the termination of this Agreement.
Except as provided above, this Agreement shall terminate upon
distribution of the death benefit proceeds in accordance with
Paragraph VI above.
XI. INSURED'S OR ASSIGNEE'S ASSIGNMENT RIGHTS
The Insured may not, without the prior written consent of the Bank,
assign to any individual, trust or other organization, any right,
title or interest in the Policy nor any rights, options, privileges
or duties created under this Agreement.
XII. AGREEMENT BINDING UPON THE PARTIES
This Agreement shall be binding upon the Insured and the Bank, and
their respective heirs, successors, personal representatives and
assigns, as applicable.
XIII. NAMED FIDUCIARY AND PLAN ADMINISTRATOR
The Bank is hereby designated the "Named Fiduciary" until
resignation or removal by its Board of Directors. As Named
Fiduciary, the Bank shall be responsible for the management,
control, and administration of this Agreement as established herein.
The Named Fiduciary may allocate to others certain aspects of the
management and operations responsibilities of this Agreement,
including the employment of advisors and the delegation of any
ministerial duties to qualified individuals.
XIV. FUNDING POLICY
-4-
<PAGE> 5
The funding policy for this Agreement shall be to maintain the
Policy in force by paying, when due, all premiums required.
XV. CLAIM PROCEDURES
Claim forms or claim information as to the subject Policy can be
obtained by contacting The Benefit Marketing Group, Inc.
(770-952-1529). When the Named Fiduciary has a claim which may be
covered under the provisions described in the Policy, it should
contact the office named above, and they will either complete a
claim form and forward it to an authorized representative of the
Insurer or advise the named Fiduciary what further requirements are
necessary. The Insurer will evaluate and make a decision as to
payment. If the claim is payable, a benefit check will be issued to
the Named Fiduciary.
In the event that a claim is not eligible under the Policy, the
Insurer will notify the Named Fiduciary of the denial pursuant to
the requirements under the terms of the Policy. If the Named
Fiduciary is dissatisfied with the denial of the claim and wishes to
contest such claim denial, it should contact the office named above
and they will assist in making inquiry to the Insurer. All
objections to the Insurer's actions should be in writing and
submitted to the office named above for transmittal to the Insurer.
XVI. GENDER
Whenever in this Agreement words are used in the masculine or neuter
gender, they shall be read and construed as in the masculine,
feminine or neuter gender, whenever they should so apply.
XVII. INSURANCE COMPANY NOT A PARTY TO THIS AGREEMENT
The Insurer shall not be deemed a party to this Agreement, but will
respect the rights of the parties as set forth herein upon receiving
an executed copy of this Agreement. Payment or other performance in
accordance with the Policy provisions shall fully discharge the
Insurer from any and all liability.
IN WITNESS WHEREOF, the Insured and a duly authorized Bank officer
have signed this Agreement as of the date first written above.
BANK OF STOCKDALE, F.S.B. INSURED
- -------------------------- ----------------------------------------
[Bank Officer other than Insured] [Executive Name]
[Title]
-5-
<PAGE> 6
BENEFICIARY DESIGNATION FORM
PRIMARY DESIGNATION:
NAME RELATIONSHIP
________________________________ ______________________________________
________________________________ ______________________________________
________________________________ ______________________________________
CONTINGENT DESIGNATION:
________________________________ ______________________________________
________________________________ ______________________________________
________________________________ ______________________________________
_____________________________ ______________, 19__
[Executive Name]
-6-
<PAGE> 1
EXHIBIT 10.19
DIRECTOR SUPPLEMENTAL COMPENSATION BENEFITS AGREEMENT
This Agreement is made and entered into effective as of _____________,
1999 by and between Bank of Stockdale, F.S.B. with its principal offices located
in the City of Bakersfield, Kern County, California (the "Bank"), and
___________________, an individual residing in the State of California (the
"Director").
R E C I T A L S
WHEREAS, the Director is an member of the Board of Directors of the
Bank and has served in such capacity since [INSERT DATE];
WHEREAS, the Bank desires to establish a compensation benefit for
directors who are not also officers or employees of the Bank in order to attract
and retain individuals with extensive and valuable experience as director; and
WHEREAS, the Director and the Bank wish to specify in writing the terms
and conditions upon which this additional compensatory incentive will be
provided to the Director, or as applicable, to the Director's spouse or
designated beneficiaries, as the case may be.
NOW, THEREFORE, in consideration of the services to be performed by the
Director in the future, as well as the mutual promises and covenants contained
herein, the Director and the Bank agree as follows:
A G R E E M E N T
1. TERMS AND DEFINITIONS.
1.1. ADMINISTRATOR. The Bank shall be the "Administrator" and,
solely for the purposes of ERISA, as defined in subparagraph 1.9 below, the
"fiduciary" of this Agreement where a fiduciary is required by ERISA.
1.2. APPLICABLE PERCENTAGE. The term "Applicable Percentage"
shall mean that percentage listed on Schedule "A" attached hereto which is
adjacent to the number of calendar years which shall have elapsed from the date
of the Director's commencement of service as a member of the Board of Directors
of the Bank and ending on the date payments are to first begin under the terms
of this Agreement. Notwithstanding the foregoing or the percentages set forth on
Schedule "A", but subject to all other terms and conditions set forth herein,
the "Applicable Percentage" shall be: (i) provided payments have not yet begun
hereunder, one hundred percent (100%) upon the occurrence of a "Change in
Control" as defined in subparagraph 1.4 below, or the Director's Disability (as
defined in subparagraph 1.6 below); and (ii) notwithstanding subclause (i) of
this subparagraph 1.2, zero percent (0%) in the event the Director takes any
intentional action which prevents the Bank from collecting the proceeds of any
life insurance policy which the Bank may happen to own at the time of the
Director's death
<PAGE> 2
and of which the Bank is the designated beneficiary. Furthermore,
notwithstanding the foregoing, or anything contained in this Agreement to the
contrary, in the event the Director takes any intentional action which prevents
the Bank from collecting the proceeds of any life insurance policy which the
Bank may happen to own at the time of the Director's death and of which the Bank
is the designated beneficiary: (1) the Director's estate or designated
beneficiary shall no longer be entitled to receive the amounts, if any, payable
under the terms of this Agreement, and (2) the Bank shall have the right to
recover from Director's estate all of the amounts paid to the Director's estate
(with respect to amounts, if any, paid prior to the Director's death or paid to
the Director's estate) or designated beneficiary (with respect to amounts, if
any, paid to the designated beneficiary) pursuant to the terms of this Agreement
prior to and after Director's death.
