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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
VALLEY NATIONAL CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
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Delaware 6710 33-0825336
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(State or Other Jurisdiction of (Primary Standard Industrial (IRS Employer
Incorporation or Organization) Classification Code Number) Identification No.)
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1234 East Main Street
El Cajon, CA 92021
(619) 593-3330
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
Mr. William V. Ehlen, President Copies of communications to:
Valley National Corporation James K. Sterrett, Esq.
1234 East Main Street Dostart Clapp Sterrett & Coveney, LLP
El Cajon, CA 92021 4370 La Jolla Village Dr., Suite. 970
(619) 593-3330 San Diego, CA 92122
(619) 593-3344 FAX (619) 623-4200
(619) 623-4299 FAX
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
Mr. William V. Ehlen, President
Valley National Corporation
1234 East Main Street
El Cajon, CA 92021
(619) 593-3330
(619) 593-3344 FAX
Approximate date of commencement of proposed sale of the securities to the
public: as soon as practicable after this registration statement becomes
effective.
If the securities being registered on this form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box: [X]
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CALCULATION OF REGISTRATION FEE
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Class of Proposed Maximum Proposed Maximum Amount of
Securities to be Amount to be Offering Price Per Aggregate Offering Registration
Registered Registered Share(1) Price(1) Fee(1)
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Common Stock,
$0.0001 par value 2,640,062 $15.50 $40,920,961 $11,376.03
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(1) The registration fee has been computed pursuant to Rule 457(f)(2) and
(3) based on the aggregate market value of all the outstanding shares of
common stock of Valle de Oro Bank, N.A. as of November 17, 1998, or
$40,920,961 in the aggregate. The proposed maximum offering price per
share is determined by dividing the proposed maximum aggregate offering
price by the number of shares to be registered.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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VALLE DE ORO BANK, N.A.
1234 EAST MAIN STREET
EL CAJON, CALIFORNIA 92021
ONE-BANK HOLDING COMPANY PROPOSED - YOUR VOTE IS IMPORTANT
Dear Stockholder:
The Board of Directors of Valle de Oro Bank, N.A. has voted in favor of
creating a "one-bank holding company" to be called Valley National Corporation.
Under this proposal, you would exchange your Bank shares for shares in the
Holding Company. Thus, instead of owning the Bank directly, you would own shares
in the Holding Company which would own the Bank. If the reorganization is
completed, you will receive two shares of the Holding Company common stock for
each share of Bank common stock that you own.
This new corporate structure will give the Bank greater financial and
corporate flexibility to make acquisitions. In addition, the new structure will
allow the Bank to participate in activities through the Holding Company, which
are not permissible for the Bank to engage in directly. The Holding Company will
be permitted to engage in non-bank activities, such as selling insurance and
securities, and providing financial and investment services. After the
reorganization, the nature of the business conducted by the Bank will not
change.
The proposal cannot be completed unless holders of two-thirds of the
outstanding shares vote for it. We have scheduled a special meeting for our
stockholders to vote on the proposal. The date, time and place of the special
meeting are: February 16, 1999, 8:00 a.m. at Valle de Oro Bank, N.A., located at
1234 East Main Street, El Cajon, California.
Whether or not you plan to attend the meeting, please take the time to
complete and mail your proxy to us. If you do not indicate how you want to vote,
your proxy will be counted as a vote in favor of the proposal. If you fail to
return your proxy, you will in effect vote against the proposal.
We are pleased to enclose for your review this Proxy Statement -
Prospectus that provides you with the information you need to evaluate the
proposal. We encourage you to review it carefully.
I strongly support the organization of a one-bank holding company and
enthusiastically recommend that you vote in favor of the it.
Very truly yours,
William V. Ehlen
President and Chief Executive Officer
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The proposed reorganization involves certain risks. See Risk Factors on page 8.
These securities are not deposits or accounts, and are not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
Neither the Securities and Exchange Commission, the Federal Deposit Insurance
Corporation, the Office of the Comptroller of the Currency nor any state
securities commission has approved or disapproved of these securities or passed
upon the adequacy or accuracy of this Proxy Statement - Prospectus. Any
representation to the contrary is a criminal offense.
January 12, 1999.
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VALLEY DE ORO BANK, N.A.
PROXY STATEMENT - PROSPECTUS
TABLE OF CONTENTS
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Introduction...............................................................................5
Organization of a One-bank Holding Company.................................................5
Summary....................................................................................5
One-bank Holding Company...............................................................5
Stockholders Approval..................................................................5
What Should Stockholders Do?...........................................................6
Directors Approval.....................................................................6
Dissenters Appraisal Rights............................................................6
The Companies..........................................................................6
The Two-for-One Exchange Ratio and Market Value ...................6
Per Share Summary of the Bank and Pro Forma Per Share Summary of the Holding Company...7
Management.............................................................................7
Differences Between Holding Company Stock and Bank Stock...............................7
Anti-takeover Measures.................................................................8
Tax Consequences.......................................................................8
Risk Factors...............................................................................8
The Holding Company's Financial Condition..............................................8
Banking Institutions...................................................................9
Anti-takeover Provisions...............................................................9
Additional Information.....................................................................9
One-bank Holding Company Reorganization...................................................10
Reasons for the Proposal..............................................................10
Description of the Reorganization.....................................................10
Conversion and Exchange of Stock......................................................11
Affiliate Restrictions................................................................11
Conditions of Consummation............................................................12
Other Considerations..................................................................12
Expenses..............................................................................12
Federal Tax Consequences..............................................................12
State Tax Consequences................................................................13
Appraisal Rights of Dissenting Stockholders...........................................13
Accounting Treatment..................................................................14
Anti-takeover Measures....................................................................14
The Purposes of the Anti-takeover Provisions..........................................14
Summary of Fair Price and Supermajority Vote Provisions...............................15
Classified Board of Directors.........................................................16
Additional Considerations.............................................................16
Market Prices of Stock....................................................................17
The Holding Company...................................................................17
The Bank..............................................................................17
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Dividends.................................................................................18
The Holding Company...................................................................18
The Bank..............................................................................19
Capitalization............................................................................19
Financial Statements......................................................................20
History and Business of the Holding Company...............................................21
General...............................................................................21
Employees.............................................................................21
Board of Directors....................................................................21
Remuneration of Directors and Officers................................................21
Indemnification.......................................................................21
History and Business of the Bank..........................................................22
General...............................................................................22
Competition...........................................................................23
Employees.............................................................................24
Property..............................................................................24
Year 2000 Issue.......................................................................25
Litigation............................................................................26
Board of Directors and Officers.......................................................27
Compensation of Executive Officers and Directors..........................................31
Executive Officers' Compensation......................................................31
401(k) Retirement Plan................................................................32
Employee Stock Ownership Plan.........................................................32
Stock Option Plans....................................................................33
Directors' Compensation...............................................................34
Committees............................................................................35
Certain Transactions......................................................................35
Supervision and Regulation................................................................36
Holding Company Regulation............................................................36
Capital...............................................................................36
Additional Regulation.................................................................37
Dividend Regulation...................................................................37
Government Policies and Legislation...................................................37
Comparative Description of Common Stock...................................................38
General...............................................................................38
Voting Rights.........................................................................38
Right of Redemption...................................................................38
Liquidation Rights....................................................................39
Preemptive Rights.....................................................................39
Cumulative Voting.....................................................................39
Indemnification.......................................................................39
Dividend Rights.......................................................................39
Transfer and Accessibility............................................................40
Anti-takeover Measures................................................................40
Reports...................................................................................40
Legal Opinion.............................................................................41
Other Matters.............................................................................41
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Consolidation Agreement.........................................................Appendix I
Dissenters' Statute 12 U.S.C. Section 215 and Banking Circular 259..............Appendix II
Certificate of Incorporation of the Holding Company.............................Appendix III
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INTRODUCTION
This Proxy Statement - Prospectus is furnished to the stockholders of
Valle de Oro Bank in connection with the solicitation of proxies to be used in
voting at a special meeting of stockholders to be held on February 16, 1999,
1234 East Main Street, El Cajon, California at 10:00 a. m. The Meeting has been
called for the purpose of acting on a proposal to organize a one-bank holding
company, and such other matters as may properly come before the Meeting.
The Enclosed Proxy is Solicited by the Board of Directors of the Bank.
This Proxy Statement - Prospectus and the enclosed proxy were mailed to the
Bank's stockholders on _________________, 1999.
ORGANIZATION OF A ONE-BANK HOLDING COMPANY
SUMMARY
This Summary contains a brief description of the proposed
reorganization. This Summary is not a complete statement of all the information
contained in this Proxy Statement Prospectus. We recommend that you read all of
it carefully.
ONE-BANK HOLDING COMPANY
You are being asked to vote on a proposal to organize a one-bank holding
company, which will own the Bank. The new corporate structure of the Bank will
permit the Holding Company and the Bank greater financial and corporate
flexibility in such areas as acquisitions and debt financing. In addition, it
will allow us to :
o Offer new services.
o Enjoy access to new markets.
o Participate in activities which are not permissible for the Bank to
engage in directly.
In order to organize a one-bank holding company, banking laws require
that the Holding Company form an interim bank into which the Bank will be
consolidated. Thus, a new bank called Valle de Oro Interim Bank, N.A. has been
organized solely for the purpose of the reorganization.
Immediately prior to the consolidation, the Holding Company will own all
of the stock of the Interim Bank. Following the consolidation, the Holding
Company will own all of the outstanding shares of common stock of the Bank and
the Interim Bank so consolidated, and the Bank will continue to do business
under the name of Valle de Oro Bank, N.A.
After the consolidation, the shares of Interim Bank will be redeemed and
canceled. The capital stock of the Resulting Bank will be equal to the capital
structure of the Bank immediately prior to the consolidation. All stockholders
of the Bank, except those stockholders who properly exercise dissenters' rights,
will become stockholders of the Holding Company.
STOCKHOLDERS APPROVAL
Banking laws require that the reorganization be approved by the holders
of at least two-thirds of the outstanding shares of common stock of the Bank. As
of ____________, 199_, the record date, there were 1,320,031 shares
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of common stock outstanding and entitled to vote. Therefore, the affirmative
vote of 880,020 shares is required to approve the reorganization.
WHAT SHOULD STOCKHOLDERS DO?
If you want to vote in favor of the reorganization, mail your signed
proxy card in the enclosed envelope as soon as possible so that your shares can
be voted at the stockholder's meeting. The Board of Directors of the Bank
unanimously recommends voting in favor of the reorganization.
If you want to vote against the reorganization, you do not need to do
anything. Your failure to send in your proxy card will automatically be counted
as a vote against the reorganization.
DIRECTORS APPROVAL
All of the directors of the Bank have signed the Consolidation Agreement
and have agreed to vote their Bank stock in favor of the reorganization.
DISSENTERS APPRAISAL RIGHTS
Stockholders who vote against the reorganization will be entitled to
receive the value in cash of the Bank common stock held by them. Stockholders
will waive this right if they fail to follow the procedures set forth in section
215 of Title 12 of the United States Code, which is in Appendix II of this Proxy
Statement - Prospectus.
THE COMPANIES
THE HOLDING COMPANY
The Holding Company is a Delaware business corporation that was formed
by the Bank on October 7, 1998. The Holding Company has not engaged in any
business since its incorporation. After the reorganization, the Holding Company
will become a registered bank holding company, whose principal asset will be its
stockholdings in the Resulting Bank.
THE BANK
The Bank is a national bank. The Bank engages in the commercial banking
business in East San Diego County, California.
THE INTERIM BANK
The Interim Bank is a newly-formed, national bank organized solely for
the purpose of this transaction. The Interim Bank will not conduct any business
prior to the reorganization. The Holding Company owns all of the capital stock
of the Interim Bank. The separate existence of the Interim Bank will cease after
the reorganization.
THE TWO-FOR-ONE EXCHANGE RATIO AND MARKET VALUE
If the proposed reorganization is approved, stockholders of the Bank
would exchange their Bank shares for stock in the Holding Company on a
two-for-one basis: two shares of Holding Company stock will be exchanged for
each share of Bank stock.
The Boards of Directors of the Bank and the Holding Company established
the two-for-one exchange ratio so that the market price for shares of the
Holding Company after the reorganization could be in the range of $13.50 to
$17.00 per share. The Boards of Directors believe that such a price range will
make the shares affordable for a larger group of potential stockholders,
increasing the liquidity of the shares.
Shares of the Holding Company have not been publicly traded, as it is a
new company. It has not engaged in any prior business activity. Thus, there is
no published information as to the market price of Holding Company stock.
Bank stock is listed for quotation on the National Market System of the
Nasdaq Stock
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Market under the trading symbol "VADO." After the reorganization, Holding
Company stock will be listed for quotation on the National Market System and
will use the same trading symbol "VADO." After the consolidation, no market
will exist for Resulting Bank stock because the Holding Company will be the
Resulting Bank's only stockholder.
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PER SHARE SUMMARY OF THE BANK AND PRO FORMA PER SHARE SUMMARY OF THE
HOLDING COMPANY
Presented below is certain per share financial information of the Bank.
Certain pro forma per share information is provided for the Holding Company,
assuming there are no dissenters to the transaction.
PER SHARE DATA
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9 Mos.
Ended Year Ended December 31,
Sept. 30, -------------------------------------------------
1998 1997 1996 1995 1994 1993
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Valle de Oro Bank
Diluted net earnings $ 1.18 $ 1.33 $ 1.06 $ 0.88 $ 1.06 $1.02
Cash dividend declared $ 0.19 $ 0.24 $ 0.24 $ 0.20 $ 0.15 none
Book value (at period end) $14.25 $13.14 $11.93 $11.16 $13.51 $9.81
Pro Forma Valley National
Corporation
Diluted net earnings $ 0.59 $ 0.67 $ 0.53 $ 0.44 $ 0.53 $0.51
Cash dividends declared $ 0.10 $ 0.12 $ 0.12 $ 0.10 $ 0.08 none
Book value (at period end) $ 7.13 $ 6.57 $ 5.97 $ 5.58 $ 6.76 $4.91
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MANAGEMENT
The directors and officers of the Bank will continue to be directors and
officers of the Resulting Bank following the reorganization. After the
reorganization, the present directors of the Holding Company will continue to be
directors of the Holding Company. Thereafter, the stockholders of the Holding
Company will elect the directors of the Holding Company from time to time.
DIFFERENCES BETWEEN HOLDING COMPANY STOCK AND BANK STOCK
Stockholders of the Holding Company will have rights comparable to those
rights which they now possess as stockholders of the Bank.
The stockholders of the Bank currently have the right to cumulate their
shares in the elections of directors and after the reorganization stockholders
of the Holding Company will have the right to vote cumulatively in the elections
of directors as provided by Delaware law. Cumulative voting means that a
stockholder may cast the number of shares he owns times the number of directors
to be elected in favor of one nominee or allocate such votes among the nominees
as he determines.
Stockholders will be affected by certain differences between Delaware
law governing corporations and federal law governing banks. The differing
provisions of the Certificate of Incorporation and Bylaws of the Holding Company
and the Articles of Association and Bylaws of the Bank will also affect
stockholders.
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For a more complete discussion regarding these matters, see "Anti-takeover
Measures" and "Comparative Description of Common Stock" below.
There are also differences as to the availability of funds for the
payment of dividends by a national bank and a Delaware corporation. (See
"Dividends" below).
ANTI-TAKEOVER MEASURES
The Holding Company's Certificate of Incorporation contains "fair price
and supermajority vote" provisions. If the reorganization is approved, such
provisions will require the affirmative vote of the holders of 80% of the shares
of the Holding Company to approve certain business combinations, unless the
transaction is approved by the Directors. Certain other conditions must also be
met which result in a "fair price" being paid to all stockholders. We believe
that these provisions in the Holding Company's Certificate of Incorporation will
aid in assuring that stockholders are treated fairly in any offer for their
shares. The Holding Company has certain other provisions which are also
"anti-takeover" in nature, such as a classified board of directors and a
supermajority requirement for removal of one or all of the directors.
We believe that the conversion to a holding company form of ownership is
the appropriate time to implement such anti-takeover provisions. The adoption of
such provisions is not in response to any attempted takeover of the Bank. The
Bank has not been the target of an attempted takeover in the past.
The presence of these anti-takeover provisions may have the effect of
discouraging outside offers for the shares of the Holding Company. These
provisions may also give management more control than it would otherwise have
over the acceptance or rejection of such offers. Such provisions may protect the
incumbent Board of Directors and management by discouraging takeover attempts
which are not supported by the Board, but which may be supported by the majority
of stockholders.
TAX CONSEQUENCES
Legal counsel, Dostart Clapp Sterrett Coveney, LLP, San Diego, has
opined that no gains or losses will be recognized by either the Bank or the
Holding Company or their stockholders as a result of the reorganization, except
for those stockholders who perfect their dissenters' rights and receive cash for
their shares.
Each stockholder should rely upon his own tax advisor with respect to
the federal, state and local income tax consequences of the reorganization.
RISK FACTORS
The purpose of the proposal is to give the Bank greater financial and
corporate flexibility in such areas as acquisitions and debt financing, and to
permit it to participate in non-bank activities, which are not permissible for
the Bank to engage in directly. The nature of the business conducted by the Bank
will not change.
Certain risks associated with the combined business of the Holding
Company and the Bank as a result of the reorganization of the Bank's corporate
structure, are presented below.
THE HOLDING COMPANY'S FINANCIAL CONDITION
The proposed reorganization calls for you to receive Holding Company
stock in exchange for your Bank stock. The Holding Company has no history of
financial performance because it is a newly-formed Delaware corporation.
Stockholders that receive Holding Company stock
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will not have the opportunity to analyze the historical financial performance of
the Holding Company. The Holding Company's financial condition following the
consolidation will depend on the operation and profitability of the Bank. The
Holding Company's profitability may be affected by other factors such as:
o businesses started or acquired by the Holding Company other than the
Bank; and
o laws and regulations applicable to the Holding Company.
Although the Holding Company intends to operate the Bank in substantially the
same manner that it has been operated to date, changes to the operations of the
Bank and new businesses may affect the financial performance and condition of
the Holding Company as a whole and the return to stockholders of the Holding
Company.
BANKING INSTITUTIONS
The financial services industry and banking in particular has undergone
a complex deregulation process. The interest rate limitations on what banks may
pay to depositors have been phased out. Interstate banking laws which allow
financial institutions to cross state lines have been enacted nationally.
Competition to provide traditional banking services has increased among banks
and other companies. The Holding Company and the Bank will continue to be
affected by these changes in the future. The conduct of the Bank's business as a
subsidiary of the Holding Company may increase its ability to compete in this
newly deregulated environment. There is no assurance that the organization of
the holding company will shelter the Holding Company and the Bank from increased
competition.
ANTI-TAKEOVER PROVISIONS
The Holding Company's Certificate of Incorporation and Bylaws contain
provisions intended to prevent hostile takeovers. The anti-takeover provisions
include a supermajority vote provision, a fair price provision, staggered terms
for the Board of Directors, supermajority removal for Directors and other items.
These provisions and additional provisions of Delaware law may:
o discourage outside offers for the shares of the Holding Company;
o give management more control over the acceptance or rejection of
business combination offers; and
o protect incumbent Directors by discouraging takeover attempts which are
not supported by the Board.
ADDITIONAL INFORMATION
Valley National Corporation, 1234 East Main Street, El Cajon, CA 92021,
(619) 593-3330 (the "Holding Company"), has filed a Registration Statement with
the Securities and Exchange Commission concerning the securities to be issued by
it in connection with a plan of reorganization described in this Proxy Statement
- - Prospectus. This Proxy Statement - Prospectus constitutes part of the
Registration Statement covering the shares to be offered pursuant to the
reorganization by the Holding Company. This Proxy Statement - Prospectus does
not contain all the information set forth in such Registration Statement and the
exhibits thereto, certain portions of which have been omitted pursuant to the
rules and regulations of the Securities and Exchange Commission.
Such Registration Statement may be inspected, without charge, at the
principal office
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of the Securities and Exchange Commission, 450 Fifth Street, N.W., Washington,
D.C., and copies of all or part thereof may be obtained from the Securities and
Exchange Commission upon payment of its prescribed fees. The Securities and
Exchange Commission also maintains a Web Site at: http:// www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission, including
the Holding Company.
The Bank's common stock is registered under Section 12(g) of the
Securities and Exchange Act of 1934 (the "Exchange Act"), pursuant to which it
files annual and quarterly financial reports with the Office of the Comptroller
of the Currency. The Bank's Form 10-KSB Annual Report which includes financial
statements and schedules, by reference, is filed with the Office of the
Comptroller of the Currency in Washington, D.C. A copy of this report is
available to stockholders upon request to the Secretary, Valle de Oro Bank,
N.A., 1234 Main Street, El Cajon, California; 92021, (619) 593-3330. The first
copy will be provided without charge. Neither the annual report to stockholders
nor the Form 10-KSB are to be treated as part of the proxy solicitation
material, nor as having been incorporated herein by reference. Additionally,
such Form 10-KSB Annual Report may be inspected and copied at the offices of the
Office of the Comptroller of the Currency, 490 L'Enfante Plaza, S.W.,
Washington, D.C., 20219.
ONE-BANK HOLDING COMPANY REORGANIZATION
The Board of Directors of the Bank has approved a plan of reorganization
under which the business of the Bank would be conducted as a wholly-owned
subsidiary of the Holding Company.
REASONS FOR THE PROPOSAL
A bank holding company form of organization will increase the corporate
and financial flexibility of the businesses operated by the Bank through the
combined business of the Bank and the Holding Company. Examples are:
o increased structural alternatives for acquisitions;
o the ability to augment Bank capital by means of Holding Company debt;
o the ability of the Holding Company to redeem its own stock.
A bank holding company can engage in certain non-bank-related activities
in which the Bank cannot presently engage. The reorganization would broaden the
scope of services which could be offered to the public. The Holding Company has
not made any specific determination as to which of these types of activities it
may engage in after consummation of the proposed transaction.
DESCRIPTION OF THE REORGANIZATION
The Holding Company will subscribe for and will hold all of the 2,000
authorized shares of common stock of the Interim Bank, which will be chartered
solely for the purpose of this transaction. The Bank will consolidate with the
Interim Bank under the name and charter of the Bank, pursuant to the terms of
the Consolidation Agreement. (See Appendix I of this Proxy Statement -
Prospectus.) Upon consummation of the transaction, the "Resulting Bank" will
redeem and cancel the Interim Bank shares.
After the consolidation, the business of the Bank will be conducted by
the Resulting Bank under the name "Valle de Oro Bank." All of the outstanding
shares of stock of the Resulting Bank will be owned by the Holding Company. The
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Resulting Bank will have the same directors, officers, interests and properties
as those of the Bank immediately prior to the consolidation. The Resulting Bank
will continue to be subject to regulation by the Office of the Comptroller of
the Currency, and as a subsidiary of the Holding Company, will be subject to
regulation by the Board of Governors of the Federal Reserve System.
CONVERSION AND EXCHANGE OF STOCK
Upon consummation of the reorganization, each outstanding share of the
Bank stock will be converted into two shares of the Holding Company stock. Each
holder of Bank stock certificates upon surrender of such certificates for
cancellation will be entitled to receive certificates representing twice as many
shares of the Holding Company stock.
Stock certificates representing shares of the Holding Company's common
stock will be generally distributed to stockholders of the Bank by approximately
March 31, 1999. The distribution of stock certificates to you will be dependent
upon the date of receipt of your Bank stock certificate for exchange.
Stockholders of the Bank will continue to be entitled to sell or transfer their
Bank stock through the date of consummation of the transaction. Further, you may
sell Holding Company stock after the effective date of the Consolidation but
before receipt of certificates representing Holding Company stock. Such sales
will only require presentation of your Bank stock certificate.
Until so surrendered, Bank stock certificates will be deemed for all
purposes to evidence twice as many shares of the Holding Company stock. No
dividends will be paid upon Bank stock certificates after consummation of the
reorganization, but such dividends will be accumulated and paid, without
interest, at the time of surrender of such Bank stock certificates for Holding
Company stock certificates.
AFFILIATE RESTRICTIONS
The shares of Holding Company stock will be registered pursuant to the
Securities Act of 1933. However, the resale of such shares by the directors,
principal officers and principal stockholders may be restricted by the 1933 Act
and by SEC rules if such directors, principal officers and principal
stockholders are deemed to be "affiliates" as that term is defined by the 1933
Act and SEC rules.
Persons considered to be in control of an issuer are considered as
"affiliates" and may include officers, directors and stockholders who own 10% or
more of the outstanding stock. Holding Company stock received after the
transaction by "affiliates" the Holding Company will be "control stock," which
can be sold only if they are registered or transferred in a transaction exempt
from registration under the 1933 Act, such as pursuant to SEC Rules 144 and 145,
or pursuant to a private placement. SEC Rules 144 and 145 generally require that
before an affiliate can sell control stock:
o There must be on file with the SEC public information filed by the
issuer;
o The affiliate must sell his stock in a unsolicited broker's transaction
or directly to a market maker; and
o During any three-month period, the amount of the securities that can be
sold is limited to the greater of 1% of the outstanding stock of the
issuer or the average weekly trading volume during the last four
calendar weeks.
It may be advisable for those stockholders who may become "affiliates"
of the Holding Company to confer with their legal counsel prior to the sale of
any Holding Company stock.
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CONDITIONS OF CONSUMMATION
Federal law provides that a bank consolidation requires the approval of
a consolidation agreement by the Boards of Directors and by stockholders holding
two-thirds of the outstanding common stock of each bank.
The obligation of the Bank and the Holding Company to consummate the
reorganization is conditioned further upon the following:
o the absence of any action, suit, proceeding or claim, made or
threatened, related to the proposed consolidation;
o any development which makes consummation of the consolidation
inadvisable in the opinion of either Board of Directors;
o the receipt of a favorable opinion of legal counsel with respect to the
tax consequences of the consolidation;
o the receipt of all necessary regulatory approvals; and
o the performance of all covenants and agreements.
OTHER CONSIDERATIONS
The Holding Company is a business corporation formed under Delaware law.
It will have greater flexibility than the Bank in certain corporate procedures,
such as:
o the incurrence of debt for leveraged growth;
o the redemption of stock; and
o the operation of related financially-oriented businesses.
The Holding Company will be a registered bank holding company and
subject to the Federal Bank Holding Company Act of 1956.
EXPENSES
The reorganization will cost about $100,000. The expenses are related
to:
o legal fees;
o accounting fees;
o application fees;
o printing costs; and
o other expenses.
FEDERAL TAX CONSEQUENCES
An opinion of special legal counsel, Dostart Clapp Sterrett Coveney,
LLP, has been obtained to the following effect:
o the transaction will qualify as a reorganization within the meaning of
Internal Revenue Code section 368(a)(1)(A) and (a)(2)(E);
o no gain or loss will be recognized for federal income tax purposes by
Bank stockholders upon conversion of Bank stock into Holding Company
stock, except for those stockholders who dissent and perfect their
appraisal rights;
o the tax basis of the Holding Company stock will be the same as the tax
basis of the Bank stock surrendered by the stockholders; and
o the holding period of the Holding Company stock will include the holding
period of the Bank stock surrendered by stockholders, provided that the
Bank stock is held as a capital asset on the date of consummation of the
consolidation.
Stockholders who dissent from the transaction and receive cash in
exchange for their Bank shares will recognize taxable gain or loss in an amount
equal to the difference between their basis in the shares and the amount of cash
received. The tax treatment of such gain or loss
12
<PAGE> 15
will depend on the particular circumstances of each dissenting stockholder.
STATE TAX CONSEQUENCES
Depending upon your state of residence, the transaction may subject you
to certain state law provisions relating to capital gains tax. Shares of Bank
stock may in some jurisdictions have certain advantages not available to shares
of Holding Company stock, such as exemption from personal property taxes,
exemption from taxation on dividend income, and qualification as a legal
investment. For residents of California, there are no material differences in
the state tax treatment of gains, losses and distributions from the Bank or the
Holding Company nor are there any other significant differences as to the tax
treatment of shares of the Bank or the Holding Company.
Stockholders are urged to review their tax status under any state or
local tax laws with their own tax advisors.
APPRAISAL RIGHTS OF DISSENTING STOCKHOLDERS
Pursuant to the provisions of Section 215 of Title 12 of the United
States Code, the Consolidation Agreement provides that any stockholder of the
Bank who has voted against the Consolidation Agreement, or who has given prior
notice in writing to the Chairman of the Meeting or the Secretary of the Bank
that such stockholder dissents, shall be entitled to receive the value of the
Bank stock held by such stockholder.
The relevant portions of Section 215 of Title 12 of the United States
Code are attached as Appendix II. The failure of a stockholder to follow the
procedures set forth in Section 215 will terminate such stockholder's appraisal
rights. As a consequence, each stockholder of the Bank who desires to exercise
such rights should review Section 215 and follow its provisions.
A failure to vote against the Consolidation Agreement or to give such
notice in writing at or prior to the meeting will be deemed a waiver of a
stockholder's right of appraisal. Any Bank stockholder who votes against
reorganization, or who gives prior notice that such stockholder dissents, will
be notified in writing of the date of the reorganization of the Bank as a
one-bank holding company.
In order to receive the value of the Bank stock held, a stockholder must
make a written request for payment to the Resulting Bank before 30 days after
the date of consummation, accompanied by the surrender of such stockholder's
stock certificates. This written request for payment should be sent to: Valle de
Oro Bank, 1234 East Main Street, El Cajon, California 92021, Attention:
Secretary.
The value of the shares of any dissenting stockholder will be
ascertained, as of the effective date, by an appraisal made by a committee of
three persons comprised of:
o one selected by the vote of the holders of the majority of the Bank
stock, the owners of which requested appraisal;
o one selected by the Directors of the Resulting Bank; and
o one selected by the two so selected.
The valuation agreed upon by any two of the three appraisers shall govern.
If the value so fixed shall not be satisfactory to any dissenting
stockholder, that stockholder may, within five days after being notified of the
appraised value of such shares, appeal to the Office of the Comptroller of the
Currency, which shall cause a final reappraisal to be made. If within 90 days
from the date of consummation, for any reason one or more of the appraisers is
not selected as above provided, or if the appraisers fail to determine the value
of such shares, the Office of the Comptroller of the Currency shall, upon
written request of any
13
<PAGE> 16
interested party, cause an appraisal to be made which shall be final and binding
on all parties.
The expenses of the Office of the Comptroller of the Currency in making
an appraisal shall be paid by the Resulting Bank. The value of the shares
ascertained shall be promptly paid to the dissenting stockholders by the
Resulting Bank. In performing the appraisal or reappraisal, the Office of the
Comptroller of the Currency selects an appropriate valuation method, or
combination of methods, after reviewing the facts of each case. The Office of
the Comptroller of the Currency may review the market value of the shares being
appraised, the investment value of the shares based upon earnings of the Bank
and similarly situated banks, and the adjusted book value of the shares. A
combination of methods may be used with the Office of the Comptroller of the
Currency applying varying weights to the different methods. See Banking Circular
259 in Appendix II to this Proxy Statement - Prospectus for a more complete
description of the valuation methods used by the Office of the Comptroller of
the Currency.
ACCOUNTING TREATMENT
The consolidation of Bank and Interim Bank will be accounted for in a
method similar to a pooling of interests.
ANTI-TAKEOVER MEASURES
THE PURPOSE OF THE ANTI-TAKEOVER PROVISIONS
The Holding Company's Certificate of Incorporation contains "fair price"
and "supermajority vote" provisions. We included them because certain tactics
have become relatively common in corporate takeover practice, including:
o an accumulation of a substantial block of stock as a prelude to an
attempted takeover or proxy fight, or a partial tender offer
o followed by a second step business combination involving less favorable
considerations than were offered in the partial tender offer.
We believe such tactics can be highly disruptive and can result in
dissimilar and unfair treatment of stockholders. We are not aware of any current
efforts to obtain control of the Bank or to effect substantial accumulations of
its stock.
The fair price and supermajority vote provisions are designed to
encourage potential takeover bidders to negotiate at arms-length with the Board
of Directors. In the absence of such negotiations, the provisions are intended
to assure any multi-step attempt to take over the Holding Company is made on
terms that offer similar treatment to all stockholders. Neither the proposed
fair price provision nor the supermajority vote provision will impede a takeover
that is approved by a majority of the directors of the Holding Company who are
unaffiliated with a 10% or more stockholder.
There have been several takeovers of publicly-held corporations
accomplished by the purchase of a control block of stock by means of open market
purchases or by means of a tender offer made directly to a target corporation's
stockholders at a price above the prevailing market price, followed by a
second-step consolidation or other business combination. The value of the
consideration given for the shares in the second step of such an acquisition
frequently has been less than the value paid in the first step. We are concerned
that the interest of all stockholders may not be adequately protected in such a
two-step acquisition.
14
<PAGE> 17
The Bank has a large number of long-term stockholders who each hold a
relatively small number of Bank shares. We believe that sophisticated
arbitrageurs and other market professionals are generally in a better position
to take advantage of the more lucrative first step transaction, while long-term
stockholders will often, as a practical matter, be compelled to accept the less
favorable consideration payable in the second step consolidation or other
business combination.
The potential for future use of the two-step acquisition have convinced
us that these provisions are desirable in order to preserve for the stockholders
the benefits which will accrue to the Holding Company and its subsidiary, the
Resulting Bank, including its increased ability to compete in the significantly
deregulated banking industry.
SUMMARY OF FAIR PRICE AND SUPERMAJORITY VOTE PROVISIONS
Under the "fair price" provision, no Business Combination may be
effected without the approval of the Continuing Directors, unless either:
o it is approved by holders of not less than two-thirds of the voting
stock held by all independent stockholders voting together as a
class; or
o the minimum price and certain other requirements are met.
The fair price is the aggregate of the cash and fair market value of
property paid, plus interest paid on such property from the date the offeror
became an interested stockholder to the date of consummation. It is possible
that, if the interested stockholder has not made a recent purchase of Holding
Company stock, the fair price might be a price paid by the interested
stockholder several years ago. That price may have no relation to the present
market value of the stock, particularly if the stock has declined in value
during the interim.
As such, a determination of whether the price paid satisfies the fair
price provision conceivably may not be made until the date of consummation. This
uncertainty may preclude an interested stockholder from determining the price
required to satisfy the fair price provision, even if the interested stockholder
had every intention of doing so. The uncertainty associated with the fair price
provision may have the effect of encouraging an interested stockholder who is
not assured of a supermajority vote to negotiate any proposed business
combination with the Continuing Directors.
The purpose of the foregoing conditions is to require, in the absence of
the approval of the directors or holders of at least two-thirds of all voting
stock held by the independent stockholders, that the independent stockholders
receive the "minimum price," which is the highest price per share paid by the
interested stockholder. The form of the consideration must be the same as
previously paid by the interested stockholder to acquire the largest number of
shares of such class or series.
The Certificate of Incorporation also contains a "supermajority vote"
provision. The vote required is in addition to any vote required by the fair
price provision. No business combination with an interested stockholder may be
effected without the approval of the directors, unless approved by holders of
not less than 80% of the outstanding stock, including the shares held by the
interested stockholders. This vote is required notwithstanding that no
stockholder vote or a lesser percentage stockholder vote may be required by law
or other provisions of the Certificate of Incorporation.
All actions required to be taken by the directors shall be taken by the
vote of two-thirds of the directors. In the event that the number of
15
<PAGE> 18
directors is at any time less than five, all power and authority of the
directors to approve business combinations and successor directors and filling
director vacancies ceases. The directors are given authority to determine such
matters as whether any person is an interested stockholder, the fair market
value of property, securities and other noncash considerations, and the like.
We have determined that encouraging a prospective purchaser to negotiate
directly with the Board will be beneficial to all stockholders. We believe that,
in consultation with our professional advisors, we are in the best position to
assess the business and prospects of the Holding Company. Accordingly, we are of
the opinion that negotiations between the Holding Company and a potential
acquirer will increase the likelihood that stockholders will receive a higher
price for their shares.
The fair price and supermajority vote provisions may have the effect of
protecting the incumbent Board of Directors by discouraging takeover attempts
which are not supported by the Board. As a result, stockholders may not have the
opportunity to sell some or all of their shares in such a takeover attempt.
Tender offers for control usually involve a purchase price higher than the
prevailing market price and may result in a bidding contest between competing
takeover bidders.
An effect of the fair price and supermajority vote provisions is to make
more difficult the consummation of a business combination with a 10% or more
stockholders in the absence of the approval of the Board of Directors.
Accordingly, the provisions may discourage takeover attempts which are not
supported by the Board of Directors even in transactions which may be supported
by a majority of stockholders.
These "anti-takeover" provisions could affect the price of the Holding
Company's shares by making it less attractive to persons who invest in
securities in anticipation of an increase in price if a takeover attempt occurs.
The fair price and supermajority vote provisions may also deter an interested
stockholder from proceeding with a second-step business combination unless
approved by the directors, especially if the market price of the Holding Company
shares had declined from the highest price paid by the interested stockholder in
acquiring shares of such class. Unless the directors approve a business
combination, these anti-takeover provisions would give the holder of a minority
of the total outstanding shares the veto power over a business combination with
an interested stockholder, notwithstanding that the other stockholders, may
believe the business combination to be desirable or beneficial.
CLASSIFIED BOARD OF DIRECTORS
The Holding Company's Board of Directors is divided into three classes
of two directors each. Each class will be elected for a three-year term. The
classified election system for directors provides continuity of directors and
also serves as a defense against unwanted takeovers. Stockholders desiring to
change a majority of the Board would have to wait at least two years, because
only one class of the directors is elected annually. This may discourage
potential buyers from making acquisitions of the Holding Company's stock.
ADDITIONAL CONSIDERATIONS
Federal law requires prior approval by the Board of Governors of the
Federal Reserve System before any company acquires control of a bank holding
company. In addition, pursuant to national banking law, no person or entity may
directly or indirectly, acquire a controlling interest in a bank without the
prior written approval of Office of the Comptroller of the Currency. Independent
of any provision of the Holding Company's Certificate of Incorporation
16
<PAGE> 19
or Bylaws, the requirement for such regulatory approval may delay efforts to
obtain control over the Holding Company.
The Holding Company has 10,000,000 shares of authorized common stock of
which, after consummation of the proposed reorganization, there will be
2,640,062 shares issued and outstanding. Therefore the Holding Company will have
7,359,938 shares of its authorized common stock available for future issuance by
the Board of Directors for any proper corporate purpose. These shares could be
issued into "friendly" hands by the Board of Directors in the event of an
attempt to gain control of the Holding Company. Because the Holding Company's
authorized but unissued shares could be issued and used in this manner, they
represent another potential anti-takeover device.
The Holding Company's Certificate of Incorporation and Bylaws currently
contain no other provisions that were intended to be or could fairly be
considered as anti-takeover in nature or effect. The Board of Directors has no
present intention to amend the Certificate of Incorporation to add any
anti-takeover provisions.
MARKET PRICES OF STOCK
THE HOLDING COMPANY
Valley National Corporation was incorporated on October 7, 1998. No
shares of the Holding Company have been publicly traded since the date of its
incorporation to the present time. Therefore, no meaningful market exists at
this time for the Holding Company's stock. Bank stockholders will exchange their
Bank stock for Holding Company stock. Shares of the Holding Company will be
listed for quotation on the Nasdaq National Market System with the same trading
symbol (VADO) as that used for Bank shares.
THE BANK
Until November 17, 1998, there had been only a limited over-the-counter
market for the Bank's common stock. On such date, the Bank's common stock was
listed for quotation on the National Market System of the Nasdaq Stock Market.
The Bank had approximately 1248 stockholders as of September 30, 1998.
17
<PAGE> 20
The following sets forth the high and low trading prices of the Bank's
common stock for the quarters indicated based on transactions of which
Management is aware:
TRADING PRICES(1)
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
1996
----
First Quarter $12.33 $11.31
Second Quarter $14.51 $12.70
Third Quarter $14.74 $13.61
Fourth Quarter $15.88 $13.82
1997
----
First Quarter $16.32 $14.29
Second Quarter $22.14 $17.14
Third Quarter $23.10 $22.14
Fourth Quarter $25.24 $24.11
1998
----
First Quarter $30.48 $24.29
Second Quarter $34.25 $27.00
Third Quarter $34.75 $29.00
</TABLE>
- -----------------------
(1) Prices have been adjusted for each of the 5% common stock dividends
declared and paid by the Bank in 1996, 1997 and 1998.
DIVIDENDS
THE HOLDING COMPANY
Since the date of its incorporation, the Holding Company has paid no
dividends. After consummation of the reorganization, the amount and timing of
future dividends will be determined by its Board of Directors and will
substantially depend upon the earnings and financial condition of its principal
subsidiary, the Resulting Bank. The ability of the Holding Company to obtain
funds for the payment of dividends and for other cash requirements is largely
dependent on the amount of dividends which may be declared by its subsidiary,
the Resulting Bank.
The power of the Board of Directors of a national bank, such as the
Bank, to declare a cash dividend is subject to statutory and regulatory
restrictions which limit the amount available for cash dividends depending upon
the earnings, financial condition and cash needs of the bank, as well as general
business conditions. A national bank is prohibited from paying dividends out of
common capital. Dividends must be paid out of undivided profits. If losses have,
at any time, been sustained equal to or exceeding a bank's undivided profits
then on hand, no dividend may be paid. Moreover, even if a national bank's
surplus exceeded its common capital and its undivided profits exceed its losses,
the approval
18
<PAGE> 21
of the Comptroller is required for the payment of dividends if the total of all
dividends declared by a national bank in any calendar year would exceed the
total of its net profits of that year combined with its net profits of the two
preceding years, less any required transfers to surplus.
THE BANK
The Bank paid quarterly cash dividends of $0.06 per share in the first
and second quarters of 1998, and in each quarter of 1997 and 1996. In the third
quarter of 1998, a dividend of $0.07 per share was paid. The Bank has paid 5%
stock dividends to stockholders in each year since 1988. Cash was paid in lieu
of fractional shares.
The Holding Company anticipates continuing to pay such dividends in the
future.
CAPITALIZATION
The following table sets forth the capitalization of the Bank as of
September 30, 1998 and the pro forma capitalization of the Holding Company as of
September 30, 1998, assuming that the reorganization had been consummated at
such date, no stockholder of the Bank had exercised dissenters' rights, and the
Holding Company had redeemed and canceled the shares of the Interim Bank issued
to the Holding Company.
<TABLE>
<CAPTION>
Bank Interim Bank Adjustments Holding Company
(Actual) (Actual)(1) (Pro Forma) (Pro Forma)
------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C>
Common Stock $ 14,845,000 $ 240,000 $ 240,000 $ 14,845,000
Retained Earnings 3,758,000 0 0 3,758,000
Unrealized Gains
on Securities (2) 209,000 0 0 209,000
------------- ---------- ---------- -------------
Total Stockholders' Equity $ 18,812,000 $ 240,000 $ 240,000 $ 18,812,000
</TABLE>
(1) Represents the capitalization of the Interim Bank in accordance with
federal banking law which requires minimum capitalization of $240,000.
Upon consummation, this capital will be immediately withdrawn through a
redemption of such stock by the Resulting Bank. The capital of the
Resulting Bank and the Holding Company therefore will be equal to the
capital of the Bank immediately before the transaction, and will not be
affected by the temporary capitalization of the Interim Bank.
(2) Represents unrealized gain on investment securities classified as
"Available for Sale" under Statement of Financial Accounting Standards
No. 115 "Accounting for Certain Investments in Debt and Equity
Securities."
19
<PAGE> 22
FINANCIAL STATEMENTS
The Bank's audited Balance Sheets as of December 31, 1997 and 1996, the
related audited Statements of Earnings, Changes in Stockholders' Equity and Cash
Flows for each of the two years ended December 31, 1997 and 1996 are included in
the Bank's Annual Report, which was sent to each stockholder in connection with
the Annual Meeting of stockholders held May 5, 1998. Financial statements of the
Bank are not included herein as they are not deemed material to the exercise of
prudent judgment by stockholders with respect to the matters to be acted upon at
the Meeting. If any stockholder so desires, he may obtain an additional copy of
such financial statements upon written request to William V. Ehlen, President,
Valle de Oro Bank, 1234 East Main Street, El Cajon, California 92021.
Provided below is a five-year summary of selected financial data of the
Bank. In addition, selected financial data is presented for the nine months
ended and as of September 30, 1998.
SELECTED FINANCIAL DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
As of or for the Periods Ended
--------------------------------------------------------------------
December 31,
Sept. 30, --------------------------------------------------------
Statement of Income Data: 1998 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Interest Income $ 13,369 $ 16,270 $ 14,865 $ 13,573 $ 11,487 $ 9,379
Interest Expense 4,772 5,940 5,316 4,329 2,866 2,649
-------- -------- -------- -------- -------- --------
Net Interest Income $ 8,597 $ 10,330 $ 9,549 $ 9,244 $ 8,621 $ 6,730
Provision for Loan Losses $ 488 $ 497 $ 1,062 $ 862 $ 837 $ 920
Other Income 2,181 2,744 2,249 2,112 1,781 1,570
Other Expenses 7,704 9,688 8,542 8,644 7,839 5,850
Income Taxes 914 1,037 791 707 676 625
-------- -------- -------- -------- -------- --------
Net Earnings $ 1,672 $ 1,852 $ 1,403 $ 1,143 $ 1,050 $ 905
Per Share Data (1):
Basic Net Earnings $ 1.28 $ 1.43 $ 1.09 $ 0.89 $ 1.07 $ 1.07
Diluted Net Earnings $ 1.18 $ 1.33 $ 1.06 $ 0.88 $ 1.06 $ 1.02
Cash Dividends Declared $ 0.19 $ 0.24 $ 0.24 $ 0.20 $ 0.15 none
per Common Share
Balance Sheet Data:
Net Loans $145,153 $134,837 $118,219 $103,457 $ 94,274 $ 84,412
Total Deposits $212,233 $188,147 $167,059 $141,968 $114,701 $112,055
Total Assets $231,981 $206,083 $183,449 $156,838 $128,620 $120,885
Total Stockholders' Equity $ 18,812 $ 17,026 $ 15,397 $ 14,303 $ 13,249 $ 8,301
Long-term Debt $ 60 $ 83 $ 112 $ 139 $ 163 $ 185
</TABLE>
- ------------
(1) Per share information adjusted to account for 5% stock dividend in each
year.
20
<PAGE> 23
HISTORY AND BUSINESS OF THE HOLDING COMPANY
GENERAL
The Holding Company was incorporated under the laws of the State of
Delaware on October 7, 1998, for the purpose of becoming the holding company of
the Bank. Immediately prior to consummation of the reorganization, the Holding
Company will own all of the stock of the Interim Bank. Thereafter, the Interim
Bank will consolidate with the Bank. Stockholders of the Bank will become
stockholders of the Holding Company, subject to their dissenters' rights. The
Holding Company will become the sole stockholder of the Resulting Bank. The
Resulting Bank will carry on the business of the Bank under the name "Valle de
Oro Bank." The executive offices of the Holding Company are located at 1234 East
Main Street, El Cajon, California 92021. A copy of the Holding Company's
Certificate of Incorporation is attached as Appendix III.
EMPLOYEES
The Holding Company has no employees other than its officers, each of
whom is also an employee and officer of the Bank and who serve in their capacity
as officers of the Holding Company without additional compensation. Upon
consummation of the reorganization, the Holding Company, whose sole business
function will be to hold 100% of the Bank stock, does not anticipate any
immediate change in the number of or status of its employee officers. The status
of the Bank's employees is not expected to be affected by the reorganization.
BOARD OF DIRECTORS
The Directors of the Holding Company are James F. Carroll, Samuel M.
Ciccati, Ph.D., Obert D. "Dale" Conway, William V. Ehlen, C.K. Hill, O.D., and
Philip J. Gelber, M.D., each of whom also serve as Directors of the Bank.
Directors of the Holding Company are elected to staggered three-year terms. Upon
consummation of the reorganization, the Directors of the Holding Company will
own the following percentages of Holding Company stock.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Directors Percentage of Common Stock
--------- --------------------------
<S> <C>
James F. Carroll 3.5%
Samuel M. Ciccati, Ph.D. 1.0%
Obert D. "Dale" Conway 6.2%
William V. Ehlen 4.6%
Philip J. Gelber, M.D. 0.9%
C.K. Hill, O.D. 2.5%
All directors as a group (6 persons) 18.7%
- --------------------------------------------------------------------------------
</TABLE>
REMUNERATION OF DIRECTORS AND OFFICERS
The Holding Company has paid no remuneration to its officers and
directors since its incorporation. It is not anticipated that the Holding
Company's officers and directors will initially be paid any additional
compensation by the Holding Company other than that currently paid to them by
the Bank.
INDEMNIFICATION
The Holding Company's Certificate of Incorporation and Bylaws
21
<PAGE> 24
provide for indemnification of officers, directors, employees and agents to the
fullest extent permitted by Delaware law.
Delaware law generally provides for the payment of expenses, including
attorney's fees, judgments, fines and amounts paid in settlement reasonably
incurred by the indemnitee provided such person acted in good faith and in a
manner he reasonably believed not to be opposed to the best interests of the
corporation. However, in derivative suits, if the suit is lost, no
indemnification is permitted if the prospective indemnitee is found to be liable
for misconduct in the performance of his duty to the corporation. No
indemnification may be provided in any action or suit in which the only
liability asserted against a director is pursuant to a statutory provision
outlawing loans, dividends, and distribution of assets under certain
circumstances.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
Holding Company pursuant to provisions in the Holding Company's Certificate of
Incorporation and Bylaws, the Holding Company has been informed that, in the
opinion of the SEC, such indemnification is against public policy as expressed
in the Securities Act of 1933, and is therefore unenforceable.
The reorganization of the Bank into a subsidiary of the Holding Company
is not expected to have any effect on the ability of the Bank or the Holding
Company to obtain officers and directors indemnification insurance, or the rates
at which such insurance is available. The provisions regarding indemnification
may not be applicable under certain federal banking laws and regulations.
HISTORY AND BUSINESS OF THE BANK
GENERAL
The Bank opened in 1983. The Bank conducts substantially the same
business operations as a typical independent, commercial bank including
accepting demand, savings and time deposits and making commercial, real estate
and consumer loans. It has six offices:
o Casa de Oro Office, 9832 Campo Road, Spring Valley
o Sweetwater Office, 491 Sweetwater Road, Spring Valley
o Rancho San Diego Office, 2986 Jamacha Road, El Cajon
o Grossmont Center Office, 8690 Center Drive, La Mesa
o Santee Office, 8867 Cuyamaca Street, Santee
o El Cajon Office, 1234 East Main Street, El Cajon.
The Bank issues cashier's checks and money orders, sells traveler's
cheques and provides other customary banking services. The Bank also offers
mortgage brokerage services, including a variety of conventional and FHA/VA
residential real estate loan products as well as commercial loan products. The
Bank sells to its customers, through a third party broker/dealer, nondeposit
investment products including mutual funds, fixed and variable annuities,
stocks, bonds and other nondeposit investment products. The Bank does not
operate or have any present intention to seek authority to operate a trust
department.
The Bank has always emphasized consumer and small business banking. Most
of
22
<PAGE> 25
the Bank's depositors are consumers and small business customers.
As of December 31, 1997, the Bank has concentrated its lending
activities in three areas:
o real estate loans (49%)
o commercial loans to small businesses (41%)
o consumer loans (10%).
The Bank's real estate loan portfolio is comprised of amortizing loans
and consumer lines of credit secured by residential properties, loans secured by
commercial real estate, and construction loans. These loans are made primarily
for the purpose of purchasing or improving residential real estate, to purchase
or improve commercial real estate and to construct owner-occupied, single family
residential real estate. Commercial loans to small businesses, including Small
Business Administration loans, are made essentially to provide working capital
and equipment financing for small business customers. Consumer loans are for
household expenditures such as automobiles, recreation and other personal
expenditures.
The Bank evaluates each borrower's credit-worthiness on a case-by-case
basis. The amount of collateral obtained by the Bank, if necessary, is based
upon management's credit evaluation of the borrower. Collateral held varies but
may include certificates of deposit, accounts receivable, inventory, property,
plant and equipment, residential real estate and income-producing commercial
properties. The Bank's lending activities are concentrated in San Diego County.
The Bank provides 24-hour daily banking transactional service through
its electronic Automatic Teller Machines (ATMs) at all of its offices, and is a
member of the STAR SYSTEM, PLUS and VISA ATM networks. In 1997, the Bank
introduced its VISA Check Card where purchases are charged directly to the
customer's checking account rather than a credit card line, but looks similar to
a credit card and can be used anywhere a VISA credit card is accepted. The Bank
also provides automated clearing house services for both origination and receipt
of funds through the California Clearing House Association.
Most of the Bank's business originates from its primary service areas,
consisting of the communities of Spring Valley, El Cajon, Lemon Grove, La Mesa
and Santee, all located in eastern San Diego County, California. The Bank does
not attract deposits from and has not made loans to foreign governments or
foreigners. The Bank's business is not seasonal. There has been no material
effect upon the Bank's capital expenditures, earnings or competitive position as
a result of federal, state or local environmental regulations.
The Bank does not obtain a material portion of its deposits from a
single person or few persons, nor is a material portion of the Bank's loans
concentrated within a single industry or group of related industries. The Bank's
deposits are insured by the Federal Deposit Insurance Corporation to applicable
legal limits, and the Bank is supervised and regulated by the Office of the
Comptroller of the Currency.
COMPETITION
The banking business in California generally, and specifically in the
Bank's primary service areas, is highly competitive with respect to both loans
and deposits and is dominated by a relatively small number of major banks which
have many offices operating over wide geographic areas. The Bank competes for
deposits and loans principally with these major banks, but also with small
independent banks and credit unions located in its service area. Among the
advantages which the major banks have over the Bank is their ability to finance
extensive advertising campaigns and to allocate their
23
<PAGE> 26
investment assets to regions of highest yield and demand. Many of the major
commercial banks operating in the Bank's service area offer certain services
(such as trust and international banking services) which are not offered
directly by the Bank. By virtue of their greater total capitalization, such
banks also have substantially higher lending limits than the Bank.
Banks generally, and the Bank in particular, face increasing competition
for loans and deposits from non-bank financial intermediaries including credit
unions, savings and loan associations, brokerage firms, thrift and loan
companies, mortgage companies, insurance companies, and other financial and
non-financial institutions. In addition, there is increased competition among
banks, savings and loan institutions, and credit unions for the deposit and loan
business of individuals.
The recent trend has been for other institutions, such as brokerage
firms, credit card companies and retail establishments to offer banking services
to consumers, such as money market funds with check access and cash advances on
credit card accounts. In addition, other entities (both public and private)
seeking to raise capital through the issuance and sale of debt or equity
securities compete with banks in the acquisition of deposits. While the
direction of recent legislation and economic developments seems to favor
increased competition between different types of financial institutions for both
deposits and loans, resulting in increased cost of funds to banks, it is not
possible to predict the full impact these developments will have on commercial
banking or the Bank.
In order to compete with other financial institutions in its service
area, the Bank relies principally upon local promotional activity including:
o direct mail;
o advertising in the local media;
o personal contacts by its directors, officers, employees and
stockholders; and
o specialized services.
The Bank's promotional activities emphasize the advantages of dealing with a
locally-owned and headquartered institution attuned to the particular needs of
the community. For customers whose loan demands exceed the Bank's lending
limits, the Bank attempts to arrange for such loans on the participation basis
with other financial institutions. The Bank also assists customers requiring
services not offered by the Bank to obtain these services from its correspondent
banks.
EMPLOYEES
As of September 30, 1998, the Bank had 113 full-time employees and seven
part-time employees. The Bank provides several benefits for its full-time
employees, including health and life insurance, workers' compensation, social
security, paid vacations, bank services and a retirement plan.
PROPERTY
The Bank operates six offices, all in the "East County" area of San
Diego County, California. The Bank owns the Casa de Oro and Santee offices. It
owns the Sweetwater building and leases the land. The Bank's other facilities
are leased.
The Bank has three properties classified as other real estate owned with
a carrying value of $1.4 million as of September 30, 1998. These properties are
comprised of two parcels of unimproved land and one parcel of commercial real
estate. The unimproved land parcels are located in the Otay Mesa area of San
Diego County. The Bank maintains active sales programs for these properties.
24
<PAGE> 27
YEAR 2000 ISSUE
The Year 2000 ("Y2K") issue is the result of computer programs being
written using two digits rather than four to define the applicable year. Any of
the Bank's programs that have time sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a variety
of system miscalculations, operating problems and system failures.
The Bank is addressing its Y2K issues using a five phase program. The
five phases are awareness, assessment, renovation, validation and
implementation. A brief description of each phase and the Bank's progress toward
completing each phase follows.
The awareness phase:
o identifies potential Y2K problems,
o develops an overall strategy for addressing the issues,
o obtains support from the Board of Directors and management,
o appoints a project team of employees to direct the Bank's activities,
and
o implements an internal and external communication program to raise
awareness of the problems and issues.
The Bank completed the awareness phase March 31, 1998.
The assessment phase identifies all information technology systems, such
as hardware, software, networks and ATMs, and non-information technology
systems, such as alarm and security systems, and environmental controls. This
phase also develops a system to evaluate and assess borrower and vendor
preparedness, including a tracking and monitoring system to identify potential
problems. Based on the initial results of the assessment phase, contingency
planning and resource allocation has begun.
The Bank has completed all of its information and non-information
technology system assessments. In addition, it has communicated with borrowers
and vendors, established a monitoring system, logged responses, and assigned
risk factors. The Bank has begun quantifying the Y2K risk factors associated
with its borrowers and assigned preliminary allocations of the allowance for
loan losses. This allocation process will be reviewed and revised on a quarterly
basis through, at least, the first quarter of 2000. Accordingly, monitoring and
communication with borrowers and vendors is ongoing.
The Bank has also made initial assessments of its liquidity position in
case of a loss of one or more of its larger depositors due to Y2K, and the
impact of Y2K, in general, upon its deposit base. To ensure Y2K issues do not
have an adverse effect on depositors or liquidity, the Bank intends to perform
this assessment on a quarterly basis.
The renovation phase involves making the necessary information
technology and non-information technology changes and upgrades necessary to be
Y2K compliant. The Bank has purchased and installed new item processing and
voice response software, in addition to local area network servers and security
and alarm systems. The Bank is awaiting installation of three new automated
teller machines. Renovation continues on less critical internal PC-based
accounting and information systems with a target completion date of December 31,
1998 for this phase.
The validation phase is the testing phase. The Bank uses a third party
data processing vendor whose software is Y2K compliant. However, the software is
currently undergoing proxy testing by several of its users and is expected to be
complete by March 31, 1999. The Bank is currently testing its other internal
specialized systems and expects to complete this phase by December 31, 1998.
25
<PAGE> 28
The implementation phase introduces system changes into our operating
environment. Once tested, Y2K compliant systems are ready to be introduced into
the Bank's operating environment. The target date for implementation of all
systems is September 30, 1999.
Contingency planning has begun. The Board of Directors has appointed a
contingency planning project manager. A workgroup has been established and is
preparing a Y2K contingency plan. A planning event timeline, incorporating the
Y2K renovation and testing milestones, to date, has been prepared. The Bank
intends to complete a full business resumption plan by December 31, 1998.
The Bank's direct expenses for Y2K have been mitigated, to some degree,
by its use of a third-party data processor and its policy of periodically
upgrading in-house hardware and software systems. The Bank has spent
approximately $20,000 on assessing, renovating and testing. This does not
include the cost of a significant amount of Bank staff time spent on Y2K issues.
In addition, the Bank has spent approximately $67,000 to replace capital
equipment, which would not have been replaced except for Y2K.
The Bank's 1998 budget for Y2K expenses is approximately $40,000. In
1999, the Bank's operating budget is $50,500 and in 2000 $13,500 for a total of
$104,000. The Bank's 1998 capital budget for Y2K related expenditures is
$155,000. In 1999, its capital budget is $40,000.
At this time, we are uncertain of the ability of our telecommunications
and utility service providers to furnish consistent, uninterrupted services to
the Bank in the early part of 2000. This view is solely based upon a lack of
material disclosure to us by these companies on their Y2K efforts. The Bank has
undertaken a plan to receive and use data in a hardcopy form and use cellular
communications in the event of service disruptions.
LITIGATION
There is no material pending litigation to which the Holding Company, the Bank
or the Interim Bank is a party, other than routine litigation incidental to the
business of the Bank. Further, there is no material legal proceeding in which
any director, executive officer, principal stockholder, or affiliate of the
Holding Company, the Bank or the Interim Bank or any associate of any such
director, executive officer, or principal stockholder is a party and has a
material interest adverse to the Holding Company, the Bank or the Interim Bank.
None of the routine litigation in which the Bank is involved is expected to have
a material adverse impact upon the financial position or results of operations
of the Holding Company, the Bank or the Interim Bank.
26
<PAGE> 29
BOARD OF DIRECTORS AND OFFICERS
The Bank's Board of Directors is presently composed of 10 members, each
of whom stand for election each year.
The following table sets forth for each of the directors, name, age (as
of September 30, 1998) principal occupation during the past five years, the year
each first became a director and the number of shares of the Bank beneficially
owned, and the shares owned by all directors and executive officers as a group
(15 persons) and one other stockholder which owns more than 5% of the
outstanding shares of the Bank.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Number of Shares
Year First Of Common Stock
Appointed or Beneficially Percent
Name and Title Other Than Director(1) Age Elected Director Owned(2) of Class
- ------------------------------------- --- ---------------- -------- --------
<S> <C> <C> <C> <C>
James F. Carroll, Chairman of the Board 69 1983 46,537(3) 3.5%
Samuel M. Ciccati, Ph.D. 62 1995 13,306(4) 1.0%
Obert D. "Dale" Conway, Vice Chairman 71 1985 81,959(5) 6.2%
William V. Ehlen, President and Chief 51 1983 62,575(6) 4.6%
Executive Officer
Myron D. Fessler, M.D. 67 1985 20,996(7) 1.6%
Philip J. Gelber, M.D. 64 1996 11,701(8) 0.9%
C.K. Hill, O.D., Secretary 79 1984 33,349(9) 2.5%
Janet L. Johnson 64 1983 26,957(10) 2.0%
Lloyd E. Peterson 72 1983 25,741(11) 1.9%
Joseph G. Vehige 77 1985 17,562(12) 1.3%
Financial Institution Partners, L.P. 72,684 5.5%
1824 Jefferson Place, N.W.
Washington, D.C. 20036
All directors and executive officers as a 450,320(13) 31.5%
group (15 persons)
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) Unless otherwise indicated, the business address for each of the persons
listed in the table is 1234 East Main Street, El Cajon, California,
92021.
(2) Shares are beneficially owned, directly and indirectly, together with
spouses, and, unless otherwise indicated, holders share voting power
with their spouses.
(3) Includes 10,719 shares which Mr. Carroll has the right to acquire within
60 days of September 30, 1998 pursuant to the exercise of options.
(4) Includes 11,695 shares held in trust for which Dr. Ciccati is the
trustee and 1,611 shares which Dr. Ciccati has the right to acquire
within 60 days of September 30, 1998 pursuant to the exercise of
options.
(5) Includes 74,816 shares held in trust for which Mr. Conway is trustee and
6,286 shares which Mr. Conway has the right to acquire within 60 days of
September 30, 1998 pursuant to the exercise of options.
27
<PAGE> 30
(6) Includes 38,262 shares which Mr. Ehlen has the right to acquire within
60 days of September 30, 1998 pursuant to the exercise of options and
685 shares in a 401(k) plan.
(7) Includes 8,887 shares held in trust for which Dr. Fessler is co-trustee,
4,983 shares held in a pension plan, 330 shares held in custody for
minor family members and 6,286 shares which Dr. Fessler has the right to
acquire within 60 days of September 30, 1998 pursuant to the exercise of
options.
(8) Includes 11,260 shares held in trust for which Dr. Gelber is trustee and
441 shares which Dr. Gelber has the right to acquire within 60 days of
September 30, 1998 pursuant to the exercise of options.
(9) Includes 28,716 shares held in trust for which Dr. Hill is co-trustee
and 4,633 shares which Dr. Hill has the right to acquire within 60 days
of September 30, 1998 pursuant to the exercise of options.
(10) Includes 5,786 shares which Mrs. Johnson has the right to acquire within
60 days of September 30, 1998 pursuant to the exercise of options.
(11) Includes 3,094 shares held jointly with family members and 6,286 shares
which Mr. Peterson has the right to acquire within 60 days of September
30, 1998 pursuant to the exercise of options.
(12) Includes 13,536 shares held in trust for which Mr. Vehige is co-trustee
and 4,026 shares which Mr. Vehige has the right to acquire within 60
days of September 30, 1998 pursuant to the exercise of options.
(13) Includes 108,314 shares which the directors and executive officers have
the right to acquire within 60 days of September 30, 1998 pursuant to
the exercise of options.
-------------------------
28
<PAGE> 31
Set forth below is certain information regarding the directors of the
Bank:
<TABLE>
<CAPTION>
Name Biographical Information
- ---- ------------------------
<S> <C>
James F. Carroll: Chairman of the Board of Directors of the Bank;
President of Data Disposal, Inc. since 1985;
member of the Association of Naval Aviation, the
Tailhook Association and the Retired Officers
Association.
Samuel M. Ciccati, Ph.D.: Investor in real estate during the past five
years; formerly President of Cuyamaca College,
El Cajon from 1984 until his retirement in 1993.
Obert D. "Dale" Conway: Vice Chairman of the Board of Directors of the
Bank; owner (since 1987) of Continental
Investors, a firm which makes investments in
cleaning establishments.
William V. Ehlen: President and Chief Executive Officer of the
Bank since its inception in 1983.
Myron D. Fessler, M.D.: Physician with Comp Health/Kron since 1993;
previously in private practice in Jamul from
1988 to 1993.
Philip J. Gelber: Ophthalmologist in practice in San Diego,
California since 1969; Medical Director of the
San Diego Eye Bank; past President of the San
Diego Ophthalmologic Society.
C.K. Hill: Owner of Casa de Oro Travel since 1978; active
in the Spring Valley Rotary Club.
Janet L. Johnson: Owner of M. C. Johnson Scraper Rental, a
National City earthmoving business, which she
has operated since 1975.
Lloyd E. Peterson: Builder of custom homes for the past five years.
Joseph G. Vehige: Real estate and securities investor for the past
five years.
</TABLE>
None of the directors of the Bank were selected pursuant to arrangements
or understandings other than with the directors and stockholders of the Bank
acting within their capacity as such. There are no family relationships between
any of the directors, and none of the directors serve as a director of any
company which has a class of securities registered under, or subject to periodic
reporting requirements of, the Securities Exchange Act of 1934, as amended, or
any company registered as an investment company under the Investment Company Act
of 1940.
29
<PAGE> 32
The following is a list of executive officers of the Bank, other than
William V. Ehlen, who is listed above, together with share ownership
information:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Number of
Shares of
Common Stock Percent
First Year Beneficially of
Name and Title Age Appointed Owned(1) Class
-------------- --- ---------- ------------- -------
<S> <C> <C> <C> <C>
Tom Ferrara, Executive Vice President
and Chief Credit Officer 55 1986 29,495(2) 2.2%
Michael P. Foley, Senior Vice
President and Senior Lending
Officer 52 1993 3,514 0.3%
Paul M. Cable, Senior Vice President
and Chief Financial Officer 48 1998 1,383 0.1%
Connie Goules, Senior Vice President
and Chief Administrative Officer 48 1998 2,561 0.2%
- -----------------------------------------------------------------------------------------
</TABLE>
(1) Shares are beneficially owned, directly and indirectly, together with
spouses, and, unless otherwise indicated, holders share voting power
with their spouses.
(2) Includes 19,018 shares which Mr. Ferrara has the right to acquire within
60 days of September 30, 1998 pursuant to the exercise of options, 788
shares in an IRA account and 59 shares in a 401(k) plan.
Set forth below is certain information regarding these officers of the
Bank:
<TABLE>
<CAPTION>
Name Biographical Information
- ---- ------------------------
<S> <C>
Thomas Ferrara: Executive Vice President and Chief Credit Officer of
the Bank, a position he has held since joining the Bank
in 1986.
Michael P. Foley: Senior Vice President and Senior Lending Officer of the
Bank, a position he has held since joining the Bank in
1993; Executive Vice President, Chief Credit Officer of
the Bank of San Diego from 1992 to 1993; Executive Vice
President, Chief Operating Officer of American Valley
Bank, from 1977 to 1992.
Paul M. Cable: Senior Vice President and Chief Financial Officer of
the Bank, a position he has held since July, 1998;
previously Vice President and Controller of the Bank
since 1995; Senior Vice President and Chief Financial
Officer of First National Bank of North County, from
1991 to 1995.
Connie Goules: Senior Vice President and Chief Administrative Officer
of the Bank, a position she has held since June, 1998;
joined the Bank in 1991 as Customer Accounting Manager;
from 1992 to 1998 rose from Assistant Vice President
and Administrative Officer to 1st Vice President and
Administrative Officer.
</TABLE>
30
<PAGE> 33
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
EXECUTIVE OFFICERS' COMPENSATION
Information is set forth below concerning the annual and long-term
compensation for services rendered in all capacities for the fiscal years ended
December 31, 1997, 1996 and 1995 of the Chief Executive Officer and the only
other executive officer at December 31, 1997, whose salary and bonus exceeded
$100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Long Term
Compensation
Awards
Annual Compensation ------------
-------------------- Securities All
Underlying Other
Name and Position Year Salary($) Bonus($) Options Compensation
- ----------------- ---- -------- ------- ---------- -------
<S> <C> <C> <C> <C> <C>
William V. Ehlen, 1997 $175,000 $25,957 - $38,913
President and Chief 1996 $175,000 $21,995 - $38,662
Executive Officer (1) 1995 $172,500 $29,063 - $3,410
Thomas Ferrara, 1997 $109,500 $4,079 - $11,002
Executive Vice President 1996 $106,000 $1,221 - $10,830
and Chief Credit Officer 1995 $106,100 $10,904 - $12,420
(2)
- ------------------------------------------------------------------------------------------
</TABLE>
(1) Mr. Ehlen's other compensation includes (i) accrued "salary
continuation" benefits of $37,704 for 1997 and $37,704 for 1996, (ii)
employer profit sharing and matching contributions of $833, $722 and
$3,014 to the Profit Sharing and Salary Deferral 401(k) Plan (the
"401(k) Plan") for 1997, 1996 and 1995, respectively; (iii) amounts paid
for credit life and disability insurance incentives of $176 in 1997,
$236 in 1996 and $346 in 1995; and (iv) mortgage banking incentives of
$200 in 1997 and $50 in 1995.
(2) Mr. Ferrara's other compensation includes (i) employer profit sharing
and matching contributions of $702, $630 and $2,220 in the 401(k) Plan
for 1997, 1996 and 1995, respectively; (ii) automobile allowances of
$10,200, $10,200 and $10,100 in 1997, 1996 and 1995, respectively; and
(iii) mortgage banking incentives of $100 in both 1997 and 1995.
The Bank entered into an employment agreement on July 1, 1995 with Mr.
Ehlen as its President and Chief Executive Officer. The agreement, which expires
July 1, 1999, provides for a minimum base salary of $175,000 annually, use of a
Bank-owned automobile and certain insurance benefits. The Bank has not entered
into any other employment agreements. The employment agreement is subject to
Title 12 United States Code Section 24 which provides that all officers of a
national bank may be
31
<PAGE> 34
dismissed at the pleasure of the Board of Directors.
On January 10, 1996, the Bank entered into a Salary Continuation
Agreement (the "Salary Agreement") with Mr. Ehlen providing for the payment of
certain benefits to Mr. Ehlen. Pursuant to the terms of the Salary Agreement,
upon retirement after age 62 or in the event Mr. Ehlen dies while in the employ
of the Bank, the Bank shall be obligated to pay Mr. Ehlen or his estate $108,000
per year, payable monthly for a period of 180 months. In the event Mr. Ehlen
terminates employment with the Bank prior to age 62, the Bank is obligated to
pay Mr. Ehlen an amount based on the actuarial reduction of the amount of salary
continuation liability accrued to the date of termination. In addition, the
Salary Agreement provides that in the event Mr. Ehlen's employment is terminated
by reason of, or within two years after, a "change in control" of the Bank, the
Bank is obligated to pay Mr. Ehlen $108,000 per year, payable monthly for a
period of 180 months. A "change in control" is deemed to occur:
o when there is a change in the composition of the Bank's Board of
Directors, as a result of which fewer than two-thirds of the incumbent
directors are directors who either (a) had been directors of the Bank 24
months prior to such change or (b) were elected, or nominated for
election, to the Board with the affirmative votes of at least a majority
of the directors who had been directors of the Bank 24 months prior to
such change and who were still in office at the time of the election or
nomination; and
o subject to certain exceptions, whenever any person is or becomes the
beneficial owner, directly or indirectly, of 26% or more of the combined
voting power of the Bank's then outstanding securities having the right
to vote for the election of directors.
In the event Mr. Ehlen's employment is terminated by the Bank for cause,
the Bank is under no obligation to make any payments to Mr. Ehlen pursuant to
the Salary Agreement. No compensation under the Salary Agreement was paid to Mr.
Ehlen in 1997.
401(k) RETIREMENT PLAN
The Board of Directors has adopted a Profit Sharing and Salary Deferral
401(k) Plan for the benefit of the Bank's eligible employees. During 1997, 1996
and 1995, the Board of Directors approved contributions of $120,000, $62,000 and
$51,000, respectively, to the 401(k) Plan.
EMPLOYEE STOCK OWNERSHIP PLAN
The Bank has established an employee stock ownership plan effective
January 1, 1998. The Bank believes that giving employees an indirect ownership
interest in their employer encourages maximum efforts on behalf of the Bank. The
main investment in the plan will be the common stock of the Bank. Contributions
to the plan are made annually from pre-tax earnings at the discretion of the
Board of Directors.
To be eligible, employees of the Bank must be:
o at least 21 years of age;
o employed for a period of at least 1,000 hours during any plan year; and
o employed on the last day of the plan year.
Employees become vested at the rate of 20% per year and are fully vested
after five years of service (1,000 hours of service per year). Employees become
fully vested sooner only if they die, become totally and permanently disabled,
or retire at the age of 65 or later.
32
<PAGE> 35
STOCK OPTION PLANS
THE 1982 STOCK OPTION PLAN. In 1983, the Bank adopted a 1982 Stock
Option Plan whereby both incentive and nonqualified options to purchase shares
of the Bank's common stock were granted to full-time salaried officers and
employees of the Bank. Nonqualified options to purchase shares of the Bank's
common stock were granted to the Bank's directors. The 1982 Plan terminated in
1992, except as to unexercised and unexpired outstanding options. As of
September 30, 1998, there were outstanding under the 1982 Plan options for
42,767 shares, all of which were fully vested. This number of shares does not
take into account the two-for-one stock exchange that would occur if the
reorganization is consummated.
THE 1994 STOCK OPTION PLAN. The Valle de Oro Bank 1994 Stock Option Plan
was approved by the Board of Directors and the stockholders in 1994. The 1994
Plan is administered by a Committee composed of at least two disinterested
members of the Board of Directors. Subject to the limitations set forth in the
1994 Plan, the Committee has the authority to determine, among other things, to
whom options will be granted, the number of option shares, the term during which
an option may be exercised and the rate at which the options may vest. Under the
1994 Plan, 250,000 shares of common stock have been reserved for issuance upon
exercise of options.
The 1994 Plan provides for the grant of both incentive stock options
("ISOs") intended to qualify as such under section 422 of the Internal Revenue
Code, as amended, and nonstatutory stock options ("NSOs"). ISOs may be granted
only to employees of the Bank (including officers and certain directors who are
also employees). NSOs may be granted to employees and non-employee directors of
the Bank. The maximum term of each option which may be granted under the 1994
Plan is 10 years (five years in the case of an ISO granted to a 10%
stockholder). The exercise price for ISOs and NSOs will be no less than 100% of
fair market value on the date of grant.
Non-employee directors are not eligible to receive stock options under
the 1994 Plan other than an automatic grant of an NSO for 2,000 shares in each
even-numbered year after 1995 at the conclusion of the regular annual meeting of
stockholders of the Bank for such year. In addition, each nonemployee director
who is newly elected or appointed after July 1, 1994 is entitled to a one-time
grant of an NSO for 1,000 shares on the first business day after his or her
initial election or appointment. No director will receive both the 2,000 NSO
grant and 1,000 NSO grant in the same calendar year.
All options granted to nonemployee directors have an exercise price
equal to 100% of the fair market value of common stock on the date of grant and
will have a 10-year term, subject to earlier expiration in the event that the
director's service terminates. The Board of Directors may amend or terminate the
1994 Plan from time to time, except that any amendment or termination shall not
affect any option previously granted.
As of September 30, 1998, there were outstanding under the 1994 Plan
options for 172,073 shares, 84,816 of which were vested, 34,815 of which will
vest in 1999 and the remainder of which vest from 2000 through 2003. This number
of shares does not take into account the two-for-one stock exchange that would
occur if the reorganization is consummated.
33
<PAGE> 36
OPTION EXERCISES FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
AND OPTION VALUES AT SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying In-The-Money Options
Shares Unexercised Options @ at 9/30/98
Acquired On Value 9/30/98 Exercisable/ Exercisable/
Name Exercise Realized Unexercisable(1) Unexercisable(2)
---- ----------- -------- --------------------- --------------------
<S> <C> <C> <C> <C>
William V. Ehlen
President & Chief - - 38,263/7,293 $777,465/$145,614
Executive Officer
Thomas Ferrara
Executive Vice - - 17,018/3,647 $386,308/$72,807
President &
Chief Credit
Officer
</TABLE>
- ---------------------
(1) The number of securities underlying unexercised options do not take into
account the two-for-one stock exchange that would occur if the
reorganization is consummated.
(2) Calculated on the basis of the fair market value of the underlying
securities at September 30, 1998, including the exercise price.
- --------------------------------------------------------------------------------
DIRECTORS' COMPENSATION
Members of the Board of Directors, other than the Chairman of the Board,
committee chairmen, and those who are not full-time employees of the Bank,
receive $725 monthly for regularly scheduled meetings of the Board plus a $100
monthly retainer for committee participation. The Chairman of the Board receives
$1,875 monthly, the Vice Chairman receives $1,500 monthly and each committee
chairperson receives $850 monthly plus a $125 monthly retainer for committee
participation. The Bank plans to continue the payment of such fees for regular
meetings of the Board. No other arrangements exist for compensation of the
Bank's directors. Pursuant to the Bank's 1994 Plan, nonemployee directors
receive automatic grants of options as described in "- Stock Options - The 1994
Stock Option Plan," above.
34
<PAGE> 37
COMMITTEES
During 1997, the Board of Directors held 12 regular meetings and one
organizational meeting. All members of the Board attended at least 75% of the
regular meetings of the Board of Directors and of the committees to which they
were appointed to serve. The Board of Directors has appointed an Audit
Committee, Executive Committee, Investment Committee, a Loan and Discount
Committee and Compensation and Human Resources Committee. The Bank does not have
a Nominating Committee.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Meetings
Committee Members Function (1997)
- --------- ------- -------- ---------
<S> <C> <C> <C>
Audit Gelber, Hill, Johnson and Engages independent CPA's; 4
Peterson (directors); Audrey oversees internal auditor;
Wilson (internal auditor); receives and reviews quarterly
Ehlen (ex officio member). and annual management reports
from independent CPA's
Executive Carroll, Conway, Ehlen, Serves as the planning arm of 6
Fessler and Hill (directors). the Board of Directors
Investment Ehlen, Gelber, Johnson and Reviews management's adherence 4
Vehige (directors); Cable to investments and funds
(chief financial officer) management policy.
Loan and Discount Ciccati, Conway, Ehlen and Establishes credit policy and 15
Fessler (directors); Ferrara approves loans in excess of
and Foley (lending officers). management's internal limits.
Compensation & Ciccati, Ehlen, Peterson and Reviews the compensation plan 7
Human Resources Vehige (directors); Elizabeth for the Bank's employees; makes
I. Sigal (human resources recommendations to the Board
director). regarding salaries of executive
officers.
</TABLE>
- --------------------------------------------------------------------------------
CERTAIN TRANSACTIONS
Some of the directors and executive officers of the Bank and the
companies with which they are associated are customers of, and have had banking
transactions with, the Bank in the ordinary course of the Bank's business. The
Bank expects to have banking transactions with such persons and companies in the
future. In management's opinion, all loans and commitments to lend included in
said transactions were made in compliance with applicable laws on substantially
the same terms, including interest rates and collateral, as those prevailing for
comparable contemporaneous transactions with other persons of similar
creditworthiness, and did not involve more than a normal risk of collectability
or present other unfavorable
35
<PAGE> 38
features. The aggregate amount of all such loans made during 1997 amounted to
$236,000 and in the nine months ended September 30, 1998 amounted to $474,000,
including in both cases renewals of previous loans. The balance of these loans
and loans made in prior years outstanding at September 30, 1998 amounted to
$1,158,000.
SUPERVISION AND REGULATION
The following is a summary of certain statutes and regulations affecting
the Holding Company and the Bank. This summary is qualified in its entirety by
such statutes and regulations.
HOLDING COMPANY REGULATION
The Holding Company will be a registered bank holding company under the
Bank Holding Company Act of 1956 (the "Banking Act") as amended, and as such
will be subject to regulation by the Federal Reserve Board. A bank holding
company is required to file with the Federal Reserve Board annual reports and
other information regarding its business operations and those of its
subsidiaries. A bank holding company and its subsidiary banks are also subject
to examination by the Federal Reserve Board.
The Banking Act requires every bank holding company to obtain the prior
approval of the Federal Reserve Board before acquiring substantially all the
assets of any bank or bank holding company or ownership or control of any voting
shares of any bank or bank holding company, if, after such acquisition, it would
own or control, directly or indirectly, more than 5% of the voting shares of
such bank or bank holding company.
In approving acquisitions by bank holding companies of companies engaged
in banking-related activities, the Federal Reserve Board considers whether the
performance of any such activity by a subsidiary of the holding company
reasonably can be expected to produce benefits to the public, such as greater
convenience, increased competition, or gains in efficiency, which outweigh
possible adverse effects, such as overconcentration of resources, decrease of
competition, conflicts of interest, or unsound banking practices.
Bank holding companies are restricted in, and subject to, limitations
regarding transactions with subsidiaries and other affiliates.
CAPITAL
The Federal Reserve Board, Office of the Comptroller of the Currency and
Federal Deposit Insurance Corporation require banks and holding companies to
maintain minimum capital ratios.
The Federal Reserve Board and the Federal Deposit Insurance Corporation
have adopted substantially similar risk-based capital guidelines. These ratios
involve a mathematical process of assigning various risk weights to different
classes of assets, then evaluating the sum of the risk-weighted balance sheet
structure against the capital base of the Bank and the Holding Company. The
rules set the minimum guidelines for the ratio of Total Capital to risk-weighted
assets (including certain off-balance sheet activities, such as standby letters
of credit) at 8% and the ratio of Tier 1 Capital to risk-weighted assets
(including certain off-balance sheet activities) at 4%. To be well capitalized,
the minimum ratio for Total Capital is 10% and the minimum ratio for Tier 1
Capital is 6%. At least half of the total capital is to be composed of common
equity, retained earnings, and a limited amount of perpetual preferred stock
less certain goodwill items ("Tier 1 Capital"). The remainder may consist of a
limited amount of subordinated debt, other preferred stock, or a limited amount
of loan loss reserves. At September 30, 1998, on a pro forma basis as if the
transaction had been
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consummated on such date, the Holding Company's consolidated risk-adjusted Tier
1 Capital and Total Capital, as defined by the regulatory agencies based on the
fully phased in 1992 guidelines, were 11.5 % and 12.49% of risk-weighted assets,
respectively, well above the minimum and well-capitalized standards mandated by
the regulatory agencies.
In addition, the federal banking regulatory agencies have adopted
leverage capital guidelines for banks and bank holding companies. Under these
guidelines, banks and bank holding companies must maintain a minimum ratio of 3%
Tier 1 Capital (as defined for purposes of the risk-based capital guidelines) to
total assets. However, most banking organizations are expected to maintain
capital ratios well in excess of the minimum levels and generally must keep such
Tier 1 ratio at or above 5%. To be well capitalized, the minimum Tier 1 ratio
must be 6%. As of September 30, 1998, on a pro forma basis as if the transaction
had been consummated on such date, the Holding Company's leverage ratio was
7.99%, well above the regulatory minimum and well-capitalized standards.
Regulatory authorities may increase such minimum requirements for all
banks and bank holding companies or for specified banks or bank holding
companies. Increases in the minimum required ratios could adversely affect the
Resulting Bank and the Holding Company, including their ability to pay
dividends.
ADDITIONAL REGULATION
The Bank is also subject to federal regulation as to such matters as
required reserves, limitation as to the nature and amount of its loans and
investments, regulatory approval of any consolidation or consolidation, issuance
or retirement by the Bank of its own securities, limitations upon the payment of
dividends and other aspects of banking operations. In addition, the activities
and operations of the Bank are subject to a number of additional detailed,
complex and sometimes overlapping laws and regulations. These include:
o state usury and consumer credit laws,
o laws relating to fiduciaries,
o the Federal Truth-in-Lending Act and Regulation Z,
o the Federal Equal Credit Opportunity Act and Regulation B,
o the Fair Credit Reporting Act,
o the Truth in Savings Act,
o the Community Reinvestment Act,
o anti-redlining legislation, and
o antitrust laws.
DIVIDEND REGULATION
The ability of the Holding Company to obtain funds for the payment of
dividends and for other cash requirements is largely dependent on the amount of
dividends which may be declared by its subsidiary, the Resulting Bank.
Generally, a national banking association may not declare a dividend, without
the approval of the Office of the Comptroller of the Currency if the total of
dividends declared by such bank in a calendar year exceeds the total of its net
profits for that year combined with its retained profits of the preceding two
years. In addition, national banks are subject to dividend regulation by the
Office of the Comptroller of the Currency in connection with its general
supervisory authority as it relates to a bank's requirement to maintain adequate
capital.
GOVERNMENT POLICIES AND LEGISLATION
The policies of regulatory authorities, including the Office of the
Comptroller of the Currency, Federal Reserve Board, Federal Deposit Insurance
Corporation and the Depository Institutions Deregulation Committee, have had a
significant effect on the operating results of commercial banks in the past and
are expected to do so in the future. An important function of the Federal
Reserve System is to
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regulate aggregate national credit and money supply through such means as open
market dealings in securities, establishment of the discount rate on member bank
borrowings, and changes in reserve requirements against member bank deposits.
Policies of these agencies may be influenced by many factors, including
inflation, unemployment, short-term and long-term changes in the international
trade balance and fiscal policies of the United States government.
The United States Congress has periodically considered and adopted
legislation which has resulted in further deregulation of both banks and other
financial institutions, including mutual funds, securities brokerage firms and
investment banking firms. No assurance can be given as to whether any additional
legislation will be adopted or as to the effect such legislation would have on
the business of the Resulting Bank or the Holding Company. In addition to the
relaxation or elimination of geographic restrictions on banks and bank holding
companies, a number of regulatory and legislative initiatives have the potential
for eliminating many of the product line barriers presently separating the
services offered by commercial banks from those offered by nonbanking
institutions.
COMPARATIVE DESCRIPTION OF COMMON STOCK
GENERAL
The authorized common stock of the Holding Company consists of
10,000,000 shares of voting common stock, with $0.0001 par value per share. The
authorized capital stock of the Bank consists of 10,000,000 shares of $3.33 par
value per share, 1,320,031 of which were outstanding as of September 30, 1998.
Assuming the consummation of the holding company reorganization and no
dissenters to the transaction, the Holding Company will issue 2,640,062 shares
of its common stock to existing stockholders of the Bank on the basis of two
shares of Holding Company common stock for each share of common stock of the
Bank. The Holding Company will have a capital structure of 10,000,000 authorized
shares of $0.0001 par value common stock of which 2,640,062 shares would be
outstanding.
VOTING RIGHTS
Each share of common stock of the Holding Company and the Bank entitles
the holder thereof to one vote on all matters, except in the election of
directors. Stockholders of the Bank have, and stockholders of the Holding
Company will have, cumulative voting rights. (See "Comparative Description of
Common Stock--Cumulative Voting.") Pursuant to the Holding Company's Bylaws, the
affirmative vote of 75% of the shares represented at a duly called meeting for
such purpose may remove any one or all of the directors of the Holding Company.
Pursuant to federal banking law, a majority of shares represented may remove any
one or all of the directors of the Bank. A special meeting of stockholders of
the Bank may be called by stockholders of the Bank who own not less than 25% of
the voting power of the Bank. A special meeting of stockholders of the Holding
Company may be called by stockholders who own in the aggregate not less than 50%
of the stock of the Holding Company.
RIGHT OF REDEMPTION
The Bank has limited ability to buy its outstanding shares from its
stockholders. The Holding Company is empowered by the law of Delaware to buy its
shares of outstanding common stock from its stockholders, at the mutual accord
of the stockholder and Holding Company.
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LIQUIDATION RIGHTS
In the event of liquidation, holders of common stock of the Holding
Company and the Bank are entitled to similar rights as to assets distributable
to stockholders on a pro rata basis.
PREEMPTIVE RIGHTS
Holders of common stock of the Holding Company will not have the
preemptive right to subscribe for or to purchase any additional securities which
may be issued by the Holding Company. Holders of common stock of the Bank do not
have preemptive rights to subscribe for or to purchase additional securities
issued by the Bank.
CUMULATIVE VOTING
Each share of common stock of the Bank entitles the holder thereof to
one vote on all matters except for the election of directors where stockholders
are entitled to vote cumulatively. The stockholders of the Holding Company will
have a right to one vote per share on all matters and will have the right to
cumulate their shares in the election of Directors. A stockholder voting
cumulatively may cast votes equal to the number of shares he owns times the
number of Directors to be elected in favor of one nominee or allocate such votes
among the nominees as he determines.
INDEMNIFICATION
The Holding Company's Certificate of Incorporation and Bylaws provide
for indemnification of officers, directors, employees and agents to the fullest
extent permitted by Delaware law. Similarly, the Articles of Association of the
Bank provide for indemnification of directors and officers of the Bank.
Delaware law generally provides for the payment of expenses, including
attorneys' fees, judgments, fines and amounts paid in settlement reasonably
incurred by the indemnitees provided such person acted in good faith and in a
manner he reasonably believed not to be opposed to the best interests of the
corporation and with respect to any criminal action or proceeding if he had no
reasonable cause to believe his conduct was unlawful. However, in derivative
suits, if the suit is lost, no indemnification is permitted in respect of any
claim as to which the prospective indemnitee is adjudged to be liable for
misconduct in the performance of his duty to the corporation and then only if,
and only to the extent that, a court of competent jurisdiction determines the
prospective indemnitee is fairly and reasonably entitled to indemnity for such
expenses as the court deems proper. Finally, no indemnification may be provided
in any action or suit in which the only liability asserted against a director is
pursuant to a statutory provision outlawing loans, dividends, and distribution
of assets under certain circumstances.
The provisions regarding indemnification may not be applicable under
certain federal banking and securities laws and regulations.
DIVIDEND RIGHTS
Dividends may be paid on common stock of the Holding Company as are
declared by the Board of Directors out of funds legally available therefor.
Dividends may not exceed the surplus of the Holding Company, as defined by the
Delaware General Corporation Law, and may not be declared if the Holding Company
is insolvent or would thereby be made insolvent.
Dividends may be paid on common stock of the Bank as are declared by the
Board of Directors out of funds legally available therefor. Dividends paid by
the Bank on its common stock must be declared out of the net profits of the
Bank.
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TRANSFER AND ACCESSIBILITY
Transfer of common stock of the Holding Company may not be restricted by
the Holding Company. When issued, common stock of the Holding Company will be
fully paid and nonassessable.
The transfer of common stock of the Bank may not be restricted, except
as is reasonably calculated by the Bank to simplify the work of the Bank with
respect to stock transfers, voting at stockholders' meetings and related
matters, and to protect it against fraudulent transfers. The common stock of the
Bank is subject to assessment by the Board of Directors in order to restore
capital impaired by losses or otherwise, and shares owned by public stockholders
who fail to pay any assessment may be sold at public or private sale. The common
stock of the Holding Company is not subject to assessment.
ANTI-TAKEOVER MEASURES
A vote of the holders of at least two-thirds of the outstanding common
shares of capital stock of the Bank is required to effectuate a voluntary
liquidation of the Bank, reorganization of the Bank, merger or consolidation of
the Bank with another bank, or the increase or decrease of the Bank's authorized
or outstanding capital stock. A majority vote of the outstanding stock is
required for such transactions of the Holding Company, unless a higher or lower
voting requirement is established in the Holding Company's Certificate of
Incorporation.
Pursuant to the Certificate of Incorporation of the Holding Company, a
majority vote of the issued and outstanding shares is sufficient to amend the
Certificate of Incorporation of the Holding Company, other than Article XII. In
accordance with Article XII of the Certificate of Incorporation of the Holding
Company a "Business Combination" (which includes any consolidation, sale, lease
or other disposition of greater than 10% of the assets of the Holding Company;
issuance or sale of any securities of the Holding Company; and adoption of a
plan of liquidation) requires the approval of 80% of the total outstanding
shares of common stock and two-thirds of the outstanding shares of common stock
held by the Independent Stockholders, unless such Business Combination has been
approved by the "Continuing Directors." In addition, if an amendment of Article
XII of the Holding Company's Certificate of Incorporation is not approved by the
Continuing Directors it may require the vote of 80% of the Holding Company's
outstanding shares and shares held by two-thirds of the Independent
Stockholders.
Because the executive officers and directors of the Holding Company will
own approximately 31.5% of the shares of the Holding Company (assuming
consummation of the proposed consolidation and assuming there are no dissenting
stockholders to the transaction), a Business Combination with an Interested
Stockholder may be difficult to approve without the consent of the Continuing
Directors and Management. The Bank has no anti-takeover provision which is
substantially similar to Article XII of the Holding Company's Certificate of
Incorporation.
REPORTS
The Bank currently files periodic reports with the Office of the
Comptroller of the Currency pursuant to the 1934 Act as a "reporting company."
Subsequent to the consummation of the transaction, the Holding Company as
"successor" to the Bank will file similar reports with the SEC. The Holding
Company will deliver to the stockholders of the Holding Company
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an annual report containing audited financial information as required under the
1934 Act. While the Holding Company will file quarterly reports with the SEC,
copies of which may be obtained from the SEC, the Holding Company is not
obligated and does not currently intend to provide copies of such quarterly
reports to stockholders.
LEGAL OPINION
Legal matters in connection with the issuance of common stock of the
Holding Company in the consolidation will be passed upon by special counsel,
Dostart Clapp Sterrett & Coveney, LLP, San Diego, California.
OTHER MATTERS
The management of the Bank is not aware of any other matters to be
presented for consideration at the meeting or any adjournments thereof. If any
other matters should properly come before the meeting, it is intended that the
persons' names in the enclosed proxy will vote the shares represented thereby in
accordance with their judgment, pursuant to the discretionary authority granted
therein.
By Order of the Board of Directors
C.K. Hill, Secretary
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APPENDIX I
CONSOLIDATION AGREEMENT
This CONSOLIDATION AGREEMENT (hereinafter called the "Agreement") dated as
of this _____ day of November, 1998 between Valle de Oro Bank, N.A. (the "Bank")
and Valley National Corporation (the "Corporation").
WITNESSETH:
WHEREAS, the Bank is a national banking association duly organized under
the laws of the United States, with its principal office in Spring Valley,
California. The Bank is a banking corporation engaged in the business of
banking.
WHEREAS, the Corporation is a corporation duly organized under the laws of
the State of Delaware with its principal office in Spring Valley, California.
The Corporation will be the parent company of Valle de Oro Interim Bank, N.A.
(the "Interim Bank") upon its organization.
WHEREAS, the Interim Bank will be organized as a national banking
association under the laws of the United States, with its principal office in
Spring Valley, California. The Interim Bank will be a banking corporation which
will not be engaged in the business of banking prior to the consolidation as
provided herein. The Corporation will be the parent company of the Interim Bank
upon its organization.
WHEREAS, the Interim Bank will be capitalized with capital stock of
$200,000, divided into 2,000 shares of common stock with a par value of $100 per
share and paid-in surplus of $40,000 for total capital funds of $240,000, and
WHEREAS, it is anticipated that the Interim Bank will join in this
Agreement once it is organized.
WHEREAS, the Bank and the Interim Bank, upon its organization, shall
consolidate pursuant to the provisions of 12 U.S.C. Section 215 of the banking
laws of the United States, under the charter of the Bank and with the name
"Valle de Oro Bank, N.A.", and
WHEREAS, as of December 31, 1997, the capital funds of the Bank consisted
of capital stock of $4,110,000, divided into 1,234,117 shares of common stock
with a par value of $3.33 per share, surplus of $8,698,000 and undivided
profits, including capital reserves and unrealized gains on "available for sale
securities" of $4,142,000, for total equity capital of $17,026,000, and
WHEREAS, an application to charter the Interim Bank and to consolidate the
Interim Bank with the Bank will be submitted to the Office of the Comptroller of
the Currency for approval and, upon the effective date of the Consolidation, the
Interim Bank will have capital stock of $200,000, divided into 2,000 shares of
common stock with a par value of $100 per share and paid-in surplus of $40,000
for total capital funds of $240,000, and
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WHEREAS, all of the shares of the Bank and the Interim Bank outstanding
immediately prior to the Consolidation of the Bank and the Interim Bank (the
"Consolidation") will be owned by the Corporation immediately following the
Consolidation, and such shares of the Interim Bank will be retired and canceled
by the Corporation immediately subsequent to the Consolidation, and the initial
capital of the Interim Bank in the amount of $240,000 consisting of $200,000 of
capital stock and $40,000 of paid-in surplus shall be returned to the
Corporation, and
WHEREAS, the Corporation as of the date hereof has 10,000,000 common
shares with $0.0001 par value authorized, and
WHEREAS, from and after the time the Consolidation becomes effective, and
as and when required by the provisions of this Agreement, the Corporation will
issue shares of its common stock as hereinafter provided, and
WHEREAS, a majority of the Board of Directors of the Bank has approved
this Agreement and authorized its execution, and a majority of the Board of
Directors of the Corporation has approved this Agreement, such that the
Corporation shall join in and be bound by it, and has authorized the undertaking
hereinafter made by the Corporation.
NOW, THEREFORE, in consideration of the promises, covenants and conditions
contained herein, the Bank and the Corporation hereby enter into this Agreement
and prescribe the terms and conditions set forth herein.
1. Consolidation. The Interim Bank upon its organization and the Bank shall
be consolidated under the Charter of the Bank pursuant to the provisions of, and
with the effect provided under 12 U.S.C. Section 215.
2. Name, Articles and Bylaws. Upon the Consolidation becoming effective, the
name of the Bank (the "Consolidated Bank" whenever reference is made to it as of
the time of Consolidation or thereafter) shall be "Valle de Oro Bank, N.A.," its
Articles of Association shall be the current Articles of Association of the
Bank, and its Bylaws shall be the current Bylaws of the Bank upon the effective
date of the Consolidation. The principal office of the Consolidated Bank shall
be the currently existing principal office of the Bank and the Consolidated Bank
shall continue to operate all legally established branches of the Bank.
3. Effect of Consolidation. Upon the Consolidation becoming effective, the
corporate existence of the Bank and the Interim Bank shall be consolidated into
and continued in the Consolidated Bank, as provided by the aforementioned
federal banking laws, and the Consolidated Bank shall be deemed to be the same
association as the Bank and the Interim Bank combined, possessing all the
rights, interests, privileges, powers and franchises and being subject to all
restrictions, liabilities and duties of each. All and each of the rights,
interests, privileges and franchises of the Bank and Interim Bank and all
property, real, personal and mixed, and all debts due to the Bank and Interim
Bank on whatever account, shall be transferred to and vested in the Consolidated
Bank without any deed or other transfer and without any order or other action on
the part of any court or otherwise; and, all property, rights, privileges,
powers,
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franchises and interests and each and every other interest of the Bank or
Interim Bank shall be thereafter the property of the Consolidated Bank. The
Consolidated Bank, by virtue of the Consolidation, and without any order or
other action on the part of any court or otherwise, shall hold and enjoy the
same and all rights of property, franchises and interests, including
appointments, designations and nominations and all other rights and interests as
trustee, executor, administrator, registrar of stocks and bonds, guardian of
estates, assignee, receiver, guardian of mentally incompetent persons and in
every other fiduciary capacity, in the same manner and to the same extent as
such rights, franchises and interests were held or enjoyed by the Bank and
Interim Bank immediately prior to the Consolidation of the Bank and the Interim
Bank.
4. Liabilities. Upon the Consolidation becoming effective, the Consolidated
Bank shall be liable for all deposits, debts, liabilities, obligations and
contracts of the Bank and of the Interim Bank, respectively, matured or
unmatured, whether accrued, absolute, contingent or otherwise; and whether or
not reflected or reserved against on balance sheets, books of account, or
records of the Bank or the Interim Bank, as the case may be, shall be those of
the Consolidated Bank, and shall not be released or impaired by the
Consolidation; and, all rights of creditors and other obligees and all liens on
property of either the Bank or the Interim Bank shall be preserved unimpaired.
5. Conversion, Exchange and Consolidation of Shares. Upon the Consolidation
becoming effective:
(a) The shareholders of the Bank of record at the time the Consolidation
becomes effective shall be allocated and entitled to receive shares
of the common stock of the Corporation, $0.0001 par value, at the
rate of two such shares of the Corporation for each one share of the
common stock of the Bank.
(b) Each share of the common stock of the Bank shall, ipso facto and
without any action on the part of the holder thereof, become and be
converted into two shares of the common stock of the Corporation,
and outstanding certificates representing shares of the common stock
of the Bank shall thereafter represent shares of the common stock of
the Corporation, and such certificates may be exchanged by the
holders thereof, after the Consolidation becomes effective, for the
new certificates for the appropriate number of shares bearing the
name of the Corporation.
(c) Upon the effective date of the Consolidation, the initial capital of
the Interim Bank in the amount of $240,000 consisting of $200,000 of
capital stock and $40,000 of paid-in surplus shall be returned to
the Corporation and the capital stock of the Interim Bank shall be
retired and canceled.
(d) Upon and by reason of the Consolidation becoming effective, stock
shall be allocated as follows:
(i) To shareholders of the Bank of record at the time the
Consolidation becomes effective there shall be allocated two
shares of common stock of the
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Corporation for each one share of common stock of the Bank held
of record at the time of the Consolidation; and
(ii) To the Corporation there shall be allocated the amount and the
number of shares of capital stock of the Consolidated Bank of
the par value of $3.33 each, which shall be equal to the amount
and the number of shares of capital stock of the Bank
outstanding immediately before the Consolidation.
(e) No dividend, except if and to the extent permitted by the Board of
Directors of the Corporation, payable by the Corporation as of any
date subsequent to the date the Consolidation becomes effective,
shall be payable to any holder of shares of the Corporation
evidenced by any certificate for stock of the Bank outstanding on
the effective date of the Consolidation, unless and until such
outstanding certificate for Bank stock shall have been surrendered
to the Corporation in exchange for a certificate or certificates
evidencing shares of the common stock of the Corporation. Upon the
surrender of any such Bank certificate for a new certificate or
certificates evidencing shares of the common stock of the
Corporation, there shall be paid to the holder of the certificate
the amount of dividends payable by the Corporation as of a date
subsequent to the effective date of the Consolidation and not
theretofore paid on such shares of its common stock.
6. Employee Benefit Plans. Any employee benefit plan of Bank shall not be
terminated upon consummation of the Consolidation, but shall continue thereafter
as the plan of the Consolidated Bank. The parties hereto may enter into a
succession agreement relating to such plans to reflect such continuation, to
adapt such plans to the corporate structure existing from and after the
Consolidation becomes effective, and to make provisions for the employees of the
Corporation to participate therein, all in such manner as the Boards of
Directors of the respective parties may deem necessary or desirable.
7. Directors and Officers. The Board of Directors and Officers of the
Consolidated Bank, upon the Consolidation becoming effective, shall consist of
all persons who are directors or officers, as the case may be, of the Bank
immediately before the Consolidation becomes effective.
8. Stockholder and Regulatory Approvals. This Agreement shall be submitted to
the shareholders of the Bank for ratification and confirmation at meetings to be
called and held in accordance with the applicable provisions of law and the
Articles of Association and Bylaws of the Bank. The Bank shall proceed
expeditiously and cooperate fully in the procurement of any other consents and
approvals and in the taking of any other action, and the satisfaction of all
other requirements prescribed by law or otherwise, necessary for consummation of
the Consolidation on the terms herein provided; including, without being limited
to, the preparation and submission of an application to the Office of the
Comptroller of the Currency to charter Interim Bank and application for approval
under the provisions of Section 18(c) of the Federal Deposit Insurance Act, as
amended, for prior approval to effect the Consolidation, and, incident thereto,
to establish a branch or branches under Section 9 of the Federal Reserve Act (12
U.S.C.
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321), and an application by the Corporation to the Federal Reserve System to
acquire the Bank through the Consolidation.
9. Dissenters' Rights. A shareholder of the Bank who votes against the
Consolidation at the meeting of shareholders of the Bank held for the purpose of
considering the Consolidation or who gives notice in writing to the Bank at or
prior to such meeting that he dissents from the Consolidation, shall be entitled
to receive in cash, as provided in 12 U.S.C. Section 215, from the Consolidated
Bank if and when the Consolidation is consummated. A copy of the relevant
portions of Section 215 of the National Banking Laws is attached hereto as
Exhibit A.
10. Conditions. Effectuation of the Consolidation herein provided is
conditioned upon the following:
(a) Ratification and confirmation of this Agreement by vote of the
shareholders of the Bank, as required by law; and
(b) Procurement of the consent of the Office of the Comptroller of the
Currency, Board of Governors of the Federal Reserve, and all other
necessary consents and approvals, and satisfaction of all other
requirements prescribed by law which are necessary for consummation
of the Consolidation.
11. Termination. If any of the following shall occur, then this Agreement may
be terminated at any time before the Consolidation becomes effective, by the
written notice by the Bank, which is authorized or approved by a resolution
adopted by the Board of Directors of the Bank:
(a) The number of shares of capital stock of the Bank voted against the
Consolidation, or in respect of which written notice is given
purporting to dissent from the Consolidation, shall exceed five
percent (5%) of the outstanding shares; or
(b) Any action, suit, proceeding or claim has been instituted, made or
threatened relating to the proposed Consolidation; or
(c) Any action, consent or approval, governmental or otherwise, which
is, or in the opinion of counsel for the Bank, may be necessary to
permit or enable the Consolidated Bank, upon and after the
Consolidation, to conduct all or any part of the business
activities of the Bank up to the time of the Consolidation, in the
manner in which such activities and businesses are then conducted,
shall not have been obtained; or
(d) Rulings from the Internal Revenue Service, or any opinion of
counsel in lieu thereof, satisfactory in form and substance to the
Bank and counsel for the Bank with respect to tax consequences of
the Consolidation and transactions referred to herein shall not
have been obtained and remain in effect.
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12. Effective Time. Subject to the terms of this Agreement and upon
satisfaction of all requirements of law and the conditions specified in
this Agreement, the Consolidation shall become effective at the time
specified in the certificate of the Comptroller of the Currency approving
the Consolidation.
13. Agreement of Directors. Each of the natural persons whose signature is
appended to this Agreement as a Director of the Bank hereby covenants and
agrees with each of the other natural persons and with each of the
corporate parties to the Agreement, that he will vote any and all shares
of the capital stock of the Bank now owned, held, or standing in his name
in his individual, fiduciary, or other capacity that he may or shall be or
become entitled to vote, in favor of the adoption of this Agreement in any
meeting of shareholders of the Bank called for the purpose of voting on
this Agreement.
14. Agreement of Affiliates. The Bank shall obtain agreements in the form set
forth as Exhibit B attached hereto, executed by each person, who is
identified as an "affiliate" (as such term is defined in Rule 144 under
the Securities Act of 1933) of the Bank.
15. Miscellaneous.
(a) Any of the terms or conditions of this Agreement may be waived at
any time by any party hereto, by action of its Board of Directors,
evidenced by a certificate signed by its President or other duly
authorized person.
(b) To the extent permitted by law, this Agreement may be amended or
supplemented at any time, whether before or after the vote of
shareholders of the Bank or Interim Bank, by written amendment
authorized by the Boards of Directors of each of the parties and
executed by a majority of members of the Boards of Directors of
each party.
(c) This Agreement and the instruments referred to herein constitute
the entire contract among the parties and supersede all other
understandings with respect to the subject matter hereof.
(d) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together shall
be deemed one and the same Agreement, and shall become binding on
the parties hereto when one or more counterparts have been signed
by each of the parties and delivered to the other parties.
(e) Any notices or other communications required or permitted hereunder
shall be sufficiently given if hand delivered or sent by registered
mail or certified mail, postage prepaid, addressed, if to the
Corporation, the Bank, or the Interim Bank, at 9832 Campo Road,
Spring Valley, California 91977, or such other address as shall be
furnished in writing by any party, and any such notice or
communication shall be deemed to have been given as of the date so
mailed (except that a notice of
6
<PAGE> 50
change of address shall not be deemed to have been given until
received by the addressee).
(f) This Agreement shall be governed by and construed in accordance
with the laws of the United States.
(g) The descriptive headings of the several articles, sections and
paragraphs of this Agreement are inserted for convenience only and
do not constitute a part of this Agreement.
IN WITNESS WHEREOF, the Bank and the Corporation have caused this
Consolidation Agreement to be executed in counterpart by their duly authorized
officers as of the date first above written.
VALLE DE ORO BANK, N.A.
By: /s/ By: /s/
------------------------------ ----------------------------
William V. Ehlen, President C.K. Hill, Secretary
VALLEY NATIONAL CORPORATION
By: /s/ By: /s/
------------------------------ ----------------------------
William V. Ehlen, President C.K. Hill, Secretary
The undersigned Directors of Valle de Oro Bank, N.A. execute this Consolidation
Agreement pursuant to the provisions of Section 13.
/s/ /s/
- ------------------------------------ ----------------------------------
William V. Ehlen, Director Philip J. Gelber, M.D., Director
/s/ /s/
- ------------------------------------ ----------------------------------
James F. Carroll, Director C.K. Hill, Director
/s/ /s/
- ------------------------------------ ----------------------------------
Samuel M. Ciccati, Ph.D., Director Janet L. Johnson, Director
7
<PAGE> 51
/s/ /s/
- ----------------------------------- ----------------------------------
Obert D. Conway, Director Lloyd E. Peterson, Director
/s/ /s/
- ----------------------------------- ----------------------------------
Myron D. Fessler, M.D., Director Joseph G. Vehige, Director
8
<PAGE> 52
EXHIBIT A
DISSENTERS' RIGHTS {12 U.S.C. SECTION 215(b), (c) and (d)}
(b) The consolidated association shall be liable for all liabilities of the
respective consolidating banks or associations. The capital stock of such
consolidated association shall not be less than that required under existing law
for the organization of a national bank in the place in which it is located:
Provided, That if such consolidation shall be voted for at such meetings by the
necessary majorities of the shareholders of each association and State bank
proposing to consolidate, and thereafter the consolidation shall be approved by
the Comptroller, any shareholder of any of the associations or State banks so
consolidated who has voted against such consolidation at the meeting of the
association or bank of which he is a shareholder, or who has given notice in
writing at or prior to such meeting to the presiding officer that he dissents
from the plan of consolidation, shall be entitled to receive the value of the
shares so held by him when such consolidation is approved by the Comptroller
upon written request made to the consolidated association at any time before
thirty days after the date of consummation of the consolidation, accompanied by
the surrender of his stock certificates.
(c) The value of the shares of any dissenting shareholder shall be
ascertained, as of the effective date of the consolidation, by an appraisal made
by a committee of three persons, composed of (1) one selected by the vote of the
holders of the majority of the stock, the owners of which are entitled to
payment in cash; (2) one selected by the directors of the consolidated banking
association; and (3) one selected by the two so selected. The valuation agreed
upon by any two of the three appraisers shall govern. If the value so fixed
shall not be satisfactory to any dissenting shareholder who has requested
payment, that shareholder may, within five days after being notified of the
appraised value of his shares, appeal to the Comptroller, who shall cause a
reappraisal to be made which shall be final and binding as to the value of the
shares of the appellant.
(d) If, within 90 days from the date of consummation of the consolidation, for
any reason one or more of the appraisers is not selected as herein provided, or
the appraisers fail to determine the value of such shares, the Comptroller shall
upon written request of any interested party cause an appraisal to be made which
shall be final and binding on all parties. The expenses of the Comptroller in
making the reappraisal or the appraisal, as the case may be, shall be paid by
the consolidated banking association. The value of the shares ascertained shall
be promptly paid to the dissenting shareholders by the consolidated banking
association. Within thirty days after payment has been made to all dissenting
shareholders as provided for in this section the shares of stock of the
consolidated banking association which would have been delivered to such
dissenting shareholders had they not requested payment shall be sold by the
consolidated banking association at an advertised public auction, unless some
other method of sale is approved by the Comptroller, and the consolidated
banking association shall have the right to purchase any of such shares at such
public auction, if it is the highest bidder therefor, for the purpose of
reselling such shares within thirty days thereafter to such person or persons
and at such price not less than par as its board of directors by resolution may
determine. If the shares are sold at public auction at a price greater than the
amount paid to the dissenting shareholders
9
<PAGE> 53
the excess in such sale price shall be paid to such dissenting shareholders. The
appraisal of such shares of stock in any State bank shall be determined in the
manner prescribed by the law of the State in such cases, rather than as provided
in this section, if such provision is made in the State law; and no such
consolidation shall be in contravention of the law of the State under which such
bank is incorporated.
10
<PAGE> 54
EXHIBIT B
Affiliate Letter
Valley National Corporation
1234 E. Main Street
El Cajon, California 92021
Gentlemen:
I have been advised that I may be deemed an "affiliate," within the meaning of
Paragraph (c) of Rule 145 of the Rules and Regulations of the Securities and
Exchange Commission ("SEC") under the Securities Act of 1933 (the "Act"), of
Valle de Oro Bank, N.A., Spring Valley, CA, a national banking association (the
"Bank"), and may be deemed such at the time of the Consolidation
("Consolidation") of the Bank with Valle de Oro Interim Bank, N.A., a newly
chartered national banking association organized by Valley National Corporation
(the "Holding Company") for the sole purpose of effecting the affiliation of the
Holding Company and the Bank. Pursuant to the Consolidation, I will acquire two
shares of the Common Stock of the Holding Company ("Holding Company Common
Stock") in exchange for each share of the Bank stock held by me and elected for
such exchange. I agree that I will not make any sale, transfer or other
disposition of the Holding Company Common Stock in violation of the Act or the
rules and regulations promulgated thereunder by the SEC.
I have been advised that the issuance of the Holding Company Common Stock to me
pursuant to the Consolidation has been registered under the Act by the Holding
Company by the filing of a Registration Statement with the SEC or is exempt from
such registration. I have also been advised that such registration does not
apply to any distribution by me of the Holding Company Common Stock received by
me in the Consolidation. I have also been advised that, since at the effective
time of the Consolidation, I may be deemed to have been an "affiliate" of the
Bank, any offering or sale by me of any of the Holding Company Common Stock
will, under current law, require either: (i) the further registration under the
Act of the Holding Company Common Stock to be sold; (ii) compliance with Rule
145 promulgated under the Act; or (iii) the availability of another exemption
from such registration. In addition, I have been advised that any transferee in
a private offering or other similar disposition will be subject to the same
limitations as those imposed on me.
I represent and warrant to the Company that:
1. I have carefully read this letter and discussed its requirements and other
applicable limitations upon the sale, transfer or other disposition of the
Holding Company Common Stock and to the extent I felt necessary, with my
legal counsel or legal counsel for the Bank.
2. I have been informed by the Holding Company that the Holding Company
Common Stock must be held by me indefinitely unless: (i) any of the
Holding Company Common Stock received by me in the Consolidation and to be
distributed by me has been registered under the Act other than by the
registration by the Holding Company referred
11
<PAGE> 55
to above; (ii) a sale of the Holding Company Common Stock is made in
conformity with the volume and other applicable limitations of Rule 144;
or (iii) some other exemption from registration is available with respect
to any such proposed sale, transfer or other disposition of the Holding
Company Common Stock. I will be required to deliver to the Holding Company
evidence of compliance with such requirements in connection with any
proposed sale, transfer or other disposition by me which may include, in
the case of a distribution under some other exemption from registration,
an opinion of legal counsel satisfactory to legal counsel for the Holding
Company that such exemption is available.
3. I understand that the Holding Company is under no obligation to register
the Holding Company Common Stock that I may wish to sell, transfer, or
otherwise dispose of or to take any other action necessary in order to
make compliance with an exemption from registration available.
4. If I rely on the exemption from the registration provisions contained in
Section 4 of the Act (other than that contained in Rule 144 and 145), I
will obtain and deliver to the Holding Company a copy of a letter from any
prospective transferee which will contain: (a) representations reasonably
satisfactory to the Holding Company as to the nondistributive intent,
sophistication, ability to bear risk, and access to information of such
transfer of the Holding Company Common Stock; and (b) an assumption of the
obligations of the undersigned under this Paragraph 4.
5. I also understand that to enforce the foregoing commitments, stop transfer
instructions will be given to the Holding Company's transfer agent with
respect to the Holding Company Common Stock and that there will be placed
on the certificates for the Holding Company Common Stock, or any
substitutions therefor, a legend stating in substance:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933
APPLIES AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IN COMPLIANCE WITH
THE REQUIREMENTS OF RULE 145 OR PURSUANT TO A REGISTRATION STATEMENT UNDER
SAID ACT OR AN EXEMPTION FROM SUCH REGISTRATION.
Very truly yours,
_______________________________
12
<PAGE> 56
AMENDMENT TO CONSOLIDATION AGREEMENT
This AMENDMENT TO CONSOLIDATION AGREEMENT (hereinafter called the
"Amendment") dated as of this _____ day of __________________, 1998 is entered
into by and among Valle de Oro Bank, N.A. (the "Bank"), Valley National
Corporation (the "Corporation") and Valle de Oro Interim Bank, N.A (the "Interim
Bank").
WITNESSETH:
WHEREAS, the Bank is a national banking association duly organized under
the laws of the United States, with its principal office in Spring Valley,
California. The Bank is a banking corporation engaged in the business of
banking, and
WHEREAS, the Corporation is a corporation duly organized under the laws of
the State of Delaware with its principal office in Spring Valley, California.
The Corporation is the parent company of the Interim Bank, and
WHEREAS, the Interim Bank is a national banking association duly organized
under the laws of the United States, with its principal office in Spring Valley,
California. The Interim Bank is will not be engaged in the business of banking
prior to the consolidation, and
WHEREAS, the Interim Bank is capitalized with capital stock of $200,000,
divided into 2,000 shares of common stock with a par value of $100 per share and
paid-in surplus of $40,000 for total capital funds of $240,000, and
WHEREAS, the Corporation and the Bank have previously entered into a
Consolidation Agreement as of November 18, 1998, and the Interim Bank desires
to join in said Consolidation Agreement, and
WHEREAS, a majority of the Boards of Directors of the Bank, the
Corporation and the Interim Bank have approved this Amendment and authorized its
execution.
NOW, THEREFORE, in consideration of the promises, covenants and conditions
contained herein, the Bank, the Corporation and the Interim Bank hereby enter
into this Amendment and agree to be bound by all of the terms and conditions set
forth in said Consolidation Agreement and this Amendment.
1. Stockholder and Regulatory Approvals. This Amendment shall be submitted to
the shareholders of the Bank and the Interim Bank for ratification and
confirmation at meetings to be called and held in accordance with the applicable
provisions of law and the Articles of Association and Bylaws of the Bank and the
Interim Bank. The Bank and the Interim Bank shall proceed expeditiously and
cooperate fully in the procurement of any other consents and
1
<PAGE> 57
approvals and in the taking of any other action, and the satisfaction of all
other requirements prescribed by law or otherwise, necessary for consummation of
the Consolidation on the terms provided in said Consolidation Agreement and this
Amendment; including, without being limited to, the preparation and submission
of an application to the Office of the Comptroller for approval under the
provisions of Section 18(c) of the Federal Deposit Insurance Act, as amended,
for prior approval to effect the Consolidation, and, incident thereto, to
establish a branch or branches under Section 9 of the Federal Reserve Act (12
U.S.C. 321), and an application by the Corporation to the Federal Reserve System
to acquire the Bank through the Consolidation.
2. Conditions. Effectuation of the Consolidation provided in said
Consolidation Agreement is conditioned upon the ratification and confirmation of
this Amendment by vote of the shareholders of the Bank and the Interim Bank, as
required by law, in addition to the other terms and conditions set forth in said
Consolidation Agreement and this Amendment.
3. Termination. If any of the following shall occur, then said Consolidation
Agreement, including this Amendment, may be terminated at any time before the
Consolidation becomes effective, by the written notice by the Bank or the
Interim Bank, to the other of them, which is authorized or approved by
resolution adopted by the Board of Directors of one of them giving such notice:
(a) The number of shares of capital stock of the Bank voted against the
Consolidation, or in respect of which written notice is given
purporting to dissent from the Consolidation, shall exceed five
percent (5%) of the outstanding shares; or
(b) Any action, suit, proceeding or claim has been instituted, made or
threatened relating to the proposed Consolidation; or
(c) Any action, consent or approval, governmental or otherwise, which
is, or in the opinion of counsel for the Bank, may be necessary to
permit or enable the Consolidated Bank, upon and after the
Consolidation, to conduct all or any part of the business activities
of the Bank up to the time of the Consolidation, in the manner in
which such activities and businesses are then conducted, shall not
have been obtained; or
(d) Rulings from the Internal Revenue Service, or any opinion of counsel
in lieu thereof, satisfactory in form and substance to the Bank and
counsel for the Bank with respect to tax consequences of the
Consolidation and transactions referred to in said Consolidation
Agreement shall not have been obtained and remain in effect.
4. Agreement of Directors. Each of the natural persons whose signature is
appended to this Amendment as a Director of the Bank hereby covenants and agrees
with each of the other natural persons and with each of the corporate parties to
the Amendment, that he will vote any and all shares of the capital stock of the
Bank now owned, held, or standing in his name in his individual, fiduciary, or
other capacity that he may or shall be or become entitled to vote, in favor
2
<PAGE> 58
of the adoption of this Amendment in any meeting of shareholders of the Bank
called for the purpose of voting on this Amendment.
5. General Provisions.
(a) Any of the terms or conditions of this Amendment may be waived at
any time by any party hereto, by action of its Board of Directors,
evidenced by a certificate signed by its President or other duly
authorized person.
(b) To the extent permitted by law, this Amendment may be amended or
supplemented at any time, whether before or after the vote of
shareholders of the Bank or the Interim Bank, by written amendment
authorized by the Boards of Directors of each of the parties and
executed by a majority of members of the Boards of Directors of each
party.
(c) This Amendment and the instruments referred to herein constitute the
entire contract among the parties and supersede all other
understandings with respect to the subject matter hereof.
(d) This Amendment may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together shall be
deemed one and the same Amendment, and shall become binding on the
parties hereto when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
(e) Any notices or other communications required or permitted hereunder
shall be sufficiently given if hand delivered or sent by registered
mail or certified mail, postage prepaid, addressed, if to the
Corporation, the Bank, or the Interim Bank, at 9832 Campo Road,
Spring Valley, California 91977, or such other address as shall be
furnished in writing by any party, and any such notice or
communication shall be deemed to have been given as of the date so
mailed (except that a notice of change of address shall not be
deemed to have been given until received by the addressee).
(f) This Amendment shall be governed by and construed in accordance with
the laws of the United States.
(g) The descriptive headings of the sections and paragraphs of this
Amendment are inserted for convenience only and do not constitute a
part of this Amendment.
3
<PAGE> 59
IN WITNESS WHEREOF, the Bank, the Corporation, and the Interim Bank have
caused this Amendment to be executed in counterpart by their duly authorized
officers as of the date first above written.
VALLE DE ORO BANK, N.A.
By: ______________________________ By: ______________________________
William V. Ehlen, President C.K. Hill, Secretary
VALLE DE ORO INTERIM BANK, N.A.
By: ______________________________ By: ______________________________
William V. Ehlen, President C.K. Hill, Secretary
The undersigned Directors of Valle de Oro Bank, N.A. execute this Amendment
pursuant to the provisions of Section 4.
__________________________________ __________________________________
William V. Ehlen, Director Philip J. Gelber, M.D., Director
__________________________________ __________________________________
James F. Carroll, Director C.K. Hill, Director
__________________________________ __________________________________
Samuel M. Ciccati, Ph.D., Director Janet L. Johnson, Director
__________________________________ __________________________________
Obert D. Conway, Director Lloyd E. Peterson, Director
__________________________________ __________________________________
Myron D. Fessler, M.D., Director Joseph G. Vehige, Director
4
<PAGE> 60
APPENDIX II
DISSENTERS' STATUTE
12 U.S.C. Section 215
and OCC Banking Circular 259 (issued March 5, 1992)
Dissenters' Rights {12 U.S.C. Section 215(b), (c) and (d)}
(b) The consolidated association shall be liable for all liabilities of
the respective consolidating banks or associations. The capital stock of such
consolidated association shall not be less than that required under existing law
for the organization of a national bank in the place in which it is located:
Provided, That if such consolidation shall be voted for at such meetings by the
necessary majorities of the shareholders of each association and State bank
proposing to consolidate, and thereafter the consolidation shall be approved by
the Comptroller, any shareholder of any of the associations or State banks so
consolidated who has voted against such consolidation at the meeting of the
association or bank of which he is a shareholder, or who has given notice in
writing at or prior to such meeting to the presiding officer that he dissents
from the plan of consolidation, shall be entitled to receive the value of the
shares so held by him when such consolidation is approved by the Comptroller
upon written request made to the consolidated association at any time before
thirty days after the date of consummation of the consolidation, accompanied by
the surrender of his stock certificates.
(c) The value of the shares of any dissenting shareholder shall be
ascertained, as of the effective date of the consolidation, by an appraisal made
by a committee of three persons, composed of (1) one selected by the vote of the
holders of the majority of the stock, the owners of which are entitled to
payment in cash; (2) one selected by the directors of the consolidated banking
association; and (3) one selected by the two so selected. The valuation agreed
upon by any two of the three appraisers shall govern. If the value so fixed
shall not be satisfactory to any dissenting shareholder who has requested
payment, that shareholder may, within five days after being notified of the
appraised value of his shares, appeal to the Comptroller, who shall cause a
reappraisal to be made which shall be final and binding as to the value of the
shares of the appellant.
(d) If, within 90 days from the date of consummation of the
consolidation, for any reason one or more of the appraisers is not selected as
herein provided, or the appraisers fail to determine the value of such shares,
the Comptroller shall upon written request of any interested party cause an
appraisal to be made which shall be final and binding on all parties. The
expenses of the Comptroller in making the reappraisal or the appraisal, as the
case may be, shall be paid by the consolidated banking association. The value of
the shares ascertained shall be promptly paid to the dissenting shareholders by
the consolidated banking association. Within thirty days after payment has been
made to all dissenting shareholders as provided for in this section the shares
of stock of the consolidated banking association which would have been delivered
to such dissenting shareholders had they not requested payment shall be sold by
the consolidated banking association at an advertised public auction, unless
some other method of sale is approved by the Comptroller, and the consolidated
banking association shall have the right to purchase any of such shares at such
public auction, if it is the highest bidder therefor, for the purpose of
reselling such shares within thirty days thereafter to such person or persons
and at such price not less than par as its board of directors by resolution may
determine. If the shares are sold at public auction at a price greater than the
amount paid to the dissenting shareholders the excess in such sale price shall
be paid to such dissenting shareholders. The appraisal of such shares of stock
in any State bank shall be determined in the manner prescribed by the law of the
State in such
1
<PAGE> 61
cases, rather than as provided in this section, if such provision is made in the
State law; and no such consolidation shall be in contravention of the law of the
State under which such bank is incorporated.
2
<PAGE> 62
BC-259
Date: March 5, 1992
BANKING ISSUANCE
- --------------------------------------------------------------------------------
Comptroller of the Currency
Administrator of National Banks
- --------------------------------------------------------------------------------
Type: Banking Circular Subject: Stock Appraisals
- --------------------------------------------------------------------------------
To: Chief Executive Officers of National Banks, Deputy Comptrollers
(District), Department and Division Heads, and Examining Personnel
PURPOSE
This banking circular informs all national banks of the valuation
methods used by the Office of the Comptroller of the Currency (OCC) to estimate
the value of a bank's shares when requested to do so by a shareholder dissenting
to the conversion, merger, or consolidation of its bank. The results of
appraisals performed by the OCC between January 1, 1985 and September 30, 1991
are summarized. References: 12 U.S.C. 214a, 215 and 215a; 12 CFR 11.590 (Item 2)
BACKGROUND
Under 12 U.S.C. Section 214a, a shareholder dissenting from a
conversion, consolidation, or merger involving a national bank is entitled to
receive the value of his or her shares from the resulting bank. A valuation of
the shares shall be made by a committee of three appraisers (a representative of
the dissenting shareholder, a representative of the resulting bank, and a third
appraiser selected by the other two). If the committee is formed and renders an
appraisal that is acceptable to the dissenting shareholder, the process is
complete and the appraised value of the shares is paid to the dissenting
shareholder by the resulting bank. If, for any reason, the committee is not
formed or if it renders an appraisal that is not acceptable to the dissenting
shareholder, an interested party may request an appraisal by the OCC. 12 U.S.C.
Section 215 provides these appraisal rights to any shareholder dissenting to a
consolidation. Any dissenting shareholder of a target bank in a merger is also
entitled to these appraisal rights pursuant to 12 U.S.C. Section 215a.
The above provides only a general overview of the appraisal process. The
specific requirements of the process are set forth in the statutes themselves.
METHODS OF VALUATION USED
Through its appraisal process, the OCC attempts to arrive at a fair
estimate of the value of a bank's shares. After reviewing the particular facts
in each case and the available information on a bank's shares, the OCC selects
an appropriate valuation method, or combination of methods, to determine a
reasonable estimate of the shares' value.
Market Value. The OCC uses various methods to establish the market value
of shares being appraised. If sufficient trading in the shares exists and the
prices are available from direct quotes from the Wall Street Journal or a
market-maker, those quotes are considered in determining the market value.
1
<PAGE> 63
If no market value is readily available, or if the market value available is not
well-established, the OCC may use other methods of estimating market value, such
as the investment value and adjusted book value methods.
Investment Value. Investment value requires an assessment of the value
to investors of a share in the future earnings of the target bank. Investment
value is estimated by applying an average price/earnings ratio of banks with
similar earnings potential to the earnings capacity of the target bank.
The peer group selection is based on location, size, and earnings
patterns. If the state in which the subject bank is located provides a
sufficient number of comparable banks using location, size and earnings patterns
as the criteria for selection, the price/earnings ratios assigned to the banks
are applied to the earnings per share estimated for the subject bank. In order
to select a reasonable peer group when there are too few comparable independent
banks in a location that is comparable to that of the subject bank, the pool of
banks from which a peer group is selected is broadened by including one-bank
holding company banks in a comparable location, and/or by selecting banks in
less comparable locations, including adjacent states, that have earnings
patterns similar to the subject bank.
Adjusted Book Value. The OCC also uses an "adjusted book value" method
for estimating value. Historically, the OCC has not placed any weight on the
bank's "unadjusted book value," since that value is based on historical
acquisition costs of the bank's assets, and does not reflect investors'
perceptions of the value of the bank as an ongoing concern. Adjusted book value
is calculated by multiplying the book value of the target bank's assets per
share times the average market price to book value ratio of comparable banking
organizations. The average market price to book value ratio measures the premium
or discount to book value, which investors attribute to shares of similarly
situated banking organizations.
Both the investment value method and the adjusted book value method
present appraised values which are based on the target bank's value as a going
concern. These techniques provide estimates of the market value of the shares of
the subject bank.
OVERALL VALUATION
The OCC may use more than one of the above-described methods in deriving
the value of shares of stock. If more than one method is used, varying weights
may be applied in reaching an overall valuation. The weight given to the value
by a particular valuation method is based on how accurately the given method is
believed to represent market value. For example, the OCC may give more weight to
a market value representing infrequent trading by shareholders than to the value
derived from the investment value method when the subject bank's earnings trend
is so irregular that it is considered to be a poor predictor of future earnings.
PURCHASE PREMIUMS
For mergers and consolidations, the OCC recognizes that purchase
premiums do exist and may, in some instances, be paid in the purchase of small
blocks of shares. However, the payment of purchase premiums depends entirely on
the acquisition or control plans of the purchasers, and such payments are not
regular or predictable elements of market value. Consequently, the OCC's
valuation methods do not include consideration of purchase premiums in arriving
at the value of shares.
2
<PAGE> 64
STATISTICAL DATA
The chart below lists the results of appraisals the OCC performed
between January 1, 1985 and September 30, 1991. The OCC provides statistical
data on book value and price/earnings ratios for comparative purposes, but does
not necessarily rely on such data in determining the value of the banks' shares.
Dissenting shareholders should not view these statistics as determinative for
future appraisals.
In connection with disclosures given to shareholders under 12 CFR 11.590
(Item 2), banks may provide shareholders a copy of this banking circular or
disclose the information in the banking circular, including the past results of
OCC appraisals. If the bank discloses the past results of the OCC appraisals, it
should advise shareholders that: (1) the OCC did not rely on all the information
set forth in the chart in performing each appraisal; and (2) the OCC's past
appraisals are not necessarily determinative of its future appraisals of a
particular bank's shares.
APPRAISAL RESULTS
<TABLE>
<CAPTION>
Average Price/Earnings
Appraisal Date* OCC Appraisal Value Price Offered Book Value Ratio of Peer Group
- --------------- ------------------- ------------- ---------- ----------------------
<S> <C> <C> <C>
8/22/86 103.53 106.67 136.23 NC
12/26/86 16.66 NA 43.57 4.0
12/31/86 53.39 95.58 69.66 7.1
5/1/87 186.42 NA 360.05 5.1
6/11/87 50.46 70.00 92.35 4.5
6/11/87 38.53 55.00 77.75 4.5
7/31/87 13.10 NA 20.04 6.7
8/26/87 55.92 57.52 70.88 NC
8/31/87 19.55 23.75 30.64 5.0
8/31/87 10.98 NA 17.01 4.2
10/6/87 56.48 60.00 73.11 5.6
3/15/88 297.63 NA 414.95 6.1
6/2/88 27.26 NA 28.45 5.4
6/30/88 137.78 NA 215.36 6.0
8/30/88 768.62 677.00 1,090.55 10.7
3/31/89 773.62 NA 557.30 7.9
5/26/89 136.47 180.00 250.42 4.5
5/29/90 9.87 NA 11.04 9.9
</TABLE>
*-The "Appraisal Date" is the consummation date for the conversion,
consolidation, or merger.
NA - Not Available NC - Not Computed
For more information regarding the OCC's stock appraisal process,
contact the Officer of the Comptroller of the Currency, Bank Organization and
Structure.
Frank Maguire
Acting Senior Deputy Comptroller Corporate Policy and Economic Analysis
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APPENDIX III
CERTIFICATE OF INCORPORATION
OF
VALLEY NATIONAL CORPORATION
ARTICLE I
NAME AND PRINCIPAL OFFICE
The name of the Corporation shall be Valley National Corporation.
ARTICLE II
REGISTERED AGENT
The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington,
County of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE III
PURPOSES AND GENERAL POWERS
The purpose of this Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware. This Corporation shall have all of the powers
enumerated in the Delaware General Corporation Law, as the same now exists and
as hereafter amended, and all such other powers as are permitted by applicable
law, including, without limitation the power to act as a bank holding company
and, to the extent permitted under applicable federal and state laws, now or
hereafter existing, relating to bank holding companies and their activities.
ARTICLE IV
CAPITAL STOCK
A. The total number of shares of stock which this Corporation shall have
authority to issue is 10,000,000. All such shares are to be Common Stock, par
value $0.0001 per share and are to be of one class.
B. Voting Rights. The Common Stock shall possess and exercise exclusive
voting rights.
C. No Preemptive Rights. No stockholder of the Corporation shall have
the right, upon the sale for cash or otherwise, of any new stock of the
Corporation or of any stock of the Corporation held by it in its treasury or
otherwise, of the same or any other kind, class or series as that which he
already holds, to purchase his pro rata or any other share of such stock at the
same price at which it is offered to others or any other price.
D. Relative Rights. Each share of Common Stock shall have the same
relative rights as and be identical in all respects with all other shares of
common stock.
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ARTICLE V
INCORPORATION
The incorporators of this Corporation are William V. Ehlen and C.K.
Hill, whose mailing address is 1234 East Main Street, El Cajon, California
92021. The powers of the incorporators are to terminate upon the filing of this
Certificate of Incorporation.
ARTICLE VI
BOARD OF DIRECTORS
The business of the Corporation shall be conducted by a Board of
Directors. The following provisions shall apply with respect to the election or
removal of directors as the case may be:
A. At all elections of directors of this Corporation, each holder of
Common Stock shall be entitled at all elections of directors to as many votes as
shall equal the number of votes which (except for this provision as to
cumulative voting) he would be entitled to cast for the election of directors
with respect to his shares of stock multiplied by the number of directors to be
elected, and such holder may cast all of such votes for a single director of may
distribute them among the number to be voted for, or for any two or more of them
as he may see fit, and to one vote for each share upon all other matters.
B. The number of directors constituting the entire Board shall be not
less than three nor more than nine as fixed from time to time by vote of a
majority of the entire Board; provided, however, that the number of directors
shall not be reduced so as to shorten the term of any director at the time in
office, and provided further, that the number of directors constituting the
entire Board shall be six until otherwise fixed by a majority of the entire
Board. Each director shall be the record owner of one or more shares of Common
Stock of the Corporation.
C. The Board of Directors shall be divided into three classes, as nearly
equal in numbers as the then total number of directors constituting the entire
Board permits with the term of office of one class expiring each year. At the
annual meeting of stockholders in 1998, directors of the first class shall be
elected to hold office for a term expiring at the next succeeding annual
meeting, directors of the second class shall be elected to hold office for a
term expiring at the second succeeding annual meeting and directors of the third
class shall be elected to hold office for a term expiring at the third
succeeding annual meeting. Any vacancies in the Board of Directors for any
reason, and any directorships resulting from any increase in the number of
directors, may be filled by the Board of Directors, acting by a majority of the
directors then in office, although less than a quorum, and any directors so
chosen shall hold office until the next election of the class for which such
directors shall have been chosen and until their successors shall be elected and
qualified. Subject to the foregoing, at each annual meeting of stockholders the
successors to the class of directors whose term shall then expire shall be
elected to hold office for a term expiring at the third succeeding annual
meeting.
D. Notwithstanding any other provisions of this Certificate of
Incorporation or the Bylaws of the Corporation (and notwithstanding the fact
that some lesser percentage may be
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specified by law, this Certificate of Incorporation or the Bylaws of the
Corporation), any director or the entire Board of Directors of the Corporation
may be removed at any time, but only for cause and only by the affirmative vote
of the holders of 75% or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors (considered
for this purpose as one class) cast at a meeting of the stockholders called for
that purpose.
E. The election or directors need not be by written ballot unless the
Bylaws of this Corporation so provide.
ARTICLE VII
NO ACTION WITHOUT A MEETING
No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a meeting,
to the taking of any action is specifically denied.
ARTICLE VIII
BYLAWS
Except as otherwise provided by law, the power to adopt, alter, amend or
repeal the Bylaws shall be vested in the Board of Directors. The stockholders of
the Corporation may adopt or amend a Bylaw that fixes a greater quorum or voting
requirement for stockholders (or voting groups of stockholders) than is required
by the Delaware General Corporation Law.
ARTICLE IX
LIMITED LIABILITY OF DIRECTORS
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law or (iv) for any transaction from which the director derived any improper
personal benefit. If the Delaware General Corporation Law is amended to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended. Any repeal or modification of this
Article by the stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at the time of
such repeal or modification.
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ARTICLE X
INDEMNIFICATION
A. Each person who was or is made a party or is threatened to be made a
party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he, or a person of whom he is the legal representative,
is or was a director or officer of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the basis of
such proceeding is alleged action or omission in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his heirs,
executors and administrators; provided, however, that except as provided in
Subdivision B of this Article hereof, the Corporation shall indemnify any such
person seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Article shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that, if the Delaware General Corporation Law requires, the payment of
such expenses incurred by a director or officer in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding, shall be made only upon delivery to the Corporation
of an undertaking, by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this Article or otherwise. The
Corporation may, by action of its Board of Directors, provide indemnification to
employees and agents of the Corporation with the same scope and effect as the
foregoing indemnification of directors and officers.
B. If a claim under Subdivision A of this Article is not paid in full by
the Corporation within 30 days after a written claim has been received by the
Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under the Delaware
General Corporation Law for the Corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors,
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independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel or its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that the claimant has not met the applicable standard of conduct.
C. The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Article shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, bylaw, agreement, vote of stockholders or disinterested
directors, or otherwise.
D. The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
E. The Corporation may, to the extent authorized from time to time by
the Board of Directors, grant rights to indemnification and to the advancement
of expenses to any directors, officer, employee or agent of the Corporation,
whether or not acting in his or her capacity as such or at the request of the
Corporation, to the fullest extent of the provisions of this Article with
respect to the indemnification and advancement of expenses of directors and
officers of the Corporation.
F. The Board of Directors may, without stockholder approval, authorize
the Corporation to enter into agreements, including any amendments or
modifications thereto, with any of its directors, officers or other persons
described in Subdivision A of this Article providing for indemnification of such
persons to the maximum extent permitted under Delaware General Corporation Law
and the Corporation's Certificate of Incorporation and Bylaws.
G. For purposes of this Article, references to "the Corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, it is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this Article with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
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ARTICLE XI
AMENDMENT
This Corporation reserves the right to amend or repeal any provisions
contained in this Certificate of Incorporation, or any amendment hereto, subject
to the consent thereof by the holders of a majority of the shares entitled to
vote thereon, and any right conferred upon the stockholders is subject to this
reservation.
ARTICLE XII
FAIR PRICE AND SUPERMAJORITY VOTE REQUIREMENT
A. Definitions as Used in This Article XII.
(1) "Affiliate" or "Associate" shall have the respective meanings
given to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934.
(2) A person shall be a "beneficial owner" of any Voting Stock:
(i) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly, any shares of
Voting Stock;
(ii) which such person or any of its Affiliates or Associates
has by itself or with others: (a) the right to acquire
(whether such right is exercisable immediately or only
after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options,
or otherwise, or (b) the right to vote pursuant to any
agreement, arrangement or understanding; or
(iii) which is beneficially owned, directly or indirectly, by
any other person with which such person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding,
voting or disposing of any shares of Voting Stock.
(3) "Business Combination" shall include:
any merger or consolidation of the Corporation or any of its subsidiaries with
or into an Interested Stockholder, regardless of which person is the surviving
entity; any sale, lease, exchange, mortgage, pledge, or other disposition (in
one transaction or a series of transactions) from the Corporation or any of its
subsidiaries to an Interested Stockholder, or from an Interested Stockholder to
the Corporation or any of its subsidiaries, of assets having an aggregate Fair
Market Value of 5% or more of the Corporation's total stockholders' equity; the
issuance, sale or other transfer by the Corporation or any subsidiary thereof of
any securities of the Corporation or any subsidiary thereof to an Interested
Stockholder (other than an issuance or transfer of securities which is effected
on a pro rata basis to all stockholders of the Corporation); the acquisition by
the Corporation or any of its subsidiaries of any securities of an Interested
Stockholder; the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an Interested
Stockholder;
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any reclassification or recapitalization of securities of the Corporation if
the effect, directly or indirectly, of any transaction is to increase the
relative voting power of an Interested Stockholder; or any agreement, contract
or other arrangement providing for or resulting in any of the transactions
described in this definition of Business Combination.
(4) "Disinterested Director" shall mean any member of the Board of
Directors of the Corporation who is unaffiliated with the
Interested Stockholder and was a member of the Board of Directors
prior to the time that the Interested Stockholder became an
Interested Stockholder; any successor of a Disinterested Director
who is unaffiliated with the Interested Stockholder and is
approved to succeed a Disinterested Director by the Disinterested
Directors; any member of the Board of Directors who is
unaffiliated with the Interested Stockholder and is approved by
the Disinterested Directors.
(5) "Fair Market Value" shall mean:
(i) in the case of securities listed on a national securities
exchange or quoted in the National Association of
Securities Dealers Automated Quotations System (or any
successor thereof), the highest sales price or bid
quotation, as the case may be, reported for securities of
the same class or series traded on a national securities
exchange or in the over-the-counter market during the
30-day period immediately prior to the date in question,
or if no such report or quotation is available, the fair
market value as determined by the Disinterested Directors;
and
(ii) in the case of other securities and of other property or
consideration (other than cash), the Fair Market Value as
determined by the Disinterested Directors; provided,
however, in the event the prior authority of the
Disinterested Directors ceases and terminates pursuant to
Subdivision F of this Article XII as a result of there
being less than five Disinterested Directors at any time,
then: (a) for purpose of clause (ii) of the definition of
"Business Combination," any sale, lease, exchange,
mortgage, pledge or other disposition of assets from the
Corporation or any of its subsidiaries to an Interested
Stockholder or from an Interested Stockholder to the
Corporation or any of its subsidiaries, regardless of the
Fair Market Value thereof, shall constitute a Business
Combination; and (b) for purposes of Paragraph 1 of
Subdivision D of this Article XII, in determining the
amount of consideration received or to be received per
share by the Independent Stockholders in a Business
Combination, there shall be excluded all consideration
other than cash and the Fair Market Value of securities
listed on a national securities exchange or quoted in the
National Association of Securities Dealers Automated
Quotations System (or any successor thereof) for which
there is a reported sales price or bid quotation, as the
case may be, during the 30-day period immediately prior to
the date in question.
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(6) "Independent Stockholder" shall mean stockholders of the
Corporation other than the Interested Stockholder engaged in or
proposing the Business Combination.
(7) "Interested Stockholder" shall mean: (a) any person (other than
the Corporation or any of its subsidiaries); and (b) the
Affiliates and Associates of such person, who, or which together,
are:
(i) the beneficial owner, directly or indirectly, of 10% or
more of the outstanding Voting Stock or were within the
two-year period immediately prior to the date in question
the beneficial owner, directly or indirectly, of 10% or
more of the then outstanding Voting Stock; or
(ii) an assignee of or other person who has succeeded to any
shares of the Voting Stock which were at any time within
the two-year period immediately prior to the date in
question beneficially owned by an Interested Stockholder,
if such assignment or succession shall have occurred in
the course of a transaction or series of transactions not
involving a public offering within the meaning of the
Securities Act of 1933.
Notwithstanding the foregoing, no trust department, or designated
fiduciary or other trustee of such trust department of the Corporation
or a subsidiary of the Corporation, or other similar fiduciary capacity
of the Corporation with direct voting control of the outstanding Voting
Stock shall be included or considered as an Interested Stockholder.
Further, no profit-sharing, employee stock ownership, employee stock
purchase and savings, employee pension or other employee benefit plan of
the Corporation or any of its subsidiaries, and no trustee of any such
plan in its capacity as such trustee, shall be included or considered as
an Interested Stockholder.
(8) A "person" shall mean an individual, partnership, trust,
corporation, or other entity and includes two or more of the
foregoing acting in concert.
(9) "Voting Stock" shall mean all outstanding shares of capital stock
of the Corporation entitled to vote generally in the election of
directors of the Corporation.
B. Supermajority Vote to Effect Business Combination.
No Business Combination shall be effected or consummated unless:
(1) Authorized and approved by the Disinterested Directors and, if
otherwise required by law to authorize or approve the
transaction, the approval or authorization of stockholders of the
Corporation, by the affirmative vote of the holders of such
number of shares as is mandated the Delaware General Corporation
Law; or
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(2) Authorized and approved by the affirmative vote of holders of not
less than 80% of the outstanding Voting Stock voting together as
a single class.
The authorization and approval required by this Subdivision B is in
addition to any authorization and approval required by Subdivision C of
this Article XII.
C. Fair Price Required to Effect Business Combination.
No Business Combination shall be effected or consummated unless:
(1) All the conditions and requirements set forth in Subdivision D of
this Article XII have been satisfied; or
(2) Authorized and approved by the Disinterested Directors; or
(3) Authorized and approved by the affirmative vote of holders of not
less than two-thirds of the outstanding Voting Stock held by all
Independent Stockholders voting together as a single class.
Any authorization and approval required by this Subdivision C is in
addition to any authorization and approval required by Subdivision B of
this Article XII.
D. Conditions and Requirements to Fair Price.
All the following conditions and requirements must be satisfied in order
for clause (1) of Subdivision C of this Article XII to be applicable.
(1) The cash and Fair Market Value of the property, securities or
other consideration to be received by the Independent
Stockholders in the Business Combination per share for each class
or series of capital stock of the Corporation must not be less
than the sum of:
(i) the highest per share price (including brokerage
commissions, transfer taxes, soliciting dealer's fees and
similar payments) paid by the Interested Stockholder in
acquiring any shares of such class or series,
respectively, and, in the case of Preferred Stock, if
greater, the amount of the per share redemption price; and
(ii) the amount, if any, by which interest on the per share
price, calculated at the Treasury Bill Rate from time to
time in effect, from the date the Interested Stockholder
first became an Interested Stockholder until the Business
Combination has been consummated, exceeds the per share
amount of cash dividends received by the Independent
Stockholders during such period. The "Treasury Bill Rate"
means for each calendar quarter, or part thereof, the
interest rate of the last auction in the preceding
calendar of 91-day United States Treasury Bills expressed
as a bond equivalent yield.
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For purposes of this paragraph (1), per share amounts shall be
appropriately adjusted for any recapitalization,
reclassification, stock dividend, stock split, reverse split or
other similar transaction. Any Business Combination which does
not result in the Independent Stockholders receiving
consideration for or in respect of their shares of capital stock
of the Corporation shall not be treated as complying with the
requirements of this paragraph (1).
(2) The form of the consideration to be received by the Independent
Stockholders owning the Corporation's shares must be the same as
was previously paid by the Interested Stockholders for shares of
the same class or series; provided, however, if the Interested
Stockholders previously paid for shares of such class or series
with different forms of consideration, the form of the
consideration to be received by the Independent Stockholders
owning shares of such class or series must be in the form as was
previously paid by the Interested Stockholders in acquiring the
largest number of shares of such class or series previously
acquired by the Interested Stockholders, provided, further, in
the event no shares of the same class or series had been
previously acquired by the Interested Stockholders, the form of
consideration must be cash. The provisions of this paragraph (2)
are not intended to diminish the aggregate amount of cash and
Fair Market Value of any other consideration that any holder of
the Corporation's shares is otherwise entitled to receive upon
the liquidation or dissolution of the Corporation, under the
terms of any contract with the Corporation or an Interested
Stockholder, or otherwise.
(3) From the date the Interested Stockholder first became an
Interested Stockholder until the Business Combination has been
consummated, the following requirements must be complied with
unless the Disinterested Directors otherwise approve:
(i) the Interested Stockholder has not received, directly or
indirectly, the benefit (except proportionately as a
stockholder) of any loan, advance, guaranty, pledge, or
other financial assistance, tax credit or deduction, or
other benefit from the Corporation or any of its
subsidiaries;
(ii) there shall have been no failure to declare and pay in
full, when and as due or scheduled, any dividends required
to be paid on any class or series of the Corporation's
shares.
(iii) there shall have been: (a) no reduction in the annual rate
of dividends paid on shares of Common Stock of the
Corporation (except as necessary to reflect any split of
such shares); and (b) an increase in the annual rate of
dividends as necessary to reflect reclassification
(including a reverse split), recapitalization or any
similar transaction which has the effect of reducing the
number of outstanding shares of Common Stock; and
(iv) there shall have been no amendment or other modification
to any profit-sharing, employee stock ownership, employee
stock purchase and savings, employee pension or other
employee benefit plan of the Corporation or any of its
subsidiaries, the effect of which is to change in any
manner the
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provisions governing the voting of any shares of capital
stock of the Corporation in or covered by such plan.
(4) A proxy or information statement describing the Business
Combination and complying with the requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations
under it (or any subsequent provisions replacing that Act and the
rules and regulations under it) has been mailed at least 30 days
prior to the completion of the Business Combination to the
holders of all outstanding Voting Stock. If deemed advisable by
the Disinterested Directors, the proxy or information statement
shall contain a recommendation by the Disinterested Directors as
to the advisability (or inadvisability) of the Business
Combination, or an opinion by an investment banking firm,
selected by the Disinterested Directors and retained at the
expense of the Corporation, as to the fairness (or unfairness) of
the Business Combination to the Independent Stockholders, or
both.
E. Other Applicable Voting Requirement.
The affirmative votes or approvals required to be received from
stockholders of the Corporation under Subdivisions B, C and H of this
Article XII are in addition to the vote of the holders of any class of
shares of capital stock of the Corporation otherwise required by law, or
by other provisions of this Certificate of Incorporation, or by the
express terms of the shares of such class. The affirmative votes or
approvals required to be received from stockholders of the Corporation
under Subdivisions B, C and H of this Article XII shall apply even
though no vote or a lesser percentage vote, may be required by law, or
by other provisions of this Certificate of Incorporation, or otherwise.
Any authorization, approval or other action of the Disinterested
Directors under this Article XII is in addition to any required
authorization, approval or other action of the Board of Directors.
F. Disinterested Directors.
All actions required or permitted to be taken by the Disinterested
Directors shall be taken with or without a meeting by the vote or
written consent of two-thirds of the Disinterested Directors, regardless
of whether the Disinterested Directors constitute a quorum of the
members of the Board of Directors then in office. In the event that the
number of Disinterested Directors is at any time less than five, all
power and authority of the Disinterested Directors under this Article
XII shall thereupon cease and terminate, including, without limitation,
the authority of the Disinterested Directors to authorize and approve a
Business Combination under Subdivisions B and C of this Article XII and
to approve a successor Disinterested Director. Two-thirds of the
Disinterested Directors shall have the power and duty, consistent with
their fiduciary obligations, to determine for the purpose of this
Article XII, on the basis of information known to them:
(1) Whether any person is an Interested Stockholder;
(2) Whether any person is an Affiliate or Associate of another;
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(3) Whether any person has an agreement, arrangement, or
understanding with another or is acting in concert with another;
and
(4) The Fair Market Value of property, securities or other
consideration (other than cash).
The good faith determination of the Disinterested Directors on such
matters shall be binding and conclusive for purposes of this Article
XII.
G. Effect on Fiduciary Obligations of Interested Stockholders.
Nothing contained in this Article XII shall be construed to relieve any
Interested Stockholder from any fiduciary obligations imposed by law.
H. Repeal.
Notwithstanding any other provisions of this Certificate of
Incorporation (and notwithstanding the fact that a lesser percentage
vote may be required by law or other provision of this Certificate of
Incorporation), the provisions of this Article XII may not be repealed,
amended, supplemented or otherwise modified, unless:
(1) The Disinterested Directors (or, if there is no Interested
Stockholder, a majority vote of the whole Board of Directors of
the Corporation) recommend such repeal, amendment, supplement or
modification and such repeal, amendment or modification is
approved by the affirmative vote of the holders of not less than
two-thirds of the outstanding Voting Stock; or
(2) Such repeal, amendment, supplement or modification is approved by
the affirmative vote of holders of: (a) not less than 80% of the
outstanding Voting Stock voting together as a single class; and
(b) not less than two-thirds of the outstanding Voting Stock held
by all stockholders other than Interested Stockholders voting
together as a single class.
I. Further Considerations to Effect Business Combination.
No Business Combination shall be effected or consummated unless, in
addition to the consideration set forth in Subdivisions B, C, D and E of
this Article XII, the Board of Directors of the Corporation, including
the Disinterested Directors, shall consider all of the following factors
and any other factors which they deem relevant:
(1) The social and economic effects of the transaction on the
Corporation and its subsidiaries, employees, depositors, loan and
other customers, creditors and other elements of the communities
in which the Corporation and its subsidiaries operate or are
located;
(2) The business and financial conditions and earnings prospects of
the Interested Stockholder, including, but not limited to, debt
service and other existing or likely financial obligations of the
Interested Stockholder, and the possible effect on other
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elements of the communities in which the Corporation and its
subsidiaries operate or are located; and
(3) The competence, experience and integrity of Interested
Stockholders and their management.
ARTICLE XIII
COMPROMISES OR ARRANGEMENTS WITH CREDITORS
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them, or between this Corporation
and its stockholders or any class of them, or both, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
Section 279 of Title 8 if the Delaware Code order a meeting of the creditors or
class of creditors, or of the stockholders or class of stockholders of this
Corporation, or both, as the case may be, to be summoned in such manner as the
said court directs. If a majority in number representing three-fourths in value
of the creditors or class of creditors, or of the stockholders or class of
stockholders of this Corporation, or both, as the case may be, agree to any
compromise or arrangement and to any reorganization of this Corporation as
consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the creditors or
class of creditors, or on all the stockholders, or both, as the case may be, and
also on this Corporation.
We, the Undersigned, for the purpose of forming a corporation under the laws of
the State of Delaware, do make, file and record this Certificate, and do certify
that the facts herein stated are true, and we have accordingly hereunto set our
hands this 7th day of October, 1998.
/s/
-----------------------------------
William V. Ehlen, Incorporator
/s/
-----------------------------------
C.K. Hill, Incorporator
13
<PAGE> 78
VALLE DE ORO BANK, N.A.
2,640,062 Shares
of
Common Stock
-------------------------------
PROXY STATEMENT - PROSPECTUS
-------------------------------
--------------------------------
January 12, 1999
--------------------------------
No person has been authorized to give any information or to make any
representation other than as contained herein in connection with the offer
contained in this Proxy Statement - Prospectus, and if given or made, such
information or representation must not be relied upon. This Proxy Statement -
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any of the securities offered by this Proxy Statement - Prospectus in any
state to any person to whom it would be unlawful to make such an offer or
solicitation. The delivery of this Proxy Statement - Prospectus at any time does
not imply that the information herein is correct as of any time subsequent to
the date hereof.
<PAGE> 79
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Certificate of Incorporation and Bylaws provide for
indemnification of its officers, directors, employees and agents to the fullest
extent permitted by Delaware law.
Section 145 of Section 8 of the Delaware Code provides that corporations
may indemnify an individual made a party to any threatened, pending, or
completed action, suit or proceeding whether civil, criminal, administrative or
investigative, because the individual is or was a director, officer, employee or
agent of the corporation, against liability incurred in the proceeding if the
person acted in good faith and reasonably believed his conduct was in the
corporation's best interest or was not opposed to the corporation's best
interest.
Section 145(c) further provides that a corporation shall indemnify an
individual who was fully successful on the merits or otherwise in any proceeding
to which the director or officer was a party because the individual was or is a
director or officer of the corporation, for reasonable expenses incurred by the
director in connection with the proceeding. Section 145(g) provides that a
corporation may purchase and maintain insurance on behalf of the individual who
is or was a director, officer, employee or agent of the corporation or who,
while a director, officer, employee or agent of the corporation is or was
serving at the request of the corporation as a director, officer, partner,
trustee, employer or agent of another corporation, partnership, joint venture,
trust, or other enterprise, against liability asserted against or incurred by
the individual in that capacity or arising from the individual status as a
director, officer, employee, or agent.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS
The exhibits filed pursuant to this Item 21 immediately follow the Exhibit
Index. The following is a description of the applicable exhibits required for
Form S-4 provided by Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
(1) Not Applicable.
(2) The Consolidation Agreement by and between Valle de Oro Bank,
N.A. and Valley National Corporation and the Amendment to
Consolidation Agreement by and among Valle de Oro Bank, N.A.,
Valley National Corporation and Valle de Oro Interim Bank,
N.A. are attached as Appendix I to the Proxy Statement -
Prospectus forming a part of this Registration Statement.
(3) Certificate of Incorporation and Bylaws.
A. A copy of the Certificate of Incorporation of the
Registrant is included as Exhibit 3.A to the
Registration Statement.
B. A copy of the Bylaws of the Registrant is included as
Exhibit 3.B to this Registration Statement.
</TABLE>
Part II-1
<PAGE> 80
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
(4) Instruments defining the rights of security holders, including
indentures.
A. Instruments defining the rights of security holders are
included in the Certificate of Incorporation and Bylaws
(see Exhibit 3.A. and B.).
(5) Opinion of Dostart Clapp Sterrett & Coveney, LLP regarding
Valley National Corporation Common Stock, and Consent
(6) Not Applicable.
(7) Not Applicable.
(8) Opinion of Dostart Clapp Sterrett & Coveney, LLP, regarding
certain tax matters, and Consent.
(9) Not Applicable.
(10) Data Processing Services Agreement between Valle de Oro Bank,
N.A. and M & I Data Services, Inc. dated September 25, 1991;
Visa/Master Money Card Amendment to Data Processing Services
Agreement dated September 25, 1991; Amendment to Data
Processing Services Agreement dated October 24, 1995;
Amendment to Data Processing Services Agreement dated April 3,
1998;
PC Teller Software License Agreement between Valle de Oro
Bank, N.A. and M & I Data Services, Inc. dated December 19,
1991; Amendment No. 1 to PC Teller Software License Agreement
dated February 19, 1993;
Backup Facility Agreement between Valle de Oro Bank, N.A. and
M & I Data Services dated April 10, 1995;
Employment Agreement between Valle de Oro Bank, N.A. and
William V. Ehlen dated July 1, 1995;
Salary Continuation Agreement between Valle de Oro Bank, N.A.
and William V. Ehlen dated January 10, 1996;
Director Deferred Fee Agreement between Valle de Oro Bank,
N.A. and Samuel Ciccati dated April 15, 1998;
Director Deferred Fee Agreement between Valle de Oro Bank,
N.A. and Philip Gelber dated April 15, 1998;
Valle de Oro Bank, N.A. 401(k) Plan;
Valle de Oro Bank, N.A. 1994 Stock Option Plan;
Valle de Oro Bank, N.A. Employee Stock Ownership Plan;
Sublease between Valle de Oro Bank, N.A. and Ervin S. Wheeler,
M.D., a Medical corporation, dated January 28, 1997;
</TABLE>
Part II-2
<PAGE> 81
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
Lease between Valle de Oro Bank, N.A. and Wellesley company,
N. V., a Netherlands Antilles corporation, dated September 1,
1994;
Amendment No. 1 and Assignment Agreement (Lease) by and among
Valle de Oro Bank, N.A., Grossmont Land Company and BSD
Service Company dated January 29, 1993;
Lease between Valle de Oro Bank and Reseda Investors dated
November 15, 1987; and
Consent to Assignment of Lease between Valle de Oro Bank,
N.A., Alcott Estates and Bank of America National Trust and
Savings Association dated June 12, 1985 and underlying lease
between Pacific Coast Properties, Inc. and Bank of America
National Trust and Savings Association dated November 9, 1960.
(11) Not Applicable.
(12) Not Applicable.
(13) Not Applicable.
(14) Not Applicable.
(15) Not Applicable.
(16) Not Applicable.
(17) Not Applicable.
(18) Not Applicable.
(19) Not Applicable.
(20) Not Applicable.
(21) None.
(22) None.
(23) Consents of Experts and Counsel.
A. Consent of Dostart Clapp Sterrett & Coveney, LLP (the
consent is contained in that firm's opinions filed as
Exhibits (5) and (8)).
(24) Power of Attorney.
(25) Not Applicable.
(26) Not Applicable.
(27) Not Applicable.
</TABLE>
Part II-3
<PAGE> 82
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
(99) Additional Exhibits.
A. Form of Proxy to be delivered to Shareholders of Valle de
Oro Bank, N.A.
</TABLE>
ITEM 22. UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes as follows:
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising
after the Effective Date of the Registration Statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
Registration Statement: Notwithstanding the foregoing,
any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would
not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule
424(b) (Section 230.424(b) of this chapter) if, in the
aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee"
table in the effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
Registration Statement or any material change to the
information set forth in the Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated
Part II-4
<PAGE> 83
by reference in this Registration Statement shall be deemed to be a
new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to officers, directors, and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of
the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel that matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
B. The undersigned Registrant hereby undertakes to respond to requests for
information that are incorporated by reference into the Proxy Statement -
Prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within one
business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in the documents filed subsequent to the Effective
Date of this Registration Statement through the date of responding to the
request.
C. The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.
Part II-5
<PAGE> 84
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of El Cajon, State of California, this 20th day of
November, 1998.
Valley National Corporation
/s/ William V. Ehlen
William V. Ehlen, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 20th day of November, 1998.
<TABLE>
<CAPTION>
Signature Title
- --------- -----
<S> <C>
/s/ William V. Ehlen President and Director
- ----------------------------------
William V. Ehlen
/s/ C.K. Hill Secretary and Director
- ----------------------------------
C.K. Hill
/s/ James F. Carroll Director and Chairman of the Board
- ----------------------------------
James F. Carroll
/s/ Samuel M. Ciccati Director
- ----------------------------------
Samuel M. Ciccati
/s/ Obert D. "Dale" Conway Director
- ----------------------------------
Obert D. "Dale" Conway
/s/ Philip J. Gelber Director
- ----------------------------------
Philip J. Gelber
/s/ Paul M. Cable Treasurer and Chief Financial Officer
- ----------------------------------
Paul M. Cable
</TABLE>
<PAGE> 85
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No.
-----------
<S> <C>
3.A A copy of the Registrant's Certificate of Incorporation
3.B A copy of the Registrant's Bylaws
5.0 Opinion of Dostart Clapp Sterrett & Coveney, LLP regarding
Valley National Corporation Common Stock and Consent
8.0 Opinion of Dostart Clapp Sterrett & Coveney, LLP, Attorneys,
regarding certain Tax Matters and Consent
10.0 Data Processing Services Agreement between Valle de Oro
Bank, N.A. and M & I Data Services, Inc. dated September 25,
1991; Visa/Master Money Card Amendment to Data Processing
Services Agreement dated September 25, 1991; Amendment to
Data Processing Services Agreement dated October 24, 1995;
Amendment to Data Processing Services Agreement dated April
3, 1998
10.1 PC Teller Software License Agreement between Valle de Oro
Bank, N.A. and M & I Data Services, Inc. dated December 19,
1991; Amendment No. 1 to PC Teller Software License
Agreement dated February 19, 1993
10.2 Backup Facility Agreement between Valle de Oro Bank, N.A.
and M & I Data Services dated April 10, 1995
10.3 Employment Agreement between Valle de Oro Bank, N.A. and
William V. Ehlen dated July 1, 1995
10.4 Salary Continuation Agreement between Valle de Oro Bank,
N.A. and William V. Ehlen dated January 10, 1996
10.5 Director Deferred Fee Agreement between Valle de Oro Bank,
N.A. and Samuel Ciccati dated April 15, 1998
10.6 Director Deferred Fee Agreement between Valle de Oro Bank,
N.A. and Philip Gelber dated April 15, 1998
10.7 Valle de Oro Bank, N.A. 401(k) Plan
10.8 Valle de Oro Bank, N.A. 1994 Stock Option Plan
10.9 Valle de Oro Bank, N.A. Employee Stock Ownership Plan
</TABLE>
1
<PAGE> 86
<TABLE>
<S> <C>
10.10 Sublease between Valle de Oro Bank, N.A. and Ervin S.
Wheeler, M.D., a Medical corporation, dated January 28, 1997
10.11 Lease between Valle de Oro Bank, N.A. and Wellesley Company,
N. V., a Netherlands Antilles corporation, dated
September 1, 1994
10.12 Amendment No. 1 and Assignment Agreement (Lease) by and
among Valle de Oro Bank, N.A., Grossmont Land Company and
BSD Service Company dated January 29, 1993
10.13 Lease between Valle de Oro Bank, N.A. and Reseda Investors
dated November 15, 1987
10.14 Consent to Assignment of Lease between Valle de Oro Bank,
N.A., Alcott Estates and Bank of America National Trust and
Savings Association dated June 12, 1985 and underlying lease
between Pacific Coast Properties, Inc. and Bank of America
National Trust and Savings Association dated November 9,
1960
23.0 Contained in Opinions at 5.0 and 8.0
24.0 Power of Attorney
99.A Form of Proxy to be delivered to Shareholders of Valle de
Oro Bank, N.A.
</TABLE>
2
<PAGE> 1
CERTIFICATE OF INCORPORATION
OF
VALLEY NATIONAL CORPORATION
ARTICLE I
NAME AND PRINCIPAL OFFICE
The name of the Corporation shall be Valley National Corporation.
ARTICLE II
REGISTERED AGENT
The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington,
County of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE III
PURPOSES AND GENERAL POWERS
The purpose of this Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware. This Corporation shall have all of the powers
enumerated in the Delaware General Corporation Law, as the same now exists and
as hereafter amended, and all such other powers as are permitted by applicable
law, including, without limitation the power to act as a bank holding company
and, to the extent permitted under applicable federal and state laws, now or
hereafter existing, relating to bank holding companies and their activities.
ARTICLE IV
CAPITAL STOCK
A. The total number of shares of stock which this Corporation shall have
authority to issue is 10,000,000. All such shares are to be Common Stock, par
value $0.0001 per share and are to be of one class.
B. Voting Rights. The Common Stock shall possess and exercise exclusive
voting rights.
C. No Preemptive Rights. No stockholder of the Corporation shall have
the right, upon the sale for cash or otherwise, of any new stock of the
Corporation or of any stock of the Corporation held by it in its treasury or
otherwise, of the same or any other kind, class or series as that which he
already holds, to purchase his pro rata or any other share of such stock at the
same price at which it is offered to others or any other price.
D. Relative Rights. Each share of Common Stock shall have the same
relative rights as and be identical in all respects with all other shares of
common stock.
EXHIBIT 3.A
<PAGE> 2
ARTICLE V
INCORPORATION
The incorporators of this Corporation are William V. Ehlen and C.K.
Hill, whose mailing address is 1234 East Main Street, El Cajon, California
92021. The powers of the incorporators are to terminate upon the filing of this
Certificate of Incorporation.
ARTICLE VI
BOARD OF DIRECTORS
The business of the Corporation shall be conducted by a Board of
Directors. The following provisions shall apply with respect to the election or
removal of directors as the case may be:
A. At all elections of directors of this Corporation, each holder of
Common Stock shall be entitled at all elections of directors to as many votes as
shall equal the number of votes which (except for this provision as to
cumulative voting) he would be entitled to cast for the election of directors
with respect to his shares of stock multiplied by the number of directors to be
elected, and such holder may cast all of such votes for a single director of may
distribute them among the number to be voted for, or for any two or more of them
as he may see fit, and to one vote for each share upon all other matters.
B. The number of directors constituting the entire Board shall be not
less than three nor more than nine as fixed from time to time by vote of a
majority of the entire Board; provided, however, that the number of directors
shall not be reduced so as to shorten the term of any director at the time in
office, and provided further, that the number of directors constituting the
entire Board shall be six until otherwise fixed by a majority of the entire
Board. Each director shall be the record owner of one or more shares of Common
Stock of the Corporation.
C. The Board of Directors shall be divided into three classes, as nearly
equal in numbers as the then total number of directors constituting the entire
Board permits with the term of office of one class expiring each year. At the
annual meeting of stockholders in 1998, directors of the first class shall be
elected to hold office for a term expiring at the next succeeding annual
meeting, directors of the second class shall be elected to hold office for a
term expiring at the second succeeding annual meeting and directors of the third
class shall be elected to hold office for a term expiring at the third
succeeding annual meeting. Any vacancies in the Board of Directors for any
reason, and any directorships resulting from any increase in the number of
directors, may be filled by the Board of Directors, acting by a majority of the
directors then in office, although less than a quorum, and any directors so
chosen shall hold office until the next election of the class for which such
directors shall have been chosen and until their successors shall be elected and
qualified. Subject to the foregoing, at each annual meeting of stockholders the
successors to the class of directors whose term shall then expire shall be
elected to hold office for a term expiring at the third succeeding annual
meeting.
EXHIBIT 3.A 2
<PAGE> 3
D. Notwithstanding any other provisions of this Certificate of
Incorporation or the Bylaws of the Corporation (and notwithstanding the fact
that some lesser percentage may be specified by law, this Certificate of
Incorporation or the Bylaws of the Corporation), any director or the entire
Board of Directors of the Corporation may be removed at any time, but only for
cause and only by the affirmative vote of the holders of 75% or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class) cast at a meeting of the stockholders called for that purpose.
E. The election or directors need not be by written ballot unless the
Bylaws of this Corporation so provide.
ARTICLE VII
NO ACTION WITHOUT A MEETING
No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a meeting,
to the taking of any action is specifically denied.
ARTICLE VIII
BYLAWS
Except as otherwise provided by law, the power to adopt, alter, amend or
repeal the Bylaws shall be vested in the Board of Directors. The stockholders of
the Corporation may adopt or amend a Bylaw that fixes a greater quorum or voting
requirement for stockholders (or voting groups of stockholders) than is required
by the Delaware General Corporation Law.
ARTICLE IX
LIMITED LIABILITY OF DIRECTORS
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law or (iv) for any transaction from which the director derived any improper
personal benefit. If the Delaware General Corporation Law is amended to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended. Any repeal or modification of this
Article by the stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at the time of
such repeal or modification.
EXHIBIT 3.A 3
<PAGE> 4
ARTICLE X
INDEMNIFICATION
A. Each person who was or is made a party or is threatened to be made a
party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he, or a person of whom he is the legal representative,
is or was a director or officer of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the basis of
such proceeding is alleged action or omission in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his heirs,
executors and administrators; provided, however, that except as provided in
Subdivision B of this Article hereof, the Corporation shall indemnify any such
person seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Article shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that, if the Delaware General Corporation Law requires, the payment of
such expenses incurred by a director or officer in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding, shall be made only upon delivery to the Corporation
of an undertaking, by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this Article or otherwise. The
Corporation may, by action of its Board of Directors, provide indemnification to
employees and agents of the Corporation with the same scope and effect as the
foregoing indemnification of directors and officers.
B. If a claim under Subdivision A of this Article is not paid in full by
the Corporation within 30 days after a written claim has been received by the
Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under the Delaware
General Corporation Law for the Corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the
EXHIBIT 3.A 4
<PAGE> 5
Corporation. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he has met the applicable
standard of conduct set forth in the Delaware General Corporation Law, nor an
actual determination by the Corporation (including its Board of Directors,
independent legal counsel or its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that the claimant has not met the applicable standard of conduct.
C. The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Article shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, bylaw, agreement, vote of stockholders or disinterested
directors, or otherwise.
D. The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
E. The Corporation may, to the extent authorized from time to time by
the Board of Directors, grant rights to indemnification and to the advancement
of expenses to any directors, officer, employee or agent of the Corporation,
whether or not acting in his or her capacity as such or at the request of the
Corporation, to the fullest extent of the provisions of this Article with
respect to the indemnification and advancement of expenses of directors and
officers of the Corporation.
F. The Board of Directors may, without stockholder approval, authorize
the Corporation to enter into agreements, including any amendments or
modifications thereto, with any of its directors, officers or other persons
described in Subdivision A of this Article providing for indemnification of such
persons to the maximum extent permitted under Delaware General Corporation Law
and the Corporation's Certificate of Incorporation and Bylaws.
G. For purposes of this Article, references to "the Corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, it is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this Article with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
EXHIBIT 3.A 5
<PAGE> 6
ARTICLE XI
AMENDMENT
This Corporation reserves the right to amend or repeal any provisions
contained in this Certificate of Incorporation, or any amendment hereto, subject
to the consent thereof by the holders of a majority of the shares entitled to
vote thereon, and any right conferred upon the stockholders is subject to this
reservation.
ARTICLE XII
FAIR PRICE AND SUPERMAJORITY VOTE REQUIREMENT
A. Definitions as Used in This Article XII.
(1) "Affiliate" or "Associate" shall have the respective meanings
given to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934.
(2) A person shall be a "beneficial owner" of any Voting Stock:
(i) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly, any shares of
Voting Stock;
(ii) which such person or any of its Affiliates or Associates
has by itself or with others: (a) the right to acquire
(whether such right is exercisable immediately or only
after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options,
or otherwise, or (b) the right to vote pursuant to any
agreement, arrangement or understanding; or
(iii) which is beneficially owned, directly or indirectly, by
any other person with which such person or any of its
Affiliates or Associates has any agreement, arrangement
or understanding for the purpose of acquiring, holding,
voting or disposing of any shares of Voting Stock.
(3) "Business Combination" shall include:
(i) any merger or consolidation of the Corporation or any of
its subsidiaries with or into an Interested Stockholder,
regardless of which person is the surviving entity;
(ii) any sale, lease, exchange, mortgage, pledge, or other
disposition (in one transaction or a series of
transactions) from the Corporation or any of its
subsidiaries to an Interested Stockholder, or from an
Interested Stockholder to the Corporation or any of its
subsidiaries, of assets having an aggregate Fair Market
Value of 5% or more of the Corporation's total
stockholders' equity;
(iii) the issuance, sale or other transfer by the Corporation
or any subsidiary thereof of any securities of the
Corporation or any subsidiary thereof to an Interested
Stockholder (other than an issuance or transfer of
securities
EXHIBIT 3.A 6
<PAGE> 7
which is effected on a pro rata basis to all
stockholders of the Corporation);
(iv) the acquisition by the Corporation or any of its
subsidiaries of any securities of an Interested
Stockholder;
(v) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation proposed by or on
behalf of an Interested Stockholder; (vi) any
reclassification or recapitalization of securities of
the Corporation if the effect, directly or indirectly,
of any transaction is to increase the relative voting
power of an Interested Stockholder; or
(vii) any agreement, contract or other arrangement providing
for or resulting in any of the transactions described in
this definition of Business Combination.
(4) "Disinterested Director" shall mean any member of the Board of
Directors of the Corporation who is unaffiliated with the
Interested Stockholder and was a member of the Board of Directors
prior to the time that the Interested Stockholder became an
Interested Stockholder; any successor of a Disinterested Director
who is unaffiliated with the Interested Stockholder and is
approved to succeed a Disinterested Director by the Disinterested
Directors; any member of the Board of Directors who is
unaffiliated with the Interested Stockholder and is approved by
the Disinterested Directors.
(5) "Fair Market Value" shall mean:
(i) in the case of securities listed on a national
securities exchange or quoted in the National
Association of Securities Dealers Automated Quotations
System (or any successor thereof), the highest sales
price or bid quotation, as the case may be, reported for
securities of the same class or series traded on a
national securities exchange or in the over-the-counter
market during the 30-day period immediately prior to the
date in question, or if no such report or quotation is
available, the fair market value as determined by the
Disinterested Directors; and
(ii) in the case of other securities and of other property or
consideration (other than cash), the Fair Market Value
as determined by the Disinterested Directors; provided,
however, in the event the prior authority of the
Disinterested Directors ceases and terminates pursuant
to Subdivision F of this Article XII as a result of
there being less than five Disinterested Directors at
any time, then: (a) for purpose of clause (ii) of the
definition of "Business Combination," any sale, lease,
exchange, mortgage, pledge or other disposition of
assets from the Corporation or any of its subsidiaries
to an Interested Stockholder or from an Interested
Stockholder to the Corporation or any of its
subsidiaries, regardless of the Fair Market Value
thereof, shall constitute a Business Combination; and
(b) for purposes of Paragraph 1 of Subdivision D of this
Article XII, in determining the amount of consideration
received or to be received per share by the
EXHIBIT 3.A 7
<PAGE> 8
Independent Stockholders in a Business Combination,
there shall be excluded all consideration other than
cash and the Fair Market Value of securities listed on a
national securities exchange or quoted in the National
Association of Securities Dealers Automated Quotations
System (or any successor thereof) for which there is a
reported sales price or bid quotation, as the case may
be, during the 30-day period immediately prior to the
date in question.
(6) "Independent Stockholder" shall mean stockholders of the
Corporation other than the Interested Stockholder engaged in or
proposing the Business Combination.
(7) "Interested Stockholder" shall mean: (a) any person (other than
the Corporation or any of its subsidiaries); and (b) the
Affiliates and Associates of such person, who, or which
together, are:
(i) the beneficial owner, directly or indirectly, of 10% or
more of the outstanding Voting Stock or were within the
two-year period immediately prior to the date in
question the beneficial owner, directly or indirectly,
of 10% or more of the then outstanding Voting Stock; or
(ii) an assignee of or other person who has succeeded to any
shares of the Voting Stock which were at any time within
the two-year period immediately prior to the date in
question beneficially owned by an Interested
Stockholder, if such assignment or succession shall have
occurred in the course of a transaction or series of
transactions not involving a public offering within the
meaning of the Securities Act of 1933.
Notwithstanding the foregoing, no trust department, or designated
fiduciary or other trustee of such trust department of the Corporation
or a subsidiary of the Corporation, or other similar fiduciary capacity
of the Corporation with direct voting control of the outstanding Voting
Stock shall be included or considered as an Interested Stockholder.
Further, no profit-sharing, employee stock ownership, employee stock
purchase and savings, employee pension or other employee benefit plan of
the Corporation or any of its subsidiaries, and no trustee of any such
plan in its capacity as such trustee, shall be included or considered as
an Interested Stockholder.
(8) A "person" shall mean an individual, partnership, trust,
corporation, or other entity and includes two or more of the
foregoing acting in concert.
(9) "Voting Stock" shall mean all outstanding shares of capital
stock of the Corporation entitled to vote generally in the
election of directors of the Corporation.
EXHIBIT 3.A 8
<PAGE> 9
B. Supermajority Vote to Effect Business Combination.
No Business Combination shall be effected or consummated unless:
(1) Authorized and approved by the Disinterested Directors and, if
otherwise required by law to authorize or approve the
transaction, the approval or authorization of stockholders of the
Corporation, by the affirmative vote of the holders of such
number of shares as is mandated the Delaware General Corporation
Law; or
(2) Authorized and approved by the affirmative vote of holders of not
less than 80% of the outstanding Voting Stock voting together as
a single class.
The authorization and approval required by this Subdivision B is in
addition to any authorization and approval required by Subdivision C of
this Article XII.
C. Fair Price Required to Effect Business Combination.
No Business Combination shall be effected or consummated unless:
(1) All the conditions and requirements set forth in Subdivision D of
this Article XII have been satisfied; or
(2) Authorized and approved by the Disinterested Directors; or
(3) Authorized and approved by the affirmative vote of holders of not
less than two-thirds of the outstanding Voting Stock held by all
Independent Stockholders voting together as a single class.
Any authorization and approval required by this Subdivision C is in
addition to any authorization and approval required by Subdivision B of
this Article XII.
D. Conditions and Requirements to Fair Price.
All the following conditions and requirements must be satisfied in order
for clause (1) of Subdivision C of this Article XII to be applicable.
(1) The cash and Fair Market Value of the property, securities or
other consideration to be received by the Independent
Stockholders in the Business Combination per share for each class
or series of capital stock of the Corporation must not be less
than the sum of:
(i) the highest per share price (including brokerage
commissions, transfer taxes, soliciting dealer's fees and
similar payments) paid by the Interested Stockholder in
acquiring any shares of such class or series,
respectively,
EXHIBIT 3.A 9
<PAGE> 10
and, in the case of Preferred Stock, if greater, the
amount of the per share redemption price; and
(ii) the amount, if any, by which interest on the per share
price, calculated at the Treasury Bill Rate from time to
time in effect, from the date the Interested Stockholder
first became an Interested Stockholder until the
Business Combination has been consummated, exceeds the
per share amount of cash dividends received by the
Independent Stockholders during such period. The
"Treasury Bill Rate" means for each calendar quarter, or
part thereof, the interest rate of the last auction in
the preceding calendar of 91-day United States Treasury
Bills expressed as a bond equivalent yield.
For purposes of this paragraph (1), per share amounts shall be
appropriately adjusted for any recapitalization,
reclassification, stock dividend, stock split, reverse split or
other similar transaction. Any Business Combination which does
not result in the Independent Stockholders receiving
consideration for or in respect of their shares of capital stock
of the Corporation shall not be treated as complying with the
requirements of this paragraph (1).
(2) The form of the consideration to be received by the Independent
Stockholders owning the Corporation's shares must be the same as
was previously paid by the Interested Stockholders for shares of
the same class or series; provided, however, if the Interested
Stockholders previously paid for shares of such class or series
with different forms of consideration, the form of the
consideration to be received by the Independent Stockholders
owning shares of such class or series must be in the form as was
previously paid by the Interested Stockholders in acquiring the
largest number of shares of such class or series previously
acquired by the Interested Stockholders, provided, further, in
the event no shares of the same class or series had been
previously acquired by the Interested Stockholders, the form of
consideration must be cash. The provisions of this paragraph (2)
are not intended to diminish the aggregate amount of cash and
Fair Market Value of any other consideration that any holder of
the Corporation's shares is otherwise entitled to receive upon
the liquidation or dissolution of the Corporation, under the
terms of any contract with the Corporation or an Interested
Stockholder, or otherwise.
(3) From the date the Interested Stockholder first became an
Interested Stockholder until the Business Combination has been
consummated, the following requirements must be complied with
unless the Disinterested Directors otherwise approve:
(i) the Interested Stockholder has not received, directly or
indirectly, the benefit (except proportionately as a
stockholder) of any loan, advance, guaranty, pledge, or
other financial assistance, tax credit or deduction, or
other benefit from the Corporation or any of its
subsidiaries;
EXHIBIT 3.A 10
<PAGE> 11
(ii) there shall have been no failure to declare and pay in
full, when and as due or scheduled, any dividends required
to be paid on any class or series of the Corporation's
shares.
(iii) there shall have been: (a) no reduction in the annual rate
of dividends paid on shares of Common Stock of the
Corporation (except as necessary to reflect any split of
such shares); and (b) an increase in the annual rate of
dividends as necessary to reflect reclassification
(including a reverse split), recapitalization or any
similar transaction which has the effect of reducing the
number of outstanding shares of Common Stock; and
(iv) there shall have been no amendment or other modification
to any profit-sharing, employee stock ownership, employee
stock purchase and savings, employee pension or other
employee benefit plan of the Corporation or any of its
subsidiaries, the effect of which is to change in any
manner the provisions governing the voting of any shares
of capital stock of the Corporation in or covered by such
plan.
(4) A proxy or information statement describing the Business
Combination and complying with the requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations
under it (or any subsequent provisions replacing that Act and the
rules and regulations under it) has been mailed at least 30 days
prior to the completion of the Business Combination to the
holders of all outstanding Voting Stock. If deemed advisable by
the Disinterested Directors, the proxy or information statement
shall contain a recommendation by the Disinterested Directors as
to the advisability (or inadvisability) of the Business
Combination, or an opinion by an investment banking firm,
selected by the Disinterested Directors and retained at the
expense of the Corporation, as to the fairness (or unfairness) of
the Business Combination to the Independent Stockholders, or
both.
E. Other Applicable Voting Requirement.
The affirmative votes or approvals required to be received from
stockholders of the Corporation under Subdivisions B, C and H of this
Article XII are in addition to the vote of the holders of any class of
shares of capital stock of the Corporation otherwise required by law, or
by other provisions of this Certificate of Incorporation, or by the
express terms of the shares of such class. The affirmative votes or
approvals required to be received from stockholders of the Corporation
under Subdivisions B, C and H of this Article XII shall apply even
though no vote or a lesser percentage vote, may be required by law, or
by other provisions of this Certificate of Incorporation, or otherwise.
Any authorization, approval or other action of the Disinterested
Directors under this Article XII is in addition to any required
authorization, approval or other action of the Board of Directors.
EXHIBIT 3.A 11
<PAGE> 12
F. Disinterested Directors.
All actions required or permitted to be taken by the Disinterested
Directors shall be taken with or without a meeting by the vote or
written consent of two-thirds of the Disinterested Directors, regardless
of whether the Disinterested Directors constitute a quorum of the
members of the Board of Directors then in office. In the event that the
number of Disinterested Directors is at any time less than five, all
power and authority of the Disinterested Directors under this Article
XII shall thereupon cease and terminate, including, without limitation,
the authority of the Disinterested Directors to authorize and approve a
Business Combination under Subdivisions B and C of this Article XII and
to approve a successor Disinterested Director. Two-thirds of the
Disinterested Directors shall have the power and duty, consistent with
their fiduciary obligations, to determine for the purpose of this
Article XII, on the basis of information known to them:
(1) Whether any person is an Interested Stockholder;
(2) Whether any person is an Affiliate or Associate of another;
(3) Whether any person has an agreement, arrangement, or
understanding with another or is acting in concert with another;
and
(4) The Fair Market Value of property, securities or other
consideration (other than cash).
The good faith determination of the Disinterested Directors on such
matters shall be binding and conclusive for purposes of this Article
XII.
G. Effect on Fiduciary Obligations of Interested Stockholders.
Nothing contained in this Article XII shall be construed to relieve any
Interested Stockholder from any fiduciary obligations imposed by law.
H. Repeal.
Notwithstanding any other provisions of this Certificate of
Incorporation (and notwithstanding the fact that a lesser percentage
vote may be required by law or other provision of this Certificate of
Incorporation), the provisions of this Article XII may not be repealed,
amended, supplemented or otherwise modified, unless:
(1) The Disinterested Directors (or, if there is no Interested
Stockholder, a majority vote of the whole Board of Directors of
the Corporation) recommend such repeal, amendment, supplement or
modification and such repeal, amendment or modification is
approved by the affirmative vote of the holders of not less than
two-thirds of the outstanding Voting Stock; or
EXHIBIT 3.A 12
<PAGE> 13
(2) Such repeal, amendment, supplement or modification is approved by
the affirmative vote of holders of: (a) not less than 80% of the
outstanding Voting Stock voting together as a single class; and
(b) not less than two-thirds of the outstanding Voting Stock held
by all stockholders other than Interested Stockholders voting
together as a single class.
I. Further Considerations to Effect Business Combination.
No Business Combination shall be effected or consummated unless, in
addition to the consideration set forth in Subdivisions B, C, D and E of
this Article XII, the Board of Directors of the Corporation, including
the Disinterested Directors, shall consider all of the following factors
and any other factors which they deem relevant:
(1) The social and economic effects of the transaction on the
Corporation and its subsidiaries, employees, depositors, loan and
other customers, creditors and other elements of the communities
in which the Corporation and its subsidiaries operate or are
located;
(2) The business and financial conditions and earnings prospects of
the Interested Stockholder, including, but not limited to, debt
service and other existing or likely financial obligations of the
Interested Stockholder, and the possible effect on other elements
of the communities in which the Corporation and its subsidiaries
operate or are located; and
(3) The competence, experience and integrity of Interested
Stockholders and their management.
ARTICLE XIII
COMPROMISES OR ARRANGEMENTS WITH CREDITORS
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them, or between this Corporation
and its stockholders or any class of them, or both, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
Section 279 of Title 8 if the Delaware Code order a meeting of the creditors or
class of creditors, or of the stockholders or class of stockholders of this
Corporation, or both, as the case may be, to be summoned in such manner as the
said court directs. If a majority in number representing three-fourths in value
of the creditors or class of creditors, or of the stockholders or class of
stockholders of this Corporation, or both, as the case may be, agree to any
compromise or arrangement and to any reorganization of this Corporation as
consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court to
which the said application has been made, be
EXHIBIT 3.A 13
<PAGE> 14
binding on all the creditors or class of creditors, or on all the stockholders,
or both, as the case may be, and also on this Corporation.
We, the Undersigned, for the purpose of forming a corporation under the laws of
the State of Delaware, do make, file and record this Certificate, and do certify
that the facts herein stated are true, and we have accordingly hereunto set our
hands this 7th day of October, 1998.
/s/
---------------------------------
William V. Ehlen, Incorporator
/s/
---------------------------------
C.K. Hill, Incorporator
EXHIBIT 3.A 14
<PAGE> 1
EXHIBIT 3.B
BYLAWS
OF
VALLEY NATIONAL CORPORATION
A DELAWARE CORPORATION
Adopted October 13, 1998
<PAGE> 2
BYLAWS
OF
VALLEY NATIONAL CORPORATION
(A DELAWARE CORPORATION)
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I CORPORATE OFFICES.......................................................... 1
1.1 REGISTERED OFFICE......................................................... 1
1.2 OTHER OFFICES............................................................. 1
ARTICLE II MEETINGS OF STOCKHOLDERS................................................... 1
2.1 PLACE OF MEETING.......................................................... 1
2.2 ANNUAL MEETING............................................................ 1
2.3 SPECIAL MEETING........................................................... 1
2.4 NOTICE OF STOCKHOLDERS' MEETINGS.......................................... 2
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEE AND STOCKHOLDER BUSINESS............ 2
2.6 NOTICES................................................................... 3
2.7 QUORUM.................................................................... 4
2.8 ADJOURNED MEETINGS........................................................ 4
2.9 VOTING.................................................................... 4
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT..................................... 5
2.11 RECORD DATE AND STOCKHOLDER VOTING........................................ 5
2.11 PROXIES................................................................... 5
2.12 ORGANIZATION.............................................................. 6
2.13 LIST OF STOCKHOLDERS...................................................... 6
2.14 INSPECTORS OF ELECTION.................................................... 6
2.15 CONDUCT OF MEETINGS....................................................... 7
ARTICLE III DIRECTORS.................................................................. 7
3.1 POWERS.................................................................... 7
3.2 NUMBER AND STAGGERED TERMS................................................ 7
3.3 RESIGNATION AND VACANCIES................................................. 8
3.3 REMOVAL OF DIRECTORS...................................................... 8
3.4 PLACE OF MEETING.......................................................... 9
3.5 ORGANIZATIONAL MEETINGS................................................... 9
3.6 REGULAR MEETINGS.......................................................... 9
3.7 SPECIAL MEETINGS.......................................................... 9
3.8 QUORUM.................................................................... 10
3.9 WAIVER OF NOTICE.......................................................... 10
3.10 ADJOURNMENT............................................................... 10
3.11 NOTICE OF ADJOURNMENT..................................................... 10
3.12 BOARD ACTION BY WRITTEN CONSENT........................................... 11
3.13 COMPENSATION OF DIRECTORS................................................. 11
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
3.14 LOANS TO OFFICERS......................................................... 11
ARTICLE IV COMMITTEES................................................................. 11
4.1 COMMITTEES OF DIRECTORS................................................... 11
4.2 MEETINGS AND ACTIONS OF COMMITTEES........................................ 12
4.3 COMMITTEE MINUTES......................................................... 12
ARTICLE V OFFICERS................................................................... 12
5.1 OFFICERS.................................................................. 12
5.2 ELECTIONS................................................................. 13
5.3 SUBORDINATE OFFICERS...................................................... 13
5.4 REMOVAL AND RESIGNATION................................................... 13
5.5 VACANCIES IN OFFICES...................................................... 13
5.6 CHAIRMAN OF THE BOARD..................................................... 14
5.7 PRESIDENT................................................................. 14
5.8 VICE PRESIDENTS........................................................... 14
5.9 SECRETARY................................................................. 14
5.10 CHIEF FINANCIAL OFFICER................................................... 15
5.11 ASSISTANT SECRETARY....................................................... 15
5.12 ADMINISTRATIVE OFFICERS................................................... 15
5.13 AUTHORITY AND DUTIES...................................................... 16
ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS......... 16
6.1 INDEMNIFICATION........................................................... 16
6.2 RIGHTS OF INDEMNITEES..................................................... 17
6.3 NON-EXCLUSIVITY OF RIGHTS................................................. 17
6.4 INSURANCE................................................................. 18
6.5 INDEMNIFICATION OF AGENTS OF THE CORPORATION.............................. 18
ARTICLE VII RECORDS AND REPORTS........................................................ 18
7.1 MAINTENANCE AND INSPECTION................................................ 18
7.2 INSPECTION BY DIRECTORS................................................... 18
7.3 ANNUAL STATEMENT TO STOCKHOLDERS.......................................... 19
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS............................ 19
7.5 CERTIFICATION AND INSPECTION OF BYLAWS.................................... 19
ARTICLE VIII GENERAL MATTERS........................................................... 19
8.1 OTHER RECORD DATES........................................................ 19
8.2 CHECKS, DRAFTS AND EVIDENCES OF INDEBTEDNESS.............................. 19
8.3 CORPORATE CONTRACTS AND INSTRUMENTS....................................... 20
8.4 STOCK CERTIFICATES........................................................ 20
8.5 SPECIAL DESIGNATION ON CERTIFICATES ...................................... 21
8.6 LOST CERTIFICATES......................................................... 21
8.7 TRANSFER AGENTS AND REGISTRARS............................................ 21
8.8 CONSTRUCTION AND DEFINITIONS.............................................. 21
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE IX AMENDMENTS................................................................. 22
9.1 ADOPTION OF AMENDMENTS.................................................... 22
9.2 POSTING OF AMENDMENTS..................................................... 22
CERTIFICATE OF SECRETARY................................................................. 22
</TABLE>
iii
<PAGE> 5
BYLAWS
OF
VALLEY NATIONAL CORPORATION
(A DELAWARE CORPORATION)
ARTICLE I CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of Valley National Corporation (the "Corporation")
shall be fixed in the Certificate of Incorporation of the Corporation.
1.2 OTHER OFFICES
The Board of Directors may at any time establish branch or subordinate
offices at any place or places where the Corporation is qualified to do
business.
ARTICLE II MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETING
Meetings of stockholders shall be held at any place within our outside
the State of Delaware designated by the Board of Directors. In the absence of
any such designation, stockholders' meetings shall be held at the principal
executive office of the Corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date and
at a time designed by the Board of Directors. In the absence of such
designation, the annual meeting of stockholders shall be held on the second
Tuesday in May in each year at 10:00 a.m. However, if such day falls on a legal
holiday, then the meeting shall be held at the same time and place on the next
succeeding full business day. At the meeting, directors shall be elected, and
any other proper business may be transacted.
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the
Board of Directors, the Chairman of the Board, the President, or the holders not
less than a majority of all the shares entitled to vote at that meeting. If a
special meeting is called by any person or persons other than the Board of
Directors or the President or the Chairman of the Board, then the call shall be
in writing, specifying the time of such meeting and the general nature of the
business proposed to be transacted, and shall be delivered personally or sent by
mail or by telegraphic or other facsimile transmission to the Chairman of the
Board, the President or the Secretary of the Corporation. The officer receiving
the request shall cause notice to be promptly given to the
<PAGE> 6
stockholders entitled to vote, in accordance with the provisions of sections 2.4
and 2.6 of these Bylaws, that a meeting will be held at the time requested by
the person or persons calling the meeting, so long as that time is not less than
35 nor more than 60 days after the receipt of the request. If the notice is not
given within 20 days of after receipt of the request, then the person or persons
calling the meeting may give the notice.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings of stockholders shall be sent or otherwise given
in accordance with section 2.6 of these Bylaws not less than ten nor more than
60 days before the date of the meeting. The notice shall (a) specify the place,
date and hour of the meeting, and (b) (i) in the case of a special meeting, the
purpose or purposes for which the meeting is called (no business other than that
specified in the notice may be transacted), or (ii) in the case of the annual
meeting, those matters which the Board of Directors, at the time of giving the
notice, intends to present for action by the stockholders. The notice of any
meeting at which directors are to be elected shall include the name of any
nominee or nominees who, at the time of the notice, the Board intends to present
for election.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEE AND STOCKHOLDER BUSINESS
At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting business must be (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors, (b) otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (c) otherwise properly brought before
the meeting by a stockholder. For business to be properly brought before an
annual meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation, not less than 60 days nor more
than 90 days prior to the meeting; provided, however, that in the event that
less than 70 days' notice or prior public disclosure of the date of the meeting
is given or made to stockholders, notice by the stockholder to be timely must be
so received not later than the close of business on the tenth day following the
day on which such notice of the date of the annual meeting was mailed or such
public disclosure was made. A stockholder's notice to the Secretary shall set
forth as to each matter the stockholder proposes to bring before the annual
meeting (a) a brief description of the business desired to be brought before the
annual meeting and reasons for conducting such business at the annual meeting,
(b) the name and address, as they appear on the Corporation's books, of the
stockholder proposing such business, (c) the class and number of shares of the
Corporation which are beneficially owned by the stockholder, and (d) any
material interest of the stockholder in such business. Notwithstanding anything
in the Bylaws to the contrary, no business shall be conducted at any annual
meeting except in accordance with the procedures set forth in this section 2.5.
The Chairman of the annual meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
and in accordance with the provisions of this section 2.5, and if he should so
determine,
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he shall so declare to the meeting and any such business not properly brought
before the meeting shall not be transacted.
Only persons who are nominated in accordance with the procedures set
forth in this section 2.5 shall be eligible for election as directors.
Nominations of persons for election to the Board of Directors of the Corporation
may be made at a meeting of stockholders by or at the direction of the Board of
Directors or by any stockholder of the Corporation entitled to vote for the
election of directors at the meeting who complies with the notice procedures set
forth in this section 2.5. Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made pursuant to timely notice in
writing to the Secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered to or mailed and received at the principal executive
offices of the Corporation not less than 60 days nor more than 90 days prior to
the meeting; provided, however, that in the event that less than 70 days' notice
or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the tenth day on which such notice of the
date of the meeting was mailed or such public disclosure was made. Such
stockholder's notice shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or re-election as a director (i) the name,
age, business address and residence address of such person, (ii) the principal
occupation or employment of such person, (iii) the class and number of shares of
the Corporation which are beneficially owned by such person, and (iv) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (including without limitation such persons' written consent to being
named in the proxy statement as a nominee and to serving as a director if
elected); and (b) as to the stockholder giving the notice (i) the name and
address, as they appear on the Corporation's books, of such stockholder, and
(ii) the class and number of shares of the Corporation which are beneficially
owned by such stockholder. At the request of the Board of Directors any person
nominated by the Board of Directors for election as a director shall furnish to
the Secretary of the Corporation that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a director of the Corporation unless nominated
in accordance with the procedures set forth in this section 2.5. The Chairman of
the meeting shall, if the facts warrant, determine and declare to the meeting
that a nomination was not made in accordance with the procedures prescribed by
the Bylaws, and if he should so determine, he shall so declare to the meeting
and the defective nomination shall be disregarded.
2.6 NOTICES
Written notice of any meeting of stockholders shall be given personally,
by first-class mail, or by telegraphic or other written communication. Notices
not personally delivered shall be sent charges prepaid and shall be addressed to
the stockholder at the address of that stockholder appearing on the books of the
Corporation or given by the stockholder to the Corporation for the purpose of
notice. Notice shall be deemed to have been given at the time when delivered
personally or deposited in the mail or sent by telegram or other means of
written communication. An affidavit of the mailing or other means of giving any
notice of any
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stockholders' meeting, executed by the Secretary, Assistant Secretary or any
transfer agent of the Corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
2.7 QUORUM
The holders of a majority in voting power of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute, these Bylaws,
or by the Certificate of Incorporation. If, however, such quorum is not present
or represented at any meeting of the stockholders, then either (a) the Chairman
of the meeting or (b) the stockholders entitled to vote thereat, present in
person or represented by proxy, shall have power to adjourn the meeting in
accordance with this section 2.8 of these Bylaws.
When a quorum is present at any meeting, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which, by express provision of the laws of the State of Delaware or
of the Certificate of Incorporation or these Bylaws, a different vote is
required, in which case such express provision shall govern and control the
decision of the question.
If a quorum is initially present, the stockholders may be continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum, if any action taken is approved by a
majority of the stockholders initially constituting the quorum.
2.8 ADJOURNED MEETINGS
When a meeting is adjourned to another time and place, unless these
Bylaws otherwise require, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting the stockholders may transact any business
that might have been transacted at the original meeting. If the adjournment is
for more than 30 days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
2.9 VOTING
The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of section 2.11 of these Bylaws,
subject to the provisions of sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint
owners, and to voting trusts and other voting agreements). Except as may be
otherwise provided in the Certificate of Incorporation or these Bylaws, each
stockholder shall be entitled to one vote for each share of capital stock held
by such stockholder. Every shareholder entitled to vote at any election for
directors may cumulate his votes and give one candidate a number of votes equal
to the number of directors to be elected multiplied by the
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number of votes to which his shares are entitled, or distribute his votes on the
same principal among as many candidates as he thinks fit. The candidates
receiving the highest number of votes up to the number of directors to be
elected shall be elected.
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT
Unless otherwise restricted by the Certificate of Incorporation, any
action required or permitted to be taken at any annual or special meeting of
stockholders may be taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing setting forth the action so taken
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Such consents shall be delivered to the Corporation by delivery to its
principal place of business, or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded.
2.11 RECORD DATE AND STOCKHOLDER VOTING
For purposes of determining the stockholders entitled to notice of any
meeting or to vote thereat, the Board of Directors may fix, in advance, a record
date, which shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors and which shall not be more
than 60 days nor less than ten days before the date of any such meeting, and in
such event only stockholders of record on the date so fixed are entitled to
notice and to vote, notwithstanding any transfer of any shares on the books of
the Corporation after the record date. If the Board of Directors does not so fix
a record date, the record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of business on
the business day next preceding the day on which notice is given, or, if notice
is waived, at the close of business on the business day next preceding the day
on which the meeting is held. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting unless the Board of Directors fixes a new record date
for the adjourned meeting, but the Board of Directors shall fix a new record
date if the meeting is adjourned for more than 30 days from the date set forth
for the original meeting.
The record date for any other purpose shall be as provided in section
8.1 of these Bylaws.
2.11 PROXIES
Every person entitled to vote for directors, or on any other matter,
shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the Secretary
of the Corporation, but no such proxy shall be voted or acted upon after three
years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission, telefacsimile or
otherwise) by the stockholder or by the stockholder's attorney-in-fact. The
revocability of a proxy that states on its face that it is irrevocable shall be
governed by the provisions of section 212(e) of the General Corporation Law of
Delaware. A stockholder may revoke any proxy which is not irrevocable by
attending
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the meeting and voting in person or by filing an instrument in writing revoking
the proxy or by delivering a proxy in accordance with applicable law bearing a
later date to the Secretary of the Corporation.
2.12 ORGANIZATION
The President or in the absence of the President, the Chairman of the
Board, shall call the meetings of the stockholders to order, and shall act as
Chairman of the meetings. In the absence of the President, the Chairman of the
Board, and all of the Vice Presidents, the stockholders shall appoint a Chairman
for such meetings. The Chairman of any meetings of stockholders shall determine
the order of business and the procedures at the meeting, including such matters
as the regulation of the manner of voting and conduct of business. The Secretary
of the Corporation shall act as Secretary of all meetings of the stockholders,
but in the absence of the Secretary at any meeting of the stockholders, the
Chairman of the meeting may appoint any person to act as Secretary of the
meeting.
2.13 LIST OF STOCKHOLDERS
The officer who has charge of the stock ledger of the Corporation shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held, or,
if not so specified, at the place where the meeting is to be held. The list
shall also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
2.14 INSPECTORS OF ELECTION
In advance of any meeting of shareholders, the Board shall appoint
inspectors of election to act at the meeting and any adjournments thereof. If
inspectors of election are not so appointed, or if any persons so appointed fail
to appear or refuse to act, the Chairman of any meeting of shareholders shall
appoint inspectors of election (or persons to replace those who so fail or
refuse) at the meeting. The number of inspectors shall be either one or three.
If there are three inspectors of election, the decision, act or certificate of a
majority shall be effective in all respects as the decision, act or certificate
of all.
The inspectors of election shall determine the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum and the authenticity, validity and effect of proxies,
receive votes, ballots and consents, hear and determine all challenges and
questions in any way arising in connection with the right to vote, count and
tabulate all votes or consents, determine when the polls shall close, determine
the result and do such acts as may be proper to conduct the election or vote
with fairness to all shareholders, and after the election, they shall file with
the Secretary of the Corporation a signed certificate, certifying the results
thereof and the names of the directors elected.
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2.15 CONDUCT OF MEETINGS
The Board of Directors of the Corporation may adopt by resolution such
rules and regulations for the conduct of the meetings of stockholders as it
shall deem appropriate. Except to the extent inconsistent with such rules and
regulations as adopted by the Board of Directors, the Chairman of any meeting of
stockholders shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts as, in the judgment of such
Chairman, are appropriate for the proper conduct of the meetings. Such rules,
regulations or procedures, whether adopted by the Board of Directors or
prescribed by the Chairman of the meeting, may include, without limitation, the
following: (a) the establishment of an agenda or order of business for the
meeting; (b) rules and procedures for maintaining order at the meeting and the
safety of those present; (c) limitations on attendance at or participation in
the meeting to stockholders of record of the Corporation, their duly authorized
and constituted proxies or such other persons as the Chairman of the meeting
shall determine; (d) restrictions on entry to the meeting after the time fixed
for the commencement thereof; and (e) limitations on the time allotted to
questions or comments by participants. Meetings of stockholders shall not be
required to be held in accordance with the rules of parliamentary procedure.
ARTICLE III DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware and
to any limitations in the Certificate of Incorporation or these Bylaws relating
to action required to be approved by the stockholders or by the outstanding
shares, the business and affairs of the Corporation shall be managed and all
corporate powers shall be exercised by or under the direction of the Board of
Directors.
3.2 NUMBER AND STAGGERED TERMS
The number of directors constituting the entire Board of Directors shall
be not less than three or more than nine as shall be fixed from time to time
exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors (whether or not there exist
any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board for adoption); provided however, that the
Board of Directors may not increase the number of directors to a number which
exceeds by more than two the number of directors last elected by the
shareholders. In the absence of any such designation, the number of directors
shall be six. The directors shall be divided into three classes, as nearly equal
in number as reasonably possible, with the term of office of the first class to
expire at the 1999 annual meeting of stockholders, the term of office of the
second class to expire at the 2000 annual meeting of stockholders and the term
of office of the third class to expire at the 2001 annual meeting of
stockholders. At each annual meeting of shareholders following such initial
classification and election, directors elected to succeed those directors whose
terms expire shall be elected for a term of office to expire at the third
succeeding annual meeting of stockholders
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after their election; provided however, that in each case directors shall
continue to serve until their successors shall be elected and shall qualify.
3.3 RESIGNATION AND VACANCIES
Any director may resign effective on giving written notice to the
Chairman of the Board, the President, the Secretary or the Board of Directors,
unless the notice specifies a later time for that resignation to become
effective. If the resignation of a director is effective at a future time, the
Board of Directors may elect a successor to take office when the resignation
becomes effective.
Vacancies in the Board of Directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote of
the stockholders or by court order may be filled only by the affirmative vote of
a majority of the shares represented and voting at a duly held meeting at which
a quorum is present (which shares voting affirmatively also constitute a
majority of the required quorum). Each director so elected shall hold office
until the next election of the class for which such director shall have been
chosen and until their successor has been elected and qualified.
Unless otherwise provided in the Certificate of Incorporation or these
Bylaws:
(a) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of
the stockholders having the right to vote as a single class may
be filled by a majority of the directors then in office,
although less than a quorum, or by a sole remaining director.
(b) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the
provisions of the Certificate of Incorporation, vacancies and
newly created directorships of such class or classes or series
may be filled by a majority of the directors elected by such
class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
Corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the Certificate of Incorporation or these Bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in section 211 of the General Corporation Law of Delaware.
3.3 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, the Certificate of Incorporation
or these Bylaws, any director or the entire Board of Directors may be removed,
with or without cause, by the holders of a majority of the shares then entitled
to vote at an election of directors; provided,
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however, that, if and so long as stockholders of the Corporation are entitled to
cumulative voting, if less than the entire Board is to be removed, no director
may be removed without cause if the votes cast against his removal would be
sufficient to elect him if then cumulatively voted at an election of his or her
class of directors.
3.4 PLACE OF MEETING
Regular meetings of the Board of Directors may be held at any place
within or outside the State of Delaware that has been designated from time to
time by resolution of the Board. In the absence of such a designation, regular
meetings shall be held at the principal executive office of the Corporation.
Special meetings of the Board may be held at any place within or outside the
State of Delaware that has been designated in the notice of the meeting, or if
not stated in the notice or if there is no notice, at the principal executive
office of the Corporation.
Any meeting of the Board, regular or special, may be held by conference
telephone or similar communications equipment, so long as all directors
participating in the meeting can hear one another, and all such participating
directors shall be deemed to be present in person at the meeting.
3.5 ORGANIZATIONAL MEETINGS
The organizational meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting. In the event of the failure of the
stockholders to fix the time or place of such organizational meeting of the
newly elected Board of Directors, or in the event such meeting is not held at
the time and place so fixed by the stockholders, the meeting may be held at such
time and place as shall be specified in a notice given as hereinafter provided
for special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the directors.
3.6 REGULAR MEETINGS
Regular meetings of the Board of Directors may be held without notice at
such time as shall from time to time be determined by the Board of Directors. If
any regular meeting day shall fall on a legal holiday, then the meeting shall be
held at the same time and place on the next succeeding full business day.
3.7 SPECIAL MEETINGS
Special meetings of the Board of Directors for any purpose may be called
at any time by the Chairman of the Board, the President, the Secretary or any
two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail,
telecopy or telegram, charges prepaid, addressed to each director at that
director's address as it is shown on the records of the Corporation. If the
notice is mailed, it shall be deposited in the United States mail at least four
days before the time of the holding of the meeting. If the notice is delivered
personally or by
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telephone, telecopy or telegram, it shall be delivered personally or by
telephone or to the telegraph company at least 48 hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
Corporation.
3.8 QUORUM
A majority of the authorized number of directors shall constitute a
quorum for the transaction of business, except to adjourn as provided in section
3.11 of these Bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the Board of Directors, subject to the provisions of the
Certificate of Incorporation and applicable law. A meeting in which a quorum is
initially present may continue to transact business notwithstanding the
withdrawal of directors, if any action taken is approved by at least a majority
of the quorum for that meeting.
3.9 WAIVER OF NOTICE
Notice of a meeting need not be given to any director (a) who signs a
waiver of notice, whether before or after the meeting, or (b) who attends the
meeting other than for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. All such waivers shall be filed with the corporate records
or made part of the minutes of the meeting. A waiver of notice need not specify
the purpose of any regular or special meeting of the Board of Directors.
3.10 ADJOURNMENT
A majority of the directors present, whether or not constituting a
quorum, may adjourn any meeting of the Board to another time and place.
3.11 NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting of the
Board need not be given unless the meeting is adjourned for more than 24 hours.
If the meeting is adjourned for 24 hours, then notice of the time and place of
the adjourned meeting shall be given before the adjourned meeting takes place,
in the manner specified in section 3.8 of these Bylaws, to the directors who
were not present at the time of the adjournment.
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3.12 BOARD ACTION BY WRITTEN CONSENT
Any action required or permitted to be taken by the Board of Directors
may be taken without a meeting, provided that all members of the Board
individually or collectively consent in writing to that action. Such action by
written consent shall have the same force and effect as a unanimous vote of the
Board of Directors. Such written consent and any counterparts thereof shall be
filed with the minutes of the proceedings of the Board of Directors.
3.13 COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if
any, for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the Board of Directors. This section 3.14 shall not
be construed to preclude any director from serving the Corporation in any other
capacity as an officer, agent, employee or otherwise, and receiving compensation
for those services.
3.14 LOANS TO OFFICERS
The Corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the Corporation or any of its
subsidiaries, including any officer or employee who is a director of the
Corporation or any of its subsidiaries, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the Corporation. The loan, guaranty or other assistance may be with or
without interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the Corporation. Nothing contained in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the Corporation at
common law or under any statute.
ARTICLE IV COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The Board of Directors may, by resolution adopted by a majority of the
authorized number of directors, designate one or more committees, each
consisting of two or more directors, to serve at the pleasure of the Board. That
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. The appointment of members or alternate members of a committee
requires the vote of a majority of the authorized number of directors. Any
committee, to the extent provided in the resolution of the Board, shall have and
may exercise all the powers and authority of the Board, but no such committee
shall have the power or authority to (i) amend the Certificate of Incorporation
(except that a committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by the Board
of Directors as provided in section 151(a) of the General Corporation Law of
Delaware, fix the designations and any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the Corporation or the conversion into, or
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the exchange of such shares for, shares of any other class or classes or any
other series of the same or any other class or class of stock of the
Corporation), (ii) adopt an agreement of merger or consolidation under sections
251 or 252 of the General Corporation Law of Delaware, (iii) recommend to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, (iv) recommend to the stockholders a
dissolution of the Corporation or a revocation of a dissolution or (v) amend the
Bylaws of the Corporation; and, unless the Board resolution establishing the
committee, the Bylaws or the Certificate of Incorporation expressly so provides,
no such committee shall have the power or authority to declare a dividend, to
authorize the issuance of stock, or to adopt a certificate of ownership and
merger pursuant to section 253 of the General Corporation Law of Delaware.
4.2 MEETINGS AND ACTIONS OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the following provisions of Article III of these
Bylaws: section 3.5 (place of meetings; meetings by telephone), section 3.7
(regular meetings), section 3.8 (special meetings; notice), section 3.9
(quorum), section 3.10 (waiver of notice), section 3.11 (adjournment), section
3.12 (notice of adjournment) and section 3.13 (Board action by written consent
without meeting), with such changes in the context of those Bylaws as are
necessary to substitute the committee and its members for the Board of Directors
and its members; provided, however, that the time of regular meetings of
committees may be determined either by resolution of the Board of Directors or
by resolution of the committee, that special meetings of committees may also be
called by resolution of the Board of Directors, and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The Board of Directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these Bylaws.
4.3 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report the
same to the Board of Directors when required.
ARTICLE V OFFICERS
5.1 OFFICERS
The corporate officers of the Corporation shall be a President, a
Secretary and a Chief Financial Officer. The Corporation may also have, at the
discretion of the Board of Directors, a Chairman of the Board, one more Vice
Presidents (however denominated), one or more Assistant Secretaries, a
Treasurer, one or more Assistant Treasurers, and such other officers as may be
appointed in accordance with the provisions of section 5.3 of these Bylaws. Any
number of offices may be held by the same person.
In addition to the corporate officers of the Corporation described
above, there may also be such administrative officers of the Corporation as may
be designated and appointed from time
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to time by the President of the Corporation in accordance with the provisions of
section 5.12 of these Bylaws.
5.2 ELECTIONS
The corporate officers of the Corporation, except such officers as may
be appointed in accordance with the provisions of sections 5.3 or 5.5 of these
Bylaws, shall be chosen by the Board of Directors, subject to the rights, if
any, of an officer under any contract of employment and shall hold their
respective offices for such terms as the Board of Directors may from time to
time determine.
5.3 SUBORDINATE OFFICERS
The Board of Directors may appoint, or may empower the President to
appoint, such other corporate officers as the business of the Corporation may
require, each of whom shall hold office for such period, have such power and
authority, and perform such duties as are provided in these Bylaws or as the
Board of Directors may from time to time determine.
The President may from time to time designate and appoint administrative
officers of the Corporation in accordance with the provisions of section 5.12 of
these Bylaws.
5.4 REMOVAL AND RESIGNATION
Subject to the rights, if any, of a corporate officer under any contract
of employment, any corporate officer may be removed, either with or without
cause, by the majority vote of the Board of Directors at any time or, except in
case of a corporate officer chosen by the Board of Directors, by any corporate
officer upon whom such power of removal may be conferred by the Board of
Directors.
Any corporate officer may resign at any time by giving written notice to
the Corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the Corporation under any contract to which the corporate
officer is a party.
Any administrative officer designated and appointed by the President may
be removed, either with or without cause, at any time by the President. Any
administrative officer may resign at any time by giving written notice to the
President or to the Secretary of the Corporation.
5.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these Bylaws for regular appointments to that office.
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5.6 CHAIRMAN OF THE BOARD
The Chairman of the Board, if such an officer be elected, shall, if
present, preside at meetings of the Board of Directors and exercise such other
powers and perform such other duties as may from time to time be assigned to him
by the Board of Directors or as may be prescribed by these Bylaws. If there is
no President, then the Chairman of the Board shall also be the chief executive
officer of the Corporation and shall have the powers and duties prescribed in
section 5.7 of these Bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, as may be given by the Board of
Directors to the Chairman of the Board, if there be such an officer, the
President shall be the chief executive officer of the Corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and officers of the Corporation. The
President shall preside at all meetings of the stockholders and, in the absence
or nonexistence of a Chairman of the Board, at all meetings of the Board of
Directors. The President shall have the general powers and duties of management
usually vested in the office of President of a Corporation, and shall have such
other powers and perform such other duties as may be prescribed by the Board of
Directors or these Bylaws.
5.8 VICE PRESIDENTS
In the absence or disability of the President, and if there is no
Chairman of the Board, the Vice Presidents, if any, in order of their rank as
fixed by the Board of Directors or, if not ranked, a Vice President designated
by the Board of Directors, shall perform all the duties of the President when so
acting shall have all the powers of, and be subject to all the restrictions
upon, the President. The Vice Presidents shall have such other powers and
perform such other duties as from time to time may be prescribed for them
respectively by the Board of Directors, these Bylaws, the President or the
Chairman of the Board.
5.9 SECRETARY
The Secretary shall keep or cause to be kept, at the principal executive
office of the Corporation or such other place as the Board of Directors may
direct, a book of minutes of all meetings and actions of the Board of Directors,
committees of directors and stockholders. The minutes shall show the time and
place of each meeting, whether regular or special (and, if special, how
authorized and the notice given), the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
stockholders' meetings and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal
executive office of the Corporation or at the office of the Corporation's
transfer agent or registrar, as determined by resolution of the Board of
Directors, a share register or a duplicate share register, showing the names of
all stockholders and their addresses, the number and classes of shares held by
each, the
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number and date of certificates evidencing such shares and the number and date
of cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the Board of Directors required to be given by law or
by these Bylaws. The Secretary shall keep the seal of the Corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the Board of Directors or by these Bylaws.
5.10 CHIEF FINANCIAL OFFICER
The Chief Financial Officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the Corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings and shares. The books of account shall at all reasonable times
be open to inspection by any director for a purpose reasonably related to his
position as a director.
The Chief Financial Officer shall deposit all money and other valuables
in the name and to the credit of the Corporation with such depositories as may
be designated by the Board of Directors. He or she shall disburse the funds of
the Corporation as may be ordered by the Board of Directors, shall render to the
President and directors, whenever they request it, an account of all of his or
her transactions as Chief Financial Officer and of the financial condition of
the Corporation, and shall have such other powers to perform such other duties
as may be prescribed by the Board of Directors or these Bylaws.
If required by the Board of Directors, the Chief Financial Officer shall
give to the Corporation a bond (which shall be renewed every six years) in such
sum and with such surety or sureties as shall be satisfactory to be the Board of
Directors for the faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation.
5.11 ASSISTANT SECRETARY
The Assistant Secretary, if any, or, if there is more than one, the
Assistant Secretaries in the order determined by the Board of Directors (or if
there be no such determination, then in the order of their election), shall, in
the absence of the Secretary or in the event of his or her inability or refusal
to act, perform the duties and exercise the powers of the Secretary and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
5.12 ADMINISTRATIVE OFFICERS
The addition to the corporate officers of the Corporation as provided in
section 5.1 of these Bylaws and such subordinate corporate officers as may be
appointed in accordance with section 5.3 of these Bylaws, there may also be such
administrative officers of the Corporation as
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may be designated and appointed from time to time by the President of the
Corporation. Administrative officers shall perform such duties and have such
powers as from time to time may be determined by the President or the Board of
Directors in order to assist the corporate officers in the furtherance of their
duties. In the performance of such duties and exercise of such powers, however,
such administrative officers shall have limited authority to act on behalf of
the Corporation as the Board of Directors shall establish, including but not
limited to limitations on the dollar amount and on the scope of agreements or
commitments that may be made by such administrative officers on behalf of the
Corporation, which limitations may not be exceeded by such individuals or
altered by the President without further approval by the Board of Directors.
5.13 AUTHORITY AND DUTIES
In addition to the foregoing powers, authority and duties, all officers
of the Corporation shall respectively have such authority and powers and perform
such duties in the management of the business of the Corporation as may be
designated from time to time by the Board of Directors.
ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND OTHER AGENTS
6.1 INDEMNIFICATION
Each person who was or is made a party or is threatened to be made a
party to or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a "proceeding"),
by reason of the fact that he or she is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to an
employee benefit plan (hereinafter an "indemnitee"), whether the basis of such
proceeding is alleged action or omission in an official capacity as a director,
officer, employee or agent or in any other capacity while serving as a director,
officer, employee or agent, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the Delaware General Corporation
Law, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than such law permitted the
Corporation to provide prior to such amendment), against all expense, liability
and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid in settlement) reasonably incurred or suffered by
such indemnitee in connection therewith and such indemnification shall continue
as to an indemnitee who has ceased to be a director, officer, employee or agent
and shall inure to the benefit of the indemnitee's heirs, executors and
administrators; provided, however, that, except as provided in section 6.2
hereof with respect to proceedings to enforce rights to indemnification, the
Corporation shall indemnify any such indemnitee in connection with a proceeding
(or part thereof) initiated by such indemnitee only if such proceeding (or part
thereof) was authorized by the Board of Directors of the Corporation. The right
to indemnification conferred in this section shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding
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in advance of its final disposition (hereinafter an "advancement of expenses");
provided, further, that, if the Delaware General Corporation Law requires, an
advancement of expenses incurred by an indemnitee in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such indemnitee, including, without limitation, service to an
employee benefit plan) shall be made only upon delivery to the Corporation of an
undertaking (hereinafter an "undertaking"), by or on behalf of such indemnitee,
to repay all amounts so advanced if it shall ultimately be determined by final
judicial decision from which there is no further right to appeal (hereinafter a
"final adjudication") that such indemnitee is not entitled to be indemnified for
such expenses under this section or otherwise.
6.2 RIGHTS OF INDEMNITEES
If a claim under section 6.1 of this Article is not paid in full by the
Corporation within 30 days after a written claim has been received by the
Corporation, the indemnitee may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If successful in whole or
in party in any such suit, or in a suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the indemnitee
shall be entitled to be paid also the expense of prosecuting or defending such
suit. In (a) any suit brought by the indemnitee to enforce a right to
indemnification hereunder (but not in a suit brought by the indemnitee to
enforce a right to an advancement of expenses) it shall be a defense that, and
(b) in any suit by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking, the Corporation shall be entitled to
recover such expenses upon a final adjudication that, the indemnitee has not met
the applicable standard of conduct set forth in the Delaware General Corporation
Law. Neither the failure of the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such suit that indemnification of the indemnitee is
proper in the circumstances because the indemnitee has met the applicable
standard of conduct set forth in the Delaware General Corporation Law, nor an
actual determination by the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) that the indemnitee has not met
the applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
Article or otherwise shall be on the Corporation.
6.3 NON-EXCLUSIVITY OF RIGHTS
The rights to indemnification and to the advancement of expenses
conferred in this Article shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute, the Corporation's
Certificate of Incorporation, these Bylaws, agreement, vote of stockholders or
disinterested directors, or otherwise.
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6.4 INSURANCE
The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the Delaware General Corporation Law.
6.5 INDEMNIFICATION OF AGENTS OF THE CORPORATION
The Corporation may, to the extent authorized from time to time by the
Board of Directors, grant rights to indemnification, and to the advancement of
expenses to any employee or agent of the Corporation to the fullest extent of
the provisions of this section with respect to the indemnification and
advancement of expenses of directors and officers of the Corporation.
ARTICLE VII RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION
The Corporation shall, either at its principal executive office or at
such place or places as designated by the Board of Directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these Bylaws as amended to date,
accounting books and other records of its business and properties.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
Corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
Corporation at its registered office in Delaware or at its principal place of
business.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the Corporation's stock
ledger, a list of its stockholders and its other books and records for a purpose
of reasonably related to his or her position as a director.
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7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The Board of Directors shall present at each annual meeting and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the Corporation.
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The Chairman of the Board, if any, the President, any Vice President,
the Chief Financial Officer, the Secretary or any Assistant Secretary of this
Corporation, the Treasurer, or any other person authorized by the Board of
Directors or the President or a Vice President, is authorized to vote, represent
and exercise on behalf of this Corporation all rights incident to any and all
shares of the stock of any other corporation or corporations standing in the
name of this Corporation. The authority herein granted may be exercised either
by such person directly or by any other person authorized to do so by proxy or
power of attorney duly executed by such person having authority.
7.5 CERTIFICATION AND INSPECTION OF BYLAWS
The original or a copy of these Bylaws, as amended or otherwise altered
to date, certified by the Secretary, shall be kept at the Corporation's
principal executive office and shall be open to inspection by the stockholders
of the Corporation, at all reasonable times during office hours.
ARTICLE VIII GENERAL MATTERS
8.1 OTHER RECORD DATES
For purposes of determining the stockholders entitled to receive payment
of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix, in advance, a record date, which shall not
precede the date upon which the resolution fixing the record date is adopted and
which shall not be more than 60 days before any such action. In that case, only
stockholders of record at the close of business on the date so fixed are
entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the Corporation after the record date so fixed, except as
otherwise provided by law. If the Board of Directors does not so fix a record
date, then the record date for determining stockholders for any such purpose
shall be at the close of business on the day on which the Board of Directors
adopts the applicable resolution.
8.2 CHECKS, DRAFTS AND EVIDENCES OF INDEBTEDNESS
From time to time, the Board of Directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other
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evidences of indebtedness that are issued in the name of or payable to the
Corporation, and only the persons so authorized shall sign or endorse those
instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS
The Board of Directors, except as otherwise provided in these Bylaws,
may authorize and empower any officer or officers, or agent or agents, to enter
into any contract or execute any instrument in the name of and on behalf of the
Corporation; such power and authority may be general or confined to specific
instances. Unless so authorized or ratified by the Board of Directors or within
the agency power of an officer, no officer, agent or employee shall have any
power or authority to bind the Corporation by any contract or engagement or to
pledge its credit or to render it liable for any purpose or for any amount.
8.4 STOCK CERTIFICATES
The shares of the Corporation shall be represented by certificates,
provided that the Board of Directors of the Corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
Corporation. Notwithstanding the adoption of such a resolution by the Board of
Directors, every holder of stock represented by certificates and, upon request,
every holder of uncertificated shares, shall be entitled to have a certificate
signed by, or in the name of the Corporation by the Chairman or vice-Chairman of
the Board of Directors, or the President, and by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary of the Corporation
representing the number of shares registered in certificate form. Any or all of
the signatures on the certificate may be a facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate has ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the Corporation
with the same effect as if he or she were such officer, transfer agent or
registrar at the date of issue.
Certificates for shares shall be of such form and device as the Board of
Directors may designate and shall state the name of the record holder of the
shares represented thereby; its number; date of issuance; the number of shares
for which it is issued; a summary statement or reference to the powers,
designations, preferences or other special rights of such stock and the
qualifications, limitations or restrictions of such preferences or rights, or
both, if any; a statement as to any applicable voting trust agreement; if the
shares are assessable, or, if assessments are collectible by personal action, a
plain statement of such facts.
Upon surrender to the Secretary or transfer agent of the Corporation of
a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
The Corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefore. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, or upon the books and records of
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the Corporation in the case of uncertificated partly paid shares, the total
amount of the consideration to be paid therefor and the amount paid thereon
shall be stated. Upon the declaration of any dividend on fully paid shares, the
Corporation shall declare a dividend upon partly paid shares of the same class,
but only upon the basis of the percentage of the consideration actually paid
thereon.
8.5 SPECIAL DESIGNATION ON CERTIFICATES
If the Corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations, the
preferences and the relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences or rights, or both, shall be set forth in full
or summarized on the face or back of the certificate that the Corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the Corporation shall issue to represent
such class or series of stock a statement that the Corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualification,
limitations or restrictions of such preferences or rights, or both.
8.6 LOST CERTIFICATES
Except as provided in this section 8.6, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the Corporation and cancelled at the same time. The Board of
Directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the Board may require. The Board
may require indemnification of the Corporation secured by a bond or other
adequate security sufficient to protect the Corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.
8.7 TRANSFER AGENTS AND REGISTRARS
The Board of Directors may appoint one or more transfer agents or
transfer clerks, and one or more registrars, each of which shall be an
incorporated bank or trust company, either domestic or foreign, who shall be
appointed at such times and places as the requirements of the Corporation may
necessitate and the Board of Directors may designate.
8.8 CONSTRUCTION AND DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction and definitions in the General Corporation Law of Delaware shall
govern the construction of these Bylaws. Without limited the generality of this
provision, as used in these Bylaws, the singular
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number includes the plural, the plural number includes the singular, and the
term "person" includes both an entity and a natural person.
ARTICLE IX AMENDMENTS
9.1 ADOPTION OF AMENDMENTS
The original or other Bylaws of the Corporation may be adopted, amended
or repealed by the stockholders entitled to vote; provided, however, that the
Corporation may, in its Certificate of Incorporation, confer the power to adopt,
amend or repeal Bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal Bylaws.
9.2 POSTING OF AMENDMENTS
Whenever an amendment or new Bylaw is adopted, it shall be copied in the
book of Bylaws with the original Bylaws, in the appropriate place. If any bylaw
is repealed, the fact of repeal with the date of the meeting at which the repeal
was enacted or the filing of the operative written consents shall be stated in
said book.
CERTIFICATE OF SECRETARY
I, C.K. Hill, do hereby certify:
1. That I am the duly elected and acting Secretary of Valley
National Corporation, a Delaware corporation (the
"Corporation"); and
2. That the foregoing Bylaws constitute the Bylaws of the
Corporation duly adopted by the Board of Directors thereof on
October 13, 1998.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the
seal of the Corporation.
/s/
-----------------------------------------
C.K. Hill, Secretary
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[LETTERHEAD -- DOSTART CLAPP STERRETT & COVENEY, LLP]
EXHIBIT 5.0
November 18, 1998
Board of Directors
Valley National Corporation
1234 East Main Street
El Cajon, CA 92021
Re: S-4 Registration Statement for the Securities of Valley National Corporation
Lady and Gentlemen:
In connection with the proposed public offering of 2,640,062 shares of
common stock of Valley National Corporation by (the "Holding Company") covered
by the above Registration Statement, we have examined the Holding Company's
Certificate of Incorporation, Bylaws, Corporate Minute book, and Registration
Statement on Form S-4 to be filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933.
Based upon examination of such other instruments and records as we deem
necessary, we are of the opinion that:
1. The Holding Company has been duly incorporated under the laws of the
State of Delaware and is validly existing and in good standing under these laws.
2. The 2,640,062 shares of common stock covered by said Registration
Statement have been legally authorized, and when issued in exchange for the
common stock of Valle de Oro Bank, N.A. will be legally issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
said Registration Statement under the caption "legal opinions" in the Proxy
Statement, constituting a part of the Registration Statement.
Sincerely,
/S/ DOSTART CLAPP STERRETT & COVENEY, LLP
------------------------------------------
DOSTART CLAPP STERRETT & COVENEY, LLP
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[LETTERHEAD -- DOSTART CLAPP STERRETT & COVENEY, LLP]
EXHIBIT 8.0
November 18, 1998
The Board of Directors
Valle de Oro Bank, N.A.
1234 East Main Street
El Cajon, CA 92021
Re: Plan of Corporate Reorganization under which Valle de Oro Bank,
N.A., will become a wholly-owned subsidiary of Valley National
Corporation
Ladies and Gentlemen:
We have been requested as special counsel to Valle de Oro Bank, N.A.
(the "Bank") to render our opinion expressed below in connection with the
proposed consolidation (the "Consolidation") of the Bank and Valle de Oro
Interim Bank, N.A. (the "Interim Bank"), a wholly-owned subsidiary of Valley
National Corporation (the "Corporation"), a Delaware corporation organized at
the direction of the Bank pursuant to the terms and conditions of a
Consolidation Agreement (the "Agreement"), by and among the Bank, the
Corporation and the Interim Bank described in the Form S-4 Registration
Statement (the "Registration Statement") filed by the Corporation.
In rendering our opinion, we have conducted an examination of applicable
law, regulations, rulings, decisions, documents, and records, and have made such
investigation of fact as we have deemed necessary, and we have relied upon the
representations in the Agreement and upon the following "Assumption of Facts"
and certain "Representations" which have heretofore been made to us by directors
and officers and certain more than one percent stockholders.
ASSUMPTION OF FACTS
Valle de Oro Bank, N.A.
The Bank is a national bank organized under the laws of the United
States, with its executive offices at 1234 East Main Street, El Cajon,
California 92021.
The Bank has an authorized capital structure of 10,000,000 shares of
common stock, par value of $3.33 per share, 1,320,031 of which authorized shares
are presently issued and outstanding.
The Bank is engaged in the general banking business in San Diego County.
The Bank provides customary retail and commercial banking services to its
customers,
EXHIBIT 8.0
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The Board of Directors
November 18, 1998
Page 2
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including checking and savings accounts, time deposits, safe deposit
facilities, personal loans, and installment loans. It also makes secured and
unsecured commercial loans. The Bank does not operate any foreign offices.
Valley National Corporation
The Corporation is a domestic corporation which was incorporated on
October 7, 1998 for the purpose of becoming a bank holding company by acquiring
all of the outstanding shares of common stock of the Bank. The Corporation has
its executive offices at 1234 East Main Street, El Cajon, California 92021.
The Corporation has an authorized capital structure of 10,000,000 shares
of common stock, $0.0001 per share. After the consolidation becomes effective,
and as and when required by the Agreement, the Corporation will issue up to
2,640,062 shares of its common stock in exchange for Bank common stock, as
provided in the Agreement.
The Corporation maintains its books of account on a calendar year basis,
and computes its income for financial purposes under the accrual method of
accounting.
Valle de Oro Interim Bank, National Association
The Interim Bank is a banking association which will be organized under
the laws of the United States and wholly-owned by the Corporation. It is
intended that the Interim Bank will never open for business as a separate
operating entity, but will only be an "interim" bank to be consolidated with the
Bank as part of the proposed reorganization. The Interim Bank will have its
principal place of business at 1234 East Main Street, El Cajon, California
92021.
The Interim Bank will have an authorized capital structure of 2,000
shares of common stock, par value of $100 per share, and paid-in surplus of
$40,000. All of such 2,000 shares will be issued and outstanding at the time of
the Consolidation. Such capital and paid-in surplus figures represent the
minimum amounts which enable the Interim Bank to satisfy the capitalization
requirements of applicable law.
PROPOSED TRANSACTION
In the proposed transaction, the Bank will become a wholly-owned
subsidiary of the Corporation. Each of the following steps has been or will be
undertaken to carry out the plan of reorganization.
The Corporation will acquire 100% of the stock of the Interim Bank, as
soon as the Interim Bank receives a charter and issues shares of its common
stock. The Interim Bank
EXHIBIT 8.0
<PAGE> 3
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The Board of Directors
November 18, 1998
Page 3
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will be consolidated with the Bank under the charter of the Bank, pursuant to
the laws of the United States and pursuant to a Consolidation Agreement (the
"Agreement") which has been entered into between the Bank and the Corporation.
The Agreement will be joined in by the Interim Bank.
Pursuant to the Agreement, the resulting bank (hereinafter called the
"Resulting Bank") will continue the name and banking business of the Bank
without change. The Resulting Bank will continue to hold all of the Bank's
assets and will assume all of the Bank's liabilities subsequent to the
transaction. The name of the Resulting Bank will be "Valle de Oro Bank, N.A."
and the Resulting Bank's Articles of Incorporation and Bylaws will be the
Articles of Incorporation and Bylaws of the Bank upon the effective date of the
Consolidation. The Resulting Bank will operate under the charter of the Bank.
The principal office of the Bank will be the principal office of the Resulting
Bank.
At the effective date of the consolidation each share of the common
stock of the Bank then issued and outstanding will, by operation of law, be
transferred into stock of the Corporation, and the holders of each share of Bank
stock will receive two shares of common stock of Corporation in exchange
therefor, unless such holder properly exercises his dissenter's right of
appraisal under federal banking law. The shareholders of the Bank have the right
to dissent from the transaction under applicable law.
The amount and number of shares of capital stock of the Interim Bank
outstanding immediately before the consolidation becomes effective will be
increased by the amount and number of shares of the capital stock of the Bank
outstanding immediately before the consolidation becomes effective. At the
effective date of the consolidation the Resulting Bank will redeem from the
Corporation and simultaneously cancel the 2,000 shares of $100 par value stock
formerly representing the capital stock of the Interim Bank.
BUSINESS PURPOSES
The Boards of Directors of the Bank and the Corporation believe that the
proposed merger will provide a means whereby the Resulting Bank can provide
improved commercial banking services to the San Diego area.
The bank holding company structure will give the Resulting Bank greater
flexibility in carrying on its present activities and responding effectively in
the future to meet the changing needs of its customers. Enterprises with
facilities or customers outside of the Resulting Bank's local area can be served
more effectively by the broader geographic coverage of the Corporation. The bank
holding company structure will provide more flexibility in capital arrangements.
In addition, the borrowing ability of the group will be enhanced. Total earnings
of the group, including the Corporation and the Resulting
EXHIBIT 8.0
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The Board of Directors
November 18, 1998
Page 4
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Bank, should be increased through the use of the combined skills of the Bank and
the Corporation.
The new structure will also provide an opportunity for diversification,
either through the formation of new subsidiaries or by acquisition of
established companies. The activities in which a bank holding company may engage
include mortgage banking, financial companies, credit card activities, servicing
of loans for others, electronic data processing, equipment leasing, insurance
agencies or insurance brokerage operations, and certain equity and debt
investments.
In summary, the consolidation of the Interim Bank with and into the
Bank, and the Resulting Bank's affiliation with the Corporation is expected to
enable the Resulting Bank to operate more efficiently and profitably for the
benefit of its customers, employees and the shareholders of the Corporation.
REPRESENTATIONS
The following representations have been made to us by Corporation,
Interim Bank, Bank, directors, management, and certain more than 1%
shareholders, as applicable, in connection with the proposed transaction:
1. The fair market value of the Corporation's stock and other
consideration received by each Bank shareholder will be
approximately equal to the fair market value of the Bank stock
surrendered in the exchange.
2. There is no plan or intention by those certain shareholders of
the Bank who own 1% or more of the Bank stock, and to the best
of the knowledge of the management of Bank, there is no plan or
intention on the part of the remaining shareholders of Bank, to
sell, exchange or otherwise dispose of a number of shares of the
Corporation stock received in the transaction that would reduce
the Bank shareholders' ownership of the Corporation stock to a
number of shares having a value, as of the date of the
transaction, of less than 80% of the value of all of the
formerly outstanding stock of the Bank as of the same date. For
purposes of this representation, shares of Bank stock exchanged
for cash or other property, surrendered by dissenters or
exchanged for cash in lieu of fractional shares of parent stock
will be treated as outstanding Bank stock, and shares of
Corporation stock held by Bank shareholders and otherwise sold,
redeemed, or disposed of prior or subsequent to the transaction
have been considered in making this representation.
3. The Resulting Bank will acquire at least 90% of the fair market
value of the net assets and at least 70% of the fair market
value of the gross assets held by the
EXHIBIT 8.0
<PAGE> 5
[LOGO -- DOSTART CLAPP STERRETT & COVENEY, LLP]
The Board of Directors
November 18, 1998
Page 5
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Bank immediately prior to the transaction. For purposes of this
representation, amounts paid by the Bank to dissenters, amounts
paid by the Bank to shareholders who receive cash or other
property, the Bank assets used to pay its reorganization
expenses, and all redemptions and distributions (except for
regular, normal dividends) made by the Bank immediately
preceding the transfer, will be included as assets of the Bank
held immediately prior to the transaction.
4. Prior to the transaction, the Corporation will be in control of
the Interim Bank within the meaning of Section 368(c) of the
Internal Revenue Code.
5. Following the transaction, Resulting Bank will not issue
additional shares of its stock that would result in Corporation
losing control of Resulting Bank within the meaning of Section
368(c) of the Internal Revenue Code.
6. The Corporation has no plan or intention to reacquire any of its
stock issued in the transaction.
7. The Corporation has no plan or intention to liquidate the
Resulting Bank; to merge the Resulting Bank with and into
another corporation; to sell or otherwise dispose of the stock
of the Resulting Bank; or to cause the Resulting Bank to sell or
otherwise dispose of any of the assets of the Bank acquired in
the transaction, except for dispositions made in the ordinary
course of business or transfers described in Section
368(a)(2)(C) of the Internal Revenue Code.
8. The liabilities of the Interim Bank assumed by the Bank and the
liabilities to which the transferred assets of the Interim Bank
are subject were incurred by the Interim Bank in the ordinary
course of its business.
9. Following the transaction, the Resulting Bank will continue the
historic business of the Bank or use a significant portion of
the Bank's business assets in a business.
10. The Corporation, the Interim Bank, and the Bank, and the
shareholders of the Bank will pay their respective expenses, if
any, incurred in connection with the transaction.
11. There is no intercorporate indebtedness existing between the
Corporation and the Bank or between the Interim Bank and the
Bank that was issued, acquired, or will settle at a discount.
12. No two parties to the transaction are investment companies as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Internal
Revenue Code.
EXHIBIT 8.0
<PAGE> 6
[LOGO -- DOSTART CLAPP STERRETT & COVENEY, LLP]
The Board of Directors
November 18, 1998
Page 6
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13. The Bank is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of
the Internal Revenue Code.
14. The fair market value of the assets of the Interim Bank
transferred to the Bank will equal or exceed the sum of the
liabilities assumed by the Bank, plus the amount of liabilities,
if any, to which the transferred assets are subject.
15. No stock of the Interim Bank will be issued in the transaction.
16. No dividends will be paid by the Bank prior to the consummation
of the transaction other than regular periodic dividends,
consistent in amount and in effect with prior dividend
distributions.
17. The Bank presently has, and on the date of the proposed
transaction will have, no outstanding warrants, options or
convertible securities or any other type or right pursuant to
which any person could acquire shares of Bank except pursuant to
a stock option plan to be adopted by the Corporation for
Corporation shares after the transaction.
OPINION
Based on the foregoing "Assumption of Facts" and "Representations," it is our
opinion that:
1. The consolidation of the Interim Bank with the Bank pursuant to
12 USC Section 215 qualifies as a statutory merger/consolidation
under the federal banking laws, and provided that after the
transaction the Resulting Bank will hold substantially all of
the assets and substantially all of the liabilities of the Bank
and the Interim Bank, and further provided that in the
transaction shareholders of the Bank will exchange an amount of
stock of Bank representing "control" within the meaning of
Section 368(c) for Corporation voting stock, the transaction
will constitute a reorganization and a merger within the meaning
of Section 368(a)(1)(A) and (a)(2)(E) of the Internal Revenue
Code of 1986, as amended. For purposes of this opinion,
"substantially all" means at least 90% of the fair market value
of the gross assets of the Bank and the Interim Bank.
2. No gain or loss will be recognized by the Corporation, the Bank
or the Interim Bank upon the acquisition by the Corporation of
the stock of the Bank, as described in number 1, above.
3. The basis of the assets received by the Resulting Bank will be
the same as the basis of such assets in the hands of the Bank
immediately prior to the merger (Section 362(b)).
EXHIBIT 8.0
<PAGE> 7
[LOGO -- DOSTART CLAPP STERRETT & COVENEY, LLP]
The Board of Directors
November 18, 1998
Page 7
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4. No gain or loss will be recognized by the Corporation upon receipt of
stock of the Bank solely in exchange for stock in the Corporation
(Section 354(a)(1)).
5. With respect to Bank shareholders who receive only Corporation voting
stock in the transaction, no gain or loss will be recognized by them
on the receipt of shares of Corporation voting common stock solely in
exchange for shares of their stock in the Bank (Section 354(a)(1)).
6. With respect to those Bank shareholders who receive only Corporation
voting stock in the transaction, the basis of the Corporation stock
received by them will be the same as the basis of their shares of the
Bank stock surrendered in exchange therefor (Section 358(a)(1)).
7. The holding period for the Corporation's stock to be received by the
shareholders of the Bank will include the period during which their
shares of stock in the Bank surrendered in exchange therefor were
held, provided that the shares of the Bank stock surrendered in the
exchange were held as capital assets on the date of the exchange
(Section 1223(1)).
This letter is solely for your information and use and, except to the
extent that such may be referred to in the Registration Statement on Form S-4,
or an amendment thereto, as filed with the Securities and Exchange Commission
and the California Commissioner of Corporations, as an exhibit to same, it is
not to be used, circulated, quoted or otherwise referred to for any other
purpose, or relied upon by any other person, for whatever reason without prior
written consent.
Sincerely,
/s/ DOSTART CLAPP STERRETT & COVENEY, LLP
-------------------------------------------
DOSTART CLAPP STERRETT & COVENEY, LLP
EXHIBIT 8.0
<PAGE> 1
EXHIBIT 10.0
Data Processing Services Agreement between Valle de Oro Bank, N.A. and M & I
Data Services, Inc. dated September 25, 1991; Visa/Master Money Card Amendment
to Data Processing Services Agreement dated September 25, 1991; Amendment to
Data Processing Services Agreement dated October 24, 1995; Amendment to Data
Processing Services Agreement dated April 3, 1998
<PAGE> 2
[M&I DATA SERVICES, INC. LETTERHEAD]
DATA PROCESSING SERVICES AGREEMENT
THIS DATA PROCESSING SERVICES AGREEMENT is made as of this 25th day of
September 1991, (the "Agreement") by and between M&I Data Services, Inc., a
Wisconsin corporation ("M&I") and Valle de Oro Bank, N.A., a California
corporation, together with its subsidiaries and affiliates (collectively
referred to as the "Customer").
RECITALS
WHEREAS, M&I provides data processing services to customers located across
the country; and
WHEREAS, M&I desires to provide data processing services to Customer, and
Customer desires to have M&I provide it with such services.
NOW, THEREFORE, in consideration of the recitals and for the good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Services. M&I shall provide Customer with the data processing services
requested by Customer utilizing the version of the banking system software made
available from time to time by M&I through the M&I Service Bureau (the
"Services") . The functionality of the software and a further description of the
Services is set forth in the User Manuals, copies of which will be provided, or
made available to Customer. Unless otherwise indicated on Exhibit A, Customer
shall purchase all of its required data processing services from M&I. Customer
shall cause all future subsidiaries and affiliates, if and when any such future
subsidiary or affiliate terminates its agreement with the data processing
vendor providing services prior to the acquisition or affiliation, to purchase
all of their required data processing services from M&I, where M&I offers like
or similar data processing services to those required by the Customer, its
affiliates and subsidiaries and M&I consents to providing those services. Unless
otherwise agreed in writing between M&I and Customer, and subject to the other
provisions of the Agreement, M&I shall make the On-line Services available to
Customer, subject to normal downtime and maintenance, at times indicated on the
M&I On-line Availability Schedule, as modified from time to time.
2. Fees and Taxes. Customer agrees to pay for the Services received
hereunder as follows:
a. Amount of Fees. Commencing on the Agreement Date and on the first
day of each month thereafter through the end of the term of this Agreement,
Customer shall pay M&I a minimum monthly fee not less than twelve thousand five
hundred dollars ($12,500) per month (the "Minimum Monthly Fee"). The Minimum
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<PAGE> 3
Monthly Fee will be adjusted: (a) as of the date M&I makes effective a price
increase; and (b) on the first day of any month after: (i) the Additional Use
Fee (as defined below) is greater than twenty-five percent (25%) of the Minimum
Monthly Fee; or (ii) Customer expands the Services used hereunder to include an
additional application. The Minimum Monthly Fee may not be decreased.
Adjustments to the Minimum Monthly Fee shall be based on the Services,
transactions, and volumes used by the Customer during the Adjustment Period (as
defined below), or the period from commencement of services to the date of the
adjustment during the initial three (3) months of the Agreement. The Minimum
Monthly Fee shall not be more than eighty-five percent (85%) of the
average monthly charges during the Adjustment Period. Customer shall also pay
M&I an additional use fee each month where M&I charges for the Services actually
used by Customer during the applicable month are greater than the Minimum
Monthly Fee. M&I shall compute the Customer's actual usage charges based on
M&I's then-current standard published prices, and any amounts due M&I in excess
of the Minimum Monthly Fee shall be paid by Customer (the "Additional Use Fee").
Customer also agrees to pay all communication costs, telecommunication charges,
printline charges and other output costs, start-up fees, pass-through charges,
out-of-pocket expenses, workshop fees, training fees, and late fees or charges
billed as miscellaneous on Customer's invoice (the "Miscellaneous Fees").
Travel costs billed to Customer shall not exceed thirty thousand dollars
($30,000). The M&I standard published prices as of the date of this Agreement
are set forth on the fee schedule attached as Exhibit B.
b. Additional Charges. In addition to the charges described above or set
forth in Exhibit B, Customer agrees to pay for any manufacturers, sales, use,
excise, personal property, or any other tax or charge, or duty or assessment
levied or assessed by any governmental authority upon or as a result of the
execution or performance of any service pursuant to this Agreement or materials
furnished with respect to the Agreement, except those taxes based on M&I's net
income.
c. Terms of Payment. Customer shall pay the Minimum Monthly Fee on the
first day of the month in which the Services are to be performed, and shall pay
the Additional Use Fee and any Miscellaneous Fees within ten (10) days of the
date such amounts are invoiced to Customer. Any other amounts due hereunder
shall be paid within ten (10) days of invoice, unless otherwise provided herein.
The Customer shall also pay any collection fees and reasonable attorney's fees
incurred by M&I in collecting payment of the charges and any other amounts for
which Customer is liable under the terms and conditions of this Agreement.
d. Modification of Terms and Pricing. If Customer is in default and M&I
elects to continue to perform the Services, or if the Customer's tangible
capital or reserve requirements computed in accordance with applicable federal
regulations for itself or any of its affiliates receiving Services hereunder are
less than the required regulatory minimums, Customer agrees to Pay M&I all
unamortized conversion expenses in advance of M&I performing any additional
Services. In addition, Customer agrees that all charges for Services shall be
computed using one hundred ten percent (110%) of M&I's then-current standard
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<PAGE> 4
published prices, paid in advance as determined by M&I. At M&I's option, such
Services shall be provided on a month-to-month basis.
3. Term.
a. Initial Term. This Agreement shall be effective upon execution
by both parties. The term of this Agreement shall continue for a period of
seventy-two (72) months from the Agreement Date.
b. Renewal Obligations. During any renewal term, or for any
Services provided after the end of the initial term, whether or not the
Agreement is renewed, Customer agrees that the terms of this Agreement shall
continue to apply, except that all charges for Services shall be computed using
one hundred ten percent (110%) of M&I's then-current standard published prices
paid in advance as determined by M&I. At M&I's option, such Services shall be
provided by M&I on a month-to-month basis.
4. Affiliates. All processing for Customer and Customer's subsidiaries and
affiliates which M&I does shall be included as part of the Services provided
under this Agreement and shall be done in accordance with the terms and
conditions of this Agreement. Customer agrees that it is responsible for
assuring compliance with the Agreement by its affiliates and subsidiaries.
Customer agrees to be responsible for the submission of its affiliates' data to
M&I for processing and for the transmission to Customer's affiliates of such
data processed by and received from M&I. Customer agrees to pay any and all fees
owed under this Agreement for Services hereunder.
5. Confidentiality. Both parties will, to the extent and in accordance with
their policies used to protect their own information of similar importance, use
their best efforts to refrain from and prevent the use of or disclosure of any
confidential information of the other party, disclosed or obtained by such party
while performing its obligations under this Agreement, except when such use or
disclosure is for the purpose of providing the Services. Neither party will have
an obligation of confidentiality with regard to any information insofar as the
same: (1) was known to such party prior to disclosure; (2) is or becomes
publicly available other than as a result of a breach of this Agreement; or (3)
is disclosed to such party by a third party not subject to an obligation of
confidentiality. Nor shall the obligation of confidentiality occur where
disclosure is made pursuant to: (1) any law of the United States or any state
thereof; (2) the order of any court or governmental agency; or (3) the rules and
regulations of any governmental agency.
6. Programming. M&I reserves the right to determine the programming
(whether hardware or software) utilized with the equipment used in fulfilling
its duties under this Agreement. All programs (including ideas and know-how and
concepts) developed by M&I are and remain its sole property.
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<PAGE> 5
7. Equipment. Customer shall obtain and maintain at its own expense such
data processing and communications equipment as may be necessary or appropriate
to facilitate the proper use and receipt of the Services. Customer shall pay all
installation, monthly, and other charges relating to the installation and use of
communications lines in connection with the Services. M&I shall not be
responsible for the reliability monitoring or continued availability of the
communications lines used by Customer in accessing the Services.
8. Supplies. Customer shall pay for all supplies used in connection with
the Services. All forms, supplies, or materials used in processing Customer's
items and input data shall meet M&I's specifications.
9. Systems Modification; Amendment of Services. M&I may modify, amend,
enhance, update, or provide the appropriate replacement for any of the Services,
the software used to provide the Services, or any element of its systems at any
time to: (1) improve the Services or (2) facilitate the continued economic
provisions of the Service. M&I may, at any time, withdraw any of the Services
upon providing one hundred twenty (120) days' prior written notice to Customer.
M&I may also terminate any of the Services immediately upon any regulatory,
legislative, or judicial determination that providing such Services is
inconsistent with applicable law or regulation or upon imposition by any such
authority of restrictions or conditions which would detract from the economic or
other benefits to M&I or Customer to any element of the Services.
10. Disaster Recovery. M&I maintains, and shall continue to maintain
throughout the term of this Agreement, off-site disaster recovery capabilities
which permit M&I to recover from a disaster and continue providing Services to
Customers within a commercially reasonable period. An executive summary of the
current disaster recovery plan, which may change from time to time, is available
upon request from M&I at no charge. M&I shall test the operation and
effectiveness of its disaster recovery plan at least annually. M&I maintains,
and shall continue to maintain throughout the term of this Agreement, a backup
power supply system to guard against electrical outages.
11. Events of Default. It shall be an Event of Default on the part of the
Customer if: (1) Customer is insolvent, or a receiver or conservator shall be
appointed with respect to the Customer; or (2) Customer shall fail to pay any
sum due M&I within the prescribed time; or (3) if the Customer shall fail to
perform any of its other covenants or obligations under this Agreement. It shall
be an Event of Default on the part of M&I if M&I shall fail to perform any of
its obligations under this Agreement where the failure of M&I to perform has a
material adverse impact on Customer and is material to the provision of the
Services. The defaulting party shall have ten (10) days from the date of receipt
of notice from the nondefaulting party of nonpayment or nonperformance to cure
such an Event of Default, before the nondefaulting party may exercise any
remedies it may have as a result of the Event of Default.
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<PAGE> 6
12. Remedies Upon Default; Limitation of Liabilities. If an Event of
Default occurs on the part of the Customer, and is not cured within the ten (10)
day period prescribed in Section 11, M&I may: (1) terminate this Agreement; (2)
terminate access to its central processing unit by the Customer; and (3) declare
all amounts payable under this Agreement to be immediately due payable and file
suit for or otherwise obtain payment from the Customer of any fees or other sums
due it pursuant to this Agreement, plus any actual damages to its equipment or
systems caused by the Customer's actions, failures to act, equipment, systems or
communication facilities, plus any profits lost because of the Customer's
default. If an Event of Default occurs on the part of M&I, and is not cured
within the ten (10) day period prescribed in Section 11, the Customer may only:
(1) terminate this Agreement and (2) file suit or otherwise obtain payment of an
aggregate amount of up to the greater of (a) one hundred thousand dollars
($100,000) or (b) the amount of fees paid by the Customer to M&I hereunder
during the three (3) months immediately preceding the Event of Default. Either
party may also seek specific performance, including injunctive relief, for a
breach of Section 5 of this Agreement. M&I and the Customer agree that these
damage provisions are reasonable in light of all present predictable
circumstances (including expectable actual damages in that the fees to be
charged by M&I hereunder do not include amounts sufficient to insure against
greater claims). M&I and Customer expressly waive all claims for additional,
incidental, consequential, compensatory, or punitive damages and agree that the
remedies set forth in this Agreement shall be the sole and exclusive remedies of
the parties. No lawsuit or other action may be brought by either party hereto or
on any claim or controversy based upon or arising in any way out of this
Agreement after one (1) year from the date of the occurrence allegedly giving
rise to the action, except for nonpayment of sums due to M&I by Customer. M&I
agrees that except in the case of an Event of Default relating to a breach by
the Customer of its confidentiality obligations under Section 5 of this
Agreement, M&I will not exercise its remedy to terminate Customer's access to
the M&I central processing unit so long as: (a) Customer is current in the
payment of all amounts due M&I as reflected on M&I's last invoice to Customer;
and (b) only exercise such remedy after providing Customer with sixty (60) days'
prior written notice.
13. Termination.
a. End of Initial Term. This Agreement shall automatically be
extended at the end of the initial seventy-two (72) month term for an additional
eighteen (18) month renewal term, unless the Customer gives M&I at least one
hundred eighty (180) days' prior written notice of its intent to terminate,
which notice may be given during the initial term of the Agreement.
b. Renewal Term. During the renewal term, this Agreement shall be
automatically extended for an additional one (1) month on each monthly
anniversary date so that the term shall always be not less than one (1) month
less than eighteen (18) months. unless either party gives written notice to the
other party of notice to terminate, in which event the automatic monthly
renewals will end and the Agreement will terminate at the end of the unexpired
portion of the term in existence on the date notice to terminate is given.
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<PAGE> 7
c. Termination Upon Default. This Agreement may also terminate upon
an Event of Default and failure to cure beyond applicable cure periods at the
option of the nondefaulting party as set forth in Section 12 hereof.
14. Regulatory Assurances. M&I and Customer acknowledge and agree that the
performance of these Services will be subject to regulation and examination by
Customer's regulatory agencies to the same extent as if such Services were being
performed by Customer. Upon request, M&I agrees to provide any appropriate
assurances to such agency and agrees to subject itself to any required
examination or regulation. Customer agrees to reimburse M&I for reasonable costs
actually incurred due to any such examination or regulation that is performed
solely for the purpose of examining data processing services used by Customer.
a. Notice Requirements. The Customer shall be responsible for
complying with all regulatory notice provisions to any applicable governmental
agency, which shall include providing timely and adequate notice to the Chief
Examiner of the Federal Home Loan Bank Board, the Office of Thrift Supervision,
the Office of the Comptroller of the Currency, The Federal Deposit Insurance
Corporation, the Federal Reserve Board, or their successors, as applicable
(collectively, the "Federal Agency"), as of the effective date of Services under
this Agreement, identifying those records to which this Agreement shall apply
and the location at which such Services are to be performed.
b. Examination of Records. The parties agree that the records
maintained and produced under this Agreement shall, at all times, be available
for examination and audit by governmental agencies having jurisdiction over the
Customer's business, including (without limitation) the Federal Agency. The
Director of Examinations of the Federal Agency or his designated representative
shall have the right to ask for and to receive directly from M&I any reports,
summaries, or information contained in or derived from data in the possession of
M&I related to the Customer. M&I shall notify Customer as soon as possible of
any formal request by an authorized governmental agency to examine Customer's
records maintained by M&I, if M&I is permitted to make such a disclosure to
Customer under applicable law or regulations. Customer agrees that M&I is
authorized to provide all such described records when formally required to do so
by this authorized governmental agency.
c. Fidelity Bonds. At Customer's request, M&I shall obtain, at
Customer's expense, fidelity bond coverage for M&I and its employees as such
coverage is required by any governmental or regulatory agency.
d. Notice of Changes, Customer shall give to the Director of
Examinations of the Federal Agency at least thirty (30) days' notice of the
termination of this Agreement or of any material changes in the Services to be
provided hereunder.
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e. Insurance. Throughout the term of this Agreement, M&I shall
maintain insurance coverage (or shall be self-insured) for losses from fire,
disaster, and other causes contributing to interruption of the Services. The
proceeds of such insurance shall be payable to M&I. Nothing in this Agreement
shall be construed as to permit Customer to receive any of such proceeds, or to
be named as an additional loss payee under any insurance policy.
f. Financial Information. Customer agrees to provide M&I with a copy
of the Call Report filed with the Federal Agency simultaneously with its filing
with the Federal Agency, and to provide such additional financial information as
to its creditors or others as M&I may reasonably request.
15. Transportation and/or Transmission of Data. The responsibility and
expense for transportation and/or transmission of and risk of loss of data and
media to and from M&I's datacenters shall be borne by Customer. M&I will notify
Customer of the time by which Customer's data and media must be delivered to M&I
for processing for M&I to provide Customer's processed data within the time
period indicated by M&I.
16. Responsibility.
a. General. M&I agrees to perform the Services in a commercially
reasonable manner, which is similar to the services provided to other M&I
customers, and no other or higher degree of care. Except as otherwise described
herein, M&I assumes no other obligation as to performance or quality of the
Services provided, all other risks of error being expressly assumed by Customer.
M&I shall not be responsible for loss or damage due to delays in processing or
in the delivery of processed data as a result of any of the causes excused by
Section 19 hereof. M&I WILL IN NO EVENT BE LIABLE FOR ANY INDIRECT, INCIDENTAL,
OR CONSEQUENTIAL DAMAGES INCURRED BY CUSTOMER INCLUDING, BUT NOT LIMITED TO,
LOST PROFITS OR BUSINESS OPERATION LOSS, REGARDLESS OF WHETHER M&I WAS ADVISED
OF THE POSSIBLE OCCURRENCE OF SUCH DAMAGES.
b. Reliance on Data Supplied. M&I will process items and data and
perform those Services described in this Agreement on the basis of information
furnished by Customer. M&I shall be entitled to rely upon any such data,
information, or instructions as provided by Customer. If any error results from
incorrect input supplied by Customer, Customer shall be responsible for
discovering and reporting such error and supplying the data necessary to correct
such error to M&I for processing at the earliest possible time. Customer will
indemnify and hold M&I harmless from any cost, claim, damage, or liability
(including attorney's fees) whatsoever arising out of such data, information or
instructions, or any inaccuracy or inadequacy therein. Customer assumes all risk
of loss, delay, and miscommunication in the transportation or transmission by
electronic means of data and information from any terminal or remote unit unless
the same is caused by or attributable to any act or omission on M&I's part,
which act or omission does not meet the standard of care in Section 16(a), or
was caused by or attributable to any gross negligence or willful failure on
M&I's part to comply with its obligations under this Agreement.
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c. Data Backup. Customer shall maintain adequate records including
microfilm images of items being transported to M&I, or at least ten (10)
business days' backup on magnetic tape or other electronic media where
transactions are being transmitted to M&I, from which reconstruction of lost or
damaged items or data can be made. Customer assumes all responsibility and
liability for any loss or damage resulting from failure to maintain such
records.
d. Audit. M&I shall cause a third-party review of its data
processing systems and Services to be conducted annually by its independent
auditors. M&I shall provide Customer, upon request, at its then-current charge,
one copy of the report resulting from such review.
e. Regulatory Compliance. Customer is responsible for determining
that the Services performed in its behalf, any forms which are used with its
customers, and all records it retains comply with all applicable laws. Should
Customer need information from the Services M&I provides in order to comply with
applicable Federal or State laws and regulations, Customer's sole remedy, and
M&I's sole obligation shall be for M&I to provide the ability to process the
information requested from the Customer as promptly as is commercially
practicable.
f. Balancing and Controls. On a daily basis, Customer shall review
all input and output, controls, reports, and documentation, to ensure the
integrity of data processed by M&I. In addition, Customer shall, on a daily
basis, check exception reports to verify that all file maintenance entries and
nondollar transactions were correctly entered. Customer is responsible for
initiating timely remedial action to correct any improperly processed data which
these reviews would disclose.
g. Service Deficiencies. If Customer is aware that a defect exists
in a Service, Customer shall be responsible for making whatever appropriate
adjustments may thereafter be necessary until M&I corrects the defect and, if
requested by Customer, M&I will, at M&I's expense, assist Customer in making
such corrections through the most cost-effective means, whether manual, by
system reruns, or program modifications. M&I will, where reasonable, make every
effort to correct any known material defect as soon as commercially reasonable
at M&I's expense.
17. Ownership of Data. Customer is the owner of all of its data supplied by
Customer to M&I for processing hereunder. Customer acknowledges that it has no
rights in any of the software, systems documentation, guidelines, procedures,
and similar related materials or any modifications thereof except with respect
to M&I's use of the same during the term of this Agreement to process data. Upon
termination of this Agreement, M&I shall provide Customer with all copies of
Customer's data in a format that is being used by M&I at that time for
processing such data. Prior to the release of the Customer's data: (1) all
amounts owed under this Agreement by Customer to M&I shall be current and paid
in full, and (2) Customer shall pay M&I its "Estimated Deconversion Expenses" as
Page 8
<PAGE> 10
described below. Customer agrees to pay M&I for M&I's work in providing such
data at M&I's rates then in effect for computer and personnel time, supplies,
and other items as required, and Customer further agrees to pay M&I for any and
all charges associated with the deconversion of Customer's data based on M&I's
then-current charges for such Services. M&I shall make a good faith estimate of
all of such costs, expenses, and charges which shall be paid by Customer in
advance (the "Estimated Deconversion Expenses"). The difference, if any, between
the actual expenses and the prepaid Estimated Deconversion Expenses shall be
promptly paid after determination.
18. Warranties. M&I represents and warrants that:
a. Capability of Computer Systems and Software. M&I's computer
systems (hardware and software) are capable of performing the Services in
accordance with the provisions of this Agreement. The software used to provide
the Services will operate substantially in accordance with the specifications
and documentation for the software as modified from time to time to incorporate
enhancements or modifications of the software to provide the Services.
b. Quality of Service. The reports and Services made available to
Customer shall be in substantial conformity with the User Manuals, as amended
from time to time, copies of which have been, or will be, provided to Customer.
c. Property Rights. M&I has the right to provide the Services
hereunder, using all computer software required for that purpose.
d. Organization and Approvals. M&I is a validly organized corporate
entity with valid authority to enter into this Agreement. This Agreement has
been duly authorized by all necessary corporate action.
e. Disclaimer of Warranties. EXCEPT AS DESCRIBED IN THIS SECTION OF
THIS AGREEMENT, M&I DISCLAIMS ALL OTHER WARRANTIES, WHETHER WRITTEN, ORAL,
EXPRESSED OR IMPLIED INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
19. Force Majeure. M&I shall not be liable to Customer if M&I's fulfillment
or performance of any terms or provisions of this Agreement is delayed or
prevented by revolution or other civil disorders, wars, acts of enemies,
strikes, electrical equipment or availability failure, labor disputes, fires,
floods, acts of God, federal, state, or municipal action, statute, ordinance or
regulation, or, without limiting the foregoing, any other causes not within its,
reasonable control and which bv the exercise of reasonable diligence it is
unable to prevent, whether of the class of causes hereinbefore enumerated or
not.
Page 9
<PAGE> 11
20. IRS Filing. Customer has complied with all laws, regulations,
procedures, and requirements in attempting to secure correct Tax Identification
Numbers (TINs) for Customer's payees and agrees to attest to this compliance by
affidavit provided annually. Customer authorizes M&I to act as Customer's agent
and sign on Customer's behalf the Affidavit required by the Internal Revenue
Service on Form 4804, or any successor form.
Customer acknowledges that M&I's execution of the Form 4804 Affidavit on
Customer's behalf does not relieve Customer of responsibility to provide
accurate TINs or liability for any penalties which may be assessed for failure
to comply with TIN requirements. Customer agrees to hold M&I harmless from any
liabilities, claims, expenses, penalties, or damages (including attorneys' fees)
which may be assessed or incurred as a result of the failure to comply with TIN
requirements.
21. Use of the Services. (a) Customer assumes exclusive responsibility for
the consequences of any instructions Customer may give M&I, for Customer's
failure to properly access the Services in the manner prescribed by M&I, and for
Customer's failure to supply accurate input information; (b) Customer agrees
that it will use the Services in accordance with such reasonable policies as may
be established by M&I from time to time as set forth in any materials furnished
by M&I to Customer; (C) Customer agrees that, except as otherwise permitted by
M&I, Customer will use the Services only for its own internal business purposes
and will not sell or otherwise provide, directly or indirectly, any of the
Services or any portion thereof to any third party; and (d) Customer agrees and
represents that (i) this Agreement has been approved by its Board of Directors,
or that the officer executing this Agreement has been specifically authorized by
Customer's Board of Directors to execute this Agreement, (ii) the performance of
this Agreement by the Customer will not affect the safety or soundness of the
Customer or any of its affiliates, and (iii) this Agreement, and the obligations
evidenced hereby, will be properly reflected on the books and records of the
Customer, and the Customer will provide evidence of the same to M&I upon
request.
22. Miscellaneous.
a. Governing Law. This Agreement shall be construed and governed by
the laws of the state of Wisconsin.
b. Amendment. This Agreement, including the Schedules hereto, may be
amended only by an instrument in writing executed by the parties or their
permitted assignees.
c. Assignment. This Agreement may not be assigned by either party
without the prior written consent of the other party, which such consent shall
not be unreasonably withheld, provided that M&I may freely assign this Agreement
to any company that is directly or indirectly (i) in control of M&I, (ii) under
the control of M&I, or (iii) under common control with M&I.