1.3. BENEFICIARY. The term "beneficiary" or "designated
beneficiary" shall mean the person or persons whom the Director shall designate
in a valid Beneficiary Designation, a copy of which is attached hereto as
Schedule "C," to receive the benefits, if any, as provided hereunder. A
Beneficiary Designation shall be valid only if it is in the form attached hereto
and made a part hereof and received by the Administrator prior to the Director's
death.
1.4. CHANGE IN CONTROL. The term "Change in Control" shall
mean the occurrence of any of the following events with respect to the Bank
(with the term "Bank", for purposes of this Paragraph 1.4, being deemed to
include any parent holding company owning, directly or indirectly, substantially
all of the outstanding voting capital stock of Bank): (i) the consummation of a
merger pursuant to which shares of the Bank's capital stock are converted into
cash, securities or other property (other than a merger of the Bank in which the
holders of the Bank's capital stock immediately prior to the merger have the
same proportionate ownership of the common stock of the surviving corporation
immediately after the merger); (ii) the consummation of any sale or other
transfer of all or substantially all the assets of the Bank; or (iii) any
"person" (as defined in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), which become the "beneficial owner"
(as defined in Rule 13d-3(d) of the Exchange Act), directly or indirectly, of
forty-nine percent (49%) or more of the Bank's outstanding capital stock.
Notwithstanding the foregoing. a "Change of Control" shall not be deemed to
exist as a result of the acquisition of the Bank by merger pursuant to the
Agreement and Plan of Reorganization, dated September 15, 1998, with VIB Corp.
1.5 THE CODE. The "Code" shall mean the Internal Revenue Code
of 1986, as amended (the "Code").
1.6. DISABILITY/DISABLED. The term "Disability" or "Disabled"
shall have the same meaning given such terms in any policy of disability
insurance maintained by the Bank for the benefit of directors including the
Director. In the absence of such a policy which extends coverage to the Director
in the event of disability, the terms shall mean the Director suffering a
sickness, accident or injury which, in the judgment of a physician satisfactory
to the Bank, prevents the Director from performing substantially all of the
Director's normal duties for the Bank. As a condition to any benefits, the Bank
may require the Director to submit to such physical or mental evaluations and
tests as the Bank's Board of Directors deems appropriate.
-2-
<PAGE> 3
1.7. DIRECTOR BENEFITS. The term "Director Benefits" shall
mean the benefits determined in accordance with Schedule "B", and reduced or
adjusted to the extent: (i) required under the other provisions of this
Agreement; including but not limited to, Paragraphs 5, 6 and 7 hereof; (ii)
required by reason of the lawful order of any regulatory agency or body having
jurisdiction over the Bank; or (iii) required in order for the Bank to properly
comply with any and all applicable state and federal laws, including, but not
limited to, income, employment and disability income tax laws, (e.g., FICA,
FUTA, SDI).
1.8. EFFECTIVE DATE. The term "Effective Date" shall mean the
date first written above.
1.9. ERISA. The term "ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as amended.
1.10. NORMAL RETIREMENT DATE. The term "Normal Retirement
Date" shall mean the Retirement, as defined below, of the Director upon
attainment of age [INSERT RETIREMENT AGE].
1.11. PLAN YEAR. The term "Plan year" shall mean the Bank's
fiscal year.
1.12. RETIREMENT. The term "Retirement" or "Retires" shall
refer to the date which the Director acknowledges in writing to the Bank to be
the last day of service as a member of the Board of Directors of the Bank.
1.13. REMOVAL FOR CAUSE. The term "removal for cause" shall
mean the termination of the Director's service as a member of the Bank's Board
of Directors by reason of any of the following determined in good faith by
disinterested members of the Bank's Board of Directors:
(a) The willful, intentional and material breach or
habitual and continued neglect by the Director of his responsibilities;
(b) The continuous mental or physical incapacity of
the Director, subject to disability rights under this Agreement;
(c) The Director's willful and intentional violation
of any federal banking or securities laws, or of the Bylaws, rules, policies or
resolutions of the Bank, or the rules or regulations of the Federal Deposit
Insurance Corporation, Office of Thrift Supervision, or any other regulatory
agency or governmental authority having jurisdiction over the Bank, which has a
material adverse effect upon the Bank;
(d) The written determination by a state or federal
court, banking agency or other governmental authority having jurisdiction over
the Bank, that the Director (i) is of unsound mind, or (ii) has committed a
gross abuse of authority or discretion with reference to the Bank, or (iii)
otherwise is not suitable to continue to serve as a member of the Board of
Directors of the Bank;
-3-
<PAGE> 4
(e) The Director is convicted of any felony or a
crime involving moral turpitude or willfully and intentionally commits a
fraudulent or dishonest act; or
(f) The Director's willful and intentional
disclosure, without authority, of any secret or confidential information not
otherwise publicly available concerning the Bank or taking any action which the
Bank's Board of Directors determines, in its sole discretion and subject to good
faith, fair dealing and reasonableness, constitutes unfair competition with or
inducement of any customer to breach any contract with the Bank.