Page 10
<PAGE> 12
d . Section Headings. Section headings are for reference purposes
only and shall not affect the interpretation or meaning of this Agreement.
e. Notices. All communications or notices required or permitted by
this Agreement shall be in writing and shall be deemed to have been given at the
earlier of the date when actually delivered to an officer of a party or when
deposited in the United States mail, certified or registered mail, postage
prepaid, return receipt requested, and addressed as set forth on the signature
page, unless and until any of such parties notifies the others.
f. No Waiver of Performance. Failure by either party at any time to
require performance by the other party to claim a breach of any provision of
this Agreement will not be construed as a waiver of any right accruing under
this Agreement, nor affect any subsequent breach, nor affect the effectiveness
of this Agreement or any part hereof, nor prejudice either party as regards any
subsequent action.
g. Entire Agreement; Conflicting Provisions. This Agreement,
together with the Schedules hereto, constitutes the entire agreement between the
Customer and M&I with respect to the subject matter hereof. There are no
restrictions promises warranties, covenants, or undertakings other than those
expressly set forth herein and therein. This Agreement supersedes all prior
negotiations, agreements, and undertakings between the parties with respect to
such subject matter. In the event of any conflict between the terms of the main
body of this Agreement and any of the Schedules hereto, the terms of the main
body of this Agreement shall govern.
h. Execution in Counterparts. This Agreement may be executed
simultaneously in any number of counterparts, each of which shall be deemed an
original but all of which shall together constitute one and the same Agreement.
i. Enforceability. The invalidity or enforceability of any provision
hereof shall not affect or impair any other provisions.
j. Scope of Agreement. If the scope of any of the provisions of the
Agreement is too broad in any respect whatsoever to permit enforcement to its
full extent, then such provisions shall be enforced to the maximum extent
permitted by law and the parties hereto consent and agree that such scope may be
judicially modified accordingly and that the whole of such provisions of this
Agreement shall not thereby fail, but that the scope of such provisions shall be
curtailed only to the extent necessary to conform to law.
Page 11
<PAGE> 13
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
in their names as of the date first above written.
M&I DATA SERVICES, INC. ("M&I")
770 North Water Street
Milwaukee, WI 53202
By: /s/ JOSEPH L. DELGADILLO
-------------------------------------
Name: Joseph L. Delgadillo
Senior Vice President
M&I DATA SERVICES, INC. (M&I")
770 North Water Street
Milwaukee, WI 53202
By: /s/ MICHAEL V. RUANE
-------------------------------------
Name: Michael V. Ruane
Vice President
Valle de Oro Bank, N.A. (the "Customer")
9832 Campo Road
Spring Valley, CA 92077
By: /s/ WILLIAM V. EHLEN
--------------------------------------
Name: William V. Ehlen
President & CEO
Page 12
<PAGE> 14
ATTORNEY-IN-FACT APPOINTMENT
Customer hereby appoints M&I Data Services, Inc., ("M&I") as customer's
attorney-in-fact and empowers M&I to authorize the Internal Revenue Service
(IRS) to release information documents supplied to the IRS by M&I to states
which participate in the "Combined Federal/State Program." Customer agrees to
hold M&I harmless from any liabilities, claims, expenses, penalties, or damages
(including attorneys' fees) which may be assessed or incurred as a result of the
release of information.
Valle de Oro Bank, N.A.
Customer
By [SIG]
------------------------------------------
Customer's Representative
Page 13
<PAGE> 15
AFFIDAVIT
STATE OF California )
) SS.
COUNTY OF San Diego )
I, Roland C. Nickerson, being first duly sworn, on oath,
-------------------
Customer's Representative
depose and say:
1. I am an employee of Valle de Oro Bank, N.A. I have personal knowledge
of my employer's practices with regard to procuring and reporting Tax
Identification Numbers (TINs) and authority to execute this Affidavit on my
employer's behalf.
2. Valle de Oro Bank, N.A. has complied with all laws, regulations,
procedures, and requirements in attempting to secure correct TINs for its
payees. This compliance has been pursued with due diligence, and any failure to
secure correct TINs is due to reasonable cause.
[SIG]
---------------------------------
Customer's Representative
Subscribed and sworn to
before me this 21st day
of October 1991.
/s/ E. I. HENDRICKSON
- -----------------------------------
Notary Public
My Commission: expires October 1, 1993 [STAMP]
Page 14
<PAGE> 16
SCHEDULE
M&I ON-LINE AVAILABILITY
The following is a list of standard hours off availability by each on-line
service. All times are CST/CDT.
<TABLE>
<S> <C>
o Cardholder
(CRT Maintenance)
Monday-Thursday 7:00 a.m.- 6:45 p.m.
Friday 7:00 a.m.- 9:30 p.m.
Saturday 7:00 a.m.- 4:30 p.m.
o CIS & Deposit System
(Maintenance and Dollar Transactions)
Monday-Thursday 7:00 a.m.- 6:45 p.m.*
Friday 7:00 a.m.- 9:30 p.m.*
Saturday 7:00 a.m.- 4:30 p.m.
o Data Entry
(Account Reconciliation System)
Monday-Friday 7:00 a.m.-10:00 p.m.
o Data Entry
(Financial Control)
Monday-Thursday 7:00 a.m.-11:00 p.m.
Friday 7:00 a.m.-12:00 Midnight
Saturday 7:00 a.m.- 4:30 p.m.
o Decision Management System
Monday-Thursday 7:00 a.m.- 6:45 p.m.
Friday 7:00 a.m.- 9:30 p.m.
Saturday 7:00 a.m.- 4:30 p.m.
o Data Entry
(Trust)
Monday-Friday 7:00 a.m.- 5:00 p.m.
o Financial Control On-line
Monday-Friday 7:00 a.m.- 8:00 p.m.
Saturday 7:00 a.m.- 4:30 p.m.
o Loan System
(CRT Maintenance)
Monday-Thursday 7:00 a.m.- 6:15 p.m.
Friday 7:00 a.m.- 8:30 p.m.
Saturday 7:00 a.m.- 4:30 p.m.
o Management Information Service
Monday-Thursday 7:00 a.m.- 6:45 p.m.
Friday 7:00 a.m.- 9:30 p.m.
Saturday 7:00 a.m.- 4:30 p.m.
(Except Money Market Info.)
o Teller Terminals
Monday-Thursday 7:00 a.m.- 7:00 p.m.
Friday 7:00 a.m.- 9:30 p.m.
Saturday 7:00 a.m.- 4:30 p.m.
</TABLE>
*CIS access to loan data is based on Loan System hours of availability. West
Coast availability for CIS, Loans, and Deposits for Monday-Friday is 8:00
a.m.-10:00 p.m., CST/CDT.
<PAGE> 17
[M&I DATA SERVICES, INC. LETTERHEAD]
EXHIBIT A
<PAGE> 18
FINANCIAL SERVICE PRODUCTS
- - Deposit Services
- - Loan Services
- - Teller/Platform Services
- - Automated Funds Transfer
- - Automated Clearinghouse
- - Corporate Cash Management Services
- - Customer Information System
- - Financial Control
- - Tickler System
- - Management Information Service
- - IRS Reporting
- - INFO Center
- - EFT Services
- - Safe Deposit System
- - Item Processing
- - Remote Site Support
- - Trust Services
- - Audit Services
<PAGE> 19
[M&I DATA SERVICES, INC. LETTERHEAD]
EXHIBIT B
<PAGE> 20
M&I
DATA SERVICES, INC.
CUSTOMER PRICE LIST
(Effective March 1, 1991)
This list is intended for the use of M&I Data Services, Inc., and its customers
only. No other distribution or usage is permitted.
NOTE: Except where noted, all rates are assumed to be monthly.
<PAGE> 21
1991
PRICE LIST
Table of Contents
<TABLE>
<CAPTION>
SERVICE PAGE
------- ----
<S> <C>
Deposit Services 1-2
Loan Services 3-4
Teller/Platform Services 5
Customer Information System (CIS) 6
Financial Control (General Ledger) 7
EFT Services 8
INFO Center 9-10
Item Processing
Bulk Filing 11
Proof of Deposit (POD) 11
Remote Site Support 11
Other Services
Audit Services 12
Automated Clearing House (ACH) - Receiving 12
Automated Funds Transfer (AFT) 12
Disaster Recovery 12
Discount Brokerage 13
Custom Statement Formatter 13
IRS Reporting 13
Maintenance/Support 13
Management Information Service 13
Profitability and Management Support 13
Safe Deposit 13
Six-Day Processing 13
Tickler System 13
User-Defined Security 14
Output 15
MICARD Services
Cardholder Services 16
Cardholder Supplies 16
Merchant Services 17
Merchant Supplies 17
Debit Card Price List 18
Cardholder Services 18
Cardholder Supplies 18
Corporate Cash Management Services
Account Reconciliation 19
Automated Clearinghouse (ACH) Originating 19
Preauthorized Check Processing 20
Automated Balance Reporting 20
Controlled Disbursement 20
Management Information Link 20
MICASH Control System 21
Payroll 22
Additional Services 23
Late Fees 23
Interim Processing Service 23
</TABLE>
<PAGE> 22
<TABLE>
<CAPTION>
DEPOSIT SERVICES
Units Rate
----- ----
<S> <C> <C>
Base Fee per institution $150.00
Demand, Money Market, Savings, NOW per open account .205
Time Deposit (Levels 1-4) Accounts per open account .150
Deposits per deposit .105
Expedited Funds Availability per float transaction .005
Reject Items per item .075
Transaction Processing
1 - 250,000 per transaction .0315
250,001 - 500,000 per transaction .0285
500,001 - 750,000 per transaction .0255
750,001 - 1,000,000 per transaction .0245
Over 1,000,000 per transaction .0225
Remote Site Credit(l) per transaction (.0105)
Additional Deposit Services
ACH Originating per transaction .07
Automated Product Conversion per keyword .06
Automatic Branch Change per keyword .06
Employee Security Processing per institution 100.00
Exception Processing
Base Fee per institution 50.00
On-line Exceptions per transaction .023
Criteria Posting per item .0555
Kiting Suspect Detection(2) per account analyzed .001
Money Talks per transaction/inquiry .016
Retirement Account Reporting
Base Fee per institution 40.00
1 - 20,000 per IRA account .42
20,001 - 40,000 per IRA account .37
Over 40,000 per IRA account .32
Overdraft Checking(PRA)/Line-of-Credit per active account .48
Retention
Closed Account per account .04
Cycle - 12 months (includes History
Analysis Report R-2830) per account .07
Minimum Fee per institution 25.00
Transaction Retention per 1,000 transactions/day .045
Sweep Account Processing
Base Fee per institution 45.00
Accounts per account .08
Relationship Service Charging per account .06
</TABLE>
(1) Credit received on items captured at the customer site. Credit does not
apply to live log transactions.
(2) $25.00 minimum per institution.
Page 1
<PAGE> 23
<TABLE>
<CAPTION>
DEPOSIT SERVICES
Units Rate
----- ----
<S> <C> <C>
Reports (see output Section)(1)
Escheatment suspect - R-1003
Base Fee per institution 35.00
Account per account .02
Extra Copies per account .01
Original Issue Discount(2) per report/per request 15.00
Summary of Deposits - R-0350 per copy 25.00
Transaction Code Usage Report per report 25.00
Transaction Journal - Daily
R-1010 Hard Copy(l) per additional copy 60.00
Trial Balance - Daily(3)
Trial Balance - R-1000, R-1001,(4)
R-4000, R-4001 Hard Copy(l) per additional copy 60.00
ZIP Code Analysis Listing - R-0320 per run 25.00
</TABLE>
(1) One hard copy provided at no charge. Refer to Output Section for microfiche
charges.
(2) Reports provided on November 30 and December 31 at no charge.
(3) Hard copy reports only. For fiche charges refer to the Output Section.
(4) Remote print and off-line institutions receive one hard copy at no charge.
Institutions working through an M&I datacenter receive one fiche original
and one fiche copy.
Page 2
<PAGE> 24
LOAN SERVICES
<TABLE>
<CAPTION>
Units Rate
----- ----
<S> <C> <C>
Base Fee per institution $150.00
Accounts
1 - 30,000 per account .137
Over 30,000 per account .132
Notes .46
Loans (Commercial, Installment, per note
Mortgage, Purchased Loans, Student Loans)
Floor Plan per note .63
Revolving Credit per note .49
Commitments per commitment .10
Escrows per escrow .06
Fee Processing per fee segment .05
Participations per participation .12
Reserves (Dealer, Insurance) per reserve .035
Additional Loan Services
ACH Originating per transaction .07
Charge-Offs per charge-off .28
Collateral Processing
Base Fee per institution 170.00
Items per collateral item .17
Coupons per coupon book ordered .05
Escrow Analysis
Base Fee per final run 20.00
Analysis Test per note analyzed .10
Analysis Final per note analyzed .20
Escrow Disbursement
Base Fee per mass disbursement 20.00
Transaction per transaction .03
Processing Charge per tape 50.00
Investor Reporting (Laser, MIDANET) per institution/ 250.00
(Standard, Stand-alone) per program
Investor Reporting (Expanded)(2)
Payment Level 1 (actual principal per participation .17
and interest)
Payment Level 2 (scheduled interest per participation .19
and actual principal)
Payment Level 3 (scheduled principal per participation .21
and interest)
Payment Level 4 (GNMA) per participation .23
FHLB Processing per tape 75.00
Loan Origination(l) per transaction .50
Purchased Loans per segment .12
Credit Bureau Tapes per credit bureau 39.00
Insurance Tapes per company 39.00
</TABLE>
(1) A transmission fee is also charged. Refer to Remote Site Support.
(2) Refer to Output Section for investor check charges.
Page 3
<PAGE> 25
<TABLE>
<CAPTION>
LOAN SERVICES
Units Rate
----- ----
<S> <C> <C>
Reports (See Output Section)(1)
Daily Hard Copy Reports
1 - 5,000 Accounts per additional copy $21.00
5,001 - 10,000 Accounts per additional copy 27.00
Over 10,000 Accounts per additional copy 33.00
Weekly Hard Copy Reports
1 - 5,000 Accounts per additional COPY 41.00
5,001 - 10,000 Accounts per additional copy 52.00
Over 10,000 Accounts per additional COPY 63.00
Monthly Hard Copy Reports
1 - 5,000 Accounts per additional copy 61.00
5,001 - 10,000 Accounts per additional copy 72.00
over 10,000 Accounts per additional copy 83.00
Semiannual Hard Copy Reports
1 - 5,000 Accounts per additional copy 110.00
5,001 - 10,000 Accounts per additional copy 130.00
over 10,000 Accounts per additional copy 150.00
Annual Hard Copy Reports
1 - 5,000 Accounts per additional copy 110.00
5,001 - 10,000 Accounts per additional copy 130.00
Over 10,000 Accounts per additional copy 150.00
</TABLE>
(1) The prices above apply to copies exceeding the standard report frequencies.
Page 4
<PAGE> 26
TELLER/PLATFORM SERVICES
<TABLE>
<CAPTION>
Units Rate
----- ----
<S> <C> <C>
On-line Teller
Base Fee(l) per institution $ 65.00
Accounts(2) per account .05
Live Log Transactions per transaction .021
Outstanding No-book Transactions(3) per transaction .0025
On-line Dollar
Base Fee per institution 40.00
Accounts(2) per account .025
Live Log Transactions per transaction .021
Sunday On-line Availability(2) per account .01
Teller Platform System (4)
Base Fee Per Controller
Vboss per institution 100.00
Other (IBM, ISC) per institution 50.00
Salespartner Maintenance Fee (PC-based) per PC 35.00
Large Currency Transaction Reporting per institution 50.00
Tellerlink per institution 100.00
Teller Trial Balance (R-0200) per report 25.00
</TABLE>
(1) Fee includes logical end-of-day and on-line dollar.
(2) Includes Demand, Line of Credit, Money Market, NOW, Savings, and Time
Deposit (Level 1-3) accounts.
(3) Produces monthly report at no charge. Additional No-Book Reports (R-0202)
produced at a cost of $15.00 per report.
(4) Refer to your account manager for start-up fee.
Page 5
<PAGE> 27
CUSTOMER INFORMATION SYSTEM (CIS)
<TABLE>
<CAPTION>
Units Rate
----- ----
<S> <C> <C>
Base Fee per institution $140.00
Customers per customer .023
Accounts per account .0145
Additional CIS Services
CIS Aggregate Indebtedness per run 50.00
Base Fee per run .0006
Accounts Analyzed
CIS Customer Match - Merge per run 100.00
Base Fee
Customer Fee
First 100,000 per customer .06
Over 100,000 per customer .04
CIS Marketing per run 50.00
Base Fee(1) per customer .004
Analysis per customer .001
Automatic Promotion Coding per envelope .090
Continuous Envelopes per customer .005
Householding(2) per customer .005
Officer List per customer .001
ZIP Code Sort(2)
Marketing Profile ($25.00 minimum) per customer .005
Hard Copy
Interface File per customer .005
Magnetic Tape Creation per tape 75.00
CIS Selected N/A List ($25.00 minimum)
Hard Copy per customer selected .001
ZIP+4 Coding Service per request 250.00
Base Fee per record .006
Extract Fee
Reports (See Output Section)
Combined Statements per institution 80.00
Base Fee
Statement Fee per statement .05
Customer Profile I (R8400) per report 55.00
Customer Profile II (R8401) per request 200.00
Base Fee per customer .002
Customer Fee per customer .002
Hard Copy per customer .001
Microfiche
</TABLE>
(1) Refer to the Output Section for gum label and 3x5 card fees.
(2) ZIP Code Sort is included in Householding and is not required if using
Householding.
Page 6
<PAGE> 28
FINANCIAL CONTROL
-----------------
<TABLE>
<CAPTION>
Units Rate
----- ----
<S> <C> <C>
Base Fee per institution $100.00
Detail Accounts per account .5350
Transactions per transaction .0385
Additional FC Services
- ----------------------
Cost Accounting
Base Fee per run 50.00
Allocations per allocation .05
Generalized Interface
Base Fee per institution 140.00
Control Totals per parameter .026
Consolidated Transactions per transaction .033
Historical Data Storage(l) per additional year 100.00
On-line Inquiry and Maintenance
On-line Account Inquiry per detail account .036
On-line Report Inquiry(2) per institution 100.00
On-line Transaction History
($25.00 minimum) per transaction .012
Standard Descriptions (MICR Capture) per institution 30.00
Reports (Refer to Output Section)
- ---------------------------------
Budget Spread - GLR 512 per report 25.00
Charts of Accounts
Account Header and Detail List -
GLR 960(3) per report 25.00
Indented Chart of Accounts - GLR 962 per report 25.00
Center Sequence (All Accounts) -
GLR 964 per report 25.00
Chart Comparison (FIN010) per report 50.00
Consolidation Report - GLR 321-325 per set of reports 100.00
Detail Account Analysis - GLR 370
Weekly per account 15.00
Month-to-Date per additional report 50.00
Year-to-Date per report 100.00
Annual per report 150.00
Additional Copies per copy 75.00
Detail Quarterly Analysis - GLR 970 per report 50.00
Consolidated Quarterly Analysis - GLR 975 per report 100.00
Financial Statements (Monthly)
GLR 303, 310-312 per additional request 25.00
Full Print of Master Records - GLR 950 per report 25.00
Individual Cost Center
Monthly - GLR 380 per month No Charge
Daily per cost center 25.00
Matrix Reports/ReportWriter per report 25.00
Subledger Reports - GLR 371-379 per report 15.00
Transaction Journal
Daily (Snapshot) - GLR 298 per account .07
Minimum Fee per report 25.00
</TABLE>
(1) Current and prior two years provided at no charge. Two additional years
provided at $100.00 per month for each year retained.
(2) Cost includes all financial control reports with the exception of GLR 220,
GLR 240, and GLR 250. These reports are available at a cost of $.01 per
detail account.
(3) One copy provided at no charge on a quarterly basis.
Page 7
<PAGE> 29
EFT SERVICES(1)
--------------------
<TABLE>
<CAPTION>
Units Rate
----- ----
<S> <C> <C>
Network Administration Fee per institution $75.00
Terminal Support
1 - 15 per terminal 145.00
16 - 40 per terminal 110.00
41 - 125 per terminal 75.00
over 125 per terminal 50.00
Point of Sale (POS)
Terminal Support per terminal 10.00
Dial Terminal-WATS per transaction .10
Transaction Switching/Routing
1 - 50,000 per transaction .0475
50,001 - 200,000 per transaction .04
200,001 - 500,000 per transaction .035
Over 500,000 per transaction .03
Settlement Fee per institution 50.00
Cardbase Management
- -----------------------
Base Fee per institution 130.00
Cardholders
1 - 25,000 per cardholder .0825
25,001 - 50,000 per cardholder .08
50,001 - 200,000 per cardholder .075
Over 200,000 per cardholder .07
Transaction Authorization (On-us)
Positive Balance Authorization per transaction .0775
Negative File/Positive File
Without Balance Authorization per transaction .035
Additional Features
- ----------------------
Multiple Account Access
Base Fee per institution 25.00
Accounts per account .01
New Account Setup (Off-line Inst.) per account .10
PIN Production and Mailing per account .45
Card Production (New/Reissue) per card .75
Card Insertion per card .10
Off-line Institution per institution 30.00
Reports (See Output Section)
- ----------------------------
Hard Copy per additional copy 25.00
Microfiche per institution 65.00
</TABLE>
(1) Refer to your account manager for one-time setup fees and other special
project pricing.
Page 8
<PAGE> 30
INFO CENTER
<TABLE>
<CAPTION>
RAMIS Units Rate
- ---- ----- ----
<S> <C> <C>
Base Fee(l)
Application Extracts(2) per contact person $35.00
Deposit System
1 - 25,000 accounts per account .0121
25,001 - 50,000 accounts per account .0101
50,001 - 100,000 accounts per account .0080
100,001 - 150,000 accounts per account .0059
Over 150,000 accounts per account .0049
Financial Control - Daily
Base Fee per institution 50.00
1 - 1,000 accounts per account .057
1,001 - 2,000 accounts per account .045
2,001 - 5,000 accounts per account .035
Over 5,000 accounts per account .029
Financial Control - Monthly
1 - 1,000 accounts per account .037
1,001 - 2,000 accounts per account .025
2,001 - 5,000 accounts per account .015
Over 5,000 accounts per account .009
Loan System
1 - 2,500 accounts per account .0292
2,501 - 5,000 accounts per account .0189
5,001 - 10,000 accounts per account .0145
10,001 - 20,000 accounts per account .0122
Over 20,000 accounts per account .0098
CIS Customer Files
1 - 25,000 customers per customer .0064
25,001 - 50,000 customers per customer .0060
50,001 - 100,000 customers per customer .0056
100,001 - 200,000 customers per customer .0052
Over 200,000 customers per customer .0048
RAMIS/CIS Marketing Analysis System(3)
Setup and Customization Fee one time 375.00
Base Fee per run 125.00
MAS Report Package per customer/per run .0047
RAMIS/CIS MAS File per customer/per month .0009
RAMIS/CIS Canned Reports
Marketing Package one time 375.00
</TABLE>
(1) Includes the INFO Center newsletter, one hour of hotline support,
product updates, and user conferences. Required for RAMIS users.
(2) Based on total accounts or customers on file for the application. A
reconversion fee of $350 will be assessed on institutions which have
deconverted from RAMIS or a RAMIS Application Extract and request the
service again.
(3) MAS Report Package can be produced monthly, quarterly, semiannually, or
annually. The MAS file is updated with each run of the Report Package
and is always available. The rates charged for the MAS Report Package
are charged when run. The MAS file fee is charged monthly.
Page 9
<PAGE> 31
INFO CENTER
<TABLE>
<CAPTION>
RAMIS (Continued) Units Rate
---- ---- ----
<S> <C> <C>
Use Fees
Connect Time Fee per hour $ 9.50
CPU Fee(l)
1 - 2,500 seconds per CPU second .25
2,501 - 5,000 seconds per CPU second .22
5,001 - 10,000 seconds per CPU second .20
over 10,000 seconds per CPU second .18
Training(2)(3)
Beginning & Intermediate Lotus
(1 day each) per person/per course 165.00
Beginning RAMIS (2 days) per person/per course 390.00
All other RAMIS courses (1 day each) per person/per course 195.00
Data Transfer Facility (DTF)
Setup Fee one time only 305.00
Base Fee - Data File per institution 45.00
Diskette Creation, shipping per diskette 55.00
and handling
Software Applications
CALLREPORTER I
Less than $100MM assets per institution 30.00
$100,000 - $300MM per institution 40.00
Greater than $300MM per institution 45.00
With Foreign Offices per institution 80.00
Holding Company per holding company 45.00
Consolidation
Postage per quarter/per
institution 10.00
RAMIS Download Facility
Setup and Configuration(4) one time only 475.00
Monthly Fee per month 65.00
Download Fee per download record
1 - 1,000 records .0500
1,001 - 10,000 records .0300
10,001 - 25,000 records .0095
25,001 - 100,000 records .0075
100,001+ records .0050
Services(3)
Consulting/Custom Programming per hour (1 hr. minimum) 100.00
</TABLE>
(1) Based on IBM Model 3090E. Price is adjusted according to
relative CPU power of current CPU.
(2) Services are provided at M&I datacenter in Brown Deer,
Wisconsin. Training sessions can be scheduled on-site for
institutions with six or more people attending. Please contact
the INFO Center for more information.
(3) Travel and lodging expenses, as well as equipment and equipment
setup for services provided at alternate locations, are the
responsibility of the customer.
(4) Does not include communication software, link, and hardware.
Contact the INFO Center for detailed requirements.
Page 10
<PAGE> 32
ITEM PROCESSING
<TABLE>
<CAPTION>
Bulk Filing Units Rate
----------- ----- ----
<S> <C> <C>
Cycle Sorting per item $ .0060
Daily Exception Sorting per item .0013
Microfilming(l) per item .0005
Statement Dividers per item .0008
Proof of Deposit (POD)
Base Fee per institution 50.00
Transactions
1 - 250,000 items per item .0102
250,001 - 500,000 items per item .0092
500,001 - 1,000,000 items per item .0082
1,000,001 - 1,500,000 items per item .0073
Over 1,500,000 items per item .0063
Nonstandard Document Support(2) per institution 50.00
</TABLE>
REMOTE SITE SUPPORT
<TABLE>
<CAPTION>
Remote Site Credits(3) Units Rate
---------------------- ----- ----
<S> <C> <C>
Printline
Deposits(4) per account (.09)
Loans per note (.10)
Financial Control per account (.25)
Transactions(5) per transaction (.0105)
Basic Features
Transmissions(6)
Transmission Fee per transmission 4.75
M&I Call Handling per transmission 6.75
TRACS Handling per transmission 6.75
</TABLE>
(1) If an institution is on POD, there is no microfilming charge
incurred under Bulk Filing.
(2) Effective six months after conversion; excludes Loan coupons.
(3) Credits are a reimbursement for services performed by your
institution.
(4) Includes Demand, Savings, NOW, Money Market, and Time Deposit
(Level 1-4) accounts.
(5) Credit received on items captured at your institution. Does not
apply to Teller or On-line Dollar transactions.
(6) The minimum charge for a multi-institution transmission is
$25.00 per institution.
Page 11
<PAGE> 33
<TABLE>
<CAPTION>
OTHER SERVICES
--------------
Audit Services Units Rate
- -------------- ----- ----
<S> <C> <C>
Account Verification
Base Fee per account category $ 90.00
Positive or Negative Verification per account .28
Trial Balance per report 25.00
File Footings and Histograms per application 25.00
Computer Assisted Audit Techniques
System Stratification Reports
Deposit System per request 100.00
Loan System per request 100.00
Financial Control per request 50.00
System Selection Reports
Deposit System per request 150.00
Loan System per request 150.00
Financial Control per request 150.00
IMS Security per request 25.00
Tapes per request 150.00
Blank Verification Forms
Negative 4074 per form .05
Positive 4075 per form .05
Letter 4090 per form .05
Consulting/Custom Programming per hour (1 hr. minimum) 100.00
Automated Clearing House (ACH) Receiving
- ----------------------------------------
Base Fee per institution 40.00
Records Stored per record .08
Transactions
1 - 3,000 per item .035
3,001 - 7,000 per item .032
7,001 - 12,000 per item .030
Over 12,000 per item .028
Automated Check Charge Processing
Base Fee per institution 10.00
Transaction Premium per transaction .025
Corporate Trade Payment
Dollar Item Record per item .04
Addenda Record per record .02
File Adjustments per correction 3.25
Incoming File Report per report 10.00
Automated Funds Transfer (AFT)
- ------------------------------
Base Fee per institution 45.00
Accounts per account .077
Discount Brokerage
- ------------------
Base Fee per institution 40.00
Transaction Fee per transaction .22
Custom Statement Formatter
- --------------------------
Start-up Fee (minimum) per institution Time & Materials
Statement Fee per statement .01
Disaster Recovery
- -----------------
Base Fee per institution 70.00
</TABLE>
<PAGE> 34
OTHER SERVICES
<TABLE>
<CAPTION>
Units Rate
----- ----
<S> <C> <C>
IRS Reporting
Base Fee(l) per institution/per yr $150.00
On-line Transactions per transaction .40
Off-line Transactions per transaction .52
B-Notice Reporting(2)
1-2,000 records per record .75
Over 2,001 records per record .50
Tax ID Name/Address List per report 35.00
Tax ID Number Report (R-2500) per report 35.00
W-9s per form .095
Instruction Sheets per sheet .04
Additional Reports per report 35.00
Maintenance/Support
Mass Keyword Changes (Deposits, Loans) per request 25.00
Automated Transaction per transaction .06
M&I Entered Transaction per transaction .07
Interest Plan Test (R-0346) per interest plan 110.00
Service Charge Test (R-0340) per interest plan 110.00
Reaccrual Processing (R-0345) per interest plan 110.00
CIS File Purge (Account or customer) per additional run 150.00
CIS Miscellaneous Account Transfer per additional run 150.00
Transaction Backdating Reversal(3) per file T&M
User Manuals per additional volume 40.00
Management Information Service
Base Fee per institution 40.00
Account Inquiry per account 16.00
Profitability and Management Support
Account Analysis
Base Fee per institution 55.00
Statement Fee per statement .26
Customer Profitability System(4)
Base Fee per institution 75.00
Account per account .15
Customer per customer .31
Reanalysis per customer .31
Safe Deposit
Base Fee per institution 25.00
Boxes per box .07
Six-Day Processing (Deposit, Loan, FC)
Deposit(5) per account .047
Loan per note .068
Financial Control per detail account .105
</TABLE>
(1) The Annual Base Fee applies to IRS Magnetic Tape Reporting and 1099
and 1098 Reporting.
(2) $300 minimum.
(3) $250 minimum.
(4) Requires bank to be using the Customer Information System (CIS).
(5) Includes Demand, Savings, NOW, Money Market, Time Deposit
(Level 1-4), and Line of Credit accounts.
Page 13
<PAGE> 35
OTHER SERVICES
<TABLE>
<CAPTION>
Units Rate
----- ----
<S> <C> <C>
Tickler System
Base Fee per institution 30.00
Items per item .045
User-Defined Security
Base Fee per institution 25.00
Application per screen 1.00
</TABLE>
Page 14
<PAGE> 36
OUTPUT
<TABLE>
<CAPTION>
Units Rate
----- ----
<S> <C> <C>
Bank Control (Deposit, Loan) per application $ 60.00
Daily Microfiche (Deposit, Loan, CIS, FC)(1) per report page .0045
minimum fee/application 20.00
Statements (Deposit System)
Account Statement Fee
Hard Copy per account .105
Fiche per additional page .65
Folding per account .03
Photocopies from Fiche per copy 2.00
Check Copies (Deposit) per check 4.00
Checks Issued (Deposit, Loan)
M&I Disbursement per check .08
Correspondent Account per check .12
Name and Address List, Labels, 3x5 Cards
(Deposit, Loan, CIS, EFT)
Base Fee per run 30.00
List per account .03
Label, 3x5 Cards per account .05
Messages (Deposit, Loan, CIS) per message on system 2.00
Message Setup per request 30.00
Full Branch Processing(2) per application/branch 60.00
RIM Microfiche per institution 35.00
Reports(3) per request 25.00
WBA Forms Package (Salespartner)
Updates per quarter 100.00
</TABLE>
(1) Includes one fiche original and one fiche copy. Additional fiche
copies available at $.65 per fiche card.
(2) Report sequencing by branch provided at no charge.
(3) Applies to reports not otherwise specified in the Price List.
Page 15
<PAGE> 37
MICARD SERVICES -- CARDHOLDER
<TABLE>
<CAPTION>
Units Rate
----- ----
Cardholder Services
- -------------------
<S> <C> <C>
Base Fee per institution $90.00
Account Support Fee per account 1.57
Statements(1) per statement .65
Lockbox Service per payment .054
Payment Entry per payment .135
Transaction Processing per transaction .044
Authorizations per request .17
Card Issuance -- First(1) per card .775
Card Issuance -- Additional Cards per card .25
Temporary Rush Card -- Production Fee per card 20.00
Lost/Stolen Cards Reported per card 7.50
Combined Warning Bulletins(2) per listing .65
(single region U.S.)
Letters Printed(1) per letter .515
Compliance Fees percentage of gross sales .000799
(includes franchise) -- VISA
Compliance Fees percentage of gross sales .000999
(includes franchise) -- MasterCard
CIS Interface per institution 45.00
Business Card Reporting per institution 175.00
Cardholder Supplies
- -------------------
Plastics -- Regular per card .50
Plastics -- Gold per card 1.15
Plastics -- Custom per card Per Quote
Hot Stamp Die per die Per Quote
Graphics per design Per Quote
Card Application Holder per holder 1.75
Applications -- Regular per application .25
(300 minimum)
Applications -- Gold per application .60
(300 minimum)
Gold Brochures per brochure .80
Business Card Features and Benefits per brochure .75
</TABLE>
(1) Includes postage and envelopes.
(2) Multiple listings/foreign listings available at an additional charge.
(3) Shipping charges for temporary or rush cards will be passed through.
Page 16
<PAGE> 38
MICARD SERVICES -- MERCHANT
<TABLE>
<CAPTION>
Merchant Services Units Rate
----------------- ----- ----
<S> <C> <C>
Base Fee - Gross Deposit per institution $ 90.00
Base Fee - Net Deposit per institution 200.00
Account Support Fee per account 2.55
Statements per statement .29
Sales Draft Entry per sales draft .155
Deposit Entry per deposit .038
Transaction Processing per transaction .034
Authorizations - Voice WATS per request .615
Authorizations - Dial Terminal WATS per request .25
Authorizations - Dial Terminal Local per request .11
Authorizations - ARU WATS per request .50
Authorizations - ARU Local per request .37
Authorizations - ECR, Magnetic Tape, or per request Per Quote
Transmission
Magnetic Tape Handling per month 300.00
Data Transmissions per month 125.00
Chargebacks per request 5.50
Electronic Draft Capture - Sales Drafts per draft .058
Electronic Draft Capture - Deposits per deposit .29
Combined Warning Bulletins per month 1.10
Compliance Fees percentage of gross sales .000799
(includes franchise) - VISA
Compliance Fees percentage of gross sales .000999
(includes franchise) - MasterCard
Interchange Fees - MasterCard/VISA net sales plus per item actual
Merchant Supplies(2, 4)
-----------------------
Imprinters each 21.00
Imprinters - Plastics each .55
Imprinters - Plates each .55
VeriFone ZON Jr. XL each 230.00
VeriFone TRANZ330 (1200 Baud) each 310.00
VeriFone Slip Printer each 499.00
VeriFone Roll Printer - 250 each 285.00
Citizen Roll Printers each 245.00
VeriFone PIN Pad 101 each 150.00
VeriFone PIN Pad 201 each 234.00
Deposit Envelopes each .03
Summary Slip each .022
Merchant Kits each 15.00
Sales/Credit Slip per 1,000 19.00
General Merchant (four-ply)
Sales/Credit Slip per 1,000 17.00
General Oil Company (T&E) (three-ply)
Mail Order Continuous Form (two-ply) each .03
Merchant Application and Agreement Form each .34
Decals VISA/MasterCard each .75
Tent Signs VISA/MasterCard each .85
EDC/Terminal Agreements each .08
Terminal Programming(3) per terminal 25.00
</TABLE>
(1) Access is being eliminated in most areas.
(2) Shipping additional at cost.
(3) Assessed only if terminal is not purchased through MICARD Services.
(4) For additional supply prices, contact Merchant Services.
Page 17
<PAGE> 39
MICARD SERVICES -- DEBIT CARD
-----------------------------
<TABLE>
<CAPTION>
Units Rate
----- ----
<S> <C> <C>
Cardholder Services
-------------------
Base Fee per institution $ 90.00
Account Support Fee per account .49
Balance File Updates per account .12
Transaction Processing per transaction .057
Authorizations per request .17
Card Issuance - First(l) per card .775
Card issuance - Additional Cards per card .25
Temporary Rush Card - Production Fee per card 20.00
Lost/Stolen Cards Reported per card 7.50
Combined Warning Bulletins per listing .65
(single region U.S.)
Compliance Fees percentage of gross sales .000799
(includes franchise) - VISA
Compliance Fees percentage of gross sales .000999
(includes franchise) - MasterCard
Transaction/Balance Transmission per day, per transmission 4.75
Cardholder Supplies
-------------------
Plastics - Regular per card .50
Plastics - Gold per card 1.15
Plastics - Custom per card Per Quote
Hot Stamp Die per die Per Quote
Graphics per design Per Quote
Agent/Cardholder Setup for Standard Plan 600.00
Minimum Monthly Fee 300.00
(Minimum monthly fee does not include the following: Base,
Compliance, Authorizations, Interchange, Transmission,
Additional programming, Equipment, Training, or Special fees)
</TABLE>
(1) Includes postage and envelopes.
Page 18
<PAGE> 40
CORPORATE CASH MANAGEMENT SERVICES
<TABLE>
<CAPTION>
Account Reconciliation Units (per cycle) Rate
- ----------------------- ----- ----
<S> <C> <C>
Plan 1
Base Fee per account $ 32.00
First 1,000 Items per item N/C
Over 1,000 Items per item .027
Plan 2
Base Fee per account 34.00
First 1,000 Items per item N/C
Over 1,000 Items per item .028
Plan 3
Base Fee per account 38.00
First 1,000 Items per item N/C
Over 1,000 Items per item .031
Deposit Reconciliation
Base Fee per account 32.00
First 1,000 Items per item N/C
Over 1,000 Items per item .027
Data Entry Input - Issued or Paid Items per item .20
Fine Sorting
Base Fee per account 15.50
First 1,000 Items per item N/C
Over 1,000 Items per item .014
Balancing per item .006
Microfiche(l) per fiche card .65
New Account Setup per account 15.00
Tape Output per account 20.00
Transmission Output(2) per account 4.75
Automated Clearing House (ACH) Originating
Tape or Transmission - NACHA Format per run 18.00
Transaction Fee
1 - 1,000 per item .036
1,001 - 3,000 per item .033
Over 3,000 per item .031
PC Entry thru PC ACH MICASH Control System(3)
Setup Fee per company Per Quote
Data Entry From Listing per run 40.00
Transaction Fee per item .20
Manual Settlement Fee per entry 15.00
File Corrections per correction 5.00
</TABLE>
(1) One fiche original and one fiche copy provided at no charge.
Additional fiche copies provided at $.65 per fiche card.
(2) A paid file can be transmitted to either a mainframe or a PC.
Please refer to MICASH Control system for complete detail of
fees for a file transmission to a PC.
(3) Fees for PC-based ACH origination services are outlined under
MICASH Control System.
Page 19
<PAGE> 41
CORPORATE CASH MANAGEMENT SERVICES
<TABLE>
<CAPTION>
(ACH) Originating (Continued) Units Rate
- ----------------------------- ----- ----
<S> <C> <C>
Corporate Trade Payments (CTPs)
One-time Setup Fee per company Per Quote
Tape or Transmission - NACHA Format per run Per Quote
Dollar Item Record per item Per Quote
Addenda Record per record Per Quote
TREM (Combined ACH/PAC) Processing
Tape or Transmission per run 34.00
ACE Items per item .036
PAC Items per item .07
Fed Charges per item (1)
Automated Clearing House (ACH) Receiving - (Refer to
Other Services Section)
Automated Balance Reporting
Direct Transmission from DSI
Base Charge per account per day 1.95
Data Reported per field .09
Setup Fee per company Per Quote
To a Third Party
Base Charge per account per day 2.35
Data Reported par field .15
Setup Fee per company Per Quote
Through a Third Party Network(2)
Base Charge per account per day 3.15
Data Reported per field .15
Setup Fee per company Per Quote
Controlled Disbursement
Base Fee per institution 85.00
Summary Report Inquiry per account 16.00
Setup Fee per institution 325.00
Setup Fee per account 15.00
Depository Transfer Service
Base Fee per customer 8.00
DTCs Created(3) per item 2.70
ACH Debit Created(3) per item 1.13
Setup Fees per customer location 11.25
Management Information Link
Base Fee per company 40.00
Access Fee TYMNET Users per company No Charge
Access Fee Non-TYMNET Users per company 10.00
Account Inquiry per account 17.00
Money Center Inquiry per company 16.00
Money Center Screen Creation
One-time Setup Fee per institution 400.00
Screen Update Capability per institution 40.00
</TABLE>
(1) Fees established by the Federal Reserve for ACE processing are
subject to change without notice.
(2) This reporting is done through a third party to another
third-party network.
(3) Includes telephone input.
Page 20
<PAGE> 42
CORPORATE CASH MANAGEMENT SERVICES
<TABLE>
<CAPTION>
Management Information Link (continued) Units Rate
--------------------------------------- ----- ----
<S> <C> <C>
Stop Payment Entry Capability per company $ 17.00
Intrabank Funds Transfer Capability per company 17.00
Multibank Account Inquiry per company Per Quote
Setup Fee per company Per Quote
MICASH Control System(l) Units (per cycle)
Base Fee - per copy per inst/company per mo. 10.00
File Transfer Services
ACH Origination
PC ACH per inst/company per mo. 10.00
NACHA File Transfer per inst/company per mo. N/C
Transmission per transmission 5.00
Transaction Fee per item .10
Fed Charges per item (2)
PC Recon
Standard Recon Fees Apply by Recon Plan Type
Transmission per transmission 5.00
PC Balance Reporting
Base Charge per account per day 1.95
Data Reported per field .09
Communication Through TYMNET per minutes connected
high density $12/hr.
low, medium density $15/hr.
Setup Fees
MICASH Control System per inst/company 75.00
PC ACH Service per inst/company 50.00
NACHA File Transfer Service per inst/company 100.00
PC Recon Service per inst/company 140.00
PC Balance Reporting Service per inst/company Per Quote
</TABLE>
(1) The MICASH Control System Gateway Software will provide customer
access to Management Information Link and the file transfer
services listed.
(2) Fees established by the Federal Reserve for ACH processing are
subject to change without notice.
Page 21
<PAGE> 43
CORPORATE CASH MANAGEMENT SERVICES
<TABLE>
<CAPTION>
Payroll Units Rate
------- ----- ----
<S> <C> <C>
Base Fee per company/per payroll 30.00
Processing Fee
Datacenter Input
1 - 25 Employees per employee/per payroll N/C
26 - 50 Employees per employee/per payroll .60
51 - 250 Employees per employee/per payroll .54
Over 250 Employees per employee/per payroll .51
Addition to Payroll per employee/per payroll .55
Data Change Entries per field/per payroll .08
Data Retention on File per employee/per payroll .04
Conversion Fee - One-time per company/per payroll Per Quote
Envelopes, Stuffed, and Sealed each .11
Enclosures per enclosure .06
Additional Reports (401-K, Extra
Copies, etc.) per report/per payroll 8.00
Masterfile Data Reports (Special Run) per report 15.00
Microfiche per employee on file/ .005
per payroll (minimum 3.00)
per maintenance run 1.00
Magnetic Tape Output
One-time Setup per company/per payroll Per Quote
Per Payroll per tape/per payroll 15.00
Special Payroll Handling per payroll 10.00
Check/Direct Deposit Rerun per check/deposit 10.00
Report Rerun per run/per payroll 20.00
Labor Distribution Reporting
Base Fee per payroll 17.50
Per Employee Charge per employee/per payroll .15
Check/Deposit Advice Mailing per envelope U.S. Postal Rates
Binders per binder 4.00
Labels per label .05
Delivery of Payroll per employee/per payroll Per Quote
Checks Issued - Correspondent Disbursement per check .04
Account
Preauthorized Check Processing
One-time Setup Fee per company Per Quote
Base Fee (Tape Charge) per cycle 25.00
Document Printing per item .07
TYMNET
Usage Fee
High Density per connect hour 12.00
Low, Medium Density per connect hour 15.00
</TABLE>
Page 22
<PAGE> 44
ADDITIONAL SERVICES
The following services are available. Please ask your account manager
for pricing information.
1. Accounts Payable
2. Automated Transfer Service
3. Bookkeeping
4. Cash Letter Preparation Charge
5. Communications
6. Consolidated Proof
7. Consulting
8. Conversions
9. Deconversion Tapes
10. Delivery/Postage
11. Disaster Recovery
12. EFT
- Custom ATM Screens
- Conversion--Existing Networks, New Networks, Institution,
Cardbase, Terminal
- Computer Test Time
- Network Processor Membership Fees
13. Fixed Assets
14. IRS 1098, 1099 Processing
15. MICARD Special Services
16. Off-line Maintenance and Support
17. On-line Collections
18. Product Support
19. Programming (Customized)
20. Proprietary Credit Card
21. Reruns
22. Sharedrafts
23. Special Item Encoding
24. Specialized Data Entry
25. Tape Creation
26. Teller Cassettes/Diskettes Maintenance
27. Travel
28. Workshops
LATE FEES
Late fees are calculated at a 1.5 percent monthly periodic rate (18.00
percent annual interest) on all invoices not paid in full. Refer to your
Data Processing Services Agreement for payment terms.
INTERIM PROCESSING SERVICE(l)
110 Percent of Standard Published Prices(2)
(1) Interim Processing is defined as processing without a long-term
commitment. Examples of interim processing status are 1)
customers with no contract, 2) customers with 30-day contracts,
3) customers with expired long-term contracts, and 4) customers
in receivership who have disaffirmed the DSI contract.
(2) The charge is a monthly charge. The additional 10 percent
includes all applications, communications, miscellaneous fees,
and any line item appearing on the monthly invoice. All credits
will be discontinued with the exception of the print-back credit
and the transaction credit for remote site processing.
Page 23
<PAGE> 45
VISA/MASTERMONEY CARD
AMENDMENT TO DATA PROCESSING SERVICES AGREEMENT
THIS AMENDMENT to the Data Processing Services Agreement dated September
25, 1991, (the "Agreement") is made as of this same day by and between Valle de
Oro Bank ("Customer") and M&I Data Services, a division of the Marshall & Ilsley
Corporation ("M&I") and does hereby alter, amend, and modify the Agreement and
supersedes and takes precedence over any conflicting provisions contained in the
Agreement.
WHEREAS, Customer desires to amend the Agreement to obtain certain EFT,
VISA Check Card and/or MasterCard MasterMoney Card Services for itself and its
subsidiary users, and M&I desires to provide said services;
NOW, THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
1. In addition to the services described in the Agreement, M&I shall
provide the EFT, VISA Check Card and/or MasterCard MasterMoney Card Services
described in the attached Exhibit A (which by this reference is specifically
incorporated into and made a part of the original Exhibit A attached to the
Agreement). Customer agrees to use M&I primarily for Customer's EFT and check
card services data processing. Notwithstanding anything contained in the
Agreement to the contrary, the charges for such services shall not be subject to
any discount or price adjustment provision contained therein.
2. Customer shall execute applications for membership in VISA U.S.A.
Inc. and/or MasterCard International. M&I shall use its best efforts to assist
Customer in obtaining sponsorship by an appropriate bank.
3. Customer shall provide M&I with copies of its signed VISA U.S.A. Inc.
and/or MasterCard International membership agreements as soon as they are
available.
4. Customer shall comply with the articles, bylaws, operating
regulations, rules, procedures, and policies of VISA U.S.A. Inc. and/or
MasterCard International and shall indemnify and hold M&I harmless from and
against any and all claims, liabilities, losses, and expenses incurred by M&I
arising out of any failure by Customer to so comply.
5. In addition to the charges specified on the Price Schedule identified
as Exhibit B, Customer shall be responsible for all interchange fees and all
dues, fees, and assessments as established by and owed to VISA U.S.A. Inc.
and/or MasterCard International for processing Customer's transactions,
6. Customer shall maintain an account with a bank approved by M&I and
authorize M&I to charge any amounts due to M&I against any credits due Customer
to its account whether or not such charges create overdrafts.
<PAGE> 46
7. All terms and conditions set forth in the underlying Agreement shall
remain in full force and effect and shall apply to the additional services
rendered under this Amendment.
IN WITNESS WHEREOF, the undersigned parties have duly executed this Amendment in
a manner appropriate to each.
M&I DATA SERVICES, A DIVISION OF THE
MARSHALL & ILSLEY CORPORATION
("M&I")
By: /s/ ALFRED S. DOMINICK, JR.
---------------------------
Name: Alfred S. Dominick, Jr.
Title: President, Retail Product Delivery Group
VALLE DE ORO BANK ("CUSTOMER")
By: /s/ CONNIE GOULES
---------------------------
Name: Connie Goules
Title: FVP/Administrative Officer
<PAGE> 47
EXHIBIT A
M&I EFT SERVICES
PROPOSAL
FOR
WILLIAM EHLEN - CONNIE GOULES - SUSIE RYAN
VALLE DE ORO BANK
PRESENTED BY:
THOMAS E. MAGNUS
EFT SPECIALIST
NATIONAL SALES AND MARKETING
M&I DATA SERVICES
BROWN DEER, WISCONSIN
12/2/96
This proposal was prepared for the exclusive use of the above financial
institution. Due to the confidential nature of this document, it may not be
reproduced or distributed, in whole or in part, without the prior written
approval of M&I Data Services. This is an estimate of costs based on volumes
submitted by you and/or volumes based on institutions of similar size. This
proposal reflects the current M&I Data Services, price policy. The prices quoted
are valid through February 28, 1997. Actual costs will be based on actual
volumes at the time of processing.
<PAGE> 48
VALLE DE ORO BANK
EXHIBIT A
VISA "CHECK CARD"
5,832 ATM ACCOUNTS
INCOME SOURCES; Interchange transaction revenue (1.38 percent average).
Transaction, monthly or yearly service charging.
<TABLE>
<CAPTION>
DESCRIPTION OF SERVICE UNITS DESCRIPTION RATE TOTAL
- ---------------------- ----- ----------- ---- -----
<S> <C> <C> <C> <C>
Cardbase Fee 0 Institution $ 150.00 $ 0
Network Administration 1 Institution 75.00 (75)
Activity/Balance Transmissions 0 Transmissions 6.00 0
Accounts on File 4,659 Open Accounts 0.125 (582)
82% OF ATM ACCOUNTS
Settlement Transactions 13,197 Transactions 0.09125 (1,204)
51.5% OF OPEN ACCOUNTS
5.5 TRANSACTIONS/MONTH
(Includes.00275+.0075=.01025 VISA Fee)
Authorized Transactions 12,801 Transactions 0.097 (1,242)
97% of Transactions
(Includes .0085+.0075=.O 16 VISA Fee)
Card Issuing/Reissuing Fees 129 Cards 1.10 (142)
PIN Issuance 32 PINs 0.45 (15)
Warning Bulletin Listing (Hot Card) 28 Listings 0.05 (1)
Electronic Bulletin April 1994
Lost/Stolen Card Reporting 14 Cards Reported 8.25 (115)
.3% of Open Accounts
Fraud Loss $ 567,484 Purchases 0.0009 (511)
Compliance Fee (VISA, $100Min.) $ 567,484 Purchases 0.00091 (516)
Total Expense ($4,404)
Contingencies 0
Revenue $ 567,484 PURCHASES 0.0138 7,831
TOTAL MONTHLY PROFIT $ 3,427
========
</TABLE>
Note 1: The national average for VISA "CHECK CARD" usage is 7.7 purchases per
month per active user. Active users represent 51.5 percent of the total
database. OUR SCENARIO PROJECTS 5.5 purchases per active user.
Note 2: Total purchases are based on your institution's settled transactions
per month, times the average purchase price. VISA's NATIONAL AVERAGE IS
$43.00 PER PURCHASE. 13,197 x $43.00 = $567,484
Note 3: Low volume Visa expenses: Capture Card is $65.00, Cash Advance is
$1.50 plus. 18%, Visa ATM is $.50.
Note 4: The national average for VISA "check card" fraud is .09 percent. VISA
credit card fraud is .14%.
<PAGE> 49
VALLE DE ORO BANK
EXHIBIT A
VISA "CHECK CARD"
PAGE TWO
<TABLE>
<CAPTION>
DESCRIPTION OF SERVICE UNITS RATE TOTAL
- ---------------------- ----- ------------ ---------
<S> <C> <C> <C>
START-UP EXPENSES:
VISA "check card" interface Fee (5) 1 $ 1,500.00 $1,500
M&I Setup
Institution 0 300.00 0
Cardbase 1 400.00 400
Activity/Balance Transmissions 0 42.00 0
Card Reissue (cards) 6,989 1.10 7,688
PIN Reissue (if needed) 0 0.45 0
Product Support (hours) 30 44.00 1,320
Reissue Programming (hours) 25 42.00 1,050
Conversion Programming 0 42.00 0
Travel and Living T&L
----------
TOTAL START-UP EXPENSES $11,957.75
==========
</TABLE>
Note 1: VISA Associate membership is required for VISA "check card". Upgrade
fees are listed if needed.
Upgrade Fee: $ 1,000.00 (one time documentation fee)
New Member Fee: $1,500.00 (Min., $6.00/million assets plus $1,000)
Monthly Compliance Fee: .00 1 82 (For Five Years)
Note 2: The Cost for 20,000 cards with three colors is approximately
$5,220.00. This cost includes the VISA logo, hologram, and your own
unique cards.
Note 3: Your institution must purchase their own BIN. The cost from VISA is
$250 to purchase the BIN and $100 per year for an active BIN (an
inactive BIN costs $1,000 per year). If your institution should ever
leave M&I and you own your own BIN, you would not need to reissue cards
or PINs.
Note 4. Listed below is the average of the new revenue rates for 1994.
<TABLE>
<CAPTION>
Lowest Highest Average
------------- ------------- -------
<S> <C> <C> <C>
New Revenue Range 1.05% 2.17% 0.0143
$.03 per item $.11 per item
</TABLE>
Note 5: Your institution and an M&I conversion representative will agree on
and sign off on a conversion date that is achievable by both parties. If
your institution fails to meet that conversion date, and you fail to
notify M&I in writing 5 months prior to the scheduled date, then M&I has
the right to charge an additional $1,500 fee. This fee will be charged
for lost conversion space.
<PAGE> 50
EXHIBIT B
M&I EFT SERVICES
1996 PRICE LIST
<TABLE>
<CAPTION>
EFT Network Support(1) Units Rate
- ---------------------- --------------- ------------
<S> <C> <C>
Network Administration Fee Per Institution $ 75.00
ATM Terminal Support
1- 15 Per Terminal 150.00
16 - 40 Per Terminal 115.00
41-125 Per Terminal 75.00
126-225 Per Terminal 55.00
Over 225 Per Terminal 20.00
Point-of-sale (POS)
Terminal Support Per Terminal 10.00
Dial Terminal-WATS Per Transaction .09
Transaction Switching/Routing
1 - 50,000 Per Transaction .0489
50,001 - 200,000 Per Transaction .0455
200,001 - 500,000 Per Transaction .0420
500,001-2,500,000 Per Transaction .039
Over 2,500,000 Per Transaction .027
CARDBASE MANAGEMENT
Base Fee Per Institution 150.00
Cardholders
1 - 25,000 Per Cardholder .088
25,001 - 50,000 Per Cardholder .082
50,001 - 200,000 Per Cardholder .08
200,001-750,000 Per Cardholder .073
Over 750,000 Per Cardholder .067
Transaction Authorization (On-us)
Positive Balance Authorization
1-750,000 Per Transaction .081
750,001-2,500,000 Per Transaction .07
2,500,001-5,000,000 Per Transaction .061
Over 5,000,000 Per Transaction .058
Negative File/Positive File Without Balance Per Transaction .05
Authorization
CAF File Support .036
VISA CHECK /MASTERMONEY CARD (1)
Cardholders (2) Per Cardholder .125
Transaction Authorization/Settlement (3)
1-750,000 Per Transaction .081
750,001-2,500,000 Per Transaction .07
2,500,001-5,000,000 Per Transaction .061
Over 5,000,000 Per Transaction .058
Compliance Fees (Franchise Counterfeit) (4) Percentage of Gross Sales .00091
Lost/Stolen Cards Reported Per Card 8.25
Electronic Warning Bulletins (5) Per Account Listed/Per Month 1.30
</TABLE>
Note: Regional and national network processing fees will be passed through at
cost. Special assessments, lines, and other fees from VISA will be
passed through at cost.
<PAGE> 51
<TABLE>
<CAPTION>
Additional Features
- -------------------
<S> <C> <C>
PIN Production and Mailing Per Account .45
Card Production (New/Reissue) (Returned to Per Card .72
Institution)
Card Production (Returned to Cardholder) Per Card 1.10
Custom Card Carrier Per Carrier Type/Institution 90.00
Card Production-Mass Reissue Per card Quote
Card Retrieval Request Per Account 30.00
Card Destroy Request Per Account 15.00
Off-line Institution
Base Fee Per Institution 65.00
Transmissions - Activity/Balances Per Day 6.00
REPORTS (See Output Section)
- -------
Hard Copy Per Additional Copy 27.00
Microfiche Per Institution 65.00
Names and Address - Labels/List Per Run 35.00
Labels Per Account .06
List Per List .04
Reruns - First two each month are free per run Per Run 27.00
ATM SCREEN CHANGES
- ------------------
One-time Screen Development Per Terminal Type 250.00
Seasonal Screen Maintenance Per Terminal Type 175.00
Reload Terminal Per Terminal 20.00
ONE-TIME SETUP
- --------------
TYME Network Per Institution 1,500.00
Existing Networks Per Institution 8,200.00
New Network Certification Per Institution T&M
Institution Per Institution 300.00
Cardbase Per Cardbase 400.00
ATM Terminal Per Terminal 200.00
Transmissions - Activity/Balances M&I Format 1,325.00
Cardbase Conversion and Training Quote T&M
Application and Systems Programming Per Hour 105.00
</TABLE>
Note: One-time setup fees, conversion fees, telecommunication costs, and other
special project pricing will be quoted in the proposal and listed in
Exhibit A.
(1) Only one Network Administration fee will be assessed per institution per
month for the support of ATMs, regional and national networks, and VISA
Check/MasterMoney Card.
(2) This fee is in addition to the Cardbase Management "Cardholders" fee.
(3) This fee does not include the pass-through transaction fees from
VISA/MasterCard. Those fees are settled daily directly to your
institution.
(4) Minimum charge of $100 per quarter for associate- and principal-type
membership.
(5) Multiple listings/foreign listings available at an
additional charge. VISA and MasterCard are restructuring prices in this
area. Upon completion of their changes, M&I will reevaluate this price.
<PAGE> 52
AMENDMENT TO DATA PROCESSING SERVICES AGREEMENT
THIS AMENDMENT, to the Data Processing Services Agreement dated
September 25, 1991 (the "Agreement") is made as of this 24th day of October
1995, by and between the undersigned parties, does hereby alter, amend, and
modify the Agreement and supersedes and takes precedence over any conflicting
provisions contained in the Agreement.
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which are hereby acknowledged, the undersigned parties agree as follows:
1. Effective upon execution of this Amendment, the following Section 2
(e) is hereby added to the Agreement:
"2.e. Discount. M&I shall provide Customer with a twenty percent
(20%) discount on Services (except that Currency Transaction Reporting Services
shall be discounted fifty percent (50%) excluding communication costs,
telecommunication charges, printline charges and other output costs, start-up
fees, pass-through charges, out-of-pocket expenses, conversion expenses and
fees, workshop fees, training fees, late fees, or charges billed as
Miscellaneous on the Customer's invoice. The discount shall be in effect for the
term of the Agreement."
2. Effective upon execution of this Amendment, the following Section 2 (f)
is hereby added to the Agreement:
"2.f. Price Adjustments. M&I standard published charges are set
forth on the fee schedule attached as Exhibit B. M&I may modify its standard
published charges from time to time (the "Price Change Date"). M&I agrees to
provide Customer with thirty (30) days' written notice of any price increases
prior to effectiveness of the price increase. During each twelve (12) month
period ending on the Price Change Date (or such shorter period from the date
this Agreement becomes effective to the first Price Change Date), Customer shall
receive a credit if the increase in the standard published charges used to
compute the Additional Use Fees causes a total increase of more than three
percent (3%) (based on comparing the same mix of volume and services, as
described below). The Services and associated volumes (excluding any credits or
Miscellaneous Fees) on the three (3) most recent Customers' invoices preceding
either the announcement of any price adjustment or the determination to adjust
the Minimum Monthly Fee shall be used to calculate the percentage change (the
"Adjustment Period"). If during the first year of this Agreement three (3)
invoices are not available, the volumes processed during the prior month, or to
be processed during the current month, if the conversion occurs during the month
prior to the Price Change Date, shall be used to compute the percentage change.
If the net increase exceeds the annual ceiling, the dollar difference will be
credited to the Customer on each month's invoice (the "Price Adjustment
Credit"). For example, if the price increase is announced in January, M&I will
apply the increased prices to the volumes and Services invoiced to Customer
during the months of October, November, and December. The total of the three (3)
months, computed based on the actual invoices and recomputed using the
<PAGE> 53
increased prices, is then compared. The amount by which the difference exceeds
the annual ceiling is divided by three; the result is the Price Adjustment
Credit to be applied against the Additional Use Fees until the next price
increase. If, for example, the total monthly charges for October, November, and
December were fifty thousand dollars ($50,000), a ten percent (10%) cap would
limit the recomputed fees to fifty-five thousand dollars ($55,000). If the
recomputed fees are fifty-five thousand dollars ($55,000) or less, the Customer
receives no Price Adjustment Credit. If the recomputed fees were fifty-eight
thousand dollars ($58,000), the Customer would receive a Price Adjustment Credit
of one thousand dollars ($1,000) per month on each subsequent monthly invoice
until the next price increase."
3. References to a "seventy-two (72) month" term in Sections 3(a) and
13(a) are hereby replaced with "one hundred eight (108) month " term.
4. The following Section 22(k) is hereby added to the Agreement:
"22.k. Finder's Fees. M&I will provide Customer with a credit
which may be used to offset data processing fees for Services (excluding
Miscellaneous Fees) for Customer's correspondent or nonaffiliated institutions
whose data was not being processed by M&I, but will be processed by M&I
utilizing remote input processing sites owned by customer; provided, however,
that the credit shall not exceed fifty thousand ($50,000) for any individual
bank, or more than fifty thousand ($50,000) for any group of banks or bank
holding company.
If Customer introduces a lead to M&I, which M&I was not previously
working, and Customer assists M&I by introducing the prospect to M&I, followed
by Customer assistance and involvement in the selling process (not limited to
Customer site visits, referrals, presentations, etc.) for the purpose of selling
M&I Services, and the financial institution signs a processing agreement with
M&I, M&I will credit Customer an amount equal to one (1) month's processing
fees, which may be used to offset data processing fees for Services (excluding
Miscellaneous Fees) provided M&I agrees in advance to pay such compensation to
Customer. The finder's fee, as described above, shall be based upon and payable
after the first month's use of the ordinary Services following the completion of
all conversions of the new financial institution as proposed. The credit shall
not exceed fifty thousand ($50,000) for any individual bank, or more than fifty
thousand ($50,000) for any group of banks or bank holding company."
5. The following Section 22(1) is hereby added to the Agreement:
"22.1. Allowance. In each year of the Agreement commencing
September, 1995, M&I agrees to provide Customer a credit of up to five thousand
dollars ($5,000) to be applied against charges (exclusive of travel,
out-of-pocket, or third-party fees) for Training Workshops or One-time Product
Set-up Fees. Unused portions may not be carried forward into future years."
6. The following Section 22(m) is hereby added to the Agreement:
"22.m. System Review. M&I agrees to provide Customer a one-time
credit of up to five thousand dollars ($5,000) to be applied against charges for
a System Utilization Review to be performed by M&I"
<PAGE> 54
7. The following Section 22(n) is hereby added to the Agreement:
"22.n. Fee Waivers. M&I agrees to waive its fees for Custom
Statement Design (Laser-approximately $11,025), and Remote Project Support
(approximately $11,400)."
Except as expressly modified herein, all other terms and conditions
remain in full force and effect.
IN WITNESS WHEREOF, the undersigned parties have duly executed this
Amendment in a manner appropriate to each.
M&I DATA SERVICES, A DIVISION VALLE DE ORO BANK, N.A.
OF THE MARSHALL & ILSLEY
CORPORATION ("M&I") By: /s/ WILLIAM V. EHLEN
---------------------
Name: William V. Ehlen
Title: President & CEO
By: /s/ PATRICK C. FOY
--------------------------
Name: Patrick C. Foy
President
Title: Outsourcing Business Group
By: /s/ THOMAS J. KANTER
--------------------------
Name: Thomas J. Kanter
Title: Vice President
<PAGE> 55
AMENDMENT TO DATA PROCESSING
SERVICES AGREEMENT
THIS AMENDMENT is made this 3 day of April 1998 by and between Valle de
Oro Bank ("Customer") and M&I Data Services, a division of the Marshall & Ilsley
Corporation ("M&I").
M&I and Customer entered into a Data Processing Services Agreement dated
April 3, 1998 (the "DPS Agreement") pursuant to which M&I provides Customer with
certain data processing services.
Customer desires to obtain from M&I certain home banking and bill
payment services and M&I is willing to provide such services on the terms and
conditions contained in this Amendment.
NOW, THEREFORE, in consideration of the recitals and other good and
valuable consideration, the receipt and sufficiency of which is acknowledged by
both parties, it is agreed that:
1. The description of "Services" contained in the Agreement shall be
amended to include the home banking and bill payment services described on
Exhibit A attached hereto and incorporated herein.
2. Customer and M&I agree that the home banking and bill payment
services may be delivered to Customer by M&I or its designated subcontractors,
provided, however, that M&I shall be responsible for the performance of such
services by its subcontractors.
3. Customer agrees to pay for the services received pursuant to this
Amendment in accordance with the price schedule on Exhibit A attached hereto and
incorporated herein. The price schedule shall be subject to adjustment by M&I
provided, however, that (i) price increases shall be limited to once during any
12 month period of the term of this Amendment; (ii) M&I shall provide written
notice of such price increase to Customer at least 90 days prior to the
effective date of such price increase; and (iii) Customer shall have the right
to cancel any services subject to such price increase by delivering written
notice to M&I at least 60 days prior to the effective date of such price
increase. Customer's right of cancellation shall apply only to the home banking
and bill payment services described in this Amendment. M&I's standard published
prices as of the date of this Amendment are attached hereto as Exhibit B.
4. Customer shall enter into a written agreement directly with its
clients to whom home banking and bill payment services are to be provided.
5. Customer shall ensure that all appropriate disclosures have been made
in accordance with applicable law and/or regulations prior to its clients'
participation.
<PAGE> 56
This includes, without limitation, Regulation E disclosures as well as
disclosure of User Terms and Conditions attached hereto as Exhibit C and
incorporated herein.
6. M&I or its authorized subcontractor agrees to make all reasonable
efforts to meet the service levels specified in Exhibit D.
7. The parties desire to more clearly outline the responsibilities of
the parties with respect to credit risk and late fees that may be incurred as a
result of any inaccuracy in the processing of home banking/bill payment
transactions. These are attached hereto as Exhibit E.
8. Customer shall ensure that bill payments are funded from one of its
client's funding accounts with Customer and in accordance with applicable law.
9. Customer shall be responsible for limiting client's access to those
accounts for which the client has legal authority to access for the purpose of
funding Bill Payments and other transactions, as may be supported by the home
banking and bill payment services.
10. Customer shall be responsible for all arrangements relating to
closed customer accounts, to assure payment and other handling and clearance of
outstanding items relating to such accounts.
11. Except as modified herein, the DPS Agreement shall remain unchanged
and continue in full force and effect. The provisions in the Amendment shall
supersede any conflicting provisions contained in the DPS Agreement.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day first written above.
M&I DATA SERVICES, A DIVISION OF THE
MARSHALL & ILSLEY CORPORATION
M&I")
By: /s/ ALFRED S. DOMINICK, JR.
------------------------------
Name: Alfred S. Dominick, Jr.
Title: President, Retail Product
Delivery Group
VALLE DE ORO BANK
("CUSTOMER")
By: /s/ CONNIE GOULES
------------------------------
Name: Connie Goules
Title: FVP/ADMINISTRATIVE OFFICER
2
<PAGE> 57
EXHIBIT A
M&I DATA SERVICES' HOME BANKING SOLUTION
DIRECTPC/DIRECTBUSINESS
M&I DirectPC/DirectBusiness provides the Financial Institution with a
brand-able home banking product that provides the Financial Institution's
customers secure access to account information and bill paying through a file
server located at M&I Data Services. The Financial Institution's customers
enrolling in the DirectPC/DirectBusiness service and having the required PC
hardware and software (listed below) are provided with the DirectPC or
DirectBusiness software which will allow connectivity to the M&I Data Services
file server. Customers access the system by connecting via a toll-free number
provided by the Financial Institution. After completing an authorization
process, customers can perform banking and bill payment functions by interfacing
with the M&I server.
CUSTOMER SYSTEM REQUIREMENTS (MINIMUMS):
o Microprocessor: PC with a 386 or higher; 486 or higher recommended
o Operating System: Microsoft Windows 3.1 or later; Microsoft Windows 95
recommended
o Hard Disk Space: 12 MB
o Floppy Disk Drive: 3.5" high density
o RAM (memory): 8 MB; 16MB recommended
o Monitor: VGA or higher resolution
o Modem: 9600 BPS; 1400 BPS recommended
DIRECTPC BANKING FUNCTIONALITY:
o Receive balance inquiry and detailed account information on deposit and loan
accounts
o Transfer funds between customer's authorized accounts
o Access transaction history (from last statement cutoff)
o Place stop payments (within parameters agreed to between M&I Data Services
and Bank)
o Communicate with financial institution via e-mail
o Create export files to Microsoft Money or Intuit's Quicken
o View and maintain an online check register
3
<PAGE> 58
DIRECTPC BILL PAYMENT FUNCTIONALITY:
o Establish and maintain a complete payee list (open payee list)
o Schedule current, future and recurring payments for any payee
o A telephone bill payment feature that allows customers to pay bills via
touch-tone telephone when away from their PCs
DIRECTBUSINESS FUNCTIONALITY:
All of the above functionality plus:
o Stop payment set up by a range of checks (within parameters agreed to between
M&I Data Services and Bank)
o Management of multi-user security and user access by specific functionality
4
<PAGE> 59
EXHIBIT B
M&I DATA SERVICES' HOME BANKING SOLUTION
DIRECTPC/DIRECTBUSINESS
PRICE SCHEDULE
IMPLEMENTATION FEES
o $20,000 Implementation Fee
o $ 10.00 New Customer Set Up Fee
MONTHLY FEES
o $ 5.00 Customer Fee - includes 24x7 customer service
o $ .35 Per bill payment
MONTHLY MINIMUM FEE
o $ 1,500
MISCELLANEOUS FEES
o $ 15.00 Return Item Fee - per occurrence (bill payment)
o $ 15.00 Stop Payment Fee - per stop payment request (bill payment)
o $ 6.25 Per transmission - batch files
o $ 2.00 Per User Kit - User kit fulfillment (optional)
o $ .08 Per minute - based on current carrier's published fee schedule
NOTES:
o Telecommunications fees are the responsibility of the Financial Institution
o Prices are subject to change on an annual basis per the terms stated in the
Services Agreement
o Customization and branding of diskettes is included in the above pricing
o Customer logo bit map must meet the following standards:
o File Extension: *.bmp
o File Size: Not to exceed 48.OKB
o Bit Map Dimensions: Not to exceed 6" x 7"
o Colors: Any
o Format PC (Mac version not supported)
If the above requirements are not met and M&I Data Services needs to
make adjustments to the bit map, the time involved will be billed to
the financial institution at $140.00 per hour.
5
<PAGE> 60
EXHIBIT C
AUTOMATED BILL PAYMENT
USER TERMS AND CONDITIONS
[Financial Institution] hereby publishes the following terms and
conditions for User's use of bill payment services via telephone, personal
computer or any other device as may be offered by [Financial Institution].
[Financial Institution] reserves the right to modify these terms and conditions
at any time, effective upon publication. User's use of bill payment services
constitutes agreement to these terms and conditions and any modifications
thereof.
1. User agrees to accurately follow product use instructions contained
within the User Guide provided.
2. User agrees to schedule bill payments (payment transaction date) at
least five business days before the due date, not including any grace period.
3. User agrees to provide correct payee name, address, account
information and payment amount.
4. User agrees to maintain sufficient funds in funding account on the
transaction payment date requested.
5. User agrees to notify [Financial Institution] or its authorized agent
no later than 60 days after User receives the FIRST statement on which User
believes a problem or error occurred.
6. User acknowledges that [Financial Institution] or its authorized agent
may require up to 45 days to investigate a complaint or question. [Financial
Institution] or its authorized agent will use all reasonable efforts to resolve
an issue within 3 business days. If an issue is reported orally, User may be
required to send the complaint or question in writing within 10 business days.
Results of the investigation will be communicated within 10 business days. If
[Financial Institution] or its authorized agent needs more time, they will
recredit the user's account within 10 business days for the amount the User
believes is in error. If we ask the User to put the complaint or question in
writing and we do not receive it within 10 business days, we may not recredit
the account. If we determine there was no error, we will send a written
explanation within three business days after the investigation is finished.
7. This service may not be used to transmit alimony, child support or
other court-directed payments or tax payments.
6
<PAGE> 61
PERSONAL COMPUTER PRODUCTS
USER TERMS AND CONDITIONS
[Financial Institution] hereby publishes the following terms and
conditions for User's use of the PC (personal computer). [Financial Institution]
reserves the right to modify these terms and conditions at any time, effective
upon publication. User's use of the PC services constitutes agreement to these
terms and conditions and any modifications thereof.
1. User agrees that the following uses of the PC services are strictly
prohibited. User agrees to indemnify, hold harmless, and defend [Financial
Institution] from and against any and all claims, actions, suits, judgments and
expenses (including court costs and reasonable fees of attorneys, accountants
and expert witnesses) at User's sole expense, arising from User's failure to
abide by these restrictions on use of the PC services.
A. Unauthorized communication of any charge or credit-card information
belonging to any other person or entity;
B. Unauthorized communication of any information concerning any password
or other on-line access number, code, or identification or any other proprietary
information belonging to any other person or entity;
C. Use of the PC services to copy or to distribute or transmit copies of
copyrighted materials belonging to any other person or entity is permitted only
to the extent that the owner has provided express permission to the User
permitting such activity. Copying or distribution or transmitting copyrighted
materials other than with permission as specified above is expressly prohibited.
D. Communicating any obscene or defamatory information including but not
limited to on bulletin boards or in conjunction with e-mail; or
E. Use of the PC services in violation of any telecommunication, postal,
or other local laws or regulations of the User's country of origin or of the
United States or in furtherance or in the commission of any crime or other
unlawful or improper purpose.
2. A. [FINANCIAL INSTITUTION] AND ITS SUPPLIERS MAKE NO WARRANTIES OR
REPRESENTATIONS OF ANY KIND WITH RESPECT TO THE PC SERVICES, WHETHER EXPRESS OR
IMPLIED, INCLUDING BUT NOT LIMITED TO MERCHANTABILITY OR FITNESS FOR PARTICULAR
PURPOSE AND NEITHER [FINANCIAL INSTITUTION] NOR ITS SUPPLIERS NOR ANYONE ELSE
WHO HAS BEEN INVOLVED IN THE CREATION, PRODUCTION OR DELIVERY OF THE PC SERVICES
ASSUME ANY RESPONSIBILITIES WITH RESPECT TO USER'S USE THEREOF. NO ORAL OR
WRITTEN INFORMATION OR ADVICE GIVEN BY
7
<PAGE> 62
[FINANCIAL INSTITUTION] OR ITS SUPPLIERS OR ANY OF THEIR EMPLOYEES SHALL CREATE
A WARRANTY OR IN ANY WAY INCREASE THE SCOPE OF THIS WARRANTY, AND USER MAY NOT
RELY ON ANY SUCH INFORMATION OR ADVICE.
B. Any cause of action concerning the PC services under this
Agreement must be commenced within one year after such cause of action has
accrued.
3. User further agrees:
A. Transmission of confidential business and sensitive personal
information is at Customer's sole risk;
B. [Financial Institution] reserves the right to monitor and review
transmissions on-line and in storage, and to remove or reject any material which
[Financial Institution], at its sole discretion, believes may be unlawful or
objectionable, without prior notice to User.
8
<PAGE> 63
EXHIBIT D
SERVICE LEVELS
1. Debit to Customer Account
Current Payment: Debit customer account (payer) within 2 business days
after the customer submits the request for payment (as predicated by the current
ACH process).
Future and Recurring Payments: Debit customer account within 2
business days after the payment date entered (customer must set up the future
and recurring payment as at least 5 days prior to the actual due date).
2. Credit to vendor (payee) sent the next business day after the
customer submits request for payment (as stated above for current, future and
recurring). Average length of time from customer payment request and posting of
credit by payee is as follows:
Check: 5 business days (subject to U.S. Postal Service)
Electronic: 1 business day
3. User Kits to touch-tone bill payment and PC banking and bill payment
customer sent no later than 5 business days after Travelers Express/M&I receive
user authorization information. Server will be updated with user information by
the day the User Kit is mailed.
4. File server will be available to customers with not less than 98% up
time.
5. 95% of all bill payment customer service calls will be answered
within one minute.
6. Customer service calls will be returned within one business day.
Travelers Express will use all reasonable efforts to resolve an issue within 3
business days. If any issue is reported orally, Travelers Express may require
that the customer sends the complaint or question in writing within 10 business
days. Results of investigation will be communicated within 10 business days
after Travelers Express hears from the customer and they will correct errors
promptly. If they need more time, they may take up to 45 days to investigate the
complaint or question. If they need to do this, they will recredit the
customer's account within 10 business days for the amount the customer believes
is in error. If they ask the customer to put the complaint or question in
writing and they do not receive it within 10 business days, they may not
recredit the account. If they determine there was no error, they will send a
written explanation within three business days after the investigation is
finished.
9
<PAGE> 64
7. Travelers Express must hear from the customer no later than 60 days
after they receive the FIRST statement on which the problem or error is
reported.
8. Technical support help-line hours:
24 hours 7 days/ week
9. Technical support service levels:
o Average call queue time of less than 60 seconds
o Average call abandonment rate of less than 5%
o Average first call resolution rate of 75%
o Average initial call resolution rate 12 minutes
o One hour response time to voice messages (messages left after
hours will be returned the next day)
10
<PAGE> 65
EXHIBIT E
CREDIT RISK
A. Consumer DDA Accounts: Between the parties. M&I's third-party provider (as
of the date of this Amendment, Travelers Express) bears the credit risk
associated with potential NSF/return items for all nonbusiness customers of
Customer (the "Consumer") DDA accounts to be managed in accordance with
written procedures provided to M&I as modified from time to time.
B. Business DDA Accounts: Between the parties, Travelers Express bears the
credit risk associated with potential NSF/return items for business DDA
accounts only when all of the following conditions are met:
1. Total exposure is limited to a maximum loss of $1,000 per business
account that has been open with the financial institution for less than
one year and $5,000 per business account that has been open with the
financial institution for one year or longer. (The parties may revise
this cap from time to time by mutual agreement.)
C. Payment Cap:
Each payment is capped the same as for Consumer bill payments. The cap for both
Consumer and Business DDA accounts as of the effective date of this Amendment is
$9,999.00. Travelers Express may change the cap from time to time with the prior
consent of M&I.
D. Risk Reduction Measures: Travelers Express may, at its option, implement
features to reduce credit risks. These may include, but are not limited to,
preauthorized drafts for business customers, verifying funds through an ATM
network, and separating debits from credits so that payments are not sent
until after good funds are received.
LATE FEES
Travelers Express will reimburse any payee-imposed late fees up to $50.00
incurred by any Consumer which a payee will not waive or reverse, provided the
payment resulting in such a late fee was scheduled and was initiated by the
Consumer in accordance with approved payment timelines as shown in the product
literature and support materials. Further, Travelers Express will attempt on
behalf of Consumers to have late fees reversed or waived, even when payments
have been inappropriately initiated.
11
<PAGE> 1
EXHIBIT 10.1
PC Teller Software License Agreement between Valle de Oro Bank, N.A. and M & I
Data Services, Inc. dated December 19, 1991; Amendment No. 1 to PC Teller
Software License Agreement dated February 19, 1993
<PAGE> 2
AMENDMENT NO. 1 TO PCTELLER
SOFTWARE LICENSE AGREEMENT
This Amendment No. 1 to PCTeller Software License Agreement is entered
into as of this 19th day of February, 1993, by and between M&I Data Services,
Inc. ("M&I") and Valle de Oro Bank, N.A. (the "Customer").
RECITALS
WHEREAS, M&I and Customer are parties to a PCTeller Software License
Agreement dated December 19, 1991 (the "Agreement"), pursuant to which the
Customer obtained a right and license to use PCTeller Software (the "Software")
for its own internal business purposes; and,
WHEREAS, the Customer wishes to license additional copies of the
Software.
NOW, THEREFORE, in consideration of the Recitals and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and of the mutual covenants and agreements set forth herein, M&I
and Customer agree as follows:
1. AMENDMENT TO AGREEMENT. Exhibit A to the Agreement is deleted in
its entirety and replaced by Exhibit A attached hereto.
2. CONTINUANCE OF AGREEMENT. Except as amended herein, the
conditions and terms of the Agreement shall remain in full force
and effect.
3. BINDING AGREEMENT. Each party executing this Amendment No. 1
agrees to be bound by all the terms and conditions contained in
the Agreement as modified by this Amendment No. 1.
THE PARTIES HERETO ACKNOWLEDGE THAT EACH HAS READ THIS AMENDMENT NO. 1,
UNDERSTANDS IT, AND AGREES TO BE BOUND BY ITS TERMS AND CONDITIONS AS STATED
HEREIN.
IN WITNESS HEREOF, the parties hereto, through their duly authorized
officers and agents, have hereby executed this Amendment No. 1 on the date
before written.
VALLE DE ORO BANK, N.A. (CUSTOMER) M&I DATA SERVICES, INC. (M&I)
By: /s/ ROLAND NICKERSON By: /s/ JOSEPH L. DELGADILLO
--------------------------------- ----------------------------
Name: Roland Nickerson Name: Joseph L. Delgadillo
Title: Sr Vice President/CFO Title: Senior Vice President
<PAGE> 3
EXHIBIT A TO AMENDMENT NO. 1
PCTELLER SOFTWARE LICENSE AGREEMENT
M&I DATA SERVICES, INC.
Milwaukee, Wisconsin 53202
Customer Name: Valle de Oro Bank, N.A.
Address: 9832 Campo Road
Spring Valley, California 91979-1449
Description and Number of Licensed Computer(s)/Workstation(s)/Equipment:
PCTeller: Total of twenty-eight (28) workstations to be defined by
Customer.
-- Twenty-four (24) workstations licensed under the original
Agreement Exhibit A.
-- Four (4) workstations licensed pursuant to this Amendment
No. 1.
Customer's Primary Location Description:
Valle de Oro Bank, N.A.
9832 Campo Road
Spring Valley, California 91979-1449
User Documentation:
PCTeller Training Guide
PCTeller User Guide
Licence Fee:
<TABLE>
<S> <C> <C>
PREVIOUSLY LICENSED: $14,280.00
DUE WITH THIS AMENDMENT NO. 1:
Additional four (4) copies $ 2,380.00
Sales Tax (7.75%) 184.45
----------
TOTAL $ 2,564.45
TOTAL LICENSE FEE EXCLUDING TAX: $16,660.00
</TABLE>
<PAGE> 4
ADDENDUM
PC TELLER SOFTWARE LICENSE AGREEMENT
THIS ADDENDUM, dated this 19 day of Dec, 1991, by and between the undersigned
parties, describes the Bundled Hardware and Support Services M&I will provide to
Customer and the cost for such hardware and service.
RECITALS
WHEREAS, Customer and M&I have entered into a PC Teller Software License
Agreement on an even date herewith for the use of a personal computer-based
software system; and
WHEREAS, Customer wishes to acquire certain computer hardware, operating
software, and services to be used in conjunction with such software system.
NOW, THEREFORE, for and in consideration of the mutual agreements contained
herein, Customer hereby agrees to purchase the hardware and support services (as
described herein) through M&I, and M&I agrees to sell such hardware and provide
such support services subject to the ongoing satisfactions by Customer of the
following terms and conditions:
1. Hardware. Customer agrees to purchase through M&I thirty-eight (38) NCR
PC386SX EL units with 1 Mb RAM and 40 Mb hard disk; three (3) NCR PC386SX EL
units with 1 Mb RAM and no hard disk; three (3) NCR PC386SX/MC20 with 2 Mb RAM
and 100 Mb hard disk; thirty (30) twelve-inch NCR VGA monochrome display units;
fourteen (14) fourteen-inch NCR VGA color display units; forty-four (44) 2 Mb
RAM upgrades; twenty-four (24) NCR 5021 validation printers; five (5) Okidata
390 printers; two (2) HP Laserjet III D laser printers; six (6) NCR 5223
passbook/document printers; three (3) NCR 800 VA UPS units; three (3) Emerald
tape backup units; three (3) Novell Netware V2.2 50-user software packages;
three (3) 3270 Elite Plus NLV (multisession); three (3) LAN menuing software
packages; three (3) remote support modems and software packages; and necessary
cables, modems, multistation access units (MAUs), and boards to network hardware
and communicate to M&I host.
2. Preinstallation Services. All hardware purchased through M&I will be set up
and initial system tested at M&I. This includes, but is not limited to, 24 hour
"burn-in" of file server, gateway and LAN hardware, installation and
configuration of memory/adapters, and setup and configuration of Novell Netware
LAN Software, LAN menuing software and utilities, LAN remote support software,
LAN tape backup software, and software packages purchased through M&I.
3. Installation Services. M&I will ship the purchased hardware to the Customer's
locations) and, at the Customer's locations), install the hardware. The
installations will include installing the file server and gateway, installation
of LAN workstations, installation of LAN peripheral hardware and software as
applicable, full application testing including on-line testing with M&T, and
performance tuning as necessary. Customer is responsible for having the physical
wiring to each workstation location with connectors completed prior to M&I being
on-site for installation. M&I will provide wiring specifications suitable for an
electrical contractor to complete the necessary wiring, provide phone support to
the person(s) doing the wiring, and verify when on-site for installation that
the wiring has been completed and connectors installed as specified. Customer
may be required to reimburse M&I for time-and-materials expenses, including
<PAGE> 5
lodging and travel expenses, should the wiring or connectors be found defective
or inadequate.
4. Warranty. THE FOLLOWING LIMITED WARRANTIES ARE IN LIEU OF ALL OTHER
WARRANTIES, EXPRESSED OR IMPLIED, WRITTEN OR ORAL, INCLUDING BUT NOT LIMITED TO
THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
(a) The hardware warranties are provided by the equipment manufacturer
and are as follows:
NCR PC386SX Units One (1) year on-site
NCR Display Units One (1) year on-site
NCR Multistation Access Units One (1) year on-site
NCR 5021 Validation Printers Ninety (90) days
NCR 5223 Document Printers Ninety (90) days
Okidata 390 Printers Ninety (90) days
HP Laserjet III D Printers One (1) year
NCR 800VA Uninterruptable Power Supply Three (3) years
Practical Peripheral 2400 Modem Five (5) years
Emerald Tape Backup Unit One (1) year
M&I will secure the warranties for the Customer from the
manufacturer and, depending upon the Customer's current agreements
with the manufacturer, the Customer may be required to sign a
warranty/service agreement from the manufacturer. Upon customer's
written request, M&I will secure detailed disclosures of
manufacturer's warranties.
(b) M&I warrants that the installed operating environment will allow
stable access to the software installed by M&I and to the M&I Host System
provided access is available to Customer. Customer acknowledges and agrees that
its sole remedy under this warranty for the operating environment is for M&I to
attempt to correct deficiencies brought to its attention by the Customer during
the twelve (12) months following installation. Customer hereby acknowledges that
M&I is not liable for hardware malfunctions, and that M&Is only responsibility
is to assist Customer in resolving hardware problems reported by Customer to M&I
in the twelve-month period following installation.
5. Limitation of Liability. M&I's liability for damages to Customer for any
cause whatsoever, whether in contract or in tort, including negligence, shall be
limited to the fees paid for that portion of the installation service that
caused the damages or is directly related to the claim for relief. In no event
shall M&T be liable for damages caused by Customer's failure to perform its
obligations under this Agreement or for any lost profits, lost savings, and
incidental or consequential damages, even if M&I has been advised of the
possibility of such damage.
6. Technical Support M&I will provide to Customer for the twelve (12) months
following installation, assistance in problem determination, problem resolution,
dispatching field engineers relative to manufacturer's warranties, and
maintaining the Local Area Network (LAN) environment (new users, passwords,
etc.). M&I will remain current on new releases of hardware and software
installed by M&I and assist the Customer in determining the value of upgrading
and, when requested by the Customer, negotiate the price from the vendor and
assist with installing the upgrade. The support is provided on the premise that
Customer sends at minimum one (1) person to Novell LAN training and that the
Customer designates two (2) contact people for M&I to interact with on
supporting the operating environment. If on-site support is required as a result
of modifications made to the operating environment not preapproved by M&I, the
Customer agrees to pay for M&I's effort in investigating and/or resolving the
issues resulting from such modifications at M&I's then-current rates for such
services, plus expenses incurred by M&I. M&I will provide phone support with
regard to the operating environment during M&I's regular business hours.
<PAGE> 6
7 . Purchase Price. Customer agrees to make arrangements with M&I to pay the
hardware and installation services' invoice according to the payment terms
within the current Data Processing Services Agreement with M&I. The invoice for
the hardware and installation services will be dated after the completion of
installation at customer site(s). The total purchase price, excluding all
applicable taxes, duties, shipping charges, and travel and lodging expenses,
will not exceed $238,681 for the installation of the workstations. Customer
shall pay all applicable taxes, duties, shipping expenses, travel and lodging
expenses, and other charges (including, but not limited to, sales, use, excise,
and personal property taxes) now or hereafter levied, assessed, or charged
against the hardware and services as a consequence of this Addendum, except
where such taxes, duties, or charges are based upon net income of M&I.
8. Incorporation of License Agreement. Terms and conditions of the PC Teller
Software License Agreement not in conflict with those contained herein shall be
of the same force and effect with respect to this Addendum as if specifically
contained in this Addendum.
THE PARTIES HERETO ACKNOWLEDGE THAT EACH HAS READ THIS ADDENDUM,
UNDERSTANDS IT, AND AGREES TO BE BOUND BY ITS TERMS AND CONDITIONS, AS STATED
HEREIN.
IN WITNESS WHEREOF, the parties hereto through their duly authorized
officers and agents have hereby executed this Addendum on the date before
written.
VALLE DE ORO BANK, N.A. (CUSTOMER) M&I DATA SERVICES, INC.
By: /s/ ROLAND C. NICKERSON By: /s/ JOSEPH L. DELGADILLO
----------------------------- --------------------------------
Name: Roland C. Nickerson Name: Joseph L. Delgadillo
Title: Senior Vice President Title: Senior Vice President
Attest: Attest:
By: /s/ WILLIAM V. EHLEN By: /s/ JOHN C. ANDREWS
----------------------------- --------------------------------
Name: William V. Ehlen Name: John C. Andrews
Title: President & C.E.O. Title: Vice President
<PAGE> 7
M&T DATA SERVICES, INC.
PC TELLER SOFTWARE LICENSE AGREEMENT
THIS AGREEMENT is entered into this 19 day of Dec 1991, by and between M&I
Data Services, Inc. ("M&I"), a Wisconsin corporation located at 770 North Water
Street, Milwaukee, Wisconsin 53202 and Valle de Oro Bank, N.A. located at 9832
Campo Road, Spring Valley, California 91979-1449 (the "Customer").
RECITALS
WHEREAS, M&I has developed teller software for use with personal
computers; and
WHEREAS, Customer wishes to obtain a license to use such software for its
own internal purposes.
NOW, THEREFORE, for and in consideration of the mutual agreements contained
herein, M&I hereby grants Customer the right and license to use the PC Teller
Software (as described herein) subject to the ongoing satisfaction by Customer
of the following terms and conditions:
1. PC Teller Software. For purposes of this Agreement, the term PC Teller
Software (referred to as the "Software") shall mean a teller software system
delivered to the Customer in machine-readable code (object code) only, together
with related user documentation provided by M&I and identified in Exhibit A.
2. Scope of License. M&I hereby grants to Customer a nonexclusive,
nontransferrable, and revocable license to use the Software for its own internal
business purposes and solely accessible by the personal computers listed in
Exhibit A. Customer acknowledges and agrees that the Software is licensed to
Customer on the condition that Customer currently, and continues to have
throughout the time period of this License, all of its data processed by either
the M&I Loan System or the M&I Deposit System. Customer understands that this
License does not include the operating system which may be necessary to utilize
the Software.
3. License Fee. Customer shall pay to M&I a one-time License Fee as set
forth in Exhibit A, such fee to be based upon the number of personal computer
workstations that are authorized to access the Software, as listed in Exhibit A.
The License Fee shall, include Training and Conversion Support as described in
Section 6. Customer agrees that if additional personal computer workstations or
equipment other than those listed in Exhibit A access the Software, M&I shall,
in
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<PAGE> 8
addition to any other remedies it may have, have the right to terminate the
license granted herein granted herein or charge an additional License Fee; such
fees to be based upon the increased access computed in accordance with M&I's
then-current price schedule. Customer shall also pay all applicable taxes,
duties, and charges (including, but not limited to, sales, use, excise, and
personal property taxes) now or hereafter levied, assessed, or charged against
the Software while licensed to Customer as a consequence of this Agreement,
except where such taxes, duties, or charges are based upon the net income of
M&I.
4. Payment of License Fee. Customer shall pay to M&I the one-time License
Fee, in immediately available funds, upon execution of this Agreement.
5. Delivery. M&I shall deliver on magnetic diskette to Customer at time
of conversion to PC Teller, one machine-readable copy of the Software. Delivery
shall be deemed to have occurred upon Customer's receipt of the Software at the
time of conversion ("Delivery Date").
6. Training and Conversion Support. M&I shall provide a two-day teller
analysis session to determine teller transaction requirements and a three-day
teller training class to familiarize the Customer's trainers with the features
and functions of the Software. The sessions shall be held at the M&I Datacenter
located in Brown Deer, Wisconsin, at dates and times established by M&I. M&I
shall also be on-site for five days at Customer's main office at time of
conversion to assist with the conversion to the PC Teller Software. The date of
conversion will be mutually established by Customer and M&I. M&I will also
provide to Customer, in conjunction with their conversion to PC Teller, an
upgrade to the Tellerlink host software. M&I reserves the right to change the
content and duration of analysis and training sessions and the duration of
on-site support. Customer shall be responsible for all costs and expenses
incurred by attendees, including travel and lodging expenses. Customer agrees to
reimburse M&I for travel and lodging expenses for Training and Conversion
Support rendered to Customer outside of M&I offices.
7. Installation. M&I shall install the Software on Customer's computers)
which are purchased through M&I, as described in the Addendum. Customer agrees
to reimburse M&I for travel and lodging expenses for Installation Services
rendered to Customer outside of M&I offices.
8. Acceptance. This Agreement, and the Software, shall be deemed to have
been accepted by the Customer as of the date when M&I and Customer have both
executed this Agreement.
9. Documentation. Customer shall receive, at no additional charge, one
set of user documentation as part of the Software, as described in Exhibit A.
Additional sets of Documentation requested by the Customer will be billed to
Customer at M&I's then-current price for such documentation.
10. Maintenance and Enhancements. Maintenance services and enhancements
will be provided for the Software in accordance with the terms and conditions of
the Data Processing Services Agreement
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<PAGE> 9
by and between M&T and Customer. The Software maintenance fee shall be
incorporated in the On-line Teller rates published in the M&I Data Services,
Inc., Customer price list. Such fees will be included in the Customer's monthly
data processing invoice. On-line Teller rates may be adjusted by M&I upon
written notifications to Customer of a change in M&I's current published rates.
Customer agrees to reimburse M&I for time-and-material expenses, including
travel and lodging expenses, for Maintenance and Enhancement Services rendered
to Customer outside of M&I offices.
11. Use Rights. Customer represents and warrants that it will use the
Software solely on those computers described in Exhibit A, and that it will only
process information and data for itself, its subsidiaries, parent corporation,
and subsidiaries of its parent corporation, and that it will not directly or
indirectly permit any other person or entity to have access to or use of the
Software, and that it will not use the Software to provide data processing
services on a shared resource or service bureau basis to any other person,
company, or financial institution.
12. Notification of Unauthorized Use. Customer agrees to notify M&I
promptly of the circumstances surrounding any unauthorized possession, use, or
knowledge of any part of the Software, or any other information or documentation
made available pursuant to this Agreement to anyone other than persons properly
authorized by Customer to have such possession, use, or knowledge.
13. Ownership and Confidentiality. Customer acknowledges and agrees that
the Software, including all authorized and unauthorized copies, are proprietary
to and valuable trade secrets of M&I, and Customer shall maintain their
confidential nature. Customer agrees that the Software shall be used only in
accordance with this Agreement, and Customer shall not assign, sell, lease,
market, transfer, reproduce, or disclose the Software or any modification
thereto to others. Customer shall limit access to the Software to Customer's
employees or third parties, when such persons (1) are performing services for
the Customer, related to the Customer's authorized use of the Software; and (2)
have a valid need to know and have established a legal obligation with the
Customer to protect the Software from unauthorized copying or use. Customer
shall exercise all reasonable precautions to prevent access to the Software by
persons not authorized by terms of this Agreement. Customer shall store the
Software in a secure place at all times it is not being used. In addition,
Customer shall take appropriate measures to prevent copying, distribution,
reverse engineering, and reverse compiling of the Software. Customer recognizes
that the Software may be patented, copyrighted, trademarked, or otherwise
protected by M&I, and Customer will not undertake to patent, copyright,
trademark, or otherwise apply for a proprietary grant or right with respect to
the Software.
14. Reproduction. Customer shall have the right to load the Software on
each personal computer that is included in the License Fee and appears on
Exhibit A. Customer may also
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<PAGE> 10
reproduce the Software for backup or archival purposes only; provided, however,
such reproduction shall (1) be solely for the use of the Customer, (2)
conspicuously display the information shown in Exhibit B, and (3) be subject to
the restrictions set forth in this Agreement.
15. Modifications. Customer acknowledges and agrees that it shall not
make any modifications to the Software. M&I shall not be liable to the Customer
in warranty or otherwise for modifications made to the Software by someone other
than M&I. Under no circumstances shall Customer sell, distribute, or license
modifications of the Software. Nothing herein will prevent M&I from developing
and distributing its own modifications to the Software.
16. Warranty. THE FOLLOWING LIMITED WARRANTIES ARE IN LIEU OF ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, WRITTEN OR ORAL, INCLUDING BUT NOT LIMITED TO,
THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
(a) M&I warrants that it is the exclusive owner of the copyrights in
the Software and that it has all the rights necessary in order
to grant the licenses specified under this Agreement.
(b) M&I warrants that the Software, when run in the operating
environment specified in the user documentation, shall at the
time of the Delivery Date be capable of operating in substantial
compliance with the user documentation provided with the
Software. Customer acknowledges and agrees that its sole remedy
under this warranty is for M&I to attempt to correct all
Software errors that are brought to its attention by the
Customer during the term of this Agreement and the Data
Processing Services Agreement. Customer hereby acknowledges that
the Software is provided in an "As Is" condition and, except for
those limited warranties specified in this section, is without
warranty of any kind, either express or implied, written or
oral.
17. Limitation of Liability. M&I's liability for damages to Customer for
any cause whatsoever, whether in contract or in tort, including negligence,
shall be limited to the License Fee paid for that portion of the Software that
caused the damages or is directly related to the claim for relief. In no event
shall M&I be liable for damages caused by Customer's failure to perform its
obligations under this Agreement or for any lost profits, lost savings, and
incidental or consequential damages, even if M&I has been advised of the
possibility of such damages.
18. Authorization. Customer agrees and represents that this Agreement
has been approved by its Board of Directors, that the performance of this
Agreement by the Customer will not affect the safety or soundness of the
Customer or any of its affiliates, and that this Agreement and the obligations
evidenced hereby, will be properly reflected on the books and records of the
Customer.
19. Termination. In the event that the Customer discontinues processing
its data by use of the M&I Loan System or M&I Deposit System, this Agreement
shall automatically terminate. Customer
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<PAGE> 11
shall continue to be obligated and liable for any license or maintenance fees
due and owing under this Agreement and any other legal remedies M&I may have
against the Customer. Termination may also occur if a party fails to perform its
material obligations under this Agreement and receives written notice from the
other party informing it of the breach and requiring it to cure such breach.
Should the defaulting party fail to cure its breach within a 30-day period
following the written notice (or such reasonable period if this breach, by its
nature, cannot be cured within 30 days), the other party shall have the right to
terminate this Agreement. Upon termination of this Agreement, Customer shall (1)
immediately cease using the Software; (2) erase the same from the storage in
each computer in which it has been installed; (3) certify to M&I in writing that
Customer has taken the action described in clauses (1) and (2) above; (4)
maintain in confidence all knowledge of the Software and its use, and (5) at the
option of M&I, either return to M&I or destroy all physical embodiments of the
Software and backup copies made thereof.
20. Assignment. Customer may not assign, sublicense, or otherwise
transfer any or all of its rights and obligations under this Agreement without
M&I's prior written consent, and any assignment without such prior written
consent shall be void and of no effect.
21. Notices. Notices to be given or submitted by either party to the
other under the terms of this Agreement shall be sufficiently given if made in
writing and hand-delivered or sent by certified or registered mail, postage
prepaid and addressed to the notified party, to the address shown above or to
such other address as the notified party shall so designate in writing to the
other party at least twenty (20) days prior to notification.
22. Entire Agreement. This Agreement, the Exhibits, and the Addendum
attached hereto supersede all previous agreements and understandings of any
nature whatsoever, verbal or written, and constitute the entire understanding
between the parties with respect to the subject matter hereof. All oral or
written representations, warranties, agreements, and other inducements relating
to this Agreement and its subject matter made prior to the execution and
delivery hereof have been included herein or, to the extent not included herein,
shall be deemed to have been fully performed and discharged or deliberately
omitted. No provision of this Agreement may be waived, modified, or superseded
as against M&I or Customer, except by written instrument signed by an authorized
officer of each party, expressly stating that it is intended to operate as such.
This Agreement does not limit or restrain in any way the right of M&I to lease,
license or sell, or otherwise dispose of the Software or parts thereof to any
other person or entities, or to execute agreements providing for such transfer
of rights.
23. Governing Law. This Agreement shall be governed, interpreted,
construed, and enforced in accordance with the internal laws of the State of
Wisconsin, United States of America. The exclusive jurisdiction for any legal
proceedings regarding this Agreement shall be in the courts
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<PAGE> 12
of Milwaukee County, Wisconsin, and the parties hereto expressly submit to the
jurisdiction of said courts.
24. Severability. If any provision, clause, part, or the application of
this Agreement is held invalid, the remainder of this Agreement or the
application of such provision, clause, or part under other circumstances shall
not be affected.
25. Miscellaneous. Time is of the essence. No claim, regardless of form,
arising out of this Agreement may be brought by Customer more than two (2) years
after the events giving rise to the claim for relief occurred. The obligations
of confidentiality and non-use after termination, among others, shall survive
termination.
THE PARTIES HERETO ACKNOWLEDGE THAT EACH HAS READ THIS AGREEMENT,
UNDERSTANDS IT, AND AGREES TO BE BOUND BY ITS TERMS AND CONDITIONS, AS STATED
HEREIN.
IN WITNESS WHEREOF, the parties hereto through their duly authorized
officers and agents have hereby executed this Agreement on the date before
written.
VALLE DE ORO BANK, N.A. (CUSTOMER) M&I DATA SERVICES, INC.
By: /s/ ROLAND C. NICKERSON By: /s/ JOSEPH L. DELGADILLO
----------------------------- --------------------------------
Name: Roland C. Nickerson Name: Joseph L. Delgadillo
Title: Senior Vice President Title: Senior Vice President
Attest: Attest:
By: /s/ WILLIAM V. EHLEN By: /s/ JOHN C. ANDREWS
----------------------------- --------------------------------
Name: William V. Ehlen Name: John C. Andrews
Title: President & C.E.O. Title: Vice President
-6-
<PAGE> 13
EXHIBIT A
PC TELLER SOFTWARE LICENSE AGREEMENT
M&I DATA SERVICES, INC.
Milwaukee, Wisconsin 53202
Customer Name: Valle de Oro Bank, N.A.
Address: 9832 Campo Road
Spring Valley, California 91979-1449
Description and Number of Licensed Computer(s)/Workstation(s)/Equipment:
PC Teller - 24 workstations
Customer's Primary Location Designation:
Valle de Oro Bank, N.A.
9832 Campo Road
Spring Valley, California 91979-1449
User Documentation
PC Teller Training Guide
<TABLE>
<S> <C>
License Fee:
PC Teller Software $ 14,280.00
Sales Tax (8.25%) 1,178.10
----------
TOTAL 15,458.10
</TABLE>
<PAGE> 14
EXHIBIT B
PC TELLER SOFTWARE LICENSE AGREEMENT
M&I DATA SERVICES, INC,
Milwaukee, Wisconsin 53202
Customer shall prepare labels containing the following information and affix a
label to each diskette copy of the PC Teller Software reproduced by the
Customer:
1. PC Teller Software.
2. Diskette _________ of _____.
3. Licensed material - property of and copyrighted by M&I Data Services,
Inc.
4. This copy was made under M&I PC Teller Software License Agreement
dated _____________ and may be used only on the computers listed in
that Agreement. It may not be transferred to a third party.
<PAGE> 1
EXHIBIT 10.2
Backup Facility Agreement between Valle de Oro Bank, N.A. and M&I
Data Services dated April 10, 1995
<PAGE> 2
BACKUP FACILITY AGREEMENT
THIS BACKUP FACILITY AGREEMENT is made as of this 10th day of April, 1995,
by and between M&I Data Services, a division of the Marshall & Ilsley
Corporation (herein called "M&I") with offices located at 4900 West Brown Deer
Road, Brown Deer, Wisconsin 53223 and Valle de Oro Bank (herein called
"Customer"), a corporation with offices located at 491 Sweetwater Road, Spring
Valley, California, 91977.
WHEREAS, Customer is a user of computer equipment in the conduct of its
business operations and desires to have access to and use of backup computer
capability in the event of a Disaster as defined herein; and
WHEREAS, M&I desires to provide Customer with backup computer capability,
as more fully defined herein, in the event of a Disaster;
NOW, THEREFORE, in consideration of the mutual benefits accruing and
expected to accrue hereunder, M&I and Customer agree to be legally bound to the
following terms and conditions:
1. DEFINITIONS
In addition to the words and terms defined in this Agreement, the
following words and terms, as used herein, shall have the following meanings,
and such definitions shall apply to both the singular and plural forms of any
such words and terms:
"BACKUP FACILITY" means the computer facility containing the Equipment
Configuration, as described on Schedule A hereto and any Riders attached
thereto, which is made available to Customer in the event Customer experiences a
Disaster. The procedures and scope of disaster recovery services, are further
described in the Services Continuity Proposal dated March 16, 1995, which is
attached as a Rider to this agreement, has been provided to the Customer, and
may be revised from time to time.
"COMPUTER FACILITY" means the data processing installation utilized by
Customer, located at 491 Sweetwater Road, Spring Valley, California, 91977.
"DISASTER" means any unplanned interruption of the operations of or
inaccessibility to the Customer's Computer Facility which is expected to last at
least twenty-four (24) hours.
"DISASTER NOTIFICATION" means the oral and subsequent written notice
which Customer must deliver to M&I upon or immediately following the occurrence
of a Disaster, in which notice a request is made for access to and use of the
Backup Facility.
"DISASTER NOTIFICATION FEE" means the charge imposed by M&I and
payable by Customer on each occasion that Customer delivers a Disaster
Notification requesting access to and use of the Backup Facility.
1
<PAGE> 3
"EQUIPMENT CONFIGURATION" means computer equipment listed on the
attached Schedule A, which may be modified from time to time pursuant to Section
9.
"MULTIPLE DISASTER" means one or more Disasters being experienced by
more than one Subscription Holder, entitling them to access to and use of the
Backup Facility described in Schedule A for the same or overlapping periods.
"NORMAL OUTAGE" means ordinary downtime experienced by equipment which
is serviced and maintained in adherence to the manufacturer's recommended
procedures and practices.
"SERVICES" means the disaster backup services requested by customer
and described on Schedule A and any riders attached thereto.
"SHARED UTILIZATION PLAN" is a plan to be implemented when more than
one Subscription Holder experiences a Disaster at the same time.
"SUBSCRIPTION HOLDERS" means computer processing equipment users under
contract to M&I for access to and use of the Backup Facility for Disaster
protection.
"SUBSCRIPTION FEE" means the basic monthly charge imposed by M&I as
set forth on Schedule A hereto and payable by Customer, entitling Customer to
access and use of the Backup Facility in the event Customer experiences a
Disaster.
"USAGE FEE" means the charges imposed by M&I as set forth on Schedule
A and payable by Customer for the period during which Customer makes use of the
Equipment Configuration following delivery of a Disaster Notification.
2. USE OF BACKUP FACILITY
A. In the event of a Disaster to Customer's Computer Facility,
Customer, subject to the provisions of Section 6 (relating to Multiple
Disasters), shall have access to and use of the Backup Facility immediately
after delivery of a Disaster Notification to M&I. If necessary, initial
notification and request for access may be oral, but such oral notice must be
followed by a written Disaster Notification within seventy-two (72) hours after
initial notification. The Disaster Notification shall specify the time period
within which access is desired by Customer.
B. Customer shall continue to have the right of access to and
use of the Backup Facility for up to six (6) consecutive weeks. After the
initial six-week period, Customer shall be entitled to continued access to and
use of the Backup Facility, provided that Customer has made a good faith effort
to remedy the Disaster at its Computer Facility and provided that it continues
to pay all applicable charges hereunder and provided further, however, that if
another Subscription Holder experiences a Disaster during this extended period
of use by Customer, that subsequent Subscription Holder shall be entitled to
priority use of the Backup Facility.
C. At no additional cost, Customer shall have access to and use
of the Backup Facility during each twelve (12) month period of the term of this
Agreement for the number of hours set forth on Schedule A in order to test its
Disaster procedure ("Test Time"). Customer shall consult with M&I in scheduling
Test Time, and the
2
<PAGE> 4
parties hereto shall mutually agree upon a designated Test Time. Scheduled Test
Time is cancelable by M&I at its discretion upon receipt of a Disaster
Notification from a Subscription Holder. Attempts will be made by M&I to
reschedule Test Time, but no allowance or credits will be made for Test Time
unused due to scheduling conflicts or cancellation resulting from receipt of
Disaster Notifications.
D. Customer will obtain and maintain, at its sole expense, any
necessary equipment not included in the Backup Facility, programming, and
appropriate telephone service, all to be adaptable to and compatible with the
Backup Facility.
3. TERM
The term of this Agreement shall commence upon acceptance by M&I (the
"Commencement Date") and shall terminate as of the same date as the Data
Processing Services Agreement between the parties ("Initial Term"). At the
expiration of the Initial Term, this Agreement shall automatically renew for
successive month-to-month periods, at the then-current rate being paid by
Customer, unless notice of termination shall have been given by Customer or M&I
at least thirty (30) days prior to the end of the Initial Term.
4. FEES
A. In consideration of the right of access to the Backup Facility,
Customer shall pay the monthly Subscription Fee which shall be due and payable
on the first of each month during the term of this Agreement. If the
Commencement Date shall occur on other than the first of a month, Customer
shall make an initial payment on the Commencement Date in an amount equal to
one-thirtieth of the monthly Subscription Fee for each day from the
Commencement Date (including the Commencement Date) through the last day of
said month. The amount of the monthly Subscription Fee is stated on Schedule A
and any Rider attached thereto.
B. If Customer experiences a Disaster and must make use of the
Backup Facility, the access to the Backup Facility shall be subject to payment
of the Disaster Notification Fee stated on the attached Schedule A. The
Disaster Notification Fee shall be due upon the occurrence of each separate
Disaster which causes Customer to use the Backup Facility.
C. Customer shall pay M&I a Usage Fee in accordance with the
attached Schedule A for the period during which use is made of the Backup
Facility. During such period, Customer shall not be required to pay the
Subscription Fee required by Section 4(A). For purposes of determining the
Usage Fee, the term "day" shall mean each period of twenty-four (24)
consecutive hours commencing upon the hour Customer accesses the Equipment
Configuration.
D. The monthly Subscription Fee specified on the attached Schedule
A and any Riders shall be subject to increases by M&I annually. These increases
will be limited to five percent (5%) per annum. Any increase shall become
effective upon the annual anniversary of the Commencement Date, if on the first
of a month, or, if not, then on the first day of the following month, and shall
be applied at
3
<PAGE> 5
each such annual anniversary thereafter to the monthly Subscription Fee
resulting from the effects of any previous adjustments or, in the alternative,
on the annual price charge date M&I may establish.
5. METHOD AND TIME OF PAYMENT
The Disaster Notification Fee shall be payable within twenty-four
(24) hours of the delivery of the formal Disaster Notification. The
Subscription Fee for each calendar month during the term of this Agreement
shall be invoiced to Customer in the preceding month and shall be paid by
Customer within thirty (30) days from the date of invoice. All other fees and
charges (including applicable taxes) incurred by Customer for Backup Facility
in any calendar month will be invoiced by M&I to Customer during the succeeding
calendar month and shall be paid by customer within thirty (30) days from the
date of invoice. Whenever any payment is not made when due hereunder, Customer
shall pay interest at the rate of eighteen percent (18%) per annum or the
maximum allowable rate of interest permitted by law of the state where the
Backup Facility is located, whichever is less.
6. MULTIPLE DISASTERS
In the event of a Disaster, Customer shall have the right of access
to and use of the Backup Facility. However, the Backup Facility provided for
herein is being offered by M&I to other Subscription Holders, and to the extent
it is possible that Multiple Disasters could be experienced by Customer and
other Subscription Holders, none of the terms and conditions contained herein
shall be interpreted or construed as a covenant, promise, or guarantee of any
kind that Customer will have immediate and exclusive access to and use of the
Backup Facility. In order to limit the problem of Multiple Disasters, M&I shall
enter into similar arrangements for the Backup Facility with no more than one
hundred (100) Subscription Holders per Backup Facility.
In the event of a Multiple Disaster, M&I will use its best efforts to
provide (i) coordinating and scheduling of a Shared Utilization Plan and/or
(ii) an alternate Backup Facility. The Shared Utilization Plan and/or (ii) an
alternate Backup Facility. The Shared Utilization Plan will attempt to meet the
needs of all Subscription Holders, whether first or subsequent to another
Subscription Holder experiencing a Disaster. If Subscription Holders become
dissatisfied with the M&I-developed Shared Utilization Plan, they have the
option of unanimously agreeing to a reasonable alternative plan which will be
submitted, in writing, to M&I. If accepted by M&I, the alternative plan will be
implemented by M&I within a reasonable time period.
7. LIABILITY
A. EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT, M&I MAKES NO
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE WITH RESPECT TO THE BACKUP FACILITY OR THE USE OF THE BACKUP FACILITY.
B. M&I's liability to Customer for any losses or damages, direct or
indirect, arising out of this Agreement shall not in any event exceed the
aggregate amounts paid by Customer during the forty-five (45) day period
preceding the month in which Customer's loss or damage is incurred. Except as
otherwise provided for herein,
4
<PAGE> 6
M&I shall not be liable to Customer or any other person for any claim of damage
arising, directly or indirectly, from the furnishing of services or equipment
pursuant to this Agreement or from interruption or loss of use thereof or from
any other cause. Under no circumstances shall M&I be liable for punitive,
special, or exemplary damages, nor shall it be liable for consequential damages
including, but not limited to, loss of anticipated profits or other economic
loss in connection with the services to be rendered hereunder. M&I shall not be
liable for any claim or loss arising from required sharing of the Backup
Facility between Customer and one or more other Subscription Holders in the
event of a Multiple Disaster. In the performance of any other services, M&I
shall not be responsible for any application or the results obtained from the
use of any computer programs or for results (foreseen or unforeseen) obtained
by Customer in the use of such programs. M&I shall not, under any
circumstances, be liable to any person not a party to this Agreement. M&I and
the Customer agree that these damage provisions are reasonable in light of all
present predictable circumstances (including expectable actual damages in that
the fees to be charged by M&I hereunder do not include amounts sufficient to
insure against greater claims). Except as set forth in Section 8, Customer's
obligations to M&I are limited to its payment obligations hereunder.
C. M&I shall not be considered in default hereunder due to any
failure in its performance of this Agreement should such failure arise out of
causes beyond its reasonable control. Such causes shall include, but are not
limited to, Acts of God or a public enemy; acts of any federal, state, or local
government or authority, whether in sovereign, proprietary, or contractual
capacity; fires; floods or other disasters; epidemics; quarantines; strikes;
freight embargoes; degradation of telephone or other means of communication
service; utility outages; equipment or parts unavailability, and unusually
severe weather conditions.
D. M&I shall maintain an operating environment for the Equipment
Configuration and shall adhere to recommended policies and procedures for
proper maintenance of such equipment. If any unscheduled interruption of the
Backup Facility continues for a period of thirty (30) consecutive days, then
all fees due hereunder for the period of interruption shall be waived and the
term of this Agreement shall be deemed extended for a like period. M&I shall,
as needed, reconstruct or repair the Backup Facility as quickly as possible
following any interruption, but M&I shall not be liable for any losses or
damages suffered by Customer because of damage to or interruption of the Backup
Facility or inaccessibility of the Backup Facility due to Normal Outage.
8. MUTUAL INDEMNIFICATION
Within the limitations set forth elsewhere in this Agreement, both
M&I and Customer mutually indemnify and hold each other and their respective
employees harmless from any and all claims, liabilities, loss, damages, and
causes of action relating to personal injury, death, or property damage to the
extent of each party's intentional acts or negligence arising out of this
Agreement, provided that each party shall retain sole defense of any such claim.
9. EQUIPMENT MODIFICATIONS
M&I reserves the right to unilaterally change the Equipment
Configuration. M&I shall give Customer sixty (60) days' prior written notice of
any
5
<PAGE> 7
significant changes, and M&I shall permit Customer a reasonable amount of
additional free Test Time after such substantial changes. No such changes shall
be permitted unless the resulting equipment configuration is technically equal
to or better than the Equipment Configuration available prior to the change. If
such change substantially and adversely impacts customer to the extent that
Customer is no longer able to utilize the Backup Facility, Customer shall have
the right, for a period of sixty (60) days after Customer is allowed access to
the new configuration, to terminate this Agreement by written notice without
further obligation except for the payment of fees and any other sums payable up
to the date of termination. Customer shall comply with all procedures and
standards published and provided by M&I relating to performance hereunder.
10. CONFIDENTIALITY
A. M&I's physical security system and access control system are
trade secrets and shall not be used or disclosed to a third party by Customer
for any purpose other than as necessary to perform this Agreement. M&I and
Customer shall each exercise the same standard of care to protect any
proprietary or confidential data of the other, disclosed during negotiation or
performance of this Agreement, as is used to protect its own proprietary or
confidential data from unauthorized disclosures. If Customer has any special
means of protecting such data, it shall in writing so inform M&I who will use
its best efforts to utilize such means to protect said data provided that if
M&I incurs additional costs in so doing, Customer shall pay all such additional
costs. If such material is publicly available, already in the other party's
possession or known to it, or is thereafter rightfully obtained from other
sources, then there shall be no restriction pursuant to this Agreement in the
use of such material.
B. Neither party shall disclose that Customer is utilizing this
service without the consent of Customer, except as may be required by law or
regulation.
11. TERMINATION
A. In addition to the right to terminate set forth in Section 9,
either Customer or M&I may, by written notice, and subject to the provisions of
Subparagraph B below, terminate this Agreement for cause without further
obligation upon the occurrence of a default by the other under the terms of
this Agreement. Said default(s) shall be expressly stated in the notice of
termination.
B. Written notification must be given of an alleged default
under the terms of this Agreement, and except for failure by Customer to make
timely payments pursuant to Sections 4 and 5, the notified party shall have
twenty (20) days to remedy the specific default(s). Customer shall have ten
(10) days from receipt of written notification to pay any delinquent amount.
Failure to cure the specified default(s) within the applicable allotted time,
or recurrence of the same default within thirty (30) days after its initial
cure, will give cause for immediate termination. In the event of termination
due to Customer's default, Customer shall be liable for all amounts then owing
and the monthly fees for all of the remaining months of the Initial Term or any
extension thereof, and the same shall become immediately due and payable.
C. Customer may terminate this Agreement at any time and without
cause and without penalty by giving M&I at least sixty (60) days' prior written
notice.
6
<PAGE> 8
D. M&I may terminate this Agreement at any time and without cause
by giving Customer six (6) months' prior written notice.
12. MISCELLANEOUS
A. Neither M&I nor Customer may assign this Agreement or any rights
or obligations hereunder (except M&I may freely assign to any successor
pursuant to a merger, consolidation, or sale of all or substantially all of its
assets) without obtaining prior written consent of the other party, which such
consent shall not be unreasonably withheld.
B. This Agreement shall be governed by the laws of the state of
Wisconsin.
C. No waiver by either party of any breach or default of any of the
covenants or conditions herein contained and performed by the other party shall
be construed as a waiver of any succeeding breach of the same or of any other
covenant or condition.
D. This Agreement supersedes all prior proposals, oral and written,
all previous negotiations, and all other communications or understandings
between M&I and Customer with respect to the subject matter hereof and may not
be modified in any manner except by a writing signed by an authorized
representative of the party being bound thereby.
E. The relationship between M&I and Customer created by this
Agreement shall be that of independent contractors, and nothing contained
herein shall be construed as constituting a partnership, joint venture, or
agency between M&I and Customer.
F. Any notice, request, or other communication to either party by
the party provided for herein shall be given in writing and shall be deemed
received upon earlier of receipt of three days after mailing if mailed postage
prepaid by regular or airmail at the address for such party as set forth above
or such changed address as may be subsequently submitted by written notice of
either party.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by an authorized officer in a manner appropriate to each as of the
date above written.
M&I DATA SERVICES, A DIVISION OF
THE MARSHALL & ILSLEY CORPORATION VALLEY DE ORO BANK
("M&I") ("CUSTOMER")
By: /s/ ROBERTA ROBERTS-SOIKE By: /s/ ROLAND NICKERSON
-------------------------------- ----------------------------
Name: Roberta Roberts-Soike Name: Roland Nickerson
Title: Vice President Title: Sr. Vice President/CFO
7
<PAGE> 9
SCHEDULE A
BASIC EQUIPMENT CONFIGURATION:
One (1) NCR VIPS 8565 processor
One (1) NCR VIPS 8575 processor
Two (2) NCR 6780 reader/sorters with inline microfilm
Three (3) NCR 647 impact printers
Eight (8) NCR 658 disk drives
Two (2) 6370 NCR tape drives
Two (2) NCR 6540 disc units
One (1) IBM 3800 laser printer
One (1) Kodak Optistart Datawriter fische processor
ONE-TIME FEES
Start-up Fee: $6,400.00
M&I MONTHLY FEE
Subscription Fee: $300.00 per month.
DISASTER NOTIFICATION FEE:
Disaster Notification Fee: $1,500.00
Disaster Notification Fee: $500.00 (Print-back only)
DISASTER PROCESSING FEE:
Usage Fee: Published price in effect at time of utilization of the disaster
backup services for proof encoding, item processing, report printing, and
statement rendering.
TEST TIME:
Test Time: Eight (8) hours per year
OTHER FEES:
Custom Statement Formatter (CSF), as described in the Rider.
All transportation costs.
8
<PAGE> 1
EXHIBIT 10.3
Employment Agreement between Valle de Oro Bank, N.A. and William V.
Ehlen dated July 1, 1995
<PAGE> 2
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into this 1st day of July,
1995, by and between VALLE DE ORO BANK, N.A., a national banking association,
having its corporate offices at 1234 E. Main Street, El Cajon, California,
hereinafter referred to as the "Employer," and WILLIAM V. EHLEN, hereinafter
referred to as the "Employee."
WHEREAS, the parties hereto desire to enter into an agreement for the
purposes of engaging the services of Employee by reason of his experience,
training and ability in the California commercial banking industry;
NOW, THEREFORE, IT IS MUTUALLY AGREED AS FOLLOWS:
1. Employment and Duties. The Employer hereby employs the Employee and
the Employee hereby accepts employment with the Employer upon the terms and
conditions hereinafter set forth. The Employee is hereby employed as the
President and Chief Executive Officer of Employer and shall perform the
customary duties of a President and Chief Executive Officer of a California
commercial bank and such kindred duties as may, from time to time, be reasonably
requested of him by the Board of Directors of Employer, provided that such
duties shall not require Employee to locate his residence in an area other than
where the principal executive office of the Employer is located.
2. Extent of Services. Employee shall donate his full time, attention
and energies to the business of the Employer, and shall not during the term of
this Agreement be engaged in any other business activities, except personal
investments, without the prior written consent of Employer.
3. Term. Subject to prior termination of this Agreement as hereinafter
provided, the term of the Employment Agreement is four (4) years beginning July
1, 1995.
4. Regular Compensation. In consideration for services rendered under
this Agreement, the employer shall pay to Employee a minimum salary of one
hundred seventy-five thousand and no/100 dollars ($ 175,000.00). Employee's
salary during the remaining years of this Agreement shall be increased in an
amount to be determined by Employer.
5. Expenses. Employee shall be reimbursed for ordinary and necessary
expenses incurred by Employee in connection with activities associated with
promoting the business of Employer that are authorized from time to time by the
Board of Directors of Employer including expenses for entertainment, travel and
similar items. Employer will pay for or will reimburse Employee for all such
expenses upon presentation by Employee from time to time, of an account of such
expenditure.
<PAGE> 3
6. Automobile. Employer shall provide Employee with an automobile for
Employee's personal and business use during the term of this Agreement or until
available. The Employer also agrees to procure and maintain automobile liability
insurance on such automobile. All automobile expenses incurred by the Employee
in performing his duties hereunder are to be paid for, insofar as this is
possible, by the use of credit cards in the name of the Employer. Any such
reasonable automobile expenses which cannot be charged on a credit card may be
paid for by the Employee who will later be reimbursed by the Employer.
7. Vacation. Employee shall be entitled to an annual vacation leave of
four (4) weeks at full pay. Employee shall take at least two consecutive weeks
of vacation annually.
8. Disability. If the Employee becomes disabled during the employment
term because of sickness, physical or mental disability, so that he is unable to
perform his duties hereunder, the Employer agrees to continue the Employee's
salary for whichever of the following is shortest: until one hundred eighty
(180) days from the first working day missed because of such sickness or
disability; until Employee is able to return to work; or until the end of the
employment term hereinabove specified.
9. Insurance. Employer hereby agrees as its sole cost and expense to
provide Employee, and Employee's dependents, at all times during the term of
this Agreement, with health (including medical, dental and hospitalization),
accident and disability insurance of a type at least as comprehensive as such
coverage provided through the California Bankers Association. In addition,
Employer hereby also agrees at its sole cost and expense to provide Employee
with term life insurance upon the life of the Employee, in a face amount of at
least $100,000 and with ownership therein to be determined by Employee in his
sole discretion, including the right to designate the beneficiary of such
policy.
10. Printed Material. All written or printed materials used by Employee
performing duties for Employer are and shall remain the property of Employer.
Upon termination of employment, Employee shall return such written or printed
material to Employer.
11. Disclosure of Information. Employee shall not, either before or
after termination of the Agreement, disclose to anyone any information relating
to Employer or an financial information, trade secrets of know-how germane to
the business and operations of Employer. Employee recognizes and acknowledges
that any financial information concerning any of Employer's customers, as it may
exist from time to time, is strictly confidential and is a valuable, special and
unique asset of Employer's business. Employee shall not, either before or after
termination of this Agreement, disclose to anyone said financial information or
any part thereof, for any reason or purpose whatsoever.
<PAGE> 4
12. Non-competition by Employee. During the term of this Agreement, the
Employee shall not directly or indirectly, either as an employee, employer,
consultant, agent, principal, partner, stockholder, corporate officer, director,
or in any other individual or representative capacity, engage or participate in
any competing banking business.
13. Surety Bond. The Employee agrees that he will furnish all
information and take any other steps necessary to enable the Employer to obtain
or maintain a fidelity bond conditional on the rendering of a true account by
the Employee of monies, goods, or other property which may come into the
custody, charge, or possession of the Employee during the term of his
employment. The surety company issuing the bond and the amount of the bond must
be acceptable to the Employer. All premiums on the bond are to be paid by the
Employer. If Employee cannot qualify for a surety bond at any time during the
term of this Agreement, Employer shall have the option to terminate this
Agreement immediately.
14. Moral Conduct. The Employee agrees to conduct himself at all times
with due regard to public conventions and morals. He further agrees not to do or
commit any act that will reasonably tend to degrade him or to bring him into
public hatred, contempt, or ridicule, or that will reasonably tend to shock or
offend the community, or to prejudice the Employer or the banking industry in
general.
15. Termination of Agreement.
a. Statutory Grounds for Termination. This Agreement shall terminate
immediately upon the occurrence of any one of the following events, which are
described in Sections 2920, 2921, 2924, and 2925 of the California Labor Code:
1) The occurrence of circumstances that make it
impossible or impractical for the business of the Employer to be continued.
2) The death of the Employee.
3) The loss of the Employee of legal capacity.
4) The loss by the Employer of legal capacity to
contract.
5) The willful breach of duty by the Employee in the
course of his employment, unless waived by Employer.
6) The habitual neglect by the Employee of his
employment duties, unless waived by the Employer.
7) Subject to paragraph 8 hereof, the continued
incapacity on the part of the Employee under this Agreement, unless waived by
the Employer.
<PAGE> 5
b. Termination for Bankruptcy. This Agreement may be terminated
immediately by either party at his option and without prejudice to any other
remedy to which he may be entitled at law, in equity, or under this Agreement if
either party:
1) Files a petition in bankruptcy courts or is
adjudicated as bankrupt;
2) Institutes or suffers to be instituted against him
any procedure in bankruptcy court for reorganization or rearrangement of his
financial affairs;
3) Has a receiver of his assets or property appointed
because of insolvency; or
4) Makes a general assignment for the benefit of
creditors.
c. Effect of Termination on Compensation. In the event of the
termination of this Agreement prior to the completion of the term of employment
specified herein, the Employee shall be entitled to the compensation earned by
him prior to the date of termination as provided for in this Agreement computed
pro-rata up to and including that date; the Employee shall be entitled to no
further compensation as of the date of termination except that Employee or
Employee's estate shall receive twelve (12) months' salary when termination is
caused by death, disability, or termination without proper notice as provided
below.
d. Termination by Either Party. Notwithstanding anything to the
contrary contained in this Agreement, either party may terminate this Agreement
at any time prior to the expiration of its term, subject to (12) months' written
notice served upon the other party.
16. Notices. Any notices to be given hereunder by either party to the
other may be effected either by personal delivery in writing or by mail,
registered or certified, postage prepaid with return receipt requested. Mailed
notices to the Employer shall be given to Valle de Oro Bank, N.A., 1234 E. Main
Street, El Cajon, CA 92021, c/o Chairman of the Board of Directors. Mailed
notices to Employee shall be sent to William V. Ehlen, 1421 Fuerte Heights Lane,
El Cajon, CA 92021.
17. Entire Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing between the parties hereto with respect to
the employment of the Employee by the Employer and contains all of the covenants
and agreements between the parties with respect to such employment in any manner
whatsoever. Each party to this Agreement acknowledges that no representations,
inducements, promises, or agreements, orally or otherwise, have been made by any
party, or anyone acting on behalf of any party, which are not embodied herein,
and that no other agreement, statement, or promise not contained in this
Agreement
<PAGE> 6
shall be valid and binding. Any modification of this Agreement will be effective
only if it is in writing signed by the party to by charged.
18. Partial Invalidity. If any provision in this Agreement is held by a
court of competent jurisdiction to be invalid, void, or unenforceable, the
remaining provisions shall nevertheless continue in full force without being
impaired or invalidated in any way.
19. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
20. Waiver. The parties hereto shall not be deemed to have waived any of
their respective rights under this Agreement unless the waiver is in writing and
signed by such waiving party. No delay in exercising any right shall be a waiver
nor shall a waiver on one occasion operate as a waiver of such right on a future
occasion.
22. Payment of Money Due Deceased Employee. If the Employee dies prior
to the expiration of the term of employment, any monies that may be due him from
the Employer under this Agreement as of the date of his death shall be paid to
his executors, administrators, heirs, personal representative, successors, and
assigns.
22. Attorney's Fees. Should either party hereto institute legal
proceedings to enforce or interpret any provision hereof, the prevailing party
shall be entitled to recover from the other party reasonable attorney's fees as
determined by the court, plus court costs.
23. Approval by Employer. The obligations and rights of the parties
hereunder are expressly conditioned upon the approval of this Agreement by the
Board of Directors, Valle de Oro Bank, N.A.
EMPLOYER:
/s/ JAMES F. CARROLL
- ----------------------------------
James F. Carroll
Chairman of the Board
EMPLOYEE:
/s/ WILLIAM V. EHLEN
- -----------------------------------
William V. Ehlen
President and
Chief Executive Officer
<PAGE> 1
EXHIBIT 10.4
Salary Continuation Agreement between Valle de Oro Bank, N.A. and William V.
Ehlen dated January 10, 1996
<PAGE> 2
SALARY CONTINUATION AGREEMENT
THIS AGREEMENT is made this 10th day of January 1996 by and between
Valle de Oro Bank, N.A. (the "Company"), and William Ehlen (the "Executive").
INTRODUCTION
To encourage the Executive to remain an employee of the Company, the
Company is willing to provide salary continuation benefits to the Executive. The
Company will pay the benefits from its general assets.
AGREEMENT
The Executive and the Company agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. Whenever used in this Agreement, the following
words and phrases shall have the meanings specified:
1.1.1 "Change of Control" means
(i) A change in the composition of the Company's
Board, as a result of which fewer than two-thirds of the incumbent
directors are directors who either (A) had been directors of the Company
24 months prior to such change or (B) were elected, or nominated for
election, to the Board with the affirmative votes of at least a majority
of the directors who had been directors of the Company
<PAGE> 3
24 months prior to such change and who were still in office at the time
of the election or nomination;
(ii) Any "person" (as such term is used in sections
13(d) and 14(d) of the Exchange Act) through the acquisition or
aggregation of securities is or becomes the beneficial owner, directly
or indirectly, of securities of the Company representing 26 percent or
more of the combined voting power of the Company's then outstanding
securities ordinarily (and apart from rights accruing under special
circumstances) having the right to vote at elections of directors (the
"Base Capital Stock"); except that any change in the relative beneficial
ownership of the Company's securities by any person resulting solely
from a reduction in the aggregate number of outstanding shares of Base
Capital Stock, and any decrease thereafter in such person's ownership of
securities, shall be disregarded until such person increases in any
manner, directly or indirectly, such person's beneficial ownership of
any securities of the Company.
1.1.2 "Code" means the Internal Revenue Code of 1986, as
amended. References to a Code section shall be deemed to be to that
section as it now exists and to any successor provision.
1.1.3 "Disability" means, if the Executive is covered by a
Company-sponsored disability insurance policy, total disability as
defined in such policy without regard to any waiting period. If the
Executive is not covered by
-2-
<PAGE> 4
such a policy, Disability means the Executive suffering a sickness,
accident or injury which, in the judgment of a physician satisfactory to
the Company, prevents the Executive from performing substantially all of
the Executive's normal duties for the Company. As a condition to any
benefits, the Company may require the Executive to submit to such
physical or mental evaluations and tests as the Company's Board of
Directors deems appropriate.
1.1.4 "Normal Retirement Date" means the Executive attaining
age 62.