2. SCOPE, PURPOSE AND EFFECT.
2.1. CONTRACT OF EMPLOYMENT. Although this Agreement is
intended to provide the Director with an additional incentive to remain to serve
as a member of the Board of Directors of the Bank, this Agreement shall not be
deemed to constitute a contract of employment between the Director and the Bank
nor shall any provision of this Agreement restrict or expand the right of the
Bank to remove or cause the removal of the Director including, without
limitation, by (i) refusal to nominate the Director for election for any
successive term of office as a member of the Board of Directors of the Bank, or
(ii) complying with an order or other directive from a court of competent
jurisdiction or any regulatory authority having jurisdiction over the Bank which
requires the Bank to take action to remove the Director.
2.2. FRINGE BENEFIT. The benefits provided by this Agreement
are granted by the Bank as a fringe benefit to the Director and are not a part
of any salary reduction plan or any arrangement deferring a bonus or a salary
increase. The Director has no option to take any current payments or bonus in
lieu of the benefits provided by this Agreement.
3. DIRECTOR BENEFITS PAYMENTS. If the Director shall continue to serve
as a member of the Board of Directors until the Normal Retirement Date, the Bank
shall pay to the Director the Applicable Percentage of the Retirement Benefit
Payments specified in Schedule B commencing on the Director's Retirement,
payable annually in one (1) installment at the end of each Plan year, and
continuing until the Director's death.
4. PAYMENTS IN THE EVENT OF DISABILITY PRIOR TO RETIREMENT. In the
event the Director becomes Disabled while serving as a member of the Board of
Directors of the Bank at any time after the Effective Date of this Agreement but
prior to Retirement, the Director shall be entitled to be paid the Applicable
Percentage of the Retirement Benefit Payments specified in Schedule B. The
Retirement Benefit Payments shall commence on the Director becoming Disabled,
payable annually in one (1) installment at the end of each Plan Year, and
continue until the director's death.
5. PAYMENTS IN THE EVENT DIRECTOR IS TERMINATED PRIOR TO RETIREMENT. As
indicated in subparagraph 2.1 above, the Bank reserves the right to remove or
cause the removal of the Director under certain circumstances, at any time prior
to the Director's Retirement. In the event that the service of the Director
shall be terminated, other than by reason of death, Disability or Retirement,
prior to the Director's Normal Retirement Date, then this Agreement
-4-
<PAGE> 5
shall terminate upon the date of such termination; provided, however, that the
Director shall be entitled to the following benefits as may be applicable
depending upon the circumstances surrounding the Director's termination:
5.1. TERMINATION WITHOUT CAUSE. If the Director's service as a
member of the Board of Directors of the Bank is terminated for reasons other
than as specified in paragraph 5.3 below, and such termination is not subject to
the provisions of subparagraph 5.4 below, the Director shall be entitled to be
paid the Applicable Percentage of the Retirement Benefit Payments. The
Retirement Benefit Payments shall commence on the termination of the Director's
service, payable annually in one (1) installment at the end of each Plan Year,
and continue until the Director's death.
5.2 VOLUNTARY TERMINATION BY THE DIRECTOR. If the Director's
service on the Board of Directors is terminated by voluntary resignation on a
date when the Applicable Percentage is less than on hundred percent (100%), and
such resignation is not subject to the provisions of subparagraph 5.4 below, the
Director shall forfeit any and all rights and benefits he may have under the
terms of this Agreement and shall have no right to be paid any of the amounts
which would otherwise be due or paid to the Director by the Bank pursuant to the
terms of this Agreement. If the Applicable Percentage is one hundred percent
(100%) on the date of such voluntary resignation, the Director shall be paid the
Applicable Percentage of the Retirement Benefit Payments. The Retirement Benefit
Payments shall commence on the termination of the Director's service, payable
annually in one (1) installment at the end of each Plan Year, and continue until
the Director's death.
5.3. TERMINATION BY REMOVAL FOR CAUSE. The Director agrees
that if his service as a member of the Board of Directors of the Bank is
terminated by "removal for cause," as defined in subparagraph 1.13 of this
Agreement, he shall forfeit all Director Benefits under this Agreement.
5.4. TERMINATION BY THE BANK ON ACCOUNT OF OR AFTER A CHANGE
IN CONTROL. In the event the Director's service as a member of the Board of
Directors of the Bank is terminated in conjunction with, or by reason of, a
"Change in Control" (as defined in subparagraph 1.4 above) the Director shall be
entitled to be paid the Applicable Percentage of the Retirement Benefit
Payments. The Retirement Benefit Payments shall commence on the termination of
the Director's service, payable annually in one (1) installment at the end of
each Plan year, and continue until the Director's death.
6. SECTION 280G BENEFITS ADJUSTMENT. The Director acknowledges and
agrees that the parties have entered into this Agreement based upon certain
financial and tax accounting assumptions. Accordingly, with full knowledge of
the potential consequences the director agrees that, notwithstanding anything
contained herein to the contrary, in the event that any payment or benefit
received or to be received by the Director, whether payable pursuant to the
terms of this Agreement or any other plan, arrangement or agreement with the
Bank (together with the Director Benefits, the "Total Payments"), will not be
deductible (in whole or in part) as a result of Code Section 280G or other
applicable provisions of the Code, the Total Payments shall be reduced until no
portion of the Total Payments is nondeductible as a result of Section 280G or
such other applicable provisions of the Code. For purposes of this limitations:
-5-
<PAGE> 6
(a) No portion of the Total Payments, the receipt or
enjoyment of which the Director shall have effectively waived in writing prior
to the date of payment of any future Director Benefits payments, shall be taken
into account;
(b) No portion of the total Payments shall be taken
into account, which in the opinion of the tax counsel selected by the Bank and
acceptable to the Director, does not constitute a "parachute payment" within the
meaning of Section 280 of the Code;
(c) Any reduction of the total Payments shall be
applied to reduce any payment or benefit received or to be received by the
Director pursuant to the terms of this Agreement and any other plan, arrangement
or agreement with the Bank in order determined by mutual agreement of the Bank
and Director;
(d) Future payments shall be reduced only to the
extent necessary so that Total Payments other than those referred to in clauses
(a) or (b) above in their entirely constitute reasonable compensation for
services actually rendered within the meaning of Section 280G of the Code, in
the opinion of tax counsel referred to in clause (b) above; and
(e) The value of any non-cash benefit or any deferred
payment or benefit included in the Total Payments shall be determined by
independent auditors selected by the Bank and acceptable to the Director in
accordance with the principles of Section 280G of the Code.
7. RIGHT TO DETERMINE FUNDING METHODS. The Bank reserves the right to
determine, in its sole and absolute discretion, whether, to what extent and by
what method, if any, to provide for the payment of the amounts which may be
payable to the Director or as applicable the Director's spouse or beneficiaries
under the terms of this Agreement. In the event that the Bank elects to fund
this Agreement, in whole or in part, through the use of life insurance or
annuities, or both, the Bank shall determine the ownership and beneficial
interests of any such policy of life insurance or annuity. The Bank further
reserves the right, in its sole and absolute discretion, to terminate any such
policy, and any other device used to fund its obligations under this Agreement,
at any time, whole or in part. Consistent with Paragraph 9 below, neither the
Director, the Director's spouse nor the Director's beneficiaries shall have any
right, title or interest in or to any funding source or amount utilized by the
Bank pursuant to this Agreement, and any such funding source or amount shall not
constitute security for the performance of the Bank's obligations pursuant to
this Agreement. In connection with the foregoing, the Director agrees to execute
such documents and undergo such medical examinations or tests which the Bank may
request and which may be reasonably necessary to facilitate any funding for this
Agreement including, without limitation, the Bank's acquisition of any policy of
insurance or annuity. Furthermore, a refusal by the Director to consent to,
participate in and undergo any such medical examinations or tests shall result
in the immediate termination of this Agreement and the immediate forfeiture by
the Director, or as applicable, the Director's spouse and beneficiaries of any
and all rights to payment hereunder.
-6-
<PAGE> 7
8. CLAIMS PROCEDURE. The Bank shall, but only to the extent necessary
to comply with ERISA, be designated as the named fiduciary under this Agreement
and shall have authority to control and manage the operation and administration
of this Agreement. Consistent therewith, the Bank shall make all determinations
as to the rights to benefits under this Agreement. Any decision by the Bank
denying a claim by the Director, the Director's spouse, or the beneficiaries,
for benefits under this Agreement shall be stated in writing and delivered or
mailed, via registered or certified mail, to the Director, the Director's spouse
or the Director's beneficiaries, as the case may be. Such decision shall set
forth the specific reasons for the denial of a claim. In addition, the Bank
shall provide the Director, or as applicable, the Director's spouse or
beneficiaries with a reasonable opportunity for a full and fair review of the
decision denying such claim.
9. STATUS AS AN UNSECURED GENERAL CREDITOR. Notwithstanding anything
contained herein to the contrary: (i) neither the Director, the Director's
spouse or beneficiaries shall have any legal or equitable rights, interests, or
claims in or to any specific property or assets of the Bank as a result of this
Agreement; (ii) none of the Bank's assets shall be held in or under any trust
for the benefit of the Director, the Director's spouse or held in any way as
security for the fulfillment of the obligations of the Bank under this
Agreement; (iii) all of the Bank's assets shall be and remain the general
unpledged and unrestricted assets of the Bank; (iv) the Bank's obligation under
this Agreement shall be that of an unfunded and unsecured promise by the Bank to
pay money in the future; and (v) the Director, the Director's spouse and
beneficiaries shall be unsecured general creditors with respect to any benefits
which may be payable under the terms of this Agreement.
Notwithstanding subparagraphs (i) through (v) above, the Bank and the
Director acknowledge and agree that, in the event of a Change in Control, and at
the written request of the Director, or in the Bank's discretion if the
Director's does not so request and the Bank nonetheless deems it appropriate,
the Bank shall establish, not later than the effective date of the Change in
Control, a Rabbi Trust or multiple Rabbi Trusts (the "Trust" or "Trusts") upon
such terms and conditions as the Bank in its sole discretion, deems appropriate
and in compliance with applicable provisions of the Code, in order to permit the
Bank to make contributions and/or transfer assets to the Trust or Trusts to
discharge its obligations pursuant to this Agreement. The principal of the Trust
or Trusts and any earnings thereon shall be held separate and apart from other
funds of the Bank to be used exclusively for discharge of the Bank's obligations
pursuant to this Agreement and shall continue to be subject to the claims of the
Bank's general creditors until paid to the Director or as applicable, the
Director's spouse or beneficiaries in such manner and at such times as specified
in this Agreement.
10. DISCRETION OF BOARD TO ACCELERATE PAYOUT. Notwithstanding any of
the other provisions of this Agreement, the Board of Directors of the Bank may,
if determined in its sole and absolute discretion to be appropriate, accelerate
the payment of the amounts due under the terms of this Agreement, provided that
Director (or as applicable, the Director's spouse or beneficiaries): (i)
consents to the revised payout terms determined appropriate by the Bank's Board
of Directors; and (ii) does not negotiate or in any way influence the terms of
proposed altered/accelerated payout (said decision to be made solely by the
Bank's Board of Directors and offered to the Director [or the Director's spouse
or beneficiaries] on a "take it or leave it basis").
-7-
<PAGE> 8
11. MISCELLANEOUS.
11.1. OPPORTUNITY TO CONSULT WITH INDEPENDENT ADVISORS. The
Director acknowledges that he has been afforded the opportunity to consult with
independent advisors of his choosing including, without limitation, accountants
or tax advisors and counsel regarding both the benefits granted to him under the
terms of this Agreement and the (i) terms and conditions which may affect the
Director's right to these benefits and (ii) personal tax effects of such
benefits including, without limitation, the effects of any federal or state
taxes, Section 280G of the Code, and any other taxes, costs, expenses or
liabilities whatsoever related to such benefits, which in any of the foregoing
instances the Director acknowledges and agrees shall be the sole responsibility
of the Director notwithstanding any other term or provision of this Agreement.