1.1.5 "Termination of Employment" means the Executive's
ceasing to be employed by the Company for any reason whatsoever,
voluntary or involuntary, other than by reason of an approved leave of
absence.
1.1.6 "Plan Year" means twelve months ending on December 31.
ARTICLE 2
LIFETIME BENEFITS
2.1 Normal Retirement Benefit. If the Executive terminates
employment on or after the Normal Retirement Date for reasons other than death,
the Company shall pay to the Executive the benefit described in this Section
2.1.
2.1.1 Amount of Benefit. The benefit under this Section 2.1 is
$108,000 per year ($9,000 per month).
2.1.2 Payments of Benefit. The Company shall pay the benefit
in monthly installments to the Executive on the
-3-
<PAGE> 5
first day of each month commencing with the month following the
Retirement Date and continuing for 179 additional months.
2.2 Termination Benefit Before Age 62. If the Executive terminates
employment for any reason prior to attaining age 62, the Company shall pay to
the Executive the benefit described in this Section 2.2.
2.2.1 Amount of Benefit. The monthly benefit under this
Section 2.2 is the monthly benefit which is payable on an actuarial
basis from the lump sum amount set forth in Schedule A based on the date
of the Executive's Termination of Employment.
2.2.2 Payment of Benefit. The Company shall pay the benefit to
the Executive on the first day of each month commencing with the month
following the Executive's Normal Retirement Date and continuing for 179
additional months.
2.2.3 Present Value Calculation. In determining the monthly
benefit under Section 2.2.1 from Schedule A, the interest factor shall
be the yield for ten-year U.S. Treasury Notes, as reported by the
Federal Reserve Bank and published in the West Coast edition of the Wall
Street Journal, plus 250 basis points. If this index should cease to be
published, the index shall be comparable.
2.3 Termination by the Company on Account of or After a Change of
Control. Notwithstanding anything contained herein to the contrary, in the
event: (i) the Executive's employment with
-4-
<PAGE> 6
the Company is terminated by the Company within two years of or by reason of a
Change of Control or (ii) by reason of the Company's actions any adverse and
material change occurs in the scope of the Executive's position,
responsibilities, duties, salary, benefits, or location of employment after a
Change of Control occurs; or (iii) the Company causes an event to occur which
reasonably constitutes or results in a demotion, a significant diminution of
responsibilities or authority, or a constructive termination (by forcing a
resignation or otherwise) of the Executive's employment after a Change of
Control occurs, then the Company shall pay to the Executive the benefit
described in this Section 2.3, in lieu of any other benefit under this
Agreement.
2.3.1 Amount of Benefit. The annual benefit under this Section
2.3 shall be $108,000 ($9,000 per month). There shall be no actuarial
reduction for payment prior to Executive's Normal Retirement Date.
2.3.2 Payment of Benefit. The Company shall pay the benefit to
the Executive on the first day of each month commencing with the month
following the date of the event triggering this Section 2.3 benefit and
continuing for 179 additional months.
2.3.3 Requirement for Company Funding. In the event of a
termination pursuant to Section 2.3, the Company shall immediately pay
such amounts as are necessary to provide this benefit under policies
attached to this Plan.
-5-
<PAGE> 7
The Company shall also reflect such additional liability on its balance
sheet.
ARTICLE 3
DEATH BENEFITS
3.1 Death During Active Service. If the Executive dies while in the
active service of the Company, the Company shall pay to the Executive's
beneficiary the benefit described in this Section 3.1.
3.1.1 Amount of Benefit. The benefit under Section 3.1 is the
lifetime benefit that would have been paid to the Executive under
Section 2.1 calculated as if the date of the Executive's death were the
Normal Retirement Date.
3.1.2 Payment of Benefit. The Company shall pay the benefit to
the Beneficiary on the first day of each month commencing with the month
following the Executive's death and continuing for 179 additional
months.
3.2 Death During Benefit Period. If the Executive dies after benefit
payments have commenced under this Agreement but before receiving all such
payments, the Company shall pay the remaining benefits to the Executive's
beneficiary at the same time and in the same amounts they would have been paid
to the Executive had the Executive survived.
-6-
<PAGE> 8
ARTICLE 4
BENEFICIARIES
4.1 Beneficiary Designations. The Executive shall designate a
beneficiary by filing a written designation with the Company. The Executive may
revoke or modify the designation at any time by filing a new designation.
However, designations will only be effective if signed by the Executive and
accepted by the Company during the Executive's lifetime. The Executive's
beneficiary designation shall be deemed automatically revoked if the beneficiary
predeceases the Executive, or if the Executive names a spouse as beneficiary and
the marriage is subsequently dissolved. If the Executive dies without a valid
beneficiary designation, all payments shall be made to the Executive's surviving
spouse, if any, and, if none, to the Executive's surviving children and the
descendants of any deceased child by right of representation, and if no children
or descendants survive, to the Executive's estate.
4.2 Facility of Payment. If a benefit is payable to a minor, to a
person declared incompetent, of to a person incapable of handling the
disposition of his or her property, the Company may pay such benefit to the
guardian, legal representative or person having the care or custody of such
minor, incompetent person or incapable person. The Company may require proof of
incompetency, minority or guardianship as it may deem appropriate prior to
distribution of the benefit. Such distribution shall completely discharge the
Company from all liability with respect to such benefit.
-7-
<PAGE> 9
ARTICLE 5
GENERAL LIMITATIONS
Notwithstanding any provision of this Agreement to the contrary, the
Company shall not pay any benefit under this Agreement.
5.1 Excess Parachute Payment. To the extent the benefit would be an
excess parachute payment under Section 280G of the Code.
5.2 Termination for Cause. If the Company terminates the Executive's
employment for:
5.2.1 Gross negligence or gross neglect of duties;
5.2.2 Commission of a felony or of a gross misdemeanor
involving moral turpitude; or
5.2.3 Fraud, disloyalty, dishonesty or willful violation of
any law or significant Company policy committed in connection with the
Executive's employment and resulting in an adverse effect on the
Company.
5.3 Suicide. No benefits shall be payable if the Executive commits
suicide within two years after the date of this Agreement, of if the Executive
has made any material misstatement of fact on any application for life insurance
purchased by the Company.
ARTICLE 6
CLAIMS AND REVIEW PROCEDURES
6.1 Claims Procedure. The Company shall notify the Executive's
beneficiary in writing, within ninety (90) days of
-8-
<PAGE> 10
his or her written application for benefits, of his or her eligibility or
non-eligibility for benefits under the Agreement. If the Company determines that
the beneficiary is not eligible for benefits or full benefits, the notice shall
set forth (1) the specific reasons for such denial, (2) a specific reference to
the provisions of the Agreement on which the denial is based, (3) a description
of any additional information or material necessary for the claimant to perfect
his or her claim, and a description of why it is needed, and (4) an explanation
of the Agreement's claims review procedure and other appropriate information as
to the steps to be taken if the beneficiary wishes to have the claim reviewed.
If the Company determines that there are special circumstances requiring
additional time to make a decision, the Company shall notify the beneficiary of
the special circumstances and the date by which a decision is expected to be
made, and may extend the time for up to an addition al ninety-day period.
6.2 Review Procedure. If the beneficiary is determined by the
Company not to be eligible for benefits, or if the beneficiary believes that he
or she is entitled to greater or different benefits, the beneficiary shall have
the opportunity to have such claim reviewed by the Company by filing a petition
for review with the Company within sixty (60) days after receipt of the notice
issued by the Company. Said petition shall state the specific reasons which the
beneficiary believes entitle him or her to benefits or to greater or different
benefits. Within sixty (60) days after receipt by the Company of the petition,
-9-
<PAGE> 11
the Company shall afford the beneficiary (and counsel, if any) an opportunity to
present his or her position to the Company orally or in writing, and the
beneficiary (or counsel) shall have the right to review the pertinent documents.
The Company shall notify the beneficiary of its decision in writing within the
sixty-day period, stating specifically the basis of its decision, written in a
manner calculated to be understood by the beneficiary and the specific
provisions of the Agreement on which the decision is based. If, because of the
need for a hearing, the sixty-day period is not sufficient, the decision may be
deferred for up to another sixty-day period at the election of the Company, but
notice of this deferral shall be given to the beneficiary.
ARTICLE 7
AMENDMENTS AND TERMINATION
This Agreement may be amended or terminated only by a written agreement
signed by the Company and the Executive.
ARTICLE 8
MISCELLANEOUS
8.1 Binding Effect. This Agreement shall bind the Executive and the
Company, and their beneficiaries, survivors, executors, administrators and
transferees.
8.2 No Guaranty of Employment. This Agreement is not an employment
policy or contract. It does not give the Executive the right to remain an
employee of the Company, nor does it
-10-
<PAGE> 12
interfere with the Company's right to discharge the Executive. It also does not
require the Executive to remain an employee nor interfere with the Executive's
right to terminate employment at any time.
8.3 Non-Transferability. Benefits under this Agreement cannot be
sold, transferred, assigned, pledged, attached or encumbered in any manner.
8.4 Tax Withholding. The Company shall withhold any taxes that are
required to be withheld from the benefits provided under this Agreement.
8.5 Applicable Law. The Agreement and all rights hereunder shall be
governed by the laws of California, except to the extent preempted by the laws
of the United States of America.
8.6 Unfunded Arrangement. The Executive and beneficiary are general
unsecured creditors of the Company for the payment of benefits under this
Agreement. The benefits represent the mere promise by the Company to pay such
benefits. The rights to benefits are not subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors. Any insurance on the Executive's life is a general
asset of the Company to which the Executive and beneficiary have no preferred or
secured claim.
8.7 Determination of Golden Parachute Payments. The determination as
to whether a provision of this Agreement must be limited by the application of
the "golden parachute" provisions of Section 280G of the Internal Revenue Code
shall be made
-11-
<PAGE> 13
by a "Big 6" accounting firm acceptable to the Company and the Executive. The
determination shall be made within 90 days of notice of termination by the
Executive, and the accountant's fees shall be paid by the Company.
8.8 Mediation of Dispute. In the event of a dispute between the
Company and the Executive, the dispute shall be submitted to an independent,
private mediator agreeable to both the Company and the Executive. The mediator's
fees shall be paid by the Company. The results of the mediation shall be
non-binding unless the parties agree otherwise.
8.9 Attorney Fees. In the event of a dispute between the Company and
the Executive, the attorney fees of each party shall be borne by the
non-prevailing party.
IN WITNESS WHEREOF, the Executive and a duly authorized Company officer
have signed this Agreement.
VALLE DE ORO BANK, N.A.
/s/ WILLIAM EHLEN
- --------------------------------
William Ehlen By: /s/ [SIG]
-------------------------------------
Title: CHAIRMAN
----------------------------------
-12-
<PAGE> 14
SCHEDULE A
PARTICIPANT BALANCE SHEET AND POLICY DATA
SALARY CONTINUATION PLAN
VALLE DE ORO BANK, N.A.
WILLIAM EHLEN
AGE 49, RETIRES AT AGE 62 WITH
$108,000 ANNUAL BENEFIT,
FOR 13 YEARS
<TABLE>
<CAPTION>
ACCRUED ACCRUED
SALARY SALARY
PLAN CONTINUATION PLAN CONTINUATION
YEAR LIABILITY YEAR LIABILITY
- ---- ------------ ---- ------------
<S> <C> <C> <C>
1 37,699 23 433,559
2 78,935 24 361,662
3 124,039 25 283,020
4 173,374 26 197,001
5 227,337 27 102,913
6 286,362 28 0
7 350,924
8 421,543 --post life expectancy--
9 498,786
10 583,275 29 0
11 675,690 30 0
12 776,774 31 0
13 887,340 32 0
33 0
--post retirement-- 34 0
35 0
14 858,010 36 0
15 825,929 37 0
16 790,839 38 0
17 752,457 39 0
18 710,474
19 664,553
20 614,324
21 559,384
22 499,290
</TABLE>
<PAGE> 1
EXHIBIT 10.5
Director Deferred Fee Agreement between Valle de Oro Bank, N.A. and Samuel
Ciccati dated April 15, 1998
<PAGE> 2
VALLE DE ORO BANK, N.A.
DIRECTOR DEFERRED FEE AGREEMENT
THIS AGREEMENT is made this 15th day of April, 1998, by and between Valle
De Oro Bank, N.A., a national banking association located in Spring Valley,
California (the "Company"), and Samuel Ciccati (the "Director").
INTRODUCTION
To encourage the Director to remain a member of the Company's Board of
Directors, the Company is willing to provide to the Director a deferred fee
opportunity. The Company will pay the Director's benefits from the Company's
general assets.
AGREEMENT
The Director and the Company agree as follows:
ARTICLE 1
Definitions
1.1 Definitions. Whenever used in this Agreement, the following words and
phrases shall have the meaning specified.
1.1.1 "Anniversary Date" means December 31 of each year.
1.1.2 "Change of Control" means the transfer of shares of the
Company's voting common stock such that one entity or one person acquires (or is
deemed to acquire when applying Section 318 of the Code) more than 50 percent of
the Company's outstanding voting common stock followed within twelve (12) months
by the termination of the Director's status as a member of the Company's Board
of Directors.
1.1.3 "Deferral Account" means the Company's accounting of the
Director's accumulated Deferrals plus accrued interest.
1.1.4 "Deferrals" means the amount of the Director's Fees which
the Director elects to defer according to this Agreement.
1.1.5 "Disability" means the Director's inability to perform
substantially all normal duties of a Director, as determined by the Company's
Board of Directors in its sole discretion. As a condition to any benefits, the
Company may require the Director to submit to such physical or mental
evaluations and tests as the Board of Directors deems appropriate.
1.1.6 "Effective Date" means April 15, 1998.
<PAGE> 3
1.1.7 "Election Form" means the form attached as Exhibit 1.
1.1.8 "Fees" means the total Director's Fees payable to the
Director.
1.1.9 "Normal Retirement Age" means the Director's 70th birthday.
1.1.10 "Normal Retirement Date" means the later of the Normal
Retirement Age or the Director's Termination of Service.
1.1.11 "Plan Year" means the calendar year.
1.1.12 "Projected Benefit" means the balance that would have
accumulated in the Director's Deferral Account at Normal Retirement Age if it
is assumed that the Director: (1) continued to defer Fees at the same rate that
the Director has been deferring Fees on the date of the Director's death, and
(2) survived to Normal Retirement Age.
1.1.13 "Termination of Service" means the Director ceasing to be a
member of the Company's Board of Directors for any reason whatsoever.
ARTICLE 2
Deferral Election
2.1 Initial Election. The Director shall make an initial deferral
election under this Agreement by filing with the Company a signed Election Form
within thirty (30) days after the Effective Date of this Agreement. The
Election Form shall set forth the amount of Fees to be deferred. The election
Form shall be effective to defer only Fees earned after the date the Election
Form is received by the Company.
2.2 Election Changes
2.2.1 Generally. The Director may modify the amount of Fees to
be deferred annually by filing a new Election Form with the Company prior to
the beginning of the Plan Year in which the Fees are to be deferred. The
modified deferral election shall not be effective until the calendar year
following the year in which the subsequent Election Form is received and
approved by the Company.
2.2.2 Hardship. If an unforeseeable financial emergency arising
from the death of a family member, divorce, sickness, injury, catastrophe or
similar event outside the control of the Director occurs, the Director, by
written instructions to the Company, may reduce future Deferrals under this
Agreement.
2
<PAGE> 4
ARTICLE 3
Deferral Account
3.1 Establishing and Crediting. The Company shall establish a Deferral
Account on its books for the Director and shall credit to the Deferral Account
the following amounts:
3.1.1 Deferrals. The Fees deferred by the Director as of the
time the Fees would have otherwise been paid to the Director.
3.1.2 Interest. On each Anniversary Date and immediately prior
to the payment of any benefits, but only until commencement of the benefit
payments under this Agreement, interest is to be accrued on the account balance
and compounded at an annual rate equal to the Prime Rate as published in the
West Coast Edition of the Wall Street Journal on the Anniversary Date or the
first publication date thereafter. For any interest accruals prior to December
31, 1998, the applicable annual rate shall be eight and one-half percent (8.5%).
3.2 Statement of Accounts. The Company shall provide to the Director,
within one hundred twenty (120) days after each Anniversary Date, a statement
setting forth the Deferral Account balance.
3.3 Accounting Device Only. The Deferral Account is solely a device for
measuring amounts to be paid under this Agreement. The Deferral Account is not
a trust fund of any kind. The Director is a general unsecured creditor of the
Company for the payment of benefits. The benefits represent the mere Company
promise to pay such benefits. The Director's rights are not subject to any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment or garnishment by the Director's creditors.
ARTICLE 4
Lifetime Benefits
4.1 Normal Retirement Benefit. Upon the Normal Retirement Date, the
Company shall pay to the Director the benefit described in the Section 4.1 in
lieu of any other benefit under this Agreement.
4.1.1 Amount of Benefit. The benefit under this Section 4.1 is
the Deferral Account balance at the Director's Normal Retirement Date.
4.1.2 Payment of Benefit. The Company shall pay the benefit to
the Director in 120 equal monthly installments commencing on the first day of
the month following the Director's Normal Retirement Date. The Company shall
continue to credit interest under Section 3.1.2 on the remaining account
balance during any applicable installment period.
3
<PAGE> 5
4.2 Early Retirement Benefit. Upon Termination of Service prior to the
Normal Retirement Age for reasons other than death, Change of Control or
Disability, the Company shall pay to the Director the benefit described in this
Section 4.2 in lieu of any other benefit under this Agreement.
4.2.1 Amount of Benefit. The benefit under this Section 4.2 is
the Deferral Account balance at the Director's Termination of Service.
4.2.2 Payment of Benefit. The Company shall pay the benefit to
the Director in 120 equal monthly installments commencing on the first day of
the month following the Director's Normal Retirement Age. The Company shall
continue to credit interest under Section 3.1.2 on the remaining account balance
during any applicable installment period.
4.3 Disability Benefit. If the Director terminates service as a Director
for Disability prior to Normal Retirement Age, the Company shall pay to the
director the benefit described in this Section 4.3 in lieu of any other benefit
under this Agreement.
4.3.1 Amount of Benefit. The benefit under this Section 4.3 in
the Deferral Account balance at the Director's Termination of Service.
4.3.2 Payment of Benefit. The Company shall pay the benefit to
the Director in 120 equal monthly installments commencing on the first day of
the month following the Director's Termination of Service. The Company shall
continue to credit interest under Section 3.1.2 on the remaining account balance
during any applicable installment period.
4.4 Change of Control Benefit. Upon a Change of Control, the Company
shall pay to the Director the benefit described in this Section 4.4 in lieu of
any other benefit under this Agreement.
4.4.1 Amount of Benefit. The benefit under this Section 4.4 shall
be the Deferral Account balance on Termination of Service.
4.4.2 Payment of Benefit. The Company shall pay the benefit to the
Director in a lump sum within 60 days after the Director's Termination of
Service.
4.5 Hardship Distribution. Upon the Board of Director's determination
(following petition by the Director) that the Director has suffered an
unforeseeable financial emergency as described in Section 2.2.2, the Company
shall distribute the Director all or a portion of the Deferral Account balance
as determined by the Company, but in no event shall the distribution be greater
than is necessary to relieve the financial hardship.
4
<PAGE> 6
ARTICLE 5
Death Benefits
5.1 Death During Active Service. If the Director dies while in the active
service of the Company, the Company shall pay to the Director's beneficiary the
benefit described in this Section 5.1 in lieu of any other benefit under this
Agreement.
5.1.1 Amount of Benefit. The benefit under Section 5.1 is the
greater of the Deferral Account balance at the date of the Director's death or
the Projected Benefit; however, the Projected Benefit shall not exceed $180.000
for this calculation.
5.1.2 Payment of Benefit. The Company shall pay the benefit to the
beneficiary in 120 equal monthly installments commencing on the first day of the
month following the Director's death. The Company shall continue to credit
interest under section 3.1.2 on the remaining account balance during any
applicable installment period.
5.2 Death During Benefit Period. If the Director dies after benefit
payments have commenced under this Agreement but before receiving all such
payments, the Company shall pay the remaining benefits to the Director's
beneficiary at the same time and in the same amounts they would have been paid
to the Director had the Director survived.
5.3 Death After Termination of Employment But Before Payments Commence. If
the director is entitled to benefit payments under this Agreement, but dies
prior to the commencement of said benefit payments, the Company shall pay the
benefit payments to the Director's beneficiary that the Director was entitled to
prior to death except that the benefit payment shall commence on the first day
of the month following the date of the Director's death.
ARTICLE 6
Beneficiaries
6.1 Beneficiary Designations. The Director shall designate a beneficiary
by filing a written designation with the Company. The Director may revoke or
modify the designation at any time by filing a new designation. However,
designations will only be effective if signed by the Director and accepted by
the Company during the Director's lifetime. The Director's beneficiary
designation shall be deemed automatically revoked if the beneficiary predeceases
the Director, or if the Director names a spouse as beneficiary and the marriage
is subsequently dissolved. If the Director dies without a valid beneficiary
designation, all payments shall be made to the Director's estate.
6.2 Facility of Payment. If a benefit is payable to a minor, to a person
declared incompetent, or to a person incapable of handling the disposition of
his or her property, the Company may pay such benefit to the guardian, legal
representative or person having the care or custody of such minor, incompetent
person or incapable person. The Company may require proof or incompetence,
minority or guardianship as it may deem appropriate prior to distribution of the
benefit.
5
<PAGE> 7
Such distribution shall completely discharge from all liability with respect to
such benefit.
ARTICLE 7
General Limitations
Notwithstanding any provision of this Agreement to the contrary, the
Company shall not pay any benefit under this Agreement that is either: (1)
attributable to the interest earned on the Deferral Account or (2) in the event
of the triggering of Section 7.3, the excess of any death or benefit over the
Deferral Account; if any such payment would constitute: (x) an Excess Parachute
Payment, (y) payment following a Termination for Cause, or (z) payment following
a Suicide or Misstatement.
7.1 Excess Parachute Payment. An Excess Parachute Payment is an excess
parachute payment as defined in Section 280G of the Internal Revenue Code.
7.2 Termination for Cause. Termination for Cause shall have occurred if
the Company terminates the Director's services as a Director for:
7.2.1 Gross negligence or gross neglect of duties;
7.2.2 Commission of a felony or of a gross misdemeanor involving
moral turpitude; or
7.2.3 Fraud, disloyalty, dishonesty or willful violation of any
law or significant Company policy committed in connection with the Director's
service and resulting in an adverse financial effect on the Company.
7.3 Suicide or Misstatement. Suicide or Misstatement shall have occurred
if the Director commits suicide within two years after the date of this
Agreement, or if the Director had made any material misstatement of fact on any
application for life insurance purchased by the Company.
ARTICLE 8
Claims and Review Procedures
8.1 Claims Procedure. The Company shall notify any person or entity that
makes a claim against the Agreement (the "Claimant") in writing, within ninety
(90) days of his or her written application for benefits, of his or her
eligibility or non-eligibility for benefits under the Agreement. If the Company
determines that the Claimant is not eligible for benefits or full benefits, the
notice shall set forth (1) the specific reasons for such denial, (2) a specific
reference to the provisions of the Agreement on which the denial is based, (3) a
description of any additional information or material necessary for the Claimant
to perfect his or her claim, and a description of why it is needed, and (4) an
explanation of the Agreement's claims review procedure and other appropriate
information as to the steps to be taken if the Claimant wishes to have the claim
reviewed. If the Company determines
6
<PAGE> 8
that there are special circumstances requiring additional time to make a
decision, the Company shall notify the Claimant of the special circumstances
and the date by which a decision is expected to be made, and may extend the
time for up to an additional ninety-day period.
8.2 Review Procedure. If the Claimant is determined by the Company not
to be eligible for benefits, or if the Claimant believes that he or she is
entitled to greater or different benefits, the Claimant shall have the
opportunity to have such claim reviewed by the Company by filing a petition for
review with the Company within sixty (60) days after receipt of the notice
issued by the Company. Said petition shall state the specific reasons which the
Claimant believes entitle him or her to benefits or to greater or different
benefits. Within sixty (60) days after receipt by the Company of the petition,
the Company shall afford the Claimant (and counsel, if any) an opportunity to
present his or her position to the Company orally or in writing, and the
Claimant (or counsel) shall have the right to review the pertinent documents.
The Company shall notify the Claimant of its decision in writing within the
sixty-day period, stating specifically the basis of its decision, written in a
manner calculated to be understood by the Claimant and the specific provisions
of the Agreement on which the decision is based. If, because of the need for a
hearing, the sixty-day period is not sufficient, the decision may be deferred
for up to another sixty-day period at the election of the Company, but notice
of this deferral shall be given to the Claimant.
ARTICLE 9
Amendments and Termination
This Agreement may be amended or terminated only by a written agreement
signed by the Company and the Director.
ARTICLE 10
Miscellaneous
10.1 Binding Effect. This Agreement shall bind the Director and the
Company, and their beneficiaries, survivors, executors, administrators and
transferees.
10.2 No Guarantee of Service. This Agreement is not a contract for
services. It does not give the Director the right to remain a Director of the
Company, nor does it interfere with the shareholders' rights to replace the
Director. It also does not require the Director to remain a Director nor
interfere with the Director's right to terminate services at any time.
10.3 Non-Transferability. Benefits under this Agreement cannot be
sold, transferred, assigned, pledged, attached or encumbered in any manner.
10.4 Tax Withholding. The Company shall withhold any taxes that are
required to be withheld from the benefits provided under this Agreement.
7
<PAGE> 9
10.5 Applicable Law. The Agreement and all rights hereunder shall be
governed by the laws of the State of California, except to the extent preempted
by the laws of the United States of America.
10.6 Unfunded Arrangement. The Director and the Director's
beneficiary are general unsecured creditors of the Company for the payment of
benefits under this Agreement. The benefits represent the mere promise by the
Company to pay such benefits. The rights to benefits are not subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by creditors. Any insurance on the
Director's life is a general asset of the Company to which the Director and the
Director's beneficiary have no preferred or secured claim.
10.7 Reorganization. The Company shall not merge or consolidate into
or with another company, or reorganize, or sell substantially all of its assets
to another company, firm, or person unless such succeeding or continuing
company, firm, or person agrees to assume and discharge the obligations of the
Company under this Agreement.
10.8 Entire Agreement. This Agreement constitutes the entire
agreement between the Company and the Director as to the subject matter hereof.
No rights are granted to the Director by virtue of this Agreement other than
those specifically set forth herein.
10.9 Administration. The Company shall have powers which are
necessary to administer this Agreement, including but not limited to:
10.9.1 Interpreting the provisions of the Agreement;
10.9.2 Establishing and revising the method of accounting for the
Agreement;
10.9.3 Maintaining a record of benefit payments; and
10.9.4 Establishing rules and prescribing any forms necessary or
desirable to administer the Agreement.
10.10 Designated Fiduciary. The Company shall be the named fiduciary
and plan administrator under the Agreement. The named fiduciary may delegate to
others certain aspects of the management and operation responsibilities of the
plan including the employment of advisors and delegation of ministerial duties
to qualified individuals.
8
<PAGE> 10
IN WITNESS WHEREOF, the Director and a duly authorized Company officer
have signed this Agreement.
Dated April 15, 1998
COMPANY: DIRECTOR
Valle de Oro Bank, N A.
By: /s/ WILLIAM V. EHLEN /s/ SAMUEL CICCATI
-------------------------------- --------------------------------------
Samuel Ciccati
Title: William V. Ehlen
-----------------------------
President and
Chief Executive Officer
9
<PAGE> 11
EXHIBIT 1
TO
DIRECTOR DEFERRED FEE AGREEMENT
Deferral Election
I elect to defer my Fees received under the Director Deferred Fee Agreement with
the Company, as follows:
Amount of Deferral Duration
-------------------------- -------------
[Initial and Complete One] [Initial One]
[ ] I elect to defer 100% of [ ] One year only
my Fees paid to me
[x] I elect to defer $500 per [ ] For 8 years
month of all Fees paid to me
[ ] I elect not to defer any of [ ] Until termination of service
my Fees paid to me.
[ ] Until_______________________
(date
I understand that I may change the amount and duration of my deferrals by filing
a new election form with the Company, provided, however, that any subsequent
election will not be effective Until the calendar year the year in which the new
election Is received by the Company
Signature /s/ SAMUEL M. CICCATI
------------------------
Date 4-17-98
-----------------------------
Accepted by the Company this 17th of April, 1998
By: /s/ WILLIAM V. EHLEN
-----------------------------
Title: William V. Ehlen
President and
Chief Executive Officer
10
<PAGE> 1
EXHIBIT 10.6
Director Deferred Fee Agreement between Valle de Oro Bank, N.A. and Philip
Gelber dated April 15, 1998
<PAGE> 2
VALLE DE ORO BANK, N.A.
DIRECTOR DEFERRED FEE AGREEMENT
THIS AGREEMENT is made this 15th day of April, 1998, by and between Valle
De Oro Bank, N.A., a national banking association located in Spring Valley,
California (the "Company"), and Philip Gelber (the "Director").
INTRODUCTION
To encourage the Director to remain a member of the Company's Board of
Directors, the Company is willing to provide to the Director a deferred fee
opportunity. The Company will pay the Director's benefits for the Company's
general assets.
AGREEMENT
The Director and the Company agree as follows:
ARTICLE 1
Definitions
1.1 Definitions. Whenever used in this Agreement, the following words and
phrases shall have the meaning specified:
1.1.1 "Anniversary Date" means December 31 of each year.
1.1.2 "Change of Control" means the transfer of shares of the
Company's voting common stock such that one entity or one person acquires (or is
deemed to acquire when applying Section 318 of the Code) more than 50 percent of
the Company's outstanding voting common stock followed within twelve (12) months
by the termination of the Director's status as a member of the Company's Board
of Directors.
1.1.3 "Deferral Account" means the Company's accounting of the
Director's accumulated Deferrals plus accrued interest.
1.1.4 "Deferrals" means the amount of the Director's Fees which
the Director elects to defer according to this Agreement.
1.1.5 "Disability" means the Director's inability to perform
substantially all normal duties of a Director, as determined by the Company's
Board of Directors in its sole discretion. As a condition to any benefits, the
Company may require the Director to submit to such physical or mental
evaluations and tests as the Board of Directors deems appropriate.
1.1.6 "Effective Date" means April 15, 1998.
<PAGE> 3
1.1.7 "Election Form" means the form attached as Exhibit 1.
1.1.8 "Fees" means the total Director's Fees payable to the Director.
1.1.9 "Normal Retirement Age" means the Director's 73rd birthday.
1.1.10 "Normal Retirement Date" means the later of the Normal
Retirement Age or the Director's Termination of Service.
1.1.11 "Plan Year" means the calendar year.
1.1.12 "Projected Benefit" means the balance that would have
accumulated in the Director's Deferral Account at Normal Retirement Age if it is
assumed that the Director: (1) continued to defer Fees at the same rate that the
Director has been deferring Fees on the date of the Director's death, and (2)
survived to Normal Retirement Age.
1.1.13 "Termination of Service" means the Director ceasing to be a
member of the Company's Board of Directors for any reason whatsoever.
ARTICLE 2
Deferral Election
2.1 Initial Election. The Director shall make an initial deferral
election under this Agreement by filing with the Company a signed Election Form
within thirty (30) days after the Effective Date of this Agreement. The
Election Form shall set forth the amount of Fees to be deferred. The Election
Form shall be effective to defer only Fees earned after the date the Election
Form is received by the Company.
2.2 Election Changes
2.2.1 Generally. The Director may modify the amount of Fees to be
deferred annually by filing a new Election Form with the Company prior to the
beginning of the Plan Year in which the Fees are to be deferred. The modified
deferral election shall not be effective until the calendar year following the
year in which the subsequent Election Form is received and approved by the
Company.
2.2.2 Hardship. If an unforeseeable financial emergency arising from
the death of a family member, divorce, sickness, injury, catastrophe or similar
event outside the control of the Director occurs, the Director, by written
instructions to the Company, may reduce future Deferrals under this Agreement.
2
<PAGE> 4
ARTICLE 3
Deferral Account
3.1 Establishing and Crediting. The Company shall establish a Deferral
Account on its books for the Director and shall credit to the Deferral Account
the following amounts:
3.11 Deferrals. The Fees deferred by the Director as of the time
of the Fees would have otherwise been paid to the Director.
3.12 Interest. On each Anniversary Date and immediately prior to
the payment of any benefits, but only until commencement of the benefit
payments under this Agreement, interest is to be accrued on the account balance
and compounded at an annual rate equal to the Prime Rate as published in the
West Coast Edition of the Wall Street Journal on the Anniversary Date or the
first publication date thereafter. For any interest accruals prior to December
31, 1998, the applicable annual rate shall be eight and one-half percent (8.5%).
3.2 Statement of Accounts. The Company shall provide to the Director,
within one hundred twenty (120) days after each Anniversary Date, a statement
setting forth the Deferral Account balance.
3.3 Accounting Device Only. The Deferral Account is solely a device for
measuring amounts to be paid under this Agreement. The Deferral Account is not
a trust fund of any kind. The Director is a general unsecured creditor of the
Company for the payment of benefits. The benefits represent the mere Company
promise to pay such benefits. The Director's rights are not subject to any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment or garnishment by the Director's creditors.
ARTICLE 4
Lifetime Benefits
4.1 Normal Retirement Benefit. Upon the Normal Retirement Date, the
Company shall pay to the Director the benefit described in this Section 4.1 in
lieu of any other benefit under this Agreement.
4.1.1 Amount of Benefit. The benefit under this Section 4.1 is the
Deferral Account balance at the Director's Normal Retirement Date.
4.1.2 Payment of Benefit. The Company shall pay the benefit to the
Director in 120 equal monthly installments commencing on the first day of the
month following the Director's Normal Retirement Date. The Company shall
continue to credit interest under the Section 3.1.2 on the remaining account
balance during any applicable installment period.
3
<PAGE> 5
4.2 Early Retirement Benefit. Upon Termination of Service prior to the
Normal Retirement Age for reasons other than death, Change of Control or
Disability, the Company shall pay to the Director the benefit described in this
Section 4.2 in lieu of any other benefit under this Agreement.
4.2.1 Amount of Benefit. The benefit under this Section 4.2 is the
Deferral Account balance at the Director's Termination of Service.
4.2.2 Payment of Benefit. The Company shall pay the benefit to the
Director in 120 equal monthly installments commencing on the first day of the
month following the Director's Normal Retirement Age. The Company shall continue
to credit interest under Section 3.1.2 on the remaining account balance during
any applicable installment period.
4.3 Disability Benefit. If the Director terminates service as a Director
for Disability prior to Normal Retirement Age, the Company shall pay to the
director the benefit described in this Section 4.3 in lieu of any other benefit
under this Agreement.
4.3.1 Amount of Benefit. The benefit under this Section 4.3 is the
Deferral Account balance at the Director's Termination of Service.
4.3.2 Payment of Benefit. The Company shall pay the benefit to the
Director in 120 equal monthly installments commencing on the first day of the
month following the Director's Termination of Service. The Company shall
continue to credit interest under Section 3.1.2 on the remaining account balance
during any applicable installment period.
4.4 Change of Control Benefit. Upon a Change of Control, the Company shall
pay to the Director the benefit described in this Section 4.4 in lieu of any
other benefit under this Agreement.
4.4.1 Amount of Benefit. The Agreement under this Section 4.4
shall be the Deferral Account balance on Termination of Service.
4.4.2 Payment of Benefit. The Company shall pay the benefit to the
Director in a lump sum within 60 days after the Director's Termination of
Service.
4.5 Hardship Distribution. Upon the Board of Director's determination
(following petition by the Director) that the Director has suffered an
unforeseeable financial emergency as described in Section 2.2.2, the Company
shall distribute the Director all or a portion of the Deferral Account balance
as determined by the Company, but in no event shall the distribution be greater
than is necessary to relieve the financial hardship.
4
<PAGE> 6
ARTICLE 5
Death Benefits
5.1 Death During Active Service. If the Director dies while in the active
service of the Company, the Company shall pay to the Director's beneficiary the
benefit described in this Section 5.1 in lieu of any other benefit under this
Agreement.
5.1.1 Amount of Benefit. The benefit under Section 5.1 is the
greater of the Deferral Account balance at the date of the Director's death or
the Projected Benefit; however, the Projected Benefit shall not exceed $180,000
for this calculation.
5.1.2 Payment of Benefit. The Company shall pay the benefit to the
beneficiary in 120 equal monthly installments commencing on the first day of the
month following the Director's death. The Company shall continue to credit
interest under section 3.1.2 on the remaining account balance during any
applicable installment period.
5.2 Death During Benefit Period. If the Director dies after benefit
payments have commenced under this Agreement but before receiving all such
payments, the Company shall pay the remaining benefits to the Director's
beneficiary at the same time and in the same amounts they would have been paid
to the Director had the Director survived.
5.3 Death After Termination of Employment But Before Benefit Payments
Commence. If the director is entitled to benefit payments under this Agreement,
but dies prior to the commencement of said benefit payments, the Company shall
pay the benefit payments to the Director's beneficiary that the Director was
entitled to prior to death except that the benefit payment shall commence on
the first day of the month following the date of the Director's death.
ARTICLE 6
Beneficiaries
6.1 Beneficiary Designations. The Director shall designate a beneficiary by
filing a written designation with the Company. The Director may revoke or modify
the designation at any time by filing a new designation. However, designations
will only be effective is signed by the Director and accepted by the Company
during the Director's lifetime. The Director's beneficiary designation shall be
deemed automatically revoked if the beneficiary predeceases the Director, or if
the Director names a spouse as beneficiary and the marriage is subsequently
dissolved. If the Director dies without a valid beneficiary designation, all
payment shall be made to the Director's estate.
6.2 Facility of Payment. If a benefit is payable to a minor, to a person
declared incompetent, or to a person incapable of handling the disposition of
his or her property, the Company may pay such benefit to the guardian, legal
representative or person having the care or custody of such minor, incompetent
person or incapable person. The Company may require proof of
5
<PAGE> 7
incompetence, minority or guardianship as it may deem appropriate prior to
distribution of the benefit. Such distribution shall completely discharge the
Company from all liability with respect to such benefit.
ARTICLE 7
General Limitations
Notwithstanding any provision of this Agreement to the contrary, the
Company shall not pay any benefit under this Agreement that is either:
(1)attributable to the interest earned on the Deferral Account or (2)in the
even of the triggering of Section 7.3, the excess of any death or benefit over
the Deferral Account; if any such payment would constitute: (x)an Excess
Parachute Payment, (y)payment following a Termination for Cause, or (z)payment
following a Suicide or Misstatement.
7.1 Excess Parachute Payment. An Excess Parachute Payment is an excess
parachute payment as defined in Section 280G of the Internal Revenue Code.
7.2 Termination for Cause. Termination for Cause shall have occurred if
the Company terminates the Director's service as a Director for:
72.1 Gross negligence or gross neglect of duties;
72.2 Commission of a felony or of a gross misdemeanor involving
moral turpitude; or
72.3 Fraud, disloyalty, dishonesty or willful violation of any law
or significant Company policy committed in connection with the Director's
service and resulting in an adverse financial effect on the Company.
7.3 Suicide or Misstatement. Suicide or Misstatement shall have occurred
if the Director commits suicide within two years after the date of this
Agreement, or if the Director had made any material misstatement of fact on any
application for life insurance purchased by the Company.
ARTICLE 8
Claims and Review Procedures
8.1 Claims Procedure. The Company shall notify any person or entity that
makes a claim against the Agreement (the "Clamant") in writing, within ninety
(90) days of his or her written application for benefits, of his or her
eligibility or non-eligibility for benefits under the Agreement. If the Company
determines that the Claimant is not eligible for benefits or full benefits, the
notice shall set forth (1) the specific reasons for such denial, (2) a specific
reference to the provisions of the Agreement on which the denial is based, (3) a
description of any additional information or material necessary for the Claimant
to perfect his or her claim, and a description of why is it needed, and (4) an
explanation of the Agreement's claim review procedure and other appropriate
information as to
6
<PAGE> 8
the steps to be taken if the Claimant wishes to have the claim reviewed. If the
Company determines that there are special circumstances requiring additional
time to make a decision, the Company shall notify the Claimant of the special
circumstances and the date by which a decision is expected to be made, and may
extend the time for up to an additional ninety-day period.
8.2 Review Procedure. If the Claimant is determined by the Company not
to be eligible for benefits, or if the Claimant believes that he or she is
entitled to greater or different benefits, the Claimant shall have the
opportunity to have such claim reviewed by the Company by filing a petition for
review with the Company within sixty (60) days after receipt of the notice
issued by the Company. Said petition shall state the specific reasons which the
Claimant believes entitle him or her to benefits or to greater or different
benefits. Within sixty (60) days after receipt by the Company of the petition,
the company shall afford the Claimant (and counsel, if any) an opportunity to
present his or her position to the Company orally or in writing, and the
Claimant (or counsel) shall have the right to review the pertinent documents.
The Company shall notify the Claimant of its decision in writing within the
sixty-day period, stating specifically the basis of its decision, written in a
manner calculated to be understood by the Claimant and the specific provisions
of the Agreement on which the decision is based. If, because of the need for a
hearing, the sixty-day period is not sufficient, the decision may be deferred
for up to another sixty-day period at the election of the Company, but notice
of this deferral shall be given to the Claimant.
ARTICLE 9
Amendments and Termination
This Agreement may be amended or terminated only by a written agreement
signed by the Company and the Director.
ARTICLE 10
Miscellaneous
10.1 Binding Effect. This Agreement shall bind the Director and the
Company, and their beneficiaries, survivors, executors, administrators and
transferees.
10.2 No Guarantee of Service. This Agreement is not a contract for
services. It does not give the Director the right to remain a Director of the
Company, nor does it interfere with the shareholders' rights to replace the
Director. It also does not require the Director to remain a Director nor
interfere with the Director's right to terminate services at any time.
10.3 Non-Transferability. Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached or encumbered in any manner.
10.4 Tax Withholding. The Company shall withhold any taxes that are
required to be withheld from the benefits provided under this Agreement.
7
<PAGE> 9
10.5 Applicable Law. The Agreement and all rights hereunder shall be
governed by the laws of the State of California, except to the extent preempted
by the laws of the United States of America.
10.6 Unfunded Arrangement. The Director and the Director's
beneficiary are general unsecured creditors of the Company for the payment of
benefits under this Agreement. The benefits represent the mere promise by the
Company to pay such benefits. The rights to benefits are not subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by creditors. Any insurance on the
Director's life is a general asset of the Company to which the Director and the
Director's beneficiary have no preferred or secured claim.
10.7 Reorganization. The Company shall not merge or consolidate into
or with another company, or reorganize, or sell substantially all of its assets
to another company, firm, or person unless such succeeding or continuing
company, firm, or person agrees to assume and discharge the obligations of the
Company under this Agreement.
10.8 Entire Agreement. This Agreement constitutes the entire
agreement between the Company and the Director as to the subject matter hereof.
No rights are granted to the Director by virtue of this Agreement other than
those specifically set forth herein.
10.9 Administration. The Company shall have powers which are
necessary to administer this Agreement, including but not limited to:
10.9.1 Interpreting the provisions of the Agreement;
10.9.2 Establishing and revising the method of accounting
for the Agreement;
10.9.3 Maintaining a record of benefit payments; and
10.9.4 Establishing rules and prescribing any forms
necessary or desirable to administer the Agreement.
10.10 Designated Fiduciary. The Company shall be the named fiduciary
and plan administrator under the Agreement. The named fiduciary may delegate to
others certain aspects of the management and operation responsibilities of the
plan including the employment of advisors and delegation of ministerial duties
to qualified individuals.
8
<PAGE> 10
IN WITNESS WHEREOF, the Director and a duly authorized Company officer
have signed this Agreement.
Dated: April 15, 1998
COMPANY: DIRECTOR:
Valle de Oro Bank, N.A.
By: /s/ WILLIAM V. EHLEN /s/ PHILIP GELBER
------------------------------ -------------------------------
William V. Ehlen Philip Gelber
Title: President and
Chief Executive Officer
9
<PAGE> 11
EXHIBIT 1
TO
DIRECTOR DEFERRED FEE AGREEMENT
Deferral Election
I elect to defer my Fees received under the Director Deferred Fee Agreement
with the Company, as follows:
--------------------------------------------------------
Amount of Deferral Duration
--------------------------------------------------------
[Initial and Complete One] [Initial One]
[X] I elect to defer 100% of __ One year only
my Fees paid to me
[ ] I elect to defer $500 per /s/ [SIG] For 10 years
month of all Fees paid me ---------
[ ] I elect not to defer any __ Until termination
of my Fees paid to me. of service
__ Until ___________
(date)
--------------------------------------------------------
I understand that I may change the amount and duration of my deferrals by
filing a new election form with the Company; provided, however, that any
subsequent election will not be effective until the calendar year following the
year in which the new election is received by the Company.
Signature /s/ PHILIP GELBER, MD
----------------------------
Date 4/17/98
---------------------------------
Accepted by the Company this 17th day of April, 1998.
By: /s/ WILLIAM V. EHLEN
------------------------------
William V. Ehlen
Title: President and
Chief Executive Officer
10
<PAGE> 1
EXHIBIT 10.7
401(k) PLAN DOCUMENT
THE PRUARRAY PROTOTYPE PLAN AND
TRUST AND IRS OPINION LETTERS
[LOGO]
PRUARRAY 401 (k) PLAN
<PAGE> 2
401 (k) Plan Document
THIS DOCUMENT IS COPYRIGHTED UNDER THE LAWS OF THE UNITED STATES. USE,
DUPLICATION OR REPRODUCTION, INCLUDING THE USE OF ELECTRONIC MEANS, IS
PROHIBITED BY LAW WITHOUT THE EXPRESS CONSENT OF THE AUTHOR.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Paragraph Page
<S> <C>
ARTICLE 1: DEFINITIONS
1.1 Actual Deferral Percentage 1
1.2 Adoption Agreement 1
1.3 Aggregate Limit 1
1.4 Annual Additions 1
1.5 Annuity Starting Date 1
1.6 Applicable Calendar Year 1
1.7 Applicable Life Expectancy 2
1.8 Average Contribution Percentage (ACP) 2
1.9 Average Deferral Percentage (ADP) 2
1.10 Break In Service 2
1.11 Code 2
1.12 Compensation 2
1.13 Contribution Percentage 3
1.14 Defined Benefit Plan 4
1.15 Defined Benefit (Plan) Fraction 4
1.16 Defined Contribution Dollar Limitation 4
1.17 Defined Contribution Plan 4
1.18 Defined Contribution (Plan) Fraction 4
1.19 Designated Beneficiary 5
1.20 Disability 5
1.21 Distribution Calendar Year 5
1.22 Early Retirement Age 5
1.23 Earned Income 5
1.24 Effective Date 5
1.25 Election Period 5
1.26 Elective Deferral 5
1.27 Eligible Participant 5
1.28 Employee 6
1.29 Employer 6
1.30 Entry Date 6
1.31 Excess Aggregate Contributions 6
1.32 Excess Amount 6
1.33 Excess Contribution 6
1.34 Excess Elective Deferrals 6
1.35 Family Member 6
1.36 First Distribution Calendar Year 6
1.37 Fund 7
1.38 Hardship 7
1.39 Highest Average Compensation 7
1.40 Highly Compensated Employee 7
1.41 Hour Of Service 7
1.42 Key Employee 8
1.43 Leased Employee 9
1.44 Limitation Year 9
1.45 Master Or Prototype Plan 9
1.46 Matching Contribution 9
1.47 Maximum Permissible Amount 9
1.48 Net Profit 9
1.49 Normal Retirement Age 9
1.50 Owner-Employee 9
1.51 Paired Plans 9
1.52 Participant 10
1.53 Participant's Benefit 10
1.54 Permissive Aggregation Group 10
1.55 Plan 10
1.56 Plan Administrator 10
1.57 Plan Year 10
1.58 Present Value 10
1.59 Projected Annual Benefit 10
1.60 Qualified Deferred Compensation Plan 10
1.61 Qualified Domestic Relations Order 10
1.62 Qualified Early, Retirement Age 10
1.63 Qualified Joint And Survivor Annuity 11
1.64 Qualified Matching Contribution 11
1.65 Qualified Non-Elective Contributions 11
1.66 Qualified Voluntary Contribution 11
1.67 Required Aggregation Group 11
1.68 Required Beginning Date 11
1.69 Rollover Contribution 11
1.70 Salary Savings Agreement 11
1.71 Self-Employed Individual 11
1.72 Service 11
1.73 Service Company 12
1.74 Shareholder Employee 12
1.75 Simplified Employee Pension Plan 12
1.76 Sponsor 12
1.77 Spouse (Surviving Spouse) 12
1.78 Super Top-Heavy Plan 12
1.79 Taxable Wage Base 12
1.80 Top-Heavy Determination Date 12
1.81 Top-Heavy Plan 12
1.82 Top-Heavy Ratio 12
1.83 TOP-Paid Group 13
1.84 Transfer Contribution 13
1.85 Trustee 13
1.86 Valuation Date 13
1.87 Vested Account Balance 14
1.88 Voluntary Contribution 14
1.89 Welfare Benefit Fund 14
1.90 Year Of Service 14
ARTICLE II ELIGIBILITY REQUIREMENTS
2.1 Participation 14
2.2 Change In Classification Of Employment 14
2.3 Computation Period 15
2.4 Employment Rights 15
2.5 Service With Controlled Groups 15
2.6 Owner-Employees 15
2.7 Leased Employees 15
2.8 Omission Of Eligible Employee 16
2.9 Inclusion Of Ineligible Employee 16
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ARTICLE III: EMPLOYER CONTRIBUTION
3.1 Amount 16
3.2 Expenses And Fees 16
3.3 Responsibility For Contributions 16
3.4 Return Of Contributions 16
3.5 Form Of Contribution 16
ARTICLE IV: EMPLOYEE CONTRIBUTIONS
4.1 Voluntary Contributions 17
4.2 Qualified Voluntary Contributions 17
4.3 Rollover Contribution 17
4.4 Transfer Contribution 17
4.5 Employer Approval Of Transfer Contributions 18
4.6 Elective Deferrals 18
4.7 Direct Rollover Of Benefits 18
ARTICLE V: PARTICIPANT ACCOUNTS
5.1 Separate Accounts 19
5.2 Adjustments To Participant Accounts 19
5.3 Allocating Employer Contributions 19
5.4 Allocating Investment Earnings And Losses 20
5.5 Participant Statements 20
ARTICLE VI: RETIREMENT BENEFITS AND DISTRIBUTIONS
6.1 Normal Retirement Benefits 20
6.2 Early, Retirement Benefits 21
6.3 Benefits On Termination Of Employment 21
6.4 Restrictions On Immediate Distributions 22
6.5 Normal Form Of Payment 23
6.6 Commencement Of Benefits 23
6.7 Claims Procedures 23
6.8 In-Service Withdrawals 23
6.9 Hardship Withdrawal 24
6.10 Order Of Withdrawals 25
ARTICLE VII: DISTRIBUTION REQUIREMENTS
7.1 Joint And Survivor Annuity Requirements 25
7.2 Minimum Distribution Requirements 25
7.3 Limits On Distribution Periods 25
7.4 Required Distributions On Or After The
Required Beginning Date 26
7.5 Required Beginning Date 26
7.6 Transitional Rule 27
7.7 Designation Of Beneficiary For Death Benefit 28
7.8 Nonexistence Of Beneficiary 28
7.9 Distribution Beginning Before Death 28
7.10 Distribution Beginning After Death 28
7.11 Distribution Of Excess Elective Deferrals 29
7.12 Distributions Of Excess Contributions 29
7.13 Distribution Of Excess Aggregate Contributions 30
ARTICLE VIII: JOINT AND SURVIVOR ANNUITY REQUIREMENTS
8.1 Applicability Of Provisions 30
8.2 Payment Of Qualified Joint And Survivor Annuity 30
8.3 Payment Of Qualified Pre-Retirement
Survivor Annuity 30
8.4 Qualified Election 31
8.5 Notice Requirements For Qualified Joint
And Survivor Annuity 31
8.6 Notice Requirements For Qualified Pre-
Retirement Survivor Annuity 31
8.7 Special Safe Harbor Exception For
Certain Profit-Sharing Plans 32
8.8 Transitional Joint And Survivor
Annuity Rules 32
8.9 Automatic Joint And Survivor Annuity
And Early Survivor Annuity 33
8.10 Annuity Contracts 33
ARTICLE IX VESTING
9.1 Employee Contributions 33
9.2 Employer Contributions 33
9.3 Computation Period 34
9.4 Requalification Prior To Five Consecutive
One-Year Breaks In Service 34
9.5 Requalification After Five Consecutive
One-Year Breaks In Service 34
9.6 Calculating Vested Interest 34
9.7 Forfeitures 34
9.8 Amendment Of Vesting Schedule 34
9.9 Service With Controlled Groups 35
ARTICLE X: LIMITATION ON ALLOCATIONS AND
ANTIDISCRIMINATION TESTING
10.1 Participation In This Plan Only 35
10.2 Disposition Of Excess Annual Additions 35
10.3 Participation In This Plan And Another
Prototype Defined Contribution Plan, Welfare
Benefit Fund Or Other Medical Account
Maintained By The Employer 36
10.4 Disposition Of Excess Annual Additions Under
Two Plans 36
10.5 Participation In This Plan And Another Defined
Contribution Plan Which is Not A Master
Or Prototype Plan 37
10.6 Participation In This Plan And A
Defined Benefit Plan 37
10.7 Average Deferral Percentage (ADP) Test 37
10.8 Special Rules Relating To
Application Of ADP Test 37
10.9 Average Contribution Percentage (ACP) Test 38
10.10 Special Rules Relating To Application
Of ACP Test 38
ARTICLE XI: ADMINISTRATION
11.1 Plan Administrator 39
11.2 Trustee 40
11.3 Administrative Fees And Expenses 40
11.4 Duties And Indemnification 40
11.5 Special Provisions Concerning The
Service Company 41
ARTICLE XII: TRUST FUND
12.1 The Fund 42
12.2 Control Of Plan Assets 42
12.3 Exclusive Benefit Rules 42
12.4 Assignment And Alienation Of Benefits 42
12.5 Determination of Qualified Domestic
Relations Order (QDRO) 42
ARTICLE XIII: INVESTMENTS
13.1 Fiduciary Standards 43
13.2 No Investment Discretion 43
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13.3 Investment Directions 43
13.4 Permitted Investments 44
13.5 Shareholder Rights 44
13.6 Liquidation Of Assets 45
13.7 Arbitration 45
13.8 Participant Loans 45
13.9 Insurance Policies 47
ARTICLE XIV: TOP-HEAVY PROVISIONS
14.1 Applicability Of Rules 48
14.2 Minimum Contribution 48
14.3 Minimum Vesting 49
14.4 Limitations On Allocations 49
ARTICLE XV: AMENDMENT AND TERMINATION
15.1 Amendment By Sponsor 49
15.2 Amendment By Employer 49
15.3 Termination 49
15.4 Qualification Of Employer's Plan 50
15.5 Mergers And Consolidations 50
15.6 Resignation And Removal 50
15.7 Qualification Of Prototype 50
ARTICLE XVI: GOVERNING LAW 50
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ARTICLE I -DEFINITIONS
1.1 ACTUAL DEFERRAL PERCENTAGE
The ratio (expressed as a percentage and calculated separately for each
Participant) of:
(a) the amount of Employer contributions [as defined at (c) and (d)
actually paid over to the Fund on behalf of such Participant for the
Plan Year to
(b) the Participant's Compensation for such Plan Year. Unless otherwise
specified by the Employer in the Adoption Agreement, Compensation will
include all amounts earned from the Employer and actually paid during
the Plan Year.
Employer contributions on behalf of any Participant shall include:
(c) any Elective Deferrals made pursuant to the Participant's deferral
election, including Excess Elective Deferrals, but excluding Elective
Deferrals that are either taken into account in the Contribution
Percentage test (provided the ADP test is satisfied both with and
without exclusion of these Elective Deferrals) or are returned as excess
Annual Additions; and
(d) at the election of the Employer, Qualified Non-Elective
Contributions and Qualified Matching Contributions.
For purposes of computing Actual Deferral Percentages, an Employee who would be
a Participant but for the failure to make Elective Deferrals shall be treated
as a Participant on whose behalf no Elective Deferrals are made.
1.2 ADOPTION AGREEMENT
The document attached to this Plan by which an Employer elects to establish a
qualified retirement plan and trust under the terms of this Prototype Plan and
Trust.
1.3 AGGREGATE LIMIT - THE SUM OF:
(a) 125 percent of the greater of the ADP of the non-Highly Compensated
Employees for the Plan Year or the ACP of non-Highly Compensated
Employees under the Plan subject to Code Section 401(m) for the Plan
Year beginning with or within the Plan Year of the cash or deferred
arrangement as described in Code Section 401(k) or Code Section
402(h)(1)(B), and
(b) the lesser of 200% or two percent plus the lesser of such ADP or
ACP.
Alternatively, the aggregate limit can be determined by substituting "the lesser
of 200% or 2 percent plus" for "125% of" in (a) above, and substituting "125%
of" for "the lesser of 200% or 2 percent plus" in (b) above.
1.4 ANNUAL ADDITIONS
The sum of the following amounts credited to a Participant's account for the
Limitation Year:
(a) Employer Contributions,
(b) Employee Contributions (under Article IV),
(c) forfeitures,
(d) amounts allocated after March 31, 1984 to an individual medical
account, as defined in Code Section 415(1)(2), which is part of a
pension or annuity plan maintained by the Employer (these amounts are
treated as Annual Additions to a Defined Contribution Plan though they
arise under a Defined Benefit Plan), and
(e) amounts derived from contributions paid or accrued after 1985, in
taxable years ending after 1985, which are either attributable to
post-retirement medical benefits allocated to the account of a Key
Employee, or to a Welfare Benefit Fund maintained by the Employer, are
also treated as Annual Additions to a Defined Contribution Plan. For
purposes of this paragraph, an Employee is a Key Employee if he or she
meets the requirements of paragraph 1.43 at any time during the Plan
Year or any preceding Plan Year. Welfare Benefit Fund is defined at
paragraph 1.89.
(f) allocations under a Simplified Employee Pension Plan.
Excess amounts applied in a Limitation Year to reduce Employer contributions
will be considered Annual Additions for such Limitation Year, pursuant to the
provisions of Article X.
1.5 ANNUITY STARTING DATE
The first day of the first period for which an amount is paid as an annuity or
in any other form.
1.6 APPLICABLE CALENDAR YEAR
The First Distribution Calendar Year, and in the event of the recalculation of
life expectancy, such succeeding calendar year. If payments commence in
accordance with paragraph 7.4(e) before the
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Required Beginning Date, the Applicable Calendar Year is the year such payments
commence. If distribution is in the form of an immediate annuity purchased after
the Participant's death with the Participant's remaining interest, the
Applicable Calendar Year is the year of purchase.
1.7 APPLICABLE LIFE EXPECTANCY
Used in determining the required minimum distribution. The life expectancy (or
joint and last survivor expectancy) calculated using the attained age of the
Participant (or Designated Beneficiary) as of the Participant's (or Designated
Beneficiary's) birthday in the Applicable Calendar Year reduced by one for each
calendar year which has elapsed since the date life expectancy was first
calculated. If life expectancy is being recalculated, the Applicable Life
Expectancy shall be the life expectancy as so recalculated. The life expectancy
of a non-Spouse Beneficiary may not be recalculated.
1.8 AVERAGE CONTRIBUTION PERCENTAGE (ACP)
The average of the Contribution Percentages for each Highly Compensated Employee
and for each non-Highly Compensated Employee.
1.9 AVERAGE DEFERRAL PERCENTAGE (ADP)
The average of the Actual Deferral Percentages for each Highly Compensated
Employee and for each non-Highly Compensated Employee.
1.10 BREAK IN SERVICE
If the Hour counting method has been chosen by the Employer in the Adoption
Agreement, a Break In Service is a 12-consecutive month period during which an
Employee fails to complete more than 500 Hours of Service. If the Elapsed Time
method has been chosen by the Employer in the Adoption Agreement, a Break In
Service is a period of severance of at least 12 consecutive months.
1.11 CODE
The Internal Revenue Code of 1986, including any amendments.
1.12 COMPENSATION
Unless otherwise specified by the Employer in the Adoption Agreement,
Compensation shall include all amounts earned from the Employer and actually
paid during the Plan Year.
(a) Code Section 3401(a) Wages. Compensation is defined as wages within
the meaning of Code Section 3401(a) for the purposes of Federal income
tax withholding at the source but determined without regard to any rules
that limit the remuneration included in wages based on the nature or
location of the employment or the services performed [such as the
exception for agricultural labor in Code Section 3401(a)(2)].
(b) Code Section 415 Compensation. For purposes of applying the
limitations of Article X and Top-Heavy Minimums, the definition of
Compensation shall be Code Section 415 Compensation defined as follows:
a Participant's Earned Income, wages, salaries, and fees for
professional services and other amounts received (without regard to
whether or not an amount is paid in cash) for personal services actually
rendered in the course of employment with the Employer maintaining the
Plan to the extent that the amounts are includible in gross income
[including, but not limited to, commissions paid salesmen, compensation
for services on the basis of a percentage of profits, commissions on
insurance premiums, tips, bonuses, fringe benefits and reimbursements or
other expense allowances under a nonaccountable plan (as described in
Regulation 1.62-2(c))], and excluding the following:
(1) Employer contributions to a plan of deferred compensation
which are not includible in the Employee's gross income for the
taxable year in which contributed, or Employer contributions
under a Simplified Employee Pension Plan or any distributions
from a plan of deferred compensation,
(2) Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by the
Employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture,
(3) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock option;
and
(4) other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a
salary reduction agreement) towards the purchase of an annuity
described in Code Section 403(b) (whether or not the amounts are
actually excludable from the gross income of the Employee).
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For purposes of applying the limitations of Article X, Compensation for a
Limitation Year is the Compensation actually paid or made available during such
Limitation Year. Notwithstanding the preceding sentence, Compensation for a
Participant in a defined contribution plan who is permanently and totally
disabled [as defined in Code Section 22(e)(3)] is the Compensation such
Participant would have received for the Limitation Year if the Participant had
been paid at the rate of Compensation paid immediately before becoming
permanently and totally disabled. Such imputed Compensation for the disabled
Participant may be taken into account only if the participant is not a Highly
Compensated Employee [as defined in Code Section 414(q)] and contributions made
on behalf of such Participant are nonforfeitable when made.
If the Employer fails to pick the determination period in the Adoption
Agreement, the Plan Year shall be used. Unless otherwise specified by the
Employer in the adoption agreement, Compensation shall be determined as provided
in Code Section 3401(a) (as defined in this paragraph 1. 1 2(a)). In
nonstandardized Adoption Agreement 002, the Employer may choose to eliminate or
exclude categories of Compensation which do not violate the provisions of Code
Sections 401(a)(4), 414(s) the regulations thereunder and Revenue Procedure
89-65.
Beginning with 1989 Plan Years, the annual Compensation of each Participant
which may be taken into account for determining all benefits provided under the
Plan (including benefits under Article XIV) for any Plan Year shall not exceed
$200,000, as adjusted under Code Section 415(d). For Plan Years beginning on or
after January 1, 1994, the annual Compensation of each Participant taken into
account for determining all benefits provided under the Plan for any Plan Year
shall not exceed $150,000, as adjusted for increases in the cost-of-living in
accordance with Code Section 401(a)(17). The cost-of-living adjustment in effect
for a calendar year applies to any determination period beginning in such
calendar year.
In determining the Compensation of a Participant for purposes of this
limitation, the rules of Code Section 414(q)(6) shall apply, except in applying
such rules, the term "family" shall include only the spouse of the Participant
and any lineal descendants of the Participant who have not attained age 19
before the end of the Plan year. If, as a result of the application of such
rules the adjusted annual Compensation limitation is exceeded, then (except for
purposes of determining the portion of Compensation up to the integration level
if this Plan provides for permitted disparity), the limitation shall be prorated
among the affected individuals in proportion to each such individual's
Compensation as determined under this section prior to the application of this
limitation.
If a Plan has a Plan Year that contains fewer than 12 Calendar Months, then the
annual compensation limit for that period is an amount equal to the annual
Compensation as adjusted for the calendar year in which the compensation period
begins, multiplied by a fraction the numerator of which is the number of full
months in the short determination period and the denominator of which is 12. If
compensation for any prior plan year is taken into account in determining an
employee's contributions or benefits for the current year, the compensation for
such prior year is subject to the applicable annual compensation limit in effect
for that prior year. For this purpose, for years beginning before January 1,
1990, the applicable annual compensation limit is $200,000.
Compensation shall not include deferred compensation other than contributions
through a salary reduction agreement to a cash or deferred plan under Code
Section 401(k), a Simplified Employee Pension Plan under Code Section
402(h)(1)(B), a cafeteria plan under Code Section 125 or a tax-deferred annuity
under Code Section 403(b). Unless elected otherwise by the Employer in the
Adoption Agreement, these deferred amounts will be considered as Compensation
for Plan purposes. These deferred amounts are not counted as Compensation for
purposes of Articles X and XIV except for Code Sections 401(k) and 401(m)
testing. When applicable to a Self-Employed Individual, Compensation shall mean
Earned Income.
1.13 CONTRIBUTION PERCENTAGE
The ratio (expressed as a percentage and calculated separately for each
Participant) of:
(a) the Participant's Contribution Percentage Amounts [as defined at
(c)-(f)] for the Plan Year, to
(b) the Participant's Compensation for such Plan Year. Unless otherwise
specified by the Employer in the Adoption Agreement, Compensation will
include all amounts earned from the Employer and actually paid during
the Plan Year.
Contribution Percentage Amounts on behalf of any Participant shall include:
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(c) the amount of Employee Voluntary Contributions, Matching
Contributions, and Qualified Matching Contributions (to the extent not
taken into account for purposes of the ADP test) made under the Plan on
behalf of the Participant for the Plan Year,
(d) forfeitures of Excess Aggregate Contributions or Matching
Contributions allocated to the Participant's account which shall be
taken into account in the year in which such forfeiture is allocated,
(e) at the election of the Employer, Qualified Non-Elective
Contributions, and
(f) the Employer also may elect to use Elective Deferrals in the
Contribution Percentage Amounts so long as the ADP test is met before
the Elective Deferrals are used in the ACP test and continues to be met
following the exclusion of those Elective Deferrals that are used to
meet the ACP test.
Contribution Percentage Amounts shall not include Matching Contributions,
whether or not Qualified, that are forfeited either to correct Excess Aggregate
Contributions, or because the contributions to which they relate are Excess
Deferrals, Excess Contributions, or Excess Aggregate Contributions.
1.14 DEFINED BENEFIT PLAN
A Plan under which a Participant's benefit is determined by a formula contained
in the Plan and no individual accounts are maintained for Participants.
1.15 DEFINED BENEFIT (PLAN) FRACTION
A fraction, the numerator of which is the sum of the Participant's Projected
Annual Benefits under all the Defined Benefit Plans (whether or not terminated)
maintained by the Employer, and the denominator of which is the lesser of 125
percent of the dollar limitation determined for the Limitation Year under Code
Sections 415(b) and (d) or 140 percent of the Highest Average Compensation,
including any adjustments under Code Section 415(b).
Notwithstanding the above, if the Participant was a Participant as of the first
day of the first Limitation Year beginning after 1986, in one or more Defined
Benefit Plans maintained by the Employer which were in existence on May 6, 1986,
the denominator of this fraction will not be less than 125 percent of the sum of
the annual benefits under such plans which the Participant had accrued as of the
close of the last Limitation Year beginning before 1987, disregarding any
changes in the terms and conditions of the plan after May 5, 1986. The preceding
sentence applies only if the Defined Benefit Plans individually and in the
aggregate satisfied the requirements of Section 415 for all Limitation Years
beginning before 1987.
1.16 DEFINED CONTRIBUTION DOLLAR LIMITATION
Thirty thousand dollars ($30,000) or if greater, one-fourth of the defined
benefit dollar limitation set forth in Code Section 415(b)(1) as in effect for
the Limitation Year.
1.17 DEFINED CONTRIBUTION PLAN
A Plan tinder which individual accounts are maintained for each Participant to
which all contributions, forfeitures, investment income and gains or losses, and
expenses are credited or deducted. A Participant's benefit under such Plan is
based solely on the fair market value of his or her account balance.
1.18 DEFINED CONTRIBUTION (PLAN) FRACTION
A Fraction, the numerator of which is the sum of the Annual Additions to the
Participant's account under all the Defined Contribution Plans (whether or not
terminated) maintained by the Employer for the current and all prior Limitation
Years (including the Annual Additions attributable to the Participant's
nondeductible Employee contributions to all Defined Benefit Plans, whether or
not terminated, maintained by the Employer, and the Annual Additions
attributable to all Welfare Benefit Funds, as defined in paragraph 1.89 and
individual medical accounts, as defined in Code Section 415(1)(2), maintained by
the Employer), and the denominator of which is the sum of the maximum aggregate
amounts for the current and all prior Limitation Years of service with the
Employer (regardless of whether a Defined Contribution Plan was maintained by
the Employer). The maximum aggregate amount in the Limitation Year is the lesser
of 125 percent of the dollar limitation determined under Code Sections 415(b)
and (d) in effect under Code Section 415(c)(1)(A) or 35 percent of the
Participant's Compensation for such year.
If the Employee was a Participant as of the end of the first day of the first
Limitation Year beginning after 1986, in one or more Defined Contribution Plans
maintained by the Employer which were in existence on May 6, 1986, the numerator
of this fraction will be adjusted if the sum of this fraction and the Defined
Benefit Fraction would otherwise
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exceed 1.0 under the terms of this Plan. Under the adjustment, an amount equal
to the Product of (1) the excess of the sum of the fractions over 1.0 times (2)
the denominator of this fraction will be permanently subtracted from the
numerator of this fraction. The adjustment is calculated using the fractions as
they would be computed as of the end of the last Limitation Year beginning
before 1987, and disregarding any changes in the terms and conditions of the
Plan made after May 6, 1986, but using the Section 415 limitation applicable to
the first Limitation Year beginning on or after January 1, 1987. The Annual
Addition for any Limitation Year beginning before 1987, shall not be re-computed
to treat all Employee Contributions as Annual Additions.
1.19 DESIGNATED BENEFICIARY
The individual who is designated as the beneficiary under the Plan in accordance
with Code Section 401(a)(9) and the regulations thereunder.
1.20 DISABILITY
An illness or injury of a potentially permanent nature, expected to last for a
continuous period of not less than 12 months, certified by a physician selected
by or satisfactory to the Employer, which prevents the Employee from engaging in
any occupation for wage or profit for which the Employee is reasonably fitted by
training, education or experience.
1.21 DISTRIBUTION CALENDAR YEAR
A calendar year for which a minimum distribution is required.
1.22 EARLY RETIREMENT AGE
The age set by the Employer in the Adoption Agreement (but not less than 55),
which is the earliest age at which a Participant may retire and receive his or
her benefits under the Plan.
1.23 EARNED INCOME
Net earnings from self-employment in the trade or business with respect to which
the Plan is established, determined without regard to items not included in
gross income and the deductions allocable to such items, provided that personal
services of the individual are a material income-producing factor. Earned income
shall be reduced by contributions made by an Employer to a qualified plan to the
extent deductible under Code Section 404. For tax years beginning after 1989,
net earnings shall be determined taking into account the deduction for one-half
of self-employment taxes allowed to the Employer under Code Section 164(f) to
the extent deductible.
1.24 EFFECTIVE DATE
The date on which the Employer's retirement plan or amendment to such plan
becomes effective. Unless otherwise specified in the Adoption Agreement, the
effective date shall be the first day of the Plan Year during which the Adoption
Agreement is executed by the Employer. For amendments reflecting statutory and
regulatory changes post Tax Reform Act of 1986, the Effective Date will be the
date upon which such amendment is first administratively applied.
1.25 ELECTION PERIOD
The period which begins on the first day of the Plan Year in which the
Participant attains age 35 and ends on the date of the Participant's death. If a
Participant separates from service prior to the first day of the Plan Year in
which age 35 is attained, the Election Period shall begin on the date of
separation, with respect to the account balance as of the date of separation.
1.26 ELECTIVE DEFERRAL
Employer contributions made to the Plan at the election of the Participant, in
lieu of cash Compensation. Elective Deferrals shall also include contributions
made pursuant to a Salary Savings Agreement or other deferral mechanism, such as
a cash option contribution. With respect to any taxable year, a Participant's
Elective Deferral is the sum of all Employer contributions made on behalf of
such Participant pursuant to an election to defer under any qualified cash or
deferred arrangement as described in Code Section 401(k), any simplified
employee pension cash or deferred arrangement as described in Code Section
402(h)(1)(B), any eligible deferred compensation plan under Code Section 457,
any plan as described under Code Section 501(c)(18), and any Employer
contributions made on the behalf of a Participant for the purchase of an annuity
contract under Code Section 403(b) pursuant to a Salary Savings Agreement.
Elective Deferrals shall not include any deferrals properly distributed as
Excess Annual Additions.
1.27 ELIGIBLE PARTICIPANT
Any Employee who is eligible to make a Voluntary Contribution, or an Elective
Deferral (if the Employer takes such contributions into account in the
calculation of the Contribution Percentage), or to receive a
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Matching Contribution (including forfeitures) or a Qualified Matching
Contribution. If a Voluntary Contribution or Elective Deferral is required as a
condition of participation in the Plan, any Employee who would be a Participant
in the Plan if such Employee made such a contribution shall be treated as an
Eligible Participant even though no Voluntary Contributions or Elective
Deferrals are made.
1.28 EMPLOYEE
Any person employed by the Employer (including Self-Employed Individuals and
partners), all Employees of a member of an affiliated service group [as defined
in Code Section 414(m)], Employees of a controlled group of corporations [as
defined in Code Section 414(b)], all Employees of any incorporated or
unincorporated trade or business which is under common control [as defined in
Code Section 414(c)], leased Employees [as defined in Code Section 414(n)] and
any Employee required to be aggregated by Code Section 414(o). All such
Employees shall be treated as employed by a single Employer.
1.29 EMPLOYER
The Self-Employed Individual, partnership, corporation or other organization
which adopts this Plan including any firm that succeeds the Employer and adopts
this Plan. For purposes of Article X, Limitations on Allocations, Employer shall
mean the Employer that adopts this Plan, and all members of a controlled group
of corporations [as defined in Code Section 414(b) as modified by Code Section
415(h)], all commonly controlled trades or businesses [as defined in Code
Section 414(c) as modified by Code Section 415(h)] or affiliated service groups
[as defined in Code Section 414(m)] of which the adopting Employer is a part,
and any other entity required to be aggregated with the Employer pursuant to
regulations under Code Section 414(o).
1.30 ENTRY DATE
The date on which an Employee commences participation in the Plan as determined
by the Employer in the Adoption Agreement. Unless the Employer specifies
otherwise in the Adoption Agreement, Entry into the Plan shall be on the first
day of the Plan Year or the first day of the seventh month of the Plan Year
coinciding with or following the date on which an Employee meets the eligibility
requirements.
1.31 EXCESS AGGREGATE CONTRIBUTIONS
The excess, with respect to any Plan Year, of:
(a) The aggregate Contribution Percentage Amounts taken into account in
computing the numerator of the Contribution Percentage actually made on
behalf of Highly Compensated Employees for such Plan Year, over
(b) The maximum Contribution Percentage Amounts permitted by the ACP
test (determined by reducing contributions made on behalf of Highly
Compensated Employees in order of their Contribution Percentages
beginning with the highest of such percentages).
Such determination shall be made after first determining Excess Elective
Deferrals pursuant to paragraph 1.34 and then determining Excess Contributions
pursuant to paragraph 1.33.
1.32 EXCESS AMOUNT
The excess of the Participant's Annual Additions for the Limitation Year over
the Maximum Permissible Amount.
1.33 EXCESS CONTRIBUTION
With respect to any Plan Year, the excess of:
(a) The aggregate amount of Employer contributions actually taken into
account in computing the ADP of Highly Compensated Employees for such
Plan Year, over
(b) The maximum amount of such contributions permitted by the ADP test
(determined by reducing contributions made on behalf of Highly
Compensated Employees in order of the ADPs, beginning with the highest
of such percentages).
1.34 EXCESS ELECTIVE DEFERRALS
Those Elective Deferrals that are includible in a Participant's gross income
under Code Section 402(g) to the extent such Participant's Elective Deferrals
for a taxable year exceed the dollar limitation under such Code Section. Excess
Elective Deferrals shall be treated as Annual Additions under the Plan, unless
such amounts are distributed no later than the first April 15th following the
close of the Participant's taxable year.
1.35 FAMILY MEMBER
The Employee's Spouse, any lineal descendants and ascendants and the Spouse of
such lineal descendants and ascendants.
1.36 FIRST DISTRIBUTION CALENDAR YEAR
For distributions beginning before the Participant's death, the First
Distribution Calendar Year is the
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calendar year immediately preceding the calendar year which contains the
Participant's Required Beginning Date. For distributions beginning after the
Participant's death, the First Distribution Calendar Year is the calendar year
in which distributions are required to begin pursuant to paragraph 7.10.
1.37 FUND
All contributions received by the Trustee under this Plan and Trust, investments
thereof and earnings and appreciation thereon.
1.38 HARDSHIP
An immediate and heavy financial need of the Employee where such Employee lacks
other available resources.
1.39 HIGHEST AVERAGE COMPENSATION
The average Compensation for the three consecutive Years of Service with the
Employer that produces the highest average. A Year of Service with the Employer
is the 12-consecutive month period defined in the Adoption Agreement
1.40 HIGHLY COMPENSATED EMPLOYEE
Any Employee who performs service for the Employer during the determination year
and who, during the immediate prior year:
(a) received Compensation from the Employer in excess of $75,000 [as
adjusted pursuant to Code Section 415(d)]; or
(b) received Compensation from the Employer in excess of $50,000 [as
adjusted pursuant to Code Section 415(d)] and was a member of the
Top-Paid Group for such year; or
(c) was an officer of the Employer and received Compensation during such
year that is greater than 50 percent of the dollar limitation in effect
under Code Section 415(b)(1)(A).
Notwithstanding (a), (b) and (c), an Employee who was not Highly Compensated
during the preceding Plan Year shall not be treated as a Highly Compensated
Employee with respect to the current Plan Year unless such Employee is a member
of the 100 Employees paid the greatest Compensation during the year for which
such determination is being made.
(d) Employees who are five percent (5%) Owners at any time during the
immediate prior year or determination year.
Highly Compensated Employee includes Highly Compensated active Employees and
Highly Compensated former Employees.
1.41 HOUR OF SERVICE
(a) Hour Counting Method:
(1) Each hour for which an Employee is paid, or entitled to
payment, for the performance of duties for the Employer. These
hours shall be credited to the Employee for the computation
period in which the duties are performed; and
(2) Each hour for which an Employee is paid, or entitled to
payment, by the Employer on account of a period of time during
which no duties are performed (irrespective of whether the
employment relationship has terminated) due to vacation,
holiday, illness, incapacity (including disability), layoff,
jury duty, military duty or leave of absence. No more than 501
Hours of Service shall be credited under this paragraph for any
single continuous period (whether or not Such period occurs in a
single computation period). Hours under this paragraph shall be
calculated and credited pursuant to Section 2530.200b-2 of the
Department of Labor Regulations which are incorporated herein by
this reference; and
(3) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer. The
same Hours of Service shall not be credited both under paragraph
(a) or paragraph (b), as the case may be, and under this
paragraph (c). These hours shall be credited to the Employee for
the computation period or periods to which the award or
agreement pertains rather than the computation period in which
the award, agreement or payment is made.
(4) Hours of Service shall be credited for employment with the
Employer and with other members of an affiliated service group
[as defined in Code Section 414(m)], a controlled group of
corporations [as defined in Code Section 414(b)], or a group of
trades or businesses under common control [as defined in Code
Section 414(c)] of which the adopting Employer is a member, and
any other entity required to be aggregated with the Employer
pursuant to Code Section 414(o) and the regu-
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lations thereunder. Hours of Service shall also be credited for
any individual considered an Employee for purposes of this Plan
under Code Section 414(n) or Code Section 414(o) and the
regulations thereunder.
(5) Solely for purposes of determining whether a Break in
Service, as defined in paragraph 1.10, for participation and
vesting purposes has occurred in a computation period, an
individual who is absent from work for maternity or paternity
reasons shall receive credit for the Hours of Service which
would otherwise have been credited to such individual but for
such absence, or in any case in which such hours cannot be
determined, 8 Hours of Service per day of such absence. For
purposes of this paragraph, an absence from work for maternity
or paternity reasons means an absence by reason of the pregnancy
of the individual, by reason of a birth of a child of the
individual, by reason of the placement of a child with the
individual in connection with the adoption of such child by such
individual, or for purposes of caring for such child for a
period beginning immediately following such birth or placement.
The Hours of Service credited under this paragraph shall be
credited in the computation period in which the absence begins
if the crediting is necessary to prevent a Break in Service in
that period, or in all other cases, in the following computation
period. No more than 501 hours will be credited under this
paragraph.
(6) Unless specified otherwise in the Adoption Agreement, the
Hours of Service Method shall be used. Also, unless specified
otherwise in the Adoption Agreement, Hours of Service shall be
determined on the basis of actual hours for which an Employee is
paid or entitled to payment.
(b) Elapsed Time Method
(1) For purposes of this section, Hour of Service shall mean
each hour for which an Employee is paid or entitled to payment
for the performance of duties for the Employer.
(2) Break In Service is a period of severance of at least 12
consecutive months.
(3) Period of severance is a continuous period of time during
which the Employee is not employed by the Employer. Such period
begins on the date the Employee retires, quits or is discharged,
or if earlier, the 12 month anniversary of the date on which the
Employee was otherwise first absent from service.
(4) In the case of an individual who is absent from work for
maternity or paternity reasons, the 12-consecutive month period
beginning on the first anniversary of the first date of such
absence shall not constitute a Break In Service. For purposes of
this paragraph, an absence from work for maternity or paternity
reasons means an absence (i) by reason of the pregnancy of the
individual, (ii) by reason of the birth of a child of the
individual, (iii) by reason of the placement of a child with the
individual in connection with the adoption of such child by such
individual, or (iv) for purposes of caring for such child for a
period beginning immediately following such birth or placement.
(5) Each Employee will share in Employer contributions for the
period beginning on the date the Employee commences
participation under the plan and ending on the date on which
such Employee severs employment with the Employer or is no
longer a member of an eligible class of Employees.
(6) If the Employer is a member of an affiliated service group
(under section 414(m)), a controlled group of corporations
(under section 414(b)), a group of trades or businesses under
common control (under section 414(c)) or any other entity
required to be aggregated with the Employer pursuant to section
414(o), service will be credited for any employment for any
period of time for any other member of such group. Service will
also be credited for any individual required under section
414(n) or section (414)(o) to be considered an Employee of any
Employer aggregated under section 414(b), (c), or (m).
1.42 KEY EMPLOYEE
Any Employee or former Employee (and the beneficiaries of such employee) who at
any time during the determination period was an officer of the Employer if such
individual's annual compensation exceeds 50% of the dollar limitation under Code
Section 415(b)(1)(A) (the defined benefit maximum
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annual benefit), an owner (or considered an owner under Code Section 318) of one
of the ten largest interests in the employer if such individual's compensation
exceeds 100% of the dollar limitation under Code Section 415(c)(1)(A), a 5%
owner of the Employer, or a 1% owner of the Employer who has an annual
compensation of more than $150,000. For purposes of determining who is a Key
Employee, annual compensation shall mean Compensation as defined for Article X,
but including amounts deferred through a salary reduction agreement to a cash or
deferred plan under Code section 401(k), a Simplified Employee Pension Plan
under Code Section 408(k), a cafeteria plan under Code Section 125 or a
tax-deferred annuity under Code Section 403(b). The determination period is the
Plan Year containing the Determination Date and the four preceding Plan Years.
The determination of who is a Key Employee will be made in accordance with Code
Section 416(i)(1) and the regulations thereunder.
1.43 LEASED EMPLOYEE
Any person (other than an Employee of the recipient) who, pursuant to an
agreement between the recipient and any other person ("leasing organization"),
has performed services for the recipient [or for the recipient and related
persons determined in accordance with Code Section 414(n)(6)] on a substantially
full-time basis for a period of at least one year, and such services are of a
type historically performed by Employees in the business field of the recipient
Employer.
1.44 LIMITATION YEAR
The Plan Year as designated by the Employer in the Adoption Agreement for
purposes of determining the maximum Annual Addition to a Participant's account.
All qualified plans maintained by the Employer must use the same Limitation
Year. If the Limitation Year is amended to a different 12-consecutive month
period, the new Limitation Year must begin on a date within the Limitation Year
in which the amendment is made.
1.45 MASTER OR PROTOTYPE PLAN
A plan, the form of which is the subject of a favorable opinion letter from the
Internal Revenue Service.
1.46 MATCHING CONTRIBUTION
An Employer contribution made to this or any other defined contribution plan on
behalf of a Participant on account of an Employee Voluntary Contribution made by
such Participant, or on account of a Participant's Elective Deferral, under a
Plan maintained by the Employer.
1.47 MAXIMUM PERMISSIBLE AMOUNT
The maximum Annual Addition that may be contributed or allocated to A
Participant's account under the plan for any Limitation Year shall not exceed
the lesser of:
(a) the Defined Contribution Dollar Limitation, OR
(b) 25% of the Participant's Compensation for the Limitation Year.
The compensation limitation referred to in (b) shall not apply to any
contribution for medical benefits [within the meaning of Code Section 401(h) or
Code Section 419A(f)(2)] which is otherwise treated as an Annual Addition under
Code Section 415(l)(1) or 419(d)(2). If a short Limitation Year is created
because of an amendment changing the Limitation Year to a different
12-consecutive month period, the Maximum Permissible Amount will not exceed the
Defined Contribution Dollar Limitation multiplied by the following fraction:
Number of months in the short Limitation Year divided by 12.
1.48 NET PROFIT
The current and accumulated operating earnings of the Employer before Federal
and State income taxes, excluding nonrecurring or unusual items of income, and
before contributions to this and any other qualified plan of the Employer.
Unless otherwise specified in the Adoption Agreement, profits will not be
required for Profit-Sharing contributions to the Plan.
1.49 NORMAL RETIREMENT AGE
The age, set by the Employer in the Adoption Agreement, at which a Participant
may retire and receive his or her benefits under the Plan. Unless otherwise
specified in the Adoption Agreement, the Normal Retirement Age shall be 65.
1.50 OWNER-EMPLOYEE
A sole proprietor, or a partner owning more than 10% of either the capital or
profits interest of the partnership.
1.51 PAIRED PLANS
Two or more Plans maintained by the Sponsor designed so that a single or any
combination of Plans adopted by an Employer will meet the antidiscrimination
rules, the contribution and benefit limitations, and the Top-Heavy provisions of
the Code.
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1.52 PARTICIPANT
Any Employee who has met the eligibility requirements and is participating in
the Plan.
1.53 PARTICIPANT'S BENEFIT
The account balance as of the last Valuation Date in the calendar year
immediately preceding the Distribution Calendar Year (valuation calendar year)
increased by the amount of any contributions or forfeitures allocated to the
account balance as of the dates in the valuation calendar year after the
Valuation Date and decreased by distributions made in the valuation calendar
year after the Valuation Date. A special exception exists for the second
distribution Calendar Year. For purposes of this paragraph, if any portion of
the minimum distribution for the First Distribution Calendar Year is made in the
second Distribution Calendar Year on or before the Required Beginning Date, the
amount of the minimum distribution made in the second distribution calendar year
shall be treated as if it had been made in the immediately preceding
Distribution Calendar Year.
1.54 PERMISSIVE AGGREGATION GROUP
Used for Top-Heavy testing purposes, it is the Required Aggregation Group of
plans plus any other plan or plans of the Employer which, when considered as a
group with the Required Aggregation Group, would continue to satisfy the
requirements of Code Sections 401(a)(4) and 410.
1.55 PLAN
The Employer's retirement plan as embodied herein and in the Adoption Agreement.
1.56 PLAN ADMINISTRATOR
The Employer.
1.57 PLAN YEAR
The 12-consecutive month period designated by the Employer in the Adoption
Agreement. If no such period is designated, the Plan Year shall be the
Employer's taxable year.
1.58 PRESENT VALUE
Used for Top-Heavy test and determination purposes, when determining the Present
Value of accrued benefits, with respect to any Defined Benefit Plan maintained
by the Employer, interest and mortality rates shall be determined in accordance
with the provisions of the respective plan. If applicable, interest and
mortality assumptions will be specified in Section 11 of the Adoption Agreement.
1.59 PROJECTED ANNUAL BENEFIT
Used to test the maximum benefit which may be obtained from a combination of
retirement plans, it is the annual retirement benefit (adjusted to an actuarial
equivalent straight life annuity if such benefit is expressed in a form other
than a straight life annuity or Qualified Joint and Survivor Annuity) to which
the Participant would be entitled under the terms of a Defined Benefit Plan or
plans, assuming:
(a) the Participant will continue employment until Normal Retirement Age
under the plan (or current age, if later), and
(b) the Participant's Compensation for the current Limitation Year and
all other relevant factors used to determine benefits under the plan
will remain constant for all future Limitation Years.
1.60 QUALIFIED DEFERRED COMPENSATION PLAN
Any pension, profit-sharing, stock bonus, or other plan which meets the
requirements of Code Section 401 and includes a trust exempt from tax under
Code Section 501(a) or any annuity plan described in Code Section 403(a).
An Eligible Retirement Plan is an individual retirement account (IRA) as
described in section 408(a) of the Code, an individual retirement annuity (IRA)
as described in section 408(b) of the Code, an annuity plan as described in
section 403(a) of the Code, or a qualified trust as described in section 401(a)
of the Code, which accepts Eligible Rollover Distributions. However, in the case
of an Eligible Rollover Distribution to a surviving Spouse, an Eligible
Retirement Plan is an individual retirement account or individual retirement
annuity.
1.61 QUALIFIED DOMESTIC RELATIONS ORDER
A QDRO is a signed Domestic Relations Order issued by a State Court which
creates, recognizes or assigns to an alternate payee(s) the right to receive all
or part of a Participant's Plan benefit and which meets the requirements of Code
Section 414(p). An alternate payee is a Spouse, former Spouse, child, or other
dependent who is treated as a beneficiary under the Plan as a result of the
QDRO.
1.62 QUALIFIED EARLY RETIREMENT AGE
For purposes of paragraph 8.9, Qualified Early Retirement Age is the latest of:
(a) the earliest date, under the Plan, on which the Participant may
elect to receive retirement benefits, or
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(b) the first day of the 120th month beginning before the Participant
reaches Normal Retirement Age, or
(c) the date the Participant begins participation.
1.63 QUALIFIED JOINT AND SURVIVOR ANNUITY
An immediate annuity for the life of the Participant with a survivor annuity for
the life of the Participant's Spouse which is at least one-half of but not more
than the amount of the annuity payable during the joint lives of the Participant
and the Participant's Spouse. The exact amount of the Survivor Annuity is to be
specified by the Employer in the Adoption Agreement. If not designated by the
Employer, the Survivor Annuity will be 1/2 of the amount paid to the Participant
during his or her lifetime. The Qualified Joint and Survivor Annuity will be the
amount of benefit which can be provided by the Participant's Vested Account
Balance.
1.64 QUALIFIED MATCHING CONTRIBUTION
Matching Contributions which when made are subject to the distribution and
nonforfeitability requirements under Code Section 401(k).
1.65 QUALIFIED NON-ELECTIVE CONTRIBUTIONS
Contributions (other than Matching Contributions or Qualified Matching
Contributions) made by the Employer and allocated to Participants' accounts that
the Participants may not elect to receive in cash until distributed from the
Plan; that are nonforfeitable when made; and that are distributable only in
accordance with the distribution provisions that are applicable to Elective
Deferrals and Qualified Matching Contributions.
1.66 QUALIFIED VOLUNTARY CONTRIBUTION
A tax-deductible voluntary Employee contribution. These contributions may no
longer be made to the Plan.
1.67 REQUIRED AGGREGATION GROUP
Used for Top-Heavy testing purposes, it consists of:
(a) each qualified plan of the Employer in which at least one Key
Employee participates or participated at any time during the
determination period (regardless of whether the plan has terminated),
and
(b) any other qualified plan of the Employer which enables a plan
described in (a) to meet the requirements of Code Sections 401(a)(4) or
410.
1.68 REQUIRED BEGINNING DATE
The date on which a Participant is required to take his or her first minimum
distribution under the Plan. The rules are set forth at paragraph 7.5.
1.69 ROLLOVER CONTRIBUTION
A contribution made by a Participant of an amount distributed to such
Participant from another Qualified Deferred Compensation Plan in accordance with
Code Sections 402(a)(5), (6), and (7). An Eligible Rollover Distribution is any
distribution of all or any portion of the balance to the credit of the
Participant except that an Eligible Rollover Distribution does not include:
(a) any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the life
(or life expectancy) of the Participant or the joint lives (or joint
life expectancies) of the Participant and the Participant's Designated
Beneficiary, or for a specified period of ten years or more;
(b) any distribution to the extent such distribution is required under
section 401(a)(9) of the Code; and
(c) the portion of any distribution that is not includible in gross
income (determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
A Direct Rollover is a payment by the plan to the Eligible Retirement Plan
specified by the Participant.
1.70 SALARY SAVINGS AGREEMENT
An agreement between the Employer and a participating Employee where the
Employee authorizes the Employer to withhold a specified percentage of his or
her Compensation for deposit to the Plan on behalf of such Employee.
1.71 SELF-EMPLOYED INDIVIDUAL
An individual who has Earned Income for the taxable Year from the trade or
business for which the Plan is established including an individual who would
have had Earned Income but for the fact that the trade or business had no Net
Profit for the taxable year.
1.72 SERVICE
The period of current or prior employment with the Employer. If the Employer
maintains a plan of a predecessor employer, Service for such predecessor shall
be treated as Service for the Employer.
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1.73 SERVICE COMPANY
Prudential Mutual Fund Services, Inc., or its successor serving from time to
time.
1.74 SHAREHOLDER EMPLOYEE
An Employee or Officer who owns [or is considered as owning within the meaning
of Code Section 318(a)(1)], on any day during the taxable year of an electing
small business corporation (S Corporation), more than 5% of such corporation's
outstanding stock.
1.75 SIMPLIFIED EMPLOYEE PENSION PLAN
An individual retirement account which meets the requirements of Code Section
408(k), and to which the Employer makes contributions pursuant to a written
formula. These plans are considered for contribution limitation and Top-Heavy
testing purposes.
1.76 SPONSOR
Shall be Prudential Mutual Fund Management, Inc.
1.77 SPOUSE (SURVIVING SPOUSE)
The Spouse or Surviving Spouse of the Participant, provided that a former Spouse
will be treated as the Spouse or Surviving Spouse and a current Spouse will not
be treated as the Spouse or Surviving Spouse to the extent provided under a
Qualified Domestic Relations Order as described in Code Section 414(p).
1.78 Super Top-Heavy Plan
A Plan described at paragraph 1.81 under which the Top-Heavy Ratio [as defined
at paragraph 1.82] exceeds 90%.
1.79 TAXABLE WAGE BASE
For plans with an allocation formula which takes into account the Employer's
contribution under the Federal Insurance Contributions Act (FICA), the
contribution and benefit base in effect under Section 230, of the Social
Security Act, at the beginning of the Plan Year, or the amount elected by the
Employer in the Adoption Agreement.
1.80 TOP-HEAVY DETERMINATION DATE
For any Plan Year subsequent to the first Plan Year, the last day of the
preceding Plan Year. For the first Plan Year of the Plan, the last day of that
year.
1.81 TOP-HEAVY PLAN
For any Plan Year beginning after 1983, the Employer's Plan is top-heavy if any
of the following conditions exist:
(a) If the Top-heavy Ratio for the Employer's Plan exceeds 60% and this
Plan is not part of any required Aggregation Group or Permissive
Aggregation Group of Plans.
(b) If the Employer's plan is a part of a Required Aggregation Group of
plans but not part of a Permissive Aggregation Group and the Top-Heavy
Ratio for the group of plans exceeds 60%.
(c) If the Employer's plan is a part of a Required Aggregation Group and
part of a Permissive Aggregation Group of plans and the Top-Heavy Ratio
for the Permissive Aggregation Group exceeds 60%.
1.82 TOP-HEAVY RATIO
(a) If the Employer maintains one or more Defined Contribution plans
(including any Simplified Employee Pension Plan) and the Employer has
not maintained any Defined Benefit Plan which during the 5-year period
ending on the Determination Date(s) has or has had accrued benefits, the
Top-Heavy Ratio for this Plan alone, or for the Required or Permissive
Aggregation Group as appropriate, is a fraction,
(1) the numerator of which is the sum of the account balances of
all Key Employees as of the Determination Date(s) [including any
part of any account balance distributed in the 5-year period
ending on the Determination Date(s)], and
(2) the denominator of which is the sum of all account balances
[including any part of any account balance distributed in the
5-year period ending on the Determination Date(s)], both
computed in accordance with Code Section 416 and the regulations
thereunder.
Both the numerator and denominator of the Top-Heavy Ratio are increased
to reflect any contribution not actually made as of the Determination
Date, but which is required to be taken into account on that date under
Code Section 416 and the regulations thereunder.
(b) If the Employer maintains one or more Defined Contribution Plans
(including any Simplified Employee Pension Plan) and the Employer
maintains or has maintained one or more Defined Benefit Plans which
during the 5-year period ending on the Determination Date(s) has or has
had any accrued benefits, the Top-Heavy
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Ratio for any Required or Permissive Aggregation Group as appropriate
is a fraction, the numerator of which is the sum of account balances
under the aggregated Defined Contribution Plan or Plans for all Key
Employees, determined in accordance with (a) above, and the Present
Value of accrued benefits under the aggregated Defined Benefit Plan or
Plans for all Key Employees as of the Determination Date(s), and the
denominator of which is the sum of the account balances under the
aggregated Defined Contribution Plan or Plans for all Participants,
determined in accordance with (a) above, and the Present Value of
accrued benefits under the Defined Benefit Plan or Plans for all
Participants as of the Determination Date(s), all determined in
accordance with Code Section 416 and the regulations thereunder. The
accrued benefits under a Defined Benefit Plan in both the numerator and
denominator of the Top-Heavy Ratio are increased for any distribution
of an accrued benefit made in the 5-year period ending on the
Determination Date.
(c) For purposes of (a) and (b) above, the value of account balances and
the Present Value of accrued benefits will be determined as of the most
recent Valuation Date that falls within or ends with the 12-month period
ending on the Determination Date, except as provided in Code Section 416
and the regulations thereunder for the first and second plan years of a
Defined Benefit Plan. The account balances and accrued benefits of a
participant (1) who is not a Key Employee but who was a Key Employee in
a prior year, or (2) who has not been credited with at least one hour of
service with any Employer maintaining the Plan at any time during the
5-year period ending on the Determination Date, will be disregarded. The
calculation of the Top-Heavy Ratio, and the extent to which
distributions, rollovers, and transfers are taken into account will be
made in accordance with Code Section 416 and the regulations thereunder.
Qualified Voluntary Employee Contributions will not be taken into
account for purposes of computing the Top-Heavy Ratio. When aggregating
plans the value of account balances and accrued benefits will be
calculated with reference to the Determination Dates that fall within
the same calendar year. The accrued benefit of a Participant other than
a Key Employee shall be determined under (1) the method, if any, that
uniformly applies for accrual purposes under all Benefit Plans
maintained by the Employer, or (2) if there is no such method, as if
such benefit accrued not more rapidly than the slowest accrual rate
permitted under the fractional rule of Code Section 411(b)(1)(C).
1.83 TOP-PAID GROUP
The group consisting of the top 20% of Employees when ranked on the basis of
Compensation paid during such year. For purposes of determining the number of
Employees in the group (but not who is in it), the following Employees shall be
excluded:
(a) Employees who have not completed 6 months of Service.
(b) Employees who normally work less than 17-1/2 hours per week.
(c) Employees who normally do not work more than 6 months during any
year.
(d) Employees who have not attained age 21.
(e) Employees included in a collective bargaining unit, covered by an
agreement between employee representatives and the Employer, where
retirement benefits were the subject of good faith bargaining and
provided that 90% or more of the Employer's Employees are covered by the
agreement.
(f) Employees who are nonresident aliens and who receive no earned
income which constitutes income from sources within the United States.
1.84 TRANSFER CONTRIBUTION
A non-taxable transfer of a Participant's benefit directly from a Qualified
Deferred compensation Plan to this Plan.
1.85 TRUSTEE
The individual(s) or institution appointed by the Employer in the Adoption
Agreement.
1.86 VALUATION DATE
The last business day of each Plan Year or such other date consistent with the
operational cycle of the Service Company, as agreed to by the Employer and the
Service Company on which Participant accounts are revalued in accordance with
Article V hereof. For Top-Heavy purposes, the date selected by the Employer as
of which the Top-Heavy Ratio is calculated.
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The value of mutual funds and other marketable investments shall be determined
using the most recent price quoted on a national securities exchange or over the
counter market. The value of investments for which there is no market shall be
determined in the sole judgment of the Employer or issuer and neither the
Trustee nor Service Company shall have responsibility with respect to the
valuation of such assets.
1.87 VESTED ACCOUNT BALANCE
The aggregate value of the Participant's Vested Account Balances derived from
Employer and Employee contributions (including Rollovers), whether vested before
or upon death, including the proceeds of insurance contracts, if any, on the
Participant's life. The provisions of Article VIII shall apply to a Participant
who is vested in amounts attributable to Employer contributions, Employee
contributions (or both) at the time of death or distribution.
1.88 VOLUNTARY CONTRIBUTION
An Employee contribution made to the Plan by or on behalf of a Participant that
is included in the Participant's gross income in the year in which made and that
is maintained under a separate account to which earnings and losses are
allocated.
1.89 WELFARE BENEFIT FUND
Any fund that is pan of a plan of the Employer, or has the effect of a plan,
through which the Employer provides welfare benefits to Employees or their
beneficiaries. For these purposes, Welfare Benefits means any benefit other than
those with respect to which Code Section 83(h) (relating to transfers of
property in connection with the performance of services), Code Section 404
(relating to deductions for contributions to an Employee's trust or annuity and
Compensation under a deferred payment plan), Code Section 404A (relating to
certain foreign deferred compensation plans) apply. A "Fund" is any social club,
voluntary employee benefit association, supplemental unemployment benefit trust
or qualified group legal service organization described in Code Section
501(c)(7), (9), (17) or (20); any trust, corporation, or other organization not
exempt from income tax, or to the extent provided in regulations, any account
held for an Employer by any person.
1.90 YEAR OF SERVICE
If the Hour counting method has been chosen by the Employer in the Adoption
Agreement, a Year Of Service is a 12-consecutive month period during which an
Employee is credited with not less than 1,000 (or such lesser number as
specified by the Employer in the Adoption Agreement) Hours of Service. If the
Elapsed Time Method has been chosen by the Employer in the Adoption Agreement,
an Employee will receive credit for the aggregate of all time period(s)
commencing with the Employee's first day of employment or reemployment and
ending on the date a Break In Service begins. The first day of employment or
reemployment is the first day the Employee performs an Hour of Service. An
Employee will also receive credit for any period of severance of less than 12
consecutive months. Fractional periods of a year will be expressed in terms of
days.
ARTICLE II - ELIGIBILITY REQUIREMENTS
2.1 PARTICIPATION
Unless otherwise specified in the Adoption Agreement, the Plan shall cover all
Employees having completed at least one Year of Service and who have attained
age 21. Employees who meet the eligibility requirements in the Adoption
Agreement on the Effective Date of the Plan shall become Participants as of the
Effective Date of the Plan. Unless stated to the contrary in the Adoption
Agreement, all Employees employed on the Effective Date of the Plan may
participate, even if they have not satisfied the Plan's specified eligibility
requirements. Other Employees shall become Participants on the Entry Date
coinciding with or immediately following the date on which they meet the
eligibility requirements. The Employee must satisfy the eligibility requirements
specified in the Adoption Agreement and be employed on the Entry Date to become
a Participant in the Plan. In the event an Employee who is not a member of the
eligible class of Employees becomes a member of the eligible class, such
Employee shall participate immediately if such Employee has satisfied the
minimum age and service requirements and would have previously become a
Participant had he or she been in the eligible class. A former Participant shall
again become a Participant upon returning to the employ of the Employer. For
this purpose, Participant's Compensation and Service shall be considered from
date of rehire.
2.2 CHANGE IN CLASSIFICATION Of EMPLOYMENT
If a Participant is transferred to an ineligible class of
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Employees, or is otherwise reclassified as an ineligible Employee, any
contribution or allocation of forfeitures which would otherwise be made for him
hereunder for the Plan Year of such transfer or reclassification shall be made.
No contribution or allocation of forfeitures for or by him shall be made,
however, for any subsequent Plan Year prior to the Plan Year in which he again
becomes a Participant.
2.3 COMPUTATION PERIOD
To determine Years of Service and Breaks in Service for purposes of eligibility,
the 12-consecutive month period shall commence on the date on which an Employee
first performs an Hour of Service for the Employer and each anniversary thereof,
such that the succeeding 12-consecutive month period commences with the
employee's first anniversary of employment and so on. If, however, the period so
specified is one year or less, the succeeding 12-consecutive month period shall
commence on the first day of the Plan Year prior to the anniversary of the date
they first performed an Hour of Service regardless of whether the Employee is
entitled to be credited with 1,000 (or such lesser number as specified by the
Employer in the Adoption Agreement) Hours of Service during their first
employment year.
2.4 EMPLOYMENT RIGHTS
Participation in the Plan shall not confer upon a Participant any employment
rights, nor shall it interfere with the Employer's right to terminate the
employment of any Employee at any time.
2.5 SERVICE WITH CONTROLLED GROUPS
All Years of Service with other members of a controlled group of corporations
[as defined in Code Section 414(b)], trades or businesses under common control
[as defined in Code Section 414(c)], or members of an affiliated service group
[as defined in Code Section 414(m)] shall be credited for purposes of
determining an Employee's eligibility to participate.
2.6 OWNER-EMPLOYEES
If this Plan provides contributions or benefits for one or more Owner-Employees
who control both the business for which this Plan is established and one or more
other trades or businesses, this Plan and the Plan established for other trades
or businesses must, when looked at as a single Plan, satisfy Code Sections
401(a) and (d) for the Employees of this and all other trades or businesses.
If the Plan provides contributions or benefits for one or more Owner-Employees
who control one or more other trades or businesses, the Employees of the other
trades or businesses must be included in a Plan which satisfies Code Sections
401(a) and (d) and which provides contributions and benefits not less favorable
than provided for Owner-Employees under this Plan.
If an individual is covered as an Owner-Employee under the plans of two or more
trades or businesses which are not controlled, and the individual controls a
trade or business, then the contributions or benefits of the Employees under the
plan of the trades or businesses which are controlled must be as favorable as
those provided for him or her under the most favorable plan of the trade or
business which is not controlled.
For purposes of the preceding sentences, an Owner-Employee, or two or more
Owner-Employees, will be considered to control a trade or business if the
Owner-Employee, or two or more Owner-Employees together:
(a) own the entire interest in an unincorporated trade or business, or
(b) in the case of a partnership, own more than 50% of either the
capital interest or the profits interest in the partnership.
For purposes of the preceding sentence, an Owner-Employee, or two or more
Owner-Employees shall be treated as owning any interest in a partnership which
is owned, directly or indirectly, by a partnership which such Owner-Employee, or
such two or more Owner-Employees, are considered to control within the meaning
of the preceding sentence.
2.7 LEASED EMPLOYEES
Any leased Employee shall be treated as an Employee of the recipient Employer;
however, contributions or benefits provided by the leasing organization which
are attributable to services performed for the recipient Employer shall be
treated as provided by the recipient Employer. A leased Employee shall not be
considered an Employee of the recipient if such Employee is covered by a money
purchase pension plan providing:
(a) a non-integrated Employer contribution rate of at least 10% of
Compensation, [as defined in Code Section 415(c)(3) but including
amounts contributed by the Employer pursuant to a salary reduction
agreement, which are excludable from the Employee's gross income under a
cafeteria
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plan covered by Code Section 125, a cash or deferred profit-sharing plan
under Section 401(k) of the Code, a Simplified Employee Pension Plan
under Code Section 402(h)(1)(B) and a tax-sheltered annuity under Code
Section 403(b)],
(b) immediate participation, and
(c) full and immediate vesting.
This exclusion is only available if Leased Employees do not constitute more than
twenty percent (20%) of the recipients non-highly compensated work force.
2.8 OMISSION OF ELIGIBLE EMPLOYEE
If, in any Plan Year, any Employee who should be included as a Participant in
the Plan is erroneously omitted and discovery of such omission is not made until
after a contribution for the year has been made, the omitted Employee shall be
included in the next valuation. The Employer shall make any additional
contribution with respect to the omitted Employee that may be deemed necessary.
Such contribution shall be made regardless of whether it is deductible in whole
or in part in any taxable year under applicable provisions of the Code. The
Employee shall receive credit under the terms of the Plan for any period during
which he should have been included as a Participant.
2.9 INCLUSION OF INELIGIBLE EMPLOYEE
If in any Plan Year, any person who should not have been included as a
Participant in the Plan is erroneously included and discovery of such incorrect
inclusion is not made until after a contribution for the year has been made, the
Employer shall not be entitled to recover the contribution made with respect to
the ineligible person regardless of whether or not a deduction is allowable with
respect to such contribution. In such event, the amount contributed with respect
to the ineligible person shall be removed from the ineligible Employee's Account
and treated as a forfeiture.
ARTICLE III - EMPLOYER CONTRIBUTIONS
3.1 AMOUNT
The Employer intends to make periodic contributions to the Plan in accordance
with the formula or formulas selected in the Adoption Agreement. However, the
Employer's contribution for any Plan Year shall be subject to the limitations on
allocations contained in Article X.
3.2 EXPENSES AND FEES
The Employer shall also be authorized to reimburse the Fund for all expenses and
fees incurred in the administration of the Plan or Trust and paid out of the
assets of the Fund. Such expenses shall include, but shall not be limited to,
fees for professional services, printing and postage. Commissions may not be
reimbursed.
3.3 RESPONSIBILITY FOR CONTRIBUTIONS
The Trustee shall not be required to determine if the Employer has made a
contribution or if the amount contributed is in accordance with the Adoption
Agreement or the Code. The Employer shall have sole responsibility in this
regard. The Trustee shall be accountable solely for contributions actually
received by it, within the limits of Article XI.
3.4 RETURN Of CONTRIBUTIONS
Contributions made to the Fund by the Employer shall be irrevocable except as
provided below:
(a) Any contribution forwarded to the Trustee because of a mistake of
fact, provided that the contribution is returned to the Employer within
one year of the contribution.
(b) In the event that the Commissioner of Internal Revenue determines
that the Plan is not initially qualified under the Internal Revenue
Code, any contribution made incident to that initial qualification by
the Employer must be returned to the Employer within one year after the
date the initial qualification is denied, but only if the application
for the qualification is made by the time prescribed by law for filing
the Employer's return for the taxable year in which the Plan is adopted,
or such later date as the Secretary of the Treasury may prescribe.
(c) Contributions forwarded to the Trustee are presumed to be deductible
and are conditioned on their deductibility. Contributions which are
determined to not be deductible will be returned to the Employer.
3.5 FORM Of CONTRIBUTION
Except as contemplated in paragraphs 4.3 and 4.4, no contribution shall be made
in property other than United States currency or such other property as is
acceptable to the Service Company.
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ARTICLE IV - EMPLOYEE CONTRIBUTIONS
4.1 VOLUNTARY CONTRIBUTIONS
Unless otherwise specified in the Adoption Agreement, an Employee may not make
Voluntary Contributions to the Plan established hereunder. If permitted, they
will be made in a uniform and nondiscriminatory manner. Such contributions are
subject to the limitations on Annual Additions and are subject to
antidiscrimination testing.
4.2 QUALIFIED VOLUNTARY CONTRIBUTIONS
A Participant may no longer make Qualified Voluntary Contributions to the Plan.
Amounts already contributed may not remain in the Trust Fund. The Participant
must withdraw the Qualified Voluntary Contribution amounts already contributed
by making a written application to the Plan Administrator.
4.3 ROLLOVER CONTRIBUTION
Unless provided otherwise in the Adoption Agreement, a Participant and an
Employee in an eligible class of Employees who has not met the eligibility
requirements for participation in the Plan may make a Rollover Contribution to
any Defined Contribution Plan established hereunder of all or any part of an
amount distributed or distributable to him or her from a Qualified Deferred
Compensation Plan provided:
(a) the amount distributed to the Participant is deposited in the Plan
no later than the sixtieth day after such distribution was received by
the Participant,
(b) the amount distributed is not one of a series of substantially equal
periodic payments made for the life (or life expectancy) of the
Participant or the joint lives (or joint life expectancies) of the
Participant and the Participant's Designated Beneficiary, or for a
specified period of ten years or more;
(c) the amount distributed is not required under section 401(a)(9) of
the Code;
(d) if the amount distributed included property such property is rolled
over, or if sold the proceeds of such property may be rolled over,
(e) the amount distributed is not includible in gross income (determined
without regard to the exclusion for net unrealized appreciation with
respect to employer securities).
In addition, if the Adoption Agreement allows Rollover Contributions, the Plan
will also accept any Eligible Rollover Distribution (as defined at paragraph
1.69) directly to the Plan.
Rollover Contributions, which relate to distributions prior to January 1, 1993,
must be made in accordance with paragraphs (a) through (e) and additionally meet
the requirements of paragraph (f):
(f) the distribution from the Qualified Deferred Compensation Plan
constituted the Participant's entire interest in such Plan and was
distributed within one taxable year to the Participant:
(1) on account of separation from Service, a Plan termination,
or in the case of a profit-sharing or stock bonus plan, a
complete discontinuance of contributions under such plan within
the meaning of Section 402(a)(6)(A) of the Code, or
(2) in one or more distributions which constitute a qualified
lump sum distribution within the meaning of Code Section
402(e)(4)(A), determined without reference to subparagraphs (B)
and (H),
Such Rollover Contribution may also be made through an Individual Retirement
Account qualified under Code Section 408 where the IRA was used as a conduit
from the Qualified Deferred Compensation Plan, the Rollover Contribution is made
in accordance with the rules provided under paragraph (a) through (e) and the
Rollover Contribution does not include any regular IRA contributions, or
earnings thereon, which the Participant may have made to the IRA. Rollover
Contributions which relate to distributions prior to January 1, 1993, may be
made through an IRA in accordance with paragraphs (a) through (f) and additional
requirements as provided in the previous sentence. The Trustee shall not be held
responsible for determining the tax-free status of any Rollover Contribution
made under this Plan.
4.4 TRANSFER CONTRIBUTION
Unless provided otherwise in the Adoption Agreement, a Participant and an
Employee in an eligible class of Employees who has not met the eligibility
requirements for participation in the Plan,
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<PAGE> 22
may, subject to the provisions of paragraph 4.5, also arrange for the direct
transfer of his or her benefit from a Qualified Deferred Compensation Plan to
this Plan. For accounting and record keeping purposes, Transfer Contributions
shall be identical to Rollover Contributions.
In the event the Employer accepts a Transfer Contribution from a Plan in which
the Employee was directing the investments of his or her account, the Employer
may continue to permit the Employee to direct his or her investments in
accordance with paragraph 13.7 with respect only to such Transfer Contribution.
Notwithstanding the above, the Employer may refuse to accept such Transfer
Contributions.
Notwithstanding anything to the contrary, if a Participant changes
classification of employment between eligible and ineligible classes, then the
Employer may transfer said Participant's account balance between the appropriate
plans maintained by the Employer, so long as such transfer will not result in an
illegal cut back in benefits in violation of Code Section 411(d)(6).
4.5 EMPLOYER APPROVAL OF TRANSFER CONTRIBUTIONS
The Employer maintaining a Safe-Harbor Profit-Sharing Plan in accordance with
the provisions of paragraph 8.7, acting in a nondiscriminatory manner, may in
its sole discretion refuse to allow Transfer Contributions to its profit-sharing
plan, if such contributions are directly or indirectly being transferred from a
defined benefit plan, a money purchase pension plan (including a target benefit
plan), a stock bonus plan, or another profit-sharing plan which would otherwise
provide for a life annuity form of payment to the Participant.
4.6 ELECTIVE DEFERRALS
A Participant may enter into a Salary Savings Agreement with the Employer
authorizing the Employer to withhold a portion of such Participant's
(compensation not to exceed $7,000 per calendar year as adjusted under Code
Section 415(d) or, if lesser, the percentage of Compensation specified in the
Adoption Agreement and to deposit such amount to the Plan. No Participant shall
be permitted to have Elective Deferrals made under this Plan or any other
qualified plan maintained by the Employer, during any taxable year, in excess of
the dollar limitation contained in Code Section 402(g) in effect at the
beginning of such taxable year.
Thus, the $7,000 limit may be reduced if a Participant contributes pre-tax
contributions to qualified plans of this or other Employers. Any such
contribution shall be credited to the Employee's Salary Savings Account. Unless
otherwise specified in the Adoption Agreement, a Participant may amend his or
her Salary Savings Agreement to increase, decrease or terminate the percentage
upon 30 days written notice to the Employer. If a Participant terminates his or
her agreement, such Participant shall not be permitted to put a new Salary
Savings Agreement into effect until the first pay period in the next Plan Year,
unless otherwise stated in the Adoption Agreement. The Employer may also amend
or terminate said agreement on written notice to the Participant. If a
Participant has not authorized the Employer to withhold at the maximum rate and
desires to increase the total withheld for a Plan Year, such Participant may
authorize the Employer upon 30 days notice to withhold a supplemental amount up
to 100% of his or her Compensation for one or more pay periods. In no event may
the sum of the amounts withheld under the Salary Savings Agreement plus the
supplemental withholding exceed 25% of a Participant's Compensation for a Plan
Year. Elective Deferrals shall be deposited in the Trust no later than the date
described in Section 2510.3-102 of the Department of Labor Regulations.
4.7 DIRECT ROLLOVER OF BENEFITS
Notwithstanding any provision of the plan to the contrary that would otherwise
limit a Participant's election under this Paragraph, for distributions made on
or after January 1, 1993, a Participant may elect, at the time and in the manner
prescribed by the Plan Administrator, to have any portion of an Eligible
Rollover Distribution paid directly to an Eligible Retirement Plan specified by
the Participant in a Direct Rollover. Any portion of a distribution which is not
paid directly to an Eligible Retirement Plan shall be distributed to the
Participant. For purposes of this Paragraph, a Surviving Spouse or a spouse or
former spouse who is an alternate payee under a Qualified Domestic, Relations
Order as defined in section 414(p) of the Code, will be permitted to elect to
have any Eligible Rollover Distribution paid directly to an individual
retirement account (IRA), an individual retirement annuity (IRA), or another
qualified retirement Plan.
The plan provisions otherwise applicable to distributions continue to apply to
Rollover and Transfer Contributions.
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ARTICLE V - PARTICIPANT ACCOUNTS
5.1 Separate Accounts
The Employer shall establish a separate bookkeeping account for each Participant
showing the total value of his or her interest in the Fund. Each Participant's
account shall be separated for bookkeeping purposes into the following
sub-accounts:
(a) Employer contributions.
(1) Matching Contributions.
(2) Qualified Matching Contributions.
(3) Qualified Non-Elective Contributions.
(4) Discretionary Contributions.
(5) Elective Deferrals.
(b) Voluntary Contributions (and additional amounts including required
contributions and, if applicable, either repayments of loans previously
defaulted on and treated as "deemed distributions" on which a tax report
has been issued, and amounts paid out upon a separation from service
which have been included in income and which are repaid after being
re-hired by the Employer).
(c) Transfer Contributions.
(d) Rollover Contributions.
5.2 ADJUSTMENTS TO PARTICIPANT ACCOUNTS
As of each Valuation Date of the Plan, the Employer shall add to each account.
(a) the Participant's share of the Employer's contribution and
forfeitures as determined in the Adoption Agreement,
(b) any Elective Deferrals, Voluntary, Rollover or Transfer
Contributions made by the Participant,
(c) any repayment of amounts previously paid out to a Participant upon a
separation from Service and repaid by the Participant since the last
Valuation Date, and
(d) the Participant's proportionate share of any investment earnings and
increase in the fair market value of the Fund since the last Valuation
Date, as determined at paragraph 5.4.
The Employer shall deduct from each account:
(e) any withdrawals or payments made from the Participant's account
since the last Valuation Date, and
(f) the Participant's proportionate share of any decrease in the fair
market value of the Fund since the last Valuation Date, as determined at
paragraph 5.4.
5.3 ALLOCATING EMPLOYER CONTRIBUTIONS
The Employer's contribution shall be allocated to Participants in accordance
with the allocation formula selected by the Employer in the Adoption Agreement,
and the minimum contribution and allocation requirements for Top-Heavy Plans.
Unless otherwise specified in the Adoption Agreement, the Plan will not be
integrated with Social Security. Beginning with the 1990 Plan Year and
thereafter, for plans on Standardized Adoption Agreement 001, Participants who
are credited with more than 500 Hours of Service or are employed on the last day
of the Plan Year must receive a full allocation of Employer contributions. In
Nonstandardized Adoption Agreement 002, Employer contributions shall be
allocated to the accounts of Participants employed by the Employer on the last
day of the Plan Year unless indicated otherwise in the Adoption Agreement. In
the case of a non-Top-Heavy, Nonstandardized Plan, Participants must also have
completed a Year of Service unless otherwise specified in the Adoption
Agreement. For Nonstandardized Adoption Agreement 002, the Employer may only
apply the last day of the Plan Year and Year of Service requirements if the Plan
satisfies the requirements of Code Sections 401(a)(26) and 410(b) and the
regulations thereunder including the exception for 401(k) plans. If, when
applying the last day and Year of Service requirements, the Plan fails to
satisfy the aforementioned requirements, additional Participants will be
eligible to receive an allocation of Employer Contributions until the
requirements are satisfied. Participants who are credited with a Year of
Service, but not employed at Plan Year end, are the first category of additional
Participants eligible to receive an allocation. If the requirements are still
not satisfied, Participants credited with more than 500 Hours of Service and
employed at Plan Year end are the next category of Participants eligible to
receive an allocation. Finally, if necessary to satisfy the said requirements,
any Participant credited with more than 500 Hours of Service will be eligible
for an allocation of Employer Contributions. The Service requirement is not
applicable with respect to any Plan Year during which the Employer's Plan is
Top-Heavy.
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<PAGE> 24
In the event the Employer selects an integrated allocation formula, the
Employer's contribution will be allocated in accordance with the following
method unless otherwise specified in the Adoption Agreement:
(a) First, to the extent contributions and forfeitures are sufficient, all
Participants will receive an allocation equal to 3% of their Compensation.
(b) Next, any remaining Employer Contributions and forfeitures will be
allocated to Participants who have Compensation in excess of the Taxable Wage
Base (excess Compensation). Each such Participant will receive an allocation
in the ratio that his or her excess compensation bears to the excess
Compensation of all Participants. Participants may only receive an allocation
of 3% of excess Compensation.
(c) Next, any remaining Employer contributions and forfeitures will be
allocated to all Participants in the ratio that their Compensation plus
excess Compensation bears to the total Compensation plus excess Compensation
of all Participants. Participants may only receive an allocation of up to
2.7% of their Compensation plus excess Compensation, under this allocation
method. If the Taxable Wage Base as defined in Section 3 of the Adoption
Agreement is less than the maximum, but more than the greater of $10,000 or
20% of the maximum, then the 2.7% must be reduced. If the amount specified is
greater than 80% but less than 100% of the maximum Taxable Wage Base, the
2.7% must be reduced to 2.4%. If the amount specified is greater than the
greater of $10,000 or 20% of the maximum Taxable Wage Base, but not more than
80%, 2.7% must be reduced to 1.3%.
(d) Next, any remaining Employer contributions and forfeitures will be
allocated to all Participants (whether or not they received an allocation
under the preceding paragraphs) in the ratio that each Participant's
Compensation bears to all Participants' Compensation.
If the Plan is not Top-Heavy, subparagraphs (a) and (b) above may be disregarded
and 5.7%, 5.4% or 14.3% may be substituted for 2.7%, 2.4% or 1.3% where it
appears in (c) above.
5.4 ALLOCATING INVESTMENT EARNINGS AND LOSSES
A Participant's share of investment earnings and any increase or decrease in the
fair market value of the Fund shall be based on the proportionate value of all
active accounts (other than accounts with segregated investments) as of the last
Valuation Date less withdrawals since the last Valuation Date. If applicable,
segregated accounts may be allocated earnings, up through the date of
segregation, under the above method, at the Plan Administrator's discretion. If
Employer and/or Employee contributions are made monthly, quarterly, or on some
other systematic basis, the adjusted value of such accounts for allocation of
investment income and gains or losses shall include one-half the contributions
for such period. If Employer and/or Employee contributions are not made on a
systematic basis, it is assumed that they are made at the end of the valuation
period and therefore will not receive an allocation of investment earnings and
gains or losses for such period. Notwithstanding the above, if contributions are
made on a nonsystematic basis, at the Plan Administrator's discretion, such
contributions will be credited with an allocation of the actual investment
earnings and gains and losses from the actual date of deposit of each such
contribution until the end of the period. In no event shall this election of
allocating gains and losses be used to discriminate. Finally, the Plan
Administrator may elect to disregard nonsystematic contributions made during the
year, altogether, and allocate earnings exclusively on the basis of all active
accounts (other than accounts with segregated investments) as of the last
Valuation Date less withdrawals since the last Valuation Date, or, if
applicable, take into consideration any systematic contributions, as provided
above, Accounts with segregated investments shall receive only the income or
loss on such segregated investments.
5.5 PARTICIPANT STATEMENTS
The Employer shall periodically (not less often than annually), prepare a
statement for each Participant showing the additions to and subtractions from
his or her account since the last such statement and the fair market value of
his or her account as of the date for which the statement is prepared.
ARTICLE VI - RETIREMENT BENEFITS AND DISTRIBUTIONS
6.1 NORMAL RETIREMENT BENEFITS
A Participant shall be entitled to receive the balance held in his or her
account from Employer contributions upon attaining Normal Retirement Age or at
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such earlier dates as the provisions of this Article VI may allow. If the
Participant elects to continue working past his or her Normal Retirement Age, he
or she will continue as an active Plan Participant and no distribution shall be
made to such Participant until his or her actual retirement date unless the
employer elects otherwise in the Adoption Agreement, or a minimum distribution
is required by law. Settlement shall be made in the normal form, or if elected,
in one of the optional forms of payment provided below.
6.2 EARLY RETIREMENT BENEFITS
If the Employer so provides in the Adoption Agreement, an Early Retirement
Benefit will be available to individuals who meet the age and Service
requirements. An individual who meets the Early Retirement Age requirements and
separates from Service, will become fully vested, regardless of any vesting
schedule which otherwise might apply. If a Participant separates from Service
before satisfying the age requirements, but after having satisfied the Service
requirement, the Participant will be entitled to elect an Early Retirement
benefit upon satisfaction of the age requirement.
6.3 BENEFITS ON TERMINATION OF EMPLOYMENT
(a) If a Participant terminates employment prior to Normal Retirement
Age, such Participant shall be entitled to receive the vested balance
held in his or her account payable at Normal Retirement Age in the
normal form, or if elected, in one of the optional forms of payment
provided hereunder. If applicable, the Early Retirement Benefit
provisions may be elected. Notwithstanding the preceding sentence, a
former Participant may, if allowed in the Adoption Agreement, make
application to the Employer requesting early payment of any deferred
vested and nonforfeitable benefit due.
(b) If a Participant terminates employment, and the value of that
Participant's vested account balance derived from Employer and Employee
contributions is not greater than $3,500, the Participant may receive a
lump sum distribution of the value of the entire vested portion of such
account balance and the non-vested portion will be treated as a
forfeiture. The Employer shall continue to follow their consistent
policy, as may be established, regarding immediate cash-outs of Vested
Account Balances of $3,500 or less. For purposes of this Article, if the
value of a Participant's Vested Account Balance is zero, the Participant
shall be deemed to have received a distribution of such Vested Account
Balance immediately following termination. Likewise, if the Participant
is reemployed prior to incurring 5 consecutive 1-year Breaks In Service
they will be deemed to have immediately repaid such distribution. For
Plan Years beginning prior to 1989, a Participant's Vested Account
Balance shall not include Qualified Voluntary Contributions.
Notwithstanding the above, if the Employer maintains or has maintained a
policy of not distributing any amounts until the Participant's Normal
Retirement Age, the Employer can continue to uniformly apply such
policy.
(c) If a Participant terminates employment with a Vested Account Balance
derived from Employer and Employee contributions in excess of $3,500,
and elects (with his or her Spouse's consent, if required) to receive
100% of the value of his or her Vested Account Balance in a lump sum,
the non-vested portion will be treated as a forfeiture. The Participant
(and his or her Spouse, if required) must consent to any distribution,
when the Vested Account Balance described above exceeds $3,500 or if at
the time of any prior distribution it exceeded $3,500. For purposes of
this paragraph, for Plan Years beginning prior to 1989, a Participant's
Vested Account Balance shall not include Qualified Voluntary
Contributions.
(d) Distribution of less than 100% of the Participant's Vested Account
Balance shall be permitted upon termination of employment.
(e) If a Participant who is not 100% vested receives or is deemed to
receive a distribution pursuant to this paragraph and resumes employment
covered under this Plan, the Participant shall have the right to repay
to the Plan the full amount of the distribution attributable to Employer
contributions on or before the earlier of the date that the Participant
incurs 5 consecutive 1-year Breaks in Service following the date of
distribution or five years after the first date on which the Participant
is subsequently reemployed. In such event, the Participant's account
shall be restored to the value thereof at the time the distribution was
made and may further be increased by the Plan's income and investment
gains and/or losses on the undistributed amount
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from the date of distribution to the date of repayment.
(f) A Participant shall also have the option, to postpone payment of his
or her Plan benefits until the first day of April following the calendar
year in which he or she attains age 70-1/2. Any balance of a
Participant's account resulting from his or her Employee contributions
not previously withdrawn, if any, may be withdrawn by the Participant
immediately following separation from Service.
(G) If a Participant ceases to be an active Employee as a result of a
Disability as defined at paragraph 1.21, such Participant shall be able
to make an application for a disability retirement benefit payment. The
Participant's account balance will be deemed "immediately distributable"
as set forth in paragraph 6.4, and will be fully vested pursuant to
paragraph 9.2.
6.4 RESTRICTIONS ON IMMEDIATE DISTRIBUTIONS
(a) An account balance is immediately distributable if any part of the
account balance could be distributed to the Participant (or Surviving
Spouse) before the Participant attains (or would have attained if not
deceased) the later of the Normal Retirement Age or age 62.
(b) If the value of a Participant's vested account balance derived from
Employer and Employee Contributions exceeds (or at the time of any prior
distribution exceeded) $3,500, and the account balance is immediately
distributable, the Participant and his or her Spouse (or where either
the Participant or the Spouse has died, the survivor) must consent to
any distribution of such account balance. The consent of the Participant
and the Spouse shall be obtained in writing within the 90-day period
ending on the annuity starting date, which is the first day of the first
period for which an amount is paid as an annuity or any other form. The
Plan Administrator shall notify the Participant and the Participant's
Spouse of the right to defer any distribution until the Participant's
account balance is no longer immediately distributable. Such
notification shall include a general description of the material
features, and an explanation of the relative values of, the optional
forms of benefit available under the plan in a manner that would satisfy
the notice requirements of Code Section 417(a)(3), and shall be provided
no less than 30 days and no more than 90 days prior to the annuity
starting date.
(c) Notwithstanding the foregoing, only the Participant need consent to
the commencement of a distribution in the form of a qualified Joint and
Survivor Annuity while the account balance is immediately distributable.
Furthermore, if payment in the form of a Qualified Joint and Survivor
Annuity is not required with respect to the Participant pursuant to
paragraph 8.7 of the Plan, only the Participant need consent to the
distribution of an account balance that is immediately distributable.
Neither the consent of the Participant nor the Participant's Spouse
shall be required to the extent that a distribution is required to
satisfy Code Section 401(a)(9) or Code Section 415. In addition, upon
termination of this Plan if the Plan does not offer an annuity option
(purchased from a commercial provider), the Participant's account
balance may, without the Participant's consent, be distributed to the
Participant or transferred to another Defined Contribution Plan [other
than an employee stock ownership plan as defined in Code Section
4975(e)(7)] within the same controlled group.
(d) For purposes of determining the applicability of the foregoing
consent requirements to distributions made before the first day of the
first Plan Year beginning after 1988, the Participant's vested account
balance shall not include amounts attributable to Qualified Voluntary
Contributions.
(e) If a distribution is one to which Code Section 401(a)(11) and 417 do
not apply, such distribution may commence less than 30 days after the
notice required under Section 1.411(a)-11(c) of the Income Tax
Regulations is given, provided that:
(1) the Plan Administrator clearly informs the Participant that
the Participant has a right to a period of at least 30 days
after receiving the notice to consider the decision of whether
or not to elect a distribution (and, if applicable, a particular
distribution option), and
(2) the Participant, after receiving the notice, affirmatively
elects a distribution.
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6.5 NORMAL FORM OF PAYMENT
The normal form of payment for a profit-sharing plan satisfying the requirements
of paragraph 8.7 hereof shall be a lump sum with no option for annuity payments.
For all other plans, the normal form of payment hereunder shall be a Qualified
Joint and Survivor Annuity as provided under Article VIII. A Participant whose
vested account balance derived from Employer and Employee contributions exceeds
$3,500, or if at the time of any prior distribution it exceeded $3,500, shall
(with the consent of his or her Spouse) have the right to receive his or her
benefit in a lump sum or in monthly, quarterly, semi-annual or annual payments
from the Fund over any period not extending beyond the life expectancy of the
Participant and his or her Beneficiary. For purposes of this paragraph, for Plan
Years prior to 1989, a Participant's Vested Account Balance shall not include
Qualified Voluntary Contributions. The normal form of payment shall be
automatic, unless the Participant files a written request with the Employer
prior to the date on which the benefit is automatically payable, electing a lump
sum or installment payment option. No amendment to the Plan may eliminate one of
the optional distribution forms listed above.
6.6 COMMENCEMENT Of BENEFITS
(a) Unless the Participant elects otherwise, distribution of benefits will
begin no later than the 60th day after the close of the Plan Year in which
the latest of the following events occurs:
(1) the Participant attains age 65 (or normal retirement age if
earlier),
(2) the 10th anniversary of the year in which the Participant commenced
participation in the Plan, or
(3) the Participant terminates Service with the Employer.
(b) Notwithstanding the foregoing, the failure of a Participant and Spouse
(if necessary) to consent to a distribution while a benefit is immediately
distributable, within the meaning of paragraph 6.4 hereof, shall be deemed an
election to defer commencement of payment of any benefit sufficient to
satisfy this paragraph.
6.7 CLAIMS PROCEDURES
Upon retirement, death, or other severance of employment, the participant or his
or her representative may make application to the Employer requesting payment of
benefits due and the manner of payment. If no application for benefits is made,
the Employer shall automatically pay any vested benefit due hereunder in the
normal form at the time prescribed at paragraph 6.4. If an application for
benefits is made, the Employer shall accept, reject, or modify such request and
shall notify the Participant in writing setting forth the response of the
Employer and in the case of a denial or modification the Employer shall:
(a) state the specific reason or reasons for the denial,
(b) provide specific reference to pertinent Plan provisions on which the
denial is based,
(c) provide a description of any additional material or information
necessary for the Participant or his representative to perfect the claim
and an explanation of why such material or information is necessary, and
(d) explain the Plan's claim review procedure as contained in this Plan.
In the event the request is rejected or modified, the Participant or his or her
representative may within 60 days following receipt by the Participant or
representative of such rejection or modification, submit a written request for
review by the Employer of its initial decision. Within, 60 days following such
request for review, the Employer shall render its final decision in writing to
the Participant or representative stating specific reasons for such decision. If
the Participant or representative is not satisfied with the Employer's final
decision, the Participant or representative can institute an action in a federal
court of competent jurisdiction; for this purpose, process would be served on
the Employer.
6.8 IN-SERVICE WITHDRAWALS
An Employee may withdraw all or any part of the fair market value of his or her
Voluntary Contributions, Qualified Voluntary Contributions, Rollover
Contributions, upon written request to the Employer. Transfer Contributions,
which originate from a Plan meeting the safe-harbor provisions of paragraph 8.7,
may also be withdrawn, by an Employee, upon written request to the Employer.