The Director further acknowledges and agrees that the Bank shall have no
liability whatsoever related to any such personal tax effects or other personal
costs, expenses, or liabilities applicable to the Director and further
specifically waives any right for himself or herself, and his or her heirs,
beneficiaries, legal representatives, agents, successors and assigns to claim or
assert liability on the part of the Bank related to the matters described above
in this subparagraph 11.1. The Director further acknowledges and agrees that he
has read, understands and consents to all of the terms and conditions of this
Agreement, and that the he enters into this Agreement with a full understanding
of its terms and conditions.
11.2. ARBITRATION OF DISPUTES. All claims, disputes and other
matters in question arising out of or relating to this Agreement or the breach
or interpretation thereof, other than those matters which are to be determined
by the Bank in its sole and absolute discretion, shall be resolved by binding
arbitration before a representative member, selected by the mutual agreement of
the parties, of the Judicial Arbitration and Mediation Services, Inc. ("JAMS"),
in San Francisco, California. In the event JAMS is unable or unwilling to
conduct the arbitration provided for under the terms of this Paragraph, or has
discontinued its business, the parties agree that a representative member,
selected by the mutual agreement of the parties, of the American Arbitration
Association ("AAA"), located in San Francisco, California, shall conduct the
binding arbitration referred to in this Paragraph. Notice of the demand for
arbitration shall be filed in writing with the other party to this Agreement and
with JAMS (or AAA, if necessary). In no event shall the demand for arbitration
be made after the date when institution of legal or equitable proceedings based
on such claim, dispute or other matter in question would be barred by the
applicable statute of limitations. The arbitration shall be subject to such
rules of procedure used or established by JAMS, or if there are none, the rules
of procedure used or established by AAA. Any award rendered by JAMS or AAA shall
be final and binding upon the parties, and as applicable, their respective
heirs, beneficiaries, legal representatives, agents, successors and assigns, and
may be entered in any court having jurisdiction thereof. The obligation of the
parties to arbitrate pursuant to this clause shall be specifically enforceable
in accordance with, and shall be conducted consistently with, the provisions of
Title 9 of Part 3 of the California Code of Civil Procedure. Any arbitration
hereunder shall be conducted in Bakersfield, California, unless otherwise agreed
to by the parties.
-8-
<PAGE> 9
11.3. ATTORNEY'S FEES. In the event of any arbitration or
litigation concerning any controversy, claim or dispute between the parties
hereto, arising out of or relating to this Agreement or the breach hereof, or
the interpretation hereof, the prevailing party shall be entitled to recover
from the non-prevailing party reasonable expenses, attorneys' fees and costs
incurred in connection therewith or in the enforcement or collection of any
judgment or award rendered therein. The "prevailing party" means the party
determined by the arbitrator(s) or court, as the case may be, to have most
nearly prevailed, even if such party did not prevail in all matters, not
necessarily the one in whose favor a judgment is rendered.
11.4. NOTICE. Any notice required or permitted of either the
Director or the Bank under this Agreement shall be deemed to have been duly
given, if by personal delivery, upon the date received by the party or its
authorized representative; if by facsimile, upon transmission to a telephone
number previously provided by the party to whom the facsimile is transmitted as
reflected in the records of the part transmitting the facsimile and upon
reasonable confirmation of such transmission; and if by mail, on the third day
after mailing via U.S. first class mail, registered or certified, postage
prepaid and return receipt requested, and addressed to the party at the address
given below for the receipt of notices, or such changed address as may be
requested in writing by a party.
If to the Bank: Bank of Stockdale, F.S.B.
5151 Stockdale Highway
Bakersfield, California 93309
Attn: Ed Hickman
President
If to the Director: ___________________________
___________________________
___________________________
11.5. ASSIGNMENT. Neither the Director, or as applicable, the
Director's spouse or beneficiaries, shall have any power or right to transfer,
assign, anticipate, hypothecate, modify or otherwise encumber any part or all of
the amounts payable hereunder, nor, prior to payment in accordance with the
terms of this Agreement, shall any portion of such amounts be: (i) subject to
seizure by any creditor of the Director, or the Director's spouse or
beneficiaries, by a proceeding at law or in equity, for the payment of any
debts, judgments, alimony or separate maintenance obligations which may be owed
by the Director, the Director's spouse, or beneficiaries; or (ii) transferable
by operation of law in the event of bankruptcy, insolvency or otherwise. Any
such attempted assignment or transfer shall be void and shall terminate this
Agreement, and the Bank shall thereupon have no further liability hereunder.
-9-
<PAGE> 10
11.6. BINDING EFFECT/MERGER OR REORGANIZATION. This Agreement
shall be binding upon and insure to the benefit of the Director and the Bank
and, as applicable, their respective heirs, beneficiaries, legal
representatives, agents, successors and assigns. Accordingly, the Bank shall not
merge or consolidate into or with another corporation, or reorganize or sell
substantially all of its assets to another corporation, firm or person, unless
and until such succeeding or continuing corporation, firm or person agrees to
assume and discharge the obligations of the Bank under this Agreement. Upon the
occurrence of such event, the term "Bank" as used in this Agreement shall be
deemed to refer to such surviving or successor firm, person, entity or
corporation.
11.7. NON-WAIVER. The failure of either party to enforce at
any time or for any period of time any one or more of the terms or conditions of
this Agreement shall not be a waiver of such terms(s) or condition(s) or of that
party's right thereafter to enforce each and every term and condition of this
Agreement.
11.8. PARTIAL INVALIDITY. If any term, provision, covenant, or
condition of this Agreement is determined by an arbitrator or a court, as the
case may be, to be invalid, void, or unenforceable, such determination shall not
render any other term, provision, covenant or condition invalid, void or
unenforceable, and the Agreement shall remain in full force and effect
notwithstanding such partial invalidity.
11.9. ENTIRE AGREEMENT. This Agreement supersedes any and all
other agreements, either oral or in writing, between the parties with respect to
the subject matter of this Agreement and contains all of the covenants and
agreements between the parties with respect thereto. Each party to this
Agreement acknowledges that no other representations, inducements, promises, or
agreements, oral or otherwise, have been made by any party, or anyone acting on
behalf of any party, which are not set forth herein, and that no other
agreement, statement, or promise not contained in this Agreement shall be valid
or binding on either party.
12. MODIFICATIONS. Any modification of this Agreement shall be
effective only if it is in writing and signed by each party or such party's
authorized representative.
12.1. PARAGRAPH HEADINGS. The paragraph headings used in this
Agreement are included solely for the convenience of the parties and shall not
affect or be used in connection with the interpretation of this Agreement.
12.2. NO STRICT CONSTRUCTION. The language used in this
Agreement shall be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction will be applied
against any person.
12.3. GOVERNING LAW. The laws of the State of California,
other than those laws denominated choice of law rules, and, where applicable,
the rules and regulations of the Office of Thrift Supervision and the Federal
Deposit Insurance Corporation, shall govern the validity, interpretation,
construction and effect of this Agreement.
-10-
<PAGE> 11
12.4. WAIVER OF PRIOR PLAN BENEFIT. To the extent that the
Director is a participant in any other supplemental benefit plan provided by the
Bank which affords the Director benefits in the event of the Director's
retirement, death, disability, termination or a change in control, it is an
express condition precedent to the effectiveness of this Agreement that the
Director execute and deliver the Waiver of Prior Plan Benefit attached as
Schedule "D" to this Agreement.
IN WITNESS WHEREOF, the Bank and the Director have executed this
Agreement on the date first above written in the City of Bakersfield, Kern
County, California.
BANK DIRECTOR
BANK OF STOCKDALE, F.S.B.
By: ______________________________ ______________________________
Ed L. Hickman,
President and Chief Executive Officer
-11-
<PAGE> 12
SCHEDULE A
<TABLE>
<CAPTION>
CALENDAR YEAR APPLICABLE PERCENTAGE
- ------------- ---------------------
<S> <C>
___________, 199__ to December 31, 199__ 100%
</TABLE>
<PAGE> 13
SCHEDULE B
DIRECTOR BENEFITS
Retirement Benefit Payments:
The Bank shall pay to the Director the Applicable Percentage of Seven Thousand
Dollars ($7,000.00) in accordance with the terms of the Agreement.
<PAGE> 14
SCHEDULE C
BENEFICIARY DESIGNATION
To the Administrator of the Bank of Stockdale Director Supplemental
Compensation Benefits Agreement:
Pursuant to the Provisions of my Director Supplemental Compensation
Benefits Agreement with Bank of Stockdale, permitting the designation of a
beneficiary or beneficiaries by a participant, I hereby designate the following
persons and entities as primary and secondary beneficiaries of any benefit under
said Agreement payable by reason of my death:
PRIMARY BENEFICIARY:
- ---------------------- -------------------------- ---------------------
Name Address Relationship
SECONDARY (CONTINGENT)
BENEFICIARY:
- ---------------------- -------------------------- ---------------------
Name Address Relationship
THE RIGHT TO REVOKE OR CHANGE ANY BENEFICIARY DESIGNATION IS HEREBY RESERVED.
ALL PRIOR DESIGNATIONS, IF ANY, OF PRIMARY BENEFICIARIES AND SECONDARY
BENEFICIARIES ARE HEREBY REVOKED.
The Administrator shall pay all sums payable under the Agreement by reason of my
death to the Primary Beneficiary, if he or she survives me, and if no Primary
Beneficiary shall survive me, then to the Secondary Beneficiary, and if no named
beneficiary survives me, then the Administrator shall pay all amounts in
accordance with the terms of my Director Supplemental Compensation Benefits
Agreement. In the event that a named beneficiary survives me and dies prior to
receiving the entire benefit payable under said Agreement, then and in that
event, the remaining unpaid benefit payable according to the terms of my
Director Supplemental Compensation Benefits Agreement shall be payable to the
personal representative of the estate of said beneficiary who survived me but
died prior to receiving the total benefit provided by my Director Supplemental
Compensation Benefits Agreement.
-1-
<PAGE> 15
Dated: ____________________, 1999 ______________________________
CONSENT OF THE DIRECTOR'S SPOUSE
TO THE ABOVE BENEFICIARY DESIGNATION:
I, _______________________, being the spouse of _________________,
after being afforded the opportunity to consult with independent counsel of my
choosing, do hereby acknowledge that I have read, agree and consent to the
foregoing Beneficiary Designation which relates to the Director Supplemental
Compensation Benefits Agreement entered into by my spouse effective
________________. I understand that the above Beneficiary Designation may affect
certain rights which I may have in the benefits provided for under the terms of
the Director Supplemental Compensation Benefits Agreement and in which I may
have a marital property interest.
Dated: ________________, 1999.
_________________________________
Type/Print Name
-2-
<PAGE> 16
SCHEDULE D
WAIVER OF PRIOR PLAN BENEFITS
In consideration for the Director Benefits made available to the
Director by this Director Supplemental Compensation Benefits Agreement (the
"Agreement"), the Director acknowledges and agrees as follows:
(a) The Director is a party to that certain Bank of Stockdale
Amended and Restated Deferred Fee Agreement made with the Bank dated
____________, 19__. Such Agreement, and all amendments, modifications,
interpretations and understandings thereof or with respect thereto are referred
to as the "Prior Plan Agreement".
(b) This Agreement and the Director Benefits hereunder are
provided as a substitute for the Death Benefits provided by the Prior Plan
Agreement. The Death Benefits under the Prior Plan Agreement are hereby
terminated effective as of the Effective Date of this Agreement.