Transfer Contributions not meeting the safe-harbor provisions may only be
withdrawn upon retirement,
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<PAGE> 28
death, disability, termination or termination of the Plan, and will be subject
to Spousal consent requirements contained in Code Sections 411(a)(11) and 417.
No such withdrawals are permitted from a money purchase plan until the
participant reaches Normal Retirement Age. Such request shall include the
Employee's address, social security number, birthdate, and amount of the
withdrawal. If at the time a distribution of Qualified Voluntary Contributions
is received the Participant has not attained age 59-1/2 and is not disabled, as
defined at Code Section 22(e)(3), the Participant will be subject to a federal
income tax penalty, unless the distribution is rolled over to a qualified plan
or individual retirement plan within 60 days of the date of distribution. A
Participant may withdraw all or any part of the fair market value of his or her
pre-1987 Voluntary Contributions with or without withdrawing the earnings
attributable thereto. Post-1986 Voluntary Contributions may only be withdrawn
along with a portion of the earnings thereon. The amount of the earnings to be
withdrawn is determined by using the formula: DA [1-(V/V+E)], where DA is the
distribution amount, V is the amount of Voluntary Contributions and V+E is the
amount of Voluntary Contributions plus the earnings attributable thereto. A
Participant withdrawing his or her other contributions prior to attaining age
59-1/2, will be subject to a federal tax penalty to the extent that the
withdrawn amounts are includible in income. Any Participant in a profit-sharing
plan may, if permitted by the Employer in the Adoption Agreement, withdraw all
or any part of the fair market value of any of such vested contributions, plus
the investment earnings thereon, after attaining age 59-1/2 without separating
from Service. Such Employer contributions may not have been used to satisfy the
antidiscrimination test of Code Section 401(k). Such distributions shall not be
eligible for redeposit to the Fund. A withdrawal under this paragraph shall not
prohibit such Participant from sharing in any future Employer Contribution he or
she would otherwise be eligible to share in. A request to withdraw amounts
pursuant to this paragraph must if applicable, be consented to by the
Participant's Spouse. The consent shall comply with the requirements of
paragraph 6.4 relating to immediate distributions.
6.9 HARDSHIP WITHDRAWAL
Unless otherwise specified by the Employer in the Adoption Agreement, a
Participant may not request a Hardship withdrawal prior to attaining age 59-1/2.
If permitted and the Participant has not attained age 59-1/2, the Participant
may be subject to a federal income tax penalty. Such request shall be in writing
to the Employer who shall have sole authority to authorize a hardship
withdrawal, pursuant to the rules below. Hardship withdrawals may include
Elective Deferrals regardless of when contributed and any earnings accrued and
credited thereon as of the last day of the Plan Year ending before July 1, 1989
and Employer related contributions including but not limited to Employer
Matching Contributions, plus the investment earnings thereon to the extent
vested. Qualified Matching Contributions, Qualified Non-Elective Contributions
and Elective Deferrals reclassified as Voluntary Contributions plus the
investment earnings thereon are only available for hardship withdrawal prior to
age 59-1/2 to the extent that they were credited to the Participant's Account as
of the last day of the Plan Year ending prior to July 1, 1989. The Plan
Administrator may limit withdrawals to Elective Deferrals and the earnings
thereon as stipulated above. Hardship withdrawals are subject to the Spousal
consent requirements contained in Code Sections 401(a)(11) and 417. Only the
following reasons are valid to obtain hardship withdrawal:
(a) medical expenses [within the meaning of Code Section 213(d)],
incurred or necessary for the medical care of the Participant, his or
her Spouse, children and other dependents,
(b) the purchase (excluding mortgage payments) of the principal
residence for the Participant,
(c) payment of tuition and related educational expenses for the next
twelve (12) months of post-secondary education for the Participant, his
or her Spouse, children or other dependents, or
(d) the need to prevent eviction of the Employee from or a foreclosure
on the mortgage of, the Employee's principal residence.
Furthermore, the following conditions must be met in order for a withdrawal to
be authorized:
(e) the Participant has obtained all distributions, other than hardship
distributions, and all nontaxable loans under all plans maintained by
the Employer,
(f) all plans maintained by the Employer, other
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<PAGE> 29
than flexible benefit plans under Code Section 125 providing for current
benefits, provide that the Employee's Elective Deferrals and Voluntary
Contributions will be suspended for twelve months after the receipt of the
Hardship distribution,
(g) the distribution is not in excess of the amount of the immediate and
heavy financial need [(a) through (d) above], including amounts necessary to
pay any federal, state or local income tax or penalties reasonably
anticipated to result from the distribution, and
(h) all plans maintained by the Employer provide that an Employee may not
make Elective Deferrals for the Employee's taxable year immediately following
the taxable year of the hardship distribution in excess of the applicable
limit under Code Section 402(g) for such taxable year, less the amount of
such Employee's pre-tax contributions for the taxable year of the hardship
distribution.
If a distribution is made at a time when a Participant has a nonforfeitable
right to less than 100% of the account balance derived from Employer
contributions and the Participant may increase the nonforfeitable percentage in
the account:
(i) A separate account will be established for the Participant's interest in
the Plan as of the time of the distribution, and
(j) At any relevant time the Participant's nonforfeitable portion of the
separate account will be equal to an amount ("X") determined by the formula:
X = P [AB + (R X D)] - (R X D)
For purposes of applying the formula: "P" is the nonforfeitable percentage at
the relevant time, "AB" is the account balance at the relevant time, "D" is the
amount of the distribution and "R" is the ratio of the account balance at the
relevant time to the account balance after distribution.
6.10 ORDER Of WITHDRAWALS
Unless the Participant directs otherwise, withdrawals shall be made:
(a) First, from amounts attributable to Voluntary Contributions;
(b) Second, from amounts attributable to Rollover Contributions;
(c) Third, from amounts attributable to Transfer Contributions;
(d) Fourth, from amounts attributable to Elective Deferrals;
(e) Fifth, from amounts attributable to Qualified Non-Elective Contributions;
(f) Sixth, from amounts attributable to Qualified Matching Contributions;
(g) Seventh, from amounts attributable to vested matching Contributions; and
(h) Eighth, from amounts attributable to vested Discretionary Contributions.
ARTICLE VII - DISTRIBUTION REQUIREMENTS
7.1 JOINT AND SURVIVOR ANNUITY REQUIREMENTS
All distributions made under the terms of this Plan must comply with the
provisions of Article VIII including, if applicable, the safe harbor provisions
thereunder.
7.2 MINIMUM DISTRIBUTION REQUIREMENTS
All distributions required under this Article shall be determined and made in
accordance with the minimum distribution requirements of Code Section 401(a)(9)
and the regulations thereunder, including the minimum distribution incidental
benefit rules found at Regulations Section 1.401(a)(9)-2. The entire interest of
a Participant must be distributed or begin to be distributed no later than the
Participant's Required Beginning Date. Life expectancy and joint and last
survivor life expectancy are computed by using the expected return multiples
found in Tables V and VI of Regulations Section 1.72-9.
In determining required distributions under the Plan, Participants and/or their
Spouse (Surviving Spouse) shall have the right to have their life expectancy
recalculated annually. Whether the Participant only or both the Participant and
Spouse's lives shall be recalculated shall be determined by the Participant.
7.3 LIMITS ON DISTRIBUTION PERIODS
As of the First Distribution Calendar Year, distribu-
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<PAGE> 30
tions if not made in a single-sum, may only be made over one of the following
periods (or a combination thereof):
(a) the life of the Participant,
(b) the life of the Participant and a Designated Beneficiary,
(c) a period certain not extending beyond the life expectancy of the
participant, or
(d) a period certain not extending beyond the joint and last survivor
expectancy of the Participant and a designated beneficiary.
7.4 REQUIRED DISTRIBUTIONS ON OR AFTER THE REQUIRED BEGINNING DATE
(a) If a participant's benefit is to be distributed over (1) a period
not extending beyond the life expectancy of the Participant or the joint
life and last survivor expectancy of the Participant and the
Participant's Designated Beneficiary or (2) a period not extending
beyond the life expectancy of the Designated Beneficiary, the amount
required to be distributed for each calendar year, beginning with
distributions for the First Distribution Calendar Year, must at least
equal the quotient obtained by dividing the Participant's benefit by the
Applicable Life Expectancy.
(b) For calendar years beginning before 1989, if the Participant's
Spouse is not the Designated Beneficiary, the method of distribution
selected must have assured that at least 50% of the Present Value of the
amount available for distribution was to be paid within the life
expectancy of the Participant.
(c) For calendar years beginning after 1988, the amount to be
distributed each year, beginning with distributions for the First
Distribution Calendar Year shall not be less than the quotient obtained
by dividing the Participant's benefit by the lesser of (1) the
Applicable Life Expectancy or (2) if the Participant's Spouse is not the
Designated Beneficiary, the applicable divisor determined from the table
set forth in Q&A-4 of Regulations Section 1.401(a)(9)-2. Distributions
after the death of the Participant shall be distributed using the
Applicable Life Expectancy as the relevant divisor without regard to
Regulations Section 1.401(a)(9)-2.
(d) The minimum distribution required for the Participant's First
Distribution Calendar Year Must be made on or before the Participant's
Required Beginning Date. The minimum distribution for other calendar
years, including the minimum distribution for the Distribution Calendar
Year in which the Participant's Required Beginning Date occurs, must be
made on or before December 31 of that Distribution Calendar Year.
(e) If the Participant's benefit is distributed in the form of an
annuity purchased from an insurance company, distributions thereunder
shall be made in accordance with the requirements of Code Section
401(a)(9) and the Regulations thereunder.
(f) For purposes of determining the amount of the required distribution
for each Distribution Calendar Year, the account balance to be used is
the account balance determined as of the last valuation preceding the
Distribution Calendar Year. This balance will be increased by the amount
of any contributions or forfeitures allocated to the account balance
after the valuation date in such preceding calendar year. Such balance
will also be decreased by distributions made after the Valuation Date in
such preceding Calendar Year.
(g) For purposes of subparagraph 7.4(f), if any portion of the minimum
distribution for the First Distribution Calendar Year is made in the
second Distribution Calendar Year on or before the Required Beginning
Date, the amount of the minimum distribution made in the second
Distribution Calendar Year shall be treated as if it had been made in
the immediately preceding Distribution Calendar Year.
7.5 REQUIRED BEGINNING DATE
(a) General Rule. The Required Beginning Date of a Participant is the
first day of April of the calendar year following the calendar year in
which the Participant attains age 70-1/2.
(b) Transitional Rules. The Required Beginning Date of a Participant who
attains age 70-1/2 before 1988, shall be determined in accordance with
(1) or (2) below:
(1) Non-5-percent owners. The Required Beginning Date of a
Participant who is not a 5-percent owner is the first day of
April of the calendar year following the calendar year in
26
<PAGE> 31
which the later of retirement or attainment of age 70-1/2 occurs. In the
case of a Participant who is not a 5-percent owner who attains age
70-1/2 during 1988 and who has not retired as of January 1, 1989, the
Required Beginning Date is April 1, 1990.
(2) 5-percent owners. The Required Beginning Date of a Participant who
is a 5-percent owner during any year beginning after 1979, is the first
day of April following the later of:
(i) the calendar year in which the Participant attains age
70-1/2, or
(ii) the earlier of the calendar year with or within which ends
the plan year in which the Participant becomes a 5-percent
owner, or the calendar year in which the Participant
retires.
(c) A Participant is treated as a 5-percent owner for purposes of this
Paragraph if such Participant is a 5-percent owner as defined in Code
Section 416(i) (determined in accordance with Code Section 416 but
without regard to whether the Plan is Top-Heavy) at any time during the
Plan Year ending with or within the calendar year in which such Owner
attains age 66-1/2 or any subsequent Plan Year.
(d) Once distributions have begun to a 5-percent owner under this
paragraph, they must continue to be distributed, even if the Participant
ceases to be a 5-percent owner in a subsequent year.
7.6 TRANSITIONAL RULE
(a) Notwithstanding the other requirements of this Article and subject
to the requirements of Article VIII, Joint and Survivor Annuity
Requirements, distribution on behalf of any Employee, including a
5-percent owner, may be made in accordance with all of the following
requirements (regardless of when such distribution commences):
(1) The distribution by the Trust is one which would not have
disqualified such Trust under Code Section 401(a)(9) as in
effect prior to amendment by the Deficit Reduction Act of
1984.
(2) The distribution is in accordance with a method of
distribution designated by the Employee whose interest in
the Trust is being distributed or, if the Employee is
deceased, by a beneficiary of such Employee.
(3) Such designation was in writing, was signed by the Employee
or the beneficiary, and was made before 1984.
(4) The Employee has accrued a benefit under the Plan as of
December 31, 1983.
(5) The method of distribution designated by the Employee or
the beneficiary specifies the time at which distribution
will commence, the period over which distributions will be
made, and in the case of any distribution upon the
Employee's death, the beneficiaries of the Employee listed
in order of priority.
(b) A distribution upon death will not be covered by this transitional
rule unless the information in the designation contains the required
information described above with respect to the distributions to be made
upon the death of the Employee.
(c) For any distribution which commences before 1984, but continues
after 1983, the Employee or the beneficiary, to whom such distribution
is being made, will be presumed to have designated the method of
distribution under which the distribution is being made if the method of
distribution was specified in writing and the distribution satisfies the
requirements in subparagraphs (a)(1) and (5) above.
(d) If a designation is revoked, any subsequent distribution must
satisfy the requirements of Code Section 401(a)(9) and the regulations
thereunder. If a designation is revoked subsequent to the date
distributions are required to begin, the Trust must distribute by the
end of the calendar year following the calendar year in which the
revocation occurs the total amount not yet distributed which would have
been required to have been distributed to satisfy Code Section 401(a)(9)
and the regulations thereunder, but for the section 242(b)(2) election
of the Tax Equity and Fiscal Responsibility Act of 1982. For calendar
years beginning after 1988, such distributions must meet the minimum
distribution incidental benefit requirements in section 1.401(a)(9)-2 of
the Income Tax Regulations. Any changes in the designation will be
considered to be a revocation
27
<PAGE> 32
of the designation. However, the mere substitution or addition of another
beneficiary (one not named in the designation) under the designation will not
be considered to be a revocation of the designation, so long as such
substitution or addition does not alter the period over which distributions
are to be made under the designation, directly or indirectly (for example, by
altering the relevant measuring life). In the case in which an amount is
transferred or rolled over from one plan to another plan, the rules in Q&A
J-2 and Q&A J-3 of the regulations shall apply.
7.7 DESIGNATION of BENEFICIARY FOR DEATH BENEFIT
Each Participant shall file a written designation of beneficiary with the
Employer upon qualifying for participation in this Plan. Such designation shall
remain in force until revoked by the Participant by filing a new beneficiary
form with the Employer. The Participant may elect to have a portion of his or
her account balance invested in an insurance contract. If an insurance contract
is purchased under the Plan, the Trustee must be named as Beneficiary under the
terms of the contract. However, the Participant shall designate a Beneficiary to
receive the proceeds of the contract after settlement is received by the
Trustee. Under a profit-sharing plan satisfying the requirements of paragraph
8.7, the Designated Beneficiary shall be the Participant's Surviving Spouse, if
any, unless such Spouse properly consents otherwise.
7.8 NONEXISTENCE OF BENEFICIARY
Any portion of the amount payable hereunder which is not disposed of because of
the Participant's or former Participant's failure to designate a beneficiary, or
because all of the Designated Beneficiaries predeceased the Participant, shall
be paid to his or her Spouse. If the Participant had no Spouse at the time of
death, payment shall be made to the personal representative of his or her estate
in a lump sum.
7.9 DISTRIBUTION BEGINNING BEFORE DEATH
If the Participant dies after distribution of his or her interest has begun, the
remaining portion of such interest will continue to be distributed at least as
rapidly as under the method of distribution being used prior to the
Participant's death.
7.10 DISTRIBUTION BEGINNING AFTER DEATH
If the Participant dies before distribution of his or her interest begins,
distribution of the Participant's entire interest shall be completed by December
31 of the calendar year containing the fifth anniversary of the Participant's
death except to the extent that an election is made to receive distributions in
accordance with (a) or (b) below:
(a) If any portion of the Participant's interest is payable to a Designated
Beneficiary, distributions may be made over the life or over a period
certain not greater than the life expectancy of the Designated Beneficiary
commencing on or before December 31 of the calendar year immediately
following the calendar year in which the Participant died;
(b) If the Designated Beneficiary is the Participant's surviving Spouse,
the date distributions are required to begin in accordance with (a) above
shall not be earlier than the later of (1) December 31 of the calendar year
immediately following the calendar year in which the participant died or
(2) December 31 of the calendar year in which the Participant would have
attained age 70-1/2.
If the Participant has riot made an election pursuant to this paragraph 7.10
by the time of his or her death, the Participant's Designated Beneficiary must
elect the method of distribution no later than the earlier of (1) December 31
of the calendar year in which distributions would be required to begin under
this section, or (2) December 31 of the calendar year which contains the fifth
anniversary of the date of death of the participant. If the Participant has no
Designated Beneficiary, or if the Designated Beneficiary does not elect a
method of distribution, then distribution of the Participant's entire interest
must be completed by December 31 of the calendar year containing the fifth
anniversary of the Participant's death.
For purposes of this paragraph if the Surviving Spouse dies after the
Participant, but before payments to such Spouse begin, the provisions of this
paragraph with the exception of paragraph (b) therein, shall be applied as if
the Surviving Spouse were the Participant. For the purposes of this paragraph
and paragraph 7.9, distribution of a Participant's interest is considered to
begin on the Participant's Required Beginning Date (or, if the preceding
sentence is applicable, the date distribution is required to begin to the
Surviving Spouse). If distribution in the form of an annuity described
28
<PAGE> 33
in paragraph 7.4(e) irrevocably commences to the Participant before the
Required Beginning Date, the date distribution is considered to begin is the
date distribution actually commences.
For purposes of paragraph 7.9 and this paragraph, if an amount is payable to
either a minor or an individual who has been declared incompetent, the benefits
shall be paid to the legally appointed guardian for the benefit of said minor or
incomplete individual, unless the court which appointed the guardian has ordered
otherwise.
7.11 DISTRIBUTION OF EXCESS ELECTIVE DEFERRALS
(a) Notwithstanding any other provision of the Plan, Excess Elective
Deferrals plus any income and minus any loss allocable thereto, shall be
distributed no later than April 15, 1988, and each April 15 thereafter,
to Participants to whose accounts Excess Elective Deferrals were
allocated for the preceding taxable year, and who claim Excess Elective
Deferrals for such taxable year. Excess Elective Deferrals shall be
treated as Annual Additions under the plan, unless such amounts are
distributed no later than the first April 15th following the close of
the Participant's taxable year. A Participant is deemed to notify the
Plan Administrator of any Excess Elective Deferrals that arise by taking
into account only those Elective Deferrals made to this Plan and any
other plans of this Employer.
(b) Furthermore, a Participant who participates in another plan allowing
Elective Deferrals may assign to this Plan any Excess Elective Deferrals
made during a taxable year of the Participant, by notifying the Plan
Administrator of the amount of the Excess Elective Deferrals to be
assigned. The Participant's claim shall be in writing; shall be
submitted to the Plan Administrator not later than March 1 of each year;
shall specify the amount of the Participant's Excess Elective Deferrals
for the preceding taxable year; and shall be accompanied by the
Participant's written statement that if such amounts are not
distributed, such Excess Elective Deferrals, when added to amounts
deferred under other plans or arrangements described in Code Sections
401(k), 408(k) [Simplified Employee Pensions], or 403(b) [annuity
programs for public schools and charitable organizations] will exceed
the $7,000 limit as adjusted under Code Section 415(d) imposed on the
Participant by Code Section 402(g) for the year in which the deferral
occurred.
(c) Excess Elective Deferrals shall be adjusted for any income or loss
up to the end of the taxable year, during which such excess was
deferred. Income or loss will be calculated under the method used to
calculate investment earnings and losses elsewhere in the Plan or any
other reasonable method. Whichever method is selected shall be used for
all Participants and for all corrective distributions made from the Plan
for the Plan Year.
(d) If the Participant receives a return of his or her Elective
Deferrals, the amount of such contributions which are returned must be
brought into the Employee's taxable income.
7.12 DISTRIBUTIONS OF EXCESS CONTRIBUTIONS
(a) Notwithstanding any other provision of this Plan, Excess
Contributions, plus any income and minus any loss allocable thereto,
shall be distributed no later than the last day of each Plan Year to
Participants to whose accounts such Excess Contributions were allocated
for the preceding Plan Year. If such excess amounts are distributed more
than 2-1/2 months after the last day of the Plan Year in which such
excess amounts arose, a ten (10) percent excise tax will be imposed on
the Employer maintaining the Plan with respect to such amounts. Such
distributions shall be made to Highly Compensated Employees on the basis
of the respective portions of the Excess Contributions attributable to
each of such Employees. Excess Contributions of Participants who are
subject to the Family Member aggregation rules of Code Section 414(q)(6)
shall be allocated among the Family Members in proportion to the
Elective Deferrals (and amounts treated as Elective Deferrals) of each
Family Member that is combined to determine the Average Deferral
Percentage.
(b) Excess Contributions (including the amounts recharacterized) shall
be treated as Annual Additions under the Plan.
(c) Excess Contributions shall be adjusted for any income or loss up to
the end of the Plan Year. Income or loss will be calculated under the
method used to calculate investment earnings and losses elsewhere in the
Plan.
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<PAGE> 34
(d) Excess Contributions shall be distributed from the Participant's Elective
Deferral account and Qualified Matching Contribution account (if applicable)
in proportion to the Participant's Elective Deferrals and Qualified Matching
Contributions (to the extent used in the ADP test) for the Plan Year. Excess
Contributions shall be distributed from the Participant's Qualified
Non-Elective Contribution account only to the extent that such Excess
Contributions exceed the balance in the Participant's Elective Deferral
account and Qualified Matching Contribution account.
7.13 DISTRIBUTION Of EXCESS AGGREGATE CONTRIBUTIONS
(a) Notwithstanding any other provision of this Plan, Excess Aggregate
Contributions, plus any income and minus any loss allocable thereto, shall be
forfeited, if forfeitable, or if not forfeitable, distributed no later than
the last day of each Plan Year to Participants to whose accounts such Excess
Aggregate Contributions were allocated for the preceding Plan Year. Excess
Aggregate Contributions shall be allocated to Participants who are subject to
the Family Member aggregation rules of Code Section 414(q)(6) in the manner
prescribed by the regulations.
If such Excess Aggregate Contributions are distributed more than 2-1/2 months
after the last day of the Plan Year in which such excess amounts arose, a ten
(10) percent excise tax will be imposed on the Employer maintaining the Plan
with respect to those amounts. Excess Aggregate Contributions shall be
treated as Annual Additions under the plan.
(b) Excess Aggregate Contributions shall be adjusted for any income or loss
up to the end of the Plan Year. The income or loss allocable to Excess
Aggregate Contributions is the sum of income or loss for the Plan Year
allocable to the Participant's Voluntary Contribution account, Matching
Contribution account (if any, and if all amounts therein are not used in the
ADP test) and, if applicable, Qualified Non-Elective Contribution account and
Elective Deferral account. Income or loss will be calculated under the method
used to calculate investment earnings and losses elsewhere in the Plan.
(c) Forfeiture of Excess Aggregate Contributions may either be reallocated
to the accounts of non-Highly Compensated Employees or applied to reduce
Employer contributions, as elected by the employer in the Adoption
Agreement.
(d) Excess Aggregate Contributions shall be forfeited if such amount is not
vested. If vested, such excess shall be distributed in the following order:
(i) First, from the Participant's Voluntary (contribution account;
(ii) Second, from the Participant's Matching Contribution account; and
(iii) Third, from the Participant's Qualified Matching Contribution
account (if applicable).
ARTICLE VIII - JOINT AND SURVIVOR ANNUITY REQUIREMENTS
8.1 APPLICABILITY Of PROVISIONS
The provisions of this Article shall apply to any Participant who is credited
with at least one Hour of Service with the Employer on or after August 23,
1984 and such other Participants as provided in paragraph 8.8.
8.2 PAYMENT OF QUALIFIED JOINT AND SURVIVOR ANNUITY
Unless an optional form of benefit is selected pursuant to a Qualified
Election within the 90-day period ending on the Annuity Starting Date, a
married Participant's Vested Account Balance will be paid in the form of a
Qualified Joint and Survivor Annuity and an unmarried Participant's Vested
Account Balance will be paid in the form of a life annuity. The Participant
may elect to have such annuity distributed upon attainment of the Early
Retirement Age under the Plan.
8.3 PAYMENT OF QUALIFIED PRE-RETIREMENT SURVIVOR ANNUITY
Unless an optional form of benefit has been selected within the Election
Period pursuant to a Qualified Election, if a Participant dies before
benefits have commenced then the Participant's vested account balance shall be
paid in the form of an annuity for the life of the Surviving Spouse. The
Surviving Spouse may elect to have such annuity distributed within a
reasonable period after the Participant's death.
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A Participant who does not meet the age 35 requirement set forth in the Election
Period as of the end of any current Plan Year may make a special qualified
election to waive the qualified Pre-retirement Survivor Annuity for the period
beginning on the date of such election and ending on the first day of the Plan
Year in which the Participant will attain age 35. Such election shall not be
valid unless the Participant receives a written explanation of the Qualified
Pre-retirement Survivor Annuity in such terms as are comparable to the
explanation required under paragraph 8.5. Qualified Pre-retirement Survivor
Annuity coverage will be automatically reinstated as of the first day of the
Plan Year in which the Participant attains age 35. Any new waiver on or after
such date shall be subject to the full requirements of this Article.
8.4 QUALIFIED ELECTION
A Qualified Election is an election to either waive a Qualified Joint and
Survivor Annuity or a qualified pre-retirement survivor annuity. Any such
election shall not be effective unless:
(a) the Participant's Spouse consents in writing to the election;
(b) the election designates a specific beneficiary, including any class of
beneficiaries or any contingent beneficiaries, which may not be changed
without spousal consent (or the Spouse expressly permits designations by the
Participant without any further spousal consent);
(c) the Spouse's consent acknowledges the effect of the election; and
(d) the Spouse's consent is witnessed by a Plan representative or notary
public.
Additionally, a Participant's waiver of the Qualified joint and Survivor Annuity
shall not be effective unless the election designates a form of benefit payment
which may not be changed without spousal consent (or the Spouse expressly
permits designations by the Participant without any further spousal consent), If
it is established to the satisfaction of the Plan Administrator that there is no
Spouse or that the Spouse cannot be located, a waiver will be deemed a Qualified
Election. Any consent by a Spouse obtained under this provision (or
establishment that the consent of a Spouse may not be obtained) shall be
effective only with respect to such Spouse. A consent that permits designations
by the Participant without any requirement of further consent by such Spouse
must acknowledge that the Spouse has the right to limit consent to a specific
beneficiary, and a specific form of benefit where applicable, and that the
Spouse voluntarily elects to relinquish either or both of such rights. A
revocation of a prior waiver may be made by a Participant without the consent of
the Spouse at any time before the commencement of benefits. The number of
revocations shall not be limited. No consent obtained under this provision shall
be valid unless the Participant has received notice as provided in paragraphs
8.5 and 8.6 below.
8.5 NOTICE REQUIREMENTS FOR QUALIFIED JOINT AND SURVIVOR ANNUITY
In the case of a Qualified Joint and Survivor Annuity, the Plan Administrator
shall, no less than 30 days and no more than 90 days prior to the Annuity
Starting date, provide each Participant a written explanation of:
(a) the terms and conditions of a Qualified Joint and Survivor Annuity;
(b) the Participant's right to make and the effect of an election to waive
the Qualified Joint and Survivor Annuity form of benefit;
(c) the rights of a Participant's Spouse; and
(d) the right to make, and the effect of, a revocation of a previous election
to waive the Qualified Joint and Survivor Annuity.
8.6 NOTICE REQUIREMENTS FOR QUALIFIED PRERETIREMENT SURVIVOR ANNUITY
In the case of a qualified pre-retirement survivor annuity as described in
paragraph 8.3, the Plan Administrator shall provide each Participant within the
applicable period for such Participant a written explanation of the qualified
pre-retirement survivor annuity in such terms and in such manner as would be
comparable to the explanation provided for meeting the requirements of paragraph
8.5 applicable to a Qualified Joint and Survivor Annuity. The applicable period
for a Participant is whichever of the following periods ends last:
(a) the period beginning with the first day of the Plan Year in which the
Participant attains age 32 and ending with the close of the Plan Year
preceding the Plan Year in which the Participant attains age 35;
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(b) a reasonable period ending after the individual becomes a Participant;
(c) a reasonable period ending after this Article first applies to the
Participant. Notwithstanding the foregoing, notice must be provided within a
reasonable period ending after separation from Service in the case of a
Participant who separates from Service before attaining age 35.
For purposes of applying the preceding paragraph, a reasonable period ending
after the events described in (b) and (c) is the end of the two-year period
beginning one-year prior to the date the applicable event occurs, and ending
one-year after that date. In the case of a Participant who separates from
Service before the Plan Year in which age 35 is attained, notice shall be
provided within the two-year period beginning one year prior to separation and
ending one year after separation. If such a Participant subsequently returns to
employment with the Employer, the applicable period for such Participant shall
be re-determined.
8.7 SPECIAL SAFE-HARBOR EXCEPTION FOR CERTAIN PROFIT-SHARING PLANS
(a) This paragraph shall apply to a Participant in a profit-sharing plan, and
to any distribution, made on or after the first day of the first plan year
beginning after 1988, from or under a separate account attributable solely to
Qualified Voluntary contributions, as maintained on behalf of a Participant
in a money purchase pension plan, (including a target benefit plan) if the
following conditions are satisfied:
(1) the Participant does not or cannot elect payments in the form of a life
annuity; and
(2) on the death of a Participant, the Participant's Vested Account Balance
will be paid to the Participant's Surviving Spouse, but if there is no
Surviving Spouse, or if the Surviving Spouse has consented in a manner
conforming to a Qualified Election, then to the Participant's Designated
Beneficiary.
The Surviving Spouse may elect to have distribution of the Vested Account
Balance commence within the 90-day period following the date of the
Participant's death. The account balance shall be adjusted for gains or losses
occurring after the Participant's death in accordance with the provisions of
the Plan governing the adjustment of account balances for other types of
distributions. These safe-harbor rules shall not be operative with respect to
a Participant in a profit-sharing plan if that plan is a direct or indirect
transferee of a Defined Benefit Plan, money purchase plan, a target benefit
plan, stock bonus plan, or profit-sharing plan which is subject to the
survivor annuity requirements of Code Section 401(a)(11) and Code Section 417,
and would therefore have a Qualified joint and Survivor Annuity as its normal
form of benefit.
(b) The Participant may waive the spousal death benefit described in this
paragraph at any time provided that no such waiver shall be effective
unless it satisfies the conditions (described in paragraph 8.4) that would
apply to the Participant's waiver of the Qualified PreRetirement Survivor
Annuity.
(c) If this paragraph 8.7 is operative, then all other provisions of this
Article other than paragraph 8.8 are inoperative.
8.8 TRANSITIONAL JOINT AND SURVIVOR ANNUITY RULES
Special transition rules apply to Participants who were not receiving benefits
on August 23, 1984.
(a) Any living Participant not receiving benefits on August 23, 1984, who
would otherwise not receive the benefits prescribed by the previous
paragraphs of this Article, must be given the opportunity to elect to have
the prior paragraphs of this Article apply if such Participant is credited
with at least one Hour of Service under this Plan or a predecessor Plan in
a Plan Year beginning on or after January 1, 1976 and such Participant had
at least 10 Years of Service for vesting purposes when he or she separated
from Service.
(b) Any living Participant not receiving benefits on August 23, 1984, who
was credited with at least one Hour of Service under this Plan or a
predecessor Plan on or after September 2, 1974, and who is not otherwise
credited with any Service in a Plan Year beginning on or after January 1,
1976, must be given the opportunity to have his or her benefits paid in
accordance with paragraph 8.9.
(c) The respective opportunities to elect [as described in (a) and (b)
above] must be afforded
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to the appropriate Participants during the period commencing on August
23, 1984 and ending on the date benefits would otherwise commence to
said Participants.
8.9 AUTOMATIC JOINT AND SURVIVOR ANNUITY AND EARLY SURVIVOR ANNUITY
Any Participant who has elected pursuant to paragraph 8.8(b) and any Participant
who does not elect under paragraph 8.8(a) or who meets the requirements of
paragraph 8.8(a), except that such Participant does not have at least 10 years
of vesting Service when he or she separates from Service, shall have his or her
benefits distributed in accordance with all of the following requirements if
benefits would have been payable in the form of a life annuity.
(a) Automatic Joint and Survivor Annuity. If benefits in the form of a
life annuity become payable to a married Participant who:
(1) begins to receive payments under the Plan on or after Normal
Retirement Age, or
(2) dies on or after Normal Retirement Age while still working
for the Employer, or
(3) begins to receive payments on or after the Qualified Early
Retirement Age, or
(4) separates from Service on or after attaining Normal
Retirement (or the Qualified Early Retirement Age) and after
satisfying the eligibility requirements for the payment of
benefits under the Plan and thereafter dies before beginning to
receive such benefits, then such benefits will be received under
this Plan in the form of a Qualified Joint and Survivor Annuity,
unless the Participant has elected otherwise during the Election
Period. The Election Period must begin at least 6 months before
the Participant attains Qualified Early Retirement Age and end
not more than 90 days before the commencement of benefits. Any
election will be in writing and may be changed by the
Participant at any time.
(b) Election of Early Survivor Annuity. A Participant who is employed
after attaining the Qualified Early Retirement Age will be given the
opportunity to elect, during the Election Period, to have a survivor
annuity payable on death. If the Participant elects the survivor
annuity, payments under such annuity must not be less than the payments
which would have been made to the Spouse under the Qualified Joint and
Survivor Annuity if the Participant had retired on the day before his or
her death. Any election under this provision will be in writing and may
be changed by the Participant at any time. The Election Period begins on
the later of:
(1) the 90th day before the Participant attains the Qualified
Early Retirement Age, or
(2) the date on which participation begins, and ends on the date
the Participant terminates employment.
8.10 ANNUITY CONTRACTS
Any annuity contract distributed under this Plan must be nontransferable. The
terms of any annuity contract purchased and distributed by the Plan to a
Participant or Spouse shall comply with the requirements of this Plan.
ARTICLE IX - VESTING
9.1 EMPLOYEE CONTRIBUTIONS
A Participant shall always have a 100% vested and nonforfeitable interest in his
or her Elective Deferrals, Voluntary Contributions, Qualified Voluntary
Contributions, Rollover Contributions, and Transfer Contributions plus the
earnings thereon. No forfeiture of Employer related contributions (including any
minimum contributions made under paragraph 14.2) will occur solely as a result
of an Employee's withdrawal of any Employee contributions.
9.2 EMPLOYER CONTRIBUTIONS
A Participant shall acquire a vested and nonforfeitable interest in his or her
account attributable to Employer contributions in accordance with the table
selected in the Adoption Agreement, provided that if a Participant is not
already fully vested, he or she shall become so upon attaining Normal Retirement
Age, Early Retirement Age, on death prior to normal retirement, on retirement
due to Disability, or on termination of the Plan. If no table is selected in the
Adoption Agreement, an Employee shall acquire a vested and nonforfeitable
interest in his or her account attributable to Employer contributions in
accordance with the following percentages: 20% after 2 Years Of Service, 20%
additional for each of
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the following Years Of Service, reaching 100% after 6 Years Of Service with the
Employer.
9.3 COMPUTATION PERIOD
The computation period for purposes of determining Years of Service and Breaks
in Service for purposes of computing a Participant's nonforfeitable right to his
or her account balance derived from Employer contributions shall be the Plan
Year. In the event a former Participant with no vested interest in his or her
Employer contribution account requalifies for participation in the Plan after
incurring a Break in Service, such Participant shall be credited for vesting
with all pre-break and postbreak Service.
9.4 REQUALIFICATION PRIOR TO FIVE CONSECUTIVE ONE-YEAR BREAKS IN SERVICE
The account balance of such Participant shall consist of any undistributed
amount in his or her account as of the date of re-employment plus any future
contributions added to such account plus the investment earnings on the account.
The vested account balance of such Participant shall be determined by
multiplying the Participant's account balance (adjusted to include any
distribution or redeposit made under paragraph 6.3) by such Participant's vested
percentage. All Service of the Participant, both prior to and following the
break, shall be counted when computing the Participant's vested percentage.
9.5 REQUALIFICATION AFTER FIVE CONSECUTIVE ONE-YEAR BREAKS IN SERVICE
If such Participant is not fully vested upon reemployment, a new account shall
be established for such Participant to separate his or her deferred vested and
nonforfeitable account, if any, from the account to which new allocations will
be made. The Participant's deferred account to the extent remaining shall be
fully vested and shall continue to share in earnings and losses of the Fund.
When computing the Participant's vested portion of the new account, all
pre-break and post-break Service shall be counted. However, notwithstanding this
provision, no such former Participant who has had five consecutive one-year
Breaks in Service shall acquire a larger vested and nonforfeitable interest in
his or her prior account balance as a result of requalification hereunder.
9.6 CALCULATING VESTED INTEREST
A Participant's vested and nonforfeitable interest shall be calculated by
multiplying the fair market value of his or her account attributable to Employer
contributions on the Valuation Date preceding distribution by the decimal
equivalent of the vested percentage as of his or her termination date. The
amount attributable to Employer contributions for purposes of the calculation
includes amounts previously paid out pursuant to paragraph 6.3 and not repaid if
the non-vested portion has not been forfeited. The Participant's vested and
nonforfeitable interest, once calculated above, shall be reduced to reflect
those amounts previously paid out to the Participant and not repaid by the
Participant. The Participant's vested and nonforfeitable interest so determined
shall continue to share in the investment earnings and any increase or decrease
in the fair market value of the Fund up to the Valuation Date preceding or
coinciding with payment.
9.7 FORFEITURES
Any balance in the account of a Participant who has separated from Service to
which he or she is not entitled under the foregoing provisions, shall be
forfeited and applied as provided in the Adoption Agreement. A forfeiture may
only occur if the Participant has received a distribution from the Plan or if
the Participant has incurred five consecutive 1-year Breaks in Service.
Furthermore, a Highly Compensated Employee's Matching Contributions may be
forfeited, even if vested, if the contributions to which they relate are Excess
Deferrals, Excess Contributions or Excess Aggregate Contributions.
9.8 AMENDMENT Of VESTING SCHEDULE
No amendment to the Plan shall have the effect of decreasing a Participant's
vested interest determined without regard to such amendment as of the later of
the date such amendment is adopted or the date it becomes effective. Further, if
the vesting schedule of the Plan is amended, or the Plan is amended in any way
that directly or indirectly affects the computation of any Participant's
nonforfeitable percentage or if the Plan is deemed amended by an automatic
change to or from a Top-Heavy vesting schedule, each Participant with at least
three Years of Service with the Employer may elect, within a reasonable period
after the adoption of the amendment, to have his or her nonforfeitable
percentage computed under the Plan without regard to such amendment. For
Participants who do not have at least one Hour of Service in any Plan Year
beginning after 1988, the preceding sentence shall be
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applied by substituting "Five Years of Service" for "Three Years of Service"
where such language appears. The period during which the election may be made
shall commence with the date the amendment is adopted and shall end on the later
of:
(a) 60 days after the amendment is adopted;
(b) 60 days after the amendment becomes effective; or
(c) 60 days after the Participant is issued written notice of the
amendment by the Employer or the Trustee. If the Trustee is asked to so
notify, the Fund will be charged for the costs thereof.
No amendment to the Plan shall be effective to the extent that it has the effect
of decreasing a Participant's accrued benefit. Notwithstanding the preceding
sentence, a Participant's account balance may be reduced to the extent permitted
under section 412(c)(8) of the Code (relating to financial hardships). For
purposes of this paragraph, a Plan amendment which has the effect of decreasing
a Participant's account balance or eliminating an optional form of benefit, with
respect to benefits attributable to service before the amendment, shall be
treated as reducing an accrued benefit.
9.9 SERVICE WITH CONTROLLED GROUPS
All Years of Service with other members of a controlled group of corporations
[as defined in Code Section 414(b)], trades or businesses under common control
[as defined in Code Section 414(c)], or members of an affiliated service group
[as defined in Code Section 414(m)] shall be considered for purposes of
determining a Participant's nonforfeitable percentage.
ARTICLE X- LIMITATIONS ON ALLOCATIONS AND ANTIDISCRIMINATION TESTING
10.1 PARTICIPATION IN THIS PLAN ONLY
If the Participant does not participate in and has never participated in another
qualified plan, a Welfare Benefit Fund (as defined in paragraph 1.89) or an
individual medical account, as defined in Code Section 415(1)(2), or a
Simplified Employee Pension Plan, as defined in Code Section 408(k), maintained
by the adopting Employer, which provides an Annual Addition as defined in
paragraph 1.4, the amount of Annual Additions which may be credited to the
Participant's account for any Limitation Year will not exceed the lesser of the
Maximum Permissible Amount or any other limitation contained in this Plan. If
the Employer contribution that would otherwise be contributed or allocated to
the Participant's account would cause the Annual Additions for the Limitation
Year to exceed the Maximum Permissible Amount, the amount contributed or
allocated will be reduced so that the Annual Additions for the Limitation Year
will equal the Maximum Permissible Amount. Prior to determining the
Participant's actual Compensation for the Limitation Year, the Employer may
determine the Maximum Permissible Amount for a Participant on the basis of a
reasonable estimate of the Participant's Compensation for the Limitation Year,
uniformly determined for all Participants similarly situated. As soon as is
administratively feasible after the end of the Limitation Year, the Maximum
Permissible Amount for the Limitation Year will be determined on the basis of
the Participant's actual Compensation for the Limitation Year.
10.2 DISPOSITION OF EXCESS ANNUAL ADDITIONS
If, pursuant to paragraph 10.1 or as a result of the allocation of forfeitures,
there is an Excess Amount, the excess will be disposed of under one of the
following methods as determined in the Adoption Agreement. If no election is
made in the Adoption Agreement then method "(a)" below shall apply.
(a) Suspense Account Method
(1) Any Elective Deferrals and nondeductible Employee Voluntary
Contributions, to the extent they would reduce the Excess
Amount, will be returned to the Participant;
(2) If after the application of paragraph (1) an Excess Amount
still exists, and the Participant is covered by the Plan at the
end of the Limitation Year, the Excess Amount in the
Participant's account will be used to reduce Employer
contributions (including any allocation of forfeitures) for such
Participant in the next Limitation Year, and each succeeding
Limitation Year if necessary;
(3) If after the application of paragraph (1) an Excess Amount
still exists, and the Participant is not covered by the Plan at
the end of the Limitation Year, the Excess Amount will be held
unallocated in a suspense account. The suspense account will be
applied to reduce
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future Employer contributions (including allocation of any
forfeitures) for all remaining Participants in the next
Limitation Year, and each succeeding Limitation Year if
necessary;
(4) If a suspense account is in existence at any time during the
Limitation Year pursuant to this paragraph, it will not
participate in the allocation of investment gains and losses. If
a suspense account is in existence at any time during a
particular Limitation Year, all amounts in the suspense account
must be allocated and reallocated to Participants' accounts
before any Employer contributions or any Employee Contributions
may be made to the Plan for that Limitation Year. Excess amounts
may not be distributed to Participants or former Participants.
(b) Spillover Method
(1) Any Elective Deferrals and nondeductible Employee Voluntary
Contributions, to the extent they would reduce the Excess
Amount, will be returned to the Participant.
(2) Any Excess Amount which would be allocated to the account of
an individual Participant under the Plan's allocation formula
will be reallocated to other Participants in the same manner as
other Employer contributions. No such reallocation shall be made
to the extent that it will result in an Excess Amount being
created in such Participant's own account.
(3) To the extent that amounts cannot be reallocated under (1)
above, the suspense account provisions of (a) above will apply.
10.3 PARTICIPATION IN THIS PLAN AND ANOTHER QUALIFIED MASTER AND PROTOTYPE
DEFINED CONTRIBUTION PLAN, WELFARE BENEFIT FUND, INDIVIDUAL MEDICAL ACCOUNT OR
SIMPLIFIED EMPLOYEE PENSION PLAN MAINTAINED BY THE EMPLOYER
The Annual Additions which may be credited to a Participant's account under this
Plan for any Limitation Year will not exceed the Maximum Permissible Amount
reduced by the Annual Additions credited to a Participant's account under the
other qualified Master or Prototype Defined Contribution Plans, Welfare Benefit
Funds, and individual medical accounts as defined in Code Section 415(1)(2), or
Simplified Employee Pension Plan, maintained by the Employer, which provide an
Annual Addition as defined in paragraph 1.4 for the same Limitation Year. If the
Annual Additions, with respect to the Participant under other Defined
Contribution Plans and Welfare Benefit Funds maintained by the Employer, are
less than the Maximum Permissible Amount and the Employer contribution that
would otherwise be contributed or allocated to the Participant's account under
this Plan would cause the Annual Additions for the Limitation Year to exceed
this limitation, the amount contributed or allocated will be reduced so that the
Annual Additions under all such plans and funds for the Limitation Year will
equal the Maximum Permissible Amount. If the Annual Additions with respect to
the Participant under such other Defined Contribution Plans and Welfare Benefit
Funds in the aggregate are equal to or greater than the Maximum Permissible
Amount, no amount will be contributed or allocated to the Participant's account
under this Plan for the Limitation Year. Prior to determining the Participant's
actual Compensation for the Limitation Year, the Employer may determine the
Maximum Permissible Amount for a Participant in the manner described in
paragraph 10.1. As soon as administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for the Limitation Year will be
determined on the basis of the Participant's actual Compensation for the
Limitation Year.
10.4 DISPOSITION OF EXCESS ANNUAL ADDITIONS UNDER TWO PLANS
If, pursuant to paragraph 10.3 or as a result of forfeitures, a Participant's
Annual Additions under this Plan and such other plans would result in an Excess
Amount for a Limitation Year, the Excess Amount will be deemed to consist of the
Annual Additions last allocated except that Annual Additions attributable to a
Simplified Employee Pension Plan will be deemed to have been allocated first,
followed by Annual Additions attributable to a Welfare Benefit Fund or
Individual Medical Account as defined in Code Section 415(1)(2) regardless of
the actual allocation date. If an Excess Amount was allocated to a Participant
on an allocation date of this Plan which coincides with an allocation date of
another plan, the Excess Amount attributed to this Plan will be the product of:
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(a) the total Excess Amount allocated as of such date, times
(b) the ratio of:
(1) the Annual Additions allocated to the Participant for the
Limitation Year as of such date under the Plan, to
(2) the total Annual Additions allocated to the Participant for
the Limitation Year as of such date under this and all the other
qualified Master or Prototype Defined Contribution Plans.
Any Excess Amount attributed to this Plan will be disposed of in the manner
described in paragraph 10.2.
10.5 PARTICIPATION IN THIS PLAN AND ANOTHER DEFINED CONTRIBUTION PLAN WHICH IS
NOT A QUALIFIED MASTER OR PROTOTYPE PLAN
If the Participant is covered under another qualified Defined Contribution Plan
maintained by the Employer which is not a qualified Master or Prototype Plan,
Annual Additions which may be credited to the Participant's account under this
Plan for any Limitation Year will be limited in accordance with paragraphs 10.3
and 10.4 as though the other plan were a Master or Prototype Plan, unless the
Employer provides other limitations in the Adoption Agreement.
10.6 PARTICIPATION IN THIS PLAN AND A DEFINED BENEFIT PLAN
If the Employer maintains, or at any time maintained, a qualified Defined
Benefit Plan covering any Participant in this Plan, the sum of the Participant's
Defined Benefit Plan Fraction and Defined Contribution Plan Fraction will not
exceed 1.0 in any Limitation Year. For any Plan Year during which the Plan is
Top-Heavy, the Defined Benefit and Defined Contribution Plan Fractions shall be
calculated in accordance with Code Section 416(h). The Annual Additions which
may be credited to the Participant's account under this Plan for any Limitation
Year will be limited in accordance with the provisions set forth in the Adoption
Agreement.
10.7 AVERAGE DEFERRAL PERCENTAGE (ADP) TEST
With respect to any Plan Year, the Average Deferral Percentage for Participants
who are Highly Compensated Employees and the Average Deferral Percentage for
Participants who are non-Highly Compensated Employees must satisfy one of the
following tests:
(a) Basic Test - The Average Deferral Percentage for Participants who
are Highly Compensated Employees for the Plan Year is not more than 1.25
times the Average Deferral Percentage for Participants who are
non-Highly Compensated Employees for the same Plan Year, or
(b) Alternative Test - The Average Deferral Percentage for Participants
who are Highly Compensated Employees for the Plan Year does not exceed
the Average Deferral Percentage for Participants who are non-Highly
Compensated Employees for the same Plan Year by more than 2 percentage
points provided that the Average Deferral Percentage for Participants
who are Highly Compensated Employees is not more than 2.0 times the
Average Deferral Percentage for Participants who are non-Highly
Compensated Employees.
10.8 SPECIAL RULES RELATING TO APPLICATION OF ADP TEST
(a) The Actual Deferral Percentage for any Participant who is a Highly
Compensated Employee for the Plan Year and who is eligible to have
Elective Deferrals (and Qualified Non-Elective Contributions or
Qualified Matching Contributions, or both, if treated as Elective
Deferrals for purposes of the ADP test) allocated to his or her accounts
under two or more arrangements described in Code Section 401(k), that
are maintained by the Employer, shall be determined as if such Elective
Deferrals (and, if applicable, such Qualified Non-Elective Contributions
or Qualified Matching Contributions, or both) were made under a single
arrangement. If a Highly Compensated Employee participates in two or
more cash or deferred arrangements that have different Plan Years, all
cash or deferred arrangements ending with or within the same calendar
year shall be treated as a single arrangement.
(b) In the event that this Plan satisfies the requirements of Code
Sections 401(k), 401(a)(4), or 410(b), only if aggregated with one or
more other plans, or if one or more other plans satisfy the requirements
of such Code Sections only if
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aggregated with this Plan, then this Section shall be applied by
determining the Actual Deferral Percentage of Employees as if all such
plans were a single plan. For Plan Years beginning after 1989, plans may
be aggregated in order to satisfy Code Section 401(k) only if they have
the same Plan Year.
(c) For purposes of determining the Actual Deferral Percentage of a
Participant who is a 5-percent owner or one of the ten most highly-paid
Highly Compensated Employees, the Elective Deferrals (and Qualified
Non-Elective Contributions or Qualified Matching Contributions, or both,
if treated as Elective Deferrals for purposes of the ADP test) and
Compensation of such Participant shall include the Elective Deferrals
(and, if applicable, Qualified Non-Elective Contributions and Qualified
Matching Contributions, or both) for the Plan Year of Family Members as
defined in paragraph 1.36 of this Plan. Family Members, with respect to
such Highly Compensated Employees, shall be disregarded as separate
Employees in determining the ADP both for Participants who are
non-Highly Compensated Employees and for Participants who are Highly
Compensated Employees. In the event of repeal of the family aggregation
rules under Code Section 414(q)(6), all applications of such rules under
this Plan will cease as of the effective date of such repeal.
(d) For purposes of determining the ADP test, Elective Deferrals,
Qualified Non-Elective Contributions and Qualified Matching
Contributions must be made before the last day of the twelve-month
period immediately following the Plan Year to which contributions
relate.
(e) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ADP test and the amount of Qualified Non-Elective
Contributions or Qualified Matching Contributions, or both, used in such
test.
(f) The determination and treatment of the Actual Deferral Percentage
amounts of any Participant shall satisfy such other requirements as may
be prescribed by the Secretary of the Treasury.
10.9 AVERAGE CONTRIBUTION PERCENTAGE (ACP) TEST
If the Employer makes Matching Contributions or if the Plan allows Employees to
make Voluntary Contributions the Plan must meet additional nondiscrimination
requirements provided under Code Section 401(m). If Employee Contributions
(including any Elective Deferrals recharacterized as Voluntary Contributions)
are made pursuant to this Plan, then in addition to the ADP test referenced in
paragraph 10.7, the Average Contribution Percentage test is also applicable. The
Average Contribution Percentage for Participants who are Highly Compensated
Employees for each Plan Year and the Average Contribution Percentage for
Participants who are Non-Highly Compensated Employees for the same Plan Year
must satisfy one of the following tests:
(a) Basic Test - The Average Contribution Percentage for Participants
who are Highly Compensated Employees for the Plan Year shall not exceed
the Average Contribution Percentage for Participants who are non-Highly
Compensated Employees for the same Plan Year multiplied by 1.25; or
(b) Alternative Test - The ACP for Participants who are Highly
Compensated Employees for the Plan Year shall not exceed the Average
Contribution Percentage for Participants who are non-Highly Compensated
Employees for the same Plan Year multiplied by two (2), provided that
the Average Contribution Percentage for Participants who are Highly
Compensated Employees does not exceed the Average Contribution
Percentage for Participants who are non-Highly Compensated Employees by
more than two (2) percentage points.
10.10 SPECIAL RULES RELATING TO APPLICATION Of ACP TEST
(a) If one or more Highly Compensated Employees participate in both a
cash or deferred arrangement and a plan subject to the ACP test
maintained by the Employer and the sum of the ADP and ACP of those
Highly Compensated Employees subject to either or both tests exceeds the
Aggregate Limit, then the ADP or ACP of those Highly Compensated
Employees who also participate in a cash or deferred arrangement will be
reduced (beginning with such Highly
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Compensated Employee whose ADP or ACP is the highest) as set forth in
the Adoption Agreement so that the limit is not exceeded. The amount by
which each Highly Compensated Employee's Contribution Percentage Amounts
is reduced shall be treated as an Excess Aggregate Contribution. The ADP
and ACP of the Highly Compensated Employees are determined after any
corrections required to meet the ADP and ACP tests. Multiple use does
not occur if both the ADP and ACP of the Highly Compensated Employees
does not exceed 1.25 multiplied by the ADP and ACP of the non-Highly
Compensated Employees.
(b) For purposes of this Article, the Contribution Percentage for any
Participant who is a Highly Compensated Employee and who is eligible to
have Contribution Percentage Amounts allocated to his or her account
under two or more plans described in Code Section 401(a), or
arrangements described in Code Section 401(k) that are maintained by the
Employer, shall be determined as if the total of such Contribution
Percentage Amounts was made under each Plan. If a Highly Compensated
Employee participates in two or more cash or deferred arrangements that
have different plan years, all cash or deferred arrangements ending
with or within the same calendar year shall be treated as a single
arrangement.
(c) In the event that this Plan satisfies the requirements of Code
Sections 401(a)(4), 401(m), or 410(b) only if aggregated with one or
more other plans, or if one or more other plans satisfy the requirements
of such Code Sections only if aggregated with this Plan, then this
Section shall be applied by determining the Contribution Percentage of
Employees as if all such plans were a single plan. For plan years
beginning after 1989, plans may be aggregated in order to satisfy Code
Section 401(m) only if the aggregated plans have the same Plan Year.
(d) For purposes of determining the Contribution percentage of a
Participant who is a five-percent owner or one of the ten most
highly-paid, Highly Compensated Employees, the Contribution Percentage
Amounts and Compensation of such Participant shall include the
Contribution Percentage Amounts and Compensation for the Plan Year of
Family Members as defined in Paragraph 1.36 of this Plan. Family
Members, with respect to Highly Compensated Employees, shall be
disregarded as separate Employees in determining the Contribution
Percentage both for Participants who are non-Highly Compensated
Employees and for Participants who are Highly Compensated Employees. In
the event of repeal of the family aggregation rules under Code Section
414(q)(6), all applications of such rules under this Plan will cease as
of the effective date of such repeal.
(e) For purposes of determining the Contribution Percentage test,
Employee Contributions are considered to have been made in the Plan Year
in which contributed to the trust. Matching Contributions and Qualified
Non-Elective Contributions will be considered made for a Plan Year if
made no later than the end of the twelve-month period beginning on the
day after the close of the Plan Year.
(f) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ACP test and the amount of Qualified Non-Elective
Contributions or Qualified Matching Contributions, or both, used in such
test.
(g) The determination and treatment of the Contribution Percentage of
any Participant shall satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
(h) Qualified Matching Contributions and Qualified Non-Elective
Contributions used to satisfy the ADP test may not be used to satisfy
the ACP test.
ARTICLE XI - ADMINISTRATION
11.1 PLAN ADMINISTRATOR
The Employer shall be the named fiduciary and Plan Administrator. These duties
shall include:
(a) appointing the Plan's attorney, accountant, actuary, or any other
party needed to administer the Plan,
(b) directing the Trustee with respect to payments from the Fund,
(c) communicating with Employees regarding their participation and
benefits under the Plan, including the administration of all claims
procedures,
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(d) filing any returns and reports with the Internal Revenue Service,
Department of Labor, or any other governmental agency,
(e) reviewing and approving any financial reports, investment reviews,
or other reports prepared by any party appointed by the Employer under
paragraph (a),
(f) establishing a funding policy and investment objectives consistent
with the purposes of the Plan and the Employee Retirement Income
Security Act of 1974, and
(g) construing and resolving any question of Plan interpretation. The
Plan Administrator's interpretation of Plan provisions including
eligibility and benefits under the Plan is final, and unless it can be
shown to be arbitrary and capricious will not be subject to "de novo"
review.
11.2 TRUSTEE
The Trustee shall only be responsible for maintaining the trust account(s) in
accordance with applicable laws on behalf of the Employer. The Trustee's duties
shall include:
(a) receiving contributions under the terms of the Plan, but not
determining the amount or enforcing the payment thereof,
(b) making distributions from the Fund in accordance with written
instructions received from an authorized representative of the Employer,
and
(c) keeping accurate and detailed records of all contributions,
receipts, investments, distributions, disbursements and all other
transactions with respect to each account (in the case of Employee
Investment Direction) or the Fund (in the case of Employer Investment
Direction). Periodically (not less than annually), the Trustee shall
provide a transcript of all activity in the account or in the Fund
(which may consist of regularly issued statements from the Service
Company). In the case of Employee Investment Direction, each such
transcript will be provided to the Participant. In the case of Employer
Investment Direction, each such transcript will be provided to the
Employer. Each such transcript shall be the sole accounting required of
the Trustee. Unless the Participant or Employer files a written
objection to the transcript within 60 days following the date it is
furnished, he shall be deemed to have consented to the accounting, and
the Trustee and Service Company shall be forever released and discharged
from liability and accountability to anyone with respect to its acts,
transactions, duties, obligations or responsibilities as shown in, or
reflected by the transcript.
(d) employing such agents, attorneys or other professionals as the
Trustee may deem necessary or advisable in the performance of its
duties.
The Trustee's duties shall be limited to those described above. The Employer
shall be responsible for any other administrative duties required under the Plan
or by applicable law.
11.3 ADMINISTRATIVE FEES AND EXPENSES
All reasonable costs, charges and expenses incurred by the Trustee and Service
Company in connection with the administration of the Fund and all reasonable
costs, charges and expenses incurred by the Plan Administrator in connection
with the administration of the Plan (including fees for legal services rendered
to the Trustee and Service Company or Plan Administrator) may be paid by the
Employer, but if not paid by the Employer when due, shall be paid from the Fund.
Such reasonable compensation to the Trustee and Service Company as may be agreed
upon from time to time between the Employer and the Trustee and Service Company
and such reasonable compensation to the Plan Administrator as may be agreed upon
from time to time between the Employer and Plan Administrator and the
compensation of the Service Company in accordance with its fee schedule as in
effect at the applicable time, may be paid by the Employer, but if not paid by
the Employer when due shall be paid by the Fund. The Trustee and Service Company
shall have the right to liquidate trust assets to cover its fees.
Notwithstanding the foregoing, no compensation other than reimbursement for
expenses shall be paid to a Plan Administrator who is the Employer or a
full-time Employee of the Employer. In the event any part of the Trust becomes
subject to tax, all taxes incurred will be paid from the Fund unless the Plan
Administrator advises the Trustee not to pay such tax.
11.4 DUTIES AND INDEMNIFICATION
(a) The Trustee shall have the authority and discretion to manage and
govern the Fund to the extent provided in this instrument, but does not
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guarantee the Fund in any manner against investment loss or depreciation
in asset value, or guarantee the adequacy of the Fund to meet and
discharge all or any liabilities of the Plan.
(b) The Trustee shall not be liable for the making, retention or sale of
any investment or reinvestment made by it, as herein provided, or for
any loss to, or diminution of the Fund, or for any other loss or damage
which may result from the discharge of its duties hereunder except to
the extent it is judicially determined that the Trustee has failed to
exercise the care, skill, prudence and diligence under the circumstances
then prevailing that a prudent person acting in a like capacity and
familiar with such matters would use in the conduct of an enterprise of
a like character with like aims.
(c) The Employer warrants that all directions issued to the Trustee by
it or the Plan Administrator will be in accordance with the terms of the
Plan and not contrary to the provisions of the Employee Retirement
Income Security Act of 1974 and regulations issued thereunder.
(d) The Trustee shall not be answerable for any action taken pursuant to
any direction, consent, certificate, or other paper or document on the
belief that the same is genuine and signed by the proper person. All
directions by the Employer, Participant or the Plan Administrator shall
be given in a manner and form prescribed by the Trustee and approved by
the Service Company. The Employer shall deliver to the Trustee
certificates evidencing the individual or individuals authorized to act
as set forth in the Adoption Agreement or as the Employer may
subsequently inform the Trustee in writing and shall deliver to the
Trustee specimens of their signatures.
(e) The duties and obligations of the Trustee shall be limited to those
expressly imposed upon it by this instrument or subsequently agreed upon
by the parties. Responsibility for administrative duties required under
the Plan or applicable law not expressly imposed upon or agreed to by
the Trustee shall rest solely with the Employer.
(f) The Trustee shall be indemnified and saved harmless by the Employer
from and against any and all liability to which the Trustee may be sub-
jected, including all expenses reasonably incurred in its defense, for
any action or failure to act resulting from compliance with the
instructions of the Employer, the employees or agents of the Employer,
the Plan Administrator, or any other fiduciary to the Plan, and for any
liability arising from the actions or non-actions of any predecessor
Trustee or fiduciary or other fiduciaries of the Plan.
(g) The Trustee shall not be responsible in any way for the application
of any payments it is directed to make or for the adequacy of the Fund
to meet and discharge any and all liabilities under the Plan.
(h) With respect to non-mutual fund investments, the Trustee in
administering the Trust Fund is authorized and empowered to exercise
generally, any of the powers which a trustee might customarily exercise
in connection with investments held by the Trust Fund and to do all
other acts that the Trustee may deem necessary or proper to carry out
any of the powers and duties set forth in this Article XI.
11.5 SPECIAL PROVISIONS CONCERNING THE SERVICE COMPANY
(a) To the full extent permitted under ERISA, the Code, any other
applicable federal or state law, the regulations, rules and
interpretations thereunder, and subject to any written instrument
executed by the Trustee and the Service Company allocating
responsibilities between them, all ministerial functions assigned to the
Trustee under the Plan shall be delegated to the Service Company. All
instructions required to be given to the Trustee under the Plan will be
effective if given to the Service Company in the manner prescribed by
the Service Company. To the extent the Service Company is performing a
function assigned to the Trustee under the Plan, the Service Company
shall have the benefit of all of the limitations of the scope of the
Trustee's duties and liabilities, all rights of indemnification granted
to the Trustee and all other protections of any nature afforded the
Trustee under the Plan.
(b) It is understood and agreed that while the Service Company will
perform certain ministerial duties (such as custodial, reporting,
recording, and bookkeeping functions) with respect to Plan assets, such
duties do not involve the exercise of
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any discretionary authority or other authority to manage or control Plan
assets.
(c) With respect to any transaction which the Service Company is
directed to engage in, the Employer, the Trustee, the Named Investment
Fiduciary and the person directing the transaction shall be responsible
for making sure that the transaction does not violate any applicable
provision of law or disqualify the Plan under the Code, and the Service
Company shall have no responsibility therefor.
(d) The Employer and, where the Service Company is following the
directions or instructions of a Participant, the Trustee, Plan
Administrator or the Named Investment Fiduciary, such Participant, the
Trustee, Plan Administrator or the Named Investment Fiduciary (as the
case may be) shall at all times fully indemnify and save harmless the
Service Company from any liability which may arise in connection with
this Plan, except liability arising from the gross negligence or willful
misconduct of the Service Company. For purposes of this Section 11.5,
"liability" shall include, without limitation, taxes, expenses, claims,
damages, actions, suits, attorneys' fees, expenses of litigation or
preparation for threatened litigation, and any other charges. The
Service Company shall be liable for its own gross negligence or willful
misconduct in the performance of the duties expressly assumed by it
under the Plan.
ARTICLE XII - TRUST FUND
12.1 THE FUND
The Fund shall consist of all contributions made under Article III and Article
IV of the Plan and the investment thereof and earnings thereon. All
contributions and the earnings thereon less payments made under the terms of the
Plan, shall constitute the Fund. The Fund shall be administered as provided in
this document.
12.2 CONTROL OF PLAN ASSETS
The assets of the Fund or evidence of ownership shall be held by the Trustee
under the terms of the Plan and Trust. If the assets represent amounts
transferred from another trustee under a former plan, the Trustee named
hereunder shall not be responsible for the propriety of any investment under
the former plan.
12.3 EXCLUSIVE BENEFIT RULES
No part of the Fund shall be used for, or diverted to, purposes other than for
the exclusive benefit of Participants, former Participants with a vested
interest, and the beneficiary or beneficiaries of deceased Participants having
a vested interest in the Fund at death.
12.4 ASSIGNMENT AND ALIENATION OF BENEFITS
No right or claim to, or interest in, any part of the Fund, or any payment from
the Fund, shall be assignable, transferable, or subject to sale, mortgage,
pledge, hypothecation, commutation, anticipation, garnishment, attachment,
execution, or levy of any kind. The Trustee shall not recognize any attempt to
assign, transfer, sell, mortgage, pledge, hypothecate, commute, or anticipate
the same, except to the extent required by law. The preceding sentences shall
also apply to the creation, assignment, or recognition of a right to any benefit
payable with respect to a Participant pursuant to a domestic relations order,
unless such order is determined to be a qualified domestic relations order, as
defined in Code Section 414(p), or any domestic relations order entered before
January 1, 1985 which the Plan attorney and Plan Administrator deem to be
qualified.
12.5 DETERMINATION OF QUALIFIED DOMESTIC RELATIONS ORDER (QDRO)
A Domestic Relations Order shall specifically state all of the following in
order to be deemed a Qualified Domestic Relations Order ("QDRO"):
(a) The name and last known mailing address (if any) of the Participant
and of each alternate payee covered by the QDRO. However, if the QDRO
does not specify the current mailing address of the alternate payee, but
the Plan Administrator has independent knowledge of that address, the
QDRO will still be valid.
(b) The dollar amount or percentage of the Participant's benefit to be
paid by the Plan to each alternate payee, or the manner in which the
amount or percentage will be determined.
(c) The number of payments or period for which the order applies.
(d) The specific plan (by name) to which the Domestic Relations Order
applies.
The Domestic Relations Order shall not be deemed a QDRO if it requires the Plan
to provide:
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(e) any type or form of benefit, or any option not already provided for
in the Plan;
(f) increased benefits, or benefits in excess of the Participant's
vested rights,
(g) payment of a benefit earlier than allowed by the Plan's earliest
retirement provisions or in the case of a profit-sharing plan, prior to
the allowability of in-service withdrawals, or
(h) payment of benefits to an alternate payee which are required to be
paid to another alternate payee under another QDRO.
Promptly, upon receipt of a Domestic Relations Order ("Order") which may or may
not be "Qualified", the Plan Administrator shall notify the Participant and any
alternate payee(s) named in the Order of such receipt, and include a copy of
this paragraph 12.5. The Plan Administrator shall then forward the Order to the
Plan's legal counsel for an opinion as to whether or not the Order is in fact
"Qualified" as defined in Code Section 414(p). Within a reasonable time after
receipt of the Order, not to exceed 60 days, the Plan's legal counsel shall make
a determination as to its "Qualified" status and the Participant and any
alternate payee(s) shall be promptly notified in writing of the determination.
If the "Qualified" status of the Order is in question, there will be a delay in
any payout to any payee including the Participant, until the status is resolved.
In such event, the Plan Administrator shall segregate the amount that would have
been payable to the alternate payee(s) if the Order had been deemed a QDRO. If
the Order is not Qualified, or the status is not resolved (for example, it has
been sent back to the Court for clarification or modification) within 18 months
beginning with the date the first payment would have to be made under the Order,
the Plan Administrator shall pay the segregated amounts plus interest to the
person(s) who would have been entitled to the benefits had there been no Order.
If a determination as to the Qualified status of the Order is made after the
18-month period described above, then the Order shall only be applied on a
prospective basis. If the Order is determined to be a QDRO, the Participant and
alternate payee(s) shall again be notified promptly after such determination.
Once an Order is deemed a QDRO, the Plan Administrator shall pay to the
alternate payee(s) all the amounts due under the QDRO, including segregated
amounts plus interest which may have accrued during a dispute as to the Order's
qualification.
Unless specified otherwise in the Adoption Agreement, the earliest retirement
age with regard to the Participant against whom the order is entered shall be
the date the order is determined to be qualified. This will only allow payouts
to alternate payee(s) and not the Participant.
ARTICLE XIII - INVESTMENTS
13.1 FIDUCIARY STANDARDS
The Trustee shall invest and reinvest income in the same Fund in accordance with
the investment objectives established by the Employer, provided that:
(a) such investments are prudent under the Employee Retirement Income
Security Act of 1974 and the regulations promulgated thereunder,
(b) such investments are sufficiently diversified or otherwise insured
or guaranteed to minimize the risk of large losses, and
(c) such investments are similar to those which would be purchased by
another professional money manager for a like plan with similar
investment objectives.
13.2 NO INVESTMENT DISCRETION
The Plan Sponsor and the Trustee shall have no discretion to direct any
investments of the Trust and are authorized solely to make and hold investments
only as directed pursuant to Section 13.3.
13.3 INVESTMENT DIRECTIONS
(a) Responsibility for directing the Trustee with respect to the
investment of the Trust Fund shall be allocated to the Employer, or a
named fiduciary appointed by the Employer for that purpose (the "Named
Investment Fiduciary"), the Participants, or any investment manager (an
"Investment Manager"), who meets the requirements of Section 3(38) of
the Employee Retirement Income Security Act of 1974 (ERISA) appointed by
the Named Investment Fiduciary, all as provided in the Plan (including
the Adoption Agreement). To the extent investment responsibility is
allocated to the Participant, the
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Designated Beneficiary of a deceased Participant shall discharge the
responsibility subsequent to the Participant's death and any reference
to the Participant in any provision of the Plan pertaining to investment
directions shall in such event be construed as a reference to the
Designated Beneficiary.
(b) Investment directions shall be given in a manner and form prescribed
by the Trustee and shall be subject to such limitations, including
limitations as to the frequency with which any standing investment
instructions may be changed and funds may be moved among investment
choices, as the Employer or other Named Investment Fiduciary shall
prescribe. If Investment responsibility is allocated to Participants, to
the extent permitted by the Trustee, investment directions may be given
directly to the Service Company in a manner and form prescribed by the
Service Company.
(c) Cash for which no investments are directed shall be automatically
invested in such investment or investments as the Employer or other
Named Investment Fiduciary shall select from the investments the Service
Company makes available for that purpose unless and until the person
responsible for giving directions directs otherwise. Such automatic
investment shall be made at regular intervals and pursuant to procedures
provided by the Service Company (which procedures may, without
limitation, provide for more frequent intervals only if reinvested
balances exceed a stated amount). Absent a contrary direction in
accordance with the preceding provisions of Section 13.2 the Service
Company is hereby directed to make such automatic investments.
Notwithstanding other provisions of the Plan to the contrary, if another
qualified plan is amended and restated in the form of this Plan, the Employer or
the named investment fiduciary shall have the power to prescribe rules regarding
the investment of the assets held under the other qualified plan until such time
as any resulting reconciliation of Participant Accounts is completed and the
assets may be reinvested in investments permitted under Section 13.4 of the
Plan.
13.4 PERMITTED INVESTMENTS
Except as Section 13.9 may apply, all amounts held in the Trust Fund under the
Plan shall be invested in mutual fund snares and annuities which are offered
through the Service Company, and such other investments as shall be accepted in
writing by the Service Company for availability under the Plan.
All dividends, including capital gain dividends, paid by any mutual fund shall
be reinvested in full and fractional shares of the mutual fund paying the
dividend in the manner specified in the prospectus of the mutual fund, and such
dividends shall be credited to the Trust Fund.
Each of the mutual funds in which the Plan may invest carries its own fees and
expenses, which may include management fees, Rule 12b-1 fees and/or other fees
and expenses, which are described in detail in each fund's prospectus.
Participants who invest in these mutual funds will, as shareholders of those
funds, bear their prorata portion of each fund's fees and expenses. Employer
acknowledges that Prudential Mutual Fund Distributors (PMFD) and Prudential
Securities Incorporated (PSI) may act as distributor of each fund's shares and
that PSI, PMFD and Pruco Securities Corporation (Prusec) are subsidiaries of The
Prudential Insurance Company of America (Prudential) (through which the
Guaranteed Interest Account is offered) and are each affiliated with the Funds
as described in each fund's prospectus. Employer acknowledges that Prudential,
PMFD, PSI and Prusec are not fiduciaries to the Plan, have no obligation to the
Plan or the Participants and are acting solely in their own interest. Employer
further acknowledges that Prudential, PMFD, PSI and Prusec may be deemed to
benefit from advisory and other fees paid to it or its affiliates in connection
with the management and operation of the mutual funds in which the Participants
may invest, from sales charges and contingent deferred sales charges imposed as
described in the prospectus and from fees paid to The Prudential Insurance
Company of America in connection with the Guaranteed Interest Account.
13.5 SHAREHOLDER RIGHTS
The Trustee shall exercise any rights of a shareholder (including voting rights)
with respect to any securities held, but only in accordance with the
instructions of the Participant or the Designated Beneficiary of a deceased
Participant subject to and except as permitted by any applicable rules of the
Securities and Exchange Commission and any national securities exchange.
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13.6 LIQUIDATION OF ASSETS
If the Trustee must liquidate assets in order to make distributions, transfer
assets, or pay fees, expenses or taxes assessed against all or a part of the
Fund, and the Trustee is not instructed as to the liquidation of such assets,
assets will be liquidated in accordance with the rules and procedures
customarily followed by the Service Company, which rules shall be formulated in
a manner to eliminate the potential for exercise of discretion by the Service
Company in the liquidation of assets and shall be applied consistently with
respect to all similarly situated plans in the form of the Prototype Plan;
provided that if a contribution is being made to an affected subaccount as of
the date the Trustee would otherwise be liquidating assets pursuant to this
section, the Trustee may withdraw the necessary amount of cash and invest the
remainder of the contribution in investments in the same proportion as would
have resulted had the withdrawal not been made. The Trustee is expressly
authorized to liquidate assets in order to satisfy the Trust Fund's obligation
to pay the Trustee's compensation if such compensation is not paid on a timely
basis.
13.7 ARBITRATION
This Plan requires that certain controversies be arbitrated as provided below.
In this regard it is to be noted that:
(a) Arbitration is final and binding on the parties.
(b) The parties are waiving their right to seek remedies in court
including the right to jury trial.
(c) Pre-arbitration discovery is generally more limited than and
different from court proceedings.
(d) The arbitrator's award is not required to include factual findings
or legal reasoning and any party's right to appeal or to seek
modification of rulings by the arbitrators is strictly limited.
(e) The panel of arbitrators will typically include a minority of
arbitrators who were or are affiliated with the securities industry.
Unless the following procedure for the resolution of controversies is not
enforceable under ERISA, any controversy arising out of or relating to the Plan,
or with respect to transactions of any kind executed by, through or with the
Service Company or otherwise pertaining to the Plan shall be settled by
arbitration. The arbitration may be before either the National Association of
Securities Dealers, Inc. (NASD) or the New York Stock Exchange, Inc., as
Employer/Employee, as the case may be, may elect and shall be governed by the
laws of the State of New York. If Employer/Employee does not make the above
election by registered mail addressed to PSI at its main office within 5
business days after demand by PSI that Employer/Employee make such election,
then PSI shall have the right to elect the arbitration tribunal of its choice.
Notice preliminary to, in conjunction with or incident to arbitration, may be
sent to Employer/Employee by mail and personal service is hereby waived.
Judgment upon any award rendered by the arbitrators may be entered in any court
having jurisdiction thereof, without notice to Employer/Employee.
No person shall bring a putative or certified class action to arbitration, nor
seek to enforce any predispute arbitration agreement against any person who has
initiated in court a putative class action; or who is a member of a putative
class who has not opted out of the class with respect to any claims encompassed
by the putative class action until: (i) the class certification is denied; or
(ii) the class is decertified; or (iii) the customer is excluded from the class
by the court. Such forbearance to enforce an agreement to arbitrate shall not
constitute a waiver of any rights under this agreement except to the extent
stated herein.
13.8 PARTICIPANT LOANS
Unless otherwise specified in the Adoption Agreement, Participant Loans will not
be permitted. If permitted by the Adoption Agreement, a Participant may make
application to the Employer requesting a loan from the Fund. Loans shall be made
available to all Participants on a reasonably equivalent basis and shall not be
made available to highly compensated employees who are Participants in amounts
greater than made available to all other Participants. The Employer will
administer all Participant Loans unless the Trustee otherwise agrees in writing
to accept these duties. Loan administration duties shall include, but are not
limited to: approving or disapproving loan applications from Participants, loan
origination and closing, providing proper disclosures to Participant borrowers
under applicable federal and state lending laws, notifying Participant borrowers
of default, and col-
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lecting current and past due payments on such loans. The Employer will notify
the Trustee of any loan to be made from the Fund. The Trustee will reflect the
amount of each such loan and its repayments on records of the Fund. Any loan
granted hereunder shall be made subject to the following rules:
(a) No loan when aggregated with any outstanding Participant loan(s),
shall exceed the lesser of (i) $50,000 reduced by the excess, if any, of
the highest outstanding balance of loans during the one year period
ending on the day before the loan is made, over the outstanding balance
of loans from the Plan on the date the loan is made or (ii) one-half of
the fair market value of a Participant's vested account balance built up
from Employer Contributions, Voluntary Contributions, and Rollover
Contributions. For the purpose of the above limitation, all loans from
all plans of the Employer and other members of a group of employers
described in Code Sections 414(b), 414(c), and 414(m) are aggregated.
An assignment or pledge of any portion of the Participant's interest in
the Plan and a loan, pledge, or assignment with respect to any insurance
contract purchased under the Plan, will be treated as a loan under this
paragraph.
(b) All applications must be made on forms provided by the Employer and
must be signed by the Participant.
(c) Any loan granted hereunder shall bear interest at a rate reasonable
at the time of application, considering the purpose of the loan and the
rate being charged by representative commercial banks in the local area
for a similar loan unless the Employer sets forth a different method for
determining loan interest rates in its loan procedures. The loan
agreement shall also provide that the payment of principal and interest
be amortized in level payments not less frequently than quarterly.
(d) The term of such loan shall not exceed five years except in the case
of a loan for the purpose of acquiring any house, apartment,
condominium, or mobile home (not used on a transient basis) which is
used or is to be used within a reasonable time as the principal
residence of the Participant. The term of such loan shall be determined
by the Employer considering the maturity dates quoted by representative
commercial banks in the local area for a similar loan.
(e) The principal and interest paid by a Participant on his or her loan
shall be credited to the Fund in the same manner as for any other Plan
investment. Loans will be treated as segregated investments of the
individual Participants.
(f) If a Participant's loan application is approved by the Employer,
such Participant shall be required to sign a note, loan agreement, and
assignment of one-half of his or her interest in the Fund as collateral
for the loan. The Participant, except in the case of a profit-sharing
plan satisfying the requirements of paragraph 8.7, must obtain the
consent of his or her Spouse, if any, within the 90 day period before
the time his or her account balance is used as security for the loan. A
new consent is required if the account balance is used for any
renegotiation, extension, renewal or other revision of the loan,
including an increase in the amount thereof. The consent must be
written, must acknowledge the effect of the loan, and must be witnessed
by a plan representative or notary public. Such consent shall thereafter
be binding with respect to the consenting Spouse or any subsequent
Spouse.
(g) If a valid Spousal consent has been obtained, then, notwithstanding
any other provision of this Plan, the portion of the Participant's
vested account balance used as a security interest held by the Plan by
reason of a loan outstanding to the Participant shall be taken into
account for purposes of determining the amount of the account balance
payable at the time of death or distribution, but only if the reduction
is used as repayment of the loan. If less than 100% of the Participant's
vested account balance (determined without regard to the preceding
sentence) is payable to the surviving Spouse, then the account balance
shall be adjusted by first reducing the vested account balance by the
amount of the security used as repayment of the loan, and then
determining the benefit payable to the Surviving Spouse.
(h) The Employer may also require additional collateral in order to
adequately secure the loan.
(i) A Participant's loan shall immediately become due and payable if
such Participant terminates
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<PAGE> 51
employment for any reason or fails to make a principal and/or interest
payment as provided in the loan agreement. If such Participant
terminates employment, the Employer shall immediately request payment of
principal and interest on the loan. If the Participant refuses payment
following termination, the Employer shall reduce the Participant's
vested account balance by the remaining principal and interest on his or
her loan. If the Participant's vested account balance is less than the
amount due, the Employer shall take whatever steps are necessary to
collect the balance due directly from the Participant. However, no
foreclosure on the Participant's note or attachment of the Participant's
account balance will occur until a distributable event occurs in the
Plan.
(j) No loans will be made to Owner-Employees (as defined in paragraph
1.50) or Shareholder-Employees (as defined in paragraph 1.74), unless an
exemption from the prohibited transactions rules is first obtained from
the Department of Labor.
(k) If a Participant requests a loan, the funds to be loaned will be
taken from the subaccount or subaccounts specified by the Participant
or, in the absence of such a specification, form the subaccounts in the
order specified in Section 6.10 pertaining to withdrawals. If specific
assets of the Trust Fund are allocable to individual Participants'
Accounts, such assets equal in value to the amount of the loan shall be
sold at the direction of the Participant to provide the funds to be
loaned.
13.9 INSURANCE POLICIES
Unless otherwise specified in the Adoption Agreement, the insurance provisions
of this Section 13.9 shall not be applicable. If agreed upon by the Trustee and
approved by the Employer in the Adoption Agreement, Employees may elect the
purchase of life insurance policies under the Plan. If elected, the maximum
annual premium for a whole life policy shall not exceed 50% of the aggregate
cumulative Employer contributions allocated to the account of a Participant.
Whole life policies are policies with both nondecreasing death benefits and
nonincreasing premiums. The maximum annual premium for term contracts or
universal life policies and all other policies which are not whole life shall
not exceed 25% of aggregate Employer contributions allocated to the account of
a Participant. The maximum annual premiums for a Participant with both a whole
life and a term contract or universal life policies shall be limited to one-half
of the whole life premiums plus the term premium but shall not exceed 25% of the
aggregate Employer contributions allocated to the account of a Participant. It
may also be elected to have policies purchased on behalf of a Participant's
spouse, their dependents, or any individual in whom the Participant has an
insurable interest. If any policy is maintained on the joint lives of a
Participant and another individual, it may not be maintained under the Plan
should the other individual predecease the Participant. Any policies purchased
under this Plan shall be held subject to the following rules:
(a) The Trustee shall be applicant and owner of any policies issued.
(b) All policies or contracts purchased shall be endorsed as
nontransferable, and must provide that proceeds will be payable to the
Trustee; however, the Trustee shall be required to pay over all proceeds
of the contracts to the Participant's Designated Beneficiary in
accordance with the distribution provisions of this Plan. Under no
circumstances shall the Trust retain any part of the proceeds.
(c) Each Participant shall be entitled to designate a beneficiary under
the terms of any contract issued; however, such designation will be
given to the Trustee which must be the named beneficiary on any policy.
Such designation shall remain in force, until revoked by the
Participant, by filing a new beneficiary form with the Trustee. A
Participant's Spouse will be the Designated Beneficiary of the proceeds
in all circumstances unless a Qualified Election has been made in
accordance with paragraph 8.4. The beneficiary of a deceased Participant
shall receive, in addition to the proceeds of the Participant's policy
or policies, the amount credited to such Participant's investment
account.
(d) A Participant who is uninsurable or insurable at substandard rates,
may elect to receive a reduced amount of insurance, if available, or may
waive the purchase of any insurance.
(e) At the discretion of the Participant, any dividends or credits
earned on a life insurance con-
47
<PAGE> 52
tract shall, either be allocated to the Participant's account in the
Fund, applied in reduction of any premiums thereon, or, if no premiums
are due, applied to increase the proceeds of the life insurance
contract.
(f) If Employer contributions are inadequate to pay all premiums on all
insurance policies, the Trustee may, at the option of the Employer,
utilize other amounts remaining in each Participant's account to pay the
premiums on his or her respective policy or policies, allow the policies
to lapse, reduce the policies to a level at which they may be
maintained, or borrow against the policies on a prorated basis, provided
that the borrowing does not discriminate in favor of the policies on the
lives of Officers, Shareholders, and highly compensated Employees.
(g) On retirement or termination of employment of a Participant, the
Employer shall direct the Trustee to cash surrender the Participant's
policy and credit the proceeds to his or her account for distribution
under the terms of the Plan. However, before so doing, the Trustee shall
first offer to distribute the policy to the Participant as a part of the
benefit distribution. If a Participant on whose life an insurance policy
is held under the Plan does not make a timely direction regarding the
policy under this Section (g), the Participant shall be deemed to have
directed that the policy be converted into cash to be distributed in the
manner in which the balance of the Participant's Account is to be
distributed. All distributions resulting from the application of this
paragraph shall be subject to the Joint and Survivor Annuity Rules of
Article VIII, if applicable.
(h) The Employer shall be solely responsible to see that these insurance
provisions are administered properly and that if there is any conflict
between the provisions of this Plan and any insurance contracts issued
that the terms of this Plan will control.
ARTICLE XIV - TOP-HEAVY PROVISIONS
14.1 APPLICABILITY OF RULES
If the Plan is or becomes Top-Heavy in any Plan Year beginning after 1983, the
provisions of this Article will supersede any conflicting provisions in the Plan
or Adoption Agreement.
14.2 MINIMUM CONTRIBUTION
Notwithstanding any other provision in the Employer's Plan, for any Plan Year in
which the Plan is Top-Heavy or Super Top-Heavy, the aggregate Employer
contributions and forfeitures allocated on behalf of any Participant (without
regard to any Social Security contribution) under this Plan and any other
Defined Contribution Plan of the Employer shall be lesser of 3% of such
Participant's Compensation or the largest percentage of Employer contributions
and forfeitures, as a percentage of the Key Employee's annual Compensation
allocated on behalf of any Key Employee for that year.
Each Participant who is employed by the Employer on the last day of the Plan
Year shall be entitled to receive an allocation of the Employer's minimum
contribution for such Plan Year. The minimum allocation applies even though
under other Plan provisions the Participant would not otherwise be entitled to
receive an allocation, or would have received a lesser allocation for the year
because the Participant fails to make Mandatory Contributions to the Plan, the
Participant's Compensation is less than a stated amount, or the Participant
fails to complete 1,000 Hours of Service (or such lesser number designated by
the Employer in the Adoption Agreement) during the Plan Year. A Paired
profit-sharing plan designated to provide the minimum Top-Heavy contribution
must do so regardless of profits. An Employer may make the minimum Top-Heavy
contribution available to all Participants or just non-Key Employees.
For purposes of computing the minimum allocation, Compensation shall mean
Compensation as defined in the second paragraph of paragraph 1.12 of the Plan.
The Top-Heavy minimum contribution does not apply to any Participant to the
extent the Participant is covered under any other plan(s) of the Employer and
the Employer has provided in Section 11 of the Adoption Agreement that the
minimum allocation or benefit requirements applicable to Top-Heavy Plans will be
met in the other plan(s).
If a Key Employee makes an Elective Deferral or has an allocation of Matching
Contributions made to his or her account, a Top-Heavy minimum will be required
for non-Key Employees who are Participants, however, neither Elective Deferrals
by nor Matching Contributions to non-Key Employees
48
<PAGE> 53
may be taken into account for purposes of satisfying the top-heavy Minimum
Contribution requirement.
14.3 MINIMUM VESTING
For any Plan Year in which this Plan is Top-Heavy, the minimum vesting schedule
elected by the Employer in the Adoption Agreement will automatically apply to
the Plan. If the vesting schedule selected by the Employer in the Adoption
Agreement is less liberal than the allowable schedule, the schedule will
automatically be modified. If the vesting schedule under the Employer's Plan
shifts in or out of the Top-Heavy schedule for any Plan Year, such shift is an
amendment to the vesting schedule and the election in paragraph 9.8 of the Plan
applies. The minimum vesting schedule applies to all accrued benefits within the
meaning of Code Section 411(a)(7) except those attributable to Employee
contributions, including benefits accrued before the effective date of Code
Section 416 and benefits accrued before the Plan became Top-Heavy. Further, no
reduction in vested benefits may occur in the event the Plan's status as Top-
Heavy changes for any Plan Year. However, this paragraph does not apply to the
account balances of any Employee who does not have an Hour of Service after the
Plan initially becomes Top-Heavy and such Employee's account balance
attributable to Employer contributions and forfeitures will be determined
without regard to this paragraph.
14.4 LIMITATIONS ON ALLOCATIONS
In any Plan Year in which the Top-Heavy Ratio exceeds 90% (i.e., the Plan
becomes Super Top-Heavy), the denominators of the Defined Benefit Fraction (as
defined in paragraph 1.15) and Defined Contribution Fraction (as defined in
paragraph 1.18) shall be computed using 100% of the dollar limitation instead of
125%.
ARTICLE XV - AMENDMENT AND TERMINATION
15.1 AMENDMENT BY SPONSOR
The Sponsor may amend any or all provisions of this Plan and Trust at any time
without obtaining the approval or consent of any Employer which has adopted this
Plan and Trust provided that no amendment shall authorize or permit any part of
the corpus or income of the Fund to be used for or diverted to purposes other
than for the exclusive benefit of Participants and their beneficiaries, or
eliminate an optional form of distribution. In the case of a mass-submitted
plan, the mass-submitter shall amend the Plan on behalf of the Sponsor.
15.2 AMENDMENT BY EMPLOYER
The Employer may amend any option in the Adoption Agreement, and may include
language as permitted in the Adoption Agreement,
(a) to satisfy Code Section 415, or
(b) to avoid duplication of minimums under Code Section 416, because of
the required aggregation of multiple plans.
The Employer may add certain model amendments published by the Internal Revenue
Service which specifically provide that their adoption will not cause the Plan
to be treated as an individually designed plan for which the Employer must
obtain a separate determination letter.
If the Employer amends the Plan and Trust other than as provided above, the
Employer's Plan shall no longer participate in this Prototype Plan and will be
considered an individually designed plan.
15.3 TERMINATION
Employers shall have the right to terminate their Plans upon 60 days notice in
writing to the Trustee. If the Plan is terminated, partially terminated, or if
there is a complete discontinuance of contributions under a profit-sharing plan
maintained by the Employer, all amounts credited to the accounts of Participants
shall vest and become nonforfeitable. In the event of a partial termination,
only those who are affected by such partial termination shall be fully vested.
In the event of termination, the Employer shall direct the Trustee with respect
to the distribution of accounts to or for the exclusive benefit of Participants
or their beneficiaries. The Trustee shall dispose of the Fund in accordance with
the written directions of the Plan Administrator, provided that no liquidation
of assets and payment of benefits, (or provision therefor), shall actually be
made by the Trustee until after it is established by the Employer in a manner
satisfactory to the Trustee, that the applicable requirements, if any, of ERISA
and the Internal Revenue Code governing the termination of employee benefit
plans, have been or are being, complied with, or that appropriate
authorizations, waivers, exemptions, or variances have been, or are being
obtained.
49
<PAGE> 54
15.4 QUALIFICATION OF EMPLOYER'S PLAN
If the adopting Employer fails to attain or retain Internal Revenue Service
qualification, such Employer's Plan shall no longer participate in this
Prototype Plan and will be considered an individually designed plan.
15.5 MERGERS AND CONSOLIDATIONS
(a) In the case of any merger or consolidation of the Employer's Plan
with, or transfer of assets or liabilities of the Employer's Plan to,
any other plan, Participants in the Employer's Plan shall be entitled to
receive benefits immediately after the merger, consolidation, or
transfer which are equal to or greater than the benefits they would have
been entitled to receive immediately before the merger, consolidation,
or transfer if the Plan had then terminated.
(b) Any corporation into which the Trustee or any successor trustee may
be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Trustee or any
successor trustee may be a party, or any corporation to which all or
substantially all the trust business of the Trustee or any successor
trustee may be transferred, shall be the successor of such Trustee
without the filing of any instrument or performance of any further act,
before any court.
15.6 RESIGNATION AND REMOVAL
The Trustee may resign by written notice to the Employer which shall be
effective 60 days after delivery. The Employer may discontinue its participation
in this Prototype Plan and Trust effective upon 60 days written notice to the
Sponsor. In such event the Employer shall, prior to the effective date thereof,
amend the Plan to eliminate any reference to this Prototype Plan and Trust and
appoint a successor trustee or arrange for another funding agent. The Trustee
shall deliver the Fund to its successor on the effective date of the resignation
or removal, or as soon thereafter as practicable, provided that this shall not
waive any lien the Trustee may have upon the Fund for its compensation or
expenses. If the Employer fails to amend the Plan and appoint a successor
trustee, or other funding agent within the said 60 days, or such longer period
as the Trustee may specify in writing, the Plan shall be deemed individually
designed and the Employer shall be deemed the successor trustee. The Employer
must then obtain its own determination letter.
15.7 QUALIFICATION OF PROTOTYPE
The Sponsor intends that this Prototype Plan will meet the requirements of the
Code as a qualified Prototype Retirement Plan and Trust. Should the Commissioner
of Internal Revenue or any delegate of the Commissioner at any time determine
that the Plan and Trust fails to meet the requirements of the Code, the Sponsor
will amend the Plan and Trust to maintain its qualified status.
ARTICLE XVI - GOVERNING LAW
Construction, validity and administration of the Prototype Plan and Trust, and
any Employer Plan and Trust as embodied in the Prototype document and
accompanying Adoption Agreement, shall be governed by Federal law to the extent
applicable and to the extent not applicable by the laws of the
State/Commonwealth in which the principal office of the Sponsor is located.
50
<PAGE> 55
INTERNAL REVENUE SERVICE Department of the Treasury
Plan Description: Prototype Standardized Profit Sharing Plan with CODA
FFN: 50296321903-001 Case: 9400380 EIN: 13-3408212 Washington, DC 20224
BPD: 03 Plan: 001 Letter Serial No: D256803b
Person to Contact: Mr. Dua
PRUDENTIAL MUTUAL FUND MANAGEMENT INC
Telephone Number: (202) 622-8380
1 SEAPORT PLAZA
Refer Reply to: CP:E:EP:Q:3
NEW YORK, NY 10292
Date: 03/11/94
Dear Applicant:
In our opinion, the amendment to the form of the plan identified above does not
in and of itself adversely affect the plan's acceptability under section 401 of
the Internal Revenue Code. This opinion relates only to the amendment to the
form of the plan. It is not an opinion as to the acceptability of any other
amendment or of the form of the plan as a whole, or as to the effect of other
Federal or local statutes.
You must furnish a copy of this letter to each employer who adopts this plan.
You are also required to send a copy of the approved form of the plan, any
approved amendments and related documents to each Key District Director of
Internal Revenue Service in whose jurisdiction there are adopting employers.
Our opinion on the acceptability of the form of the plan is not a ruling or
determination as to whether an employer's plan qualifies under Code section
401(a). An employer who adopts this plan will be considered to have a plan
qualified under Code section 401(a) provided all terms of the plan are
followed, and the eligibility requirements and contribution or benefit
provisions are not more favorable for highly compensated employees than for
other employees. Except as stated below, the Key District Director will not
issue a determination letter with regard to this plan.
Our opinion does not apply to the form of the plan for purposes of Code section
401(a)(16) if: (1) an employer ever maintained another qualified plan for one
or more employees who are covered by this plan, other than a specified paired
plan within the meaning of section 7 of Rev. Proc. 89-9, 1989-1 C.B. 780; or
(2) after December 31, 1985, the employer maintains a welfare benefit fund
defined in Code section 419(e), which provides postretirement medical benefits
allocated to separate accounts for key employees as defined in Code section
419(d)(3).
An employer that has adopted a standardized plan may not rely on this opinion
letter with respect to: (1) whether any amendment or series of amendments to
the plan satisfies the nondiscrimination requirements of section
1.401(a)(4)-5(a) of the regulations, except with respect to plan amendments
granting past service that meet the safe harbor described in section
1.401(a)(4)-5(a)(5) and are not part of a pattern of amendments that
significantly discriminates in favor of highly compensated employees; or (2)
whether the plan satisfies the effective availability requirement of section
1.401(a)(4)-4(c) of the regulations with respect to any benefit, right or
feature.
An employer that has adopted a standardized plan as an amendment to a plan
other than a standardized plan may not rely on this opinion letter with respect
to whether a benefit, right or other feature that is prospectively eliminated
satisfies the current availability requirements of section 1.401(a)-4 of the
regulations.
<PAGE> 56
PRUDENTIAL MUTUAL FUND MANAGEMENT I
FFN: 50296321903-001
Page 2
The employer may request a determination (1) as to whether the plan, considered
with all related qualified plans and, if appropriate, welfare benefit funds,
satisfies the requirements of Code section 401(a)(16) as to limitations on
benefits and contributions in Code section 415; (2) regarding the
nondiscriminatory effect of grants of past service; and (3) with respect to
whether a prospectively eliminated benefit, right or feature satisfies the
current availability requirements.
Our opinion does not apply to the form of the plan for purposes of section
401(a) of the Code unless the terms of the plan, as adopted or amended, that
pertain to the requirements of sections 401(a)(4), 401(a)(5), 401(a)(17),
401(l), 410(b) and 414(s) of the Code, as amended by the Tax Reform Act of 1986
or subsequent legislation, (a) are made effective retroactively to the first
day of the first plan year beginning after December 31, 1988 (or such other
date on which these requirements first became effective with respect to this
plan); or (b) are made effective no later than the first day on which the
employer is no longer entitled, under regulations, to rely on a reasonable,
good faith interpretation of these requirements, and the prior provisions of
the plan constitute such an interpretation.
This letter with respect to the amendment to the form of the plan does not
affect the applicability to the plan of the continued, interim and extended
reliance provisions of sections 13 and 17.03 of Rev. Proc. 89-9, 1989-1 C.B.
780. The applicability of such provisions may be determined by reference to the
initial opinion letter issued with respect to the plan.
If you, the sponsoring organization, have any questions concerning the IRS
processing of this case, please call the above telephone number. This number is
only for use of the sponsoring organization. Individual participants and/or
adopting employers with questions concerning the plan should contact the
sponsoring organization. The plan's adoption agreement must include the
sponsoring organization's address and telephone number for inquiries by
adopting employers.
If you write to the IRS regarding this plan, please provide your telephone
number and the most convenient time for us to call in case we need more
information. Whether you call or write, please refer to the Letter Serial Number
and File Folder Number shown in the heading of this letter.
You should keep this letter as a permanent record. Please notify us if you
modify or discontinue sponsorship of this plan.
Sincerely yours,
[SIG]
Chief Employee Plans Qualifications Branch
<PAGE> 1
EXHIBIT 10.8
VALLE DE ORO BANK, N.A.
1994 STOCK OPTION PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1. INTRODUCTION..................................................... 1
ARTICLE 2. ADMINISTRATION................................................... 1
2.1 The Committee................................................... 1
2.2 Disinterested Directors......................................... 1
2.3 Committee Responsibilities...................................... 1
ARTICLE 3. LIMITATION ON AWARDS............................................. 2
ARTICLE 4. ELIGIBILITY...................................................... 2
4.1 General Rule.................................................... 2
4.2 Non-Employee Directors.......................................... 2
4.3 Ten-Percent Shareholders........................................ 3
4.4 Attribution Rules............................................... 3
4.5 Outstanding Stock............................................... 3
ARTICLE 5. TERMS OF OPTIONS................................................. 3
5.1 Stock Option Agreement.......................................... 3
5.2 Options Nontransferable......................................... 4
5.3 Number of Shares; Tax Status.................................... 4
5.4 Exercise Price.................................................. 4
5.5 Exercisability and Term......................................... 4
5.6 Modification, Extension and Assumption of Options............... 4
ARTICLE 6. PAYMENT FOR OPTION SHARES........................................ 5
6.1 General Rule..................................................... 5
ARTICLE 7. PROTECTION AGAINST DILUTION...................................... 5
7.1 General.......................................................... 5
7.2 Reorganizations.................................................. 5
7.3 Reservation of Rights............................................ 5
ARTICLE 8. LIMITATION OF RIGHTS............................................. 5
8.1 Employment Rights................................................ 5
8.2 Shareholders' Rights............................................. 6
8.3 Government Regulations........................................... 6
ARTICLE 9. WITHHOLDING TAXES................................................ 6
9.1 General.......................................................... 6
9.2 Share Withholding................................................ 6
ARTICLE 10. FUTURE OF THE PLAN............................................... 6
10.1 Term of the Plan................................................. 6
10.2 Amendment or Termination......................................... 7
10.3 Effect of Amendment or Termination............................... 7
ARTICLE 11. DEFINITIONS...................................................... 7
ARTICLE 12. EXECUTION........................................................ 8
</TABLE>
-i-
<PAGE> 3
VALLE DE ORO BANK, N.A.
1994 STOCK OPTION PLAN
ARTICLE 1. INTRODUCTION.
The Plan was adopted by the Board on April 20, 1994, subject to approval by
the Bank's shareholders at the 199_ annual meeting of shareholders. The purpose
of the Plan is to promote the long-term success of the Bank and the creation of
shareholder value by (a) encouraging Non-Employee Directors and Key Employees to
focus on critical long-range objectives, (b) encouraging the attraction and
retention of Non-Employee Directors and Key Employees with exceptional
qualifications and (c) linking Non-Employee Directors and Key Employees directly
to shareholder interests through increased stock ownership. The Plan seeks to
achieve this purpose by providing for awards in the form of Options, which may
constitute incentive stock options or nonstatutory stock options.
The Plan shall be governed by, and construed in accordance with, the laws
of the State of California.
ARTICLE 2. ADMINISTRATION.
2.1 The Committee. The Plan shall be administered by the Committee. The
Committee shall consist of two or more disinterested directors of the Bank, who
shall be appointed by the Board.
2.2 Disinterested Directors. A person shall be deemed to be "disinterested"
only if he or she, during the 12 months before serving on the Committee, has not
been granted or awarded equity securities under this Plan or under any other
plan of the Bank or an affiliate of the Bank. The foregoing notwithstanding, a
Non-Employee Director shall not fail to qualify as "disinterested" merely
because he or she is eligible for the grant of Options within the limitations
set forth in Section 4.2.
2.3 Committee Responsibilities. The Committee shall select the Non-Employee
Directors and Key Employees who are to receive Options under the Plan, determine
the number, vesting requirements and other conditions of such Options, interpret
the Plan, and make all other decisions relating to the operation of the Plan.
The Committee may adopt such rules or guidelines as it deems appropriate to
implement the Plan. The Committee's determinations under the Plan shall be final
and binding on all persons.
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<PAGE> 4
ARTICLE 3. LIMITATION ON AWARDS.
The aggregate number of Options awarded under the Plan shall not exceed
250,000. If any Options are forfeited, lapse, or terminate for any other reason
before being exercised, then such Options shall again become available for
awards under the Plan. The limitation of this Article 3 shall be subject to
adjustment pursuant to Article 7.
ARTICLE 4. ELIGIBILITY.
4.1 General Rule. Only Non-Employee Directors and Key Employees shall be
eligible for designation as Optionees by the Committee. In addition, only Key
Employees shall be eligible for the grant of ISOs.
4.2 Non-Employee Directors. Any other provision of the Plan
notwithstanding, the participation of Non-Employee Directors in the Plan shall
be subject to the following restrictions:
(a) Non-Employee Directors shall receive no grants other than the NSOs
described in this Section 4.2.
(b) Each Non-Employee Director shall receive an NSO covering 1,000 Common
Shares on July 1, 1994, if he or she is serving as a member of the Board on that
date. Each Non-Employee Director who is initially elected or appointed to the
Board after July 1, 1994, shall receive an NSO covering 1,000 Common Shares on
the first business day after his or her initial election or appointment to the
Board. (The number of Common Shares included in an NSO granted under this
Subsection (b) shall be subject to adjustment under Article 7.) NSOs granted
under this Subsection (b) shall become exercisable in equal annual installments
over the five-year period following the date of grant.
(c) On the first business day following the conclusion of each regular
annual meeting of the Bank's shareholders in each even numbered year after the
year 1995, (1996, 1998, etc.) each Non-Employee Director who is a member of the
Board on such first business day shall receive an NSO covering 2,000 Common
Shares (subject to adjustment under Article 7), except that such NSO shall not
be granted in the calendar year in which the same Non-Employee Director received
the NSO described in Subsection (b) above. NSOs granted under this Subsection
(c) shall become exercisable in equal annual installments over the five year
period following the date of grant.
(d) All NSOs granted to a Non-Employee Director under this Section 4.2
shall become exercisable in full in the event of the termination of such
Non-Employee Director's service because of death, total and permanent disability
or retirement at or after age 65.
-2-
<PAGE> 5
(e) The Exercise Price under all NSOs granted to a NonEmployee Director
under this Section 4.2 shall be equal to 100 percent of the Fair Market Value of
a Common Share on the date of grant, payable in cash or in one of the forms
described in Sections 6.2 or 6.3.
(f) All NSOs granted to a Non-Employee Director under this Section 4.2
shall terminate on the earliest of (i) the 10th anniversary of the date of
grant, (ii) the date three months after the termination of such Non-Employee
Director's service for any reason other than death or total and permanent
disability or (iii) the date 12 months after the termination of such
Non-Employee Director's service because of death or total and permanent
disability.
4.3 Ten-Percent Shareholders. A Key Employee who owns more than 10 percent
of the total combined voting power of all classes of outstanding stock of the
Bank or any of its Subsidiaries shall not be eligible for the grant of an ISO
unless (a) the Exercise Price under such ISO is at least 110 percent of the Fair
Market Value of a Common Share on the date of grant and (b) such ISO by its
terms is not exercisable after the expiration of five years from the date of
grant.
4.4 Attribution Rules. For purposes of Section 4.3, in determining stock
ownership, a Key Employee shall be deemed to own the stock owned (directly or
indirectly) by or for his or her brothers, sisters, spouse, ancestors and lineal
descendants. Stock owned (directly or indirectly) by or for a corporation,
partnership, estate or trust shall be deemed to be owned proportionately by or
for its shareholders, partners or beneficiaries. Stock with respect to which the
Key Employee holds an option shall not be counted.
4.5 Outstanding Stock. For purposes of Section 4.3, "outstanding stock"
shall include all stock actually issued and outstanding immediately after the
grant of the ISO to the Key Employee. "Outstanding stock" shall not include
shares authorized for issuance under outstanding options held by the Key
Employee or by any other person.
ARTICLE 5. TERMS OF OPTIONS.
5.1 Stock Option Agreement. Each grant of an Option under the Plan shall be
evidenced by a Stock Option Agreement between the Optionee and the Bank. Such
Option shall be subject to all applicable terms and conditions of the Plan and
may be subject to any other terms and conditions which are not inconsistent with
the Plan and which the Committee deems appropriate for inclusion in a Stock
Option Agreement. Subject to Section 4.2, the provisions of the various Stock
Option Agreements entered into under the Plan need not be identical. If the
optionee is a Key Employee, the Committee may designate all or any part of the
option as an ISO.
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<PAGE> 6
5.2 Options Nontransferable. No Option granted under the Plan shall be
transferable by the Optionee other than by will, by a beneficiary designation
executed by the Optionee and delivered to the Bank or by the laws of descent and
distribution. An Option may be exercised during the lifetime of the Optionee
only by him or her or by his or her guardian or legal representative. No Option
or interest therein may be transferred, assigned, pledged or hypothecated by the
Optionee during his or her lifetime, whether by operation of law or otherwise,
or be made subject to execution, attachment or similar process.
5.3 Number of Shares; Tax Status. Each Stock Option Agreement shall specify
the number of Shares subject to the option and shall provide for the adjustment
of such number in accordance with Article 7. The Stock Option Agreement shall
also specify whether the Option is an ISO or an NSO.
5.4 Exercise Price. Each Stock Option Agreement shall specify the Exercise
Price. The Exercise Price under an ISO shall not be less than 100 percent of the
Fair Market Value of a Common Share on the date of grant, except as otherwise
provided in Section 4.3. The Exercise Price under an NSO shall not be less than
100 percent of the Fair Market Value of a Common Share on the date of grant.
Subject to the preceding two sentences, the Exercise Price under any Option
shall be determined by the Committee. The Exercise Price shall be payable in
accordance with Article 6.
5.5 Exercisability and Term. Each Stock Option Agreement shall specify the
date when all or any installment of the Option is to become exercisable. The
Stock Option Agreement shall also specify the term of the Option. The term of an
Option shall in no event exceed 10 years from the date of grant, and Section 4.3
may require a shorter term for an ISO. Subject to the preceding sentence, the
Committee shall determine when all or any part of an Option is to become
exercisable and when such Option is to expire. Subject to Section 4.2, a Stock
Option Agreement may provide for accelerated exercisability upon the Optionee's
death, disability or retirement or other events and may provide for expiration
prior to the end of its term in the event of the termination of the Optionee's
service.
5.6 Modification, Extension and Assumption of Options. Within the
limitations of the Plan, the Committee may modify, extend or assume outstanding
options or may accept the cancellation of outstanding options (whether granted
by the Bank or by another issuer) in return for the grant of new options for the
same or a different number of shares and at the same or a different exercise
price. The foregoing notwithstanding, no modification of an Option shall,
without the consent of the Optionee, alter or impair his or her rights or
obligations under such Option.
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<PAGE> 7
ARTICLE 6. PAYMENT FOR OPTION SHARES.
6.1 General Rule. The entire Exercise Price of Common Shares issued upon
exercise of Options shall be payable in cash at the time when such Common Shares
are purchased.
ARTICLE 7. PROTECTION AGAINST DILUTION.
7.1 General. In the event of a subdivision of the outstanding Common
Shares, a declaration of a dividend payable in Common Shares, a declaration of a
dividend payable in a form other than Common Shares in an amount that has a
material effect on the price of Common Shares, a combination or consolidation of
the outstanding Common Shares (by reclassification or otherwise) into a lesser
number of Common Shares, a recapitalization, a spinoff or a similar occurrence,
the Committee shall make appropriate adjustments in one or more of (a) the
number of Options available for future awards under Article 3, (b) the number of
Options included in awards to Non-Employee Directors under Section 4.2, (c) the
number of Common Shares covered by each outstanding Option or (d) the Exercise
Price under each outstanding Option.
7.2 Reorganizations. In the event that the Bank is a party to a merger or
other reorganization, outstanding Options shall be subject to the agreement of
merger or reorganization. Such agreement may provide, without limitation, for
the assumption of outstanding Options by the surviving corporation or its
parent, for their continuation by the Bank (if the Bank is a surviving
corporation), for accelerated vesting or for settlement in cash.
7.3 Reservation of Rights. Except as provided in this Article 7, a
Participant shall have no rights by reason of any subdivision or consolidation
of shares of stock of any class, the payment of any stock dividend or any other
increase or decrease in the number of shares of stock of any class. Any issue by
the Bank of shares of stock of any class, or securities convertible into shares
of stock of any class, shall not affect, and no adjustment by reason thereof
shall be made with respect to, the number or Exercise Price of Common Shares
subject to an Option. The grant of an Option pursuant to the Plan shall not
affect in any way the right or power of the Bank to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure, to merge or consolidate or to dissolve, liquidate, sell or transfer
all or any part of its business or assets.
ARTICLE 8. LIMITATION OF RIGHTS.
8.1 Employment Rights. Neither the Plan nor any Option granted under the
Plan shall be deemed to give any individual a right to remain an employee or
director of the Bank or a Subsidiary. The Bank and its Subsidiaries reserve the
right to
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<PAGE> 8
terminate the service of any employee or director at any time and for any
reason.
8.2 Shareholders' Rights. An Optionee shall have no dividend rights, voting
rights or other rights as a shareholder with respect to any Common Shares
covered by his or her Option prior to the issuance of a stock certificate for
such Common Shares. No adjustment shall be made for cash dividends or other
rights for which the record date is prior to the date when such certificate is
issued, except as expressly provided in Article 7.
8.3 Government Regulations. Any other provision of the Plan
notwithstanding, the obligations of the Bank with respect to Common Shares to be
issued pursuant to the Plan shall be subject to all applicable laws, rules and
regulations and such approvals by any governmental agencies or stock exchanges
as may be required. The Bank reserves the right to restrict, in whole or in
part, the delivery of Common Shares pursuant to any Option until such time as
any legal requirements or regulations have been met relating to the issuance of
such Common Shares, to their registration or qualification (or exemption from
registration or qualification) under the Securities Act of 1933, as amended, or
any applicable state securities laws, or to their listing on any stock exchange.
ARTICLE 9. WITHHOLDING TAXES.
9.1 General. To the extent required by applicable federal, state, local or
foreign law, an Optionee shall make arrangements satisfactory to the Bank for
the satisfaction of any withholding tax obligations that arise by reason of an
Option. The Bank shall not be required to issue any Common Shares under the Plan
until such obligations are satisfied.
9.2 Share Withholding. The Committee may permit an Optionee to satisfy all
or part of his or her withholding tax obligations by having the Bank withhold a
portion of any Common Shares that otherwise would be issued to him or her or by
surrendering a portion of any Common Shares that previously were issued to him
or her. Such Common Shares shall be valued at their Fair Market Value on the
date when taxes otherwise would be withheld in cash. The payment of withholding
taxes by assigning Common Shares to the Bank, if permitted by the Committee,
shall be subject to such restrictions as the Committee may impose.
ARTICLE 10. FUTURE OF THE PLAN.
10.1 Term of the Plan. The Plan, as set forth herein, shall become
effective on April 20, 1994, subject to the approval of the Bank's shareholders.
In the event that the shareholders fail to approve the Plan at the 1994 annual
meeting, or any adjournment thereof, any Options granted prior
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<PAGE> 9
to such meeting shall be null and void, and no additional options shall be
granted after such meeting. Any other provision of the Plan notwithstanding, no
Option shall be exercisable prior to such meeting. The Plan shall remain in
effect until it is terminated under Section 10.2, except that no new Options
shall be granted after April 19, 2004.
10.2 Amendment or Termination. The Board may, at any time and for any
reason, amend or terminate the Plan, except that the provisions of Section 4.2
relating to the amount, price and timing of Option grants to Non-Employee
Directors shall not be amended more than once in any six-month period. An
amendment of the Plan shall be subject to the approval of the Bank's
shareholders only to the extent required by applicable laws, regulations or
rules.
10.3 Effect of Amendment or Termination. No Options shall be granted under
the Plan after the termination thereof. The termination of the Plan, or any
amendment thereof, shall not affect any Option previously granted under the
Plan.
ARTICLE 11. DEFINITIONS.
11.1 "Bank" means Valle de Oro Bank, N.A.
11.2 "Board" means the Bank's Board of Directors, as constituted from time
to time.
11.3 "Code" means the Internal Revenue Code of 1986, as amended.
11.4 "Committee" means a committee of the Board, as described in Article 2.
11.5 "Common Share" means one share of the common stock of the Bank.
11.6 "Exercise Price" means the amount for which one Common Share may be
purchased upon exercise of an Option, as specified by the Committee in the
applicable Stock Option Agreement.
11.7 "Fair Market Value" shall mean the fair market value of a Common
Share, as determined by the Committee in good faith.
11.8 "ISO" means an incentive stock option described in section 422(b) of
the Code.
11.9 "Key Employee" means a key common-law employee of the Bank or of a
Subsidiary, as determined by the Committee.
11.10 "Non-Employee Director" means a member of the Board who is not a
common-law employee of the Bank or of a Subsidiary.
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<PAGE> 10
11.11 "NSO" means an employee stock option not described in section 422 or
423 of the Code.
11.12 "Option" means an ISO or NSO granted under the Plan and entitling the
holder to purchase one Common Share.
11.13 "Optionee" means an individual or estate who holds an Option.
11.14 "Plan" means this Valle De Oro Bank, N.A. 1994 Stock Option Plan, as
it may be amended from time to time.
11.15 "Stock Option Agreement" means the agreement between the Bank and an
Optionee which contains the terms, conditions and restrictions pertaining to his
or her Option.
11.16 "Subsidiary" means any corporation, if the Bank and/or one or more
other Subsidiaries own not less than 50 percent of the total combined voting
power of all classes of outstanding stock of such corporation. A corporation
that attains the status of a Subsidiary on a date after the adoption of the Plan
shall be considered a Subsidiary commencing as of such date.
ARTICLE 12. EXECUTION.
To record the adoption of the Plan by the Board, the Bank has caused its
duly authorized officer to affix the corporate name and seal hereto.
VALLE DE ORO BANK, N.A.
/s/ ROLAND C. NICKERSON
----------------------------------------
By Roland C. Nickerson,
-------------------------------------
As Its Assistant Secretary
---------------------------------
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<PAGE> 11
1994 STOCK OPTION PLAN OF VALLE DE ORO BANK, N.A.:
NONQUALIFIED STOCK OPTION AGREEMENT
Valle De Oro Bank, N.A. ("Bank"), hereby grants an option to purchase shares of
its common stock to the optionee named below. The terms and conditions of the
option are set forth in this cover sheet, in the attachment and in the 1994
Stock Option Plan of Valle De Oro Bank, N.A. (the "Plan").
Date of Option Grant:___________________ __, 199__
Name of Optionee: ______________________________________________________________
Optionee's Social Security Number: ______-______-_______
Number of Shares of Bank Common Stock Covered by Option: _______________________
Exercise Price per Share: $____.____
Vesting Start Date: __________ ___, 199__
By signing this cover sheet, you agree to all of the terms
and conditions described in the attachment and in the Plan.
Optionee: ______________________________________________________________________
(Signature)
Bank:___________________________________________________________________________
(Signature)
Title: ______________________________________________
Attachment
- ----------
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<PAGE> 12
1994 STOCK OPTION PLAN OF VALLE DE ORO BANK, N.A.:
NONQUALIFIED STOCK OPTION AGREEMENT
Nonqualified This option is not intended to be an incentive stock option stock
Stock Option option under section 422 of the Internal Revenue Code.
Vesting Your right to exercise this option vests on an annual basis over
the five-year period starting on the Vesting Start Date, as shown
on the cover sheet. The percentage of the total number of shares
for or which this option will be exercisable at any given time is
equal to the product of 20% times the number of complete years of
Bank service that have elapsed since the Vesting Start Date. The
resulting number of shares will be rounded to the nearest whole
number. No part of this option becomes exercisable during the
first twelve months after the Vesting Start Date. Except as
described below, no additional shares become exercisable after
your Bank service has terminated for any reason.
In addition, the entire option vests and will be exercisable in
full in the event of termination of your service from Bank by
reason of your death, your Total and Permanent Disability or your
voluntary retirement at or after age 65. This even applies during
the first twelve months after the Vesting Start Date.
Term Your option will expire in any event at the close of business at
Bank headquarters on the day before the 10th anniversary of the
Date of Grant, as shown on the cover sheet. (It will expire
earlier if your Bank service terminates, as described below.)
Regular If your service as an employee, director, consultant or advisor
Termination of the Bank (or any subsidiary) terminates for any reason except
death or total and permanent disability, then your option will
expire at the close of business at Bank headquarters on the 90th
day after your termination date.
The Bank determines when your service terminates for this
purpose.
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<PAGE> 13
Death If you die as an employee, director, consultant or advisor of the
Bank (or any subsidiary), then your option will expire at the
close of business at Bank headquarters on the date twelve months
after the date of death. During that twelvemonth period, your
estate, heirs or properly designated beneficiaries may exercise
all or part of your option.
Disability If your service as an employee, director, consultant or advisor
of the Bank (or any subsidiary) terminates because of your total
and permanent disability, then your option will expire at the
close of business at Bank headquarters on the date twelve months
after your termination date.
"Total and permanent disability" means that you are unable to
engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be
expected to result in death or which has lasted, or can be
expected to last, for a continuous period of not less than one
year.
Leaves of For purposes of this option, your service does not terminate
Absence when you go on a military leave, a sick leave or another bona
fide leave of absence, if the leave was approved by the Bank in
writing. But your service will be treated as terminating 90 days
after you went on leave, unless your right to return to active
work is guaranteed by law or by a contract. And your service
terminates in any event when the approved leave ends, unless you
immediately return to active work.
The Bank determines which leaves count for this purpose.
Restrictions The Bank will not permit you to exercise this option if the
on Exercise issuance of shares at that time would violate any law or
regulation.
Notice of When you wish to exercise this option, you must notify the Bank
Exercise by filing the proper "Notice of Exercise" form at the address
given on the form. Your notice must specify how many shares you
wish to purchase. Your notice must also specify how your shares
should be registered (in your name only or in your and Your
spouse's names as community property or as joint tenants with
right of survivorship). The notice will be effective when it is
received by the Bank.
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<PAGE> 14
If someone else wants to exercise this option after your death,
that person must prove to the Bank's satisfaction that he or she
is entitled to do so.
Form of When you submit your notice of exercise, you must include payment
Payment of the option price for the shares you are purchasing. Payment
must be made in cash by personal check, a cashier's check or a
money order.
Withholding You will not be allowed to exercise this option unless you make
Taxes acceptable arrangements to pay any withholding taxes that may be
due as a result of the option exercise.
Restrictions By signing this Agreement, you agree not to sell any option
on Resale shares at a time when a sale is prohibited by applicable law,
Bank policies or an agreement between Bank and its underwriters.
This restriction will apply as long as you are an employee of the
Bank (or a subsidiary).
Transfer of Prior to your death, only you may exercise this option. You
Option cannot transfer or assign this option. For instance, you may not
sell this option or use it as security for a loan. If you attempt
to do any of these things, this option will immediately become
invalid. You may, however, dispose of this option by beneficiary
designation or in your will.
Regardless of any marital property settlement agreement, the Bank
is not obligated to honor a notice of exercise from your former
spouse, nor is the Bank obligated to recognize your former
spouse's interest in your option in any other way.
Retention Your option or this Agreement does not give you the right to be
Rights retained by the Bank (or any subsidiaries) in any capacity. The
Bank (and any subsidiaries) reserves the right to terminate your
service at any time, with or without cause.
Stockholder You, or your estate or heirs, have no rights as a stockholder of
Rights Bank until a certificate for your option shares has been issued.
No adjustments are made for dividends or other rights if the
applicable record date occurs before your stock certificate is
issued, except as described in the Plan.
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<PAGE> 15
Adjustments In the event of a stock split, a stock dividend or a similar
change in Bank stock, the number of shares covered by this option
and the exercise price per share may be adjusted pursuant to the
Plan.
Applicable Law This Agreement will be interpreted and enforced under the
laws of the State of California.
The Plan and The text of the Plan is incorporated in this Agreement by
Other Agree- reference.
ments
This Agreement and the Plan constitute the entire understanding
between you and the Bank regarding this option. Any prior
agreements, commitments or negotiations concerning this option
are superseded.
By signing the cover sheet of this Agreement, you agree to all
of the terms and conditions described above and in the Plan.
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<PAGE> 16
1994 STOCK OPTION PLAN OF VALLE DE ORO BANK, N.A.:
INCENTIVE STOCK OPTION AGREEMENT
Valle De Oro Bank, N.A. ("Bank"), hereby grants an option to purchase shares of
its common stock to the optionee named below. The terms and conditions of the
option are set forth in this cover sheet, in the attachment and in the 1994
Stock Option Plan of Valle De. Oro Bank, N.A. (the "Plan").
Date of Option Grant:___________________ __, 199__
Name of Optionee: ______________________________________________________________
Optionee's Social Security Number: ______-______-_______
Number of Shares of Bank Common Stock Covered by Option: _______________________
Exercise Price per Share: $____.____
Vesting Start Date: __________ ___, 199__
By signing this cover sheet, you agree to all of the terms
and conditions described in the attachment and in the Plan.
Optionee: ______________________________________________________________________
(Signature)
Bank:___________________________________________________________________________
(Signature)
Title: ______________________________________________
Attachment
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<PAGE> 17
1994 STOCK OPTION PLAN OF VALLE DE ORO BANK, N.A.:
INCENTIVE STOCK OPTION AGREEMENT
Incentive This option is intended to be an incentive stock option under
Stock option section 422 of the Internal Revenue Code and will be interpreted
accordingly.
Vesting Your right to exercise this option vests on an annual basis over
the five-year period starting on the Vesting Start Date, as shown
on the cover sheet. The percentage of the total number of shares
for which this option will be exercisable at any given time is
equal to the product of 20% times the number of complete years of
Bank service that have elapsed since the Vesting Start Date. The
resulting number of shares will be rounded to the nearest whole
number. No part of this option becomes exercisable during the
first twelve months after the Vesting Start Date. Except as
described below, no additional shares become exercisable after
your Bank service has terminated for any reason.
The entire option vests and will be exercisable in full in the
event of your death. This even applies during the first twelve
months after the Vesting Start Date.
Term Your option will expire in any event at the close of business at
Bank headquarters on the day before the 10th anniversary of the
Date of Grant, as shown on the cover sheet. (It will expire
earlier if your Bank service terminates, as described below.)
Regular If your service as an employee, director, consultant or advisor
Termination of the Bank (or any subsidiary) terminates for any reason except
death or total and permanent disability, then your option will
expire at the close of business at Bank headquarters on the 90th
day after your termination date.
Bank determines when your service terminates for this purpose.
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<PAGE> 18
Death If you die as an employee, director, consultant or advisor of
Bank (or any subsidiary), then your option will expire at the
close of business at Bank headquarters on the date six months
after the date of death. During that six-month period, your
estate, heirs or properly designated beneficiaries may exercise
all or part of your option.
Disability If your service as an employee, director, consultant or advisor
of Bank (or any subsidiary) terminates because of your total and
permanent disability, then your option will expire at the close
of business at Bank headquarters on the date six months after
your termination date.
"Total and permanent disability" means that you are unable to
engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be
expected to result in death or which has lasted, or can be
expected to last, for a continuous period of not less than one
year.
Leaves of For purposes of this option, your service does not terminate when
Absence you go on a military leave, a sick leave or another bona fide
leave of absence, if the leave was approved by Bank in writing.
But your service will be treated as terminating 90 days after you
went on leave, unless your right to return to active work is
guaranteed by law or by a contract. And your service terminates
in any event when the approved leave ends, unless you immediately
return to active work.
The Bank determines which leaves count for this purpose.
Restrictions The Bank will not permit you to exercise this option if the
on Exercise issuance of shares at that time would violate any law or
regulation.
Notice of When you wish to exercise this option, you must notify Bank by
Exercise filing the proper "Notice of Exercise" form at the address given
on the form. Your notice must specify how many shares you wish to
purchase. Your notice must also specify how your shares should be
registered (in your name only or in your and your spouse's names
as community property or as joint tenants with right of
survivorship). The notice will be effective when it is received
by the Bank.
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<PAGE> 19
If someone else wants to exercise this Option after your death,
that person must prove to the Bank's satisfaction that he or she
is entitled to do so.
Form of When you submit your notice of exercise, you must include payment
Payment of the option price for the shares you are purchasing. Payment
must be made in cash by personal check, a cashier's check or a
money order.
Withholding You will not be allowed to exercise this option unless you make
Taxes acceptable arrangements to pay any withholding taxes that may be
due as a result of the option exercise.
Restrictions By signing this Agreement, you agree not to sell any option
on Resale shares at a time when a sale is prohibited by applicable law,
Bank policies or an agreement between Bank and its underwriters.
This restriction will apply as long as you are an employee of
the Bank (or a subsidiary).
Transfer of Prior to your death, only you may exercise this option. You
option cannot transfer or assign this option. For instance, you may not
sell this option or use it as security for a loan. If you attempt
to do any of these things, this option will immediately become
invalid. You may, however, dispose of this option by beneficiary
designation or in your will.
Regardless of any marital property settlement agreement, the Bank
is not obligated to honor a notice of exercise from your former
spouse, nor is the Bank obligated to recognize your former
spouse's interest in your option in any other way.
Retention Your option or this Agreement does not give you the right to be
Rights retained by the Bank (or any subsidiaries) in any capacity. The
Bank (and any subsidiaries) reserves the right to terminate your
service at any time, with or without cause.
Stockholder You, or your estate or heirs, have no rights as a stockholder of
Rights the Bank until a certificate for your option shares has been
issued. No adjustments are made for dividends or other rights if
the applicable record date occurs before your stock certificate
is issued, except as described in the Plan.
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<PAGE> 20
Adjustments In the event of a stock split, a stock dividend or a similar
change in Bank stock, the number of shares covered by this option
and the exercise price per share may be adjusted pursuant to the
Plan.
Applicable Law This Agreement will be interpreted and enforced under the
laws of the State of California.
The Plan and The text of the Plan is incorporated in this Agreement by
Other Agree- reference.
ments
This Agreement and the Plan constitute the entire understanding
between you and the Bank regarding this option. Any prior
agreements, commitments or negotiations concerning this option
are superseded.
By signing the cover sheet of this Agreement, you agree to all
of the terms and conditions described above and In the Plan.
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<PAGE> 1
EXHIBIT 10.9
VALLE DE ORO BANK, N.A.
EMPLOYEE STOCK OWNERSHIP PLAN
Effective January 1, 1998
<PAGE> 2
VALLE DE ORO BANK, N.A.
EMPLOYEE STOCK OWNERSHIP PLAN
TABLE OF CONTENTS
<TABLE>
<S> <C>
Article I - PURPOSE...................................................1
1.1 Exclusive Benefit..........................................1
1.2 No Rights of Employment Granted............................1
Article 11 - DEFINITIONS..............................................2
2.1 Accrued Benefit............................................2
2.2 Administrative Committee...................................2
2.3 Affiliated Employer........................................2
2.4 Beneficiary................................................2
2.5 Cash-Out...................................................2
2.6 Code.......................................................3
2.7 Compensation...............................................3
2.8 Employee...................................................3
2.9 Employer...................................................4
2.10 Employer Account...........................................4
2.11 ERISA......................................................4
2.12 Exempt Loan................................................4
2.13 Fair Market Value..........................................4
2.14 Family Member..............................................5
2.15 Forfeiture.................................................5
2.16 Highly Compensated Employee................................5
2.17 Hour of Service............................................6
2.18 Leave of Absence...........................................8
2.19 Net Profits................................................8
2.20 Normal Retirement Age......................................9
2.21 One Year Break in Service..................................9
2.22 Participant................................................10
2.23 Plan.......................................................10
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
2.24 Plan Administrator.........................................10
2.25 Plan Year..................................................10
2.26 Qualified Election Period..................................10
2.27 Qualified Participant......................................10
2.28 Qualifying Employer Security...............................10
2.29 Retirement.................................................11
2.30 Service....................................................11
2.31 Termination Date...........................................12
2.32 Total and Permanent Disability.............................12
2.33 Total Service for Vesting..................................12
2.34 Trust......................................................13
2.35 Trust Fund.................................................13
2.36 Unallocated Stock Account..................................13
2.37 Year of Service for Accrual of Benefits....................13
2.38 Year of Service for Participation..........................13
2.39 Year of Service for Vesting................................14
Article III - ELIGIBILITY TO PARTICIPATE..............................14
3.1 Initial Entry..............................................14
3.2 Resumption of Participation................................14
Article IV - CONTRIBUTIONS TO THE TRUST...............................15
4.1 Amount of Contributions to Participants....................15
4.2 Manner of Allocation.......................................15
4.3 Permissible Types of Employer Contributions................16
4.4 Interim Allocation to Unallocated Stock Account............16
4.5 General Accounting.........................................16
4.6 Additional Provisions......................................17
Article V - ADMINISTRATION OF ACCOUNTS................................17
5.1 Investments................................................17
5.2 Invest in Single Fund and Reasonable Rules.................17
5.3 Valuation of Assets and Allocation of Changes..............15
5.4 Limitations on Allocations to Each Participant.............15
(a) Defined Contribution Plan Limitations.................15
(b) Defined Benefit Plan Limitations......................20
</TABLE>
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(c) Social Security Retirement Age Limitations............21
(d) Combination Defined Benefit and Defined
Contribution Plan Limitations.........................22
5.5 Designation of Beneficiary.................................23
5.6 Participant Voting and Exercise of Stock Rights............24
Article VI - VESTING..................................................25
6.1 Employer Account Vesting on Death, Retirement,
or Total Permanent Disability..............................25
6.2 Employer Account Vesting on Termination....................25
6.3 Restoration of Forfeitures.................................26
Article VII - DISTRIBUTION OF BENEFITS................................27
7.1 Method of Distribution of Participant and Employer
Accounts...................................................27
7.2 Time of Distribution.......................................27
7.3 Segregation if Installment Distribution....................29
7.4 Non-segregation if Installment Distribution................29
7.5 Distribution After Death of Participant....................29
7.6 Distribution After Death of Beneficiary....................30
7.7 Rollover Contributions and Distributions...................30
7.8 Suspense Account for Terminated Participants...............31
7.9 Unable to Locate Participant or Beneficiary................32
7.10 Repayment of Cash-Out......................................33
7.11 Options of Participants to Sell Stock......................34
7.12 Right of First Refusal.....................................35
7.13 Distribution of Dividends..................................35
7.14 Diversification of Investments.............................36
7.15 Qualified Domestic Relations Orders........................37
Article VIII - DUTIES AND AUTHORITY OF TRUSTEE........................37
8.1 Receive Payments...........................................37
8.2 Evaluate Assets............................................38
8.3 Segregation of Accounts....................................38
8.4 Tax Returns and Reports....................................38
8.5 Powers.....................................................38
</TABLE>
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8.6 Expenses...................................................40
8.7 Litigation.................................................41
8.8 Written Instructions.......................................41
8.9 Appointment of Investment Manager..........................42
8.10 Removal and Resignation of the Trustee.....................42
8.11 Loans from Disqualified Persons............................42
Article IX - DUTIES AND AUTHORITY OF ADMINISTRATIVE COMMITTEE.........44
9.1 Appointment................................................44
9.2 No Discrimination..........................................45
9.3 Majority Action............................................45
9.4 Powers.....................................................45
9.5 Filing Reports.............................................46
9.6 Records and Information....................................46
9.7 Information to Participants................................46
9.8 Compensation of Members....................................46
9.9 Review of Participant's Claims.............................46
9.10 Exercise of Stock Rights...................................47
Article X - MODIFICATIONS FOR TOP HEAVY PLANS.........................47
10.1 Application of Article.....................................47
10.2 Definitions................................................48
(a) Top Heavy Plans.......................................48
(b) Top Heavy Group.......................................48
(c) Key Employee..........................................49
(d) Amounts Included for Computation Purposes.............50
(e) Non-Key Employee......................................50
(f) Top Heavy Accrual.....................................50
10.3 Accelerated Vesting........................................51
10.4 Minimum Contributions......................................52
10.5 Limitation on Compensation Taken into Account
Under Plan.................................................53
10.6 Modification of Defined Benefit and Defined
Contribution Plan Fraction.................................53
</TABLE>
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Article XI - AMENDMENT AND TERMINATION................................54
11.1 Rights to Suspend or Terminate Plan........................54
11.2 Successor Corporation......................................54
11.3 Amendment..................................................54
11.4 One Hundred Percent (100%) Vesting on
Termination of Plan........................................55
11.5 Plan Merger or Consolidation...............................55
Article XII - MISCELLANEOUS...........................................55
12.1 Laws of California to Apply................................55
12.2 Participant Cannot Transfer or Assign Benefits.............56
12.3 Right to Perform Alternative Acts..........................56
12.4 Reversion of Contributions Under Certain
Circumstances..............................................56
12.5 Plan Administrator Agent for Service of Process............57
12.6 Filing Tax Returns and Reports.............................57
12.7 Indemnification............................................57
12.8 Number and Gender..........................................58
12.9 Military Service...........................................58
Article XIII - EXEMPT LOANS...........................................58
13.1 Use of Proceeds............................................58
13.2 Interest Rate..............................................59
13.3 Non-recourse...............................................59
13.4 Limitations on Payments....................................59
13.5 Forfeiture of Qualifying Employer Securities...............60
13.6 Limitation on Future Obligation............................60
</TABLE>
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VALLE DE ORO BANK, N.A.