(c) The Director hereby waives and relinquishes for himself or
herself, and his or her heirs, beneficiaries, legal representatives, agents,
successors and assigns, any and all right, entitlement and interest in and to
the Death Benefits that the Director has or may have pursuant to the Prior Plan
Agreement, and accepts the Director Benefits afforded by this Agreement in full
and complete substitution for the Death Benefits otherwise provided by the Prior
Plan Agreement.
(d) Without limiting the scope and effect of subparagraph 11.1
of the Agreement, the Director (i) has had an opportunity to consult with
advisors of the Director's own choice in determining to enter into this
Agreement and this Waiver, (ii) understands that the effect of this Waiver is to
terminate, waive and relinquish forever all rights, entitlements and interests
that the Director has or may have to Death Benefits under the Prior Plan
Agreement and the benefits thereunder as a condition to receiving the Director
Benefits under this Agreement; and (iii) Director is entering into this
Agreement and this Waiver voluntarily and will full appreciate of the effect of
doing so.
Dated: _______________, 1999 ______________________________
I consent to and agree to be bound by the foregoing Waiver:
______________________________
<PAGE> 1
EXHIBIT 10.20
LIFE INSURANCE
ENDORSEMENT METHOD SPLIT DOLLAR PLAN
AGREEMENT
Insurer/Policy Number: [Insurance Company/Policy Number]
Bank: Bank of Stockdale, F.S.B
Insured: [Insert Insured Name]
Relationship of Insured to Bank: [Insert Employee or Director]
Date: ____________, 19__
The respective rights and duties of the Bank and the Insured in the above policy
("the Policy") shall be as follows:
I. DEFINITIONS
Refer to the Policy provisions for the definition of all terms of
this Agreement.
II. POLICY TITLE AND OWNERSHIP
Title and ownership shall reside in the Bank for its use and for the
use of the Insured all in accordance with this Agreement. The Bank
alone may, to the extent of its interest, exercise the right to
borrow or withdraw the Policy cash values. Where the Bank and the
Insured (or beneficiary[ies] or assignee[s], with the consent of the
Insured) mutually agree to exercise the right to increase the
coverage under the subject split dollar Policy, then in such event,
the rights, duties and benefits of the parties to such increased
coverage shall continue to be subject to the terms of this
Agreement.
III. BENEFICIARY DESIGNATION RIGHTS
The Insured (or beneficiary[ies] or assignee[s]) shall have the
right and power to designate a beneficiary or beneficiaries to
receive his or her share of the proceeds payable upon the death of
the Insured, and to elect and change a payment option for such
beneficiary, subject to any right or interest the Bank may have in
such proceeds, as provided in this Agreement.
IV. PREMIUM PAYMENT METHOD
The Bank shall pay an amount equal to the planned premiums and any
other premium payments that might become necessary to maintain the
Policy in force.
<PAGE> 2
V. TAXABLE BENEFIT
Annually the Insured will receive a taxable benefit equal to the
assumed cost of insurance as required by the Internal Revenue
Service. The Bank (or its administrator) will report to the Insured
the amount of imputed income received each year on Form W-2 or its
equivalent.
VI. DIVISION OF DEATH PROCEEDS
Subject to Paragraph VII herein, the division of the death proceeds
of the Policy is as follows:
A. The Insured's beneficiary(ies) designated in accordance
with Paragraph III, shall be entitled to an amount equal
to the one hundred percent (100%) of the net at risk
insurance portion of the proceeds. The net at risk
insurance portion is the total proceeds less the cash
value of the Policy.
B. The Bank shall be entitled to the remainder of such
proceeds.
C. The Bank and the Insured (or beneficiary[ies] or
assignee[s]) shall share in any interest due on the
death proceeds on a pro rata basis in the ratio that the
proceeds due the Bank and the Insured, respectively,
bears to the total proceeds, excluding any such
interest.
D. In the event that either the Policies are terminated or
the proceeds of the Policies are insufficient to provide
the benefit specified herein, other than as a result of
(i) a termination of this Agreement pursuant to
paragraph X or (ii) any intentional act of the Insured
which results in the termination of the Policy, then the
Bank shall pay to the Insured's beneficiary(ies) an
amount which, when combined with the proceeds of the
Policy actually received, will provide a total death
benefit equal $69,000, after tax.
VII. DIVISION OF CASH SURRENDER VALUE
The Bank shall at all times be entitled to an amount equal to the
Policy's cash value, as that term is defined in the Policy, less any
Policy loans and unpaid interest or cash withdrawals previously
incurred by the Bank and any applicable Policy surrender charges.
Such cash value shall be determined as of the date of surrender of
the Policy or death of the Insured as the case my be.
-2-
<PAGE> 3
VIII. PREMIUM WAIVER
If the Policy contains a premium waiver provision, any such waived
amounts shall be considered for all purposes of this Agreement as
having been paid by the Bank.
IX. RIGHTS OF PARTIES WHERE POLICY ENDOWMENT OR ANNUITY ELECTION EXISTS
In the event the Policy involves an endowment or annuity element,
the Bank's right and interest in any endowment proceeds or annuity
benefits shall be determined under the provisions of this Agreement
by regarding such endowment proceeds or the commuted value of such
annuity benefits as the Policy's cash value. Such endowment proceeds
or annuity benefits shall be treated like death proceeds for the
purposes of division under this Agreement.
X. TERMINATION OF AGREEMENT
This Agreement shall terminate at the option of the Bank following
thirty (30) days written notice to the Insured upon the happening of
any one of the following:
1. The Insured's right to receive benefits pursuant to the
terms and conditions of that certain Director
Supplemental Compensation Benefits Agreement effective
as of _________, 19__, shall terminate for any reason
other than the Insured's death; or
2. The Insured shall be discharged from service with the
Bank by removal for cause. The term "removal for cause"
shall have the meaning given that term in the Insured's
Director Supplemental Compensation Agreement effective
as of _____________, 19__.
Upon such termination, the Insured (or beneficiary[ies] or
assignee[s]) shall have a ninety (90) day option to receive from the
Bank an absolute assignment of the Policy in consideration of a cash
payment to the Bank, whereupon this Agreement shall terminate.