EMPLOYEE STOCK OWNERSHIP PLAN
This Stock Bonus Employee Stock Ownership Plan and Trust Agreement (Plan) is
made by and between Valle de Oro Bank, N.A., having its principal place of
business at 1234 East Main, El Cajon, CA 92021, herein called "Employer" and
Samuel M. Ciccati, Ph.D. and William V. Ehlen, herein called "Trustees."
Whereas, Employer desires to establish and maintain an employee stock ownership
plan for the benefit of its Employees who shall qualify as participants
(Participants) hereunder;
Therefore, effective January 1, 1998, Employer hereby establishes an employee
stock ownership plan and creates this Trust for the purpose of carrying out such
Plan and Trust on the following terms:
Article I
PURPOSE
1.1 Exclusive Benefit.
This Plan has been executed for the exclusive benefit of the
Participants hereunder and their Beneficiaries. This Plan shall be
interpreted in a manner consistent with this intent and with the
intention of the Employer that this Plan satisfy Internal Revenue Code
(Code) Section 401 and Code Section 501. This Plan is created for the
sole purpose of enabling employees of the Employer to share in its
growth. Under no circumstances shall the Trust Fund ever revert to or be
used or enjoyed by the Employer, except as provided in the Reversion of
Contributions Under Certain Circumstances section below.
1.2 No Rights of Employment Granted.
The establishment of this Plan shall not be considered as giving any
employee the right to be retained in the service of the Employer.
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Article II
DEFINITIONS
The following capitalized words and phrases as used in this Plan and Trust
Document shall have the meanings set forth below.
2.1 Accrued Benefit.
The "Accrued Benefit" is the amount credited to the Employer Account of
a Participant.
2.2 Administrative Committee.
The "Administrative Committee" or "Committee" shall refer to the
Administrative Committee, as defined in the Duties and Authority of
Administrative Committee Article, below.
2.3 Affiliated Employer.
"Affiliated Employer" shall mean the Employer and any corporation which
is a member of a controlled group of corporations (as defined in Code
Section 414(b)) which includes the Employer; any trade or business
(whether or not incorporated) which is under common control (as defined
in Code Section 414(c)) with the Employer; an organization (whether or
not incorporated) which is a member of an affiliated service group (as
defined in Code Section 414(m)) which includes the Employer; and any
other entity required to be aggregated with the Employer pursuant to
regulations under Code Section 414(o).
2.4 Beneficiary
A "Beneficiary" is any person, estate or trust who by operation of law,
or under the terms of the Plan, or otherwise, is entitled to receive any
Accrued Benefit of a Participant under the Plan. A "Designated
Beneficiary" is any individual designated or determined in accordance
with the Designation of Beneficiary section below, except that it shall
not include any person who becomes a Beneficiary by virtue of the laws
of inheritance or intestate succession.
2.5 Cash-Out.
A "Cash-Out" may be involuntary or voluntary.
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An involuntary Cash-Out is a distribution of Accrued Benefit to a former
Participant which meets the following requirements:
(i) The former Participant's entire non-forfeitable Accrued Benefit
distributed to him;
(ii) The present value of the non-forfeitable Accrued Benefit of the
Participant has never exceeded Five Thousand Dollars ($5,000),
and
(iii) The distribution is made on account of the Employee's
termination of participation in the Plan.
A voluntary Cash-Out is a distribution of Accrued Benefits to a former
Participant which meets the following requirements:
(i) The former Participant has voluntarily elected to receive the
distribution; and
(11) The distribution is made on account of the Employee's
termination of participation in the Plan.
2.6 Code.
"Code" refers to the Internal Revenue Code of 1986, as amended.
2.7 Compensation.
"Compensation" refers to all Compensation paid during the Plan Year
under consideration as W-2 income by the Employer to an Employee,
excluding commissions, bonuses, overtime and director's fees. It
excludes all contributions by the Employer to the Plan and to any other
retirement or deferred compensation plan maintained by the Employer and
excludes amounts in excess of One Hundred Fifty Thousand Dollars
($150,000) for the Plan Year or such other amount as may be prescribed
by law under the OBRA '93 annual compensation limit as adjusted by the
Commissioner of Internal Revenue for increases in the cost of living in
accordance with Section 401(a)(17)(B) of the Internal Revenue Code.
2.8 Employee.
An "Employee" is an individual who is employed by the Employer or who is
on a Leave of Absence, and shall include leased Employees
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within the meaning of Code Section 414(n)(2). Directors acting solely in
that capacity and independent contractors shall not be Employees.
2.9 Employer.
The "Employer" shall mean Valle de Oro Bank, N.A. and any Affiliated
Employer.
2.10 Employer Account.
The "Employer Account" is the separate account maintained for each
Participant to which all Employer contributions shall be allocated and
to which forfeitures shall be reallocated.
2.11 ERISA.
"ERlSA" refers to the Employee Retirement Income Security Act of 1974,
as amended.
2.12 Exempt Loan.
"Exempt Loan" shall mean a loan to the Plan by a disqualified person (as
defined in Code Section 4975(e)(2)) or a loan to the Plan which is
guaranteed by a disqualified person. Such loan includes a direct loan of
cash, a purchase-money transaction, and an assumption of the obligation
by the Plan. The Exempt Loan must satisfy the provisions of Treasury
Regulation Section 54.4975-7(b).
2.13 Fair Market Value.
"Fair Market Value" shall mean the closing price (or, if there is no
closing price, then the closing bid price) of Qualifying Employer
Securities as reported on the Composite Tape, or if not reported
thereon, then such price as reported in the trading reports of the
principal securities exchange in the United States on which such
Qualifying Employer Securities are listed, or if the Qualifying Employer
Securities are not listed on a securities exchange in the United States,
the mean between the dealer closing "bid" and "ask" prices on the
over-the-counter market as reported by the National Association of
Securities Dealers Automated Quotation System (NASDAQ), or NASDAQ's
successor, or if not reported on NASDAQ, the Fair Market Value of the
Qualifying Employer Securities as determined by a qualified independent
appraiser meeting requirements similar to those contained in Treasury
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regulations under Code Section 170(a)(1) and Department of Labor
Regulations under ERISA Section 3(18).
2.14 Family Member.
A "Family Member" includes the spouse, lineal ascendants and descendants
of the Employee or former Employee and the spouses of such lineal
ascendants and descendants.
2.15 Forfeiture.
"Forfeiture" refers to the amount of non-vested Accrued Benefits in a
Participant's Employer Account which are reallocated to the Employer
Accounts of other Participants.
2.16 Highly Compensated Employee.
A "Highly Compensated Employee" means a highly compensated active
Employee and a highly compensated former Employee.
A highly compensated active Employee for a determination year includes
any Employee who performs service for the Employer during the
determination year and who:
(i) Was a five percent (5%) owner (as defined in Code Section
416(i)(1)) of the Employer at any time during the determination
year or the look-back year, or
(ii) For the look-back year had compensation from the Employer in
excess of Eighty Thousand Dollars ($80,000.00) (as adjusted
pursuant to Code Section 415(d)) and, if the Employer elects for
such look-back year, was in the top-paid group of Employees for
the look-back year.
An Employee is in the top-paid group of Employees for any year if such
Employee is in the group consisting of the top twenty percent (20%) of
the Employees when ranked on the basis of compensation (as defined in
Code Section 414(q)(4)) paid during such year. For purposes of
determining the number of Employees in the top-paid group, the following
Employees shall be excluded:
(i) Employees who have not completed six (6) months of service;
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(ii) Employees who normally work less than seventeen and one-half
(17.5) hours per week;
(iii) Employees who normally work during not more than six (6) months
during any year;
(iv) Employees who have not attained age twenty-one (21); and
(v) Except to the extent provided in Treasury Regulations, Employees
who are included in a unit of Employees covered by an agreement
which the Secretary of Labor finds to be a collective bargaining
agreement between employee representatives and the Employer.
For this purpose, the determination year shall be the Plan Year unless
the Employer elects a calendar year. The look-back year shall be the
twelve (12) month period immediately preceding the determination year,
or, if elected by the Employer, the calendar year ending with or within
the applicable determination year (or, in the case of a determination
year that is shorter than twelve (12) months, the calendar year ending
with or within the twelve (12) month period ending with the end of the
applicable determination year), or, if elected, the calendar year
immediately preceding the calendar year determination year.
A highly compensated former Employee for a Plan Year includes any
Employee who separated from service (or was deemed to have separated)
prior to such Plan Year, performs no services for the Employer during
such Plan Year, and was a highly compensated active Employee for either
the Plan Year during which the separation occurred (or was deemed to
have occurred) or any Plan Year ending on or after the Employee's
fifty-fifth (55th) birthday.
The determination of who is a Highly Compensated Employee, including the
determinations of the number and identity of Employees in the top-paid
group and the compensation that is considered, will be made in
accordance with Code Section 414(q) and the regulations promulgated
thereunder.
2.17 Hour of Service.
"Hour of Service" means:
(a) Each hour for which an Employee is directly or indirectly
compensated or entitled to Compensation from the Employer for
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the performance of duties during the applicable computation
period;
(b) Each hour for which an Employee is directly or indirectly
compensated or entitled to Compensation from the Employer
(irrespective of whether the employment relationship has
terminated) for reasons other than performance of duties (such
as vacation, holidays, sickness, disability, lay-off, military
duty or leave of absence) during the applicable computation
period; and
(c) Each hour for which back pay is awarded or agreed to by the
Employer, without regard to mitigation of damages.
Hours of Service will be credited for employment with other members of
an affiliated service group (under Code Section 414(m)), a controlled
group of corporations (under Code Section 414(b)), or a group of trades
or businesses under common control (under Code Section 414(c)) of which
the Employer is a member or any other entity required to be aggregated
with the Employer pursuant to regulations under Code Section 414(o).
Hours of Service will also be credited for any individual considered an
Employee for purposes of this Plan under Code Section 414(n).
Notwithstanding subparagraph (b) above, no more than five hundred one
(501) Hours of Service are required to be credited to an Employee on
account of any single continuous period during which the Employee
performs no duties (whether or not such period occurs in a single
computation period), and an hour for which an Employee is directly or
indirectly paid, or entitled to payment, on account of a period during
which no duties are performed is not required to be credited to the
Employee if such payment is made or due under a Plan maintained by the
Employer solely for the purpose of complying with applicable worker's
compensation, unemployment compensation or disability insurance laws. In
addition, Hours of Service are not required to be credited hereunder for
a payment which solely reimburses an Employee for medical or medically
related expenses incurred by the Employee. The provisions of Sections
2530.200b-2(b) and (c) of the Department of Labor Regulations are
incorporated herein by reference.
For purposes of this Hour of Service section, a payment shall be deemed
to be made by or due from the Employer regardless of whether such
payment is made by or due from the Employer directly or indirectly
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through a trust, fund or insurer to which the Employer contributes or
pays premiums.
2.18 Leave of Absence.
A "Leave of Absence" shall refer to that period during which the
Participant is absent without Compensation and for which the
Administrative Committee, in its sole discretion, has determined him to
be on a "Leave of Absence" instead of having terminated his employment.
(However, such discretion of the Administrative Committee shall be
exercised in a nondiscriminatory manner.) In all events, a Leave of
Absence by reason of service in the armed forces of the United States
shall end no later than the time at which a Participant's reemployment
rights as a member of the armed forces cease to be protected by law and
a Leave of Absence for any other reason shall end after six (6) months,
except that if the Participant resumes employment with the Employer
prior thereto, the Leave of Absence shall end on such date of resumption
of employment. The date that the Leave of Absence ends shall be deemed
the Termination Date if the Participant does not resume employment with
the Employer. In determining a Year of Service for Accrual of Benefits,
all such Leaves of Absence shall be considered to be periods when the
Employee is a Participant.
2.19 Net Profits.
The "Net Profits" mean the Employer's Net Profits for the taxable year
of the Employer (coinciding with or within which the plan year ends) as
calculated at the end of the taxable year, in accordance with the
Employer's regular accounting practices, before state and federal income
taxes and without reduction by reason of the Employer's contributions
under the Plan and any other Plan maintained by the Employer and
described in Code Section 401(a) and Section 403(a).
The "Net Profits" shall also mean the Employer's accumulated Net Profits
for all years prior to the taxable year of the Employer, described in
the preceding paragraph of this section. Such accumulated Net Profits
shall be calculated in accordance with the Employer's regular accounting
practices, before state and federal income taxes which would be refunded
(as a result of contributions to the Plan), without reduction by reason
of the Employer's contributions, made for the current Plan Year, under
the Plan and any other Plan maintained by the Employer and described in
Code Section 401(a) or Section 403(a).
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2.20 Normal Retirement Age.
The "Normal Retirement Age" is attained on the first day of the month on
or next following the date a Participant attains age sixty-five (65).
2.21 One Year Break in Service.
A. "One Year Break in Service" means a Plan Year in which the
Participant has not completed more than five hundred (500) Hours of
Service.
However, in determining a One Year Break in Service for a Plan Year in
which, or following which, a maternity or paternity absence (as defined
below) occurs, the following shall apply: the Hours of Service which
normally would have been credited but for the maternity or paternity
absence (or eight (8) Hours of Service per day if the Administrative
Committee is unable to determine the Hours of Service which normally
would have been credited) shall be credited to the Plan Year in which
such absence begins, if the Employee would incur a One Year Break in
Service if the hours were not so credited; in all other cases the Hours
of Service shall be credited to the following Plan Year. The total Hours
of Service credited under a maternity or paternity absence shall not
exceed five hundred one (501) hours. A "maternity or paternity absence"
is one in which the Employee is absent from work because of:
(i) The pregnancy of the Employee,
(ii) The birth of a child of the Employee,
(iii) The placement of a child with the Employee in connection with
the adoption of such child by the Employee, or
(iv) The caring for such child immediately following such birth or
placement.
As a condition of an Employee being credited with Hours of Service
pursuant to this paragraph, the Administrative Committee can require
that the Employee timely furnish such information as is reasonably
necessary to establish that the absence from work was for a cause stated
in subparagraphs (i)-(iv) and the number of days attributable to such
cause.
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2.22 Participant.
A "Participant" shall refer to every Employee or former Employee who has
met the applicable participation requirements of Article III.
2.23 Plan.
"Plan" refers to this Stock Bonus Employee Stock Ownership Plan and
Trust Agreement.
2.24 Plan Administrator.
The "Plan Administrator" shall be the Administrative Committee
designated in a resolution adopted by the board of directors of the
Employer, pursuant to Article IX, who shall accept the designation in
writing.
2.25 Plan Year.
A "Plan Year" is the period from the first day of January to the last
day of December, annually.
2.26 Qualified Election Period.
"Qualified Election Period" shall mean the period of six (6) Plan Years
beginning with the later of:
(i) The Plan Year after the Plan Year in which the Participant
attains age fifty-five (55); or
(ii) The Plan Year after the Plan Year in which the Participant first
becomes a Qualified Participant.
2.27 Qualified Participant.
"Qualified Participant" shall mean a Participant who has attained age
fifty-five (55) and who has completed at least ten (10) years of
participation in the Plan.
2.28 Qualifying Employer Security.
"Qualifying Employer Security" shall mean Common Stock of the Employer
which meets the requirements of Code Section 409(l).
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2.29 Retirement.
"Retirement" refers to the termination of employment of an Employee who
has attained at least the Normal Retirement Age. The Employee may work
beyond Normal Retirement Age, in which case Employer contributions and
Forfeitures shall continue to be allocated to the Employer Account of
the Employee.
2.30 Service.
"Service" means:
(a) The period (measured in years and days) for which an Employee is
directly or indirectly compensated or entitled to Compensation
from the Employer for the performance of duties during the
applicable computation period;
(b) The period for which an Employee is directly or indirectly
compensated or entitled to Compensation from the Employer
(irrespective of whether the employment relationship has
terminated) for reasons other than performance of duties (such
as vacation, holidays, sickness, disability, lay-off, military
duty or leave of absence) during the applicable computation
period; and
(c) Each period prior to or after the effective date of this Plan
for which an Employee was directly or indirectly paid or
entitled to be paid by the Predecessor Employer.
Service will be credited for employment with other members of an
affiliated service group (under Code Section 414(m)), a controlled group
of corporations (under Code Section 414(b)), or a group of trades or
businesses under common control (under Code Section 414(c)) of which the
Employer is a member or any other entity required to be aggregated with
the Employer pursuant to regulations under Code Section 414(o) for the
period of such affiliation or common control.
Notwithstanding subparagraph (b), above, no more than five hundred one
(501) Hours of Service is required to be credited to an Employee on
account of any single continuous period during which the Employee
performs no duties (whether or not such period occurs in a single
computation period), and for which an Employee is directly or indirectly
id, or entitled to payment, if such payment is made or due under a
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plan maintained by the Employer solely for the purpose of complying with
applicable worker's compensation, unemployment compensation or
disability insurance laws. The provisions of Sections 2530.200b-2(b) and
(c) of the Department of Labor Regulations are incorporated herein by
reference.
2.31 Termination Date.
The "Termination Date" shall be the date on which the earliest of the
following events occurs:
(a) A Participant's Retirement,
(b) A Participant's termination of employment as a result of total
and permanent disability;
(c) A Participant's death, or
(d) A Participant's termination of employment for any other reason.
2.32 Total and Permanent Disability.
"Total and Permanent Disability" shall refer to the Participant
suffering from a physical or mental condition which in the sole
discretion of the Administrative Committee, based upon appropriate
medical reports and examinations, may be expected to result in death or
be of long and indefinite duration and which renders the Participant
incapable of performing any substantial gainful activity and which
qualifies as Total and Permanent Disability under the federal Social
Security Act.
2.33 Total Service for Vesting.
"Total Service for Vesting" shall mean the sum of each separate Year of
Service for Vesting credited to the Participant; however, if the
Participant incurs at least five (5) consecutive One Year Breaks in
Service, his Years of Service for Vesting rendered after such break in
service shall only be counted for purposes of determining his vested
benefits accruing after such break in service, not for determining his
vested benefits accruing before such break.
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2.34 Trust.
"Trust" means the Trust created under this Employee Stock Ownership Plan
and Trust Agreement.
2.35 Trust Fund.
The "Trust Fund" consists of the Employer and Participant contributions
held by the Plan and any income or appreciation thereon.
2.36 Unallocated Stock Account.
The Account used to hold Qualifying Employer Securities acquired with
loan proceeds pursuant to the "Loans from Disqualified Persons" section
below.
2.37 Year of Service for Accrual of Benefits.
A "Year of Service for Accrual of Benefits" means a Plan Year during
which the Employee had not less than one thousand (1,000) Hours of
Service as a Participant. If the Participant entered the Plan other than
on the first (1st) day of the Plan Year, all Hours of Service rendered
by the Participant during that Plan Year, whether or not rendered as a
Participant, shall be treated as if they were Hours of Service as a
Participant.
2.38 Year of Service for Participation.
A "Year of Service for Participation" means the twelve (12) month period
beginning with the Employee's date of hire provided the Employee was
credited with not less than one thousand (1,000) Hours of Service during
such twelve (12) months. If the Employee does not have one thousand
(1,000) Hours of Service for such twelve (12) month period, a Year of
Service for Participation shall be the (earliest Plan Year in which the
Employee is credited with one thousand (1,000) Hours of Service.
In case the Employee completes at least one (1) Year of Service for
Participation and then has at least a One Year Break in Service, a Year
of Service for Participation following such break in service shall begin
on the first day following the One Year Break in Service on which his
employment resumes. If the Employee does not perform one thousand
(1,000) Hours of Service during the Plan Year which includes such day, a
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Year of Service for Participation shall be the earliest Plan Year in
which the Employee has one thousand (1,000) Hours of Service.
2.39 Year of Service for Vesting.
A "Year of Service for Vesting" shall mean a Plan Year, either before or
after the effective date of this Plan, during which the Employee had not
less than one thousand (1,000) Hours of Service after attaining age
eighteen (18).
Article III
ELIGIBILITY TO PARTICIPATE
3.1 Initial Entry.
Every Employee who has attained the age of twenty-one (21) and completed
a Year of Service for participation shall participate in the Plan on the
first (1st) day of the Plan Year or the first (1st) day of the seventh
(7th) month of the Plan Year which first occurs on or after such
completion, provided that he is an Employee on such date. An Employee
who is eligible to participate will be treated as a Participant for all
purposes unless he informs the Administrative Committee, in writing,
that he does not wish to be a Participant, in which case he shall not be
treated as a Participant under the Plan. A decision by the Employee not
to participate cannot be changed after the first (1st) day of the first
(1st) Plan Year to which it is first effective. All Participants shall
be required to furnish such information to the Administrative Committee
as it may reasonably request for the proper administration of the Plan.
3.2 Resumption of Participation.
A Participant who is reemployed by the Employer without having incurred
a One Year Break in Service shall be a Participant as of the first (1st)
day of the month following the date of his reemployment. If an Employee
incurs at least a One Year Break in Service, his active participation in
the Plan shall be suspended until he completes a Year of Service for
Participation following such One Year Break in Service. Upon completing
a Year of Service for Participation after such One Year Break in
Service, measured from his re-employment commencement date, the
Participant will be readmitted to active participation in the Plan
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as of the first (1st) day of the Plan Year in which the Participant
completes such Year of Service for Participation.
The Committee may adjust the above service requirement, as necessary, to
make the Plan available to a newly-acquired Employee group, provided
that the adjustment:
(1) Is not more restrictive than the above requirement, and
(2) Does not discriminate in favor of Highly Compensated Employees.
Article IV
CONTRIBUTIONS TO THE TRUST
4.1 Amount of Contributions to Participants.
Subject to the rights of the Employer under Article XI, the Employer may
make a contribution to the Trust from its Net Profits beginning with the
first Plan Year ending on or after the effective date of the Plan. The
amount of the contribution shall be discretionary with the Employer and
shall be paid to the Trustees on or before the time required by law for
filing the Employer's federal income tax return (including extensions)
for the year with respect to which the contribution is made. However, no
Employer contributions may be made in any Plan Year to the extent that
they would be directly allocated to the suspense account created
pursuant to the Limitation on Allocations to Each Participant section
below.
4.2 Manner of Allocation.
(a) All contributions by the Employer for any Plan Year, plus all
Forfeitures, if any, during such year, shall be allocated as of
the last day of such year to the Employer Account of each
individual Participant, who is an Employee on the last day of
such Plan Year, and who has a Year of Service for Accrual of
Benefits for the Plan Year, in the same proportion that each
such Participant's Compensation for the Plan Year for the
portion of the Plan Year that the employee is a Participant in
the Plan bears to the total Compensation of all such
Participants for the Plan Year. Employees who terminate
employment before the last day of the Plan Year on account of
death or Retirement shall receive an
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<PAGE> 22
allocation regardless of whether they have a Year of Service for
Accrual of Benefits for such Plan Year.
(b) If allocation of Employer contributions in accordance with
Section (a) above will result in an allocation of more than
one-third (1/3) of the total contributions for a Plan Year to
the accounts of Highly Compensated Employees, then allocation of
such amounts shall be adjusted so that it will be allocated to
the Participants who are not Highly Compensated Employees.
Notwithstanding anything to the contrary contained in this
Manner of Allocation section, no Qualifying Employer Securities
may be allocated to the Employer Account of any Participant who
sold such Qualifying Employer Securities to the Plan, any person
who is a member of the family of such person (within the meaning
of Code Section 267(c)(4)), or any person who owns more than
twenty-five percent (25%) in value of any class of outstanding
Qualifying Employer Securities (after the application of Code
Section 318(a)).
4.3 Permissible Types of Employer Contributions.
Payments on account of the contributions due from the Employer for any
year may be made in cash or in kind, specifically including Qualifying
Employer Securities; except that assets may not be contributed if such
contribution violates the prohibited transaction rules of Code Section
4975, or the corresponding rules under ERISA Section 406, if applicable.
4.4 Interim Allocation to Unallocated Stock Account.
Qualifying Employer Securities purchased with an Exempt Loan when
initially acquired by the Trustees shall be credited to the Unallocated
Stock Account. The balance in the Unallocated Stock Account shall be
released in accordance with Section 8.11 and the Qualifying Employer
Securities so released shall be allocated as of the last day of each
Plan Year in accordance with Manner of Allocation section above.
4.5 General Accounting.
The Committee shall establish accounting procedures for the purpose of
making the allocations to Participant's Accounts provided for in this
Article IV. The Committee shall maintain adequate records of the
aggregate cost basis of Qualifying Employer Securities allocated to each
Participant's Employer Account. The Committee shall also keep separate
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<PAGE> 23
records of financed shares and discretionary contributions (and any
earnings thereon) made for the purpose of enabling the Trust to repay
any Exempt Loan. From time to time, the Committee may modify the
accounting procedures for the purposes of achieving equitable and
nondiscriminatory allocations among the accounts of Participants in
accordance with the general concepts of the Plan, the provisions of this
Article IV and the requirements of the Code and ERISA.
4.6 Additional Provisions.
Employer contributions shall not be made for any Plan Year in amounts
which cannot be allocated to Participant's accounts by reason of the
allocation limitations described in Article V or in amounts which are
not deductible under Code Section 404(a). Any Employer Contributions
which are not deductible under Code Section 404(a) may be returned to
the Employer by the Trustees (upon the direction of the Employer) within
one (1) year after the disallowance of the deduction or after it is
determined that the deduction is not available. In the event that
Employer Contributions are paid to the Trust by reason of a mistake of
fact, such Employer Contributions may be returned to the Employer by the
Trustees (upon the direction of the Employer) within one (1) year after
the payment to the Trust.
Article V
ADMINISTRATION OF ACCOUNTS
5.1 Investments.
The amounts allocated to the Employer Accounts shall be invested by the
Trustees as directed in accordance with Article VIII, primarily in
Qualifying Employer Securities.
5.2 Invest in Single Fund and Reasonable Rules.
The Trustees may cause all contributions paid to it by the Employer and
the income therefrom, without distinction between principal and income,
to be held and administered as a single fund, and the Trustees shall not
be required to invest separately any share of any Participant except as
provided in the Non-segregation if Installment Distribution section
below. The Trustees may adopt reasonable rules for the administration of
such common fund and for the determination of the proportionate interest
of each Participant in the fund.
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<PAGE> 24
5.3 Valuation of Assets and Allocation of Changes.
The assets of the Trust Fund will be valued as of the close of the last
day of each Plan Year at their Fair Market Value in accordance with
Section 2.13 and the Employer Account of each Participant (or Employer
Accounts if the Participant has Accrued Benefits for service incurred
both prior and subsequent to a One Year Break in Service), including any
Employer Account held in suspense, shall be adjusted for any net
appreciation or net depreciation in the assets of the Plan and any net
income or net loss of the Trust for such year, with each account being
credited or charged in the ratio that the amount of the account (as of
the close of the last day of the Plan Year) bears to the total (as of
the close of the last day of the Plan Year) of all remaining
non-segregated accounts. For the purpose of such adjustment of accounts,
any contribution made by the Employer with respect to that Plan Year
shall be considered as having been made immediately after such
evaluation and adjustment. In making the adjustments required by this
section the value of any amounts segregated in accordance with the
Non-segregation if Installment Distribution section below, shall not be
considered in determining the amount of net appreciation, depreciation,
gain or loss to be allocated to such account. The amount of any net
appreciation, depreciation, gain or loss with respect to such cash value
or segregated account shall be allocated to the individual account with
respect to which it arose. In addition to the evaluations required by
the first sentence of this section, the Trust Fund may be evaluated at
such other times during the Plan Year as the Administrative Committee
deems appropriate using the method set forth in Section 2.13.
For purposes of all computations required by this section, the accrual
method of accounting shall be used to value the Trust Fund and the
assets thereof at their fair market value as of each valuation date.
Qualifying Employer Securities shall be accounted for as provided in
Treasury Regulation Section 1.402(a)-1(b)(2)(ii), as amended, or any
regulation or statute of similar import.
5.4 Limitations on Allocations to Each Participant.
(a) Defined Contribution Plan Limitations.
Notwithstanding any other provision of this Plan the maximum
annual addition for any Plan Year which can be made to any
individual Participant's Employer and Participant accounts,
taken together, is the lesser of Thirty Thousand Dollars
($30,000) (or, if
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<PAGE> 25
greater, one-fourth (1/4) of the defined benefit dollar
limitation set forth in Code Section 415(b)(1) as in effect for
the Plan Year) or twenty-five percent (25%) of the Participant's
Compensation. In addition the increased limitations provided in
Code Section 415(c)(6) shall apply if appropriate. For purposes
of Subsections 5.4(a), (b), and (c) the annual addition is the
sum of the following amounts allocated to the accounts of the
individual Participant for the Plan Year of the Trust (which
shall be the limitation year for purposes of Code Section 415)
under this and all other defined contribution type plans
maintained by the Employer:
(i) Employer contributions;
(ii) Forfeitures (if applicable);
(iii) Participant contributions;
(iv) Amounts allocated to an individual medical account (as
defined in Code Section 415(l)(2)) that is part of a
defined benefit plan maintained by the Employer; and
(v) Amounts derived from contributions paid or accrued after
December 31, 1985, in taxable years ending after such
date, that are attributable to post-retirement medical
benefits allocated to the separate account of a Key
Employee (as defined in Code Section 419A(d)(3)) under a
welfare benefit fund (as defined in Code Section 419(e))
maintained by the Employer.
If Subsections 5.4(a), (b), and (c) limit the amount which can
be allocated to the Employer Account of any Participant for a
Plan Year, the excess amount which cannot be allocated for the
Plan Year shall be held in the suspense account to be allocated
on the last day of each succeeding Plan Year until the funds in
the suspense account have been completely reallocated. No
further Employer contributions may be made to the Plan until the
suspense account has been completely reallocated. Any
Participant contributions which exceed the limitations of
Subsections 5.4(a), (b), and (c) shall be returned to the
Participant. No investment gains and losses or other income
shall be allocated to the suspense account.
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<PAGE> 26
(b) Defined Benefit Plan Limitations.
As to any defined benefit plan maintained by the Employer for
any Plan Year the annual benefit cannot exceed the lesser of:
(i) Ninety Thousand Dollars ($90,000) (or such other figure
as determined in accordance with the cost of living
adjustment procedure of Code Section 415(d), but only
for the year in which such adjustment is effective), or
(ii) One hundred percent (100%) of the Participant's average
annual compensation for the Participant's three highest
paid consecutive Plan Years; however, benefits of up to
Ten Thousand Dollars ($10,000) during a Plan Year can be
paid without regard to the one hundred percent (100%)
limitation if the total retirement benefits payable to
an Employee under all defined benefit plans (as defined
in Code Section 414(j)) maintained by the Employer for
the present and any prior Plan Year do not exceed Ten
Thousand Dollars ($10,000) and the Employer has not at
any time maintained a defined contribution plan (as
defined in Code Section 414(i)) in which the Employee
was a Participant.
If the Participant has less than ten (10) years of participation in the
Plan (as defined in Code Section 415(b)(5)), the applicable limitation
in Paragraph (b)(i) of this Section shall be reduced by multiplying such
limitation by a fraction. The numerator of such fraction shall be the
number of years, or part thereof, of participation in the defined
benefit plan maintained by the Employer; the denominator shall be ten
(10) years.
For purposes of this Subsection 5.4(b), the "annual benefit" means a
benefit payable annually in the form of a straight life annuity with no
ancillary or incidental benefits and with no Employee or Rollover
Contributions. To the extent that ancillary benefits are provided, the
limits set forth in Subparagraphs (a) and (b) of the first paragraph of
this Section will be reduced actuarially, using an interest rate
assumption equal to the greater of five percent (5%) or the interest
rate specified in the Plan to reflect such ancillary benefits.
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<PAGE> 27
(c) Social Security Retirement Age Limitations.
"Social Security Retirement Age" means the age used as the
Retirement age under Section 216(l) of the Social Security Act,
which is presently age sixty-five (65) for a person born before
1939, age sixty-six (66) for a person born between 1939 and
1954, and age sixty-seven (67) for a person born after 1954.
If distribution of retirement benefits begins before the Social
Security Retirement Age, the Ninety Thousand Dollar ($90,000)
limitation as described in Subsection 5.4(b) shall be reduced
actuarially on the following basis:
(i) If the Social Security Retirement Age is sixty-five (65)
and distribution of benefits begins after the
Participant has attained age sixty-two (62) but before
the Social Security Retirement Age, the reduction shall
be five-ninths (5/9) of one percent (1%) per month for
each month by which the first distribution precedes the
Social Security Retirement Age;
(ii) If the Social Security Retirement Age exceeds sixty-five
(65) and the distribution of benefits begins after the
Participant has attained age sixty-two (62), the
reduction shall be the sum of (A) and (B), where
(A) Is five-ninths (5/9) of one percent (1%) per
month for each of the first thirty-six (36)
months; and
(B) Is five-twelfths (5/12) of one percent (1%) per
month for each additional month (up to
twenty-four (24) months) by which benefits
commence before the month of the Participant's
Social Security Retirement Age;
(iii) If the distribution of benefits begins before the
Participant has attained age sixty-two (62), the
limitation will be the actuarial equivalent of what it
would have been if the first distribution had been made
when the Participant had attained age sixty-two (62);
the assumed interest rate for such calculation shall be
five percent (5%).
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<PAGE> 28
For purposes of this Subsection 5.4(b) the "average annual
Compensation for a Participant's three (3) highest paid
consecutive years" shall mean the Participant's greatest
aggregate Compensation during the period of three (3)
consecutive Plan Years in which the individual was an active
Participant in the Plan.
(d) Combination Defined Benefit and Defined Contribution Plan
Limitations.
If the Employer maintains one (1) or more defined benefit plans
in addition to this Plan (and any other defined contribution
plans) the limitation of this Subsection 5.4(c) shall apply in
addition to those of Subsections 5.4(a) and 5.4(b). The
limitation of this Subsection 5.4(c) is that the sum of the
defined benefit plan fraction and the defined contribution plan
fraction for any Plan Year may not exceed 1.0.
The "defined benefit plan fraction" is a fraction:
(i) The numerator of which is the projected annual benefit
of the Participant under the Plan, (determined as of the
close of the Plan Year); and
(ii) The denominator of which (determined as of the close of
the Plan Year) is the lesser of (A) the maximum dollar
limitation, for such year as stated in Paragraph
5.4(b)(i), multiplied by 1.25, or (B) the percentage of
compensation limitation which may be taken into account
pursuant to Paragraph 5.4(b)(ii) multiplied by 1.4.
The "defined contribution plan fraction" for any year is a
fraction:
(i) The numerator of which is the sum of the annual
additions (as defined in Code Section 415(c)(2)) to the
Participant's account as of the close of the Plan Year;
and
(ii) The denominator of which is the sum, for all years of an
Employee's service with the Employer, of the lesser for
each year of (A) the maximum dollar limitation as stated
in the first paragraph of Subsection 5.4(a) for such
year multiplied by 1.25 or (B) the percentage of
Compensation amount in
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<PAGE> 29
effect as stated in the first paragraph of Subsection
5.4(a) for such year multiplied by 1.40.
With respect to each Participant, for Years of Service ending
prior to January 1, 1983, the amount taken into account in the
denominator of the defined contribution plan fraction, as set
forth above, may, at the election of the Plan Administrator, be
an amount equal to the denominator of the defined contribution
plan fraction for the Plan Year ending in 1982, as determined
under the law immediately prior to the enactment of the Tax
Equity and Fiscal Responsibility Act of 1982, multiplied by the
transition fraction described in Code Section 415(e)(6).
5.5 Designation of Beneficiary.
Each Participant may designate from time to time in writing one or more
Beneficiaries, who will receive the Participant's vested Accrued Benefit
in the event of the Participant's death. If the Participant dies without
having made a Beneficiary designation, the Trustees shall distribute
such benefits in the following order of priority to the deceased
Participant's:
(a) Spouse,
(b) Lineal descendants,
(c) Parents, or
(d) Estate.
However, in the event of the death of a married Participant, the
surviving spouse must be the sole Beneficiary unless the surviving
spouse has consented in writing to a different election, has
acknowledged the effect of such election, and the consent and
acknowledgment are witnessed by a member of the Administrative Committee
or a notary public. The consent of spouse shall not be necessary if it
is established to the satisfaction of the Administrative Committee that
there is no spouse, the spouse cannot reasonably be located, or for such
other reasons as the regulations may prescribe. The consent of a spouse
as reason for not requiring such consent shall be applicable only to
that spouse. If the spouse of a Participant becomes locatable or if a
Participant remarries, it shall be the duty of the Participant to bring
that fact to the attention of the Administrative Committee. If the
Participant so notifies the Administrative Committee,
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<PAGE> 30
the Administrative Committee shall then, if applicable, proceed to make
available to such spouse the consent of spouse procedures described in
this Section.
5.6 Participant Voting and Exercise of Stock Rights.
(a) Each Participant shall be entitled to direct the Trustees as to
the manner in which any Qualifying Employer Securities which are
a registration-type class of securities (as defined in Code
Section 409(e)(4)) which are allocated to the Employer Account
of the Participant are to be voted and as to the manner in which
other rights with respect to such Qualifying Employer Securities
are to be exercised. With respect to any class of Qualifying
Employer Securities which is not a registration-type class of
securities (as defined in Code Section 409(e)(4)), a Participant
shall be entitled to direct the Trustees as to the manner in
which voting rights will be exercised with respect to any
corporate matter which involves the voting of such shares
allocated to the Participant's account with respect to the
approval or disapproval of any corporate merger or
consolidation, recapitalization, reclassification, liquidation,
dissolution, sale of substantially all assets of a trade or
business, or such similar transactions as may be prescribed in
Treasury regulations.
(b) The Trustees shall notify Participants at least thirty (30) days
(or a lesser period if thirty (30) days if impossible or
impractical) prior to the voting or other exercise of rights
referred to in Section 5.6(a). The notice shall include all
proxy solicitations and other materials distributed to other
shareholders holding any of the shares of stock described in
this Plan as Qualifying Employer Securities.
(c) The Trustees shall vote any shares and exercise any other rights
with respect to applicable Qualifying Employer Securities in the
manner instructed by the Participant. The Trustees shall vote
any shares and exercise any other rights with respect to
Qualifying Employer Securities as to which it receives no such
instructions (either because the Participant does not timely
give such instructions, or because the shares have not yet been
allocated to the Employer Accounts, or if because the Trustees
are not required to be directed) as the Trustees in their sole
discretion, but acting in a fiduciary capacity, deems in the
best interests of the Participants and their Beneficiaries.
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<PAGE> 31
ARTICLE VI
VESTING
6.1 Employer Account Vesting on Death, Retirement, or Total Permanent
Disability.
If a Participant's employment is terminated for death, on or after
Normal Retirement Age, or for Total and Permanent Disability, one
hundred percent (100%) of the Accrued Benefit in his Employer Account,
shall vest in the Participant (or in his Beneficiary, as the case may
be) and shall be distributed or set aside in accordance with the
provisions of Article VII.
6.2 Employer Account Vesting on Termination.
If a Participant's employment is terminated except for death, Total and
Permanent Disability, or on or after Normal Retirement Age the following
percentages of the Accrued Benefit in the Employer Account of the
Participant shall vest in the Participant and shall be distributed to or
set aside for him in accordance with the provisions of Article VII:
<TABLE>
<CAPTION>
Years of Vested
Service Percentage
----------- ----------
<S> <C>
Less than 1 0%
1 20%
2 40%
3 60%
4 80%
5 100%
</TABLE>
The Accrued Benefit of a Participant which is not vested as above
provided shall be retained by the Trustees for allocation as a
Forfeiture, in accordance with the provisions of Manner of Allocation
section above, Suspense Account for Terminated Participants and Unable
to Locate Participant or Beneficiary sections below.
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<PAGE> 32
6.3 Restoration of Forfeitures.
If a Participant is less than one hundred percent (100%) vested and he
receives a distribution from the Plan and forfeits part of his Accrued
Benefit, and then, if the Participant resumes employment with the
Employer before the occurrence of five (5) consecutive One Year Breaks
in Service, until such time as there is a fifth (5th) consecutive One
Year Break in Service, the Participant's vested portion of the balance
in his account at any time shall be equal to an amount ("X") determined
by the formula X = P(AB + D) - D, where "P" is the vested percentage of
the Participant at such time, "AB" is the balance in the Participant's
account at such time and "D" is the amount distributed as a severance
of employment benefit and not previously repaid by the Participant.
Notwithstanding the preceding paragraph, if the Participant returns to
employment prior to the time he incurs five (5) consecutive One Year
Breaks in Service, he shall have the right to repay to the Plan the full
amount of the benefits previously distributed to him, provided that such
repayment is made prior to the earlier of:
(i) Five (5) years after the first date on which the Participant is
reemployed, or
(ii) The date the Participant incurs five (5) consecutive One Year
Breaks in Service following the date of the previous
distribution.
If an Employee is deemed to receive a distribution pursuant to the Time
of Distribution section below), and the Participant resumes employment
covered under the Plan before the date the Employee incurs five (5)
consecutive One Year Breaks in Service, upon the reemployment of such
Employee, the balance of the Employer Account of the Employee will be
restored to the amount on the date of such deemed distribution.
If the Participant's forfeited accrued benefit is restored pursuant to
this Section 6.3, the restoration shall be made first out of
Forfeitures, if any, and then by additional Employer contributions.
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<PAGE> 33
Article VII
DISTRIBUTION OF BENEFITS
7.1 Method of Distribution of Participant and Employer Accounts.
The Participant shall receive his distribution in the form of a single
payment of voluntary Cash-Out.
If a Participant's vested Accrued Benefit at the Termination Date has
never exceeded Five Thousand Dollars ($5,000), the entire amount of such
vested Accrued Benefit shall be distributed in the form of an
involuntary Cash-Out.
The Participant shall receive his distribution of benefits in the form
of Qualifying Employer Securities except to the extent that the
Participant's Employer Account consists of cash or fractional shares of
Qualifying Employer Securities or other assets, the Fair Market Value of
which shall be distributed in cash.
7.2 Time of Distribution.
(a) After the Participant has attained the Normal Retirement Age,
has died, or has terminated his employment due to Total and
Permanent Disability, then the first installment or Cash-Out, as
applicable, will be made as soon as administratively feasible
after the end of the Plan Year in which the Participant
separates from Service. If the Participant is zero percent (0%)
vested in his Accrued Benefit, his account balance will be
deemed to have been distributed to him in the form of a
Cash-Out. However, in all events such distributions shall begin
no later than sixty (60) days after the end of the Plan Year in
which occurs the latest of the following:
(i) The date on which the Participant attains the Normal
Retirement Age;
(ii) The tenth (10th) anniversary of the year in which the
Participant commenced participation in the Plan;
(iii) The Termination Date.
(b) Distribution to a Participant who terminates other than due to
death, Retirement or Disability, shall commence as soon as
- 27 -
<PAGE> 34
administratively feasible after the end of the Plan Year in which the
Participant separates from Service.
(c) Distributions to Highly Compensated Employees shall commence no later
than April 1 of the calendar year following the calendar year in which
the Participant attains age seventy and one-half (70-1/2).
(d) If the Participant requests to receive his distribution in Cash, the
Trustees will sell the Qualifying Employer Securities allocated to the
Participant's account and to which the Participant would be entitled to
a distribution and distribute the cash proceeds of such sale to the
Participant. If such Qualifying Employer Securities are not sold within
a time which would allow the cash distribution to take place as required
by this Time of Distribution section, the Participant will have the
right to change his or her distribution election to receive Qualifying
Employer Securities or defer the distribution until such time as the
Trustees complete the sale of such Qualifying Employer Securities or
otherwise have sufficient cash to make the distribution.
(e) If the Participant dies after distributions to him have begun but before
his entire Accrued Benefit has been distributed to him, the remaining
portion of his Accrued Benefit shall be distributed from the Plan at
least as rapidly as under the method of distribution previously
established for him, if such method is irrevocable at the time of his
death.
(f) If the Participant dies before distribution of his interest commences,
then distributions of the Participant's remaining Accrued Benefit must
be completed by the end of the fifth (5th) calendar year following the
year of his death. However, installment distributions to a designated
Beneficiary which begin not later than the end of the calendar year
following the death of the Participant shall be treated as complying
with this five (5) year distribution requirement (even though the
installment payments are not completed within five (5) years of the
Participant's death) if the distributions are made at a rate which is
not longer than that calculated (in the manner described in paragraph
(c) of this Section) to provide payment of all the Participant's Accrued
Benefit during the anticipated life expectancy of the designated
Beneficiary. Provided that if the designated Beneficiary is the
surviving spouse of the deceased Participant, the distributions can
- 28 -
<PAGE> 35
begin as long after the Participant's death as the date on which
the deceased Participant would have attained the age of seventy
and one-half (70-1/2); if the surviving spouse dies before
distributions to the surviving spouse have begun, the Plan may
make distributions at such times as described in this Section as
it would have if the surviving spouse had been a deceased
Participant.
(g) For purposes of this section, any amount paid to a child of a
Participant will be treated as if it had been paid to the
surviving spouse of the Participant if such remaining amount
becomes payable to the surviving spouse when the child reaches the
age of majority.
7.3 Segregation if Installment Distribution.
The Administrative Committee may determine that the Employer Account of
a Participant who is no longer an Employee shall be segregated and set
aside, in which event the Administrative Committee shall direct the
Trustees to segregate the vested portion (as defined in Article VI) of
the entire balance of the Participant's Employer Account and to deposit
such portion in a separate interest bearing account at a bank or savings
and loan association, and said account shall cease to participate in the
income or net loss or appreciation or depreciation of the Trust Fund, as
of the beginning of the Plan Year in which such segregation occurs, and
instead will be credited with the full amount of interest earned
thereon.
7.4 Non-segregation if Installment Distribution.
In the event the Administrative Committee does not segregate (as
provided in Section Segregation if Installment Distribution above) the
Employer Account of a Participant, said account shall continue to be
treated, without interruption, in the same manner as when the
Participant was an Employee, in which case the installment distributions
shall be adjusted upward or downward to reflect appreciation or
depreciation, or income or loss in the account balance.
7.5 Distribution After Death of Participant.
In the event of the death of a Participant after installment payments
have begun, but prior to completion of such payments, the full amount of
such unpaid benefits shall continue to be paid in the form of the
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<PAGE> 36
previously established installments except that the Beneficiary may
request that the remaining Accrued Benefit be paid in a lump sum.
In the event of the death of the Participant prior to the start of any
payments of his Accrued Benefit, distributions shall be made in the form
and at the time or times selected by the Beneficiary pursuant to
Sections 7.1 and 7.2.
7.6 Distribution After Death of Beneficiary
In the event of the death of a Beneficiary (or a contingent Beneficiary,
if applicable) prior to the completion of payment of benefits due the
Beneficiary from the Plan, the full amount of such unpaid benefits shall
at once vest in and become the property of the estate of said
Beneficiary. In determining the amount of such unpaid benefits, no
adjustment shall be made by reason of any net income, or net loss, of
the Trust, or any net appreciation or net depreciation by the Trust's
assets subsequent to the beginning of the Plan Year in which such final
distribution occurs.
7.7 Rollover Contributions and Distributions.
Rollovers from other qualified plans into the Plan will not be
permitted.
The Administrative Committee may, in its sole discretion, but only with
the prior written consent of the Participant, transfer part or all of
the funds credited to his Employer and Participant Deferral Accounts to
a retirement plan, as described in Code Section 401(a) or Section 403(a)
as to which the individual is a Participant at the time of such
distribution.
The Committee shall provide to each Participant, Beneficiary or
Alternate Payee who receives an eligible rollover distribution (as
defined in Code Section 402(f), at the time such distribution is made, a
written explanation of the:
(a) Provisions under which the distribution will not be subject to
tax if timely transferred to an eligible retirement plan; and,
if applicable,
(b) Provisions regarding the availability of capital gains and
ten-year averaging or five-year averaging tax treatment of the
distribution.
For distributions made on or after January 1, 1993, notwithstanding any
provisions of the Plan to the contrary that would otherwise limit a
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<PAGE> 37
distributee's election under this Subsection, a distributee may elect,
at the time and in the manner prescribed by the Committee, to have any
portion of an eligible rollover distribution paid directly to an
eligible retirement plan specified by the distributee in a direct
rollover.
(a) An eligible rollover distribution is any distribution of all or
any portion of the balance to the credit of the distributee,
except that an eligible rollover distribution does not include
any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for
the life (or life expectancy) of the distributee and the
distributee's designated Beneficiary, or for a specified period
of ten (10) years or more; any distribution to the extent such
distribution is required under Code Section 401(a)(9); and the
portion of any distribution that is not Includible in gross
income (determined without regard to the exclusion for net
unrealized appreciation with respect to Qualifying Employer
Securities).
(b) An eligible retirement plan is an individual retirement account
described in Code Section 408(a), an individual retirement
annuity described in Code Section 408(b), an annuity plan
described in Code Section 403(a), or a qualified trust described
in Code Section 401(a), that accepts the distributee's eligible
rollover distribution. However, in the case of an eligible
rollover distribution to the surviving spouse, an eligible
retirement plan is an individual retirement account or
individual retirement annuity.
(c) A distributee includes a Participant or former Participant. In
addition, the Participant's surviving spouse, and the
Participant's or former Participant's spouse or former spouse
who is an Alternate Payee under a Qualified Domestic Relations
Order, as defined in Code Section 414(p), are distributees with
regard to the interest of the spouse or former spouse.
(d) A direct rollover is a payment by the Plan to the eligible
retirement plan specified by the distributee.
7.8 Suspense Account for Terminated Participants.
If a Participant has terminated his employment but his Employer Account
is not one hundred percent (100%) vested and he has not had five (5)
consecutive One Year Breaks in Service subsequent to his
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termination, all funds in his Employer Account shall be held in suspense
until the happening of the soonest of the following:
(i) The Participant returning to employment with the Employer, or
(ii) The occurrence of five (5) consecutive One Year Breaks in
Service with respect to the Participant, or
(iii) The Participant attaining Normal Retirement Age, or
(iv) The Participant receives a Cash Out.
At such time the Participant's Employer Account shall cease to be held
in suspense. If a Participant has returned to employment prior to
incurring five (5) consecutive One Year Breaks in Service, his Employer
Account which has been held in suspense shall be restored to his credit,
less any Cash-Out which is not repaid in accordance with Section 7.10.
If five (5) consecutive One Year Breaks in Service occur, the non-vested
portion of the Employer Account held in suspense will be forfeited and
reallocated in accordance with the Manner of Allocation section above
for the Plan Year in which such Forfeiture occurs; the vested portion
shall be distributed in accordance with the provisions of Article VII.
Such account shall share in any appreciation, depreciation, or net
income or loss as if it were not in suspense, except that an account
which is in suspense shall have no Forfeitures allocated to it for a
Plan Year in which the Employee does not have a Year of Service for
Accrual of Benefits.
Notwithstanding anything contained in this Suspense Account for
Terminated Participants section to the contrary, upon the payment of a
Participant's vested Accrued Benefit through a Cash-Out, the non-vested
portion of such Participant's Accrued Benefit shall be forfeited and
shall be reallocated for the Plan Year in which a One Year Break in
Service occurs in accordance with the Manner of Allocation section
above.
7.9 Unable to Locate Participant or Beneficiary.
If the Participant or Beneficiary to whom benefits are to be distributed
cannot be located, and reasonable efforts have been made to locate the
Participant or Beneficiary, including the sending of notification by
certified or registered mail to his last known address, the
Administrative Committee may direct the Trustees to take any of the
following actions:
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(i) Distribute the benefits in question to an interest bearing
savings account established in the name of the Participant or
Beneficiary; or, if the benefits are payable to a Participant
(as reasonably determined by the Administrative Committee) the
Administrative Committee may instruct the Trustees to distribute
the funds to the Participant by placing them in a savings
account in the Participant's name or by purchasing U.S. Savings
Bonds in the Participant's name and holding them for the
Participant;
(ii) If the Administrative Committee has taken the reasonable
efforts, as described in the preceding sentence, to locate the
Participant, the Administrative Committee may allocate the
Participant's Accrued Benefits to a segregated account in the
manner described in Section 7.3, as if an installment
distribution were being made; however, such funds shall be held
in the segregated account for distribution to the Participant
when located;
(iii) The Participant's Accrued Benefits may be forfeited and
reallocated pursuant to the Manner of Allocation section above;
if the Participant subsequently returns, such Forfeiture shall
be restored pursuant to Section 6.5 and the restoration shall be
made first out of Forfeitures, if any, and then by additional
Employer contributions.
7.10 Repayment of Cash-Out.
If a Participant receives a Cash-Out distribution from the Plan as a
result of ceasing to be an Employee, and is less than one hundred
percent (100%) vested in his Accrued Benefit at such time, Participant
shall have the right to repay to the Plan the Cash-Out distribution
received from the Plan, prior to the sooner of five (5) years from the
individual again becoming an Employee, or the completion of five (5)
consecutive One Year Breaks in Service following the date of
distribution of the Cash-Out to the Participant. If the Participant
makes such payment within the time specified in the preceding sentence,
any non-vested portion of his Cash-Out distribution which was forfeited
pursuant to Section 7.8 will be restored to his credit. The permissible
sources of restoration of the forfeited portion of a Cash-Out
distribution are: income or gains from Plan investments, Forfeitures and
Employer contribution. However, except with respect to the forfeited
portion of a Cash-Out distribution, only amounts held in suspense
pursuant to Section 7.8 shall be used to satisfy such restoration.
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7.11. Options of Participants to Sell Stock.
(a) If the Qualifying Employer Securities are not readily tradable
on an established securities market, and if the Employer is not
a bank or financial institution prohibited by applicable federal
or local law from redeeming its stock, a Participant or
Beneficiary shall have the option to sell to the Employer all
Qualifying Employer Securities which have been distributed to
Participant or Beneficiary, at a price determined pursuant to a
fair valuation formula which is calculated to provide the fair
market value of such securities as of the valuation date
immediately preceding the date of the exercise of this "put"
option, during the sixty (60) day period immediately following
the date on which Qualifying Employer Securities are distributed
and for a sixty (60) day period beginning on the later of:
(i) The first day of the Plan Year immediately following the
distribution of Qualifying Employer Securities to the
Participant; or
(ii) The first day following the expiration of the first
sixty (60) day option period.
(b) The put option required by Section 7.11(a) shall provide that if
a Participant or Beneficiary exercises the put option, the
Employer, (or the Plan, if the Plan so elects), shall repurchase
the Qualifying Employer Securities in one of the following
methods:
(i) Payment of the fair market value of the Qualifying
Employer Securities, determined as of the valuation date
immediately preceding the date of the exercise of the
put option, may be made in substantially equal payments
not less frequently than annually, over a period not
exceeding five years. The first installment shall be
paid not later than thirty (30) days after the
Participant exercises the put option. The Employer will
pay a reasonable rate of interest and provide adequate
security on amounts not paid after thirty (30) days.
(ii) The Employer may pay the Participant or Beneficiary an
amount equal to the fair market value, determined as of
the valuation date immediately preceding the date of the
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exercise of the put option, of the Qualifying Employer
Securities repurchased no later than thirty (30) days
after the date the put option is exercised.
(c) The Trust shall have the option, but in no event the
responsibility, to assume the rights and obligations of the
Employer at the time the put option required by Section 7.11(a)
is exercised.
7.12 Right of First Refusal.
All shares of Qualifying Employer Securities distributed by the Trustee,
except those which are publicly traded, shall be subject to a "right of
first refusal." Such right shall provide that, prior to any subsequent
transfer, the shares must first be offered by written offer to the
Employer, unless the Employer is a bank or financial institution
prohibited from redeeming its stock by applicable federal or local law,
and Trust in any order of priority. In the event that the proposed
transfer constitutes a gift or such other transfer at less than fair
market value, the Plan Administrator shall so advise the Trustees and
the price per share shall be determined by the Trustee under Section
2.13 as of the last day of the Plan Year, or in the case of a
transaction between the Plan and a disqualified person as defined in
Code Section 4975(e)(2), as of the date of the transaction. In the event
of a proposed purchase by a prospective bona fide purchaser, the offer
to the Trust shall be at the greater of fair market value, as determined
above by the Trustees or at the price offered by the prospective bona
fide purchaser. The Employer or Trust, as the case may be, may accept
the offer at any time during a period not exceeding fourteen (14) days
after the security holder gives written notice to the Trustees that an
offer by a third (3rd) party to purchase the Qualifying Employer
Securities has been received or that a transfer of any sort is to occur.
7.13 Distribution of Dividends.
On or before the thirtieth (30th) day after the close of each Plan Year
the Administrative Committee shall direct the Trustees as to whether any
or all of the cash dividends received on any Qualifying Employer
Securities, if any, owned by the Plan shall be:
(i) Retained by the Plan and allocated pursuant to Section 5.3;
(ii) Distributed to each Participant; or
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(iii) Used to make payments on an Exempt Loan.
In the event the Administrative Committee elects to cause the cash
dividends to be distributed to Participants, each Participant shall
receive, no later than ninety (90) days after the close of the Plan Year
in which the dividend is paid, the pro rata share, computed in
accordance with the provisions of Section 5.3, of such cash dividend
(excluding earnings thereon).
7.14 Diversification of Investments.
(a) Notwithstanding Sections 5.01 and Article VIII, each Qualified
Participant shall be permitted to direct the Plan as to the
investment of twenty-five percent (25%) of the value of the
Participant's account balance attributable to Qualifying
Employer Securities which were acquired by the Plan after
December 31, 1986, within ninety (90) days after the last day of
each Plan Year during the Participant's Qualified Election
Period. Within ninety (90) days after the close of the last Plan
Year in the Participant's Qualified Election Period, a Qualified
Participant may direct the Plan as to the investment of fifty
percent (50%) of the value of such account balance.
(b) The Participant's direction shall be provided to the
Administrative Committee in writing; shall be effective no later
than one hundred eighty (180) days after the close of the Plan
Year to which the direction applies; and shall specify which, if
any, of the options set forth in Section 7.14(c) the Participant
selects.
(c) At the election of the Qualified Participant, the Plan shall
distribute in cash or stock the portion of the Participant's
account that is covered by the election within ninety (90) days
after the last day of the period during which the election can
be made. This Section shall apply notwithstanding any other
provision of the Plan other than such provisions as require the
consent of the Participant and the Participant's spouse.
(d) In lieu of distribution under this Section, the Qualified
Participant who has the right to receive a distribution may
direct the Plan to transfer the portion of the Participant's
account that is covered by the election to another qualified
plan of the Employer which accepts such transfers, provided that
such Plan permits Employee-
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directed investment and does not invest in Qualifying Employer
Securities to a substantial degree. Such transfer shall be made
no later than ninety (90) days after the last day of the period
during which the election can be made.
7.15 Qualified Domestic Relations Orders.
Notwithstanding any other provisions of Article VII, any Accrued Benefit
of a Participant may be apportioned between the Participant and the
alternate payee (as defined in Code Section 414(p)(8)) either through
separate accounts or by providing the alternate payee a percentage of
the Participant's account. The Committee may direct distributions to an
alternate payee pursuant to a Qualified Domestic Relations Order as
defined in Code Section 414(p)(1)(A) prior to the date on which the
Participant attains the earliest Retirement Age, provided that the
Committee has properly notified the affected Participant and each
alternate payee of the order and has determined that the order is a
Qualified Domestic Relations Order as defined in Code Section
414(p)(1)(A). The alternate payee shall be paid a separate account or a
percentage of the Participant's account, computed as of the valuation
date described in Section 5.3, in a lump sum payment notwithstanding the
value of such lump sum payment unless the domestic relations order
specifies a different manner of payment permitted by the Plan. The
alternate payee shall not be required to consent to such lump sum
payment. The Committee shall adopt reasonable procedures to determine
the qualified status of Qualified Domestic Relations Orders and to
administer the distributions thereunder. In no event will a Qualified
Domestic Relations Order which provides that a former spouse is to be
treated as the current spouse of a Participant be considered a Qualified
Domestic Relations Order under this Plan, notwithstanding that such
Qualified Domestic Relations Order is a Qualified Domestic Relations
Order as defined in Code Section 414(p)(1)(A).
Article VIII
DUTIES AND AUTHORITY OF TRUSTEE
8.1 Receive Payments.
The Trustees shall receive from the Employer the payments made by it on
account of its contributions under the Plan but the Trustees shall have
no duty to compute any amount due from the Employer or to collect the
same.
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8.2 Evaluate Assets.
The Trustees shall evaluate the assets of the Trust Fund as of the close
of the last day of each Plan Year at their Fair Market Value and the
Administrative Committee or its agent will allocate the sums contributed
by the Employer plus the net income or minus the net loss of the Trust
Fund and plus the net appreciation or minus the net depreciation in the
Trust assets to separate bookkeeping accounts in the names of the
respective Participants under the Plan in accordance with the provisions
of Sections 2.13 and 5.3.
8.3 Segregation of Accounts.
When directed in writing by the Administrative Committee, the Trustees
shall segregate the accounts of terminated Participants in accordance
with the provisions of Section 7.3, and make payments out of the Trust
Fund from time to time to the Participants or their Beneficiaries, such
payments to be made in the manner and in the amounts as may be specified
in the written instructions of the Administrative Committee.
8.4 Tax Returns and Reports.
If the Trustees are a corporate fiduciary, then such Trustees shall
prepare or cause to have prepared and filed, all tax returns, reports,
and related documents, except as otherwise specifically provided in this
Plan or unless the Administrative Committee, in writing, relieves the
Trustees of such obligation, in part or entirely, in which case the
Administrative Committee, or the person or persons it designates, shall
be responsible for filing the tax returns, reports, and related filings,
as provided by the Administrative Committee. The Trustees shall be
entitled to rely on the accuracy of any written statement from the
Administrative Committee or from an officer of the Employer as to those
matters provided in Article IX.
8.5 Powers.
The Trustees are authorized and empowered to:
(a) Invest and reinvest the Trust Fund, without distinction between
principal and income, in Qualifying Employer Securities, bank
accounts, certificates of deposit, Common Stocks, preferred
stocks,
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bonds, notes, debentures, mortgages, U.S. retirement plan bonds,
and in other property, real or personal, so long as the
incidents of ownership of such property are within the
jurisdiction of the United States, and so long as such
investments do not violate applicable law;
(b) Purchase and hold Qualifying Employer Securities in a value up
to one hundred percent (100%) of the total value of the Trust
Fund, and borrow funds and pledge as collateral therefor the
Qualifying Employer Securities so acquired; the Trustees shall
have the duty to invest primarily in Qualifying Employer
Securities;
(c) Purchase, sell, exchange, convey, transfer, or otherwise realize
the value of any property held by it, specifically including the
purchase and sale of Qualifying Employer Securities from or to
the Employer or a disqualified person (as defined in Code
Section 4975(e)(2)) or a party in interest (as defined in ERISA
Section 3(14)) if such purchase or sale is for adequate
consideration and no commission is charged with respect thereto;
(d) Convert any stocks, bonds, or other securities; to give general
or special proxies or powers of attorney with or without power
of substitution; to exercise any warrants, conversion
privileges, subscription rights, or other options and to make
any payment incidental thereto; to consent to or otherwise
participate in corporate reorganizations or other changes
affecting corporate securities and to delegate discretionary
powers to pay any assessments or charges in connection
therewith; and generally to exercise any of the powers of an
owner with respect to stocks, bonds, securities or other
properties held in the Trust Fund;
(e) Make, execute, acknowledge, and deliver any and all documents of
transfer and conveyance and any other instruments that may be
necessary or appropriate to carry out the powers herein granted;
(f) Register any investments held in the Trust Fund in its own name
or in the name of a nominee or nominees and to hold any
investment in bearer form, but the books and records of the
Trustees shall at all times show that all such investments are
part of the Trust Fund;
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<PAGE> 46
(g) Invest all or a part of the Trust Fund in deposits which bear a
reasonable rate of interest in a bank or similar financial
institution, even though such institution is a Trustee or other
fiduciary, as defined in Code Section 4975(e)(3);
(h) Invest in a common or collective trust fund or pooled investment
fund maintained by a bank or trust company or a pooled
investment fund of an insurance company qualified to do business
in a State even though such bank, trust company or insurance
company is a disqualified person, as defined in Code Section
4975(e)(2);
(i) Take whatever actions are necessary to ensure that Qualifying
Employer Securities consisting of stock are distributed in the
manner prescribed in Section 7.1; such actions may include, but
are not limited to, purchasing or exchanging such stock from the
Trust, even though it has already been allocated to the Employer
Accounts of Participants and purchasing or exchanging such stock
as described in subparagraph (c) of this Section;
(j) Purchase Qualifying Employer Securities from persons, including
"disqualified persons" as that term is defined in Code Section
4975(e)(2), so long as the purchase price does not exceed the
Fair Market Value of such securities and so long as the terms of
the purchase are fair and reasonable;
(k) Perform all such acts, although not specifically mentioned
herein, as the Trustees may deem necessary to administer the
Trust Fund and to carry out the purpose of the Trust; and
(l) Borrow, or loan, except as prohibited by Code Section 4975(c)
without reference to Code Section 4975(d), sums as the Trustees
deems desirable, and for that purpose, to mortgage or pledge all
or part of the Trust Fund; and borrow from "disqualified
persons" (as that term is defined in Code Section 4975(e)(2)) in
such amounts as permitted by Section 8.11, for the purpose of
purchasing Qualifying Employer Securities.
8.6 Expenses.
All brokerage costs, transfer taxes and similar expenses incurred in
connection with the investment and reinvestment of the Trust Fund and
all taxes of any kind whatsoever which may be levied or assessed
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under existing or future laws upon or in respect of the Trust Fund, and
any interest which may be payable on money borrowed by the Trustees for
the purpose of the Trust (however, such funds may not be borrowed for
the purpose of purchasing Qualifying Employer Securities), shall be paid
from the Trust Fund, and, until paid, shall constitute a charge upon the
Trust Fund. All other administrative expenses incurred by the Trustees
in the performance of its duties, including such compensation to the
Trustees as may be agreed upon from time to time between the Employer
and the Trustees (in accordance with the Trustees' standard schedule of
fees in effect from time to time during the time it administers this
Trust, if applicable) and all proper charges and disbursements of the
Trustees, shall be paid by the Employer, but until paid shall constitute
a charge upon the Trust Fund. If the Employer advises the Trustees in
writing of its determination to make no further contribution to this
Trust, the expenses of the Trustees shall thereafter be charged against
and paid out of the Trust Fund and a lien for the payment thereof shall
be impressed upon the assets of the Trust to be charged proportionately
against the amount standing to the credit of each Participant. However,
no person who is a disqualified person (as defined in Code Section
4975(e)(2)) and who received full-time pay from the Employer, may
receive compensation from the Trust, except for reimbursement of
expenses properly and actually incurred.
The Trustees may inspect the records of the Employer whenever such
inspection may be reasonably necessary in order to determine any fact
pertinent to the performance of its duties as the Trustees. The
Trustees, however, shall not be required to make such inspection, but
may, in good faith, rely on any statement of the Employer or any of its
officers.
8.7 Litigation.
The Trustees shall not be required to participate in any litigation
either for the collection of moneys or other property due the Trust
Fund, or in defense of any claim against the Trust Fund unless the
Trustees shall have been indemnified to its satisfaction against all
expenses and liability to which the Trustees might become subject.
8.8 Written Instructions.
When any act of the Trustees is based upon instructions of the Employer
or the Administrative Committee, the Trustees may rely upon instructions
in writing, signed by an officer of the Employer, or upon
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written instructions from the Administrative Committee, as appropriate.
8.9 Appointment of Investment Manager.
The Trustees, with the written concurrence of the Administrative
Committee, may appoint an Investment Manager (as defined in ERISA
Section 3(38)), who shall have responsibility for investment of the
Trust Fund. The Investment Manager shall have the investment powers
granted the Trustees in Section 8.5 except to the extent the Investment
Manager's powers are specifically limited by an agreement between the
Trustee and Investment Manager.
8.10 Removal and Resignation of the Trustee.
The Employer may at any time remove any Trustee acting hereunder or
appoint a corporation and/or an individual or individuals to be
successor Trustee hereunder in the place of any removed or resigning
Trustee. Any Trustee may at any time resign by giving written notice to
the Employer, which resignation shall take effect on the date therein
specified and which shall not be less than thirty (30) days from the
date of notice unless the Employer shall agree to an earlier date.
8.11 Loans from Disqualified Persons
The Trustees shall have the power to borrow funds either in the form of
cash, a purchase money transaction, or the assumption of an obligation,
from "disqualified persons" (as that term is defined in Code Section
4975(e)(2)), or guaranteed by disqualified persons, for the purpose of
purchasing Qualifying Employer Securities or to repay amounts which were
borrowed for the purpose of purchasing such securities, only if the
following conditions are met:
(a) Such loan must provide for periodic payments over a definitely
ascertainable term;
(b) The only assets given as collateral for such loan may be, in the
case of a loan to purchase Qualifying Employer Securities, those
Qualifying Employer Securities purchased with the proceeds of
the loan, and in the case of a loan to refinance a prior loan
used to acquire Qualifying Employer Securities, the Qualifying
Employer Securities acquired with such prior loan;
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<PAGE> 49
(c) The only Plan assets available upon default to persons who
loaned funds or who are entitled to payments under a loan from a
disqualified person are:
(i) Qualifying Employer Securities given pursuant to
paragraph (b) above;
(ii) Contributions made to the Plan, other than contributions
of Qualifying Employer Securities, that are made for the
purpose of meeting the Plan's obligations under the
loan; and
(iii) Earnings attributable to amounts described in (i) and
(ii) of this sentence;
(d) Amounts paid during a Plan Year in repayment of such loan may
not exceed amounts contributed (during the current and prior
Plan Years) to the Plan for the purpose of meeting the Plan's
obligations under the loan, less total prior payments on the
loan;
(e) Amounts contributed to the Plan for the purpose of meeting loan
obligations shall, prior to making payments under such loan, be
segregated from the other amounts held by the Plan and all
earnings thereon shall be allocated to such segregated account;
(f) Upon default, Plan assets shall be transferred to the lender, in
an amount which is necessary to make payments which are
currently due under the payment schedule of the loan, without
acceleration of future amounts due thereon;
(g) Interest charged under the loan must be reasonable after
considering all relevant factors such as the loan's amount and
duration, the amount of security provided the lender (including
any guarantee), the credit standing of the Plan and prevailing
interest rates;
(h) Qualifying Employer Securities which are pledged as collateral
for such loan must be released from encumbrance at the end of
each Plan Year in an amount equal to the number of currently
encumbered securities multiplied by a fraction, the numerator of
which is the total payment of principal and interest made during
the Plan Year, and the denominator of which is the total payment
of principal and interest made during the Plan Year plus the
total
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payment of principal and interest due under the loan for all
future Plan Years. (If the interest rate under the loan is
variable the above calculation must be made using the interest
rate which is applicable as of the end of the Plan Year in which
such calculation is made.) Securities of different classes must
be released from encumbrance in equal percentages;
(i) All Qualifying Employer Securities acquired with the proceeds of
a loan from a "disqualified person", whether they are pledged as
collateral for such loan or not, shall be held in suspense in
the Unallocated Stock Account and shall be removed from such
account and be allocated to the Employer Accounts of
Participants at the end of each Plan Year to the extent
paragraph (h) of this Section 8.11 provides for the release of
encumbered securities. Income earned from securities held in
suspense shall be deemed to be the income of the Plan and shall
not be held in suspense unless such income has been pledged as
collateral for the loan. Should a portion of a Participant's
Employer Account be forfeited, Qualifying Employer Securities
held in suspense for such Participant pursuant to this paragraph
may only be forfeited after all other assets in the
Participant's Employer Account are forfeited.
Article IX
DUTIES AND AUTHORITY OF ADMINISTRATIVE COMMITTEE
9.1 Appointment.
This Plan shall be administered by the Administrative Committee
as Plan Administrator. The Board of Directors of the Employer
shall appoint the Administrative Committee, which shall consist
of at least two (2) persons who shall signify in writing their
acceptance of such appointment. Any member of the Administrative
Committee may resign upon giving written notice to the board of
directors of the Employer. Each appointee shall hold office at
the pleasure of the Board Of Directors. Vacancies arising in the
Administrative Committee from death, resignation, removal or
otherwise, shall be filled by the Board of Directors, but the
Administrative Committee may act notwithstanding the existence
of vacancies so long as there is at least one member of the
Administrative Committee who is a director.
At any time the Board Of Directors of the Employer may adopt a
resolution abolishing the Administrative Committee and reserving
all
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of the duties of the Administrative Committee to the Board of Directors.
Such resolution shall be effective as soon as it is communicated in
writing to both the Administrative Committee and Trustees, or at any
such subsequent effective date as is provided in the resolution.
Whenever such a resolution is effective as to the Plan, or in the event
an Administrative Committee is not appointed, the term Plan
Administrator or Board of Directors shall be deemed to replace the term
"Administrative Committee." Such a resolution may be rescinded by the
board of directors and shall be effective as soon as it is communicated
in writing to the Trustees, or shall be effective at such later date as
is provided in the resolution.
9.2 No Discrimination.
The Administrative Committee shall not take any action nor direct the
Trustees to take any action that would result in benefiting one
Participant or group of Participants at the expense of another, or
discriminating between Participants similarly situated, or applying
different rules to substantially similar sets of facts.
9.3 Majority Action.
The Administrative Committee shall act by a majority (or by all members
if there be only one (1) or two (2) members) of the number of members
constituting the Administrative Committee at the time of such action,
and such action may be taken either by vote at a meeting or in writing
without a meeting.
9.4 Powers.
Except as otherwise provided in the Plan, the Administrative Committee
shall have control of the administration of the Plan, with all powers
necessary to enable it to carry out its duties in that respect. Not in
limitation, but in amplification of the foregoing, the Administrative
Committee shall have power to interpret or construe the Plan and to
determine all questions that may arise hereunder as to the status and
rights of Participants and others hereunder. The Administrative
Committee may inspect the records of the Employer or Trustees whenever
such inspection may be reasonably necessary in order to determine any
fact pertinent to the performance of the duties of the Administrative
Committee. The Administrative Committee, however, shall not be required
to make such inspection, but may, in good faith,
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rely on any statement of the Trustees or Employer or any of its officers
or Employees.
9.5 Filing Reports.
The Administrative Committee shall furnish, or shall see that the
Employer furnishes, a summary of this Plan to all Employees, as required
by applicable Federal law. The Administrative Committee shall furnish to
the Trustees the names of all Employees who become eligible as
Participants, and the Administrative Committee shall notify each
Employee of his eligibility.
9.6 Records and Information.
The Administrative Committee shall keep a complete record of all its
proceedings and all data necessary for the administration of the Plan.
9.7 Information to Participants.
The Administrative Committee shall direct the maintenance of separate
accounts of the Participants. It shall give each Participant, at least
once every year, information as to the balance of his Employer Account.
9.8 Compensation of Members.
The members of the Administrative Committee shall serve without
compensation for their services as such, but shall be reimbursed by the
Employer for all necessary expenses incurred in the discharge of their
duties. If the Employer advises the Administrative Committee in writing
of its determination to make no further contributions to the Plan, the
expenses of the Administrative Committee shall thereafter be charged
against and paid out of the Trust Fund and a lien for the payment
thereof shall be impressed upon the assets of the Trust to be charged
proportionately against the amount standing to the credit of each
Participant.
9.9 Review of Participant's Claims.
In case the claim of any Participant or Beneficiary for benefits under
the Plan is denied, the Administrative Committee shall provide adequate
notice in writing to such claimant, setting forth the specific reasons
for such denial. The notice shall be written in a manner calculated to
be understood by the claimant. The Administrative Committee shall afford
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a Participant or Beneficiary, whose claim for benefits has been denied,
sixty (60) days from the date notice of such denial is delivered or
mailed in which to appeal the decision in writing to the Administrative
Committee. If the Participant or Beneficiary appeals the decision in
writing within sixty (60) days, the Administrative Committee shall
review the written comments and any submissions of the Participant or
Beneficiary and render its decision regarding the appeal, all within
sixty (60) days of such appeal.
9.10 Exercise of Stock Rights.
In the event that Qualifying Employer Securities held by the Plan
include voting stock, or stock or other securities with any rights other
than voting rights, the Administrative Committee shall name, as a
Designated Fiduciary, one of its members, or such other person as may
consent thereto, to exercise on behalf of Participants, voting or other
stock or equity rights with respect to the stock contributed to the
Plan. The Designated Fiduciary shall notify each Participant to whose
account any Qualifying Employer Security has been allocated at least
thirty (30) days prior to any occasion on which such voting or other
rights may be exercised. Such notification shall include all information
distributed to shareholders or holders of such other equities by the
Employer regarding the exercise of such voting or other rights. Such
notification shall contain a procedure under which each of such
Participants shall be able to direct the Designated Fiduciary in the
exercise of the voting, or other rights. The Designated Fiduciary shall
be bound by the instructions of each Participant; if a Participant gives
no instructions to the Designated Fiduciary, the Designated Fiduciary
shall not vote such Participant's stock or exercise such rights but
shall so notify the trustees to vote such stock or exercise such rights.
ARTICLE X
MODIFICATIONS FOR TOP HEAVY PLANS
10.1 Application of Article.
The provisions in this Article X shall take precedence over any other
provisions in the Plan with which they conflict.
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10.2 Definitions.
(a) Top Heavy Plan
This Plan shall constitute a Top Heavy Plan for a Plan Year if,
as of the last day of the preceding Plan Year (or in the case of
the Plan Year in which occurs the effective date of this Plan,
the last day of such Plan Year):
(i) The aggregate of the Employer Accounts of Key Employees
exceeds sixty percent (60%) of the aggregate of the
Employer Accounts of all Employees under the Plan all
valued as of the last day of the preceding Plan Year (or
in the case of the Plan Year in which occurs the
effective date of this Plan, the last day of such Plan
Year); or
(ii) If the Plan is part of a Top Heavy Group.
(b) Top Heavy Group.
This Plan shall be deemed to be a part of a Top Heavy Group if
the Plans which make up the group of which this Plan is
considered a part are such that, when aggregated, the sum of:
(i) The present value of the cumulative accrued benefits of
Key Employees under all defined benefit plans in the
group; and
(ii) The cumulative accrued benefits in the Plan accounts of
Key Employees under all defined contribution plans in
the group, exceeds sixty percent (60%) of the sum of
such amounts for all Employees who participate in the
Plans of such group.
The group of Plans of which this Plan shall be considered a part
includes:
(i) All Plans of the Employer in which a Key Employee
participates;
(ii) All Plans which enable a Plan in which a Key Employee
participates to meet the qualification requirements of
Code Section 401(a)(4) or Code Section 410; and
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(iii) All Plans which the Employer, in its discretion, decides
to include, provided that the inclusion of such Plan or
Plans would not prevent the group of Plans from meeting
the qualification requirements of Code Section
401(a)(4) and Code Section 410.
(c) Key Employee.
"Key Employee" means an Employee or former Employee (or his
Beneficiaries) who, at any time during the Plan Year or any of
the preceding four (4) Plan Years, is any of the following:
(i) An officer of the Employer if such individual's annual
Compensation exceeded fifty percent (50%) of the dollar
limitation under Code Section 415(b)(1)(A).
(ii) One of the ten (10) Employees owning (or considered as
owning within the meaning of Code Section 318) the
largest interests in the Employer if such individual's
Compensation exceeded one hundred percent (100%) of the
dollar limitation under Code Section 415(c)(1)(A).
(iii) A "five percent owner" (5%) of the Employer. "Five
percent owner" (5%) means any person who owns (or is
considered as owning within the meaning of Code Section
318) more than five percent (5%) of the outstanding
stock of the Employer or stock possessing more than five
percent (5%) of the total combined voting power of all
stock of the Employer.
(iv) A "one percent owner" (1%) of the Employer receiving
annual Compensation from the Employer of more than One
Hundred Fifty Thousand Dollars ($150,000). "One percent
(1%) owner" means any person who owns (or is considered
as owning within the meaning of Code Section 318) more
than one percent (1%) of the outstanding stock of the
Employer or stock possessing more than one percent (1%)
of the total combined voting power of all stock of the
Employer.
In determining percentage ownership hereunder, Employers that
would otherwise be aggregated under Code Section 414(b), (c),
(m) and (o) shall be treated as separate Employers. However, in
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determining whether an individual receives compensation of more
than One Hundred Fifty Thousand Dollars ($150,000) compensation
from each Employer required to be aggregated under Code Section
414(b), (c), (m) and (o) shall be taken into account.
(d) Amounts Included for Computation Purposes.
In determining, for the purposes of this Section 10.2, the
amount of an Employee's accrued benefits and account balances,
there shall be included therein the present value of all
distributions made within a five (5) year period ending on the
date such determination is made, including distributions from
terminated. Plans required to be considered pursuant to Section
10.2(b). Furthermore, the accrued benefits and account balances
of any Employee who is not a Key Employee for the Plan Year in
question, but was a Key Employee in any previous Plan Year,
shall not be taken into consideration in making any of the
computations required in this Section 10.2. The accrued benefit
of any individual who has not performed any service for the
Employer within the five year period ending on the date such
determination is made shall not be taken into account for
purposes of Section 10.2. Except to the extent provided in
regulations of the Secretary of the Treasury, any rollover
contributions (or similar transfers) made to the Plan after
December 31, 1983 shall not be taken into consideration in
making any of the computations required by this Section 10.2.
(e) Non-Key Employee.
A "Non-Key Employee" shall mean any Employee who is not a Key
Employee.
(f) Top Heavy Accrual.
Solely for the purpose of determining if the Plan, or any Other
Plan included in a Top Heavy Group of which this Plan is a part,
is top-heavy, the accrued benefit of a Participant other than a
Key Employee shall be determined under:
(i) The method, if any, that uniformly applies for accrual
purposes under all Plans maintained by the Employer or
by other members of an affiliated service group (under
Code
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Section 414(m)), a controlled group of corporations (under
Code Section 414(b)), a group of trades or businesses under
common control (under Code Section 414(c)) of which the
Employer is a member and any other entity required to be
aggregated with the Employer pursuant to regulations under
Code Section 414(o), or
(ii) If there is no such method, as if such benefit accrued not
more rapidly than the slowest accrual rate permitted under
the fractional accrual rate of Code Section 411(b)(1)(C).
10.3 Accelerated Vesting.
Unless the Plan provides for full and immediate vesting of Employer
Accounts upon participation, then for any Plan Year in which this Plan
is deemed to be a Top Heavy Plan, the vesting schedule contained in
Section 6.2 shall be modified, only to the extent it is less favorable to
Participants than as follows:
==============================================
Total Years for Vesting Vested
(excluding Years of Service Percentage
prior to effective date of
this Plan)
----------------------------------------------
Less than 2 0%
----------------------------------------------
2 20%
----------------------------------------------
3 40%
----------------------------------------------
4 60%
----------------------------------------------
5 80%
----------------------------------------------
6 or more 100%
==============================================
Should this Plan not be deemed to be a Top Heavy Plan after previously being so
categorized, the vesting schedule contained in Section 6.2 shall again be
effective except that the vested percentage attained by Participants shall not
be reduced thereby and Participants with three (3) or more Years of Service for
Vesting shall have the right to select the vesting schedule under which their
vested Accrued Benefit will be determined.
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10.4 Minimum Contributions.
For any Plan Year in which this Plan is determined to be a Top-Heavy
Plan, either:
(i) A minimum Employer contribution shall be made, pursuant to this
Plan or another defined contribution plan maintained by the
Employer, to the account of each non-Key Employee (except those
who are separated from service with the Employer at the end of
the Plan Year); or
(ii) A minimum non-integrated benefit must be provided to each
non-Key Employee (except those who are separated from service
with the Employer at the end of the Plan Year), pursuant to a
defined benefit plan maintained by the Employer.
For the purposes of the first sentence of this Section 10.4, the minimum
Employer contribution provided to each non-Key Employee (except those
who are separated from service with the Employer at the end of the Plan
Year) shall be equal to three percent (3%) of such non-Key Employee's
Compensation. If, however, the Employer contribution, under this and any
other defined contribution plan required to be included in the Top-Heavy
Group and maintained by the Employer, for any Key Employee for such Plan
Year is less than three percent (3%) of such Key Employee's total
Compensation, then, the Employer contribution to each Participant
(except those who are separated from service with the Employer at the
end of the Plan Year) shall equal the amount which results from
multiplying such Participant's Compensation times the highest
contribution rate of any Key Employee covered by the Plan and shall
include amounts elected to be deferred by the Key Employee pursuant to
an Code Section 401(k) provision.
For the purposes of the first sentence of this Section 10.4, the minimum
non-integrated benefit provided by the Employer to each non-Key Employee
(except those who are separated from service with the Employer at the
end of the Plan Year) is an amount, which when expressed as an annual
retirement benefit, shall be no less than two percent (2%) of such
non-Key Employee's average annual Compensation for his five (5) highest
consecutive years of service, multiplied by the Employee's years of
service with the Employer, not to exceed ten (10) years. For the
purposes of the preceding sentence, years of service with the Employer
shall not include years of service completed during any
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Plan Year which begins before January 1, 1984, or years of service
completed during a Plan Year for which the Plan is not a Top-Heavy Plan.
For the purposes of this Section 10.4, the minimum benefit provided
above shall be computed in the form of a single life annuity, with no
ancillary benefits, beginning at Normal Retirement Age.
For the purposes of this Article X, "Compensation" shall have the same
meaning as it does throughout the Plan; provided that it shall include
such additional compensation as is required to meet the requirements of
Code Section 415(c)(3).
The minimum allocation required pursuant to this section shall be made
even though, under other Plan provisions, a participant would not
otherwise be entitled to receive an allocation, or would have received a
lesser allocation for the year because of such participant's failure to
complete a Year of Service.
10.5 Limitation on Compensation Taken into Account Under Plan.
For any Plan Year prior to Plan Years beginning before January 1, 1989,
in which this Plan is deemed to be a Top Heavy Plan the definition of
Compensation contained in Section 2.5 shall exclude amounts in excess of
One Hundred Fifty Thousand Dollars ($150,000).
10.6 Modification of Defined Benefit and Defined Contribution Plan Fraction.
For any Plan Year in which the Plan is deemed to be a Top Heavy Plan,
the denominators of the defined benefit plan fraction and the defined
contribution plan fraction contained in Section 5.4(c) (if such Section
is included in this Plan) shall be deemed to be modified by substituting
1.0 for 1.25. Notwithstanding the above, if this Plan would not be
deemed to be a Top Heavy Plan if ninety percent (90%) were substituted
for sixty percent (60%) in Section 10.2 and if the Employer provides
benefits and/or makes contributions to the Employer Accounts of non-Key
Employees who participate in defined benefit and/or defined contribution
plans maintained by the Employer, in amounts at least equal to that
which would be required by Section 10.4 after substituting four percent
(4%) for three percent (3%) in the second paragraph thereof, and by
substituting three percent (3%) for two percent (2%) in the third
paragraph thereof, then the reduction in the defined benefit plan
fraction and the defined contribution plan fraction as set forth in the
preceding sentence, shall not be made.
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ARTICLE XI
AMENDMENT AND TERMINATION
11.1 Rights to Suspend or Terminate Plan.
It is the present intention of the Employer to maintain this Plan
throughout its corporate existence. Nevertheless, the Employer reserves
the right, at any time, to discontinue or terminate the Plan, to
terminate the Employer's liability to make further contributions to this
Plan, to suspend contributions for a fixed or indeterminate period of
time. In any event, the liability of the Employer to make contributions
to this Plan shall automatically terminate upon its legal dissolution or
termination, upon its adjudication as a bankrupt, upon the making of a
general assignment for the benefit of creditors, or upon its merger or
consolidation with any other corporation or corporations.
11.2 Successor Corporation.
In the event of the termination of the liability of the Employer to make
further contributions to this Plan, the Employer's liability may be
assumed by any other corporation or organization which employs a
substantial number of the Participants of this Plan. Such assumption of
liability shall be expressed in an agreement between such other
corporation or organization and the Trustees under which such other
corporation or organization assumes the liabilities of this Trust with
respect to the Participants employed by it.
11.3 Amendment.
To provide for contingencies which may require the clarification,
modification, or amendment of this Plan, the Employer reserves the right
to amend this Plan at any time. The Employer, however, shall not have
the right to amend this Plan in any way which would deprive any
Participant of the right to receive his Accrued Benefits under the Plan,
or which would alter the basic purpose of the Plan, or which would give
the Employer any rights in the Trust Fund.
Each Participant having at least three Years of Service for Vesting at
the time of the adoption of any amendment changing any vesting schedule
under the Plan shall have the right to elect at any time, but no later
than 60 days after the later of:
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(a) The date the amendment is adopted;
(b) The date on which the amendment is effective; or
(c) The date on which the Participant is given written notice the
amendment, to have his vested percentage computed under the Plan
without regard to such amendment.
11.4 One Hundred Percent (100%) Vesting on Termination of Plan.
Upon termination or partial termination of the Plan and Trust by formal
action of the Employer or for any other reason, or if Employer
contributions to the Plan and Trust are permanently discontinued for any
reason, each Participant directly affected by such action shall be one
hundred percent (100%) vested in the amount allocated to the accounts of
each such Participant, and payment to such Participant shall be made in
cash as soon as practicable after liquidation of the assets of the
Trust.
11.5 Plan Merger or Consolidation.
In the case of any merger or consolidation with, or transfer of any
assets or liabilities to, any other Plan, each Participant in this Plan
must be entitled to receive (if the surviving Plan is then terminated) a
benefit immediately after the merger, consolidation, or transfer which
is equal to or greater than the benefit he would have been entitled to
receive immediately before the merger, consolidation, or transfer (if
this Plan had terminated).
ARTICLE XII
MISCELLANEOUS
12.1 Laws of California to Apply.
The Plan provisions of this document shall be construed according to the
laws of California, to the extent Federal laws do not control. The situs
of the Trust will be in California. Its validity, construction, and all
rights under the Plan and Trust shall be governed by ERISA and, to the
extent not preempted, by the laws of California. If any provisions of
the Agreement are invalid or unenforceable, the remaining provisions
thereof shall continue to be fully effective.
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<PAGE> 62
12.2 Participant Cannot Transfer or Assign Benefits.
None of the benefits, payments, proceeds, claims, or rights of any
Participant hereunder shall be subject to any claim of any creditor of
the Participant, nor shall any Participant have any right to transfer,
assign, encumber, or otherwise alienate, any of the benefits or proceeds
which a Participant may expect to receive, contingently or otherwise
under this Plan.
Notwithstanding any other provisions of this Section 12.2, the Trustees
may make distributions pursuant to a qualified domestic relations order
(as defined in Code Section 414(p)), provided that the Plan
Administrator has properly notified the Participant and any alternate
payee of the order and has determined that the order is a qualified
domestic relations order. The Plan Administrator shall adopt reasonable
procedures to determine the qualified status of such orders and to
administer distributions thereunder. Notwithstanding any restrictions on
the time of distribution which would otherwise apply under this Plan,
distributions with respect to a qualified domestic relations order may
be made at any time required by the order.
12.3 Right to Perform Alternative Acts.
In the event it becomes impossible for the Employer, the Administrative
Committee or the Trustees to perform any act required by this Plan, then
the Employer, the Administrative Committee or the Trustees may perform
such alternative act which most clearly carries out the intent and
purpose of this Plan.
12.4 Reversion of Contributions Under Certain Circumstances.
If this Plan is not initially approved and qualified by the Internal
Revenue Service as meeting the requirements of Code Section 401 and Code
Section 501, the Employer may, at its election, either:
(a) Cause the Trustees to return to the Employer any amounts
previously contributed by the Employer to the Trust and the
Participants, if any amounts have been contributed by them, and
immediately terminate the Plan; or
(b) Effect such amendments to the Plan as are necessary to obtain
the approval and qualification of the Plan by the Internal
Revenue Service.
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<PAGE> 63
All contributions made pursuant to Article IV are conditioned on
deductibility of such contributions under Code Section 404. To the
extent that the deduction under Code Section 404 for any year is
disallowed, the contribution shall be returned to the Employer within
one (1) year after disallowance of the deduction.
If a contribution is made by an Employer by a mistake of fact, the
contribution may be returned to the Employer within one (1) year after
the payment of the contribution.
Notwithstanding the above, earnings attributable to amounts described in
paragraphs two and three of this Section 12.4 shall not be returned to
the Employer; losses attributable to such amounts shall reduce the
amount returned.
12.5 Plan Administrator Agent for Service of Process.
The Plan Administrator is designated agent to receive service of legal
process on behalf of the Plan.
12.6 Filing Tax Returns and Reports.
If the Trustees are not a corporate fiduciary, the Plan Administrator
shall prepare, or cause to have prepared, all tax returns, reports, and
related documents, except as otherwise specifically provided in this
Plan or unless the Administrative Committee provides to the contrary in
the manner prescribed in Section 8.4.
12.7 Indemnification.
The Employer agrees to indemnify all Employees who serve as members of
the Administrative Committee or who serve as Trustee against all
liability arising in connection with their duties under the Plan, except
that this indemnification shall not include acts of embezzlement, or
diversion of Trust Funds by the Employee, nor shall it include acts of
gross negligence.
The Employer shall indemnify and hold harmless the Trustees, its
officers, Employees, agents, successors and assigns against all
liabilities, demands, claims, actions, losses, taxes, expenses
(including reasonable attorney's fees), both direct and indirect,
arising out of:
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<PAGE> 64
(1) Acts or omissions to act with respect to the Plan by persons
unrelated to the Trustees ("unrelated persons"),
(2) The Trustee's action or inaction with respect to the Plan
resulting from reliance on the actions or inaction of unrelated
persons, including directions to invest or otherwise deal with
Plan assets, or
(3) Any violation by an unrelated persons of the provisions of ERISA
or the regulations thereunder.
The foregoing indemnity shall not apply if the actions or omissions of
the Trustees result from the Trustees' willful misconduct or gross
negligence.
12.8 Number and Gender.
When appropriate the singular as used in this Plan shall include the
plural and vice versa; and the masculine shall include the feminine.
12.9 Military Service.
Notwithstanding any provision of this Plan to the contrary,
contributions, benefits and Service credit with respect to qualified
military service will be provided in accordance with Section 414(u) of
the Internal Revenue Code.
ARTICLE XIII
EXEMPT LOANS
13.1 Use of Proceeds.
The proceeds of an Exempt Loan must be used within a reasonable time
after their receipt by the Plan only for any or all of the following
purposes:
(a) To acquire Qualifying Employer Securities;
(b) To repay such Exempt Loan;
(c) To repay a prior Exempt Loan.
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<PAGE> 65
If the proceeds of a loan are used to repay an Exempt Loan, the new loan
must constitute an Exempt Loan.
13.2 Interest Rate.
The interest rate of any loan to the Plan, including an Exempt Loan must
not be in excess of a reasonable rate of interest. All other factors will
be considered in determining a reasonable rate of interest, including the
amount and duration of the loan, the security and guaranty (if any)
involved, the credit standing of the Plan and the guarantor (if any), and
the interest rate prevailing for comparable loans, including a variable
interest rate if reasonable.
13.3 Non-recourse.
An Exempt Loan must be without recourse against the Plan. The only assets
of the Plan that may be given as collateral on an Exempt Loan are
Qualifying Employer Securities which were either:
(i) Acquired with the proceeds of the Exempt Loan; or
(ii) Were used as collateral on a prior Exempt Loan repaid with the
proceeds of the current Exempt Loan.
No person entitled to payment under the Exempt Loan shall have any right to
assets of the Plan other than:
(a) Collateral given for the Exempt Loan;
(b) Contributions (other than contributions of Qualifying Employer
Securities) that are made under the Plan to meet the obligations of
the Exempt Loan; and
(c) Earnings attributable to such collateral and the investment of such
contributions.
13.4 Limitations on Payments.
Payments made with respect to an Exempt Loan by the Plan during a Plan Year
must not exceed an amount equal to the sum of such contributions and
earnings received during or prior to the Plan Year less such payments in
prior Plan Years. Such contributions and earnings
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shall be accounted for separately by the Employer in the books of account
of the Plan until the Exempt Loan is repaid.
13.5 Forfeiture of Qualifying Employer Securities.
All Qualifying Employer Securities acquired with the proceeds of a loan
from a "disqualified person", whether they are pledged as collateral for
such loan or not, shall be held in a suspense account and shall be removed
from such account and be allocated to the Employer Accounts of
Participants at the end of each Plan Year to the extent paragraph (h) of
Section 8.11 provides for the release of encumbered securities. Income
earned from securities held in suspense shall be deemed to be the income
of the Plan and shall not be held in suspense unless such income has been
pledged as collateral for the loan. Should a portion of a Participant's
Employer Account be forfeited, Qualifying Employer Securities held in
suspense for such Participant pursuant to this paragraph may only be
forfeited after all other assets in the Participant's Employer Account are
forfeited. If interests in more than one class of Qualifying Employer
Securities have been allocated to the Participant's Employer Account, the
Participant must be treated as forfeiting the same proportion of each
such class of Qualifying Employer Securities.
13.6 Limitation on Future Obligation.
The Plan shall not obligate itself to acquire Qualifying Employer
Securities from a particular security holder at an indefinite time
determined upon the happening of an event such as the death of the
security holder. However, this shall not prevent the Plan from providing
for the issuance of options in accordance with Treasury Regulation
Sections 54.4975-7(b)(10), (11), and (12).
In the event of default upon an Exempt Loan, the value of Plan assets
transferred in satisfaction of the Exempt Loan may not exceed the amount
of default. If the lender is a disqualified person (as defined in Code
Section 4975(e)(2)), the Exempt Loan must provide for a transfer of Plan
assets upon default only upon and to the extent of the failure of the Plan
to meet the payment schedule of the Exempt Loan. For purposes of this
Section 13.6, the making of a guaranty does not make a person a lender.
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IN WITNESS WHEREOF, the parties have executed this agreement this 18th day of
September, 1998.
WITNESS EMPLOYER
VALLE DE ORO BANK, N.A.
/s/ [SIG] /s/ WILLIAM V. EHLEN
- ------------------------------ ----------------------------------
William V. Ehlen
President
WITNESS TRUSTEE
/s/ [SIG] /s/ SAMUEL M. CICCATI
- ------------------------------ ----------------------------------
Samuel M. Ciccati, Ph.D.
/s/ [SIG] /s/ WILLIAM V. EHLEN
- ------------------------------ ----------------------------------
William V. Ehlen
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<PAGE> 1
EXHIBIT 10.10
Sublease between Valle de Oro Bank, N.A. and Ervin S. Wheeler, M.D., a Medical
corporation, dated January 28, 1997
<PAGE> 2
SUBLEASE
This Sublease ("Sublease") dated as of January 28, 1997, is made between
Valle de Oro Bank, N.A., a national banking association ("Sublandlord") and
Ervin S. Wheeler, M.D., A Medical Corporation ("Subtenant"), pursuant to the
recitals set forth below.
RECITALS
A. RAINBOW LAND CO. ("Owner") is the owner of the real property
commonly known as 8690 Center Drive, La Mesa, California ("Land"). Pursuant to a
written lease agreement dated January 10, 1958 (which, together with all
amendments thereto, is referred to herein as the "Land Lease"), Owner leased the
Land to GROSSMONT LAND CO., a California limited partnership ("Master
Landlord").
B. Pursuant to a written lease agreement dated as of August 6, 1982,
(which, together with all amendments thereto, is referred to herein as the
"Master Lease"), Master Landlord subleased the Land and an office building
thereon ("Original Master Premises") to Sublandlord's predecessor in interest. A
copy of the Master Lease is attached hereto as Exhibit "A." Sublandlord is the
present tenant under the Master Lease.
C. Pursuant to a written sublease agreement dated as of March 26, 1984,
(which, together with all amendments thereto, is referred to herein as the "Old
Sublease"), Sublandlord's predecessor in interest subleased a portion of the
Original Master Premises (the "Old Sublease Premises") to Subtenant. As of
December 30, 1995, Sublandlord was the landlord under the Old Sublease.
D. Pursuant to a written sublease agreement dated as of November 1,
1991, (the "Old Wheeler-Carter Sublease"), Subtenant subleased a portion of the
Old Sublease Premises (the "Old Wheeler-Carter Sublease Premises") to JOHN D.
CARTER, D.D.S. ("Carter").
E. On December 30, 1995, a fire occurred on the Original Master
Premises, resulting in the total destruction of the improvements thereon and
rendering the Original Master Premises unusable. As a result of the destruction,
Sublandlord declared the Old Sublease terminated. The termination of the Old
Sublease automatically terminated the Old Wheeler-Carter Sublease.
F. Master Landlord and Sublandlord have entered into a written Agreement
Re Restoration of Leased Premises (the "Restoration Agreement") setting forth
their respective rights and obligations regarding the payment for and rebuilding
of improvements on the Land. Subtenant is not a party to the Restoration
Agreement.
G. Sublandlord intends to construct new improvements on the Land. The
Land and the new improvements to be constructed thereon are hereinafter
collectively referred to as the
1
<PAGE> 3
"Master Premises." It is the intent of the Sublandlord and the Master Landlord
that the Master Premises shall be subject to the provisions of the Master Lease.
H. This Sublease is intended to set forth the terms and conditions
pursuant to which Sublandlord shall sublease a portion of the Master Premises to
Subtenant.
I. This Agreement in no way diminishes or relinquishes Subtenant's
rights, if any, with respect to insurance proceeds or recovery for damaged
tenant improvements.
SECTION 1. SUBLEASE.
1.1 New Sublease; Termination of Old Sublease. A dispute has existed
between Subtenant and Sublandlord regarding the affect upon the Old Sublease of
the destruction of the Old Sublease Premises. Sublandlord has taken the position
that the Old Sublease was terminated thereby and Subtenant has contended it was
not. In consideration of this Sublease, Sublandlord and Subtenant hereby
acknowledge that the Old Sublease was terminated by reason of the destruction
and upon such termination, all tenant improvements and fixtures thereupon became
the property of Sublandlord. Further, the parties acknowledge that upon such
termination of the Old Sublease, the Old Wheeler-Carter Sublease automatically
terminated.
1.2 The Premises. Sublandlord subleases to Subtenant on the terms and
conditions in this Sublease the following portion of the Master Premises (the
"Premises"): approximately 3327 square feet of ground floor office space as
depicted on Exhibit B attached hereto.
1.3 Parking. Subject to Master Landlord's rights under Section 8 of the
Master Lease, Sublandlord grants to Subtenant and its authorized
representatives, employees, patients and invitees the non exclusive right to
park in designated parking spaces and to use the common areas as depicted on
Exhibit B. Notwithstanding the foregoing, nothing shall prevent Sublandlord from
designating, appropriately marking and enforcing up to _ parking spaces for the
exclusive use of Sublandlord's customers and/or for limited time periods.
SECTION 2. TERM; POSSESSION
2.1 Preparation of Premises. Sublandlord shall promptly cause the
Premises to be constructed and improved in accordance with the Work Letter
attached hereto as Exhibit "C" ("Work Letter").
2.2 Term. The term of this Sublease ("Term") shall commence
("Commencement Date") on the later to occur of (a) April 1, 1997, or (b) ten
(10) business days following "Substantial Completion" of the Premises (as
defined in the Work Letter). Subject to early termination pursuant to the terms
of this Sublease, and subject to extension pursuant to Section 2.4 of this
Sublease, the Term shall expire December 31, 2006.
2.3 Possession. Upon substantial completion, Subtenant may enter upon
the Premises for the purpose of performing Subtenant's Work (as defined in the
Work Letter). Any
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<PAGE> 4
entry onto the Premises by Subtenant pursuant to this section will be subject to
all of provisions of this Sublease, except the obligation to pay Rent.
2.4 Extension of Term. Subtenant may extend the Term for two consecutive
five-year extension periods following the expiration of the initial Term, by
giving written notice of its intention to exercise such option to extend at
least six months but no more than one year prior to the expiration of the
initial Term or the first extension period, as the case may be. However, if
Subtenant is in material default as of the giving of such written notice or as
of the date an extension period is to begin, such notice will be of no effect
and Sublandlord will have all remedies available to it in the event of a default
by Subtenant and the extension period will not, at Sublandlord's option, begin.
SECTION 3. RENT.
3.1 Minimum Rent. Subtenant will pay to Sublandlord as minimum rent,
without deduction, setoff, notice, or demand, at Sublandlord's office at 8690
Center Drive, La Mesa, CA to the Attention of: Manager, or at any other place
Sublandlord designates by written notice to Subtenant, the amount of Four
Thousand Eighty-Five Dollars ($4,085.00) monthly ("Minimum Rent"), in advance on
the first day of each month of the Term subject to adjustment as herein
provided. Subtenant's obligation to pay Minimum Rent shall commence upon the
Commencement Date. If Subtenant's obligation to pay Minimum Rent begins or ends
on a day other than the first or last day of a month, the rent for the partial
month(s) will be prorated on a per diem basis based on a 30 day month.
3.2 Increase in Minimum Rent. At the end of each 12-month period during
the Term, including any extension thereof, Minimum Rent will be increased as
follows: the monthly rent for the ensuing 12-month period will be increased by
the amount of 4 percent of the monthly rent then in effect.
3.3 Common Area Charges. Subtenant shall pay its proportionate share
(defined below) of all common area expenses ("Common Area Charges") for the
Master Premises which expenses include: real property taxes as well as new
assessments and substitute or additional taxes as described in Section 5 of the
Master Lease, landscaping, maintenance, and repairs to the roof, the exterior or
structural components of the Master Premises. Subtenant's proportionate share of
the Common Area Charges shall be that portion of the total Common Area Charges
that is equal to the fraction created with the numerator being the square
footage of the Premises and the denominator being the square footage of the
total building area of the Master Premises. The parties acknowledge that this
ratio is 3555/10,737. Sublandlord estimates Subtenant's current monthly share as
of the Commencement Date to be Five Hundred Sixty-Seven Dollars ($567.00).
Subtenant will pay such estimated additional amount as additional rent together
with the monthly Minimum Rent. Sublandlord may adjust the amount of Common Area
Charges quarterly on the basis of reasonably anticipated Common Area Charges for
the following quarter. Within 30 days after the end of each calendar quarter
during the Term, Sublandlord shall furnish Subtenant a reasonably detailed
statement showing the total Common Area Charges and Subtenant's
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<PAGE> 5
proportional share as well as the monthly payments made by Subtenant as its
share. If Subtenant's share exceeds the amounts paid by Subtenant for such
period of time, Subtenant shall pay Sublandlord the deficiency within 10
calendar days after receipt of the statement. If Subtenant's payments exceed
Subtenant's share as shown on the statement, then, Sublandlord shall credit such
excess amount against then next due amounts from Subtenant for Common Area
Charges. Anything in this Paragraph to the contrary notwithstanding, Subtenant
shall not be required to pay any estate, gift, inheritance, succession,
franchise, income, or excess profits taxes that may be payable by Sublandlord.
3.4 Excess Tenant Improvement Costs. Subtenant and Sublandlord will
each perform their work pursuant to the Work Letter. As described in the Work
Letter, Sublandlord is providing Subtenant with an allowance of $32,000.00
("Allowance") for Subtenant's Work including the amount of $7,000.00 for design
services. In addition to paying the Allowance pursuant to the terms of the Work
Letter, Sublandlord will advance the actual costs of Subtenant's Improvements
(such costs to be approved in writing by Sublandlord pursuant to the Work
Letter) in excess of the Allowance which excess is referred to as "Excess Tenant
Improvement Costs" up to the amount of $400,000.00. The Excess Tenant
Improvement Costs as advanced by Sublandlord will be repaid to Sublandlord by
Subtenant as additional rent as described in Section 3.4. 1. Any Excess Tenant
Improvement Costs which are over and above the $400,000.00 maximum shall be
borne by Subtenant.
3.4.1 The Excess Tenant Improvement Costs will be amortized over the ten
year Term of this Sublease with interest at the rate of 8.5 percent per annum
and the monthly amount necessary to amortize such sum over ten years will be
paid monthly by Subtenant together with Minimum Rent and Common Area Charges.
3.4.2 Sublandlord shall use its reasonable efforts to recover tenant
improvement losses caused by the fire destruction. "Reasonable efforts" shall
require Sublandlord to give due consideration to the interests of the Subtenant.
To the extent that Sublandlord ultimately recovers on insurance claims
("Claims") against Sublandlord's carrier (the Chubb Group of Companies) or any
other carrier, which recoveries are attributable specifically to Subtenant's
improvements under the Old Sublease, then the amount of such recovery (less any
unreimbursed costs and attorneys' fees incurred by Sublandlord in the pursuit of
such Claims) shall, if and when received, be applied against the Excess Tenant
Improvement Costs and the then remaining amount of Excess Tenant Improvement
Costs will be reamortized over the then remaining Term. Further, Subtenant shall
be credited for any accelerated payments (of principal but not of interest) made
to Sublandlord under this Section 3.4 which exceed the payments which would have
been due under the reamortized amount.
3.4.3 FOR EXAMPLE, if
(a) the Excess Tenant Improvement Costs is $300,000;
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<PAGE> 6
(b) $200,000 is received by Sublandlord from the carrier(s) in
payment of Claims after eight amortization payments have been made by Subtenant
to Sublandlord under Section 3.4. 1;
(c) $20,000 in costs and attorneys' fees was incurred by
Sublandlord in pursuit of the Claims; then...
(1) Sublandlord shall be reimbursed $20,000 in costs
and attorneys' fees;
(2) Subtenant shall receive a credit against the Excess
Tenant Improvement Costs of $17,853.92 for excess amortization payments as
follows:
<TABLE>
<S> <C>
amortization payments at $300,000 $ 3,719.57/mo.
amortization payments at $120,000 $ 1,487.82/mo.
--------------
(monthly excess) $ 2,231.74/mo.
x8
---------
(excess monthly payments) $17,853.92
</TABLE>
(3) The remaining unpaid Excess Tenant Improvement Costs
would be $107,839.20 ($300,000 - $180,000 - ($1,487.82 x 8) = $102,146.08; and
(4) Subtenant would continue making amortization
payments of $1,487.82 each month for the balance of the Term.
SECTION 4. SECURITY DEPOSIT.
Subtenant will deposit with Sublandlord on execution of this Sublease
the sum of $5,000.00 as security for Subtenant's faithful performance of
Subtenant's obligations under this Sublease ("Security Deposit"). If Subtenant
fails to pay rent or other charges when due under this Sublease, or fails to
perform any obligations under this Sublease, Sublandlord may use any portion of
the Security Deposit for the payment of any rent (including, without limitation,
additional rent) or other amount then due and unpaid, for the payment of any
other sum for which Sublandlord may become obligated because of Subtenant's
default or breach, or for any loss sustained by Sublandlord as a result of
Subtenant's default or breach. If Sublandlord uses any portion of the Security
Deposit, Subtenant will, within ten (10) days after written demand by
Sublandlord, restore the Security Deposit to the full amount originally
deposited. Subtenant's failure to do so will constitute a default under this
Sublease. Sublandlord will not be required to keep the Security Deposit separate
from its general accounts, and will have no obligation or liability for payment
of interest on the Security Deposit. If Sublandlord assigns its interest in this
Sublease, Sublandlord will deliver to its assignee as much of the Security
Deposit as Sublandlord then holds. Within thirty (30) days after the Lease has
expired or terminated, Subtenant has vacated the Premises, whichever occurs
last, and provided that Subtenant is not then in default under this Sublease,
the Security Deposit, or as much as remains that has not been applied by
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<PAGE> 7
Sublandlord, will be returned to Subtenant or to the last assignee, if any, of
Subtenant's interest under this Sublease.
SECTION 5. USE OF PREMISES.
The Premises will be used and occupied only for medical or dental
offices and for no other use or purpose.
SECTION 6. ASSIGNMENT AND SUBLETTING.
Subtenant will not assign this Sublease or further sublet all or any
part of the Premises without the prior written consent of Sublandlord which
consent shall not be unreasonably withheld. Sublandlord may withhold its consent
to a proposed assignment or sublease on any reasonable ground. Such reasonable
grounds shall include, without limitation, any one or more of the following:
(i) That the prospective transferee's financial condition is or may
become insufficient to support all of the financial and other obligations of
this Sublease;
(ii) That the use to which the Premises will be put by the prospective
transferee is inconsistent with the terms of this Sublease or other existing
leases or is otherwise not compatible, in Sublandlord's view, with Sublandlord's
use of adjoining space;
(iii) That the nature of the prospective transferee's proposed or likely
use of the Premises would involve any increased risk of the use, release or
mishandling of hazardous materials;
(iv) That the prospective transferee is not likely to conduct on the
Premises a business of a quality substantially equal to that conducted by
Subtenant and Sublandlord.
SECTION 7. OTHER PROVISIONS OF SUBLEASE.
7.1 Incorporated Provisions of Master Lease. All applicable terms and
conditions of the Master Lease are incorporated into and made a part of this
Sublease as if Sublandlord were the landlord, Subtenant the lessee, and the
Premises the Master Premises, subject to the following: Sections 7.2 through
7.5.
7.2 Conflict between Master Lease and this Sublease. To the extent that
this Sublease specifically addresses rights and obligations otherwise
incorporated pursuant to this Section from the Master Lease, and to the extent
there is a conflict, the provisions of this Sublease shall prevail and control
the rights and obligations of Sublandlord and Subtenant.
7.3 Respective Obligations. Subtenant assumes and agrees to perform the
lessee's obligations under the Master Lease during the Term to the extent that
these obligations are applicable to the Premises. However, the obligation to pay
rent, operating costs and other
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<PAGE> 8
amounts to Master Landlord under the Master Lease will be considered performed
by Subtenant to the extent and in the amount rent (excepting payments due
pursuant to Section 3.4.1) is paid to Sublandlord in accordance with Section 3
of this Sublease. Subtenant will not commit or suffer any act or omission that
will violate any of the provisions of the Master Lease. Sublandlord will
exercise due diligence in attempting to cause Master Landlord to perform its
obligations under the Master Lease for the benefit of Subtenant.
7.4 Effect of Termination of Master Lease. If the Master Lease
terminates, at the option of Master Landlord, this Sublease will terminate and
the parties will be relieved of any further liability or obligation under this
Sublease. However, if the Master Lease terminates as a result of a default or
breach by Sublandlord or Subtenant under this Sublease or the Master Lease, the
defaulting party will be liable to the nondefaulting party for the damage
suffered as a result of the termination.. However, if the Master Lease gives
Sublandlord any right to terminate the Master Lease in the event of the partial
or total damage, destruction, or condemnation of the Master Premises or the
building or project of which the Master Premises are a part, the exercise of
this right by Sublandlord will not constitute a default or breach.
7.5 Acknowledgment of Master Landlord's Right to Terminate. The parties
acknowledge that the Master Landlord has the right under the Master Lease, at
its option, to terminate the Master Lease by notice delivered between January 1,
2007 and June 30, 2007. In the event of such termination, this Sublease shall
automatically terminate.
SECTION 8. IMPROVEMENTS, ALTERATIONS AND ADDITIONS.
8.1 Changes. Subtenant will neither make nor permit any destruction,
alteration, improvement and or addition to the Premises except in accordance
with the Work Letter, without Sublandlord's prior written consent and which will
not be unreasonably withheld.
8.2 Personal Property Taxes. Subtenant shall pay before delinquency, all
taxes, assessments, license fees and other charges that are assessed against
Subtenant's personal property installed or located in the Premises and that
become payable during the Term. On demand by Sublandlord, Subtenant shall
provide Sublandlord with satisfactory evidence of these payments. If any taxes
on Subtenant's personal property are levied on Sublandlord or the Master
Premises, or if the assessed value of the Building in which the Premises are
located is increased by the inclusion of a value placed on Subtenant's personal
property, and if Sublandlord pays the taxes on any of these items or the taxes
based on the increased assessment of these items, Subtenant, on demand, shall
immediately reimburse Sublandlord for the sum of such taxes or the proportion of
the taxes resulting from the increased assessment.
8.3 Title to Improvements. Upon the expiration or earlier termination of
this Sublease, Subtenant shall surrender the Premises to Sublandlord. All
fixtures, improvements, alterations and or additions to or of the Premises,
excepting movable and trade fixtures listed as such on Exhibit D shall, upon
such expiration, become a part of the Premises and belong to Sublandlord and as
such, shall be surrendered to Sublandlord. Subtenant shall leave the surrendered
Premises
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<PAGE> 9
and any other property in good condition and repair and in the same condition as
delivered to Subtenant or as improved during the Term, less normal wear and
tear.
SECTION 9. MAINTENANCE AND UTILITIES.
9.1 Maintenance. Subtenant shall, at its sole cost, maintain the
Premises in good condition, including, but not limited to, windows, HVAC
systems, and all electrical, lighting and plumbing systems serving and or
located within the Premises. Sublandlord shall not have any responsibility to
maintain the Premises or any part thereof. Subtenant hereby waives the
provisions of Californian Civil Codes Sections 1941 and 1942 (with respect to a
landlord's obligation for habitability of rented premises and a tenant's right
to repair and deduct).
9.2 Utilities. Subtenant shall, at its sole cost and expense, make all
arrangements for and pay for all charges for utilities and services furnished to
it or used by it and any subtenants, including without limitation, gas,
electricity, water, telephone service and trash and medical or hazardous waste
collection.
SECTION 10. INDEMNITY, EXCULPATION AND INSURANCE.
10.1 Assumption of Risk. Subtenant, as a material part of the
consideration to Sublandlord, hereby assumes all risk of damage to property or
persons in, upon or about the Premises from any cause other than Sublandlord's
active negligence or omissions or willful misconduct of Sublandlord, its agents
or employees and Subtenant hereby waives all claims against Sublandlord in
respect thereof. Sublandlord, including its agents and employees shall not be
liable for any injury or damage to persons or property within or around the
Premises during the Term, including agents, officers and employees of Subtenant
or their property for any cause whatsoever, including without limitation, fire,
explosion, falling plaster, steam, gas, electricity, water or rain which may
leak from any part of the Building or from the pipes, appliances or plumbing
works therein, or from the roof, street of subsurface, or from any other place
resulting from dampness or any other cause whatsoever, except to the extent
caused by the active negligence or omission of Sublandlord, its agents or
employees. Further, Sublandlord, its agents and employees shall not be liable
for interference with the light or other incorporeal hereditaments or loss of
business by Subtenant, nor shall Sublandlord be responsible for any latent
defect of the Premises. Subtenant shall give prompt notice to Sublandlord in the
case of any fire or accidents or of defects within the Premises or the fixtures
or equipment therein.
10.2 Indemnity. Subtenant hereby agrees to indemnify and hold
Sublandlord harmless against and from any and all claims arising from
Subtenant's use of the Premises for the conduct of its business or from any
activity or work or other thing done, permitted or suffered by Subtenant on or
about the Premises except for acts or omissions of Sublandlord, and shall
further indemnify and hold harmless Sublandlord against and from any and all
claims arising from any breach or default in the performance of any obligation
on Subtenant's part to be performed under the terms of this Sublease or arising
from any act of negligence of Subtenant or any officer or agent or guest or
invitee of Subtenant and from and against all attorneys' fees and costs and
expenses and liabilities incurred in or about any such claim or any action or
proceeding brought
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<PAGE> 10
thereon. If any case, action or proceeding is brought against Sublandlord by
reason of any such claim, Subtenant, upon notice from Sublandlord, shall defend
the same at Subtenant's expense by counsel satisfactory to Sublandlord.
10.3 Insurance.
10.3.1 Liability and Property Damage Insurance. Subtenant, at
its sole cost and expense, shall purchase and maintain public liability and
property damage insurance with limits of not less than $1,000,000.00 for
personal injury to or death of one or more persons and/or property damage
arising out of a single accident or occurrence, insuring against all liability
of Sublandlord, Subtenant, its subtenants and its authorized representatives,
arising out of or in connection with Subtenant's use and/or occupancy of the
Premises, including the use and/or occupancy of Subtenant's subtenants. All
public liability and property damage insurance shall insure the performance by
Subtenant of the indemnity provisions set forth above in this Section IO.
Further, in all insurance required to be obtained and maintained by Subtenant,
Sublandlord and Master Landlord shall be named as co-insureds, and the policy
shall contain cross liability endorsements. Not more frequently than every three
years during the Term, Sublandlord may, in its sole discretion, not to be
unreasonably exercised, require that Subtenant increase the amount of coverage
for public liability and property damage insurance.
10.3.2 Personal Property Insurance. Subtenant, at its sole cost
and expense, shall maintain on all its personal property, tenant improvements
and alterations, in or about the Premises, a policy of fire and extended
coverage insurance with vandalism and malicious mischief endorsements to the
extent of at least 100 percent of their full replacement value. The proceeds of
any such policy shall be used by Subtenant for the replacement of personal
property or the restoration of tenant improvements or alterations. Subtenant
may, if it so elects maintain coverage for plate glass; however, regardless of
such coverage, Subtenant is responsible for maintaining all plate glass at the
Premises.
10.3.3 Worker's Compensation Insurance. Subtenant shall, at its
sole cost and expense, procure and maintain worker's compensation coverage in
full force and effect throughout the Term in the amounts required by law.
10.3.4 General Insurance Provisions. All insurances required
hereunder shall be issued by insurance companies authorized and licensed to do
business in the State of California with a financial rating of at least A-
status as rated in the most recent of Best's Insurance Reports; be issued as a
primary coverage policy and be non-contributing with any insurance which may be
carried by Sublandlord; include an endorsement requiring 30 days written notice
from the insurance company to both parties before cancellation or change in
coverage, scope or amount of such policy. Subtenant shall provide Sublandlord
with evidence of such coverage prior to commencement of the Term
10.3.5 Waiver of Subrogation. The parties release each other and
their respective authorized agents and representatives from any claims for
damage to any person or to the Premises and the building and other improvements
in which the Premises are located, and to
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the fixtures, personal property, Subtenant's improvements and alterations of
either Sublandlord or Subtenant that are caused or by or result from risks
insured against under any insurance policies carried by the parties and in force
at the time of any such damage. Each party shall cause each insurance policy
obtained by it to provide that the insurance company waives any right of
recovery by way of subrogation against the other party in connection with any
damage covered by any policy.
SECTION 11. ATTORNEY FEES.
If either party commences an action against the other in connection with
this Sublease, the prevailing party will be entitled to recover costs of suit
and reasonable attorneys' fees.
SECTION 12. NO BROKER.
Sublandlord and Subtenant each warrant that they have not dealt with any
real estate broker in connection with this transaction in a way which would
obligate the other party to pay a brokerage commission or finder's fee.
Sublandlord and Subtenant each agree to indemnify, defend, and hold the other
harmless against any damages incurred as a result of the breach of the warranty
contained in this Sublease. Sublandlord shall pay a brokerage commission to
Owsley-Kugler pursuant to separate agreement.
SECTION 13. NOTICES.
All notices and demands that may be required or permitted by either
party to the other will be in writing. All notices and demands by the
Sublandlord to Subtenant will be sent by United States Mail, postage prepaid,
addressed to the Subtenant at the Premises, and to the address in this Sublease
below, or to any other place that Subtenant may from time to time designate in a
notice to the Sublandlord. All notices and demands by the Subtenant to
Sublandlord will be sent by United States Mail, postage prepaid, addressed to
the Sublandlord at the address in this Sublease, and to any other person or
place that the Sublandlord may from time to time designate in a notice to the
Subtenant.
To Sublandlord: Valle de Oro Bank
Attention: Chief Financial Officer
1234 S. Main Street
El Cajon, CA 92021
To Subtenant: Ervin S. Wheeler, M.D.
8690 Center Drive
La Mesa, CA
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<PAGE> 12
SECTION 14. SUCCESSORS AND ASSIGNS.
This Sublease will be binding on and inure to the benefit of the parties
to it, their heirs, executors, administrators, successors in interest, and
assigns. Nothing in this Section 14 shall affect in any way the provisions of
Section 6.
SECTION 15. ATTORNMENT.
If the Master Lease terminates, Subtenant will, if requested, attorn to
Master Landlord and recognize Master Landlord as Sublandlord under this
Sublease. However, Subtenant's obligation to attorn to Master Landlord will be
conditioned on Subtenant's receipt of a nondisturbance agreement in form and
content reasonably acceptable to Subtenant.
SECTION 16. ENTRY.
Sublandlord reserves the right to enter the Premises on reasonable
notice to Subtenant to inspect the Premises or the performance by Subtenant of
the terms and conditions of this Sublease and, during the last 12 months of the
Term, to show the Premises to prospective subtenants. In an emergency, no notice
will be required for entry.
SECTION 17. LATE CHARGE AND INTEREST.
The late payment of any Rent (including without limitation, additional
rent and common area charges) will cause Sublandlord to incur additional costs,
including the cost to maintain in full force the Master Lease, administration
and collection costs, and processing and accounting expenses. If Sublandlord has
not received any installment of Rent within five (5) days after that amount is
due, Subtenant will pay five percent (5%) of the delinquent amount, which is
agreed to represent a reasonable estimate of the cost incurred by Sublandlord.
In addition, all delinquent amounts will bear interest from the date the amount
was due until paid in full at a rate per annum ("Applicable Interest Rate")
equal to the greater of (a) five percent (5%) per annum plus the then federal
discount rate on advances to member banks in effect at the Federal Reserve Bank
of San Francisco on the 25th day of the month preceding the date of this
Sublease or (b) ten percent (10%). However, in no event will the Applicable
Interest Rate exceed the maximum interest rate permitted by law that may be
charged under these circumstances. Sublandlord and Subtenant recognize that the
damage Sublandlord will suffer in the event of Subtenant's failure to pay this
amount is difficult to ascertain and that the late charge and interest are the
best estimate of the damage that Sublandlord will suffer. If a late charge
becomes payable for any three (3) installments or Rent within any twelve (12)
month period, the Rent will automatically become payable quarterly in advance.
SECTION 18. ENTIRE AGREEMENT.
This Sublease (including Exhibits) sets forth all the agreements between
Sublandlord and Subtenant concerning the Premises, and there are no other
agreements either oral or written other than as set forth in this Sublease.
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SECTION 19. TIME OF ESSENCE.
Time is of the essence in this Sublease.
SECTION 20. CONSENT BY MASTER LANDLORD.
THIS SUBLEASE WILL HAVE NO EFFECT UNLESS CONSENTED TO BY MASTER LANDLORD
WITHIN 15 DAYS AFTER EXECUTION BY SUBLANDLORD AND SUBTENANT.
SECTION 21. SIGNAGE
Subtenant shall have the right to construct and maintain a sign on the
Premises or monument sign in the Common Area in accordance with the signage plan
attached hereto as Exhibit E.
SECTION 22. GOVERNING LAW.
This Sublease will be governed by and construed in accordance with
California law.
IN WITNESS WHEREOF, the parties have executed this Sublease as of the
date first above written.
SUBTENANT:
ERVIN S. WHEELER, M.D., A Date: 28 January 97
Medical Corporation
By: /s/ Ervin S. Wheeler as President
----------------------------------
Name: Ervin S. Wheeler, M.D.
Its: President
SUBLANDLORD:
VALLE DE ORO BANK, N.A. Date: February 3, 1997
a national banking association
By: /s/ William V. Ehlen
------------------------------
Name: William V. Ehlen
Its: President and
Chief executive officer
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EXHIBIT A TO SUBLEASE
1. Lease dated January 16, 1963, by RAINBOW INVESTMENT CO., a California
limited partnership to GROSSMONT LAND CO., a California limited partnership of
land including the Master Premises.
2. Lease dated August 6, 1982 by GROSSMONT LAND CO., a California limited
partnership of the Master Premises to BSD SERVICE COMPANY, a California
corporation.
3. Sublease dated August 18, 1982 by BSD SERVICE COMPANY, a California
corporation to ERVIN S. WHEELER, M.D., A Medical Corporation for Parcels 1 and 2
of the Master Premises ("the Sublet Premises").
4. Sublease dated October 25, 1988,, by BSD SERVICE COMPANY, a California
corporation to THE BANK OF SAN DIEGO, as to all of the Master Premises.
5. Sublease dated November 1, 1991 by ERVIN S. WHEELER, M.D. to JOHN G.
CARTER, D. D. S., of a portion of the Sublet Premises.
6. Branch Purchase Agreement dated June 30, 1992, between THE BANK OF SAN
DIEGO and VALLE DE ORO BANK, N.A. pursuant to which the former acquires assets
of the latter including the former's interest in the Lease.
7. Sublease Termination Agreement dated January 29, 1993, pursuant to which
the Sublease from BSD SERVICE COMPANY to THE BANK OF SAN DIEGO (Item 3 above) is
to terminate upon closing of branch transfer.
8. Amendment No. 1 and Assignment Agreement dated January 29, 1993,
pursuant to which BSD SERVICE COMPANY assigns its interest in the Lease (Item 2
above, as to the entire Master Premises) to VALLE DE ORO BANK, N.A.
<PAGE> 1
EXHIBIT 10.11
Lease between Valle de Oro Bank, N.A. and Wellesley Company, N.V., a Netherlands
Antilles corporation, dated September 1, 1994
<PAGE> 2
Rent for any period during.
STANDARD INDUSTRIAL LEASE -- NET
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
[LOGO]
1. PARTIES. This Lease, dated for reference purposes only, ______, 1994, is made
by and between WELLESLEY COMPANY N.V., a Netherlands Antilles corporation
(herein called "Lessor") and VALLE DE ORO BANK, a California banking corporation
(herein called "Lessee").
2. PREMISES. Lessor hereby leases to Lessee and Lessee leases from Lessor for
the term, at the rental, and upon all of the conditions set forth herein, that
certain real property situated in the County of San Diego, State of California
commonly known as 1234 East Main Street, El Cajon and described as Parcel 1 of
Parcel Map No. 6678, filed in the official records of San Diego County,
California on December 21, 1977, as File No. 77-527133. Said real property
including the land and all improvements therein, is herein called "the
Premises".
3. TERM.
3.1 TERM. the term of this Lease shall be for five (5) years and three
(3) months commencing on September 1, 1994 and ending on November 30, 1999
unless sooner terminated pursuant to any provision hereof.
3.3 EARLY POSSESSION. If Lessee occupies the Premises prior to said
commencement date, such occupancy shall be subject to all provisions hereof,
such occupancy shall not advance the termination date, and Lessee shall pay
rent for such period at the initial monthly rates set forth below.
4. RENT. Lessee shall pay to Lessor as rent for the Premises, monthly payments
of $10,867, in advance, on the first day of each month of the term hereof.
Lessee shall pay Lessor upon the execution hereof $10,867 as rent for the month
of December 1994. Rent for September 1994 through November 1994 shall be $0.
However, Lessee will be responsible for maintenance, insurance and taxes, and
other property operating expenses commencing September 1, 1994.
Rent for any period during the term hereof which is for less than one month
shall be a pro rata portion of the monthly installment. Rent shall be payable in
lawful money of the United States to Lessor at the address stated herein or to
such other persons or at such other places as Lessor may designate in writing.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof
$10,867 as security for Lessee's faithful performance of Lessee's obligations
hereunder. If Lessee fails to pay rent or other charges due hereunder, or
otherwise defaults with respect to any provision of this Lease, Lessor may use,
apply or retain all or any portion of said deposit for the payment of any rent
or other charge in default or for the payment of any other sum to which Lessor
may become obligated by reason of Lessee's default, or to compensate Lessor for
any loss or damage which Lessor may suffer thereby. If Lessor so uses or applies
all or any portion of said deposit, Lessee shall within ten (10) days after
written demand therefor deposit cash with Lessor in an amount sufficient to
restore said deposit to the full amount hereinabove stated and Lessee's failure
to do so shall be a material breach of this Lease. Lessor shall not be required
to keep said deposit separate from its general accounts. If Lessee performs all
of Lessee's obligations hereunder, said deposit, or so much thereof as has not
theretofore been applied by Lessor, shall be returned, without payment of
interest or other increment for its use, to Lessee (or, at Lessor's option, to
the last assignee, if any, of Lessee's interest hereunder) at the expiration of
the term hereof, and after Lessee has vacated the Premises. No trust
relationship is created herein between Lessor and Lessee with respect to said
Security Deposit.
6. USE.
6.1 USE. The Premises shall be used and occupied only for banking,
general office, or any other use which is reasonably comparable and for no
other purpose.
6.2 COMPLIANCE WITH LAW. See Addendum paragraph 54.
Lessee shall, at Lessee's expense, comply promptly with all applicable
statues, ordinances, rules, regulations, orders, covenants and restrictions of
record, and requirements in effect during the term of any part of the term
hereof, regulating the use by Lessee of the Premises. Lessee shall not use nor
permit the use of the Premises in any manner that will tend to create waste or
a nuisance or, if there shall be more than one tenant in the building
containing the Premises, shall tend to disturb such other tenants.
6.3 CONDITION OF PREMISES.
Lessee hereby accepts the Premises in their condition existing as of the
Lease commencement date or the date that Lessee takes possession of the
Premises, whichever is earlier, subject to all applicable zoning, municipal,
county and state laws, ordinances and regulations governing and regulating the
use of the Premises, and any covenants or restrictions of record, and accepts
this Lease subject thereto and to all matters disclosed thereby and by any
exhibits attached hereto. Lessee acknowledges that neither Lessor nor Lessor's
agent has made any representation or warranty as to the present or future
suitability of the Premises for the conduct of Lessee's business. See Addendum
paragraph 55.
7. MAINTENANCE, REPAIRS AND ALTERATIONS.
7.1 LESSEE'S OBLIGATIONS. Lessee shall keep in good order, condition and
repair the Premises and every part thereof, structural and non structural,
(whether or not such portion of the Premises requiring repair, or the means of
repairing the same are reasonably or readily accessible to Lessee, and whether
or not the need for such repairs occurs as a result of Lessee's use, any prior
use, the elements or the age of such portion of the Premises) including,
without limiting the generality of the foregoing, all plumbing, heating, air
conditioning. (Lessee shall procure and maintain, at Lessee's expense, an air
conditioning system maintenance contract) ventilating, electrical, lighting
facilities and equipment within the Premises, fixtures, walls (interior and
exterior), foundations, ceilings, roofs, (interior and exterior), floors,
windows, doors, plate glass and skylights located within the Premises, and all
landscaping, driveways, parking lots, fences and signs located on the Premises
and sidewalks and parkways adjacent to the Premises.
7.2 SURRENDER. On the last day of the term hereof, or on any sooner
termination, Lessee shall surrender the Premises to Lessor in the same
condition as when received, ordinary wear and tear excepted, clean and free of
debris. Lessee shall repair any damage to the Premises, occasioned
Initials:
----
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(C)American Industrial Real Estate Association 1980
NET
<PAGE> 3
by the installation or removal of Lessee trade fixtures, furnishings and
equipment. Notwithstanding anything to the contrary otherwise stated in this
Lease, lessee shall leave the air lines, power panels, electrical distribution
systems, lighting fixtures, space heaters, air conditioning, plumbing and
fencing on the premises in good operating condition.
7.3 LESSOR'S RIGHTS. If Lessee fails to perform Lessee's obligations under
this Paragraph 7, or under any other paragraph of this Lease, Lessor may at its
option (but shall not be required to) enter upon the Premises after ten (10)
days' prior written notice to Lessee (except in the case of an emergency, in
which case no notice shall be required), perform such obligations on Lessee's
behalf and put the same in good order, condition and repair, and the cost
thereof together with interest thereon at the maximum rate then allowable by law
shall become due and payable as additional rental to Lessor together with
Lessee's next rental installment.
7.4 LESSOR'S OBLIGATIONS. Except for the obligations of Lessor under
Paragraph 9 (relating to destruction of the Premises) and under Paragraph 14
(relating to condemnation of the Premises), it is intended by the parties hereto
that Lessor have no obligation, in any manner whatsoever, to repair and maintain
the Premises nor the building located thereon nor the equipment therein, whether
structural or non structural, all of which obligations are intended to be that
of the Lessee under Paragraph 7.1 hereof. Lessee expressly waives the benefit of
any statute now or hereinafter in effect which would otherwise afford Lessee the
right to make repairs at Lessor's expense or to terminate this Lease because of
Lessor's failure to keep the premises in good order, condition and repair.
7.5 ALTERATIONS AND ADDITIONS.
(a) Lessee shall not, without Lessor's prior written consent make any
alterations, improvements, additions, or Utility Installations in, on or about
the Premises, except for nonstructural alterations not exceeding $2,500 in
cumulative costs during the term of this Lease. In any event, whether or not in
excess of $2,500 in cumulative cost, Lessee shall make no change or alteration
to the exterior of the Premises nor the exterior of the building(s) on the
Premises without Lessor's prior written consent. As used in this Paragraph 7.5
the term "Utility Installation" shall mean carpeting, window coverings, air
lines, power panels, electrical distribution systems, lighting fixtures, space
heaters, air conditioning, plumbing and fencing. Lessor may require that Lessee
remove any or all of said alterations, improvements, additions or Utility
Installations at the expiration of the term, and restore the Premises to their
prior condition. Lessor may require Lessee to provide Lessor, at Lessee's sole
cost and expense, a lien and completion bond in an amount equal to one and
one-half times the estimated cost of such improvements, to insure Lessor against
any liability for mechanic's and materialmen's liens and to insure completion of
the work. Should Lessee make any alterations, improvements, additions or Utility
Installations without the prior approval of Lessor, Lessor may require that
Lessee remove any or all of the same.