Such cash payment shall be the greater of:
1. The Bank's share of the cash value of the Policy on the
date of such assignment, as defined in this Agreement.
2. The amount of the premiums which have been paid by the
Bank prior to the date of such assignment.
Should the Insured (or beneficiary[ies] or assignee[s]) fail to
exercise this option within the prescribed ninety (90) day period,
the Insured (or beneficiary[ies] or assignee[s]) agrees that all of
his or her rights, interest and claims in the Policy shall terminate
as of the date of the termination of this Agreement.
-3-
<PAGE> 4
Except as provided above, this Agreement shall terminate upon
distribution of the death benefit proceeds in accordance with
Paragraph VI above.
XI. INSURED'S OR ASSIGNEE'S ASSIGNMENT RIGHTS
The Insured may not, without the prior written consent of the Bank,
assign to any individual, trust or other organization, any right,
title or interest in the Policy nor any rights, options, privileges
or duties created under this Agreement.
XII. AGREEMENT BINDING UPON THE PARTIES
This Agreement shall be binding upon the Insured and the Bank, and
their respective heirs, successors, personal representatives and
assigns, as applicable.
XIII. NAMED FIDUCIARY AND PLAN ADMINISTRATOR
The Bank is hereby designated the "Named Fiduciary" until
resignation or removal by its Board of Directors. As Named
Fiduciary, the Bank shall be responsible for the management,
control, and administration of this Agreement as established herein.
The Named Fiduciary may allocate to others certain aspects of the
management and operations responsibilities of this Agreement,
including the employment of advisors and the delegation of any
ministerial duties to qualified individuals.
XIV. FUNDING POLICY
The funding Policy for this Agreement shall be to maintain the
Policy in force by paying, when due, all premiums required.
XV. CLAIM PROCEDURES
Claim forms or claim information as to the subject Policy can be
obtained by contacting The Benefit Marketing Group, Inc.
(770-952-1529). When the Named Fiduciary has a claim which may be
covered under the provisions described in the Policy, it should
contact the office named above, and they will either complete a
claim form and forward it to an authorized representative of the
Insurer or advise the Named Fiduciary what further requirements are
necessary. The Insurer will evaluate and make a decision as to
payment. If the claim is payable, a benefit check will be issued to
the Named Fiduciary.
In the event that a claim is not eligible under the Policy, the
Insurer will notify the Named Fiduciary of the denial pursuant to
the requirements under the terms of the Policy. If the Named
Fiduciary is dissatisfied with the denial of the claim and wishes to
contest such claim denial, he or she should contact the office named
above and they will assist in making inquiry to the Insurer. All
objections to the Insurer's actions should be in writing and
submitted to the office named above for transmittal to the Insurer.
-4-
<PAGE> 5
XVI. GENDER
Whenever in this Agreement words are used in the masculine or neuter
gender, they shall be read and construed as in the masculine,
feminine or neuter gender, whenever they should so apply.
XVII. INSURANCE COMPANY NOT A PARTY TO THIS AGREEMENT
The Insurer shall not be deemed a party to this Agreement, but will
respect the rights of the parties as set forth herein upon receiving
an executed copy of this Agreement. Payment or other performance in
accordance with the Policy provisions shall fully discharge the
Insurer from any and all liability.
IN WITNESS WHEREOF, the Insured and a duly authorized Bank officer
have signed this Agreement as of the above written date.
BANK OF STOCKDALE, F.S.B. INSURED
- ------------------------------- -------------------------------
Ed. L. Hickman (Insured)
President and Chief
Executive Officer
-5-
<PAGE> 6
BENEFICIARY DESIGNATION FORM
PRIMARY DESIGNATION:
<TABLE>
<CAPTION>
NAME RELATIONSHIP
---- ------------
<S> <C>
----------------------------- -----------------------------
----------------------------- -----------------------------
----------------------------- -----------------------------
CONTINGENT DESIGNATION:
----------------------------- -----------------------------
----------------------------- -----------------------------
----------------------------- -----------------------------
______________________________ ____________, 1999
(Insured)
</TABLE>
-6-
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 27,113,188
<INT-BEARING-DEPOSITS> 634,253
<FED-FUNDS-SOLD> 1,673,598
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 174,078,974
<INVESTMENTS-CARRYING> 3,275,923
<INVESTMENTS-MARKET> 3,191,513
<LOANS> 618,720,897
<ALLOWANCE> (5,195,881)
<TOTAL-ASSETS> 868,202,987
<DEPOSITS> 683,975,820
<SHORT-TERM> 86,700,000
<LIABILITIES-OTHER> 5,210,160
<LONG-TERM> 35,815,817
0
0
<COMMON> 53,679,208
<OTHER-SE> 2,821,982
<TOTAL-LIABILITIES-AND-EQUITY> 868,202,987
<INTEREST-LOAN> 38,912,135
<INTEREST-INVEST> 7,164,141
<INTEREST-OTHER> 532,076
<INTEREST-TOTAL> 46,608,352
<INTEREST-DEPOSIT> 15,290,481
<INTEREST-EXPENSE> 3,356,144
<INTEREST-INCOME-NET> 27,961,727
<LOAN-LOSSES> 2,050,000
<SECURITIES-GAINS> 1,755
<EXPENSE-OTHER> 24,283,898
<INCOME-PRETAX> 6,463,274
<INCOME-PRE-EXTRAORDINARY> 6,463,274
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,103,773
<EPS-BASIC> 0.38
<EPS-DILUTED> 0.37
<YIELD-ACTUAL> 8.43
<LOANS-NON> 4,943,000
<LOANS-PAST> 201,000
<LOANS-TROUBLED> 3,828,372
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,296,414
<CHARGE-OFFS> 1,198,427
<RECOVERIES> 47,894
<ALLOWANCE-CLOSE> 5,195,881
<ALLOWANCE-DOMESTIC> 5,195,881
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