(b) Any alterations, improvements, additions or Utility Installations in,
or about the Premises that Lessee shall desire to make and which requires the
consent of the Lessor shall be presented to Lessor in written form, with
proposed detailed plans. If Lessor shall give its consent, the consent shall be
deemed conditioned upon Lessee acquiring a permit to do so from appropriate
governmental agencies, the furnishing of a copy thereof to Lessor prior to the
commencement of the work and the compliance by Lessee of all conditions of said
permit in a prompt and expeditious manner.
(c) Lessee shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for use in
the Premises, which claims are or may be secured by any mechanics' or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in the Premises, and Lessor shall have the right to post notices of
non-responsibility in or on the Premises as provided by law. If Lessee shall, in
good faith, contest the validity of any such lien, claim or demand, then Lessee
shall, at its sole expense defend itself and Lessor against the same and shall
pay and satisfy any such adverse judgment that may be rendered thereon before
the enforcement thereof against the Lessor or the Premises, upon the condition
that if Lessor shall require, Lessee shall furnish to Lessor a surety bond
satisfactory to Lessor in an amount equal to such contested lien claim or demand
indemnifying Lessor against liability for the same and holding the Premises free
from the effect of such lien or claim. In addition, Lessor may require Lessee to
pay Lessor's attorneys fees and costs in participating in such action if Lessor
shall decide it is to its best interest to do so.
(d) Unless Lessor requires their removal, as set forth in Paragraph
7.5(a), all alterations, improvements, additions and Utility Installations
(whether or not such Utility Installations constitute trade fixtures of Lessee),
which may be made on the Premises, shall become the property of Lessor and
remain upon and be surrendered with the Premises at the expiration of the term.
Notwithstanding the provisions of this Paragraph 7.5(d), Lessee's machinery and
equipment, other than that which is affixed to the Premises so that it cannot be
removed without material damage to the Premises, shall remain the property of
Lessee and may be removed by Lessee subject to the provisions of Paragraph 7.2.
See Addendum paragraph 56.
8. INSURANCE INDEMNITY.
8.1 INSURING PARTY. As used in this Paragraph 8, the term "insuring party"
shall mean the party who has the obligation to obtain the Property Insurance
required hereunder. The insuring party shall be designated in Paragraph 46
hereof. In the event Lessor is the insuring party, Lessor shall also maintain
the liability insurance described in paragraph 8.2 hereof, in addition to, and
not in lieu of, the insurance required to be maintained by Lessee under said
paragraph 8.2, but Lessor shall not be required to name Lessee as an additional
insured on such policy. Whether the insuring party is the Lessor or the Lessee,
Lessee shall, as additional rent for the Premises, pay the cost of all insurance
required hereunder, except for that portion of the cost attributable to Lessor's
liability insurance coverage in excess of $1,000,000 per occurrence. If Lessor
is the insuring party Lessee shall, within ten (10) days following demand by
Lessor, reimburse Lessor for the cost of insurance so obtained.
8.2 LIABILITY INSURANCE. Lessee shall, at Lessee's expense obtain and keep
in force during the term of this Lease a policy of Combined Single Limit, Bodily
Injury and Property Damage insurance insuring Lessor and Lessee against any
liability arising out of the ownership, use, occupancy or maintenance of the
Premises and all areas appurtenant thereto. Such insurance shall be a combined
single limit policy in an amount not less than $2,000,000 per occurrence. The
policy shall insure performance by Lessee of the indemnity provisions of this
Paragraph 8. The limits of said insurance shall not, however, limit the
liability of Lessee hereunder.
8.3 PROPERTY INSURANCE.
(a) The insuring party shall obtain and keep in force during the term
of this Lease a policy or policies of insurance covering loss or damage to the
Premises, in the amount of the full replacement value thereof, as the same may
exist from time to time, against all perils included within the classification
of fire, extended coverage, vandalism, malicious mischief, flood (in the event
same is required by a lender having a lien on the Premises), and special
extended perils ("all risk" as such term is used in the insurance industry).
Said insurance shall provide for payment of loss thereunder to Lessor or to the
holders of mortgages or deeds of trust on the Premises. The insuring party
shall, in addition, obtain and keep in force during the term of this Lease a
policy of rental value insurance covering a period of one year, with loss
payable to Lessor, which insurance shall also cover all real estate taxes and
insurance costs for said period. A stipulated value or agreed amount endorsement
deleting the coinsurance provision of the policy shall be procured with said
insurance. If the insuring party shall fail to procure and maintain said
insurance the other party may, but shall not be required to, procure and
maintain the same, but at the expense of Lessee. If such insurance coverage has
a deductible clause, the deductible amount shall not exceed $1,000 per
occurrence, and Lessee shall be liable for such deductible amount.
(b) If the Premises are part of a larger building, or if the Premises
are part of a group of buildings owned by Lessor which are adjacent to the
Premises, then Lessee shall pay for any increase in the property insurance of
such other building or buildings if said increase is caused by Lessee's acts,
omissions, use or occupancy of the Premises.
(c) If the Lessor is the insuring party the Lessee will not insure
Lessee's fixtures, equipment or tenant improvements unless the tenant
improvements have become a part of the Premises under paragraph 7, hereof. But
if Lessee is the insuring party the Lessee shall insure its fixtures, equipment
and tenant improvements.
8.4 INSURANCE POLICIES. Insurance required hereunder shall be in companies
holding a "General Policyholders Rating" of at least A or such other rating as
may be required by a lender having a lien on the Premises, as set forth in the
most current issue of "Best's Insurance Guide". The insuring party shall deliver
to the other party copies of policies of such insurance or certificates
evidencing the existence and amounts of such insurance with loss payable clauses
as required by this paragraph 8. No such policy shall be cancellable or subject
to reduction of coverage or other modification except after thirty (30) days'
prior written notice to Lessor. If Lessee is the insuring party Lessee shall, at
least thirty (30) days prior to the expiration of such policies, furnish Lessor
with renewals or "binders" thereof, or Lessor may order such insurance and
charge the cost thereof to Lessee, which amount shall be payable by Lessee upon
demand. Lessee shall not do or permit to be done anything which shall invalidate
the insurance policies referred to in Paragraph 8.3. If Lessee does or permits
to be done anything which shall increase the cost of the insurance policies
referred to in Paragraph 8.3, then Lessee shall forthwith upon Lessor's demand
reimburse Lessor for any additional premiums attributable to any act or omission
or operation of Lessee causing such increase in the cost of insurance. If Lessor
is the insuring party, and if the insurance policies maintained hereunder cover
other improvements in addition to the Premises, Lessor shall deliver to Lessee a
written statement setting forth the amount of any such insurance cost increase
and showing in reasonable detail the manner in which it has been computed. See
Addendum paragraph 57.
8.5 WAIVER OF SUBROGATION. Lessee and Lessor each hereby release and
relieve the other, and waive their entire right of recovery against the other
for loss or damage arising out of or incident to the perils insured against
under paragraph 8.3, which perils occur in, on or about the Premises, whether
due to the negligence of Lessor or Lessee or their agents, employees,
contractors and/or invitees. Lessee and Lessor shall, upon obtaining the
policies of insurance required hereunder, give notice to the insurance carrier
or carriers that the foregoing mutual waiver of subrogation is contained in this
Lease.
8.6 INDEMNITY. Lessee shall indemnify and hold harmless Lessor from and
against any and all claims arising from Lessee's us of the Premises, or from the
conduct of Lessee's business or from any activity, work or things done,
permitted or suffered by Lessee in or about the Premises or elsewhere and shall
further indemnify and hold harmless Lessor from and against any and all claims
arising from any breach or default in the performance of any obligation on
Lessee's part to be performed under the terms of this Lease, or arising from any
negligence of the Lessee, or any of Lessee's agents, contractors, or employees,
and from and against all costs, attorney's fees, expenses and liabilities
incurred in the defense of any such claim or any action or proceeding brought
thereon; and in case any action or proceeding be brought against Lessor by
reason of any such claim, Lessee upon notice from Lessor shall defend the same
at Lessee's expense by counsel satisfactory to Lessor. Lessee, as a material
part of the consideration to Lessor, hereby assumes all risk of damage to
property or injury to persons, in, upon or about the Premises arising from any
cause and Lessee hereby waives all claims in respect thereof against Lessor.
8.7 EXEMPTION OF LESSOR FROM LIABILITY. Lessee hereby agrees that Lessor
shall not be liable for injury to Lessee's business or any loss of income
therefrom or for damage to the goods, wares, merchandise or other property of
Lessee, Lessee's employees, invitees, customers, or any other person in or about
the Premises, nor shall Lessor be liable for injury to the person of Lessee,
Lessee's employees, agents or contractors, whether such damage or injury is
caused by or results from fire, steam, electricity, gas, water or rain, or from
the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether the said damage or injury results from conditions arising upon
the Premises or upon other portions of the building of which the Premises are a
part, or from other sources or places and regardless of whether the cause of
such damage or injury or the means of repairing the same is inaccessible to
Lessee. Lessor shall not be liable for any damages arising from any act or
neglect of any other tenant, if any, of the building in which the Premises are
located.
INITIALS: _________
_________
- 2 -
<PAGE> 4
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "Premises Partial Damage" shall herein mean damage or destruction
to the Premises to the extent that the cost or repair is less than 50% of the
then replacement cost of the Premises. "Premises Building Partial Damage" shall
herein mean damage or destruction to the building of which the Premises are a
part to the extent that the cost of repair is less than 50% of the then
replacement cost of such building as a whole.
(b) "Premises Total Destruction" shall herein mean damage or
destruction to the Premises to the extent that the cost of repair is 50% or
more of the then replacement cost of the Premises. "Premises Building Total
Destruction" shall herein mean damage or destruction to the building of which
the Premises are a part to the extent that the cost of repair is 50% or more of
the then replacement cost of such building as a whole.
(c) "Insured Loss" shall herein mean damage or destruction which was
caused by an event required to be covered by the insurance described in
paragraph 8. See Addendum paragraph 58.
9.2 PARTIAL DAMAGE -- INSURED LOSS. Subject to the provisions of
paragraphs 9.4, 9.5 and 9.6, if at any time during the term of this Lease there
is damage which is an Insured Loss and which falls into the classification of
Premises Partial Damage or Premises Building Partial Damage, then Lessor shall,
at Lessor's expense, repair such damage, but not Lessee's fixtures, equipment
or tenant improvements unless the same have become a part of the Premises
pursuant to Paragraph 7.5 hereof as soon as reasonably possible and this Lease
shall continue in full force and effect. Notwithstanding the above, if the
Lessee is the insuring party, and if the insurance proceeds received by Lessor
are not sufficient to effect such repair, Lessor shall give notice to Lessee of
the amount required in addition to the insurance proceeds to effect such
repair. See Addendum paragraph 59.
9.3 PARTIAL DAMAGE -- UNINSURED LOSS. Subject to the provisions of
Paragraphs 9.4, 9.5 and 9.6, if at any time during the term of this Lease there
is damage which is not an Insured Loss and which falls within the classification
of Premises Partial Damage or Premises Building Partial Damage, unless caused by
a negligent or willful act of Lessee (in which event Lessee shall make the
repairs at Lessee's expense), Lessor may ay Lessor's option either (i) repair
such damage as soon as reasonably possible at Lessor's expense, in which event
this Lease shall continue in full force and effect, or (ii) give written notice
to Lessee within thirty (30) days after the date of the occurrence of such
damage of Lessor's intention to cancel and terminate this Lease, as of the date
of the occurrence of such damage. In the event Lessor elects to give such notice
of Lessor's intention to cancel and terminate this Lease, Lessee shall have the
right within ten (10) days after the receipt of such notice to give written
notice to Lessor of Lessee's intention to repair such damage at Lessee's
expense, without reimbursement from Lessor, in which event this Lease shall
continue in full force and effect, and Lessee shall proceed to make such repairs
as soon as reasonably possible. If Lessee does not give such notice within such
10-day period this Lease shall be cancelled and terminated as of the date of the
occurrence of such damage.
9.4 TOTAL DESTRUCTION. If at any time during the term of this Lease there
is damage, whether or not an insured Loss, (including destruction required by
any authorized public authority), which falls into the classification of
Premises Total Destruction or Premises Building Total Destruction, this Lease
shall automatically terminate as of the date of such total destruction. See
Addendum paragraph 60.
9.5 DAMAGE NEAR END OF TERM
(a) if at any time during the last six months of the term of this
Lease there is damage, whether or not an insured Loss, which falls within the
classification of Premises Partial Damage, Lessor may at Lessor's option cancel
and terminate this Lease as of the date of occurrence of such damage by giving
written notice to Lessee of Lessor's election to do so within 30 days after the
date of occurrence of such damage.
(b) Notwithstanding paragraph 9.5(a), in the event that Lessee has an
option to extend or renew this Lease, and the time within which said option may
be exercised has not yet expired, Lessee shall exercise such option, if it is to
be exercised at all, no later than 20 days after the occurrence of an Insured
Loss falling within the classification of Premises Partial Damage during the
last six months of the term of this Lease. If Lessee duly exercises such option
during said 20 day period, Lessor shall, at Lessor's expense, repair such
damage as soon as reasonably possible and this Lease shall continue in full
force and effect. If Lessee fails to exercise such option during said 20 day
period, then Lessor may at Lessor's option terminate and cancel this Lease as of
the expiration of said 20 day period by giving written notice to Lessee of
Lessor's election to do so within 10 days after the expiration of said 20 day
period, notwithstanding any term or provision in the grant of option to the
contrary.
9.6 ABATEMENT OF RENT LESSEE'S REMEDIES.
(a) In the event of damage described in paragraph 9.2 or 9.3, and
Lessor or Lessee repairs or restores the Premises pursuant to the provisions of
this Paragraph 9, the rent payable hereunder for the period during which such
damage, repair or restoration continues shall be abated in proportion to the
degree to which Lessee's use of the Premises is impaired. Except for abatement
of rent, if any, Lessee shall have no claim against Lessor for any damage
suffered by reason of any such damage, destruction, repair or restoration.
(b) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence such repair or
restoration within 90 days after such obligations shall accrue, Lessee may at
Lessee's option cancel and terminate this Lease by giving Lessor written notice
of Lessee's election to do so at any time prior to the commencement of such
repair or restoration. In such event this Lease shall terminate as of the date
of such notice.
9.7 TERMINATION - ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this Paragraph 9, an equitable adjustment shall be made concerning
advance rent and any advance payments made by Lessee to Lessor. Lessor shall,
in addition, return to Lessee so much of Lessee's security deposit as has not
theretofore been applied by Leasor.
9.8 WAIVER. Lessor and Lessee waived the provisions of any statutes which
relate to termination of leases when property is destroyed and agree that such
event shall be governed by the terms of this Lease.
10. REAL PROPERTY TAXES.
10.1 PAYMENT OF TAXES. Lessee shall pay the real property tax, as defined
in paragraph 10.2, applicable to the Premises during the term of this Lease. All
such payments shall be made at least ten (10) days prior to the delinquency date
of such payment. Lessee shall promptly furnish Lessor with satisfactory evidence
that such taxes have been paid. If any such taxes paid by Lessee shall cover any
period of time prior to or after the expiration of the term hereof, Lessee's
share of such taxes shall be equitably prorated to cover only the period of time
within the tax fiscal year during which this Lease shall be in effect, and
Lessor shall reimburse Lessee to the extent required. If Lessee shall fail to
pay any such taxes, Lessor shall have the right to pay the same, in which case
Lessee shall repay such amount to Lessor with Lessee's next rent installment
together with interest at the maximum rate then allowable by law.
10.2 DEFINITION OF "REAL PROPERTY TAX". As used herein "real property tax"
shall include any form of real estate tax or assessment, general, special,
ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than inheritance, personal income
or estate taxes) imposed on the Premises by any authority having the direct or
indirect power to tax, including any school, agricultural, sanitary, fire,
street, drainage or other improvement district thereof, as against any legal or
equitable interest of Lessor in the Premises or in the real property of which
the Premises are a part, as against Lessor's right to rent or other income
therefrom, and as against Lessor's business of leasing the Premises. The term
"real property tax" shall also include any tax, fee, levy, assessment or change
(i) in substitution of, partially or totally, any tax, fee, levy, assessment or
charge hereinabove included within the definition of "real property tax," or
(ii) the nature of which was hereinbefore included within the definition of
"real property tax," or (iii) which is imposed for a service or right not
charged prior to June 1, 1978, or, if previously charged, has been increased
since June 1, 1978, or (iv) which is imposed as a of result of a transfer,
either partial or total, of Lessor's interest in the Premises or which is added
to a tax or charge hereinbefore included within the definition of real property
tax by reason of such transfer, or (v) which is imposed by reason of this
transaction, any modifications or changes hereto, or any transfers hereof. See
Addendum paragraph 66
10.3 JOINT ASSESSMENT. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the real property taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion not to be determined by Lessor from the respective valuations
assigned in the assessor's work sheets or such other information as may be
reasonably available. Lessor's reasonable determination thereof, in good faith,
shall be conclusive.
10.4 PERSONAL PROPERTY TAXES.
(a) Lessee shall pay prior to delinquency all taxes assessed against
and levied upon, trade fixtures, furnishings, equipment and all other personal
property of Lessee contained in the Premiss or elsewhere. When possible, Lessee
shall cause said trade fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.
(b) If any of Lessee's said personal property shall be assessed with
Lessor's real property, Lessee shall pay Lessor the taxes attributable to
Lessee within 10 days after receipt of a written statement setting forth the
taxes applicable to Lessee's property.
11. UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
telephone and other utilities and services supplied to the Premises, together
with any taxes thereon. If any such services are not separately metered to
Lessee, Lessee shall pay a reasonable proportion to be determined by Lessor of
all charges jointly metered with other premises.
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessee's interest in this Lease or in the Premises,
without Lessor's prior written consent, which Lessor shall not unreasonably
withhold. Lessor shall respond to Lessee's request for consent hereunder in a
timely manner and any attempted assignment, transfer, mortgage, encumbrance or
subletting without such consent shall be void, and shall constitute a breach of
this Lease.
12.2 LESSEE AFFILIATES. Notwithstanding the provisions of paragraph 12.1
hereof, Lessee may assign or sublet the Premises, or any portion thereof with
thirty (30) days prior notice to but without Lessor's consent, to any
corporation which controls, is controlled by or is under common control with
Lessee, or to any corporation resulting from the merger or consolidation with
Lessee, or to any person or entity which acquires all the assets of Lessee as a
going concern of the business that is being conducted on the Premises, provided
that said assignee assumes, in full, the obligations of Lessee under this Lease.
Any such assignment shall not, in any way, affect or limit the liability of
Lessee under the terms of this Lease even if after such assignment or subletting
the terms of this Lease are materially changed or altered without the consent of
Lessee, the consent of whom shall not be necessary.
12.3 NO RELEASE OF LESSEE. Regardless of Lessor's consent, no subletting
or assignment shall release Lessee of Lessee's obligation or alter the primary
liability of Lessee to pay the rent and to perform all other obligations to be
performed by Lessee hereunder. The acceptance of rent by Lessor from any other
person shall not be deemed to be a waiver by Lessor of any provision hereof.
Consent to one assignment or subletting shall not be deemed consent to any
subsequent assignment or subletting. In the event of default by any assignee of
Lessee or any successor of Lessee, in the performance of any of the terms
hereof, Lessor may proceed directly against Lessee without the necessity of
exhausting remedies against said assignee. Lessor may consent to subsequent
assignments or subletting of this Lease or amendments or modifications to this
Lease with assignees.
INITIALS:_______
_______
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<PAGE> 5
of Lessee, without notifying Lessee, [ILLEGIBLE] successor of Lessee, and
without obtaining its [ILLEGIBLE] consent thereto and such action shall not
relieve Lessee of liability under this Lease.
12.4 ATTORNEY'S FEES. In the event Lessee shall assign or sublet the
Premises or request the consent of Lessor to any assignment or subletting or if
Lessee shall request the consent of Lessor for any act Lessee proposes to do
then Lessee shall pay Lessor's reasonable attorneys fees incurred in connection
therewith, such attorneys fees not to exceed $350.00 for each such request.
13. DEFAULTS; REMEDIES.
13.1 DEFAULTS. The occurrence of any one or more of the following events
shall constitute a material default and breach of this Lease by Lessee:
(a) The vacating or abandonment of the Premises by Lessee.
(b) The failure by Lessee to make any payment of rent or any other
payment required to be made by Lessee hereunder, as and when due, where such
failure shall continue for a period of ten days after written notice thereof
from Lessor to Lessee. In the event that Lessor serves Lessee with a Notice to
Pay Rent or Quit pursuant to applicable Unlawful Detainer statutes such Notice
to Pay Rent or Quit shall also constitute the notice required by this
subparagraph.
(c) The failure by Lessee to observe or perform any of the
covenants, conditions or provisions of this Lease to be observed or performed
by Lessee, other than described in paragraph (b) above, where such failure
shall continue for a period of 30 days after written notice thereof from Lessor
to Lessee; provided, however, that if the nature of Lessee's default is such
that more than 30 days are reasonably required for its cure, then Lessee shall
not be deemed to be in default if Lessee commenced such cure within said 30-day
period and thereafter diligently prosecutes such cure to completion.
(d) (i) The making by Lessee of any general arrangement or
assignment for the benefit of creditors: (ii) Lessee becomes a "debtor" as
defined in 11 U.S.C. Section 101 or any successor statute thereto (unless, in
the case of a petition filed against Lessee, the same is dismissed within 60
days); (iii) the appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where possession is not restored to Lessee within 30
days; or (iv) the attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where such seizure is not discharged within 30 days.
Provided, however, in the event that any provision of this paragraph 13.1(d) is
contrary to any applicable law, such provision shall be of no force or effect.
(e) The discovery by Lessor that any financial statement given to
Lessor by Lessee, any assignee of Lessee, any subtenant of Lessee, any
successor in interest of Lessee or any guarantor of Lessee's obligation
hereunder, and any of them, was materially false.
13.2 REMEDIES. In the event of any such material default or breach by
Lessee, Lessor may at any time thereafter, with or without notice or demand and
without limiting Lessor in the exercise of any right or remedy which Lessor may
have by reason of such default or breach:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession of the Premises to Lessor. In such event
Lessor shall be entitled to recover from Lessee all damages incurred by Lessor
by reason of Lessee's default including, but not limited to, the cost of
recovering possession of the Premises; expenses of reletting, including
necessary renovation and alteration of the Premises, reasonable attorney's
fees, and any real estate commission actually paid; the worth at the time of
award by the court having jurisdiction thereof of the amount by which the
unpaid rent for the balance of the term after the time of such award exceeds
the amount of such rental loss for the same period that Lessee proves could be
reasonably avoided; that portion of the leasing commission paid by Lessor
pursuant to Paragraph 15 applicable to the unexpired term of this Lease.
(b) Maintain Lessee's right to possession in which case this Lease
shall continue in effect whether or not Lessee shall have abandoned the
Premises. In such event Lessor shall be entitled to enforce all of Lessor's
rights and remedies under this Lease, including the right to recover the rent
as it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the state wherein the Premises are
located. Unpaid installments of rent and other unpaid monetary obligations of
Lessee under the terms of this Lease shall bear interest from the date due at
the maximum rate then allowable by law.
13.3 DEFAULT BY LESSOR. Lessor shall not be in default unless Lessor
fails to perform obligations required of Lessor within a reasonable time, but
in no event later than thirty (30) days after written notice by Lessee to
Lessor and to the holder of any first mortgage or deed of trust covering the
Premises whose name and address shall have theretofore been furnished to Lessee
in writing, specifying wherein Lessor has failed to perform such obligation;
provided, however, that if the nature of Lessor's obligation is such that more
than thirty (30) days are required for performance then Lessor shall not be in
default if Lessor commences performance within such 30-day period and
thereafter diligently prosecutes the same to completion.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by Lessee
to Lessor of rent and other sums due hereunder will cause Lessor to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but at not limited to, processing
and accounting charges, and late charges which may be imposed on Lessor by the
terms of any mortgage or trust deed covering the Premises. Accordingly, if any
installment of rent or any other sum due from Lessee shall not be received by
Lessor or Lessor's designee within ten (10) days after such amount shall be
due, then, without any requirement for notice to Lessee, Lessee shall pay to
Lessor a late charge equal to 6% of such overdue amount. The parties hereby
agree that such late charge represents a fair and reasonable estimate of the
costs Lessor will incur by reason of late payment by Lessee. Acceptance of
such late charge by Lessor shall in no event constitute a waiver of Lessee's
default with respect to such overdue amount, nor prevent Lessor from exercising
any of the other rights and remedies granted hereunder. In the event that a
late charge is payable hereunder, whether or not collected, for three (3)
consecutive installments of rent, then rent shall automatically become due and
payable quarterly in advance, rather than monthly, notwithstanding paragraph 4
or any other provision of this Lease to the contrary.
13.5 IMPOUNDS. In the event that a late charge is payable hereunder,
whether or not collected, for three (3) installments of rent or any other
monetary obligation of Lessee under the terms of this Lease, Lessee shall pay to
Lessor, if Lessor shall so request, in addition to any other payments required
under this Lease, a monthly advance installment, payable at the same time as the
monthly rent, as estimated by Lessor, for real property tax and insurance
expenses on the Premises which are payable by Lessee under the terms of this
Lease. Such fund shall be established to insure payment when due, before
delinquency, of any or all such real property taxes and insurance premiums. If
the amounts paid to Lessor by Lessee under the provisions of this paragraph are
insufficient to discharge the obligations of Lessee to pay such real property
taxes and insurance premiums as the same become due, Lessee shall pay to Lessor,
upon Lessor's demand, such additional sums necessary to pay such obligations.
All moneys paid to Lessor under this paragraph may be intermingled with other
moneys of Lessor and shall not bear interest. In the event of a default in the
obligations of Lessee to perform under this Lease, then any balance remaining
from funds paid to Lessor under the provisions of this paragraph may, at the
option of Lessor, be applied to the payment of any monetary default of Lessee in
lieu of being applied to the payment of real property tax and insurance
premiums.
14. CONDEMNATION. If the Premises or any portion thereof are taken under
the power of eminent domain, or sold under the threat of the exercise of said
power (all of which are herein called "condemnation"), this Lease shall
terminate as to the part so taken as of the date the condemning authority takes
title or possession, whichever first occurs. If more than 10% of the floor area
of the building on the Premises, or more than 25% of the land area of the
Premises which is not occupied by any building, is taken by condemnation, Lessee
may, at Lessee's option, to be exercised in writing only within ten (10) days
after Lessor shall have given Lessee written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemning authority
shall have taken possession) terminate this Lease as of the date the condemning
authority takes such possession. If Lessee does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in full force and effect
as to the portion of the Premises remaining, except that the rent shall be
reduced in the proportion that the floor area of the building taken bears to the
total floor area of the building situated on the Premises. Any award for the
taking of all or any part of the Premises under the power of eminent domain or
any payment made under threat of the exercise of such power shall be the
property of Lessor, whether such award shall be made as compensation for
diminution in value of the leasehold or for the taking of the fee, or as
severance damages; provided, however, that Lessee shall be entitled to any award
for loss or damage to Lessee's trade fixtures and removable personal property.
In the event that this Lease is not terminated by reason of such condemnation,
Lessor shall to the extent of severance damages received by Lessor in connection
with such condemnation, repair any damage to the Premises caused by such
condemnation except to the extent that Lessee has been reimbursed therefor by
the condemning authority. See Addendum paragraph 61.
15. [Intentionally deleted]
16. ESTOPPEL CERTIFICATE.
(a) Lessee shall at any time upon not less than ten
(10) days' prior written notice from Lessor execute, acknowledge and deliver to
Lessor a statement in writing (i) certifying that this Lease is unmodified and
in full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease, as so modified, is in full force
and effect) and the date to which the rent and other charges are paid in
advance, if any, and (ii) acknowledging that there are not, to Lessee's
knowledge, any uncured defaults on the part of Lessor hereunder, or specifying
such defaults if any are claimed. Any such statement may be conclusively relied
upon by any prospective purchaser or encumbrancer of the Premises.
(b) At Lessor's option, Lessee's failure to deliver such statement
within such time shall be a material breech of this Lease or shall be
-4-
Initials
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<PAGE> 6
conclusive upon Lessee (i) that this Lease is in full force and effect, without
modification except as may be represented by Lessor, (ii) that there are no
uncured defaults in Lessor's performance, and (iii) that not more than one
month's rent has been paid in advance or such failure may be considered by
Lessor as a default by Lessee under this Lease.
(c) If Lessor desires to finance, refinance, or sell the Premises, or any
part thereof, Lessee hereby agrees to deliver to any lender or purchaser
designated by Lessor such financial statements of Lessee as may be reasonably
required by such lender or purchaser. Such statements shall include the past
three years' financial statements of Lessee. All such financial statements
shall be received by Lessor and such lender or purchaser in confidence and
shall be used only for the purpose herein set forth.
17. LESSOR'S LIABILITY. The term "Lessor" as used herein shall mean only the
owner or owners at the time in question of the fee title or a lessee's interest
in a ground lease of the Premises, and except as expressly provided in Paragraph
15, in the event of any transfer of such title or interest. Lessor herein named
(and in case of any subsequent transfers then the grantor) shall be relieved
from and after the date of such transfer of all liability as respects Lessor's
obligations thereafter to be performed, provided that any funds in the hands of
Lessor or the then grantor at the time of such transfer, in which Lessee has an
interest, shall be delivered to the grantee. The obligations contained in this
Lease to be performed by Lessor shall, subject as aforesaid, be binding on
Lessor's successors and assigns, only during their respective periods of
ownership.
18. SEVERABILITY. The invalidity of any provision of this Lease as determined
by a court of competent jurisdiction, shall in no way affect the validity of
any other provision hereof.
19. INTEREST ON PAST-DUE OBLIGATIONS. Except as expressly herein provided, any
amount due to Lessor not paid when due shall bear interest at the maximum rate
then allowable by law from the date due. Payment of such interest shall not
excuse or cure any default by Lessee under this Lease, provided, however, that
interest shall not be payable on late charges incurred by Lessee nor on any
amounts upon which late charges are paid by Lessee.
20. TIME OF ESSENCE. Time is of the essence.
21. ADDITIONAL RENT. Any monetary obligations of Lessee to Lessor under the
terms of this Lease shall be deemed to be rent.
22. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No prior
agreement or understanding pertaining to any such matter shall be effective.
This Lease may be modified in writing only, signed by the parties in interest
at the time of the modification. Except as otherwise stated in this Lease,
Lessee hereby acknowledges that neither the real estate broker listed in
Paragraph 15 hereof nor any cooperating broker on this transaction nor the
Lessor or any employees or agents of any of said persons has made any oral or
written warranties or representations to Lessee relative to the condition or
use by Lessee of said Premises and Lessee acknowledges that Lessee assumes all
responsibility regarding the Occupational Safety Health Act, the legal use and
adaptability of the Premises and the compliance thereof with all applicable
laws and regulations in effect during the term of this Lease except as
otherwise specifically stated in this Lease.
23. NOTICES. Any notice required or permitted to be given hereunder shall be
in writing and may be given by personal delivery or by certified mail, and if
given personally or by mail, shall be deemed sufficiently given if addressed to
Lessee or to Lessor at the address noted below the signature of the respective
parties, as the case may be. Either party may by notice to the other specify a
different address for notice purposes except that upon Lessee's taking
possession of the Premises, the Premises shall constitute Lessee's address for
notice purposes. A copy of all notices required or permitted to be given to
Lessor hereunder shall be concurrently transmitted to such party or parties at
such addresses as Lessor may from time to time hereafter designate by notice to
Lessee.
24. WAIVERS. See Addendum paragraph 62.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a "short form" memorandum of this
Lease for recording purposes.
26. HOLDING OVER. If Lessee, with Lessor's consent, remains in possession of
the Premises or any part thereof after the expiration of the term hereof, such
occupancy shall be a tenancy from month to month upon all the provisions of
this Lease pertaining to the obligations of Lessee, but all options and rights
of first refusal, if any, granted under the terms of this Lease shall be deemed
terminated and be of no further effect during said month to month tenancy. See
Addendum paragraph 63.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies
at law or in equity.
28. COVENANTS AND CONDITIONS. Each provision of this Lease performable by
Lessee shall be deemed both a covenant and a condition.
29. BINDING EFFECT; CHOICE OF LAW. Subject to any provisions hereof restricting
assignment or subletting by Lessee and subject to the provisions of Paragraph
17, this Lease shall bind the parties, their personal representatives,
successors and assigns. This Lease shall be governed by the laws of the State
wherein the Premises are located.
30. SUBORDINATION.
(a) This Lease, at Lessor's option, shall be subordinate to any ground
lease, mortgage, deed of trust, or any other hypothecation or security now or
hereafter placed upon the real property of which the Premises are a part and to
any and all advances made on the security thereof and to all renewals,
modifications, consolidations, replacements and extensions thereof.
Notwithstanding such subordination, Lessee's right to quiet possession of the
Premises shall not be disturbed if Lessee is not in default and so long as
Lessee shall pay the rent and observe and perform all of the provisions of this
Lease, unless this Lease is otherwise terminated pursuant to its terms. If any
mortgagee, trustee or ground lessor shall elect to have this Lease prior to the
lien of its mortgage, deed of trust or ground lease, and shall give written
notice thereof to Lessee, this Lease shall be deemed prior to such mortgage,
deed of trust, or ground lease, whether this Lease is dated prior or subsequent
to the date of said mortgage, deed of trust or ground lease or the date of
recording thereof.
(b) Lessee agree to execute any documents required to effectuate an
attornment, a subordination or to make this Lease prior to the lien of any
mortgage, deed of trust or ground lease, as the case may be. Lessee's failure
to execute such documents within 10 days after written demand shall constitute
a material default by Lessee hereunder. See Addendum paragraph 64.
31. ATTORNEY'S FEES. If either party or the broker named herein brings an
action to enforce the terms hereof or declare rights hereunder, the prevailing
party in any such action, on trial or appeal, shall be entitled to his
reasonable attorney's fees to be paid by the losing party as fixed by the
court. The provisions of this paragraph shall inure to the benefit of the broker
named herein who seeks to enforce a right hereunder.
32. LESSOR'S ACCESS. Lessor and Lessor's agents hall have the right to enter
the Premises at reasonable times for the purpose of inspecting the same,
showing the same to prospective purchasers, lenders, or lessees, and making
such alterations, repairs, improvements or additions to the Premises or to the
building of which they are a part as Lessor may deem necessary or desirable.
Lessor may at any time place on or about the Premises any ordinary "For Sale"
signs and Lessor may at any time during the last 120 days of the term hereof
place on or about the Premises any ordinary "For Lease" signs, all without
rebate of rent or liability to Lessee.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first
having obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
34. SIGNS. Lessee shall not place any sign upon the Premises without Lessor's
prior written consent except that Lessee shall have the right, without the
prior permission of Lessor to place ordinary and usual for rent or sublet signs
thereon.
35. MERGER. The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, or a termination by Lessor, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of lessor, operate as an assignment to
Lessor of any or all of such subtenancies.
36. CONSENTS. Except for paragraph 33 hereof, wherever in this Lease the
consent of one party is required to an act of the other party such consent
shall not be unreasonably withheld.
37. GUARANTOR. In the event that there is a guarantor of this Lease, said
guarantor shall have the same obligations as Lessee under this Lease.
38. QUIET POSSESSION. Upon Lessee paying the rent for the Premises and
observing and performing all of the covenants, conditions and provisions on
Lessee's part to be observed and performed hereunder, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease. The individuals executing this Lease on behalf of
Lessor represent and warrant to Lessee that they are fully authorized and
legally capable of executing this lease on behalf of Lessor and that such
execution is binding upon all parties holding an ownership interest in the
Premises.
39. OPTIONS.
39.1 DEFINITION. As used in this paragraph the word "Options" has the
following meaning: (1) the right or option to extend the term of this Lease or
to renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor, (2) the option or right of first refusal to lease the
Premises or the right of first offer to lease the Premises or the right of
first refusal to lease other property of Lessor or the right of first offer to
lease other property of Lessor; (3) the right or option to purchase the
Premises, or the right of first refusal to purchase the Premises, or the right
of first offer to purchase the Premises or the right or option to purchase
other property of Lessor, or the right of first refusal to purchase other
property of Lessor or the right of first offer to purchase other property of
Lessor.
Initials:
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NET -5-
<PAGE> 7
39.2 OPTIONS PERSONAL. Each Option granted to Lessee in this Lease are
personal to Lessee and may not be exercised or be assigned, voluntarily or
involuntarily, by or to any person or entity other than Lessee, provided,
however, the Option may be exercised by or assigned to any Lessee Affiliate as
defined in paragraph 12.2 of this Lease. The Options herein granted to Lessee
are not assignable separate and apart from this Lease.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple options
to extend or renew this Lease a later option cannot be exercised unless the
prior option to extend or renew this Lease has been so exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option, notwithstanding
any provision in the grant of Option to the contrary. See Addendum Paragraph 67
or (iii) at any time after an event of default described in paragraphs 13.1(a),
13.1(d), or 13.1(e) (without any necessity of Lessor to give notice of such
default to Lessee), or (iv) in the event that Lessor has given to Lessee three
or more notices of default under paragraph 13.1(b), where a late charge has
become payable under paragraph 13.4 for each of such defaults, or paragraph
13.1(c), whether or not the defaults are cured, during the 12 month period prior
to the time that Lessee intends to exercise the subject Option.
(b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due and
timely exercise of the Option, if, after such exercise and during the term of
this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee
for a period of 30 days after such obligation becomes due (without any necessity
of Lessor to give notice thereof to Lessee), or (ii) Lessee fails to commence to
cure a default specified in paragraph 31.1(c) within 30 days after the date that
Lessor gives notice to Lessee of such default and/or Lessee fails thereafter to
diligently prosecute said cure to completion, or (iii) Lessee commits a default
described in paragraph 13.1(a), 13.1(d) or 13.1(e) (without any necessity of
Lessor to give notice of such default to Lessee), or (iv) Lessor gives to Lessee
three or more notices of default under paragraph 13.1(b), where a late charge
becomes payable under paragraph 13.4 for each such default, or paragraph
13.1(c), whether or not the defaults are cured.
40. MULTIPLE TENANT BUILDING. In the event that the Premises are part of a
larger building or group of buildings then Lessee agrees that it will abide by,
keep and observe all reasonable rules and regulations which Lessor may make
from time to time for the management, safety, care, and cleanliness of the
building and grounds, the parking of vehicles and the preservation of good
order therein as well as for the convenience of other occupants and tenants of
the building. The violations of any such rules and regulations shall be deemed
a material breach of this Lease by Lessee.
41. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of Lessee, its agents and
invitees from acts of third parties.
42. EASEMENT. Lessor reserves to itself the right, from time to time, to grant
such easements, rights and dedications that Lessor deems necessary or
desirable, and to cause the recordation of Parcel Maps and restrictions, so
long as such easements, rights, dedications, Maps and restrictions do not
unreasonably interfere with the use of the Premises by Lessee. Lessee shall
sign any of the aforementioned documents upon request of Lessor and failure to
do so shall constitute a material breach of this Lease.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one party to the other under the
provisions hereof, the party against whom the obligation to pay the money is
asserted shall have the right to make payment "under protest" and such payment
shall not be regarded as a voluntary payment, and there shall survive the right
on the part of said party to institute suit for recovery of such sum. If it
shall be adjudged that there was no legal obligation on the part of said party
to pay such sum or any part thereof, said party shall be entitled to recover
such sum or so much thereof as it was not legally required to pay under the
provisions of this lease.
44. AUTHORITY. If Lessee is a corporation, trust, or general or limited
partnership, each individual executing this Lease on behalf of such entity
represents and warrants that he or she is duly authorized to execute and deliver
this Lease on behalf of said entity. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after execution of this
Lease, deliver to Lessor evidence of such authority satisfactory to Lessor. See
Addendum paragraph 65.
45. CONFLICT. Any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions shall be controlled by the typewritten or
handwritten provisions.
46. INSURING PARTY. The insuring party under this lease shall be the Lessee.
47. ADDENDUM. Attached hereto is an addendum or addenda containing paragraphs
48 through 67 which constitutes a part of this Lease.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN IT HAS BEEN PREPARED FOR SUBMISSION
TO YOUR ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION OR RECOMMENDATION
IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE
REAL ESTATE BROKER OF ITS AGENTS OR EMPLOYEES AS TO THE LEGAL
SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE
TRANSACTION RELATING THERETO; THE PARTIES SHALL RELY SOLELY UPON THE
ADVICE OF THEIR OWN LEGAL COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES
OF THIS LEASE.
THE PARTIES HERETO HAVE EXECUTED THIS LEASE AT THE PLACE ON THE DATES SPECIFIED
IMMEDIATELY ADJACENT TO THEIR RESPECTIVE SIGNATURES.
Executed at Oakland, Ca WELLESLEY COMPANY N.V.
on September 7, 1994 By Brighton Pacific Authorized Agent
Address 555 Montgomery Street ---------------------------------
Suite 820 By [SIG], Vice Chairman
San Francisco, ---------------------------------
California 94111
(415) 956-7685 "LESSOR" (Corporate seal)
Executed at VALLE DE ORO BANK
------------------------
on By /s/ WILLIAM V. EHLEN, PRESIDENT/CEO
--------------------------------- -----------------------------------
Address By
---------------------------- -----------------------------------
- ----------------------------------- "LESSEE" (Corporate seal)
For these forms write or call the American Industrial Real Estate Association,
350 South Figueroa St., Suite 275, Los Angeles, CA 90071
<PAGE> 8
ADDENDUM TO STANDARD INDUSTRIAL LEASE
BETWEEN WELLESLEY COMPANY, N.V. AND VALLE DE ORO BANK
FOR 1234 EAST MAIN STREET, EL CAJON, CALIFORNIA
48. ANNUAL RENT ADJUSTMENT. Rent payable by Lessee pursuant to Paragraph 4 shall
be increased for each year of the term of this Lease, including any renewal
thereof, as of each anniversary of the commencement date of the term of this
Lease to reflect any increase in the cost of living, which adjustment shall be
determined as follows:
(a) At the end of the first Lease Year and each Lease Year
thereafter, the then most recently published CPI (as defined below) figure shall
be established and rent for the succeeding Lease Year shall be the rent set
forth under Paragraph 4 increased by the same percentage, if any, by which the
then most recently published CPI figure shall have increased over the CPI for
the month in which the term of this Lease commenced, provided that in no event
shall rent be less than the rent payable in the immediately preceding Lease
Year.
(b) As used herein, the term "Lease Year" shall mean a period of 365
days or 366 days, as the case may be, commencing on the commencement date of the
term of this Lease and on each anniversary thereof, and ending on the day prior
to the anniversary of the commencement of each respective Lease Year.
(c) As used herein, the term "CPI" shall refer to the "Consumer Price
Index For All Urban Consumers, San Diego, California (All Items)" compiled by
the U.S. Department of Labor, Bureau of Labor Statistics (1982-84 equals 100).
(d) If the CPI should hereafter be changed, then the new base shall be
converted to the 1982-84 base and the base as so converted shall be used. In the
event that the Bureau shall cease to publish the CPI, then the successor or most
nearly comparable index thereto shall be used.
(e) If the commencement date is other than on the first day of a
calendar month, then the installment of rent payable on the first day of any
month during which an increase in rent is to occur shall be prorated based on
the number of days in such month prior to the effective date of the increase and
the number of days in such month on or after the effective date of the increase.
Addendum Page 1 of 11
<PAGE> 9
Notwithstanding anything in this Paragraph 48 to the contrary, the adjustment
described above shall in no event be less than three percent (3%) or be more
than six percent (6%) per year.
49. REGULATORY APPROVAL. Lessee acknowledges that it has obtained the consent of
the office of the Comptroller of the Currency to open a branch bank in the
Premises.
50. LICENSE TO STORE PERSONAL PROPERTY. Lessor has granted Lessee an irrevocable
license (the "License") to store certain furniture, equipment and personal
property which Lessee purchased from the Federal Deposit Insurance Corporation
on the first floor of the Premises for a term of commencing on February 1, 1994
and ending on the commencement date of this Lease. Lessee shall pay Lessor, on
the first day of each month during the term of the License, a license fee of Two
Thousand Dollars ($2,000). Lessee shall observe and perform the terms and
conditions of this Lease regarding the Premises during the term of the License,
including, without limitation, all rules and regulations reasonably established
by Lessor concerning the storage of Lessee's personal property.
51. OPTION TO EXTEND THE TERM.
(a) Lessor hereby grants to Lessee the option to extend the initial
term (the "Renewal Option") with respect to all of the rentable area of the
Premises leased by Lessee as of the expiration date of the initial term for
three periods of five (5) years each (each a "Renewal Term"). Each Renewal Term
shall commence immediately following the expiration date of the preceding term
("Renewal Commencement Date") and shall expire on the day before the fifth
anniversary of the Renewal Commencement Date. Each Renewal option shall be
exercised, if at all, by written notice to Lessor not less than six (6) months
nor more than twelve (12) months prior to the expiration date of the preceding
term, which notice shall be irrevocable by Lessee; provided, however, that, if
Lessee is in default under this Lease either at the time Lessee exercises any
Renewal Option or at any time thereafter prior to or upon the commencement of
the applicable Renewal Term, Lessor shall have, in addition to all of Lessor's
other rights and remedies under this Lease, the right to terminate all
unexercised Renewal Options and to cancel unilaterally Lessee's exercise of the
applicable Renewal Option, in which event the expiration date of this Lease
shall be and remain the then scheduled expiration date, and Lessee shall have no
further rights under this Lease to renew or extend the preceding term.
Addendum Page 2 of 11
<PAGE> 10
(b) Each Renewal Term shall be upon and subject to all of the terms,
covenants and conditions of this Lease; provided, however, that rent for each
Renewal Term shall be equal to the Prevailing Market Rental for space comparable
to the Premises in the El Cajon, California, area as of the date of commencement
of the applicable Renewal Term, and shall be adjusted annually in accordance
with paragraph 48. The term "Prevailing Market Rental" shall mean the base
annual rental for such comparable space, taking into account any additional
rental and all other monetary payments and escalations payable hereunder and by
tenants under leases of such comparable space, and any tenant improvements and
other concessions granted to Lessee and tenants under leases of such comparable
space. Such rent shall be determined by Lessor not later than four (4) months
prior to the commencement of the applicable Renewal Term. If Lessee disputes
Lessor's determination of the Prevailing Market Rental for the applicable
Renewal Term, Lessee shall, within twenty (20) days after the date of Lessor's
notice setting forth the Prevailing Market Rental for the applicable Renewal
Term, send to Lessor a notice stating that Lessee either (x) elects to terminate
its exercise of the applicable Renewal Option, in which event such Renewal
Option shall lapse and this Lease shall terminate on the expiration date of the
preceding term in the manner provided herein, or (y) disagrees with Lessor's
determination of Prevailing Market Rental for the applicable Renewal Term and
elects to resolve the disagreement as provided in Paragraph 51(d) below. If
Lessee does not send to Lessor a notice as provided in the previous sentence,
Lessor's determination of the Prevailing Market Rental shall be determinative.
Until the disagreement is resolved as provided in Paragraph 51(d) below,
Lessee's monthly payments of rent shall be in an amount not less than the rent
payable for the twelve (12) month period immediately preceding the applicable
Renewal Commencement Date. Within ten (10) business days following the
resolution of such dispute by the parties or the decision of the brokers, as
applicable, Lessee shall pay to Lessor the amount of any deficiency in the rent
theretofore paid.
(c) Notwithstanding anything to the contrary set forth in this
Paragraph 51, in no event shall the rent for any Renewal Term be less than the
rent payable for the twelve (12) month period immediately preceding the
applicable Renewal Commencement Date. Lessee shall in any event pay all
applicable additional charges with respect to the Premises, in the manner and at
the times provided in this Lease, effective upon the applicable Renewal
Commencement Date, and notwithstanding any dispute regarding rent for the
applicable Renewal Term.
Addendum Page 3 of 11
<PAGE> 11
(d) Any disagreement regarding the Prevailing Market Rental as
defined in this Paragraph 51 shall be resolved as follows:
(i) Within twenty (20) days after Lessee's response to Lessor's
notice to Lessee of the Prevailing Market Rental, Lessor and Lessee shall meet
no less than two (2) times, at a mutually agreeable time and place, to attempt
to resolve any such disagreement.
(ii) If, within the twenty (20) day consultation period, Lessor
and Lessee cannot reach an agreement as to the Prevailing Market Rental, they
shall each select one broker to determine the Prevailing Market Rental. Each
such broker shall arrive at a determination of the Prevailing Market Rental and
submit their conclusions to Lessor and Lessee within thirty (30) days after the
expiration of the twenty (20) day consultation period.
(iii) If only one determination is submitted within the requisite
time period, it shall be deemed to be the Prevailing Market Rental. If both
determinations are submitted within such time period, and if the two
determinations so submitted differ by five percent (5%) or less of the higher of
the two, the average of the two shall be the Prevailing Market Rental. If the
two determinations differ by more than five percent (5%) the higher of the two,
then the two brokers shall immediately select a third broker who shall within
thirty (30) days after his or her selection make a determination of the
Prevailing Market Rental and submit such determination to Lessor and Lessee.
This third determination will then be averaged with the closer of the two
previous determinations and the result shall be the Prevailing Market Rental.
(iv) All brokers specified pursuant to this paragraph 51 shall be
real estate brokers licensed and in good standing with the State of California
with not less than ten (10) years experience in commercial property leasing in
the El Cajon, California, area. Each party shall pay the cost of the broker
selected by such party and one-half of the cost of the third broker plus
one-half of any other costs incurred in resolving the disagreement pursuant to
this Paragraph 51(d).
52. OPTION TO PURCHASE THE PREMISES.
(a) Provided that Lessee has duly exercised the first Renewal Option
in accordance with Paragraph 51, Lessor grants to Lessee the one-time option
(the "Purchase Option")
Addendum Page 4 of 11
<PAGE> 12
to purchase the Premises on December 1, 2004 (the "Closing Date") for the Fair
Market Value of the Premises as determined in accordance with Paragraph 52(b),
subject to the terms and conditions of this Paragraph 52. The Purchase Option
shall be exercised, if at all, by written notice to Lessor not less than six (6)
months nor more than twelve (12) months prior to the Closing Date, which notice
shall be irrevocable by Lessee; provided, however, that, if Lessee is in default
under this Lease either at the time Lessee exercises the Purchase Option or at
any time thereafter prior to the Closing Date, Lessor shall have, in addition to
all of Lessor's other rights and remedies under this Lease, the right to
terminate the Purchase Option and to cancel unilaterally Lessee's exercise of
the Purchase Option.
(b) The fair market value of the Premises (the "Fair Market
Value") shall be determined by Lessor on the basis of the highest and best use
of the Premises as if the Premises were unencumbered and free of all liens,
including this Lease. Lessor shall notify Lessee of the Fair Market Value of the
Premises not later than four (4) months prior to the Closing Date. If Lessee
disputes Lessor's determination of the Fair Market Value, Lessee shall, within
twenty (20) days after the date of Lessor's notice setting forth the Fair Market
Value, send to Lessor a notice stating that Lessee either (i) elects to
terminate its exercise of the Purchase Option, in which event the Purchase
Option shall be deemed terminated, or (ii) disagrees with Lessor's determination
of Fair Market Value and elects to resolve the disagreement as provided in
Paragraph 52(c) below. If Lessee does not send to Lessor a notice as provided in
the previous sentence, Lessor's determination of the Fair Market Value shall be
determinative. The Fair Market Value of the Premises, as established pursuant to
this Paragraph 52, shall be the purchase price which Lessee shall pay Lessor on
the Closing Date.
(c) Any disagreement regarding the Fair Market Value as defined in
this Paragraph 52 shall be resolved as follows:
(i) Within twenty (20) days after Lessee's response to Lessor's
notice to Lessee of the Fair Market Value, Lessor and Lessee shall meet no less
than two (2) times, at a mutually agreeable time and place, to attempt to
resolve any such disagreement.
(ii) If, within the twenty (20) day consultation period, Lessor
and Lessee cannot reach an agreement as to the Fair Market Value, they shall
each select one appraiser to determine the Fair Market Value.
Addendum Page 5 of 11
<PAGE> 13
Each such appraiser shall arrive at a determination of the Fair Market Value and
submit their conclusions to Lessor and Lessee within thirty (30) days after the
expiration of the twenty (20) day consultation period.
(iii) If only one determination is submitted within the requisite
time period, it shall be deemed to be the Fair Market Value. If both
determinations are submitted within such time period, and if the two
determinations so submitted differ by five percent (5%) or less of the higher of
the two, the average of the two shall be the Fair Market Value. If the two
determinations differ by more than five percent (5%) of the higher of the two,
then the two appraisers shall immediately select a third appraiser who shall,
within thirty (30) days after his or her selection, make a determination of the
Fair Market Value and submit such determination to Lessor and Lessee. This third
determination will then be averaged with the closer of the two previous
determinations and the result shall be the Fair Market Value.
(iv) All appraisers specified pursuant to this paragraph 52
shall be members of the American Institute of Real Estate Appraisers with not
less than ten (10) years experience in appraising commercial properties in the
El Cajon, California, area. Each party shall pay the cost of the appraiser
selected by-such party and one-half of the cost of the third appraiser plus
one-half of any other costs incurred in resolving the disagreement pursuant to
this Paragraph 52(c).
(d) Within five (5) days after the final determination of the
purchase price, Lessee and Lessor will open an escrow (the "Escrow") with a
mutually agreeable title and escrow company. Lessee and Lessor will each deposit
such instruments as are reasonably required by the Escrow holder or otherwise
required to close Escrow, and shall designate the Escrow holder as the
"Reporting Person" for the transaction pursuant to Section 6045(e) of the
Internal Revenue Code. At the close of Escrow, fee simple title to the Premises
will be conveyed to Lessee by Lessor by grant deed, subject only to a lien for
real property taxes and assessments not then delinquent, matters of title
affecting the Premises as of the date of this Lease, and matters affecting the
condition of title to the Premises created by or with the consent of Lessee or
otherwise approved by Lessee. Lessee agrees that the Premises are to be sold to
and accepted by Lessee at the close of Escrow in its then condition AS-IS AND
WITH ALL FAULTS. In connection with the closing, Lessor will pay all documentary
transfer taxes, one-half of the costs and fees associated with the
Addendum Page 6 of 11
<PAGE> 14
Escrow and Lessor's share of prorations. Lessee will pay all document recording
charges, one-half of the costs and fees associated with the Escrow, the title
policy, the survey, if any, and Lessee's share of prorations. Lessee and Lessor
will each pay all legal and professional fees and fees of other consultants
incurred by Lessee and Lessor, respectively. All other costs and expenses will
be allocated between Lessee and Lessor in accordance with the customary practice
in the county in which the Premises are located. All non-delinquent real estate
taxes and assessments on the Property will be prorated as of the Closing Date
based on the actual current tax bill. If the Closing Date takes place before the
real estate taxes are fixed for the tax year in which the Closing Date occurs,
the apportionment of real estate taxes will be made on the basis of the real
estate taxes for the immediately preceding tax year applied to the latest
assessed valuation, and adjusted after the Closing Date by the parties to the
extent necessary. Any tax refunds received by Lessee which are allocable to the
period prior to Closing Date will be paid by Lessee to Lessor.
(e) Lessee may not, either voluntarily or by operation of law, assign
or otherwise transfer its rights in and to the Purchase Option without Lessor's
prior written consent, which consent may withhold in Lessor's sole and absolute
discretion; provided, however, that Lessee may assign such rights in connection
with an assignment of this Lease pursuant to the terms of Paragraph 12. Any
attempted assignment or other transfer made without such consent or not in
connection with an assignment of this Lease pursuant to the terms of Paragraph
12 below shall be null and void.
53. ADDITIONAL REMEDIES OF LESSOR. In addition to the remedies of Lessor in the
event of a material default or breach by Lessee described in Paragraph 13.2,
Lessor shall have the following rights and remedies:
(a) The rights and remedies provided by California Civil Code Section
1951.2, including but not limited to the right to terminate Lessee's right to
possession of the Premises and to recover the worth at the time of award of the
amount by which the unpaid rent, additional rent and other charges for the
balance of the term of this Lease after the time of award exceed the amount of
rental loss for the same period that Lessee proves could be reasonably avoided,
as computed pursuant to subsection (b) of said Section 1951.2;
Addendum Page 7 of 11
<PAGE> 15
(b) The rights and remedies provided by California Civil Code Section
1951.4, that allows Lessor to continue this Lease in effect and to enforce all
of its rights and remedies under this Lease, including the right to recover
rent, additional rent and other charges as they become due, for so long as
Lessor does not terminate Lessee's right to possession. Acts of maintenance or
preservation, efforts to relet the Premises, the appointment of a receiver upon
Lessor's initiative to protect its interest under this Lease, or withholding
consent to a subletting or assignment or terminating a subletting or assignment,
if the withholding or termination does not violate the rights of Lessee
specified in Section 1951.4(b) shall not constitute a termination of Lessee's
right to possession;
(c) The right to terminate this Lease by giving notice to Lessee in
accordance with applicable law;
(d) The right, exercisable with or without terminating this Lease, to
re-enter the Premises and remove all persons and property from the Premises;
such property may be removed and stored in a public warehouse or elsewhere at
the cost of and for the account of Lessee. No re-entry or taking possession of
the Premises by Lessor pursuant to this Paragraph 52 shall be construed as an
election to terminate this Lease unless a written notice of such intention is
given to Lessee or unless the termination thereof is decreed by a court of
competent jurisdiction; and
(e) Any and all other rights and remedies available to Lessor at law
or in equity.
All rights, options and remedies of Lessor contained in this Lease or
provided by law or in equity shall be construed and held to be cumulative, and
no one of them shall be exclusive of the other. No waiver of any breach or
default hereunder shall be implied from any acceptance by Lessor of any rent,
additional rent or other charges due hereunder or any omission by Lessor to take
any action on account of such breach or default, and no express waiver shall
affect any breach or default other than as specified in said waiver. The consent
or approval of Lessor to or of any act by Lessee requiring Lessor's consent or
approval shall not be deemed to waive or render unnecessary Lessor's consent or
approval to or of any subsequent similar acts by Lessee.
54. INSERT TO PARAGRAPH 6.2. Lessor represents to Lessee in good faith that to
the best of Lessor's actual knowledge, without any duty of independent inquiry:
(a) the Premises was constructed in accordance with local building codes that
Addendum Page 8 of 11
<PAGE> 16
were applicable when the Premises were constructed, (b) Lessor has not received
written notice of any violations of law with respect to the Premises, (c) the
Premises and the Lessor are in compliance with covenants and agreements of
record, if any, (d) no hazardous materials or substances exist on the Property
except for the presence of layered asbestos membrane (which constitutes part of
the roof), and (e) the roof and HVAC systems will be in good repair and operable
condition following the completion of Lessor's repair/maintenance work described
in Paragraph 55 below.
55. INSERT TO PARAGRAPH 6.3. Notwithstanding the foregoing, Lessor agrees that
it will undertake to encapsulate the southern portion of the roof with a new
roof, and encapsulate the northern portion of the roof to abate the layered
asbestos membrane contained therein. In addition, Lessor will either repair the
HVAC system or replace any necessary parts. Upon completion of Lessor's
repair/replacement work on the HVAC system, in the event major
repair/replacement work ("Work") is required during the period beginning on the
Commencement Date and terminating eighteen (18) months thereafter (i.e. February
29, 1996) (the "Repair Period"), the parties agree that Lessee shall pay for the
initial One Thousand Dollars ($1,000) of Work, and Lessor shall pay for the cost
of any Work in excess of the initial One Thousand Dollars ($1,000). Any such
Work must be previously approved in writing by Lessor or its consultant. Any
such Work required after the Repair Period shall be Lessee's sole responsibility
and Lessee shall pay the cost of any such Work after the Repair Period at
Lessee's sole cost and expense. Lessee will also be performing its initial
tenant improvement work described on Schedule 1 attached hereto. Lessor and
Lessee acknowledge that both parties will undertake to perform the work
described above on the commencement date of this Lease, and both parties agree
that they will cooperate in good faith with each other so as to minimize any
interference with the other party's repair or tenant improvement work.
56. INSERT TO PARAGRAPH 7.5. (e) Notwithstanding anything in this Paragraph 7.5
to the contrary, Lessee shall remove from the Premises all of its personal
property, trade fixtures, machinery and equipment (including ATM machines) upon
early termination or expiration of this Lease. Lessee agrees that it shall
repair any damage to the Premises caused by such removal and restore the
Premises to its original condition, reasonable wear and tear excepted.
57. INSERT TO PARAGRAPH 8.4. Lessor acknowledges that Lessee intends to satisfy
its insurance obligations hereunder pursuant to a blanket policy of insurance.
Addendum Page 9 of 11
<PAGE> 17
58. INSERT TO PARAGRAPH 9.1. In the event the Premises are damaged by fire or
other casualty, Lessee shall promptly give notice thereof to Lessor, generally
describing the nature and extent of such damage or destruction and setting forth
Lessee's best estimate of the cost of repair.
59. INSERT TO PARAGRAPH 9.2. Lessee shall have the option to contribute the
required amount to Lessor within ten (10) days after Lessee has received notice
from Lessor of the shortage of insurance proceeds to complete such repairs as
necessary to restore the Premises to its condition existing immediately prior to
such Premises Partial Damage or Premises Building Partial Damage. When Lessee
contributes such amount to Lessor, Lessor shall make such repairs as soon as
reasonably possible and this Lease shall continue in full force and effect.
Lessee shall in no event have any right to reimbursement for any such amounts so
contributed. In the event Lessee does not elect to contribute the required
amount to Lessor within ten (10) days after Lessee has received notice from
Lessor of the shortage of insurance proceeds to complete such repairs, Lessor
shall have the option to either (a) terminate this Lease by giving written
notice to Lessee within fifteen (15) business days after the expiration of such
ten (10) day period, or (b) contribute such required amount, at Lessor's sole
cost and expense, and make such repairs as soon as reasonably possible and this
Lease shall continue in full force and effect. In the event Lessor fails to
complete such repairs within one (1) year of such damage or destruction for any
reason other than Lessee's default under this Lease, Lessee shall have the
option to terminate this Lease by giving written notice to Lessor within ten
(10) days after the expiration of such one (1) year period.
60. INSERT TO PARAGRAPH 9.4. All insurance proceeds, if any, on account of such
damage or destruction shall be paid directly to Lessor, except for any insurance
proceeds applicable to Lessee's personal property, trade fixtures, machinery or
equipment, which shall be paid to Lessee.
61. INSERT TO PARAGRAPH 14. In addition, Rent shall also be reduced for area
taken which does not have a building located thereon in proportion to the effect
of the partial condemnation upon Lessee's business. Notwithstanding the
foregoing, in the event such partial condemnation reduces the parking area or
access thereto, or any area which does not have a building located thereon,
below Lessee's minimum requirements which are more particularly described on
Exhibit A attached hereto, Lessee shall have the option to terminate this Lease
by giving written notice to Lessor within ten (10) days after the date the
condemning authority takes title or possession, whichever occurs first.
Addendum Page 10 of 11
<PAGE> 18
62. INSERT TO PARAGRAPH 24. No waiver by either party or any provision hereof
shall be deemed a waiver of any other provision hereof or of any subsequent
breach by the other party of the same or any other provision. One party's
consent to, or approval of, any act shall not be deemed to render unnecessary
the obtaining of the same party's consent to or approval of any subsequent act.
The acceptance of rent hereunder by Lessor shall not be a waiver of any
preceding breach by Lessee of any provision hereof, other than the failure of
Lessee to pay the particular rent so accepted, regardless of Lessor's knowledge
of such preceding breach at the time of acceptance of such rent.
63. INSERT TO PARAGRAPH 26. The rent during such month to month tenancy shall be
one hundred fifty percent (150%) of the rent payable during the last month of
the term hereof.
64. INSERT TO PARAGRAPH 30. In connection with any attornment or subordination
provided herein, Lessor will use its best efforts to obtain a non-disturbance
agreement from any party requiring such attornment or subordination. However,
Lessor's failure to obtain a non-disturbance agreement shall in no way affect
the non-disturbance provision set forth in subsection (a) above.
65. INSERT TO PARAGRAPH 44. If Lessor is a corporation, trust or partnership,
Lessor shall, within thirty (30) days after execution of this Lease, deliver to
Lessee evidence of such authority.
66. INSERT TO PARAGRAPH 10.2. Notwithstanding the foregoing, the term "real
property tax" shall not include any tax, levy, fee, assessment or charge which
is imposed as a result of a transfer, either partial or total, of Lessor's
interest in the Premises during the initial five (5) years of this Lease, or
which is added to a tax or charge hereinbefore included within the definition of
real property tax by reason of such transfer.
67. INSERT TO PARAGRAPH 39.4(a). (i) at any time after an event of default
described in paragraphs 13.1(b) and 13.1(c) has occurred and Lessee has failed
to cure such default within any applicable cure period after receipt of notice
of such default from Lessor, or (ii) [intentionally deleted],
Addendum Page 11 of 11
<PAGE> 1
EXHIBIT 10.12
Amendment No. 1 and Assignment Agreement (Lease) by and among Valle de Oro Bank,
N.A., Grossmont Land Company and BSD Service Company dated January 29, 1993
<PAGE> 2
AMENDMENT NO. 1 and ASSIGNMENT AGREEMENT
Dated
January 29, 1993
by and among
GROSSMONT LAND CO. ("Landlord")
BSD SERVICE COMPANY ("Assignor") and
VALLE de ORO BANK ("Assignee")
INDEX
<TABLE>
<CAPTION>
Tab No. Document
- ------ --------
<S> <C>
1 Amendment No. 1 and Assignment dated January 29, 1993 by and among
Grossmont Land Co., BSD Service Company, and Valle de Oro Bank
2 Sublease Termination Agreement dated January 29, 1993 by and between BSD
Service Company and the Bank of San Diego
3 Consent of Master Lessor dated April 26, 1993 from Rainbow Investment
Co.
4 Estoppel Certificate dated April 26, 1993 from Rainbow Investment Co.
5 Estoppel Certificate dated April 15, 1993 from Grossmont Land Co.
6 Estoppel Certificate dated January 29, 1993 from BSD Service Company
7 Estoppel Certificate dated January 29, 1993 from Ervin S. Wheeler, M.D.
</TABLE>
<PAGE> 3
AMENDMENT NO. 1 AND ASSIGNMENT AGREEMENT
This AMENDMENT NO. 1 AND ASSIGNMENT AGREEMENT (this "Agreement") is
made and entered into as of January 29, 1993, by and among GROSSMONT LAND CO., a
California limited partnership ("Landlord"), BSD SERVICE COMPANY, a California
corporation ("Assignor"), and VALLE DE ORO BANK, N.A., a national banking
association ("Assignee"), with respect to the Recitals below.
RECITALS
A. Landlord and Rainbow Investment Co., a California limited
partnership ("Master Lessor") entered into that certain Ground Lease dated
January 10, 1958, as amended (the "Master Lease") which is on file in the office
of Landlord.
B. Landlord and Assignor entered into that certain Lease dated
August 6, 1982 (the "Lease"), pertaining to improved real property located at
8690 Center Drive, La Mesa, California (the "Premises").
C. Assignor and Ervin S. Wheeler, M.D., a medical corporation
("Wheeler") entered into that certain Sublease dated March 26, 1984, as extended
(the "Wheeler Sublease"), pertaining to a portion of the Premises.
D. Assignor and The Bank of San Diego entered into that certain
Sublease dated October 25, 1988 (the "Bank Sublease"), pertaining to a portion
of the Premises.
E. Wheeler and John G. Carter, D.D.S. ("Carter") entered into that
certain Sublease dated November 1, 1991 (the "Carter Sublease"), pertaining to a
portion of the Premises.
F. Assignor and Assignee entered into that certain Branch Purchase
and Assumption Agreement dated June 30, 1992 (the "Purchase Agreement")
providing for, among other things, the transfer of Assignor's interest in the
Lease to Assignor as of the Closing Date (defined in the Purchase Agreement).
G. As of the Closing Date, the parties intend to amend the Lease
and assign Assignor's interest in the amended Lease to Assignee, as more fully
set forth below.
AGREEMENT
NOW, THEREFORE, for and in consideration of the mutual covenants
and promises herein contained, and for other good and valuable consideration,
the receipt and sufficiency of
- 1 -
<PAGE> 4
which are hereby acknowledged, the parties hereto agree as follows:
1. Defined Terms. As used in this Agreement, the following
capitalized terms have the following meanings:
(a) "Assignment Date" means that date which corresponds to the
"Closing" (as defined in the Purchase Agreement).
(b) "Conditions to Assignment" means those conditions set forth
in Section 6 of this Agreement.
(c) "Required Consents" means, collectively, all consents and
other authorizations that are required to be obtained pursuant to
Section 16 of the Lease with respect to this Agreement.
Capitalized terms used in this Agreement, and not otherwise defined herein,
shall have the same meanings ascribed to them in the Lease or the Purchase
Agreement, as appropriate.
2. Assignment of Lease. As of the Assignment Date, Assignor grants,
conveys and assigns to Assignee all of Assignor's right, title and interest in
and to the Lease as amended pursuant to Section 11, below.
3. Assumption of Obligations. As of the Assignment Date, Assignor
assigns to Assignee, and Assignee hereby assumes, all obligations and
liabilities of Assignor under the Lease that accrue after the Assignment Date.
Assignee hereby agrees to defend, indemnify and hold Assignor harmless from
all claims, demands, causes of action, liabilities, losses, costs and expenses
(including reasonable attorneys, fees) arising from or in connection with the
obligations and liabilities assumed by Assignee hereunder. Assignor hereby
agrees to defend, indemnify and hold Assignee harmless from all claims,
demands, causes of action, liabilities, losses, costs and expenses (including
without limitation costs of suit and reasonable attorneys' fees) arising from
or in connection with any obligation or liability of Assignor under the Lease
which accrue prior to the Assignment Date. No assumption by Assignee of any
obligations of Assignor under this Section 3 shall be effective except in
conjunction with the assignment to Assignee of the rights and interests of
Assignor under Section 2.
4. Continuing Obligation of Assignor. Notwithstanding the assignment
and assumptions set forth in Sections 2 and 3 above, Assignor shall remain
obligated under all terms and conditions of the Lease to Landlord from the
Assignment Date through December 31, 1999, in the event of Assignee's default.
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<PAGE> 5
5. Delivery of the Premises. On the Assignment Date, Assignor shall
deliver the Premises to Assignee in its then "as is" condition, which shall be
the same condition as existed on the date of execution of the Purchase
Agreement, reasonable wear and tear excepted. Notwithstanding the foregoing,
Assignor shall be responsible for the cost of roof repair pursuant to separate
contract with Green Roofing (and related contracts), which expenses may accrue
prior to, or after, the Assignment Date.
6. Conditions to Assignment. Notwithstanding anything to the contrary
contained herein, no assignment by Assignor to Assignee shall be effective until
each of the following conditions (the "Conditions to Assignment") have been
fulfilled:
(a) Assignor and Assignee shall have obtained all Required
Consents, including an original, fully executed copy of the Consent of
Master Lessor in the form attached as Exhibit "E" to this Agreement;
(b) Assignor shall have caused the Bank Sublease to be terminated
as of the Assignment Date, by entering into a Sublease Termination
Agreement with the Bank of San Diego in the form attached hereto as
Exhibit "F" to this Agreement; and
(c) Assignee shall have received an original, fully executed copy
of an Estoppel Certificate in the form attached as Exhibit "G" to this
Agreement from Master Lessor (with respect to the Master Lease),
Landlord (with respect to the Lease), and Wheeler (with respect to the
Wheeler Sublease).
7. Representations and Warranties of Assignor. Assignor hereby
represents and warrants to Assignee, as of the date this Agreement is executed
by Assignor, that:
(a) A true and complete copy of the Lease, together with all
supplements, amendments and other modifications thereto, is attached hereto as
Exhibit "A" and made a part hereof.
(b) True and complete copies of the Wheeler Sublease and the
Carter Sublease, together with all supplements, amendments and other
modifications thereto, are attached hereto as Exhibits "B", and "C,"
respectively.
(c) A true and complete copy of the Bank Sublease, together with
all supplements, amendments and other modifications thereto, is attached hereto
as Exhibit "D" and made a part hereof.
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<PAGE> 6
(d) The Lease is in full force and effect, and Assignor's rights
and interests under the Lease are free of any liens, charges and encumbrances
created by Assignor (other than the Wheeler Sublease and the Carter Sublease).
(e) No uncured default or event, which with the giving of notice
or passage of time, or both, would constitute a default by Landlord or Assignor,
presently exists under the Lease.
(f) No uncured default or event, which with the giving of notice
or passage of time, or both, would constitute a default by Wheeler or Carter,
presently exists under the Wheeler Sublease or the Carter Sublease.
(g) There are no contracts or other agreements (other than the
Lease, the Wheeler Sublease, and the Carter Sublease) by which Assignor will be
bound in connection with its tenancy of the Premises following the Assignment
Date.
8. Acknowledgements, and Representation and Warranty of Landlord.
Assignor and Assignee acknowledge that portions of Center Drive are subject to
closure after the date of this Agreement; Assignee and Assignor acknowledge and
approve this closure. Landlord represents and warrants to Assignor and Assignee
that despite the potential closure of portions of Center Drive, the Premises
shall have uninterrupted access for ingress and egress from the former Center
Drive, as proposed on the "Center Drive Parking" preliminary map dated November
17, 1992, a copy of which has been provided to Assignee, and the plan prepared
by Architectural Management dated February 4, 1993 showing possible additional
entry from the former Center Drive and ingress and egress from Grossmont Center
Drive. These changes, as delineated and outlined in red on the Architectural
Management plan would be subject to approval by the City of La Mesa and funding
by the Tenant.
9. Covenants Prior to Closing. Following the execution of this Agreement
by Assignor and until the Assignment Date occurs, Assignor shall not, without
the prior written consent of Assignee, take any action, or omit to take any
action, which will render any representation or warranty set forth in Section 7
inaccurate, and shall notify Assignee in writing, within three (3) business days
of Assignor's learning, from time to time, of any fact or circumstance which
renders any such representation or warranty inaccurate. Without limiting the
generality of the foregoing, Assignor shall not, without Assignee's prior
written consent, supplement, amend or otherwise modify the Lease or the Wheeler
Sublease, or enter into any other agreement or contract which affects the
Premises.
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<PAGE> 7
10. Amendment of Lease. As of the Assignment Date, the Lease shall be
amended by Landlord and Assignor, and Assignor's interest in the amended Lease
shall concurrently be assigned to Assignee as set forth in Section 2 of this
Agreement. As of the Assignment Date, the Lease shall be amended as follows:
(a) Extension of Lease Term. The Lease Term set forth in Section
3 of the Lease shall be extended to January 10, 2015 (which is coterminous with
the Master Lease).
(b) Rent Adjustment. The CPI limitations (5% floor and 8%
ceiling) in Section 4B of the Lease shall be eliminated, such that the rental
rate shall be adjusted to the full extent of any CPI increase for the applicable
adjustment period. To that end, Section 4B of the Lease is amended and restated,
in its entirety, as follows:
4B. Monthly Rent. Tenant shall pay to Landlord, without
abatement, deduction, or offset, monthly rent in the approximate amount of $1.98
per square foot ($15,844.63 per month for the Premises), in advance, on or
before the first day of each month. Commencing January 1, 1995, and every three
(3) years throughout the term of the Lease (the "Adjustment Date"), the rent
shall be subject to adjustment by the Consumer Price Index for All Urban
Consumers for the San Diego Metropolitan Area (1982 -1984 = 100), published by
the United States Department of Labor, Bureau of Labor Statistics (the "Index").
The base index shall be January, 1992 which is 144.7 (the "Beginning Index").
The Index which is published for each Adjustment Date shall be the "Adjustment
Index." If the Adjustment Index has increased over the Beginning Index, then
rent shall be adjusted by multiplying the monthly rent set forth in this
paragraph by a fraction, the numerator of which is the Adjustment Index and the
denominator of which is the Beginning Index. In no event shall the Monthly Rent
decrease at any time during the term of this Lease. In the event the Index is
discontinued or revised during the term, such other government index or
computation with which it is replaced shall be used in order to obtain
substantially the same result as would be involved if the Index had not been
discontinued or revised.
(c) Improvements and Alterations. In addition to the rights set
forth in Section 7 of the Lease, Tenant shall have the right to make such
improvements and alterations to the Premises as may be reasonable and necessary
to improve access, convenience and enjoyment of the Premises, subject to
Landlord's prior written consent, which shall not be unreasonably withheld.
(d) Tenant's Limited Right of First Refusal. If Landlord
determines that Landlord will build a new building generally in the area of the
Premises at 8690 Center Drive (the
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<PAGE> 8
"Site") which will necessitate Landlord's exercising its early termination
right, as specified in subparagraph 10(e), then Landlord shall be obligated to
extend to Tenant a "Limited Right of First Refusal" to occupy new premises to be
constructed by Landlord on the Site (hereinafter referred to as the "New
Building").
(i) Landlord may deliver to Tenant notice of Tenant's first right
of refusal any time between January 1, 2006, and June 30, 2007. Landlord and
Tenant shall negotiate in good faith for a period not to exceed ninety (90) days
from the date of Landlord's offer (the "Negotiation Period") to establish rental
terms for the New Building. Such terms for the New Building shall be based upon
similar terms then being offered to similarly situated tenants for comparable
premises in the Grossmont area. In the event of a dispute as to Tenant's base
rental rate for the New Building, such base rental rate for the new premises
shall be established by calculating the average of three "fair market" base
rental rates for the New Building (taking into account all relevant factors,
including but not limited to size, location, tenant improvements, rental term
and additional rent) as determined by three (3) mutually acceptable independent
appraisers. If, at the end of the Negotiation Period, Landlord and Tenant are
unable to reach an agreement on the rental terms for the New Building, Tenant's
rights under this Section 10(d)(i) shall expire, and Landlord shall have no
further obligations to Tenant under this Section 10, except for Sections
10(d)(iii) and 10(e).
(ii) If, during the Negotiation Period, Landlord and Tenant agree
on rental terms and conditions for a lease in the New Building, then Landlord
will permit Tenant to place a trailer on the Site (or nearby the Site) to be
used as a temporary premises. Such trailer site would be made available to
Tenant thirty (30) days prior to Tenant's required vacation of the existing
Premises.
(iii) If, during the Negotiation Period, Landlord and Tenant do
not agree on rental terms and conditions for a lease in the New Building and
Landlord still elects to terminate the lease, Landlord shall use reasonable
efforts to locate replacement premises as provided in Section 10(e)(i) below.
However, in the event Landlord and Tenant are unable to agree on a suitable
alternate location, Landlord shall have no further obligations to Tenant beyond
the termination compensation provided in Section 10(e)(ii).
(e) Landlord Right of Early Termination. Landlord may terminate
the Lease, upon at lease one (1) year's prior written notice (the "Early
Termination Notice") delivered to Assignee, or the then-existing tenant
("Tenant"), between January 1, 2007 and June 30, 2007. Landlord's right of early
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<PAGE> 9
termination shall apply only in the event that Tenant's improvements on the
Premises are to be demolished. In the event Landlord elects to terminate the
Lease, Landlord shall provide the following to Tenant:
(i) If Landlord and Tenant do not agree on rental terms and
conditions for a lease in the New Building, then for a period not to exceed four
(4) months from the date of Landlord's delivery of the Early Termination Notice
(the "Relocation Period"), Landlord shall use its reasonable efforts to locate
existing replacement premises for Tenant in the Grossmont area, suitable for
Tenant's business purposes. Such substitute premises shall be subject to
Tenant's approval, which shall not be unreasonably withheld. If, at the end of
the Relocation Period, Landlord is unable to locate existing replacement
premises for Tenant, Landlord shall have no further obligations to Tenant under
this Section 1(e), except for Landlord's obligation under Section 11(e)(ii).
(ii) Upon delivery of the Early Termination Notice, Landlord
shall reimburse Tenant the sum equal to 7/22 (31.818%) of Tenant's investment to
acquire the existing Leasehold Improvements (as defined in the Purchase
Agreement) from Tenant's predecessor-in-interest, plus 7/22 (31.818%) of
Tenant's improvements to the Premises during 1993 (or thereafter, in the event
Tenant's improvements are delayed for reasons beyond Tenant's control) approved
by Landlord after the date of this Agreement.
11. Conflicting Terms. Except as modified by this Agreement, the Lease
shall remain in full force and effect. In the event a conflict exists between
the terms and conditions of the Agreement and the terms and conditions of the
Lease, the terms and conditions of this Agreement shall control.
12. Further Assurances. Each party hereto shall execute, acknowledge and
deliver to each other party all documents, and shall take all actions,
reasonably required by such other party from time to time to confirm or effect
the matters set forth herein, or otherwise to carry out the purposes of this
Agreement.
13. Attorneys' Fees. In the event that any litigation shall be commenced
concerning this Agreement by any party hereto, the party prevailing in such
litigation shall be entitled to recover, in addition to such other relief as may
be granted, its reasonable costs and expenses, including without limitation
reasonable attorneys' fees and court costs, as awarded by a court of competent
jurisdiction.
14. Notices. All notices, demands, approvals and other communications
provided for in this Agreement shall be in
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<PAGE> 10
writing and be delivered to the appropriate party at its address as follows:
If to Landlord: Grossmont Land Co.
5500 Grossmont Center Drive
La Mesa, CA 91942
Attn: Thomas J. Magee
If to Assignor: BSD Service Company
225 Broadway
San Diego, California 92101
Attn: Chief Executive Officer
If to Assignee: Valle de Oro Bank, N.A.
P.O. Box 1449
9832 Campo Road
Spring Valley, California 91979
Attn: Chief Executive Officer
With a copy to: Pillsbury Madison & Sutro
101 West Broadway, Suite 1800
San Diego, California 92101
Attn: Jo Ann Taormina, Esq.
Addresses for notice may be changed from time to time by written notice to all
other parties. All communications shall be effective when actually received;
provided, however, that nonreceipt of any communication as the result of a
change of address of which the sending party was not notified or as the result
of a refusal to accept delivery shall be deemed receipt of such communication.
15. Miscellaneous. This Agreement shall bind, and shall inure to the
benefit of, the successors and assigns of the parties hereto. This Agreement may
be executed in counterparts with the same force and effect as if the parties had
executed one instrument, and each such counterpart shall constitute an original
hereof. No provision of this Agreement that is held to be inoperative,
unenforceable or invalid shall affect the remaining provisions, and to this end
all provisions hereof are hereby declared to be severable. Time is of the
essence of this Agreement. This Agreement shall be governed by the laws of the
State of California.
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<PAGE> 11
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
Landlord: GROSSMONT LAND CO., a California
limited partnership
By: Denele Co., an Illinois
limited partnership, general
partner
By: Delen Management, an
Illinois Corporation,
general partner
By: /s/
------------------------
Its:
------------------------
Assignor: BSD SERVICE COMPANY, a California
corporation
By: /s/ MARILYN K. CRESON
----------------------------------
Marilyn K. Creson
Its: Chief Financial Officer
Assignee: VALLE DE ORO BANK, N.A. a national
banking association
By: /s/ WILLIAM V. EHLEN
----------------------------------
William V. Ehlen
Its: President and Chief
Executive Officer
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<PAGE> 12
LEASE
Between
GROSSMONT LAND CO., A California Limited Partnership
And
BSD SERVICE COMPANY, A California Corporation
Dated: August 6, 1982
EXHIBIT A
<PAGE> 13
Lease between GROSSMONT LAND CO., a California Limited Partnership
(Landlord) and BSD SERVICE COMPANY, a California Corporation (Tenant).
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C> <C>
1. PARTIES ....................................................1
2. PREMISES ...................................................1
A. Description.......................................1
B. Lease of Premises.................................1
C. Limited Option....................................1
3. TERM ..................................................2
4. RENT AND OTHER CONSIDERATION................................2
A. Lease Consideration...............................2
B. Monthly Rent......................................2
C. Net Lease.........................................3
D. Other Consideration and Conditions................3
5. TAXES AND ASSESSMENTS ......................................3
A. Personal Property Taxes ..........................3
B. Real Property Taxes ..............................3
C. Tax Impound ......................................4
D. New Assessments ..................................4
E. Tenant's Right to Contest Real
Property Taxes ...................................4
F. Substitute or Additional Taxes ...................5
</TABLE>
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<TABLE>
<CAPTION>
Paqe
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<S> <C> <C>
6. USE..................................................................5
A. Limits on Use.................................................5
B. Exclusive Use.................................................6
7. IMPROVEMENTS, ALTERATIONS AND ADDITIONS............................6
A. In General....................................................6
B. Mechanic's Liens and Lien Release Bond........................6
8. COMMON AREA........................................................6
A. Definition....................................................6
B. Maintenance...................................................7
C. Costs.........................................................7
9. MAINTENANCE........................................................8
10. UTILITIES AND SERVICES.............................................8
11. INDEMNITY, EXCULPATION AND INSURANCE...............................9
A. Assumption of Risk............................................9
B. Indemnity.....................................................9
C. Liability and Property Damage Insurance......................10
D. Personal Property Insurance..................................10
E. Worker's Compensation Insurance..............................10
F. General Insurance Provisions.................................10
G. Landlord's Insurance.........................................11
H. Waiver of Subrogation........................................11
12. DESTRUCTION.......................................................12
13. CONDEMNATION......................................................13
A. Definitions..................................................13
</TABLE>
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<PAGE> 15
<TABLE>
<CAPTION>
Paqe
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<S> <C> <C>
B. Total Taking...........................................13
C. Partial Taking.........................................13
D. Award..................................................14
E. Temporary Taking.......................................15
F. Taking in Final Year...................................15
14. DEFAULT.......................................................15
15. REMEDIES OF LANDLORD..........................................16
16. ASSIGNMENT....................................................19
17. ENTRY BY LANDLORD DURING THE TERM
OF THE LEASE..................................................20
18. SUBORDINATION.................................................21
19. NOTICES.......................................................21
20. RECORDATION OF MEMORANDUM OF LEASE............................22
21. SUCCESSORS....................................................22
22. EXPIRATION, TERMINATION AND HOLDING OVER......................22
23. ARBITRATION...................................................23
24. LIMITED RIGHT OF FIRST REFUSAL................................23
A. Notice..................................................23
B. Negotiation.............................................24
C. First Refusal Rights....................................24
D. Termination of this Lease...............................24
25. MISCELLANEOUS PROVISIONS......................................25
A. Counterparts............................................25
B. Time of the Essence.....................................25
C. Authority...............................................25
</TABLE>
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<TABLE>
<CAPTION>
Page
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<S> <C> <C>
D. Estoppel Certificates..........................................25
E. Applicable Law.................................................25
F. Prior Agreements and Modification..............................25
G. Sale of Premises by Landlord...................................25
H. Captions, Table of Contents, Headings
and Marginal Headings..........................................26
I. Attorneys' Fees................................................26
J. Provisions are Covenants and Conditions........................26
K. Severability...................................................26
L. Non-Merger of Fee and Leasehold Estates........................26
M. Rent Payable in United States Currency.........................26
N. Sublease.......................................................26
</TABLE>
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<PAGE> 17
LEASE
1. PARTIES
This Lease, is made and entered into by and between GROSSMONT LAND CO., a
California limited partnership (hereinafter referred to as "Landlord") and BSD
California corporation (hereinafter referred to as "Tenant") , effective August
6, 1982.
2. PREMISES
A. Description. This lease is made with respect to certain real
property located at 8690 Center Drive, La Mesa, California 92041, as depicted on
Exhibit "A", attached hereto and incorporated herein by this reference. Said
real property consists of three (3) separate parcels, depicted on Exhibit "A",
and hereinafter respectively referred to as "Parcel 1", "Parcel 2", and "Parcel
3". This lease provides that tenant is leasing Parcel 1 and Parcel 2, commencing
on different dates, and that Tenant has a limited option to lease Parcel 3. As
used hereinafter, the term "Premises" refers to the parcel(s) tenant is leasing
at the applicable time.
B. Lease of Premises. Landlord does hereby lease to Tenant, and
Tenant hereby leases from Landlord, Parcel 1 and Parcel 2, as well as any
drive-up facility constructed by Tenant pursuant to Paragraph 7 of this Lease.
Said Premises are hired, demised and leased to Tenant from Landlord in an
"as-is" condition with respect to compliance with statutes, ordinances, rules,
regulations, zoning variances and/or conditional use permits applicable to the
Premises. Tenant hereby accepts the building and improvements on the Premises in
their existing condition. No representation, statement or warranty, express or
implied, has been made by or on behalf of Landlord as to the condition or as to
the use that may be made of the Premises. In no event shall Landlord be liable
for any defect in the Premises or for any limitation on its use which may be
imposed by statute, ordinance, regulation, economic condition or otherwise.
C. Limited Option. Parcel 3 will be available for lease on August
1, 1983. Landlord hereby grants Tenant the limited option to lease all of Parcel
3 as of August 1,1983, at the monthly rent of $1.25 per square foot, with cost
of living adjustments pursuant to the provisions of Paragraph 4.B. below, and on
all of the same terms and conditions contained in this Lease. Tenant shall
exercise this limited option by giving written notice of exercise to Landlord on
or before January 31, 1983; provided that if Tenant is in default hereunder on
the date
<PAGE> 18
of giving the notice of exercise of option, or on August 1, 1983, the exercise
will be ineffective and this option will be void. If effective notice of
exercise of option is not delivered on or before January 31, 1983, this option
shall automatically terminate. Tenant may not exercise this option for less than
the entire Parcel 3.
3. TERM
The term of this Lease shall commence on November 15, 1982, as to Parcel
1, and as to Parcel 2, upon termination of the existing lease of Parcel 2 to
Prudential Insurance Company of America, but in no event later than August 1,
1983. This lease shall terminate on December 31, 1999 as to the entire Premises.
4. RENT AND OTHER CONSIDERATION
A. Lease Consideration. Upon execution hereof, Tenant shall pay
Landlord the sum of $5,000.00 as consideration for entering into this Lease.
This payment is non-refundable and shall not be applied to any future rents
payable hereunder.
B. Monthly Rent. Commencing November 15, 1982, Tenant shall pay
to Landlord, without abatement, deduction, or offset, monthly rent in the amount
of $1.25 per square foot ($1,065.31 per month for Parcel 1), in advance, on or
before the first day of each month, with the first month's rent prorated.
Commencing August 1, 1983, the rent shall be adjusted to the sum of $6,618.44
per month to reflect the addition of Parcel 2 to the Premises. If Tenant
exercises the option described in Paragraph 2.C. above, the monthly rent shall
be adjusted to reflect the increased square footage of the Premises. Commencing
January 1, 1986, and every three (3) years thereafter, the rent shall be subject
to adjustment as follows:
The base for computing the adjustment is the Consumer Price Index for
Urban Wage Earners and Clerical Workers - All Items for San Diego,
California, published by the United States Department of Labor, Bureau
of Labor Statistics (the "Index"), which is published for May, 1982
(the "Beginning Index"). If the latest published Index ("Adjustment
Index") before the adjustment date has increased over the Beginning
Index, the monthly rent shall be set by multiplying the monthly, rent
set forth in this Paragraph 4.B. by a fraction, the numerator of which
is the Adjustment Index and the denominator of which is the Beginning
Index. No adjustment to the monthly rent shall be less than five
percent (5%) per year (compounded) nor more than eight
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<PAGE> 19
percent (8%) per year (compounded). If the Index is changed so that the
base year differs from that used as of May, 1982, the Index shall be
converted in accordance with the conversion factor published by the
United States Department of Labor, Bureau of Labor Statistics. In the
event the Index is discontinued or revised during the term, such other
government index or computation with which it is replaced shall be used
in order to obtain substantially the same result as would be involved if
the Index had not been discontinued or revised.
C. Net Lease. It is the intention of the parties that this be a net
lease, and that all costs of maintenance, taxes and insurance be borne by Tenant
in addition to the rent stated herein.
D. Other Consideration and Conditions. This Lease is subject to the
terms, covenants and conditions herein set forth. Tenant covenants as a material
part of the consideration for this Lease to keep and perform each and all of
said terms, covenants and conditions by it to be kept and performed, and this
Lease is made upon the condition of said performance.
5. TAXES AND ASSESSMENTS
A. Personal Property Taxes. Tenant shall pay before delinquency all
taxes, assessments, license fees, and other charges that are levied and assessed
against Tenant's personal property installed or located in or on the Premises,
and that become payable during the term of the Lease. On demand by Landlord,
Tenant shall furnish Landlord with satisfactory evidence of these payments. If
any taxes on Tenant's personal property are levied against Landlord or
Landlord's property, or if the assessed value of the building and other
improvements in which the Premises are located is increased by the inclusion of
a value placed on Tenant's personal property, and if Landlord pays the taxes on
any of these items or the taxes based on the increased assessment of these
items, Tenant, on demand, shall immediately reimburse Landlord for the sum of
the taxes levied against Landlord, or the proportion of the taxes resulting from
the increase in Landlord's assessment. Landlord shall have the right to pay
these taxes regardless of the validity of the levy.
B. Real Property Taxes. Tenant hereby agrees to pay its
proportionate share of all real property taxes, general and special assessments,
and other charges of every description levied on or assessed against the
Premises, improvements located on the Premises, the Common Area (defined in
Paragraph 8 below), the leasehold estate, or any subleasehold estate, to the
full
- 3 -
<PAGE> 20
extent of the installments falling due during the term of this Lease. Tenant's
proportionate share shall be the ratio of such taxes that the total number of
square feet in the Premises bears to the total number of leaseable square feet
in the building in which the Premises are located (hereinafter referred to as
the "Proportionate Share"), which is initially 66.31 percent and which is
subject to recalculation as necessary. At such time as Tenant leases all of
Parcel 1, Parcel 2 and Parcel 3, Tenant's Proportionate Share shall be 100%.
Landlord shall notify Tenant of Landlord's calculation of Tenant's
Proportionate Share of the real property taxes and together with such notice
shall furnish Tenant with a copy of the tax bill. Tenant shall pay its
Proportionate Share of the real property taxes semi-annually not later than
ten (10) days before the taxing authority's delinquent date, or ten (10) days
after receipt of the tax bill, whichever is later. As of such time as Tenant's
Proportionate Share is 100%, Tenant shall make all payments hereunder directly
to the charging governmental authority at least ten (10) days before the
taxing authority's delinquency date. All payments of taxes and other charges
pursuant to this paragraph shall be prorated for the initial lease year and
for the year in which this Lease terminates.
C. Tax Impound. If Landlord's lender required Landlord to
impound real property taxes on a periodic basis during the term, Tenant, on
notice from Landlord, shall pay its Proportionate Share of the real property
taxes to Landlord on a periodic basis in accordance with the lender's
requirements. Landlord shall impound the tax payments received from Tenant in
accordance with the requirements of the lender.
D. New Assessments. If any general or special assessment is
levied or assessed against the building, or other improvements, or land of
which the Premises and Common Area are a part, Landlord can elect to either
pay the assessment in full or allow the assessment to go to bond. If Landlord
pays the assessment in full, Tenant shall pay to Landlord each time a payment
of real property taxes is made a sum equal to that which would have been
payable (as both principal and interest) had Landlord allowed the assessment
to go to bond.
E. Tenant's Right to Contest Real Property Taxes. Tenant shall at
its own cost have the right to seek a reduction in the assessed valuation of
the land and improvements of which the Premises and Common Area are a part, or
any portion thereof, or to contest the legal validity or amount of any real
property taxes, assessments, or charges that are to be paid by Tenant under
the provisions of this Lease, and may institute such proceedings as Tenant
considers necessary. Landlord shall not be required to join in any proceedings
or contest brought by Tenant unless the provisions of any law require that the
proceeding or
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<PAGE> 21
contest be brought by or in the name of the Landlord, or any owner of the
Premises. In that case, Landlord shall join in the proceeding or contest or
permit it to be brought in Landlord's name, so long as Landlord is not
required to bear any cost. Tenant shall furnish to Landlord a surety bond,
cash deposit, or other security reasonably satisfactory to Landlord, in an
amount equal to one hundred twenty-five percent (125%) of the total amount of
real property taxes in dispute. The bond shall hold Landlord and the Premises
harmless from any damage arising out of the proceedings or contest and shall
insure the payment of any judgment that may be rendered. In the event the
building, other improvements, or land of which the Premises and Common Area
are a part is in immediate danger of being forfeited or sold because of
non-payment of any levy or assessment, Landlord may require immediate payment
from Tenant.
F. Substitute or Additional Taxes. If at any time during the
term of this Lease the law concerning the methods of real property taxation
prevailing at the commencement of the term hereof are changed so that a tax or
excise on rent or any other such tax, however described, is levied or assessed
against Landlord as a direct substitution in whole or in part for any real
property taxes, or in addition thereto, Tenant shall pay before delinquency
the substitute or additional tax or excise on rents. Tenant shall not,
however, be required to pay any municipal, county, state or federal income or
franchise taxes of Landlord, or any municipal, county, state or federal
estate, succession, inheritance or transfer taxes of Landlord.
6. USE
A. Limits on Use. Tenant hereby agrees to use the Premises for
any lawful activity of a branch bank or bank holding company and for no other
business. In its use of the Premises, Tenant shall comply with all laws,
statutes, ordinances, governmental rules and/or regulations, conditional use
permits, zoning variances and the like, now in force or which may hereinafter
be enacted, promulgated and/or granted with respect to the Premises and the
banking business, including but not limited to laws, statutes, ordinances,
rules or regulations pertaining to exterior signs. Further, Tenant shall bear
the entire cost and all expenses necessary to alter, maintain and/or restore
the Premises so as to remain in compliance and conformity with the laws
relating to the condition, use and/or occupancy of the Premises during the
term. Tenant shall not use the Premises nor permit any use of the Premises
which in any manner will cause or constitute waste, nuisance or unreasonable
annoyance to owners or occupants of adjacent properties. Tenant shall not do,
bring, keep or permit anything in or about the Premises that will cause a
cancellation of any insurance covering the Premises. Tenant
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shall keep the Premises under its control, including sidewalks adjacent to the
Premises and loading areas allocated for the use of Tenant, clean and free from
rubbish and dirt at all times.
B. Exclusive Use. Tenant shall have the right to control the
use of and access to the Premises at all hours of the day and night, except as
limited by Paragraph 17 of this Lease.
7. IMPROVEMENTS, ALTERATIONS AND ADDITIONS
A. In General. Tenant shall neither make nor permit any
destruction, alteration, improvement and/or addition to the Premises without the
consent of Landlord (which consent shall not be unreasonably withheld). Landlord
hereby consents to the initial remodeling of the interior and exterior of the
building of which the Premises are a part, including the construction of a
drive-up banking facility, provided that the plans shall be subject to
Landlord's reasonable approval and the approval of such governmental agencies as
are required by law. If any alterations, improvements and/or additions are
approved by Landlord during the term of this Lease, including the initial
remodeling, construction shall not commence until five (5) days after Landlord
has received written notice from Tenant stating the date that the installation
of such alterations, improvements and/or additions is to commence so that
Landlord can post and record an appropriate notice of nonresponsibility. Tenant
shall pay all costs for construction done by it or permitted by it to be done on
the Premises (as permitted by this Lease).
B. Mechanic's Liens and Lien Release Bond. Tenant shall keep the
Premises free and clear of all mechanic's liens resulting from construction done
by or for the Tenant or with the permission of Tenant. Tenant shall have the
right to test the correctness or the validity of any such lien if, immediately
on demand by Landlord, Tenant procures and records a lien release bond issued by
a corporation authorized to issue surety bonds in the State of California in an
amount equal to one and one-half (1 and 1/2) times the amount of the claim of
lien. The bond shall meet the requirements of Civil Code Section 3143 and shall
provide for the payment of any sum that the claimant may recover on the claim
(together with costs of suit, if any, if it recovers in the action).
8. COMMON AREA
A. Definition. The term Common Area means the area exterior
to the building in which the Premises are located which is denoted as Common
Area on Exhibit "A", including landscaping and parking area. Landlord gives to
Tenant and its authorized
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representatives and invitees the non-exclusive right to use the Common Area,
subject to Landlord's rights set forth in the following paragraph.
B. Maintenance. So long as Tenant is leasing fewer than all of
Parcel 1, Parcel 2 and Parcel 3, Landlord shall maintain the Common Area in
good condition, and shall have the right to:
(1) Close any of the Common Area to whatever extent required in
the opinion of Landlord's counsel to prevent a dedication of any of the
Common Area or the accrual of any rights of any person or of the public
to the Common Area;
(2) Close temporarily any of the Common Area for maintenance
purposes;
(3) Select a person to maintain and operate any of the Common
Area; and
(4) Make changes to the Common Area including, without
limitation, changes in the location of driveways, entrances, exits,
vehicular parking spaces, and direction of the flow of traffic. Tenant
shall have the right to reasonably approve any such changes.
As of such time as Tenant is leasing all of Parcel 1, Parcel 2 and
Parcel 3, Tenant shall assume direct responsibility for Common Area
maintenance, and shall make direct payment of all expenses thereby incurred.
C. Costs. Unless Tenant has assumed direct responsibility for
Common Area maintenance pursuant to Subparagraph B above, Tenant shall pay to
Landlord an amount estimated by Landlord to be Tenant's Proportionate Share of
Common Area costs on the first day of each month, commencing on the date the
term commences, and continuing during the term. Landlord can adjust the
monthly Common Area charges at the end of each quarter of the accounting
period on the basis of Landlord's reasonably anticipated costs for the
following accounting period. An accounting period is a calendar year except
that the first accounting period shall commence on the date the term commences
and the last accounting period shall end on the date the term expires or
terminates. Landlord shall furnish to Tenant a reasonably detailed statement
showing the total Common Area costs, Tenant's Proportionate Share of Common
Area costs for the accounting period, and the payments made by Tenant with
respect to each accounting period, within thirty (30) days after the end of
each accounting period, covering the accounting period just ended. Each
statement shall be prepared, signed, and certified
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to be correct by Landlord. Tenant shall have the right to audit each such
statement. If Tenant's share of Common Area costs for the accounting period
exceeds the payments made by Tenant, Tenant shall pay Landlord the deficiency
within ten (10) days after receipt of the statement. If Tenant's payments made
during the accounting period exceed Tenant's share of Common Area costs,
Landlord shall credit the excess against future payments by Tenant for Common
Area costs. Common area costs means all sums expended by Landlord for the
maintenance and operation of the Common Areas, and an allowance to Landlord for
Landlord's supervision of maintenance and operation in the Common Areas in an
amount equal to ten percent (10%) of the total Common Area costs.
9. MAINTENANCE
Tenant, at its sole cost, shall maintain the Premises in good condition,
including but not limited to windows, all heating, ventilating and
air-conditioning systems, and all electrical, lighting, and plumbing systems,
and shall deliver the same and surrender them to Landlord at the end of the term
hereof in the same condition as received at the commencement of this Lease, or
in such better condition as later improved, less the effects of normal wear and
tear. Landlord shall not have any responsibility to maintain the Premises or any
part thereof. Tenant hereby waives the provisions of California Civil Code
Sections 1941 and 1942 (with respect to Landlord's obligations for habitability
of the Premises and Tenant's right to make repairs and deduct the expenses of
such repairs from payments of rent due). Landlord shall maintain the exterior
and roof of the building, and Tenant shall reimburse Landlord its Proportionate
Share of the costs of such maintenance with ten (10) days after receipt of a
statement of such costs from Landlord. As of such time as Tenant is leasing all
of Parcel 1, Parcel 2 and Parcel 3, Tenant shall assume direct responsibility
for maintenance of the exterior and roof of the building, and shall make direct
payments of all expenses thereby incurred.
10. UTILITIES AND SERVICES
Tenant shall, at its sole cost and expense, make all arrangements for and
pay for all charges for utilities and services furnished to it or used by it and
any subtenants, including, without limitation, gas, electricity, water,
telephone service and trash collection. Tenant shall reimburse Landlord on a
monthly basis for Tenant's Proportionate Share of the costs of refuse disposal
and any other services furnished by Landlord, within ten (10) days after Tenant
receives an invoice from Landlord. Landlord shall not be liable for failure to
furnish
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refuse disposal or other services furnished by Landlord to the Premises when the
failure results from causes beyond Landlord's reasonable control, but in case of
the failure, Landlord will take all reasonable steps to restore the interrupted
disposal service. As of such time as Tenant is leasing all of Parcel 1, Parcel 2
and Parcel 3, Landlord shall no longer be responsible for furnishing any
services to Tenant, and Tenant shall arrange for and pay all charges for refuse
disposal and any other services previously furnished by Landlord.
11. INDEMNITY, EXCULPATION AND INSURANCE
A. Assumption of Risk. Tenant, as a material part of the
consideration to Landlord, hereby assumes all risk of damage to property or
injury to persons in, upon or about the Premises from any cause other than
Landlord's active negligence or omissions of Landlord's agents or employees, and
Tenant hereby waives all claims against Landlord in respect thereof. Landlord,
including its employees and agents, shall not be liable for any injury or damage
to persons or property within or around the Premises during the term of this
Lease, including agents, officers and employees of Tenant or their property, for
any cause whatsoever, including, without limitation, fire, explosion, falling
plaster, steam, gas, electricity, water or rain which may leak from any part of
the building or from the pipes, appliance or plumbing works therein, or from the
roof, street or subsurface or from any other place resulting from dampness or
any other cause whatsoever, unless caused by the active negligence or omission
of Landlord, its agents, servants or employees. Further, Landlord, its agents
and employees shall not be liable for interference with the light or other
incorporeal hereditaments or loss of business by Tenant, nor shall Landlord be
responsible for any latent defect in the Premises. Tenant shall give prompt
notice to Landlord in the case of fire or accidents or of defects within the
Premises or the fixtures or equipment therein.
B. Indemnity. Tenant hereby agrees to indemnify and hold Landlord
harmless against and from any and all claims arising from Tenant's use of the
Premises for the conduct of its business or from any activity, work or other
thing done, permitted or suffered by Tenant on or about the Premises except for
acts or omissions of Landlord, and shall further indemnify and hold harmless
Landlord against and from any and all claims arising from any breach or default
in the performance of any obligation on Tenant's part to be performed under the
terms of this Lease or arising from any act or negligence of Tenant or any
officer, agent, employee, guest or invitee of Tenant, and from and against all
cost, attorneys fees, expenses and liabilities incurred in or about any such
claim or any action or proceeding brought thereon; and if any case, action or
proceeding be brought
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against Landlord by reason of any such claim, Tenant, upon notice from
Landlord, shall defend the same at Tenant's expense by counsel reasonably
satisfactory to Landlord.
C. Liability and Property Damage Insurance. Tenant, at its sole
cost and expense, shall purchase and maintain public liability and property
damage insurance with limits of not less than $1,000,000 for injury to or
death of one or more persons and/or property damage arising out of a single
accident or occurrence, insuring against all liability of Landlord, Tenant,
its subtenants and its authorized representatives, arising out of and in
connection with Tenant's use and/or occupancy of the Premises, including the
use and/or occupancy of subtenants. All public liability insurance and
property damage insurance shall insure the performance of Tenant of the
indemnity provisions set forth hereinabove in this paragraph. Further, in all
such insurance required to be purchased and maintained by Tenant, Landlord and
Landlord's lender, if any, shall be named as co-insureds, and the policy shall
contain cross-liability endorsements. Not more frequently than every three (3)
years, if, in the opinion of Landlord's lender or insurance broker, the amount
of public liability and property damage insurance is inadequate, Tenant shall
increase such coverage as required by Landlord's lender or insurance broker.
D. Personal Property Insurance. Tenant, at its sole cost and
expense, shall maintain on all its personal property, Tenant improvements and
alterations, in, on, or about the Premises, a policy of standard fire and
extended coverage insurance with vandalism and malicious mischief endorsements
to the extent of at least one hundred percent (100%) of their full replacement
value. The proceeds from any such policy shall be used by Tenant for the
replacement of personal property or the restoration of Tenant's improvements
or alterations. Tenant may, at its cost, maintain full coverage plate glass
insurance on the Premises; provided, however, that whether or not Tenant
maintains such insurance, all glass is maintained at Tenant's risk.
E. Worker's Compensation Insurance. Tenant further agrees to
purchase and maintain in full force and effect such policies of worker's
compensation insurance as may be required to cover any employee of Tenant
during the term of this Lease in form and amount acceptable to Landlord.
F. General Insurance Provisions. All insurance required under
this Lease shall be issued by insurance companies authorized and licensed to
do business in the State of California with a financial rating of at least A+X
status as rated in the most recent of Best's Insurance Reports; be issued as a
primary coverage policy and non-contributing with any insurance which may be
carried by Landlord; contain an endorsement requiring thirty
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(30) days' written notice from the insurance company to both parties and the
Landlord's lender, if any, before cancellation or change in the coverage, scope
or amount of any policy. Tenant shall use its best efforts to deposit each
policy or certificate thereof, together with evidence of payment of each premium
as it becomes due, with Landlord at the commencement of the term and on renewal
of the policy not less than twenty (20) days before expiration of the term of
each such policy.
G. Landlord's Insurance. Landlord shall maintain on the building
and other improvements in which the Premises are located a policy of standard
fire and extended coverage insurance, with vandalism and malicious mischief
endorsements. Tenant shall reimburse Landlord for Tenant's Proportionate Share
of the premiums paid by Landlord for maintaining such insurance within ten (10)
days after Tenant receives a copy of the premium notice. If Landlord's lender
requires Landlord to impound insurance premiums on a periodic basis during the
term, tenant, on notice from Landlord, shall pay a sum of money towards its
liability under this paragraph to Landlord on a periodic basis in accordance
with the lender's requirements. Landlord shall impound the insurance premiums
received from Tenant in accordance with the requirements of the lender.
H. Waiver of Subrogation The parties release each other, and their
respective authorized representatives, from any claims for damage to any person
or to the Premises and the building and other improvements in which the Premises
are located, and to the fixtures, personal property, Tenant's improvements, and
alterations of either Landlord or Tenant in or on the Premises and the building
and other improvements in which the Premises are located that are caused by or
result from risks insured against under any insurance policies carried by the
parties and in force at the time of any such damage. Each party shall cause each
insurance policy obtained by it to provide that the insurance company waives all
right of recovery by way of subrogation against either party in connection with
any damage covered by any policy. Neither party shall be liable to the other for
any damage caused by fire or any of the risks insured against under any
insurance policy required by this Lease. If any insurance policy cannot be
obtained with a waiver of subrogation, or is obtainable only by the payment of
an additional premium charge above that charged by insurance companies issuing
policies without waiver of subrogation, the party undertaking to obtain the
insurance shall notify the other party of this fact. The other party shall have
a period of ten (10) days after receiving the notice either to place the
insurance with a company that is reasonably satisfactory to the other party and
that will carry the insurance with waiver of subrogation, or to agree to pay the
additional premium if such a policy is obtainable at additional cost. If the
insurance cannot
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be obtained or the party in whose favor a waiver of subrogation is desired
refuses to pay the additional premium charged, the other party is relieved of
the obligation to obtain a waiver of subrogation rights with respect to the
particular insurance involved.
12. DESTRUCTION
If, during the term of this Lease, the Premises or the building and
other improvements in which the Premises are located are totally or partially
destroyed from any cause, rendering the Premises totally or
practically inaccessible or unusable, Landlord shall restore the Premises or the
building and other improvements in which the Premises are located to
substantially the same condition as they were in immediately before destruction,
if the restoration can be made under the existing laws and can be completed
within one hundred eighty (180) working days after the date of the destruction.
Such destruction shall not terminate this Lease. If the restoration cannot be
made in the time stated in this paragraph, then within fifteen (15) days after
the parties determine that the restoration cannot be made in the time stated in
this paragraph, Tenant can terminate this Lease immediately by giving notice to
Landlord. If Tenant fails to terminate this Lease and if restoration is
permitted under the existing laws, Landlord, at its election, can either
terminate this Lease or restore the Premises or the building and other
improvements in which the Premises are located within a reasonable time and this
Lease shall continue in full force and effect. If the existing laws do not
permit the restoration, either party can terminate this Lease immediately by
giving notice to the other party.
If there is destruction of the building and other improvements in which
the Premises are located that exceeds thirty-three and one-third percent
(33 1/3%) of the then replacement value of the building and other improvements
from any cause, Landlord can elect to terminate this Lease whether or not the
Premises are rendered inaccessible or unusable, as long as Landlord terminates
the lease of the other tenant in the building.
In case of destruction there shall be an abatement or reduction of rent
between the date of destruction and the date of completion of restoration, based
on the extent to which the destruction interferes with Tenant's use of the
Premises, provided that Landlord shall be entitled to the proceeds of the
business interruption insurance required under Paragraph 11 (eleven), F. If
destruction to the Premises occurs during the last year of the term, Landlord
can terminate this Lease by giving notice to Tenant not more than fifteen (15)
days after the
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destruction. Tenant waives the provisions of Civil Code Section 1932(2) and
Civil Code Section 1933(4) with respect to any destruction of the Premises.
13. CONDEMNATION
If during the term of this Lease there is any taking of all or any part
of the Premises or any interest in this Lease by condemnation, the rights and
obligations of the parties shall be determined pursuant to this paragraph.
A. Definitions. For purposes of this paragraph, the following
definitions shall apply:
(1) "Condemnation" means (a) the exercise of any
governmental power, whether by legal proceedings or otherwise by a condemnor,
and (b) a voluntary sale or transfer by Landlord to any condemnor, either under
threat of condemnation or while legal proceedings for condemnation are pending.
(2) "Date of taking" means the date the condemnor has
the right to possession of the property being condemned.
(3) "Award" means all compensation, sums or anything
of value awarded, paid or received on a total or partial condemnation, less
attorneys fees and legal costs incurred in obtaining such award.
(4) "Condemnor" means any public or quasi-public
authority or private corporation or individual, having the power of eminent
domain.
B. Total Taking. If the Premises are totally taken by
condemnation, this Lease shall terminate as of the date of taking.
C. Partial Taking. If any portion of the Premises is taken by
condemnation, this Lease shall remain in effect, except Tenant can elect to
terminate this Lease if the taking is substantial; that is, if the remaining
portion of the Premises is rendered unsuitable for Tenant's continued use of the
Premises. Landlord shall notify Tenant that there is going to be a taking within
a reasonable time after receipt of service of summons and complaint. If Tenant
elects to terminate this Lease, Tenant must exercise its right to terminate
pursuant to this paragraph by giving written notice to Landlord within thirty
(30) days after receipt of notice of the taking. If Tenant elects to terminate
this Lease as provided in this paragraph, Tenant shall also notify Landlord of
the date of termination, which date shall not be earlier than thirty (30) days
following receipt of written
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notice nor later than sixty (60) days after receipt of such written notice by
Landlord. Except that this Lease shall terminate on the date of taking, if the
date of taking falls on a date before the date of termination as designated by
Tenant. If Tenant does not terminate this Lease within said 30-day period, this
Lease shall continue in full force and effect, except that monthly rent shall be
reduced pursuant to this paragraph.
If any portion of the Premises is taken by condemnation, and this Lease
remains in full force and effect, on the date of taking, monthly rent shall be
reduced by an amount that is in the same ratio to rent as the value of the area
of the portion of the Premises taken bears to the total value of the Premises
immediately before the date of the taking.
If within thirty (30) days after the date that the nature and extent of
the taking are finally determined Landlord notifies Tenant that Landlord, at its
cost, will add on to the remaining Premises so that the area and the approximate
layout of the Premises will be substantially the same after the date of taking
as they were before the date of taking, and Landlord commences the restoration
immediately and completes the restoration within one hundred twenty (120) days
after Landlord notifies Tenant, then the Lease shall not be subject to
termination by Tenant and shall continue in full force and effect. Rent shall be
abated or reduced during the period from the date of taking until the completion
of restoration based upon the extent to which the restoration interferes with
Tenant's use of the Premises; and, after completion of restoration, rent shall
be restored to precondemnation levels.
Notwithstanding any other provision contained in this paragraph,
Landlord shall not be responsible or obligated to, in the course of any
restoration work hereunder, replace or repair any Tenant improvements, fixtures
and/or equipment of Tenant or any subtenant.
Both Landlord and Tenant hereby waive the provisions of Code of Civil
Procedure Section 1265.130, which allow either party to petition the Superior
Court to terminate this Lease in the event of a partial taking of the Premises.
D. Award. Any award made pursuant to any condemnation of all or
part of the Premises shall belong to and be paid to Landlord. However, Tenant
shall receive from the award the following: A sum equal to the reasonable value
of Tenant's improvements or alterations made to the Premises by Tenant during
and in accordance with this Lease which Tenant has the right to remove from the
Premises but elects not to remove; or, if Tenant elects to remove such Tenant
improvements or alterations, a sum equal to the reasonable removable and
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relocation costs not to exceed the reasonable value of such improvements or
alterations less allowed or allowable depreciation.
E. Temporary Taking. The taking of the Premises or any part of the
Premises on a temporary basis shall be a taking of the Premises by condemnation
pursuant to this paragraph only when the use and occupancy by the condemnor has
continued for longer than one hundred eighty (180) consecutive days. During such
180-day period, all the provisions of this Lease shall remain in full force and
effect, except that rent shall be abated or reduced during such period of taking
based on the extent to which the taking interferes with Tenant's use of the
Premises, and Landlord shall be entitled to whatever award may be paid for the
use and occupation of the Premises for the period involved without any payment
at all to Tenant therefor.
F. Taking in Final Year. Any condemnation of the Premises or any
part thereof during the final year of this Lease shall, in the case of a
complete taking, terminate the Lease, notwithstanding any other provisions of
this paragraph and, in the case of a partial taking, shall merely abate the
amount of rent paid pursuant to the provisions above of this paragraph with no
obligation on the part of either Landlord or Tenant to restore the Premises.
Tenant shall receive no part whatsoever of any award from such a condemnation
during the final year of the term.
14. DEFAULT
The occurrence of any one or more of the following events shall
constitute a default and breach of this Lease:
A. Abandonment, vacating or surrender of the Premises or of the
leasehold estate by Tenant.
B. Failure by Tenant to make any payment of rent or any other
payment required to be made by Tenant hereunder as and when due if such failure
continues for a period of ten (10) days after the giving of written notice
thereof by Landlord to Tenant.
C. The failure or refusal of Tenant to perform, as required or
conditioned, any covenant or condition of this Lease deemed to be substantive
and material.
D. The subjection of any right or interest of Tenant in the
Premises, or any subtenant, to attachment, execution or other levy, or seizure
under legal process, if not released within thirty (30) days.
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E. The appointment of a receiver and/or trustee to take possession
of the Premises or improvements either of Tenant or any subtenant, or of
Tenant's interest in the leasehold estate, or of Tenant's operations on the
Premises for any reason, including but not limited to, assignment for the
benefit of creditors, voluntary or involuntary proceedings commenced by or
against Tenant under the bankruptcy laws of the United States of America as the
same shall exist now or may be amended or modified in the future during the term
of this Lease. Included, without limitation, within the reference to a
proceeding commenced under the United States Bankruptcy Law, are all proceedings
for the purpose of adjudicating Tenant a bankrupt, for extending time of payment
adjustment or satisfaction of Tenant's liabilities to its creditors and/or for
reorganization, dissolution or arrangement on account of or to prevent a
bankruptcy or insolvency.
F. Any attempted assignment and/or sublease by Tenant of all or
any portion of the demised Premises to a third party without prior written
consent of Landlord.
G. Failure of Tenant to comply with any law, statute, ordinance,
rule or regulation pertaining to exterior signs on or adjacent to the Premises
or Common Area.
As a precondition to pursuing any remedy for an alleged default by
Tenant, Landlord shall give written notice of default to Tenant, which shall
specify the alleged event of default and the required remedy therefor.
Tenant shall have the right to cure defaults hereunder and be relieved
from the effects thereof if, in the case of a monetary default, Tenant remedies
such default by making the required payment(s) within fifteen (15) days of the
giving of notice by Landlord in writing, and in the case of non-monetary
defaults cures the default within thirty (30) days after the giving of notice by
Landlord, or such other time as is reasonable.
15. REMEDIES OF LANDLORD
If any default by Tenant continues uncured following notice of default
as required by the foregoing paragraph of this Lease and is not cured within the
grace period provided in said paragraph, Landlord shall have the following
remedies in addition to all other rights and remedies provided by law or equity
to which Landlord may resort, cumulatively or in the alternative:
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A. After expiration of the applicable time for curing a particular
default, or before the expiration of that time in the event of emergency,
Landlord may, at Landlord's election, but is not obligated to do so, make any
payment required of Tenant under this Lease or under any note or other document
pertaining to the financing of improvements or fixtures on the Premises, or
perform or comply with any covenant or condition imposed on Tenant under this
Lease or any such note or document, and the amount so paid plus the reasonable
cost of any performance or compliance (including without limitation attorneys
fees and costs actually paid by Landlord), plus interest at the rate of ten per
cent (10%) per annum from the date of payment, performance or compliance shall
be deemed to be added to and become additional rent payable by Tenant with the
next succeeding installment of rent. No such act shall constitute a waiver of
default or any remedy for default or render Landlord liable for any loss or
damage resulting from such act.
B. Landlord may, at its election, terminate this Lease by giving
Tenant written notice of termination. Promptly after notice of termination,
Tenant shall surrender and vacate the Premises and all improvements in
broom-clean condition, and Landlord may reenter and take possession of the
Premises and all remaining improvements and eject all parties in possession, or
eject some but not others, or eject none. Termination under this paragraph shall
not relieve Tenant from the payment of any sum then due to Landlord or from any
claim for damages previously accrued or then accruing against Tenant. No act by
Landlord other than giving written notice to Tenant shall terminate this Lease.
C. Landlord may, at its election, continue this Lease in full
force and effect, and the Lease will continue in effect as long as Landlord does
not terminate Tenant's right to possession; and Landlord shall have the right to
collect rent when due. During the period Tenant is in default, Landlord can
reenter the Premises and, without terminating this Lease at any time and from
time to time, relet the Premises and improvements or any part or parts of them
for the account and in the name of Tenant or otherwise. Tenant shall be liable
immediately to Landlord for all costs Landlord incurs in reletting the Premises,
including, without limitation, brokers' commissions, expenses of remodeling the
Premises required by reletting and like costs. Reletting can be for a period
shorter or longer than the remaining term of this Lease. Landlord may, at its
election, eject all persons, or eject some and not others, or eject none.
Landlord shall apply all rents from such reletting to the rent becoming due from
Tenant under the terms of the Lease. Landlord may execute any leases made under
this provision, in the Landlord's name, and shall be entitled to all rents from
the use, operation or occupancy of the Premises or improvements, or both.
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Tenant shall, nevertheless, pay to Landlord on the due date specified in this
Lease the equivalent of all sums required of Tenant under this Lease plus
Landlord's expenses (including, without limitation, actual attorneys fees and
legal costs) less the net proceeds of any reletting or attornment. No act by or
on behalf of Landlord under this provision shall constitute a termination of
this Lease unless Landlord gives Tenant written notice of such termination.
After Tenant's default and for as long as Landlord does not terminate Tenant's
right to possession of the Premises, if Tenant obtains Landlord's consent,
Tenant shall have the right to assign or sublet its interest in this Lease, but
Tenant shall not be released from liability. Landlord's consent to a proposed
assignment or subletting under this paragraph shall not be unreasonably
withheld.
D. Landlord may, at its election, use Tenant's personal property
and trade fixtures, or any of such property and fixtures, which are not removed
from or remain upon the leased Premises, without compensation and without
liability for use or damage, or store them for the account and at the cost of
Tenant.
E. Landlord shall be entitled, at its election, to each
installment of rent or to any combination of installments of rent and other
monetary payments due for any period before termination, plus interest at the
maximum rate per annum allowed under California law from the date each
installment shall have fallen due. Net proceeds of any reletting or attorned
subrents collected by Landlord pursuant to any remedy permitted under this
Paragraph 15 (fifteen), when received shall be applied first to any back rents
and other monetary sums not paid by Tenant for which Tenant is obligated by the
terms of this Lease, then to the current rents due from Tenant, with any
remaining proceeds after payment of the foregoing sums payable to Tenant.
F. On Landlord's termination of this Lease, Landlord shall be
entitled, at its election, to damages in the following sums: (1) The worth at
the time of award in any court action of unpaid rent which had been earned and
due and payable to Landlord as of the termination of this Lease; (2) The worth
at the time of award in any court action of the amount by which the unpaid rent
which would have been earned after termination of the Lease until the time of
award exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided; (3) The worth at the time of award at any court proceeding
to recover it of an amount by which the unpaid rent for the balance of the term
after the time of award exceeds the amount of such rental loss that Tenant
proves could reasonably have been avoided; (4) Any other amount necessary to
compensate Landlord for all detriment proximately caused by Tenant's failure to
perform its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom. The phrase "worth at the time of
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award" with respect to unpaid rent which shall have been earned at the time of
termination and with respect to unsaid rent which shall have been earned after
termination through the time of award, shall be computed by adding to each of
said sums interest at the rate of 10 per cent (10%) per annum from the
respective due dates for each increment of such rent. The phrase "worth at the
time of award" used in respect to rent for the balance of the term following the
time of award shall be computed by discounting such rent at the discount rate of
the Federal Reserve Bank of San Francisco at the time of award, plus one per
cent (1%).
No waiver of any default shall constitute a waiver of any other breach
or default, whether of the same or any other covenant or condition. No waiver,
benefit, privilege or service voluntarily given or performed by either party
shall give the other any contractual right by custom, estoppel or otherwise to
receive the same at any other time. The subsequent acceptance of rent pursuant
to this Lease shall not constitute a waiver of any preceding default by Tenant
other than default in the payment of the particular rental payment so accepted,
regardless of Landlord's knowledge of the preceding breach at the time of
accepting the rent; nor shall acceptance of rent or any other payment after
termination constitute a reinstatement, extension or renewal of the Lease or
revocation of any notice or any other act previously given or done by Landlord.
Tenant hereby assigns to Landlord all subrents and other sums falling
due from any subtenants (whose tenancy has been previously approved in writing
by Landlord pursuant to this Lease), licensees and concessionaires (hereinafter
collectively referred to as subtenants) during any period in which Landlord has
the right under this Lease, whether exercised or not, to reenter the Premises
for Tenant's default. Tenant shall not have any right to such sums during that
period. Any collection of such sums during any such period by Tenant shall be
held in trust for Landlord and shall be paid over to Landlord immediately upon
demand therefor. Landlord may, at its election reenter the Premises and
improvements without or with process of law without terminating this Lease and
either or both collect these sums or bring action for recovery of these sums
directly from the subtenants.
16. ASSIGNMENT
Tenant shall have the right to assign or sublease its interest in this
Lease or in the Premises to THE BANK OF SAN DIEGO, a California banking
corporation (hereinafter referred to as "The Bank of San Diego"). If Tenant
assigns or subleases to The Bank of San Diego, Tenant shall guarantee this Lease
or sublease. Tenant shall not otherwise voluntarily assign or
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encumber its interest in this Lease or in the Premises or sublease all or any
part of the Premises or allow any other person or entity (except Tenant's
authorized representatives) to occupy or use all or any part of the Premises
without first obtaining Landlord's consent, which consent shall not be
unreasonably withheld. If Landlord unreasonably withholds its consent, Tenant
shall not be entitled to damages, but shall, as its sole remedy, have the option
to terminate this Lease without liability on the part of Tenant or Landlord.
"Reasonableness" under this paragraph shall be determined pursuant to Paragraph
23 of this Lease. Except for assignment or sublease to The Bank of San Diego,
any assignment, encumbrance or sublease concerning which the Landlord's consent
was not requested by Tenant or concerning which the Landlord reasonably withheld
its consent, shall be voidable and, at Landlord's election, shall constitute a
default. No consent to any assignment, encumbrance or sublease shall constitute
a further waiver of the provisions of this paragraph.
Any dissolution, merger, consolidation, or other reorganization of
Tenant, or the sale or other transfer of a controlling percentage of the capital
stock of Tenant, or the sale of fifty-one percent (51%) of the value of the
assets of Tenant, shall be deemed an assignment. The phrase "controlling
percentage" means the ownership of, and the right to vote, stock possessing at
least fifty-one percent (51%) of the total combined voting power of all classes
of Tenant's capital stock issued, outstanding and entitled to vote for the
election of directors.
17. ENTRY BY LANDLORD DURING THE TERM OF THE LEASE
Landlord and its authorized representatives shall have the right to
enter the Premises at all reasonable times for any of the following purposes: To
determine whether the Premises are in good condition and whether Tenant is
complying with its obligations under this Lease; to do any necessary maintenance
and to make any restoration to the Premises required to be made or which
Landlord, in its discretion, may make pursuant to this Lease; to serve, post or
keep posted any notices required or allowed under the provisions of this Lease;
to post "for sale" signs at any time during the term and to post "for rent" or
"for lease" signs during the last six (6) months of the term, or during any
period while Tenant is in default; to show the Premises to prospective brokers,
agents, buyers, tenants or persons interested in an exchange at any time during
the term; to shore the foundations, footings and walls of the building and other
improvements that are part of the Premises but not to prevent entry thereto, and
to do any other act or thing necessary for the safety or preservation of the
Premises or if any excavation or other construction is undertaken or is about to
be
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undertaken on any adjacent property or nearby street (at the sole election of
Landlord and when Landlord, if at any time, is obligated by the terms of this
Lease to do so). Landlord's rights under this provision extend to the owners of
adjacent property on which excavation or construction is to take place and
adjacent property owners' authorized representatives. Landlord shall not be
liable in any manner for any inconvenience, disturbance, loss of business or
other damage resulting from Landlord's entry onto the Premises as provided in
this paragraph, except damage or injury resulting from the negligence of
Landlord or its authorized representatives. Tenant shall not be entitled to an
abatement or reduction in rent if Landlord exercises any rights reserved in this
paragraph.
Landlord shall conduct its activities on the Premises as allowed in this
paragraph in a manner that will cause the least possible inconvenience,
annoyance or disturbance to Tenant.
18. SUBORDINATION
This Lease is and shall be subordinate to any encumbrance now of record
or recorded after the date of this Lease affecting the building, other
improvements, and the land of which the Premises are a part. Such subordination
is effective without any further act of Tenant. Tenant shall from time to time
on request from Landlord execute and deliver any documents or instruments that
may be required by a lender to effectuate any subordination. If Tenant fails to
execute and deliver any such documents or instruments, Tenant irrevocably
constitutes and appoints Landlord as Tenant's special attorney-in-fact to
execute and deliver any such documents or instruments.
19. NOTICES
Any notice, demand or request, consent, approval or communication that
either Landlord or Tenant desires or is required to give to the other or any
other person shall be in writing and either served personally or sent prepaid,
first-class mail, certified, return receipt requested. Any such writing mailed
shall be addressed to the other party at the address set forth hereinbelow.
Either party may change its address by notifying the other of a change of
address in writing pursuant to this paragraph. Notice shall be deemed
communicated upon delivery of such writing or, in the case of mailing, at the
time and as of the date of depositing such writing in the United
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States Mail. The addresses of Landlord and Tenant for purposes of this
paragraph are as follows:
Landlord: Grossmont Land Co.
5500 Grossmont Center Drive
La Mesa, California 92041
Tenant: President
BSD Service Company
225 Broadway, Suite 110
San Diego, California 92101
20. RECORDATION OF MEMORANDUM OF LEASE
This Lease shall not be recorded; however, if either party requests the
other party to do so, the parties shall execute a Memorandum of Lease, which
shall be recorded in the Office of the San Diego County Recorder. Upon any
termination of this Lease, Tenant shall execute in recordable form and deliver
to Landlord a quitclaim deed concerning Tenant's terminated leasehold interest
in the Premises. If Tenant fails to do so, and Landlord brings an action to
remove the cloud on its title regarding Tenant's terminated leasehold interest
in the Premises, Tenant shall pay as liquidated damages Three Hundred Dollars
($300.00) per day from the date of termination, as well as Landlord's attorneys'
fees and costs in bringing said action.
21. SUCCESSORS
Subject to the provisions of this Lease on assignment and subletting,
each and all of the covenants and conditions of this Lease shall be binding upon
and shall inure to the benefit of the heirs, successors, executors,
administrators, assigns and personal representatives of the respective parties.
22. EXPIRATION, TERMINATION AND HOLDING OVER
At the expiration or earlier termination of the term of this Lease,
Tenant shall surrender to Landlord the possession of the Premises. Fixtures,
improvements, alterations and/or additions to or of the Premises, excepting only
movable and trade fixtures listed on Exhibit "B" (attached hereto and
incorporated herein by this reference), shall, upon the expiration of the term,
become a part of the Premises and the property of the Landlord and, as such,
shall be surrendered to Landlord. Tenant shall leave the surrendered Premises
and any other property in good and broom-clean condition and, except as provided
to the contrary in provisions of this Lease on maintenance and repair, in the
same
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condition as delivered to Tenant or as improved during the term hereof, less
normal wear and tear. Tenant shall remove all of its signs from the Premises, at
its expense. All property that Tenant is required to surrender shall become
Landlord's property as of the termination date of this Lease. All property that
Tenant is not required to surrender but that Tenant does not remove from the
Premises prior to the termination of this Lease shall, at Landlord's election,
be Landlord's property at termination.
If Tenant fails to surrender the Premises at the expiration or sooner
termination of this Lease, Tenant shall defend and indemnify Landlord from all
liability and expense resulting from Tenant's failure to surrender.
This Lease shall terminate without further notice at the expiration of
the term. Any holding over by Tenant after expiration with the consent of
Landlord shall not constitute a renewal or extension or give Tenant any right in
or to the Premises. During any such period of holding over, Tenant will be
deemed to be in possession of the Premises on a month-to-month basis, subject to
the covenants and conditions of this Lease, including, without limitation, the
obligation to pay the rent reserved to Landlord.
23. ARBITRATION
Any controversy arising out of this Lease or its breach shall be settled
by arbitration if, prior to the commencement of any legal proceedings dealing
with a controversy arising out of this Lease or its breach, any party to this
Lease demands that such controversy be arbitrated. After such demand, and within
ten (10) days from such demand, the parties shall attempt to designate a
mutually acceptable individual to arbitrate the controversy. If within said
ten-day period the parties are unable to designate such an individual, the
controversy shall be arbitrated under the rules of the American Arbitration
Association. Both parties shall be entitled to conduct discovery procedures in
the same manner provided by law as if a civil action had been instituted, and
judgment on the award, whether rendered by the arbitrator chosen by the parties
or the arbitrator used pursuant to the rules of the American Arbitration
Association, may be entered in any court having jurisdiction and shall be fully
binding on the parties.
24. LIMITED RIGHT OF FIRST REFUSAL
A. Notice. Landlord is currently the lessee, under the ground
lease described in Paragraph 25.N. below, of certain
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real property described as Lot 2 of Grossmont Land Co., La Mesa, California,
(hereafter referred to as "Lot 2"). Lot 2 is currently subleased and used for a
gas station and other commercial uses. In the event such subleases are all
terminated or expire during the term of this Lease, and Landlord determines to
develop the property with a building suitable for office and/or bank use, then
Landlord shall deliver written notice to Tenant, describing the proposed
development, and offering to Tenant the first right to lease space.
B. Negotiation. For a period of sixty (60) days after delivery of
said notice to Tenant, Landlord shall not enter into any agreement with any
entity or person other than Tenant concerning the leasing of the proposed
building on Lot 2. Landlord and Tenant shall negotiate in good faith for a
period of sixty (60) days after delivery of the notice, regarding the premises
to be leased by Tenant, and the terms and conditions of such lease. If Landlord
and Tenant are unable to reach an agreement at the end of such sixty (60) day
period, Tenant may present Landlord with an offer in writing, describing the
premises Tenant desires, and the terms and conditions upon which Tenant is
willing to lease such premises. Landlord shall have ten (10) days in which to
either accept or reject the offer. If Landlord elects to reject the offer,
Landlord shall be free to lease the premises described in Tenant's last written
offer to any third party, on terms and conditions more favorable to Landlord,
and the balance of Lot 2 not described in Tenant's offer, upon any terms and
conditions.
C. First Refusal Rights. During the term of this Lease, should
Landlord subsequently desire to offer the premises described in Tenant's last
written offer to a third party on the same terms and conditions as those
described in Tenant's last written offer, or on terms and conditions more
favorable to a tenant, Landlord shall first submit a written offer to Tenant
prior to offering the same to a third party. Tenant shall have ten (10) days in
which to either accept or reject said offer. If Tenant rejects said offer,
Landlord may lease such premises to any party upon any terms and conditions,
without any further notice to Tenant, and Tenant shall have no further rights
concerning Lot 2.
D. Termination of this Lease. At such time as Landlord and Tenant
consummate a lease of Lot 2 or any portion thereof, this Lease shall
automatically terminate without further action.
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25. MISCELLANEOUS PROVISIONS
A. Counterparts. This Lease may be executed in two or more
counterparts, each of which shall be an original, but all of which shall
constitute one and the same instrument.
B. Time of the Essence. In the performance of all of the covenants
and conditions of this Lease, time shall be of the essence.
C. Authority. Each individual executing this Lease on behalf of
Tenant represents and warrants that he is duly authorized to execute and deliver
this Lease on behalf of Tenant and that this Lease is binding upon Tenant
pursuant to the terms of this Lease.
D. Estoppel Certificates. Each party hereto shall, at any time and
from time to time upon not less than ten (10) days' prior written notice from
the other party, execute, acknowledge and deliver to the other party a statement
in writing which shall set forth the following: (1) A certification that this
Lease is unmodified and in full force and effect (or, if modified, stating the
nature of such modification and certifying that this Lease, as so modified, is
in full force and effect), and the date to which the rental or other charges
have been paid in advance, if any; (2) An acknowledgement that there are not, to
the knowledge of said party making the acknowledgement, any uncured defaults on
the part of the other party hereunder or specifying such defaults, if any are
claimed; and (3) That said party making said statement is in full compliance
with all applicable statutes, ordinances, rules, regulations, zoning variances
and conditional use permits applicable to the Premises. Tenant hereby agrees
that any statement delivered pursuant to this paragraph may be relied upon by
any prospective purchaser or encumbrancer of the Premises.
E. Applicable Law. In interpreting the covenants and conditions of
this Agreement, the laws of the State of California shall apply.
F. Prior Agreements and Modification. No provision of this Lease
may be amended or added to except by a subsequent contract in writing signed by
the parties hereto or their respective successors in interest. Further, this
Agreement takes the place of all other oral and written agreements between
Landlord and Tenant made prior to the date first set forth hereinabove on the
first page of this Lease and contains the entire agreement of Landlord and
Tenant.
G. Sale of Premises by Landlord. In the event of any sale of the
Premises, Landlord shall be entirely free and
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relieved of all liability under any and all of Landlord's covenants and
obligations contained in or derived from this Lease; provided that Landlord
furnishes Tenant with a written agreement of the purchaser (who has reasonable
capacity to perform), in recordable form, to the effect that the purchaser
assumes and agrees to carry out any and all of the covenants and obligations of
Landlord under this Lease. Landlord agrees to comply with all requirements of
law regarding advance payments and deposits made by Tenant.
H. Captions, Table of Contents, Headings and Marginal Headings.
The captions, table of contents and marginal headings used throughout this Lease
agreement have been provided for the convenience of the parties and for
reference only. Such are not to be deemed a part of this Lease nor to be
considered in the construction or interpretation of any part hereof.
I. Attorney's Fees. In the event of any action or proceeding
brought by either party against the other under this Lease, the prevailing party
shall be entitled to recover all costs and expenses, including the fees of its
attorneys in such action or proceeding, in such amount as the court may deem
reasonable.
J. Provisions are Covenants and Conditions. All provisions whether
covenants or conditions on the part of Tenant, shall be deemed as both covenants
and conditions hereunder.
K. Severability. The unenforceability, invalidity or illegality of
any provision of this Lease shall not render any other provision unenforceable,
invalid or illegal.
L. Non-Merger of Fee and Leasehold Estates. If both Landlord's and
Tenant's estates in the Premises or the improvements, or both, become vested in
the same owner, this Lease shall nevertheless not be destroyed by application of
the doctrine of merger, except at the express election of the owner.
M. Rent Payable in United States Currency. Rent and all other sums
payable under this Lease must be paid in lawful money of the United States of
America.
N. Sublease. Landlord is the lessee of the Premises pursuant to a
ground lease and amendments (the "Master Lease"). Said Master Lease and all
amendments thereto are on file in the office of the Landlord and have been made
available to the Tenant at reasonable times and will continue to so be
available. Although this Lease is a sublease under the Master Lease, at all
times herein the use of the word "Lease" refers to this sublease
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to Tenant and the sublease relationship created hereby between Landlord (Master
Lessee) and Tenant.
IN WITNESS WHEREOF, the parties hereto have executed this Lease on the
date first above written.
LANDLORD: GROSSMONT LAND CO., A Limited Partnership
By: Its General Partner, Denele Co., A
Limited Partnership
By: Its General Partner, Delen Management,
An Illinois Corporation
By: /s/ THOMAS J. MAGEE
--------------------------------------------
Thomas J. Magee, President
TENANT: BSD Service Company, A California Corporation
By: /s/ JAMES S. BROWN
--------------------------------------------
James S. Brown, President
By: /s/
--------------------------------------------
Secretary
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The Bank of San Diego
INTER-OFFICE CORRESPONDENCE
TO: Brad Hanson FROM: Michael White, Vice President
Bank Operations Administrator
cc: DATE: October 1, 1987
SUBJECT: GROSSMONT PROPERTY LEASE
================================================================================
The Bank of San Diego shall waive its right to lease additional, contiguous
space at its Grossmont Branch location for a period of three years (11/01/87
thru 10/31/90). The Bank reserves the right to exercise this option by providing
one year's written notice after the 24th month of the three year waiver period.
<PAGE> 45
SUBLEASE
BSD SERVICE COMPANY
NO. 17
This SUBLEASE, is entered into on March 26, 1984, by and between BSD
SERVICE COMPANY ("Sublessor") and ERVIN S. WHEELER, M.D., A MEDICAL CORPORATION
("Subtenant"), with reference to the following facts:
A. Sublessor is the tenant under a Lease Agreement (the "Lease"),
executed on August 6, 1982, by Sublessor and Grossmont Land Co, (a California
Corporation), ("Lessor"), covering property (the "Premises") described as
follows:
1. Location
8690 Center Drive, La Mesa. The southwest
corner of Center Drive and Grossmont Center
Drive, adjacent to The Bank of San Diego.
2. Size
Parcel One - Approximately 2,680 square feet of ground
level office space.
Parcel Two - approximately 640 square feet of ground
level office space.
Parcel Three - space currently occupied by The Bank of
San Diego.
A copy of the Lease is attached hereto as Exhibit "A" and made a part
hereof. Exhibit "B" is a schematic representing the Parcels as listed above.
B. Section 16 of the Lease provides that the Tenant may sublease the
Premises with the prior written consent of Lessor.
C. Sublessor desires to sublease the Premises, and Subtenant desires to
accept the Premises, subject to the provisions of this Sublease.
THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. AGREEMENT TO SUBLEASE. Sublessor hereby subleases the Premises to
Subtenant, and Subtenant hereby subleases the premises from Sublessor, subject
to the terms and conditions of this Sublease.
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2. TERM. The term of this Sublease shall commence on February 1, 1984,
and shall continue as follows:
Parcel One - 10 years commencing February 1, 1984.
Parcel Two - 10 years commencing February 1, 1984. Any time after
year 2 of the Lease term, either party may terminate this Sublease as it relates
to Parcel Two only, upon giving the other party one year's notice. Said notice
may only be given after year two of the Lease term. Recovery of the parcel by
The Bank of San Diego or its successors shall be the sole purpose of direct use
by the Sublessor and shall not be used by unrelated third party tenants.
3.A RENT - PARCEL ONE. Subtenant agrees to pay Sublessor rent in the
amount of $3,350.00 per month in advance, prior to the first day of each month
during the term, at the address for notice to Sublessor stated herein or at such
other place as Sublessor may direct. Rent for any fraction of a month at the
beginning of the term will be prorated and, paid at the commencement of the
term. Upon execution hereof, Subtenant shall pay Sublessor $3,350.00 to be
applied as rent for the first full month of the term.
3.B RENT - PARCEL TWO. Subtenant agrees to pay Sublessor rent in the
amount of $400 per month in advance, prior to the first day of each month during
the term, at the address for notice to Sublessor stated herein or at such other
place as Sublessor may direct.
3.C RENT ABATEMENT. Subtenant's obligation to pay rent shall commence
June 1, 1984.
3.D COST OF LIVING ADJUSTMENTS. Commencing June 1, 1985 and each year
thereafter, Subtenant's rent shall increase in accordance with the Consumer
Price Index. The Index to be used shall be San Diego - All Urban Consumers. In
the event this Index is no longer in use, a comparable Index chosen by the
Sublessor shall be used. Subtenant's rental increases shall be a minimum of 5%
per year and a maximum of 8% per year.
3.E OTHER CHARGES. The Sublease shall be a triple net Sublease with
Subtenant required to pay a full prorata share of all real estate taxes, common
area maintenance, and insurance for the Premises. All other expenses, including
but not limited to items such as liability insurance and janitorial service, are
to be paid by Subtenant. Subtenant shall only be responsible for these items
after the execution of the Sublease. Prior to that time, Sublessor shall
maintain Premises and pay all such expenses.
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3.F ADVANCE RENTAL. Subtenant shall pay the following as advance rent,
prior to June 1, 1984:
<TABLE>
<S> <C>
January, 1984: $3,750.00
February, 1984: 3,750.00
March, 1984: 3,750.00
April, 1984: 3,750.00
May, 1984: 3,750.00
</TABLE>
In the event Subtenant does not execute a Sublease, Subtenant shall
forfeit these advance rental payments on a prorata basis.
In the event Subtenant does execute a Sublease, any payments made shall
be applied, in proportion to the number of months paid, to the June, July,
August, September, and October, 1984 rents.
3.G PARKING. The parties recognize there may be a parking requirement
which will require additional time and expense. Subtenant shall provide for and
pay all expenses related to the addition of any required parking as a result of
this Sublease, subject to 4(c) below.
4. TENANT IMPROVEMENT ALLOWANCE.
(a) Upon Subtenant's opening for business and filing of a
Certificate of Occupancy, Sublessor shall pay to Subtenant the sum of
$78,360.00. This represents an allowance of $25.00 per square foot for the 2,680
square feet in Parcel One, $12.50 per square foot allowance for the 640 square
feet in Parcel Two, and $40.00 per lineal foot allowance for Subtenant's
storefront.
(b) An additional Subtenant allowance of up to $10,000.00, plus
parking expenses in 4(c) below, will be paid to Subtenant in the event Subtenant
shows Sublessor receipts for permanent improvements to be made to the Premises
in this amount. The amount of allowance over $78,360.00 will be repaid to
Sublessor at the rate of 2.5% per month over the term of the Sublease. Sublessor
shall prepare, as an addendum to the Sublease, a note to be executed by
Subtenant for the repayment of those monies.
(c) Any expenses related to the additional parking in 3.G above,
shall also be paid to Subtenant and repaid to Sublessor in accordance with 4(b)
above.
5. OBLIGATIONS TO SUBLESSOR. Sublessor shall maintain the Lease
throughout the entire original term and shall not commit any act which may
constitute a breach of the Lease or which may otherwise jeopardize Subtenant's
rights or obligations under the Lease. Sublessor does not assume the obligations
of Lessor under the Lease, but shall exercise due diligence in attempting to
cause Lessor to perform its obligations under the Lease for the benefit of
Subtenant.
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<PAGE> 48
6. OBLIGATIONS OF SUBLESSEE. Subtenant shall not commit any acts which
may constitute a breach of the Lease or which may otherwise jeopardize
Sublessor's rights or obligations under the Lease. Subtenant hereby expressly
assumes and agrees to perform all the obligations and covenants, including all
obligations to make monetary payments, required by the Lease to be kept or
performed by Sublessor as Tenant thereunder, except as follows:
(a) The obligation to pay rent to Lessor shall be considered
performed by Subtenant to the extent rent is paid to Sublessor
in accordance with Section 3 of this Sublease.
(b) ASSIGNMENT AND SUBLETTING. Sublessor acknowledges that by the
nature of the medical practice of Subtenant, Subtenant may
assign or sublet the premises after June 1, 1984, with the
consent of Sublessor, which shall not be unreasonably withheld,
however, paragraph 11 (Guarantee of Sublease) shall not be
waived.
7. INDEMNITY AND HOLD HARMLESS. Sublessor hereby agrees to indemnify and
hold Subtenant harmless from and against any and all liabilities, costs,
damages, and other expenses, including attorneys' fees, accruing with respect to
the Premises before the commencement of the term of this Sublease, and Subtenant
hereby agrees to indemnify and hold Sublessor harmless from and against any and
all liabilities, costs, damages, and other expenses, including attorneys' fees,
accruing with respect to the Premises on or after the commencement of the term
of this Sublease.
8. COVENANT OF QUIET ENJOYMENT. Sublessor represents that the Lease is
in full force and effect and that there are no defaults on Sublessor's part
thereunder as of the commencement of the term of this Sublease. Sublessor
represents that if Subtenant performs all the provisions in this Sublease, and
subject to the provisions of the Lease, Subtenant shall have and enjoy
throughout the term of this Sublease the quiet and undisturbed possession of the
premises.
9. OPTION. Subtenant shall have an option to extend the term of the
Sublease for six (6) years at the then-prevailing market rental for
medical/office facilities of a similar size in the La Mesa area.
10. RIGHT OF FIRST REFUSAL. Subtenant shall have the right of first
refusal on any or all of Parcel Three which Landlord decides it no longer
desires to use or which Landlord decides to assign or sublease.
-4-
<PAGE> 49
11. GUARANTEE OF SUBLEASE. Although ERVIN S. WHEELER., M.D., A MEDICAL
CORPORATION, is the Tenant, ERVIN S. WHEELER M.D. will individually guaranty
said Sublease for the first five (5) years of the Sublease.
12. CONSENT OF LESSOR. This Sublease is contingent upon the written
consent of Lessor.
13. SUBJECT TO LEASE. This Sublease is subject to all of the provisions
of the Lease. If the Lease terminates, this Sublease shall terminate and the
parties shall be relieved of all liabilities and obligations hereunder.
SUBLESSOR: SUBTENANT:
BSD SERVICE COMPANY
By: /s/ By: /s/ ERVIN S. WHEELER, M.D.
-------------------------- ------------------------------
Title: Senior Vice President Title: President
Address for Notice: Address for Notice:
P.O. Box 81988 8910 Wakarusa, Suite C
San Diego, CA 92138 La Mesa, CA 92041
-5-
<PAGE> 50
That certain sublease dated March 26, 1984 by and between BSD Service Company
("Sublessor") and Ervin S. Wheeler M.D., A Medical Corporation ("Subtenant"), is
hereby amended as follows:
Sublessor and Sublessee may not terminate the lease term as it relates
to parcel two only of said lease until October 31, 1990. Such
termination still requiring one year notification in advance of the
desired termination date. Either party has the right to exercise the one
year termination notice effective November 1, 1989.
Agreed and Accepted
Sublessor: Subtenant:
BSD Service Company Ervin S. Wheeler M.D.
A Medical Corporation
By: /s/ J. BRADFORD HANSON By: /s/ ERVIN S. WHEELER
----------------------------- --------------------------------
J. Bradford Hanson Dr. Ervin S. Wheeler
Chief Financial Officer President
<PAGE> 51
EXTENSION OF SUBLEASE
THIS EXTENSION OF SUBLEASE ("Extension") is made and entered into this
2nd day of August, 1991 by and between BSD SERVICE COMPANY, a California
Corporation ("Sublessor"), and ERVIN S. WHEELER, M.D., a Medical Corporation
("Subtenant"), and is made with reference to the following facts:
A. On or about March 26, 1984, the parties entered into a Sublease
whereby Subtenant leases from Sublessor that portion of the premises located at
8690 Center Drive, La Mesa, California commonly referred to as "Parcel 1" and
"Parcel 2", respectively (the "Premises").
B. Pursuant to the terms of the Sublease, Subtenant commenced occupancy
of the Premises and continues in possession of the Premises at this time.
Subtenant desires to extend the term of the Sublease to end concurrent with the
end of the term of the master lease ("Lease") to Sublessor.
C. The purpose of this Extension is to modify the Sublease to extend the
terms and to confirm certain other matters concerning with the Sublease.
<PAGE> 52
IT IS AGREED:
1. It is agreed that the term of the Sublease is hereby Extended to
December 31, 1999 unless earlier terminated as otherwise provided under the
Sublease, the Lease or by operation of law.
2. It is acknowledged that the rent payable under the Sublease shall
continue on the same basis as provided in the Sublease with continuing annual
rent escalations through the extended term.
3. It is further acknowledged that pursuant to the provisions of
Paragraph 4 of the Sublease, additional tenant improvement expenses were
incurred under subparagraph (b) which were paid by Sublessor. These additional
expenses are being reimbursed to Sublessor at an rate of Two Hundred and Fifty
Dollars ($250.00) per month. The parties acknowledge that this reimbursement is
in addition to rent payable under the Sublease and shall continue on a monthly
basis through the end of the initial term of the Sublease on January 31, 1994.
4. It is acknowledged that this Extension of the Sublease is in lieu of
subsequent exercise of option rights as contained in Paragraph 9 of the
Sublease. Upon execution of this Extension Paragraph 9 of this Sublease shall be
of no further force and effect.
5. This Extension of the Sublease contingent upon the written consent of
the Lessor. The parties agree to immediately proceed to request approval from
the Lessor which approval shall be obtained within thirty (30) days of the
execution of this Extension.
6. The parties hereby reconfirm that all the remaining terms and
conditions of the Sublease, except as expressly modified herein shall remain in
full force and effect. The Sublease shall remain subject to all the terms and
conditions of the Sublease and shall terminate in the event of termination of
the Lease with the parties being relieved of all liabilities and obligations
hereunder in such event.
IN WITNESS WHEREOF, this Extension has been executed on the date first
above written.
BSD SERVICE COMPANY, ERVIN S. WHEELER, M.D.,
a California Corporation a Medical Corporation
By: /s/ MARILYN CRESON JONES By: /s/ ERVIN S. WHEELER
---------------------------- --------------------------------
Ervin S. Wheeler, President
Its: Chief Financial Officer
<PAGE> 53
CONSENT OF LESSOR
The undersigned the Lessor pursuant to that certain Lease between
Grossmont Land Co., a California Limited Partnership and BSD Service Company, a
California Corporation, dated August 6, 1982 hereby consents to the Extension of
the Sublease of a portion of the Lease premises to Ervin S. Wheeler, M.D., a
Medical Corporation.
Grossmont Land, Co.
a California Limited Partnership
By: /s/ THOMAS J. MAGEE
------------------------------
Authorized Agent
/s/ THOMAS J. MAGEE
------------------------------
President
<PAGE> 54
ACKNOWLEDGEMENT
It is hereby acknowledged, understood and agreed as follows:
On or about March 26, 1984, BSD Service Company, a California corporation
(herein after referred to as BSD) and Ervin S. Wheeler, M.D., medical
corporation (herein after referred to as Wheeler) entered into a sublease
whereby Wheeler leased from BSD that portion of the premises located at 8690
Center Drive, La Mesa, California, commonly referred to as "Parcel 1" and
"Parcel 2".
That original sublease authorized termination of the lease as to "Parcel 2" upon
one year written notice.
On or about August 2, 1991, BSD and Wheeler entered into an extension of
sublease. Pursuant to the Extension of Sublease the term of the sublease between
BSD and Wheeler was extended to December 31, 1999.
The extension applied to both "Parcel 1" and "Parcel 2" of that property located
at 8690 Center Drive, La Mesa.
Any provision of any agreement between BSD and Wheeler which may have authorized
the termination of the sublease as to "Parcel 2" occurred prior to the extension
and is of no force and effect whatsoever.
BSD and Wheeler acknowledge that they both intended by any documents heretofore
signed that the sublease as to "Parcel 2" shall continue without restriction or
limitation to December 31, 1999.
It is so acknowledged, understood and agreed.
Dated: 8/18/92 BSD Service Company
By: /s/ MARILYN K. CRESON
----------------------------------------
Dated: 9/4/92 Ervin S. Wheeler, M.D., Medical Corp.
By: /s/ ERVIN S. WHEELER
----------------------------------------
Doctor Ervin S. Wheeler,
President
<PAGE> 55
SUBLEASE
THIS SUBLEASE is made effective this 1st day of November 1991, by and
between ERVIN S. WHEELER, M.D., A Medical Corporation hereinafter called
"Sublessor", and John G. Carter, D.D.S. hereinafter called "Sublessee."
ARTICLE 1. RECITALS
1:01 Sublessor is the Subtenant under that certain Sublease, dated
March 26, 1984, between Sublessor and BSD Service Company, hereinafter called
dated August 6, 1982, between BSD Service Company and Grossmont Land Company,
hereinafter called "Master Sublease". Both parties have reviewed the Master
Sublease and Master Lease and are aware of the terms and conditions contained
therein.
1:02 Sublessor desires to sublease to Sublessee a part of the property
described in the Master Sublease being leased by Sublessor under the terms of
the Master Sublease and Sublessee desires to lease such space from Sublessor.
This is not an assignment but is a Sublease.
THEREFORE, Sublessor and Sublessee agree as follows:
ARTICLE II DEMISE AND DESCRIPTION OF PROPERTY
2:02 Subleased Premises. Sublessor hereby subleases to Sublessee, and
Sublessee hereby subleases from Sublessor, on an subject to the terms,
conditions, and covenants hereinafter set forth, the property hereinafter
referred to as the "Subleased Premises," described as follows:
Approximately 640 square feet located at 8690 Center Drive, La Mesa,
California, more particularly described on Exhibit "A" attached hereto.
ARTICLE III. TERM
3:01 Initial Term. The term of this Sublease shall be to December 31,
1999 unless earlier terminated as otherwise provided under the Sublease, the
Lease or by operation by law as stated in paragraph 1. of the Extension of
Sublease.
3.02 In the event sublessor obtains an extension of his sublease with
BSD Service Company beyond 12/31/99, Sublessee herein shall have the right and
option to extend this sublease for any or all of the period of time beyond
12/31/99 as available under the extension obtained by sublessor. The terms of
the extension shall be consistent with the terms of this sublease unless
otherwise agreed to by the parties.
<PAGE> 56
3:02.1 Sublessor shall provide sublessee notice of the availability of
this option immediately after the extension has been obtained by after the
extension has been obtained by sublessor from BSD Service. Sublessee shall give
notice of exercising the option at any time prior to 12/31/99.
ARTICLE IV. RENT AND DEPOSIT
4:01. Rent and Cost of Living Adjustment. Sublessee shall pay to Sublessor
as rent for the Subleased Premises monthly rental in advance on the first day of
each calendar month during the term, commencing November 1, 1991 through
December 31, 1999. The rent shall increase on an annual basis in accordance with
the Consumer Price Index. The Index to be used shall be San Diego-All Urban
Consumers. In the event this Index is no longer in use, a comparable Index
chosen by Sublessor shall be used. In no event shall the rent fall below the
initial rent of $928.00.
4:01.1 On execution of this Lease, Sublessee shall deposit with Sublessor
$928.00 as a security deposit for the performance by Sublessee of the
provisions of this Sublease. If sublessee is in default, Sublessor can use the
security deposit, or any portion of it, to cure the default or to compensate
Sublessor for all damage sustained by Sublessor resulting from Sublessee's
default. Sublessee shall immediately on demand pay to Sublessor a sum equal to
the portion of the security deposit expended or applied by Sublessor as
provided in this paragraph so as to maintain the security deposit in the sum
initially deposited with Sublessor. If Sublessee is not in default at the
expiration or termination of this Sublease, Sublessor, shall return the
security deposit to Sublessee. Sublessor's obligations with respect to the
security deposit are those of a debtor and not a trustee.
4:02 Additional Expenses. This Sublease shall be a triple net Sublease
with Subtenant required to pay a full prorate share of all real estate taxes,
common area maintenance, insurance, water, electrical and outside lighting.
ARTICLE V. USE, SIGNAGE AND SUBLESSEE IMPROVEMENTS.
5:01 Use. the subleased premises shall be used by Sublessee for dental
practice only and for uses normally incident thereto and for no other purposes.
5:02 Signage. Signage shall be consistent with established signs subject
to the approval of the sublessor, subject to which such approval will not be
unreasonably withheld.
5:03 Sublessee Improvements. Sublessee shall be responsible for the cost
of any improvements. Prior to making any improvements, Sublessee shall obtain
approval for the
<PAGE> 57
improvements from Sublessor.
5:03.1 It is specifically acknowledged, understood and agreed that
in the event plans for improvements as submitted by the sublessee to any party
to this agreement or to any governmental entity are rejected, or in any other
manner not approved for construction, then any and all obligations under this
sublease are terminated.
5:03.2 It is specifically understood that stained glass windows
installed by sublessee shall remain the personal property of sublessee, and
will not, at any time, be considered a fixture of demised premises.
5:03.3 It is further specified, that, at the time sublessee vacates
the premises, the sublessee will be responsible for removing the stained glass.
ARTICLE V. OBLIGATIONS OF SUBLESSEE
6:01 Obligations and Covenants. Sublessee hereby expressly assumes
and agrees to perform all the obligations and covenants required by this
Sublease, the Master Sublease and Master Lease. Sublessee shall not commit any
act which may constitute a breach of this Sublease, the Master Sublease or the
Master Lease or which may otherwise jeopardize Sublessor's right or obligations
thereunder.
6:02 Alterations. Sublessee shall not make any improvements or
modifications to the Subleased Premises without the express written consent of
the Sublessor which consent shall not be unreasonably withheld.
6:03 Assignment and Subletting. Sublessee may not assign or sublet
the Subleased Premises without the prior written consent of the Sublessor .
Which consent shall not be unreasonable withheld.
6:04 Indemnity and Hold Harmless. Sublessee shall indemnify and
hold Sublessor free and harmless from any and all liabilities, costs, damages
and other expenses, including attorney's fees, from any wrongful acts or
Sublessee in relation to his/her use of the Subleased Premises.
ARTICLE VII. GENERAL PROVISIONS
7:01 Attorney's Fees. Should any litigation be commenced between
the parties to this Sublease concerning said Subleased Premises, over the
rights and duties of either in relation thereto, the party prevailing in such
litigation shall be entitled, in addition to such other relief as may be
granted in the litigation, to a reasonable sum as and for his attorney's
<PAGE> 58
fees and costs in such litigation which shall be determined by the Court.
7:02 Binding on Heirs and Successors. This Sublease shall be binding on
and shall enter into the benefit or the heirs, executors, administrators,
successors, assigns, shareholders, officers, and directors of the parties
hereto.
7:03 Partial Invalidity. Should any provision of this Sublease be held
by a Court of competent jurisdiction to be either invalid, void or
unenforceable, the remaining provisions of this Sublease shall remain in full
force and effect.
7:04 Not a Partnership. The parties hereto are not creating by this
Sublease any corporation, partnership, joint medical practice or joint venture
and neither party shall represent same to any other person.
7:05 Number and Gender. As used in this Sublease, the masculine
feminine or neuter gender and the singular or plural number shall be deemed to
include the others whenever the context so indicates.
SUBLESSOR:
ERVIN S. WHEELER, M.D.
A Medical Corporation
Date: By: /s/ ERVIN S. WHEELER, MD
---------------------- ---------------------------------
ERVIN S. WHEELER, MD
SUBLESSEE:
JOHN G. CARTER, D.D.S.
Date: 11//1/91 By: /s/ JOHN G. CARTER, DDS
---------------------- ---------------------------------
JOHN G. CARTER, DDS
SUBLESSEE'S SPOUSE'S
SIGNATURE
Date: 11/1/91 By: /s/ GRETCHEN CARTER
---------------------- ---------------------------------
<PAGE> 59
EXHIBIT D
SUBLEASE
1. PARTIES
This Sublease is entered into by and between BSD Service Co. ("Service"),
Sublessor and The Bank of San Diego ("TBSD") , Sublessee as a Sublease under the
Master Lease executed August 6, 1982, entered into by Grossmont Land Company
Lessor, and Sublessor under this Sublease as Lessee; a copy of the Master Lease
is attached hereto as Exhibit A.
2. PROVISIONS CONSTITUTING SUBLEASE
(a) This Sublease is subject to all of the terms and conditions of the Master
Lease in Exhibit A and Sublessee shall assume and perform the obligations of
Sublessor and Lessee in said Master Lease, to the extent said terms and
conditions are applicable to this Premises subleased pursuant to this Sublease.
Sublessee shall not commit or permit to be committed on the Premises any act or
omission which shall violate any term or condition of the Master Lease. In the
event of the termination of Sublessor's interest as Lessee under the Master
Lease for any reason, then this Sublease shall terminate coincidently
therewith without any liability of Sublessor to Sublessee.
(b) All of the terms and conditions contained in the Exhibit A Master Lease are
incorporated herein, as terms and conditions of this Sublease (with each
reference therein to Lessor and Lessee to be deemed to refer to Sublessor and
Sublessee) and, along with all of the following Sections set out in this
Sublease, shall be the complete terms and conditions of this Sublease.
3. PREMISES
Sublessor leases to Sublessee and Sublessee hires from Sublessor the following
described Premises together with the appurtenances situated in the City of La
Mesa, County of San Diego, State of California, located at 8690 Center Drive
consisting of 3 separate parcels: parcel 1 contains approximately 852.25 square
feet; parcel 2 contains approximately 4,442.5 square feet and parcel 3 contains
approximately 2,690 square feet.
4. RENTAL
Sublessee shall pay to Sublessor as rent for the Premises in advance on the
first day of each calendar month of the term of this Sublease without deduction,
offset, prior notice or demand, in lawful money of the United States, the sum of
$7,773.79 per month the rate in effect as of October 1988 to be adjusted in
accordance with paragraph 4(b) of Exhibit A.
<PAGE> 60
Page 2
5. TERM
(a) The term of this Sublease shall commence on November 1982 and shall continue
for the entire unexpired term of the master lease.
(b) In the event Sublessor is unable to deliver possession of the Premises at
the commencement of the term, Sublessor shall not be liable for any damage
caused thereby, nor shall this Sublease be void or voidable but Sublessee shall
not be liable for rent until such time as Sublessor offers to deliver possession
of the Premises to Sublessee, but the term hereof shall not be extended by such
delay. If Sublessee, with Sublessor's consent, takes possession prior to the
commencement of the term, Sublessee shall do so subject to all of the covenants
and conditions hereof and shall pay rent for the period ending with the
commencement of the term at the same rental as that prescribed for the first
month of the term, prorated at the rate of 1/30th thereof per day.
6. USE
Sublessee shall use the Premises for the purpose of Banking and General office
purposes incidental thereto and for no other purpose without the prior written
consent of Sublessor.
Sublessee's business shall be established and conducted throughout the term
hereof in a first class manner. Sublessee shall not use the Premises for, or
carry on, or permit to be carried on, any offensive, noisy or dangerous trade,
business, manufacture or occupation nor permit any auction sale to be held or
conducted on or about the Premises. Sublessee shall not do or suffer anything to
be done upon the Premises which will cause structural injury to the Premises or
the building of which the Premises form a part. The Premises shall not be
overloaded and no machinery, apparatus or other appliance shall be used or
operated in or upon the Premises which will in any manner injure, vibrate or
shake the Premises or the building of which it is a part. No use shall be made
of the Premises which will in any way impair the efficient operation of the
sprinkler system (if any) within the building containing the Premises. Sublessee
shall not leave the Premises unoccupied or vacant during the term. No musical
instruments of any sort, or any noise making device will be operated or allowed
upon the Premises for the purpose of attracting trade or otherwise. Sublessee
shall not use or permit the use of the Premises or any part thereof for any
purpose which will increase the existing rate of insurance upon the building in
which the Premises are located, or cause a cancellation of any insurance policy
covering the building or any part thereof. If any act on the part of Sublessee
or use of the Premises by Sublessee shall cause, directly or indirectly, any
increase of Sublessor's insurance expense, said additional expense shall be paid
by Sublessee to Sublessor upon
<PAGE> 61
Page 3
demand. No such payment by Sublessee shall limit Sublessor in the exercise of
any other rights or remedies, or constitute a waiver of Sublessor's right to
require Sublessee to discontinue such act or use.
7. NOTICES
All notices or demands of any kind required or desired to be given by Sublessor
or Sublessee hereunder shall be in writing and shall be deemed delivered
forty-eight (48) hours after depositing the notice or demand in the United
States mail, certified or registered, postage prepaid, addressed to the Landlord
or Tenant respectively at the addresses set forth after their signatures at the
end of this Sublease. All rent and other payments due under this Sublease or the
Master Lease shall be made by Sublessee to Sublessor at the same address.
Dated: October 25, 1988
Sublessor: Sublessee:
By: /s/ [SIG] By: /s/ [SIG]
------------------------------ ----------------------------------
Address: 225 Broadway Suite 1320 Address: 225 Broadway Suite 1320
City: San Diego St: CA City: San Diego St: CA
Telephone: 237-5366 Telephone: 237-5450
<PAGE> 62
EXHIBIT "E"
CONSENT OF MASTER LESSOR
Master Lessor hereby consents to that certain assignment set forth in
Section 2 of the Amendment No. 1 and Assignment Agreement dated as of January
29, 1993 by and among Grossmont Land Co., BSD Service Company and Valle de Oro
Bank, to which this Consent of Master Lessor is attached, provided that Assignor
shall remain obligated for rental payments from the Assignment Date through
December 31, 1999, in the event of Assignee's default.
Dated: January __, 1993
Master Lessor: RAINBOW INVESTMENT CO., a
California limited partnership
By: __________________________, a
_______________________,
general partner
By:__________________________________
Its:_________________________________
-14-
<PAGE> 63
EXHIBIT "F"
SUBLEASE TERMINATION AGREEMENT
This SUBLEASE TERMINATION AGREEMENT (this "Agreement") is made and
entered into on January 29, 1993, by and between BSD Service Company, a
California corporation ("Sublessor") and THE BANK OF SAN DIEGO, a California
banking corporation ("Sublessee"), with reference to the Recitals below.
Recitals
A. Sublessor and Sublessee entered into that certain Sublease dated
October 25, 1988 (the "Sublease") pertaining to certain improved real property
located at 8690 Center Drive, La Mesa, California (the "Premises").
B. Sublessor and Sublessee mutually desire to terminate the Sublease, on
the terms and conditions below.
Agreement
NOW, THEREFORE, for and in consideration of the mutual covenants and
promises herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Effective Date. The Sublease shall remain in full force and effect
until the Closing (as defined in Section 2 of this Agreement).
2. Termination. The Sublease shall terminate on the "Closing" as that
certain Branch Purchase Agreement dated June 30, 1992 (the "Purchase Agreement")
between Sublessee and Valle de Oro Bank, N.A., a national banking association
("Valle de Oro Bank"). Sublessee shall fully comply with all obligations under
the Sublease through the Closing, including those provisions relating to the
condition of the Premises. Sublessee shall vacate the Premises within fifteen
(15) days after the Closing. Upon termination, the Premises shall be left in its
then "as is" condition, including all improvements, fixtures and equipment to be
transferred to Valle de Oro Bank pursuant to the Purchase Agreement. Sublessee
shall repair, at its sole cost and expense, any damage to the Premises caused by
removal of
-15-
<PAGE> 64
Sublessee's personal property, or by Sublessee's failure to leave the Premises
in a clean and orderly condition.
3. Payments. Sublessee shall continue to pay all rentals and other
charges under the Sublease through the Closing.
4. Miscellaneous. This Agreement may be executed in any number of
counterparts which together shall constitute the Agreement. If any party obtains
a judgment against any other party by reason of breach of this Agreement,
reasonable attorneys' fees as fixed by the court shall be included in such
judgment. This Agreement and the terms and provisions hereof shall inure to the
benefit of and be binding upon the heirs, successors and assigns of the parties.
This Agreement shall be construed and enforced in accordance with the laws of
the state of California.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Sublessor: BSD SERVICE COMPANY, a California
corporation
By:
-------------------------------------
Marilyn K. Creson
Its: Chief Financial Officer
Sublessee: THE BANK OF SAN DIEGO, a California
banking corporation
By:
-------------------------------------
Marilyn K. Creson
Its: Executive Vice President and
Chief Financial Officer
-16-
<PAGE> 65
EXHIBIT "G"
ESTOPPEL CERTIFICATE
Gentlemen:
The undersigned hereby certifies as follows:
1. __________________________________________________________ , as
"Tenant," and _________________________________________, as "Landlord," entered
into a written lease dated __________________ , 19__, ("Lease"), in which
Landlord leased to Tenant and Tenant leased from Landlord, certain "Premises"
described in said Lease and located in the City of La Mesa, County of San Diego,
California.
2. The Lease represents the entire agreement between Landlord and
Tenant. The Lease is in full force and effect and has not been amended,
modified, supplemented or assigned by Tenant except by written agreement(s)
dated, ___________________, 19__.
3. Tenant has accepted the Premises and presently occupies them, and is
paying rent on a current basis. Tenant has no setoffs, claims, or defenses to
the enforcement of the Lease.
4. As of the date of this certificate, Tenant is not in default in the
performance of any of its obligations under the Lease, and has not committed any
breach of the Lease. No notice of default has been given to Tenant, and no event
has occurred which, with the passage of time or the giving of notice, or both,
would constitute a breach of the Lease.
5. As of the date of this certificate, Landlord is not in default in the
performance of any of its obligations under the Lease, and has not committed any
breach of the Lease, no notice of default has been given to Landlord and no
event has occurred which, with the passage of time or the giving of notice, or
both, would constitute a breach of the Lease.
6. No rents have been prepaid, other than (if none, state so):
_____________________________________________________________________________
_____________________________________________________________________________.
The current base rent is _________________________________ ($________________)
per month. The amount of the security deposit paid to Landlord is
_____________________ ($_________________).
-17-
<PAGE> 66
7. Tenant has no claim against Landlord for any other security deposit,
prepaid fee or charge, or prepaid rent except as provided in Paragraph 6 of this
certificate.
8. The term of the Lease commenced on ____ 199__, and will terminate
on ____, __
9. No actions, whether voluntary or otherwise, are pending against
Tenant under the bankruptcy laws of the United States.
10. All tenant improvements to be constructed by Landlord under the
Lease have been satisfactorily completed, accepted by Tenant, and are in good
condition, reasonable wear and tear excepted.
11. Tenant has no options to extend or renew the term of the Lease, no
options or rights of first refusal or expansion with respect to the Premises or
other buildings owned by Landlord, and no option to purchase the Premises or any
part thereof, except as follows (if none, state so):___________________________
__________________________________________________________________.
12. The undersigned acknowledges that you are relying on this
certificate, and warrants, represents and declares, for your benefit and that of
your successors and assigns, that each of the foregoing certifications is true,
correct and complete.
IN WITNESS WHEREOF, the Tenant has executed this -Estoppel Certificate
as of 1993
TENANT:
___________________________________,
a___________________________________
By:_________________________________
Its: _______________________________
-18-
<PAGE> 67
[BUILDING DIAGRAM 8690 CENTER DRIVE]
<PAGE> 68
SUBLEASE TERMINATION AGREEMENT
This SUBLEASE TERMINATION AGREEMENT (this "Agreement") is made and
entered into on January 29, 1993, by and between BSD Service Company, a
California corporation ("Sublessor") and THE BANK OF SAN DIEGO, a California
banking corporation ("Sublessee"), with reference to the Recitals below.
Recitals
A. Sublessor and Sublessee entered into that certain Sublease dated
October 25, 1988 (the "Sublease") pertaining to certain improved real property
located at 8690 Center Drive, La Mesa, California (the "Premises").
B. Sublessor and Sublessee mutually desire to terminate the Sublease, on
the terms and conditions below.
Agreement
NOW, THEREFORE, for and in consideration of the mutual covenants and
promises herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Effective Date. The Sublease shall remain in full force and effect
until the Closing (as defined in Section 2 of this Agreement).
2. Termination. The Sublease shall terminate on the "Closing" as defined
in that certain Branch Purchase Agreement dated June 30, 1992 (the "Purchase
Agreement") between Sublessee and Valle de Oro Bank, N.A., a national banking
association ("Valle de Oro Bank"). Sublessee shall fully comply with all
obligations under the Sublease through the Closing, including those provisions
relating to the condition of the Premises. Sublessee shall vacate the Premises
within fifteen (15) days after the Closing. Upon termination, the Premises shall
be left in its then "as is" condition, including all improvements, fixtures and
equipment to be transferred to Valle de Oro Bank pursuant to the Purchase
Agreement. Sublessee shall repair, at its sole cost and expense, any damage to
the Premises caused by removal of Sublessee's personal property, or by
Sublessee's failure to leave the Premises in a clean and orderly condition.
3. Payments. Sublessee shall continue to pay all rentals and other
charges under the Sublease through the Closing.
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<PAGE> 69
4. Miscellaneous. This Agreement may be executed in any number of
counterparts which together shall constitute the Agreement. If any party obtains
a judgment against any other party by reason of breach of this Agreement,
reasonable attorneys' fees as fixed by the court shall be included in such
judgment. This Agreement and the terms and provisions hereof shall inure to the
benefit of and be binding upon the heirs, successors and assigns of the parties.
This Agreement shall be construed. and enforced in accordance with the laws of
the state of California.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Sublessor: BSD SERVICE COMPANY, a California
corporation
By: /s/ MARILYN K. CRESON
----------------------------------
Marilyn K. Creson
Its: Chief Financial Officer
Sublessee: THE BANK OF SAN DIEGO, a California
banking corporation
By: /s/ MARILYN K. CRESON
----------------------------------
Marilyn K. Creson
Its: Executive Vice President and
Chief Financial Officer
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<PAGE> 70
CONSENT OF MASTER LESSOR
Master Lessor hereby consents to that certain assignment set forth in Section 2
of the Amendment No. 1 and Assignment Agreement dated as of January 29, 1993, by
and among Grossmont Land Co., BSD Service Company and Valle de Oro Bank, to
which this Consent of Master Lessor is attached, provided that Assignor shall
remain obligated for rental payments from the Assignment date through December
31, 1999, in the event of Assignee's default.
Dated: April 26, 1993
MASTER LESSOR: RAINBOW INVESTMENT CO.,
a California limited partnership
by CHEL CO.,
Its general partner
By: /s/ [SIG]
------------------------------
<PAGE> 71
ESTOPPEL CERTIFICATE
Gentlemen:
The undersigned hereby certifies as follows:
1. Grossmont Land Co., as "Tenant", and Rainbow Investment Co., as
"Landlord" entered into a written lease dated January 16, 1963, (the "Lease"),
in which Landlord leased to Tenant and Tenant leased from Landlord, certain
"Premises" described in said Lease and located in the City of La Mesa, County of
San Diego, California.
2. The Lease represents the entire agreement between Landlord and
Tenant. The Lease is in full force and effect and has not been amended,
modified, supplemented or assigned, except for an Amendment to Lease dated April
30, 1963.
3. Tenant has accepted the Premises and presently occupies them, and is
paying rent on a current basis. Tenant has no setoffs, claims, or defenses to
the enforcement of the Lease.
4. As of the date of this certificate, Tenant is not in default in the
performance of any of its obligations under the Lease, and has not committed any
breach of the Lease. No notice of default has been given to Tenant, and no event
has occurred which, with the passage of time or the giving of notice, or both,
would constitute a breach of the Lease.
5. Landlord has no claim against Tenant for any security deposit,
prepaid fee or charge, or prepaid rent.
6. The term of the Lease commenced on January 16, 1963, and will
terminate on January 10, 2015.
7. No actions, whether voluntary or otherwise, are pending against
Landlord under the bankruptcy laws of the United States.
8. All tenant improvements to be constructed by Tenant under the Lease
have been satisfactorily completed, accepted by Landlord, and are in good
condition, reasonable wear and tear excepted.
9. Tenant has no options to extend or renew the term of the Lease, no
options or rights of first refusal or expansion with respect to the Premises or
other buildings owned by Landlord, and no option to purchase the Premises or any
part hereof.
<PAGE> 72
10. The undersigned acknowledges that you are relying on this
certificate, and warrants, represents and declares, for your benefit and that of
your successors and assigns, that each of the foregoing certifications is true,
correct and complete.
IN WITNESS WHEREOF, the Landlord has executed this Estoppel Certificate
as of April 26, 1993.
RAINBOW INVESTMENT CO.
A limited partnership
By its General Partner CHEL, INC.
By /s/ [SIG]
---------------------------------
<PAGE> 73
ESTOPPEL CERTIFICATE
Gentlemen:
The undersigned hereby certifies as follows:
1. BSD Service Company, as "Tenant", and Grossmont Land Co., at
"Landlord", entered into a written lease dated August 6, 1982, (the "Lease"),
in which Landlord leased to Tenant and Tenant leased from Landlord, certain
"Premises" described in said Lease and located in the City of La Mesa, County of
San Diego, California.
2. The Lease represents the entire agreement between Landlord and
Tenant. The Lease is in full force and effect and has not been amended,
modified, supplemented or assigned by Landlord.
3. Tenant has accepted the Premises and presently occupies them, and is
paying rent on a current basis. Tenant has no setoffs, claims, or defenses to
the enforcement of the Lease.
4. As of the date of this certificate, Tenant is not in default in the
performance of any of its obligations under the Lease, and has not committed any
breach of the Lease. No notice of default has been given to Tenant, and no event
has occurred which, with the passage of time or the giving of notice, or both,
would constitute a breach of the Lease.
5. No rents have been prepaid. The current base rent is One Thousand Six
Hundred Ninety and 65/100 Dollars ($1,690.65) per month. Landlord holds no
security deposit.
6. Landlord has no claim against Tenant for any other security deposit,
prepaid fee or charge, or prepaid rent except as provided in Paragraph 6 of this
certificate.
7. The term of the Lease commenced on November 15, 1982, and will
terminate on December 31, 1999.
8. No actions, whether voluntary or otherwise, are pending against
Landlord under the bankruptcy laws of the United States.
9. All tenant improvements to be constructed by Tenant under the Lease
have been satisfactorily completed, accepted by Landlord, and are in good
condition, reasonable wear and team excepted.
10. Tenant has no options to extend or renew the term of the Lease, no
options or rights of first refusal or expansion with respect to the Premises or
other buildings owned by Landlord, and no option to purchase the Premises or any
part hereof.
<PAGE> 74
11. The undersigned acknowledges that you are relying on this
certificate, and warrants, represents and declares, for your benefit and that of
your successors and assigns, that each of the foregoing certifications is true,
correct and complete.
IN WITNESS WHEREOF, the Landlord has executed this Estoppel Certificate
as of April 15, 1993.
GROSSMONT LAND CO.
A limited partnership
By its General Partner Denele Co.
A limited partnership
By its General Partner Delen Management Co.
An Illinois Corporation
By /s/ THOMAS J. MAGEE
----------------------------------
Thomas J. Magee, President
<PAGE> 75
BSD Service Company
ESTOPPEL CERTIFICATE
Grossmont Land Co.
5500 Grossmont Center Dr., Ste. 213
La Mesa, CA 91942
Gentlemen:
The undersigned hereby certifies as follows:
1. Grossmont Land Co., a California limited partnership ("Landlord") and
BSD Service Company, a California corporation ("Tenant") entered into a Lease
dated August 6, 1982 ("Lease"), in which Landlord leased to Tenant, and Tenant
leased from Landlord, certain "Premises" described in said Lease and located in
the City of La Mesa, County of San Diego, California.
2. The Lease represents the entire agreement between Landlord and
Tenant. The Lease is in full force and effect and has not been amended,
modified, supplemented or assigned by Tenant, except as follows (if none, state
so): none /s/ MKC
---------------------------------------------------------------------------
3. Tenant has sublet, with Landlord's prior consent, portions of the
Premises to The Bank of San Diego ("Bank of San Diego") and Ervin S. Wheeler,
M.D. ("Wheeler"), as "Sublessees." Tenant provided its prior consent to
Wheeler's sublease of a portion of the Premises to John D. Carter, D.D.S.
("Carter") as "Sub-Sublessee."
4. Tenant has accepted the Premises and presently occupies the same
(along with Sublessees and Sub-Sublessee), and is paying rent on a current
basis. Tenant has no setoffs, claims, or defenses to the enforcement of the
Lease.
5. As of the date of this certificate, Tenant is not in default in the
performance of any of its obligations under the Lease, and has not committed any
breach of the Lease. No notice of default has been given to Tenant, and no event
has occurred which, with the passage of time or the giving of notice, or both,
would constitute a breach of the Lease.
6. As of the date of this certificate, Sublessees are not in default in
the performance of any of their obligations under their respective subleases,
and have not committed any breach of their respective subleases. No notice of
default has been given to Sublessees, and no event has
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<PAGE> 76
occurred which, with the passage of time or the giving of notice, or both, would
constitute a breach of their respective subleases. Tenant is not aware of any
default in the performance of the Carter sublease, and Tenant has approved of no
other subletting by Wheeler other than to Carter.
7. As of the date of this certificate, Landlord is not in default in the
performance of any of its obligations under the Lease, and has not committed any
breach of the Lease. No notice of default has been given to Landlord and no
event has occurred which, with the passage of time or the giving of notice, or
both, would constitute a breach of the Lease.
8. No rents have been prepaid, other than (if none, state so): none.
Tenant's current base rent is FIFTEEN THOUSAND EIGHT HUNDRED FORTY FOUR AND
SIXTY-SIX CENTS ($15,844.66*) per month. The amount of Tenant's security
deposit paid to Landlord is none ($0) plus operating expense, which is
currently $34 per month.
9. Tenant has no claim against Landlord for any other security deposit,
prepaid fee or charge, or prepaid rent except as provided in Paragraph 8 of this
certificate.
10. The term of the Lease commenced on November 15, 1982, and will
terminate on December 31, 1999.
11. No actions, whether voluntary or otherwise, are pending against
Tenant under the bankruptcy laws of the United States.
12. All tenant improvements to be constructed by Landlord under the
Lease have been satisfactorily completed, accepted by Tenant, and are in good
condition, reasonable wear and tear excepted.
13. Tenant has no options to extend or renew the term of the Lease, no
options or rights of first refusal or expansion with respect to the Premises or
other buildings owned by Landlord, and no option to purchase the Premises or any
part thereof, except as follows (if none, state so): none.
14. The undersigned intends to assign its rights and obligations under
the Lease to Valle de Oro Bank pursuant to that certain Amendment No. 1 and
Assignment Agreement dated January 29, 1993.
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<PAGE> 77
15. The undersigned acknowledges that Landlord is relying upon this
certificate, and Tenant warrants, represents and declares, for Landlord's
benefit and that of its successors and assigns, that each of the foregoing
certifications is true, correct and complete.
IN WITNESS WHEREOF, the Tenant has executed this Estoppel Certificate as
of January 29, 1993.
TENANT:
BSD SERVICE COMPANY, a California
corporation
By: /s/ MARILYN K. CRESON
---------------------------------
Marilyn K. Creson
Its: Chief Financial Officer
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<PAGE> 78
Ervin Wheeler
ESTOPPEL CERTIFICATE
BSD Service Company
225 Broadway, Ste. 1309
San Diego, CA 92101
Gentlemen:
The undersigned hereby certifies as follows:
1. BSD Service Company, a California corporation ("Sublessor") and Ervin
S. Wheeler, M.D., a medical corporation ("Sublessee") entered into a Sublease
dated March 26, 1984 ("Sublease"), in which Sublessor leased to Sublessee, and
Sublessee leased from Sublessor, certain "Premises" described in said Sublease
and located in the City of La Mesa, County of San Diego, California.
2. The Sublease represents the entire agreement between Sublessor and
Sublessee. The Sublease is in full force and effect and has not been amended,
modified, supplemented or assigned by Sublessor except by that certain Extension
of Sublease dated August 2, 1991.
3. Sublessee has sublet, with Sublessor's prior consent, a portion of
the Premises to John G. Carter, D.D.S. ("Carter") as "Sub-Sublessee."
4. Sublessee has accepted the Premises and presently occupies the same
(along with Sub-Sublessee), and is paying rent on a current basis. Sublessee has
no setoffs, claims, or defenses to the enforcement of the Sublease.
5. As of the date of this certificate, Sublessee is not in default in
the performance of any of its obligations under the Sublease, and has not
committed any breach of the Sublease. No notice of default has been given to
Sublessee, and no event has occurred which, with the passage of time or the
giving of notice, or both, would constitute a breach of the Sublease.
6. As of the date of this certificate, Sub-Sublessee is not in default
in the performance of any of his obligations under the Carter sublease, and has
not committed any breach of the Carter sublease. No notice of default has been
given to Sub-Sublessee, and no event has occurred which, with the passage of
time or the giving of notice, or both, would constitute a breach of the Carter
sublease.
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<PAGE> 79
7. As of the date of this certificate, Sublessor is not in default in
the performance of any of its obligations under the Sublease, and has not
committed any breach of the Sublease, no notice of default has been given to
Sublessor and no event has occurred which, with the passage of time or the
giving of notice, or both, would constitute a breach of the Sublease.
8. No rents have been prepaid, other than (if none, state so): none.
Sublessee's current base rent is Five Thousand Five Hundred Sixty Two and
Thirteen* Dollars ($5,562.13*) per month. The amount of the security deposit
paid to Sublessor is zero** Dollars $0. *plus $250/mo tenant improvement
repayment until January 31, 1994 plus direct expenses which vary.
9. Sublessee has no claim against Sublessor for any other security
deposit, prepaid fee or charge, or prepaid rent except as provided in Paragraph
8 of this certificate.
10. The term of the Sublease commenced on February 1, 1984, and will
terminate on December 31, 1999.
11. No actions, whether voluntary or otherwise, are pending against
Sublessee under the bankruptcy laws of the United States.
12. All tenant improvements to be constructed by Sublessor under the
Sublease have been satisfactorily completed, accepted by Sublessee, and are in
good condition, reasonable wear and tear excepted.
13. Sublessee has no options to extend or renew the term of the
Sublease, no options or rights of first refusal or expansion with respect to the
Premises or other buildings owned by Sublessor, and no option to purchase the
Premises or any part thereof, except as follows (if none, state so): None.
14. The undersigned acknowledges that it has been informed that
Sublessor intends to assign its rights and obligations under the Sublease to
Valle de Oro Bank pursuant to that certain Amendment No. 1 and Assignment
Agreement dated January 29, 1993.
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<PAGE> 80
15. The undersigned acknowledges that Sublessor is relying on this
certificate, and Sublessee warrants, represents and declares, for Sublessor's
benefit and that of your successors and assigns, that each of the foregoing
certifications is true, correct and complete.
IN WITNESS WHEREOF, the Sublessee has executed this Estoppel Certificate
as of January 29, 1993
SUBLESSEE:
ERVIN S. WHEELER, M.D., a Medical
Corporation
By: /s/ ERVIN S. WHEELER
---------------------------------
Ervin S. Wheeler, President
-3-
<PAGE> 81
AGREEMENT RE RESTORATION
OF LEASED PREMISES
This Agreement Re Restoration of Leased Premises ("Agreement") is
entered into as of January 30, 1996, by and between Grossmont Land Company, a
California limited partnership ("Landlord") and Valle de Oro Bank, N.A., a
national banking association ("Tenant"). Landlord and Tenant may be referred to
individually or collectively as a "Party" or the "Parties," respectively.
STATEMENT OF BACKGROUND INFORMATION
A. Landlord and BSD Service Company, a California corporation ("BSD")
entered into that certain Lease dated August 6, 1982 ("Lease") in certain real
property, improved with a two-story, office building, located at 8690 Center
Drive, La Mesa, California ("Premises"). BSD and Ervin S. Wheeler, M.D., a
medical corporation ("Wheeler") entered into a sublease of a portion of the
Premises pursuant to a sublease dated March 26, 1984, as extended ("Wheeler
Sublease") . Wheeler and John D. Carter, DDS ("Carter"), entered into a further
sublease of a portion of the Premises, dated November 1, 1991 ("Carter
Sublease").
B. Pursuant to that certain Branch Purchase and Assumption Agreement
between BSD and Tenant, dated June 30, 1992, Tenant agreed, among other things,
to acquire BSD's interest in the Lease. Pursuant to that certain Amendment
Number One and Assignment Agreement, entered into as of January 29, 1993
("Assignment Agreement"), Landlord BSD and Tenant agreed to assign the Lease to
Tenant, and to certain modifications and amendments to the Lease.
C. From on or about February 1, 1993, the Tenant has occupied a portion
of the Premises as a retail banking establishment. Wheeler and Carter have
occupied a portion of the Premises for medical office facilities, from on or
about the dates of the Wheeler Sublease and the Carter Sublease, respectively.
The Lease is in full force and effect and there are no uncured defaults by
Landlord or Tenant presently existing thereunder.
D. On the evening of December 30, 1995, a fire occurred on the Premises,
resulting in the total destruction of the improvements thereon and rendering the
Premises unusable for the tenancy of Tenant, Wheeler or Carter. As of the date
of this
<PAGE> 82
Agreement, Tenant has undertaken and completed the demolition of the damaged
Premises.
E. The Parties have determined to restore the Premises and have agreed
that Tenant will assume responsibility with respect to the restoration of the
Premises, and agreed to the respective rights and duties of the Parties with
respect thereto, on the terms and conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the Mutual covenants and agreements
contained herein, and for other valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Parties agree as follows:
1. RESTORATION OF PREMISES.
a. Undertaking to Restore. The Parties acknowledge and agree that the
Premises have been destroyed and are unsuitable for any use whatsoever. The
Parties agree that the Lease shall not terminate as a result of the destruction
and that Tenant agrees to undertake all responsibility for the expeditious
restoration of the Premises, in accordance with the provisions of this
Agreement. Tenant agrees that it will use its best efforts to complete the
restoration in a prompt manner and will apply for and prosecute to completion
all necessary governmental approvals or permits as expeditiously as possible.
Landlord agrees to cooperate with Tenant in any manner reasonably necessary to
the prompt and proper completion of the restoration. The Parties agree that if a
building permit for the restoration has not been issued by the City of La Mesa
on or before July 31, 1996, Tenant may terminate the Lease on ten (10) days
notice delivered to Landlord thereafter.
b. Insurance Coverage. Tenant has maintained a Financial Institutions
Insurance Coverage policy of insurance issued by the Federal Insurance Company
of the Chubb Group of Insurance Companies (Policy No. 3524-87-22), including
fire and extended coverage insurance covering the building and its components
comprising the Premises. Landlord has maintained a Commercial General Public
Liability and Property policy of insurance issued by the Reliance Insurance
Company (Policy No. QB 8580502 00), including fire and extended coverage
insurance covering the building and its components comprising the Premises.
Tenant and Landlord have each advised their respective insurance carrier of the
occurrence of the loss, in accordance with the provisions of the applicable
policy. Tenant and Landlord shall cooperate to make the loss adjustment with the
insurance companies insuring the loss and to claim and obtain the proceeds
2
<PAGE> 83
of the relevant insurance policies to fund the complete restoration of the
Premises, any proceeds payable pursuant to rent, business interruption or other
expense coverage and proceeds payable pursuant to any other losses of Landlord,
Tenant, or others claiming through Tenant. Tenant shall reimburse Landlord the
sum of $2,500.00, representing one-half (1/2) of the deductible payable under
Landlord's business interruption insurance.
c. Insurance Proceeds. Upon receipt by it of insurance proceeds
pertaining to the restoration of the Premises, Tenant shall hold such proceeds
in a separate, insured, interest-bearing account as a fiduciary for the benefit
of Tenant and Landlord, to be disbursed with respect to the restoration of the
Premises in accordance with this Agreement. Upon receipt by it of insurance
proceeds pertaining to the restoration of the Premises, Landlord shall deposit
such proceeds in the separate fiduciary account established by Tenant for the
benefit of Tenant and Landlord. Upon receipt of insurance proceeds pertaining to
any loss or damage to Landlord for lost rent, business interruption or other
loss sustained by Landlord, Tenant shall hold such proceeds as a fiduciary for
the benefit of Landlord and shall promptly disburse such proceeds to Landlord.
Pursuant to a written agreement to be entered into by Tenant, subject to
Landlord's reasonable consent, all proceeds pertaining to restoration of the
Premises shall be disbursed pursuant to a fund control established at Dixieline
Lumber Company ("Fund Control"). Tenant shall from time to time advance the
necessary funds from the fiduciary account to Fund Control for the purpose of
funding the restoration.
d. Duties of Fund Control. All sums deposited with Fund Control shall
be held for the following purposes and Fund Control shall have the following
powers and duties:
(1) The sums shall be paid in installments by Fund Control to the
contractor retained by Tenant as construction progresses, for payment of the
cost of restoration. A retention fund of not less than Five Percent (5%) shall
be established that will be paid to the contractor on completion of restoration,
payment of all costs, expiration of all applicable lien periods, and proof that
the Premises are free of all mechanics' liens and lienable claims.
(2) Payments shall be made on presentation of certificates or
vouchers showing the amount due from the architect or engineer retained by
Tenant and empowered pursuant to the standard fund control agreement to
authorize disbursements. If Fund Control, in its reasonable discretion,
determines that the certificates or vouchers are being improperly
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<PAGE> 84
approved by the architect or engineer retained by Tenant, Fund Control shall
have the right to appoint an architect or an engineer to supervise construction
and to make payments on certificates or vouchers approved by the architect or
engineer retained by Fund Control. The reasonable expenses and charges of the
architect or engineer retained by Fund Control shall be paid by Fund Control out
of the trust fund.
(3) If the sums held by Fund Control are not sufficient to pay the
actual cost of restoration, both Parties shall bear equally any shortfall and
shall deposit with Fund Control their respective contributions toward the amount
of the deficiency with Fund Control within twenty (20) days after request by
Fund Control indicating the amount of the deficiency. For purposes of this
Agreement, the "cost of restoration," in addition to construction fees and
costs, shall include without limitation the fees and charges of Fund Control,
all supervision charges imposed by third parties, all reasonable design fees and
charges, and all permit fees and other similar charges imposed by the City of La
Mesa or any other municipal agency. "Cost of construction" shall include charges
or allocations of cost pertaining to personnel employed by Tenant for
construction coordination or other similar functions only to the extent such
costs are reimbursable from insurance proceeds and shall be paid fully by Tenant
to the extent not so reimbursed.
(4) Landlord's undisbursed insurance proceeds pertaining to the
restoration held by Tenant or Fund Control upon the completion of the
restoration, the recordation of notice of completion and the satisfaction of all
liabilities arising from the restoration, shall be delivered to Grossmont Bank
in reduction of Landlord's outstanding indebtedness with respect to the
Premises. Undisbursed funds held by Tenant or Fund Control shall be deemed to be
deposits by the Parties to Fund Control pursuant to Paragraph 1.d.(3) to the
extent thereof, and shall be reimbursed to the Parties in proportion to their
respective deposits.
(5) Both Parties shall promptly execute all documents and perform
all acts reasonably required by Fund Control to perform its obligations under
this paragraph.
e. Rental Abatement. Monthly rent under Paragraph 4.B. of the Lease
shall be abated during the period from December 31, 1995, through the date a
certificate of occupancy is issued by the City of La Mesa with respect to the
Premises, subject to Landlord's right to recover any rent or business
interruption insurance payable; provided, however, that in no event shall the
period of rental abatement extend beyond January 1, 1997. Charges under the
Lease for real property taxes will not be
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<PAGE> 85
abated, and Tenant will continue to perform landscape and parking area
maintenance during the period of restoration. Tenant and Landlord will cooperate
to claim a reduction in ad valorem real property taxes during the period of
destruction and restoration.
2. PROCEDURE FOR RESTORING PREMISES
a. Plans and Specifications. Within seventy-five (75) days after
execution of this Agreement, Tenant shall cause to be prepared final plans and
specifications and working drawings complying with applicable laws that will be
necessary for restoration of the Premises. The plans and specifications and
working drawings must be approved by Landlord. The Parties agree generally that
the Premises will be restored with a building at least equal in value to the
building existing immediately prior to the fire and as nearly similar in
character, appearance and functionality as is reasonable and practicable, but
that the Premises may contain up to ten percent (10%) greater square footage
(subject to applicable parking availability restrictions). Landlord shall not be
required to make additional parking available to the Premises for purposes of
the restoration. Landlord shall have fifteen (15) days after receipt of the
plans and specifications and working drawings to either approve or disapprove
the plans and specifications and working drawings and return them to Tenant. If
Landlord reasonably disapproves the plans and specifications and working
drawings,, Landlord shall notify Tenant of its objections and Landlord's
proposed solution to each objection. Tenant acknowledges that the plans and
specifications and working drawings shall be subject to approval of the
appropriate government bodies and that they will be prepared in such a manner as
to obtain that approval,.
b. Change Orders. Tenant in its sole discretion may initiate and
approve a change order to the plans and specifications, as approved by Landlord,
in those instances in which the change (i) does not materially alter the
character, appearance or functionality of the Premises, (ii) increases the cost
of the restoration by an amount less than $5,000 or, when combined with other
change orders approved by Tenant under this paragraph, increases the aggregate
cost of the restoration by an amount less than $50,000, and (iii) is reasonably
necessary to expedite the completion of the restoration. Tenant shall promptly
provide Landlord with a copy of any change order approved by Tenant under this
paragraph. In the event that Landlord's approval of a change order is required
under this paragraph, Landlord shall approve or disapprove such change orders
within three (3) working days of receipt.
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<PAGE> 86
c. Procedure. The restoration shall be accomplished as follows:
(1) Tenant shall complete the restoration within two hundred forty
(240) working days after final plans and specifications and working drawings
have been approved by the appropriate government bodies and all required permits
have been obtained (subject to a reasonable extension for delays resulting from
causes beyond Tenant's reasonable control).
(2) Tenant shall retain a licensed contractor that is bondable.
The contractor shall be required to carry public liability and property damage
insurance, standard fire and extended coverage insurance, with vandalism and
malicious mischief endorsements, during the period of construction. Such
insurance shall contain waiver of subrogation clauses in favor of Landlord and
Tenant in accordance with the provisions of paragraph 11(H) of the Lease.
(3) Tenant shall notify Landlord of the date of commencement of
the restoration not later than two (2) days before commencement of the
restoration to enable Landlord to post and record notices of nonresponsibility.
The contractor retained by Tenant shall not commence construction until a
completion bond has been delivered to Landlord to insure completion of the
construction and evidence of the bond has been recorded.
(4) Tenant shall accomplish the restoration in a commercially
reasonable manner that will cause the least inconvenience, annoyance, and
disruption in and to adjoining and adjacent areas of Grossmont Shopping Center.
(5) On completion of the restoration, Tenant shall immediately
record a notice of completion in the County of San Diego.
(6) The restoration shall not be commenced until sums sufficient
to cover the cost of restoration are placed with Fund Control as provided in
Paragraph 1.c.
3. INSURANCE.
a. Fire and Extended Coverage Insurance. Tenant shall provide or
cause to be provided and shall keep in full force and effect a valid fire and
extended coverage insurance policy insuring the Premises and the improvements
located on the Premises, against loss or damage by fire or other hazards, in an
amount sufficient to provide for a full replacement of the improvements, with a
course of construction endorsement and a standard loss payable endorsement
naming Landlord as payee. The
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obligation of Tenant to obtain insurance under this Agreement shall be in
addition to its obligations to obtain insurance required by the Lease but shall
be considered a cost of construction of the restoration under this Agreement.
b. Other Insurance Coverage. Tenant shall provide or cause to be
provided by Tenant's contractor, and shall keep in full force and effect all
other insurance coverage reasonably required by Landlord, issued by companies
satisfactory to Landlord, including, without limitation: (a) worker's
compensation insurance; (b) builder's risk completed value hazard insurance,
with the standard loss payable endorsement naming Landlord and Tenant as payees,
as their interests may appear; and (c) contractor's liability, property damage
and personal injury insurance in amounts and with insurance companies
satisfactory to Landlord, with standard loss payable endorsements naming
Landlord and Tenant as payees as their interests may appear.
c. Proof of Coverage. Immediately upon demand of Landlord, Tenant
shall submit schedules, certificates of insurance, declarations or duplicate
policies evidencing the coverage required by this Agreement. All such insurance
policies shall contain a clause giving Landlord a minimum of thirty (30) days'
notice if such insurance policy is canceled.
4. RIGHTS AND REMEDIES.
a. Right to Enter. Landlord or its designated agent shall have the
right at all reasonable times to enter upon the Premises during the period of
construction and inspect the work. Landlord is under no obligation to construct
or supervise construction of the restoration. Inspection by Landlord of the
Premises is for the sole purpose of protecting Landlord's interest under the
Lease and is not to be construed as a representation by Landlord that there will
be compliance on anyone's part with the plans and specifications or that the
construction will be free from faulty material or workmanship. Tenant shall rely
entirely upon its own supervision and inspection in determining the quality and
suitability of the plans and specifications, materials and workmanship,
conformity of the work to the plans and specifications, and performance of
architects, contractors, subcontractors and materialmen.
b. Cessation; Completion. If the construction of the Premises is at
any time discontinued (unless such discontinuance is due to a force of nature or
other cause beyond Tenant's reasonable control) or abandoned for a period of
fifteen (15) days, then Landlord may at its option, upon ten (10) days prior
written notice to Tenant, declare Tenant to be in default under this Agreement
and may then, if Landlord elects, take possession
7
<PAGE> 88
of the Premises together with all materials, equipment and improvements on the
Premises, whether affixed to the Premises or not, and perform, cause to be
performed, or let contracts for, the completion of the improvements
substantially according to the plans and specifications referred to in this
Agreement.
c. Mechanic's Liens and Notices to Withhold. If a notice to withhold
is filed with or served on Landlord, or if a mechanic's lien pursuant to
Division 3, Part 4, Title 15 of the California Civil Code is recorded, Tenant
shall indemnify and hold harmless from any damage or liability arising
therefrom, including reasonable attorney's fees and costs.
d. Tenant's Indemnification. Tenant, at its sole cost, shall
indemnify and defend Landlord against any action, claim, damages, losses or
liabilities of any nature whatsoever, arising out of, or related to the
subtenancies of Wheeler or Carter or to the construction of the restoration,
including, without limiting the generality of the foregoing, any claim for
non-payment of construction work, labor, services, equipment or materials, any
claim of bodily injury, or any claim of property damage.
e. Landlord's Indemnification. Landlord, at its sole cost, shall
indemnify and defend Tenant against any action, claim, damages, losses or
liabilities of any nature whatsoever, arising out of the restoration, legally
caused by any act or omission of Landlord, Landlord's agents, employees, or
contractors, during the period of construction of the restoration, including,
without limiting the generality of the foregoing, bodily injury or property
damage of any person.
5. MISCELLANEOUS.
a. Attorneys' Fees and Costs. In the event of litigation relating to
or arising from this Agreement, or brought to enforce the terms of this
Agreement or any of the documents executed in connection therewith, the
prevailing party shall be entitled to reasonable attorneys' fees and costs. Each
Party shall bear its own costs and attorneys' fees related to the negotiation
and preparation of this Agreement.
b. Dispute Resolution. The Parties shall make a good faith effort to
settle any dispute or claim arising under this Agreement. If the Parties fail to
resolve such disputes or claims, the Parties agree first to try in good faith to
settle the dispute by mediation under the Commercial Mediation Rules of the
American Arbitration Association, before resorting to arbitration. Thereafter,
any remaining unresolved controversy or claim arising out of or relating to
this Agreement, or the breach
8
<PAGE> 89
thereof, shall be settled by arbitration in San Diego county, California, in
accordance Section 23 of the Lease.
c. Entire Agreement. This Agreement contains the entire agreement of
the Parties pertaining to the restoration of the Premises, and supersedes any
prior written or oral agreements between them concerning the subject matter
contained herein, including the provisions of Section 12 of the Lease, except to
the extent the Lease is not clearly inconsistent with the provisions of this
Agreement. Both Parties expressly waive any rights or obligations contained in
Section 12 of the Lease which are inconsistent with the terms and conditions of
this Agreement, including the right to terminate the Lease upon destruction of
the Premises. There are no representations, agreements, arrangements, or
understandings, oral or written, between the Parties hereto, relating to the
subject matter contained in this Agreement which are not fully expressed herein.
The provisions of this Agreement may only be waived, altered, amended or
repealed, in whole or in part, upon the written consent of all Parties to this
Agreement.
d. Partial Invalidity. In the event that any term, covenant,
condition or provision of this Agreement shall be held by a court of competent
jurisdiction to be invalid or against public policy, the remaining provisions
shall continue in full force and effect.
e. No Waiver. The waiver by one Party of the performance of any
covenant, condition or promise shall not invalidate this Agreement, nor shall it
be considered as a waiver by such Party of any other (or the enforcement for
subsequent breaches or failures of the same) covenant, condition, or promise.
The delay in pursuing any remedy or in insisting upon full performance for any
breach or failure of any covenant, condition or promise shall not prevent a
Party from later pursuing remedies or insisting upon full performance for the
same or similar breaches or failures.
f. Headings. The headings, subheadings and numbering of the different
paragraphs of this Agreement are inserted for convenience or reference only and
are not to be taken as part of this Stipulation or to control or affect the
meaning, construction or effect of the same.
g. Governing Law. This Agreement shall be deemed to have been
executed and delivered within the State of California, and the rights and
obligations of the Parties hereto shall be construed and enforced in accordance
with, and governed by, the laws of the State of California.
9
<PAGE> 90
h. Successors in Interest. Subject to any restrictions against
assignment contained herein, and to any legal limitations on the power of the
signatories to bind nonsignatories to this Agreement, this Agreement shall inure
to the benefit of, and shall be binding upon, the assigns, successors in
interest, personal representatives, executors, estate, heirs, legatees, agents
and related entities of each of the Parties hereto.
i. Time Is of the Essence. Time is of the essence in the performance
of all obligations under this Agreement.
j. Necessary Acts. Each Party to this Agreement agrees to perform any
further acts and execute and deliver any further documents that may be
reasonably necessary to carry out the provisions of this Agreement.
k. Construction. Each Party has cooperated in the drafting and
preparation of this Agreement. In any construction to be made of this Agreement,
or any of its terms and provisions, the same shall not be construed against any
Party. If there are any inconsistencies between the terms of this Agreement and
any attached exhibits, the terms of the attached exhibits shall govern.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement Re
Reconstruction of Leased Premises as of the date first above written.
LANDLORD: GROSSMONT LAND CO., a California
limited partnership
By: Denele Co., an Illinois
limited parnership, general
partner
By: /s/ [SIG]
--------------------------------------
Its: President
-------------------------------------
TENANT: VALLE DE ORO BANK, N.A., a national
banking association
By: /s/ WILLIAM V. EHLEN
---------------------------------------
William V. Ehlen
Its: President and Chief Executive
Officer
10
<PAGE> 1
EXHIBIT 10.13
Lease between Valle de Oro Bank, N.A. and Reseda Investors dated November 15,
1987
<PAGE> 2
SHOPPING CENTER LEASE
1. PARTIES.
This Lease, dated as of this 15th day of November, 1987, is made by
------ --------- --
and between RESEDA INVESTORS a California General Partnership (herein called
"Landlord") and Valle de Oro Bank (herein called "Tenant").
------------------
2. PREMISES.
Landlord does hereby lease to Tenant and Tenant hereby leases from Landlord
that certain space (herein called "Premises"), having dimensions of
approximately 64 feet in frontage by 64 feet in depth and containing
---- ----
approximately 4,000 square feet of floor area in a building (herein called
------
"Building") in the Rancho San Diego Shopping Center (herein called "Shopping
------------------
Center"). Subject to Articles 3.B. and 3.C. below, the location and dimensions
of said Premises are delineated on Exhibit "A" attached hereto and incorporated
by reference herein. Said Premises are located in the City of San Diego, County
of San Diego, State of California.
This Lease is subject to the terms, covenants and conditions herein set
forth and the Tenant covenants as a material part of the consideration for this
Lease to keep and perform each and all of said terms, covenants and conditions
by it to be kept and performed.
3. CONSTRUCTION OF BUILDING AND LEASED PREMISES.
3.A. Construction of Building.
Subject to Article 3.C., Landlord agrees, on or before 12 months from
execution of this Lease, to substantially complete the construction of the
Building, including the Common Area landscaping and improvements designated in
yellow on Exhibit "A." The time during which Landlord is delayed in construction
of the Premises by (a) the acts of God, (b) stormy or inclimate weather which
delays the work, (c) any strikes, boycotts or like obstructive actions by
employees or labor organizations which are beyond the control of Landlord and
which it cannot reasonably overcome,
<PAGE> 3
(d) action or inaction of governmental agencies, or (e) delays caused by Tenant
shall be added to the time for completion by a fair and reasonable allowance.
This lease is subject to approval of plans and specifications approved by
tenant and the completion of improvements according to approved plans.
3.B. Landlord's Work.
Landlord shall at its cost and expense construct the Premises for
Tenant's use and occupancy in accordance with plans and specifications prepared
by Landlord or Landlord's architect, incorporating in such construction all
items of work described as Landlord's Work in Exhibit "B."
3.C. Building Alterations and Additions.
Landlord also reserves the right to construct other buildings or
improvements in the Shopping Center from time to time and to make alterations
thereof or additions thereto. Landlord further reserves the right to repair the
roof of the building in which the Premises are located.
3.D. Location of Premises.
The purpose of the site plan attached hereto as Exhibit "A" is to
show the approximate location of the Premises. Landlord reserves the right at
any time to relocate, and adjust the size of the various buildings, contents,
automobile parking areas, and other common areas as shown on said site plan,
provided, however, that Landlord shall not materially relocated Tenant's
Premises within the Shopping Center without Tenant's consent.
4. USE AND COMPETITION.
4.A. Use.
Tenant shall use the Premises for Banking and related financial
services or services permitted to banks and shall not use or permit the
Premises to be used for any other purpose.
4.B. Competition.
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<PAGE> 4
5. MINIMUM RENT.
5.A. Payment.
Tenant agrees to pay to Landlord as Minimum Rent, without notice or
demand, the monthly sum of six thousand three hundred twenty-one and 85/100
($6,321.85. (The minimum rent) Dollars, in advance, on or before the first day
of each and every successive calendar month during the term hereof, except the
first month's rent shall be paid upon the execution hereof. The rental shall
commence (check applicable box):
90 days after substantial completion of Landlord's Work as set forth in
Exhibit "B" attached hereto and incorporated herein by reference, or when
the Tenant opens for business, whichever is sooner. Landlord agrees that
it will, at its sole cost and expense as soon as is reasonably possible
after the execution of this Lease, commence and pursue to completion the
improvements to be erected by Landlord to the extent shown on the
attached Exhibit "B" labeled "Description of Landlord's Work and Tenant's
Work." The term "substantial completion of the Premises" is defined as
the date on which Landlord or its architect notifies Tenant in writing
that the Premises are substantially complete to the extent of Landlord's
Work specified in Exhibit "B" hereof, with the exception of such work as
Landlord cannot complete until Tenant performs necessary portions of its
work. Tenant shall commence the installation of fixtures, equipment, and
any of Tenant's Work as set forth in said Exhibit "B", promptly upon
substantial completion of Landlord's Work in the Premises and shall
diligently prosecute such installation to completion, and shall open the
Premises for business not later than the expiration of said 90 day period.
Rent for any period which is for less than one (1) month shall be a prorated
portion of the monthly installment herein based upon a thirty (30) day month.
Said rental shall be paid to Landlord, without deduction or offset, in lawful
money of the United States of America, and at such place as Landlord may from
time to time designate in writing.
In the event that Tenant shall fail to pay the minimum monthly rent, or
any additional rent within five (5) days after the same has become due,
Landlord shall be entitled to recover from Tenant five (5) percent of the
amount due as a late charge.
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<PAGE> 5
5.B. Minimum Rental.
The minimum rental as set forth in 5.A. above shall be increased if
the Consumer Price Index -- Los Angeles/Long Beach All Urban Wage Earners
(herein called "Index") as published by the United States Department of Labor's
Bureau of Labor Statistics, increases over the base period Index. The base
period Index shall be the Index for the calendar month which is four (4) months
prior to the month in which rentals commence. The base period Index shall be
compared with the Index for the same calendar month for each subsequent year
(comparison month). If the Index for any comparison month is higher than the
base period Index, then the minimum rental for the next year shall be increased
by the identical percentage commencing with the next rental commencement month.
In no event shall the minimum rental be less than that set forth in 5.A. above.
(By way of illustration only, if Tenant commenced paying rent in June of 1977,
then the base period Index is that for February 1977 (assume 176.3 and that
Index shall be compared to the Index for February 1978 (assume 185.8), and
because the Index for February 1978 is 5.39% higher, the minimum rental
commencing June, 1978, shall be 5.39% higher; likewise the Index for February
1979 shall be compared with the Index for February 1977.)
Should the Bureau discontinue the publication of the above Index, or
publish same less frequently, or alter same in some other manner, then Landlord
shall adopt a substitute index or substitute procedure which reasonably
reflects and monitors consumer prices.
Notwithstanding anything contained in this Article 5.B. to the contrary,
the annual cost of living adjustments shall not be less than 3% nor more than
5%. Cost of living adjustments to be calculated and compounded on an annual
basis, but adjusted every three (3) years.
6. TERM.
The lease term shall be 15 full years commencing on the date the rental
commences. The parties shall enter into the agreement attached as Exhibit "C"
when the actual commencement date (herein "Commencement Date") becomes known.
The parties hereto acknowledge that certain obligations under various articles
hereof may commence prior to the lease term, i.e., construction, hold harmless,
liability insurance, etc.; and the parties agree to be bound by these articles
prior to commencement of the lease term.
7. SECURITY DEPOSIT.
Concurrently with the Tenant's execution of this Lease, Tenant has
deposited with Landlord a sum equivalent to the first two months rent in the
total sum of $6,321.85. Said sum shall be held by Landlord as security for the
faithful performance by Tenant of all the terms, covenants, and conditions of
this Lease to be kept and performed by Tenant during the term hereof. If Tenant
defaults with respect to any provision of this Lease, including, but not
- 4 -
<PAGE> 6
limited to the provisions relating to the payment of rent, Landlord may (but
shall not be required to) use, apply or retain all or any part of this security
deposit for the payment of any rent or any other sum in default, or for the
payment of any amount which Landlord may spend or become obligated to spend by
reason of Tenant's default, or to compensate Landlord for any other loss or
damage which Landlord may suffer by reason of Tenant's default. If any portion
of said deposit is so used or applied Tenant shall, within five (5) days after
written demand therefor, deposit cash with Landlord in an amount sufficient to
restore the security deposit to its original amount and Tenant's failure to do
so shall be a default under this Lease. Landlord shall not be required to keep
this security deposit separate from its general funds, and Tenant shall not be
entitled to interest on such deposit. If Tenant shall fully and faithfully
perform every provision of this Lease to be performed by it, the security
deposit or any balance thereof shall be returned to Tenant (or, at Landlord's
option, to the last assignee of Tenant's interest hereunder) within ten (10)
days following expiration of the Lease term. In the event of termination of
Landlord's interest in this Lease, Landlord shall transfer said deposit to
Landlord's successor in interest. Tenant shall be notified of said transfer and
receive a receipt from the successor in interest with respect to the transfer
and the amount of security deposit funds received from Landlord.
8. ADDITIONAL CHARGES.
8.A. Percentage Rent.
- 5 -
<PAGE> 7
8.B. Adjustments.
I. In addition to the Minimum Rent provided in Article 5
hereinabove, and commencing at the same time as any possession commences under
this Lease, Tenant shall pay to Landlord as additional rent the following items,
herein called Adjustments:
(a) All real estate taxes and insurance premiums on the
Premises, including land, building, and improvements thereon.
-6-
<PAGE> 8
Said real estate taxes shall include all real estate taxes and assessments that
are levied upon and/or assessed against the Premises, including any taxes which
may be levied on rents.* Said insurance shall include all insurance premiums for
fire, extended coverage, liability, rental loss and any other insurance that
Landlord deems necessary on the Premise. Said taxes and insurance premiums for
the purpose of this provision shall be reasonably apportioned in accordance with
the total floor area of the Premises as it relates to the total rentable floor
area of the Shopping Center which is from time to time completed as of the first
day of each calendar quarter (provided, however, that if any tenants in said
Building or buildings pay taxes directly to any taxing authority or carry their
own insurance, as may be provided in their leases, their square footage shall
not be deemed a part of the floor area). Tenant shall pay taxes upon its leased
premises and provide its own insurance subject to approval of Landlord and
Landlord's lender.
(b) That percent of the total cost of the following items as Tenant's
total floor area bears to the total rentable floor area of the Shopping Center
which is from time to time completed as of the first day of each calendar
quarter (provided, however, that if any tenants in the shopping center do not
pay the cost of some or all of the items, as may be provided in their leases,
their square footage shall not be deemed a part of the floor area for those
items).
(i) All real estate taxes, including assessments, repair, and
replace common areas, parking lots, sidewalks, driveways, and other areas used
in common by the tenants of the Shopping Center.
(ii) All costs to supervise, police and administer said common
areas, parking lots, sidewalks, driveways, and other areas used in common by the
tenants or occupants of the Shopping Center, specifically including without
limitation, gardening and landscaping, the cost of public liability and property
damage insurance, fire and extended coverage insurance, rental loss insurance,
roof and building repairs, line painting, lighting, sanitary control, removal of
trash, rubbish, garbage and other refuse, reasonable reserves for replacements
and repairs, bookkeeping, real estate property taxes and assessments thereon,
governmental or other surcharges, if any, the cost of personnel to implement
such services, to direct parking, and to police the Shopping Center. Said costs
shall include a fee to Landlord to supervise and administer same in an amount
equal to fifteen (15) percent of the total costs of (i) above.
(iii) Any parking charges, utilities surcharges, or any other
costs levied, assessed or imposed by, or at the direction of, or resulting from
statutes or regulations, or interpretations thereof, promulgated by any
governmental authority in connection with the use or occupancy of the Premises
or the parking facilities serving the Premises.
* Tenant shall not pay any increases in real property taxes during the first two
(2) years of the lease due to a transfer, exchange or sale of the property.
Thereafter, Tenant to pay its full pro-rata share of said taxes.
-7-
<PAGE> 9
(c) If, at any time during the term of this Lease, the State of
California or any political subdivision of the State including any
county, city, city and county, public corporation, district, or any other
political entity or public corporation of this State, levies or assesses
against Landlord a tax, fee or excise on rents, on the square footage of the
Premises, on that act of entering into the Lease, or the occupancy of Tenant,
or levies or assesses against Landlord any other tax, fee or excise, however
described, including without limitation a so-called value added tax, as a
direct substitution in whole or in part for, or in addition to any real
property taxes, Tenant shall pay before delinquency that tax, fee or excise.
Tenant's share of any such tax, fee or excise shall be substantially the same as
Tenant's proportionate share of real property taxes as provided in this lease.
In addition, Tenant shall pay its proportionate share of the cost (amortized
over a reasonable period) of any capital improvements (i) to the Shopping
Center to reduce the Shopping Center costs and expenses or (ii) that are
required by any governmental law or regulation that was not applicable to the
Shopping Center at the time it was constructed, for which tenant is otherwise
required to contribute.
II. Upon commencement of rental Landlord shall submit to Tenant a
statement of the anticipated monthly Adjustments for the period between such
commencement and the following January and Tenant shall pay these Adjustments on
a monthly basis concurrently with the payment of the Rent. Tenant shall continue
to make said monthly payments until notified by Landlord of a change thereof. By
March 1 of each year Landlord shall give Tenant a statement showing the total
Adjustments for the Shopping Center for the prior calendar year and Tenant's
allocable share thereof, prorated from the commencement of rental. In the event
the total of the monthly payments which Tenant has made for the prior calendar
year be less than the Tenant's actual share of such Adjustments then Tenant
shall pay the difference in a lump sum within ten (10) days after the receipt of
such statement from Landlord and shall concurrently pay the difference in
monthly payments made in the then calendar year and the amount of monthly
payments which are then calculated as monthly Adjustments based on the prior
year's experience. Any overpayment by Tenant shall be credited towards the
monthly Adjustments next coming due. The actual Adjustments for the prior year
shall be used for purposes of estimating the anticipated monthly Adjustments for
the then current year with actual determination of such Adjustments after each
calendar year as above provided; excepting that in any year in which
resurfacing, or any other major operating expense is contemplated Landlord shall
be permitted to include the anticipated cost of same as part of the estimated
monthly Adjustments. Even though the term has expired and Tenant has vacated the
Premises, when the final determination is made of Tenant's share of said
Adjustments for the year in which this Lease terminates, Tenant shall
immediately pay any increase due over the estimated Adjustments previously paid
and, conversely, any overpayment made shall be immediately rebated by Landlord
to Tenant. Failure of Landlord to submit statements as called for herein shall
not be deemed to be a waiver of Tenant's requirement to pay sums as herein
provided.
-8-
<PAGE> 10
9. USES PROHIBITED.
Tenant shall not do or permit anything to be done in or about the Premises
nor bring or keep anything therein which is not within the permitted use of the
Premises which will in any way increase the existing rate of or affect any fire
or other insurance upon the Building or any of its contents, or cause a
cancellation of any insurance policy covering said Building or any part thereof
or any of its contents. Tenant shall not do or permit anything to be done in or
about the Premises which will in any way obstruct or interfere with the rights
of other tenants or occupants of the Building or injure or annoy them or use or
allow the Premises to be used for any improper, immoral, unlawful or
objectionable purpose; nor shall Tenant cause, maintain or permit any nuisance
in, on or about the Premises. Tenant shall not commit or allow to be committed
any waste in or upon the Premises.
10. COMPLIANCE WITH LAW.
Tenant shall not use the Premises, or permit anything to be done in or
about the Premises, which will in any way conflict with any law, statute,
ordinance or governmental rule or regulation now in force or which may hereafter
be enacted or promulgated. Tenant shall, at its sole cost and expense, promptly
comply with all laws, statutes, ordinances and governmental rules, regulations
or requirements now in force or which may hereafter be in force and with the
requirements of any board of fire underwriters or other similar bodies now or
hereafter constituted relating to or affecting the condition, use or occupancy
of the Premises, excluding structural changes not related to or affected by
Tenant's improvements or acts. The judgment of any court of competent
jurisdiction or the admission of Tenant in any action against Tenant, whether
Landlord be a party thereto or not, that Tenant has violated any law, statute,
ordinance or governmental rule, regulation or requirement shall be conclusive of
that fact as between the Landlord and Tenant.
11. ALTERATIONS AND ADDITIONS.
11.A. Consent of Landlord Required.
Tenant shall not make or allow to be made any substantial
alterations, additions or improvements to or of the Premises or any part
thereof without first obtaining the written consent of Landlord.* Tenant shall
not perform or permit to be performed any work which requires penetration of
the roof without the express written consent and under the supervision of the
Landlord. Tenant acknowledges that Tenant's breach of this provision shall
subject it to payment of damages to Landlord for replacement of all or a
portion of the roof. Any alterations, additions or improvements to or of said
Premises, including, but not limited to, wall covering, paneling and built-in
cabinet work, but excepting movable furniture
* Said consent shall not be unreasonably withheld.
-9-
<PAGE> 11
and trade fixtures, shall at once become a part of the realty and belong to the
Landlord and shall be surrendered with the Premises. In the event Landlord
consents to the making of any alterations, additions or improvements to the
Premises by Tenant, the same shall be made by Tenant at Tenant's sole cost and
expense. Upon the expiration or sooner termination of the term hereof, Tenant
shall, upon written demand by Landlord, given at least thirty (30) days prior to
the end of the term, at Tenant's sole cost and expense, forthwith and with all
due diligence, remove any alterations, additions, or improvements made by
Tenant, designated by Landlord to be removed, and Tenant shall, forthwith and
with all due diligence at its sole cost and expense, repair any damage to the
Premises caused by such removal.
11.B. Improvement Plan.
In connection with any such alterations, additions or improvements and as a
condition to obtaining the consent of Landlord thereto, Tenant shall deliver to
Landlord (such delivery to occur within thirty (30) days of this Lease as to any
such improvements proposed to be made by Tenant upon commencement of this Lease)
a drawing setting forth those improvements proposed to be made by Tenant. If
Landlord approves Tenant's drawing, Tenant shall prepare Improvement Plans
consisting of reasonably detailed plans and specifications incorporating the
improvements as shown on the drawing and an itemized cost breakdown for those
improvements. The Improvement Plans shall be submitted to Landlord for its
approval which Landlord shall give if the Improvement Plans conform to the
improvements shown on the drawing.
11.C. Free of Liens.
Tenant shall promptly pay all contractors and materialmen, so as to
minimize the possibility of a lien attaching to the Premises, and should any
such lien be made or filed, Tenant shall bond against or discharge the same
within ten (10) days after written request by Landlord.
11.D. Hold Harmless.
Tenant shall hold the Landlord, the Premises and the Shopping Center and
every party thereof free and harmless from and against any and all liability,
damage, claims, demands, suits, actions or expense (including attorney's fees)
arising out of any work done on or about the Premises by Tenant, its employees,
representative, successors and assigns at or on behalf of Tenant. Landlord
shall hold the Tenant free and harmless from and against any and all liability,
damage, claims, demands, suits, actions or expense (including attorney's fees)
arising out of any work done on or about the Premises by Landlord, its
employees, representatives, successors and assigns at or on behalf of Landlord.
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<PAGE> 12
12. MAINTENANCE OF PREMISES.
12.A. Maintenance by Tenant.
Tenant shall at all times keep the Premises (including maintenance of
exterior entrances, all glass and show windows and their mouldings) and all
partitions, doors, door jambs, doors closers, door hardware, fixtures, equipment
and appurtenances thereof (including electrical, lighting, heating and plumbing,
and plumbing fixtures, and any air conditioning system, including leaks around
ducts, pipes, vents, or other parts of the air conditioning, heating or plumbing
systems which protrude through the roof) and any replacements thereof, in good
order, condition and repair. Such maintenance shall include reasonable periodic
painting and preventative maintenance as determined by Landlord.
Tenant shall also repair any damage to the structural portions of the
roof and Premises including structural portions thereof resulting from Tenant's
negligent acts or omissions or anyone acting or claiming under Tenant as a
result of the failure of Tenant or anyone claiming under Tenant, to perform or
observe the covenants or conditions in this Lease contained or resulting from
alterations, additions or improvements to the Premises made by Tenant or anyone
claiming under or acting through Tenant. If required by Landlord, Tenant shall
contract with a service company for the maintenance of heating, ventilating and
air-conditioning equipment, with a copy of the service contract to be furnished
to the Landlord within ten (10) days after opening for business, and a copy of
any subsequent contracts to be furnished from time to time during the term.
12.B. Maintenance by Landlord.
If Tenant refuses or neglects to properly maintain or repair the
Premises as required hereunder and to the reasonable satisfaction of the
Landlord as soon as reasonably possible after written demand, Landlord may make
such repairs without liability to the Tenant or any loss or damage that may
accrue to Tenant's merchandise, fixtures or other property or to Tenant's
business thereof, and upon completion thereof. Tenant shall pay Landlord's cost
for making such repairs plus twenty (20) percent thereof for overhead, upon
representation of a bill therefor, as additional rent. Landlord shall maintain
at Tenant's expense the structural portions of the roof and the roof membrane,
exterior walls and replacement thereof. Tenant shall reimburse Landlord for
these maintenance and replacement costs within five (5) days after billing
Tenant. Landlord shall be responsible for all improvements constructed under
"Landlord's work" for a period of one (1) year from completion and shall
promptly repair or replace defects caused by Landlord's negligence or
intentional acts. If work is not performed satisfactorily in thirty (30) days,
Tenant may perform work at Landlord's expense.
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12.C. Surrender of Premises.
At the expiration of the tenancy hereby created, Tenant shall
surrender the Premises in the same condition as the Premises were in upon
delivery of possession thereto under this Lease, reasonable wear and tear
excepted, and damage by unavoidable casualty excepted to the extent that the
same is covered by Landlord's fire insurance policy with extended coverage
endorsement, and shall surrender all keys for the Premises to Landlord at the
place then fixed for the payment of rent and shall inform Landlord of all
combinations on locks, safes and vaults, if any, in the Premises. Tenant shall
remove all its trade fixtures, and if requested by Landlord, any alterations,
additions or improvements, before surrendering the Premises as aforesaid and
shall repair any damage to the Premises caused thereby. Tenant's obligation to
observe or perform the covenant shall survive the expiration or other
termination of the term of the Lease.
13. LIENS.
Tenant shall keep the premises and the property in which the
premises are situated free from any liens arising out of any work performed,
materials furnished or obligations incurred by or on behalf of Tenant.
14. ASSIGNMENT, SUBLETTING AND OTHER TRANSFERS.
A. Tenant shall not, without Landlord's prior written consent, do
any of the following (collectively, "Transfer"):
1. Assign, hypothecate, mortgage, encumber or convey this
Lease;
2. Allow any transfer thereof or any lien upon Tenant's
interest by operation of law;
3. Sublet the Premises or any part thereof;
4. Permit the use or occupancy of the Premises or any part
thereof by anyone other than Tenant;
5. If Tenant is a partnership, permit a withdrawal or
change, voluntary or by operation of law, of any partner or the dissolution of
the partnership; or
<PAGE> 14
B. If Tenant desires the consent of Landlord to a Transfer, Tenant
shall submit to Landlord:
1. The proposed sublease or assignment or other transfer
agreement or instrument evidencing the Transfer, together with a full written
disclosure of all consideration given or to be given to Tenant in connection
with such Transfer; and
2. Any other item or information Landlord may reasonably
request, sufficient to permit Landlord to determine the acceptability of the
financial responsibility, experience, character and merchandising ability of
transferee.
C. Landlord shall not unreasonably withhold its consent except that
such consent need not be granted if:
1. In the reasonable judgment of Landlord the transferee is of a
character or is engaged in a business which is not in keeping with the
standards of Landlord for the Shopping Center or may adversely affect the
business of the other tenants in the Shopping Center;
2. In the reasonable judgment of Landlord the financial
responsibility of the transferee is not acceptable;
3. In the reasonable judgment of Landlord any purpose for which
the transferee intends to use the Premises is not in keeping with the standards
of Landlord for the Shopping Center; provided in no event may any purpose for
which transferee intends to use the Premises by in violation of this Lease;
4. In the reasonable judgment of Landlord the volume of business
to be conducted by the transferee will be less than that conducted by Tenant; or
5. Tenant is in default under this Lease.
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<PAGE> 15
E. Any consent to any Transfer which may be given by Landlord, or the
acceptance of any rent, charges or other consideration by Landlord from Tenant
or any third party, shall not constitute a waiver by Landlord of the provisions
of this Lease or a release of Tenant from the full performance by it of the
covenants on the part of Tenant herein contained; and any consent given by
Landlord to any Transfer shall not relieve Tenant (or any transferee of Tenant)
from the above requirements for obtaining the written consent of Landlord to
any subsequent Transfer.
F. Tenant shall pay Landlord the greater of Five Hundred Dollars and
No Cents ($500.00) or one-half (1/2) of the then monthly rent for each sublease
or assignment submitted as reimbursement to Landlord for expenses incurred. In
the event of any requested Transfer other than an assignment of sublease,
Tenant shall pay to Landlord all out-of-pocket expenses incurred by Landlord in
connection therewith, including attorneys' fees.
G. If a default under this Lease should occur while the Premises or
any part thereof are then assigned, sublet or otherwise transferred, Landlord,
in addition to any other remedies provided herein or by law, may at its option
collect directly from such transferee all rent or other consideration becoming
due to Tenant under such Transfer and apply such rent or other consideration
against any sums due to Landlord; by Tenant hereunder; and Tenant hereby
authorizes and directs any such transferee to make such payments of rent or
other consideration direct to Landlord upon receipt of notice from Landlord. No
direct collection by Landlord from any such transferee shall be construed to
constitute a novation or a release of Tenant or any guarantor of Tenant from
the further performance of its obligations in connection with this Lease.
H. Any sublease shall provide by its terms that at Landlord's election
the subtenant shall attorn to Landlord and the sublease shall become a direct
lease between Landlord and the subtenant, if Landlord so chooses, at the
termination of the Lease. All subrents are hereby assigned as security for the
payment of Tenant's obligations hereunder and Tenant agrees to execute such
additional documentation as may be necessary to perfect Landlord's security in
such subrents.
15. HOLD HARMLESS.
Tenant shall indemnify and hold harmless Landlord against and from any
and all claims arising from Tenant's use of the Premises or from the conduct of
its business or from any activity, work, or other things done, permitted or
suffered by the Tenant in or about
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<PAGE> 16
the Premises, and shall further indemnify and hold harmless Landlord against and
from any and all claims arising from any breach or default in the performance of
any obligation on Tenant's part to be performed under the terms of this Lease,
or arising from any act or negligence of the Tenant, or any officer, agent,
employee, guest, or invitee of Tenant, and from all costs, attorneys' fees, and
liabilities incurred in or about the defense of any such claim or any action or
proceeding brought thereon and in case any action or proceeding be brought
against Landlord by reason of such claim, Tenant upon notice from Landlord shall
defend the same at Tenant's expense by counsel reasonably satisfactory to
Landlord. Tenant, as a material part of the consideration to Landlord, hereby
assumes all risk of damage to property or injury to persons in, upon or about
the Premises, from any cause other than Landlord's negligence; and Tenant hereby
waives all claims in respect thereof against Landlord. Tenant shall give prompt
notice to Landlord in case of casualty or accidents in the Premises.
Landlord or its agents shall not be liable for any loss or damage to
persons or property resulting from fire, explosion, falling plaster, steam,
gas, electricity, water or rain which may leak from any part of the Building or
from the pipes, appliances or plumbing works therein or from the roof, street
or subsurface or from any other place resulting from dampness or any other
cause whatsoever, unless caused by or due to the negligence of Landlord, its
agents, servants or employees. Landlord or its agents shall not be liable for
interference with the light, air, or for any latent defect in the Premises.
16. SUBROGATION.
As long as their respective insurers so permit, Landlord and Tenant
hereby mutually waive their respective rights of recovery against each other
for any loss insured by fire, extended coverage and other property insurance
policies existing for the benefit of the respective parties. Each party shall
apply to their insurers to obtain said waivers. Each party shall obtain any
special endorsements, if required by their insurer to evidence compliance with
the aforementioned waiver.
17. INSURANCE.
17.A. Liability Insurance.
Tenant shall, at Tenant's expense, obtain and keep in force during
the term of this Lease a policy of comprehensive public liability insurance
insuring Landlord and Tenant against any liability arising out of the
ownership, use occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be in the amount of not less than One
Million Dollars and No Cents ($1,000,000.00) for injury or death of one person
in any one accident or occurrence and in the amount of not less than Three
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<PAGE> 17
Million Dollars and No Cents ($3,000,000.00) for injury or death of more than
one person in any one accident or occurrence. Such insurance shall further
insure Landlord and Tenant against liability for property damage of at least
Five Hundred Thousand Dollars and No Cents ($500,000.00). The limit of any such
insurance shall not, however, limit the liability of the Tenant hereunder.
Tenant may provide this insurance under a blanket policy, provided that said
insurance shall have a Landlord's protective liability endorsement attached
thereto. If Tenant shall fail to procure and maintain said insurance, Landlord
may, but shall not be required to, procure and maintain same, but at the
expense of the Tenant. Insurance required hereunder shall be in companies rated
A:XII or better in "Best's Key Rating Guide." Tenant shall deliver to Landlord,
prior to right of entry, copies of policies of liability insurance required
herein or certificates evidencing the existence and amounts of such insurance
with loss payable clauses satisfactory to Landlord. No policy shall be
cancellable or subject to reduction of coverage. All such policies shall be
written as primary policies not contributing with and not in excess of coverage
which Landlord may carry. Tenant's indemnification obligations under this Lease
shall extend to damage resulting from risks insurable by products liability
insurance and dram shop liability insurance. The public liability insurance
required in this Paragraph 17 shall include products liability insurance and
(if Tenant serves or sells alcoholic beverages on the Premises) dram shop
liability insurance.
17.B. Fire Insurance Premium.
Landlord shall maintain fire and extended coverage insurance or any
other insurance coverage deemed necessary by Landlord or Landlord's lender
throughout the term of this Lease in an amount equal to at least ninety (90)
percent of the replacement value (exclusive of foundation and excavation costs)
of the Premises and/or Building of which Premises are a part. Tenant agrees to
pay Landlord a pro rata share of the cost of said fire and extended coverage
insurance that may be charged during the terms of this Lease. This pro rata
share will be paid monthly in advance as specified in Article 8.B. In
determining the Tenant's pro rata share of the premium for said insurance for
the Premises a schedule issued by the organization making the insurance rate on
the Premises, showing the various components of such rates, shall be conclusive
evidence of the charges which make up the fire insurance rate on the Premises.
Tenant shall, at its own expense, comply with all the requirements of the
insurance underwriters and any governmental authority having jurisdiction
thereover, necessary for the maintenance of reasonable fire and extended
coverage insurance for the Premises including the installation of fire
extinguishers or an automatic dry chemical extinguishing system.
17.C. Landlord's Right to Obtain Insurance on Behalf of Tenant.
If Tenant should fail to procure and maintain any of the
above-referenced insurance required to be obtained by Tenant,
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Landlord, at its option, may obtain said insurance and charge Tenant as
Additional Rent the insurance premium cost.
18. UTILITIES.
Tenant shall pay for all water, gas, heat, light, power, sewer
charges, telephone service and all other services and utilities supplied to the
Premises, together with any taxes thereon. If any such services are not
separately metered to Tenant, Tenant shall pay their pro rata share to be
determined by Landlord of all charges jointly metered with other premises.
19. PERSONAL PROPERTY TAXES.
Tenant shall pay, or cause to be paid, before delinquency any and
all taxes levied or assessed and which become payable during the term hereof
upon all Tenant's leasehold improvements, equipment, furniture, fixtures, and
any other personal property located in the Premises. In the event any or all of
the Tenant's leasehold improvements, equipment, furniture, fixtures and other
personal property shall be assessed and taxed with the real property, Tenant
shall pay to Landlord its share of such taxes within ten (10) days after
delivery to Tenant by Landlord of a statement in writing setting forth the
amount of such taxes applicable to Tenant's property.
20. RULES AND REGULATIONS.
Tenant shall faithfully observe and comply with the rules and
regulations that Landlord shall from time to time promulgate and/or modify. The
rules and regulations shall be binding upon the Tenant upon delivery of a copy
of them to Tenant. Landlord shall not be responsible to Tenant for the
nonperformance of any said rules and regulations by any other tenants or
occupants.
21. HOLDING OVER.
If Tenant remains in possession of the Premises or any part thereof
after the expiration of the term hereof with the express written consent of
Landlord, such occupancy shall be a tenancy from month to month at a rental in
the amount of one hundred twenty (120) percent of the last Monthly Minimum Rent,
plus all other charges payable hereunder, and upon all the terms hereof
applicable to a month-to-month tenancy.
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22. ENTRY BY LANDLORD.
Landlord reserves, and shall at any and all times have, the right to
enter the Premises to inspect the same, to submit said Premises to prospective
purchasers or tenants, to post notices of non-responsibility, to repair the
Premises and any portion of the Building of which the Premises are a part that
Landlord may deem necessary or desirable, without abatement of rent, and may for
that purpose erect scaffolding and other necessary structures where reasonably
required by the character of the work to be performed, always providing that the
entrance to the Premises shall not be unreasonably blocked thereby, and further
providing that the business of the Tenant shall not be interfered with
unreasonably. Tenant hereby waives any claim for damages or for any injury or
inconvenience to or interference with Tenant's business, any loss of occupancy
or quiet enjoyment of the Premises, an any other loss occasioned thereby.
Landlord may enter premises only with the prior consent of tenant, during
regular banking hours and with reasonable notice.
23. TENANT'S DEFAULT.
The occurrence of any one or more of the following events
shall constitute a default and breach of this Lease by Tenant.
23.A.
The vacating or abandonment of the Premises by Tenant.
23.B.
The failure by Tenant to make any payment of rent or any other
payment required to be made by Tenant hereunder, as and when due, where such
failure shall continue for a period of three (3) days after written notice
thereof by Landlord to Tenant.
23.C.
The failure by Tenant to observe or perform any of the
covenants, conditions or provisions of this Lease to be observed or performed by
the Tenant, other than described in Article 23.B, above, where such failure
shall continue for a period of five (5) days after written notice thereof by
Landlord to Tenant; provided, however, that if the nature of Tenant's default is
such that more than five (5) days are reasonably required for its cure, then
Tenant shall not be deemed to be in default if Tenant commences such cure
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<PAGE> 20
within said five-(5) day period and thereafter diligently prosecutes such cure
to completion.
23.D.
The making by Tenant of any general assignment or general arrangement for
the benefit of creditors; or the filing by or against Tenant of a petition to
have Tenant adjudged a bankrupt, or a petition filed against Tenant, the same is
dismissed within sixty (60) days); or the appointment of a trustee or a receiver
to take possession of substantially all of Tenant's assets located at the
Premises or of Tenant's interest in this Lease, where possession is not restored
to Tenant within thirty (30) days; or the attachment, execution or other
judicial seizure of substantially all of Tenant's assets located at the Premises
or of Tenant's interest in this Lease, where such seizure is not discharged
within thirty (30) days.
24. REMEDIES IN TENANT'S DEFAULT.
Landlord shall have the following remedies if Tenant commits a default or
breach of the Lease. These remedies are not exclusive; they are cumulative in
addition to any remedies now or later allowed by law:
24.A.
Landlord can continue this Lease in full force and effect, and the Lease
will continue in effect as long as Landlord does not terminate Tenant's right to
possession, and Landlord shall have the right to collect rent when due. During
the period Tenant is in default, Landlord can enter the Premises and relet them,
or any part of them, to third parties for Tenant's account. Tenant shall be
liable immediately to Landlord for all cost Landlord incurs in reletting the
Premises, including, without limitation, brokers' commission, expenses of
remodeling the Premises required by the reletting, and like cost. Reletting can
be for a shorter or longer than the remaining term of this Lease. Tenant shall
pay to Landlord the rent due under this Lease on the dates the rent is due, less
the rent Landlord receives from reletting. No act by Landlord allowed by this
paragraph shall terminate this Lease unless Landlord notifies Tenant that
Landlord elects to terminate this Lease. After Tenant's default, and for as long
as Landlord does not terminate Tenant's right to possession of the Premises. If
Tenant obtains Landlord's consent, Tenant shall have the right to assign or
sublet its interest in this Lease, but Tenant shall not be released from
liability. Landlord's consent to a proposed assignment or subletting shall not
be unreasonably withheld.
If Landlord elects to relet the Premises as provided in this paragraph,
rent that Landlord receives from reletting shall be applied to the payment of:
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First, any indebtedness from Tenant to Landlord other than rent due from
Tenant;
Second, all cost, including for maintenance, incurred by Landlord in
reletting;
Third, rent due and unpaid under this Lease. After deducting the payments
referred to in this paragraph, any sum remaining from the rent Landlord
receives from reletting shall be held by Landlord and applied in payment of
future rent as rent becomes due under this Lease. In no event shall Tenant be
entitled to any excess rent received by Landlord. If, on the date rent is due
under this Lease, the rent received from the reletting is less than the rent
due on that date, Tenant shall pay to Landlord, in addition to the remaining
rent due, all cost, including cost for maintenance, Landlord incurred in
reletting that remain after applying the rent received from the reletting as
provided in this paragraph.
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<PAGE> 22
24.D.
Landlord, at any time after Tenant commits a default, can cure the default
at Tenant's cost. If landlord, at any time, by reason of Tenant's default, pays
any sum or does any act that requires the payment of any sum, the sum paid by
Landlord shall be due immediately from the Tenant to Landlord at the time the
sum is paid, and if paid at a later date, shall bear interest at the maximum
rate an individual is permitted by law to charge from the date the sum is paid
by landlord until Landlord is reimbursed by Tenant. The sum, together with the
interest on it, shall be additional rent.
24.E.
Rent not paid when due shall bear interest as additional rent at the
maximum rate an individual is permitted by law to charge from the date due
until paid.
25. LANDLORD'S DEFAULT.
Landlord shall not be in default unless Landlord fails to perform
obligations required of Landlord within a reasonable time, but in no event
later than thirty (30) days after written notice by Tenant to Landlord and to
the holder of any first mortgage or deed of trust covering the Premises whose
name and address shall have theretofore been furnished to Tenant in writing,
specifying wherein Landlord has failed to perform such obligation; provided,
however, that if the nature of Landlord's obligation is such that more than
(30) days are required for performance then Landlord shall not be in default if
Landlord commences performance within such (30) day period and thereafter
diligently prosecutes the same to completion. In no event shall Tenant have the
right to terminate this Lease as a result of Landlord's default and Tenant's
remedies shall be limited to damages and/or an injunction.
Anything in this Lease to the contrary notwithstanding, providing such
cause is not due to the willful act or neglect of the Landlord, the Landlord
shall not be deemed in default with respect to the performance of any such
terms, covenants and conditions of this Lease if any failure of performance
shall be due to any strike, lockout, civil commotion, war-like operation,
invasion, rebellion, hostilities, military or usurped power, sabotage,
government regulation or controls, inability to obtain any material, service or
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financing, rain or muddy condition, or other Act of God or any other cause
beyond the control of the Landlord.
26. RECONSTRUCTION.
In the event the Premises are damaged by fire or other perils covered by
extended coverage insurance, Landlord agrees to forthwith repair same, and this
Lease shall remain in full force and effect, except that Tenant shall be
entitled to a proportionate reduction of the Minimum Rent from the date of
damage and while such repairs are being made, such proportionate reductions to
be based upon the extent to which the damages and making of such repairs shall
reasonably interfere with the business carried on by the Tenant in the
Premises. If the damage is due to the fault or neglect of Tenant or its
employees, there shall be no abatement of rent.
In the event the Premises are damaged as a result of any cause other than
the perils covered by fire and extended coverage insurance, then Landlord shall
forthwith repair the same, provided the extent of the destruction be less than
ten (10%) percent of the then full replacement cost of the Premises. In the
event the destruction of the Premises is to an extent of ten (10%) percent or
more of the full replacement cost then Landlord shall have the option; (1) to
repair or restore such damage, this Lease continuing in full force and effect,
but the Minimum Rent to be proportionately reduced as hereinabove in this
Article provided; or (2) give notice to Tenant at any time within sixty (60)
days after such damage, terminating this Lease as of the date specified in such
notice, which date shall be no more than thirty (30) days after the giving of
such notice. In the event of giving such notice, this Lease shall expire and
all interest of the Tenant in the Premises shall terminate on the date so
specified in such notice and the Minimum Rent, reduced by a proportionate
reduction, based upon the extent, if any to which such damage interfered with
the business carried on by the Tenant in the Premises shall be paid up to date
of said such termination.
Notwithstanding anything to the contrary contained in this Article,
Landlord shall not have any obligation whatsoever to repair, reconstruct or
restore the Premises when the damage resulting from any casualty covered under
this Article occurs during the last twenty-four months of the term of this
Lease or any extension thereof.
Landlord shall not be required to repair any injury or damage by fire or
other cause, or to make any repairs or replacements of any leasehold
improvements, fixtures, or other personal property of Tenant.
In the event that fifty (50) percent or more of the rentable area of the
Shopping Center shall be damaged or destroyed by fire or other cause,
notwithstanding that the Premises may be unaffected by such fire and other
cause, Landlord shall have the right, to be
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exercised by notice in writing delivered to Tenant within sixty (60) days from
and after said occurrence, to elect to cancel and terminate this Lease. Upon
the giving of such notice to Tenant, the term of this Lease shall expire by
lapse of time upon the third day after such notice is given, and Tenant shall
vacate the Premises and surrender the same to Landlord.
27. EMINENT DOMAIN.
27.A. Total Condemnation.
If the whole of the Premises shall be acquired or condemned by eminent
domain for any public or quasi-public use or purpose, then the term of this
Lease shall cease and terminate as of the date of title vesting in such
proceeding and all rentals shall be paid up to that date.
27.B. Partial Condemnation.
If any part of the Premises shall be acquired or condemned by eminent
domain for any public or quasi-public use or purpose, and in the event that
such partial taking or condemnation shall render the Premises unsuitable for
the business of the Tenant, than the term of this Lease shall cease and
terminate as of the date of title vesting in such proceeding. In the event of
partial taking or condemnation which is not extensive enough to render the
Premises unsuitable for the business of the Tenant, the Landlord shall promptly
restore the Premises to a condition comparable to its condition at the time of
such condemnation less the portion lost in the taking, and this Lease shall
continue in full force and effect.
27.C. Partial Condemnation of Parking Area.
If any part of the parking area in the Shipping Center shall be acquired
or condemned by eminent domain for any public or quasi-public use or purpose
and if, as the result of such partial taking the ratio of square feet of
parking area to square feet of the sales area of the entire Shopping Center
buildings is reduced to an area insufficient to serve the Shopping Center, then
the term of this Lease shall cease and terminate from the date of title vesting
in such proceeding, unless the Landlord shall within a reasonable time, not to
exceed 90 days after possession by the condemning authority, increase the
parking to an area substantially equal to the original area, in which event
this Lease shall be unaffected and remain in full force and effect as between
the parties.
27.D. Landlord's Damages.
In the event of any condemnation or taking as hereinabove provided,
whether whole or partial, the Tenant shall not be entitled to any part of the
award, as damages or otherwise, for such condemnation and Landlord is to receive
the full amount of such award, the Tenant hereby expressly waiving any right or
claim to any
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<PAGE> 25
part thereof, including right or claim for the value of any unexpired term of
this Lease or diminution in value of Tenant's leasehold interest, or for the
value of any option to extend the term hereof or renew this Lease.
27.E. Tenant's Damages.
Although all damages in the event of any condemnation are to belong to the
Landlord whether such damages are awarded as compensation for diminution in
value of the leasehold or to the fee of the Premises, Tenant shall have the
right to claim and recover from the condemning authority, but not from
Landlord, such compensation as may be separately awarded or recoverable by
Tenant in Tenant's own right on account of any and all damage to Tenant's
business by reason of the condemnation or for or on account of any cost or loss
to which Tenant might incur or be put in removing Tenant's merchandise,
furniture, fixtures, leasehold improvements and equipment. In no event shall
the award thereof reduce the amount otherwise recoverable by Landlord for the
land and buildings and severance damages.
28. PARKING AND COMMON AREAS.
Landlord covenants that upon completion of the Shopping Center an area
approximately equal to the common and parking areas as shown on the attached
Exhibit A shall be at all times available for the non-exclusive use of Tenant
during the full term of this Lease or any extension of the term hereof,
provided that the condemnation or other taking by any public authority, or sale
in lieu of condemnation, of any or all of such common and parking areas shall
not constitute a violation of this covenant. Landlord reserves the right to
change the entrances, exits, traffic lanes and the boundaries and locations of
such parking area or areas. All automobile parking areas, driveways, entrances
and exits thereto, and other facilities furnished by Landlord in or near the
Shopping Center, including employee parking areas, the truck way or ways,
loading docks, temporary sewer facilities, package pick up sections, pedestrian
sidewalks and ramps, landscaped areas, exterior stairways, first-aid station,
comfort stations and other areas and improvements provided by Landlord for the
general use, in common with tenants, their officers, agents, employees and
customers, shall at all times be subject to the exclusive control and
management of Landlord and Landlord shall have the right, from time to time to
establish, modify and enforce reasonable rules and regulations with respect to
all facilities and areas mentioned in this article. Landlord shall also have
the right to alter or modify the Shopping Center and all improvements located
therein, including the traffic flow and parking, without the consent of Tenant;
provided no change, alteration or modification will be made with respect to the
Premises which substantially adversely affects Tenant's use and enjoyment of
the Premises without the consent of Tenant, which shall not be unreasonably
withheld.
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28.A.
Prior to the date of Tenant's opening for business in the Premises,
Landlord shall cause said common and parking area or areas to be graded,
surfaced, marked and landscaped at no expense to Tenant.
28.B.
The Landlord shall keep said automobile parking and common areas in a
neat, clean and orderly condition and shall repair any damage to the facilities
thereof, but all expenses in connection with said automobile parking and
common areas shall be charged and prorated in the manner as set forth in
Article 8.B hereof.
28.C.
Tenant, for the use and benefit of Tenant, its agents, employees,
customers, licensees and sub-tenants, shall have the non-exclusive right in
common with Landlord, and other present and future owners, tenants and their
agents, employees, customers, licensees and sub-tenants, to use said common and
parking areas during the entire term of this Lease, or any extension thereof,
for ingress and egress, and automobile parking.
28.D.
Tenant, in the use of said common and parking areas, agrees to comply with
such reasonable rules, regulations and charges for parking as the Landlord may
adopt from time to time for the orderly and proper operation of said common and
parking areas. Such rules may include but shall not be limited to the following:
(1)The restricting of employee parking to a limited, designated area or areas:*
(2)The regulation of the removal, storage and disposal of Tenant's refuse and
other rubbish at the sole cost and expense of Tenant.
* Tenant and its employees shall park in the designated "Employee Parking
Area" as shown on the attached Exhibit "A".
29. SIGNS.
The Tenant may not affix and maintain upon the glass panes and supports of
the shop windows or within twelve (12) inches of any window and upon the
exterior wall of the Premises any signs, advertising placards, names, insignia,
trademarks and descriptive material without the prior written consent of the
Landlord. Anything to the contrary in this Lease notwithstanding, Tenant shall
not affix any sign to the roof. Tenant, shall, however, erect one sign on the
front of the Premises not later than the date Tenant opens for business, in
accordance with a design to be prepared by Tenant and approved in writing by
Landlord in accordance with the Shopping Center sign criteria, which criteria
is attached as Exhibit D.
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<PAGE> 27
30. ADVERTISING, MERCHANTS ASSOCIATION.
30.A. Change of Name.
Tenant agrees not to change the advertised name of the business operated
in the Premises without written permission of the Landlord.
30.B. Solicitation of Business.
Tenant and Tenant's employees and agents shall not solicit business in the
parking or other common areas, nor shall Tenant distribute any handbills or
other advertising matter in automobiles parked in the parking areas or in other
common areas.
30.C. Merchant's Association.
31. DISPLAYS.
The Tenant may not display or sell merchandise or allow grocery carts or
other similar devices within the control of Tenant to be stored or to remain
outside the defined exterior walls and permanent doorways of the Premises.
Tenant further agrees not to install any exterior lighting, amplifiers or
similar devices or use in or about the Premises any advertising medium which may
be heard or seen outside the Premises, such as flashing lights, searchlights,
loudspeakers, phonographs or radio broadcasts and will not interfere with the
conduct of business of other tenants in the Shopping Center.
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<PAGE> 28
32. AUCTIONS.
Tenant shall not conduct or permit to be conducted any sale by auction
in, upon or from the Premises whether said auction be voluntary, involuntary,
pursuant to any assignment for the benefit of creditors or pursuant to any
bankruptcy or other insolvency proceeding.
33. HOURS OF BUSINESS.
Subject to the provisions of Article 27 hereof, Tenant shall continuously
during the entire term hereof conduct and carry on Tenant's business in the
Premises and shall keep the Premises open for business and cause Tenant's
business to be conducted therein during the usual business hours of each and
every business day as is customary for businesses of like character in the
county in which the Premises are located to be open for business; provided,
however, that this provision shall not apply if the Premises should be closed
and the business of Tenant temporarily discontinued therein on account of
strikes, lockouts or similar causes beyond the reasonable control of Tenant.
In the event of breach by the Tenant of any of the conditions contained
in this Article, the Landlord shall have, in addition to any and all remedies
herein provided, the right at its option to collect not only the Minimum Rent
herein provided for each and every day that the Tenant shall fail to conduct
its business as herein provided; said additional rent shall be deemed to be in
lieu of any percentage rent that might have been earned during such period of
the Tenant's failure to conduct its business as herein provided.
34. GENERAL PROVISIONS.
(i) Plats and Riders.
Clauses, plats, riders exhibits and addendums, if any affixed to
this Lease are a part hereof.
(ii) Waiver.
The waiver by Landlord of any term, covenant or condition herein
contained shall not be deemed to be a waiver of such term, covenant or condition
or any subsequent breach of the same or any other term, covenant or condition
herein contained. The subsequent acceptance of rent hereunder by Landlord shall
not be deemed to be a waiver or any preceding default by Tenant of any term,
covenant or condition of this Lease, other than the failure of the Tenant to pay
the particular rental so accepted, regardless of
-27-
<PAGE> 29
Landlord's knowledge of such preceding default at the time of acceptance of
such rent.
(iii) Joint Obligation.
If there be more than one Tenant the obligations hereunder imposed
shall be joint and several.
(iv) Marginal Headings.
The marginal headings and article titles to the articles of this
Lease are not a part of the Lease and shall have no effect upon the construction
or interpretation of any part hereof.
(v) Time.
Time is of the essence of this Lease and each and all of its
provisions in which performance is a factor.
(vi) Successors and Assigns.
The covenants and conditions herein contained, subject to the
provisions as to assignment, apply to and bind the heirs, successors, executors,
administrators and assigns of the parties hereto.
(vii) Recordation.
Neither Landlord or Tenant shall record this Lease, but a short
form memorandum hereof may be recorded at the request of the Landlord.
(viii) Quiet Possession.
Upon Tenant paying the rent reserved hereunder and observing and
performing all of the covenants, conditions and provisions on Tenant's part to
be observed and performed hereunder, Tenant shall have quiet possession of the
Premises for the entire term hereof, subject to all the provisions of this
Lease.
(ix) Accord and Satisfaction.
No payment by tenant or receipt by Landlord of a lesser amount
than the monthly rent herein stipulated shall be deemed to be other than on
account of the earliest stipulated rent, nor shall any endorsement or statement
on any check or any letter accompanying any check or payment as rent be deemed
an accord and satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such rent or
pursue any other remedy in this lease provided.
- 28 -
<PAGE> 30
(x) Prior Agreements.
This Lease contains all of the agreements of the parties hereto with
respect to any matter covered or mentioned in this Lease, and no prior
agreements or understanding pertaining to any such matters shall be effective
for any purpose. No provision of this lease may be amended or added to except by
an agreement in writing signed by the parties hereto or their respective
successors in interest. This Lease shall not be effective or binding on any
party until fully executed by both parties hereto.
(xi) Inability to Perform.
This lease and the obligations of the Tenant hereunder shall not be
affected or impaired because the Landlord is unable to fulfill any of its
obligations hereunder or is delayed in doing so, if such inability or delay is
caused by reason of strike, labor troubles, act of God, or any other cause
beyond the reasonable control of the Landlord.
(xii) Partial Invalidity.
Any provision of this Lease which shall prove to be invalid, void, or
illegal shall in no way affect, impair or invalidate any other provision hereof
and such other provision shall remain in full force and effect.
(xiii) Cumulative Remedies.
No remedy or election hereunder shall be deemed exclusive but shall,
whenever possible, be cumulative with all other remedies at law or in equity.
(xiv) Choice of Law.
This Lease shall be governed by the laws of the State in which the
Premises are located.
(xv) Attorney's Fees.
In the event of any action or proceeding brought by either party
against the other under this Lease the prevailing party shall be entitled to
recover for the fees of its attorneys in such action or proceeding, including
cost of appeal, if any, in such amount as the court may adjudge reasonable as
attorney' fees. In addition, should it be necessary for Landlord or Tenant to
employ legal counsel to enforce any of the provisions herein contained, Tenant
and Landlord agree to pay all attorneys' fees and court costs reasonably
incurred by the prevailing party.
(xvi) Sale of Premises by Landlord.
In the event of any sale of the Premises by Landlord, Landlord shall
be and is hereby entirely freed and relieved of all
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<PAGE> 31
liability under any and all of its covenants and obligations contained in or
derived from this Lease arising out of any act, occurrence or omission
occurring after the consummation of such sale; and the purchaser, at such sale
or any subsequent sale of the Premises shall be deemed, without any further
agreement between the parties or their successors in interest or between the
parties and any such purchaser, to have assumed and agreed to carry out any and
all of the covenants and obligations of the Landlord under the Lease.
(xvii) Subordination, Attornment.
Upon request of the Landlord, Tenant will in writing
subordinate its rights hereunder to the lien of any mortgage or deed or trust,
to any bank, insurance company or other lending institution, now or hereafter
in force against the Premises, and to all advances made or hereafter to be made
upon the security thereof.
In the event any proceedings are brought for foreclosure, or
in the event of the exercise of power of sale under any mortgage or deed of
trust made by the Landlord covering the Premises, the Tenant shall attorn to
the purchaser upon any such foreclosure or sale and recognize such purchaser as
the Landlord under the Lease.
The provisions of this Article to the contrary
notwithstanding, and so long as Tenant is not in default hereunder, this Lease
shall remain in full force and effect for the full term hereof.
(xviii) Notices.
All notices and demands which may or are to be required or
permitted to be given by either party on the other hereunder shall be in
writing. All notices and demands by the Landlord to the Tenant shall be sent by
United States Mail, postage prepaid, addressed to the Tenant at the Premises,
and to the address hereinbelow, or to such other place as Tenant may from time
to time designate in a notice to the Landlord at the address set forth herein,
and to such other persons or place as the Landlord may from time to time
designate in a notice to the Tenant.
To Landlord at: Reseda Investors
9001 Grossmont Blvd., La Mesa, CA 92041
To Tenant at: Valle de Oro Bank
P.O. Box 1449, Spring Valley, CA 92077
(xix) Tenant's Statement.
Tenant shall at any time and from time to time, upon not less
than three days prior written notice from Landlord, execute, acknowledge and
deliver to Landlord a statement in writing (a) certifying that this Lease is
unmodified and in full force and effect (or, if modified, stating the nature of
such notification and
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<PAGE> 32
certifying that this Lease as so modified is in full force and effect), and the
date to which the rental and other charges are paid in advance, if any, and (b)
acknowledging that there are not, to Tenant's knowledge, any uncured defaults
on the part of the Landlord hereunder, or specifying such defaults if any are
claimed, and (c) setting forth the date of commencement of rents and expiration
of the term hereof. Any such statement may be relied upon by the prospective
purchaser or encumbrancer of all or any portion of the real property of which
the Premises are a part.
(xxi) No Option.
The submission of this Lease for examination does not
constitute a reservation of or option for the Premises and this Lease becomes
effective as a lease only upon execution and delivery thereof by Landlord to
Tenant and by Tenant to Landlord.
35. BLANKET ENCUMBRANCE.
Tenant acknowledges applicability of the following provisions of
California Civil Code Section 1133:
"Buyer/Lessee is aware of the fact that the lot, parcel, or unit which he
or she is proposing to purchase or lease is subject to a deed of trust,
mortgage, or other lien known as a 'Blanket Encumbrance'.
If buyer/Lessee purchased or leases this lot, parcel, or unit, her or she
could lose that interest through foreclosure of the blanket encumbrance or
other legal process even though Buyer/Lessee is not delinquent in his or her
payments or other obligations under mortgage, deed of trust, or lease."
36. BROKERS.
Tenant warrants that it has had no dealings with any real estate broker
or agents in connection with the negotiation of this Lease excepting only Grubb
& Ellis Company and it knows of no other real estate broker or agent who is
entitled to a commission in connection with the Lease.
Check if
Applicable
[ ]
37. DUAL REPRESENTATION.
Landlord and Tenant hereby acknowledge that Jeff Platt and Mike Simmons
of Grubb & Ellis Company represents Reseda Investors and Chris Rink of Grubb &
Ellis Company represents Valle de Oro Bank, and Landlord and Tenant consent
thereto.
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<PAGE> 33
CONSENT YOUR ATTORNEY:
If this lease has been filled in it has been prepared for submission to your
attorney for his approval. No representation or recommendation is made by the
broker, if any, or its agents or employees as to the legal sufficiency, legal
effect, or tax consequences of this Lease.
RESEDA INVESTORS VALLE DO ORO BANK
By: /s/ CHARLES BUTTNER By: /s/ WILLIAM V. EHLEN
-------------------------------- -------------------------------------
Charles Buttner William V. Ehlen
Its General Partner Its President
----------------------------- ----------------------------------
By: By:
-------------------------------- -------------------------------------
Its Its
----------------------------- ----------------------------------
HCC #7
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<PAGE> 34
ADDENDUM TO SHOPPING CENTER LEASE
---------------------------------
OPTION TO EXTEND TERM
Tenant shall have the option to extend the Term for two (2) periods of five
(5) years subject to the following:
(a) Tenant's option to extend the Term shall be subject to the
following conditions precedent:
(i) Not more than nine (9) months and not less than six (6) months
before the last day of the term, Tenant shall notify Landlord in writing
of Tenant's intention to extend the Term.
(ii) The Lease shall be in effect and Tenant shall not be in default
of any material provision thereof both on the day such notice is given and
on the last day of the Term.
(b) In the event the foregoing conditions are timely satisfied, the
Terms shall be extended for the period specified above subject to all the
provisions of the Lease.
Landlord Tenant
---------------------------- -------------------------------
RESEDA INVESTORS VALLE DE ORO BANK
BY: /s/ CHARLES BUTTNER BY: /s/ WILLIAM V. EHLEN
-------------------------------- -------------------------------------
Charles Buttner William V. Ehlen
BY:
-------------------------------------
<PAGE> 35
EXHIBIT "A"
[MAP]
<PAGE> 36
EXHIBIT "B"
SCOPE OF WORK
DESCRIPTION OF LANDLORD'S WORK
I. Construction of Improvements
Landlord shall perform at its expense Landlord's Work set forth
below. Except for Landlord's Work, all other work required to complete the
Premises to a finished condition ready for the conduct of Tenant's business
shall be deemed Tenant's Work and shall be performed at Tenant's sole cost and
expense. All improvements to the Premises, whether Landlord's Work or Tenant's
Work, shall be constructed in accordance with plans and specifications prepared
by Landlord's architect, as approved by Tenant and Landlord. Landlord and
Tenant agree to pursue construction of the improvements diligently to
completion and both Landlord and Tenant agree to comply with all city, county,
state and federal ordinances, rules and regulations in performing their
respective work. Landlord agrees that improvements shall consist of a 4,000
square foot building.
II. Plans, Specifications, and Permits
A. Landlord shall, as soon as practicable, at its own expense,
provide a Tenant Improvement Package, including a plan of the premises, showing
column spacing and overall dimensions, and Landlord's criteria, if any,
pertinent to Tenant's work as indicated below. Landlord shall provide plans and
architectural rendering including site plan and working drawings. Cost of plans
and rendering shall be Landlord's.
B. After receipt by Tenant of the Tenant Improvement Package, the
following procedure shall be followed:
1. Within fourteen (14) days after it has received and
receipted for the floor plan, Tenant shall return the completed Tenant
Improvement Package questionnaire and shall submit to Landlord's architect
preliminary plans and information setting forth the basic requirements for
Tenant's improvements, including Landlord's Work and Tenant's work;
2. Within thirty (30) days after receipt by Landlord's
architect of Tenant's preliminary plans, engineering, and information,
Landlord's architect shall submit completed plans, engineering, and
specifications for work to be performed under Landlord's Work to Tenant for
approval, which approval shall not be unreasonably withheld or delayed. The
plans, engineering, and specifications shall also include Tenant's Work, which
shall be approved by Landlord;
3. DELETED.
4. DELETED.
5. If the final plans and specifications necessary for the
completion of the Premises are not approved by Tenant within sixty (60) days
after the receipt date established in paragraph B.2. above,
<PAGE> 37
Landlord shall have the option to terminate this Lease by written notice to
Tenant.
III. Landlord's Work
Landlord shall provide the following to each Tenant as "Standard
Tenant Improvements". Any deviations or changes shall be agreed to prior to
commencement of work.
A. Shell: The shell shall include exterior walls, canopy, roofing,
flashing, and roof drains. The roof/ceiling shall be insulated and consist of
built-up roofing.
B. Floor: The floor shall be exposed concrete: steel trowel finish.
C. Store Front: The store front shall be bronzed, anodized aluminum and
smoked glass, tempered as required by code. All store fronts and interiors
shall be in accordance with architectural standards established for the
shopping center by Landlord and shall be subject to review and approval by
Landlord or its architect, as provided above. Landlord to provide up to three
(3) sets of double exterior front doors per Tenant's needs.
D. Demising Walls: Demising walls shall be drywall construction on wood
or metal studs. Drywall shall be taped and sanded ready for Tenant finish.
E. Ceiling: Landlord shall provide a suspended "T" bar acoustical
ceiling. The ceiling shall not be in more than two (2) planes and conform to
plans approved by Tenant.
F. Lighting Fixtures: Landlord shall provide ceiling mounted fluorescent
fixtures as provided by plan and other fixture boxes where required by plans
approved by Tenant.
-- Lighting lamps are not included.
G. Telephone: Landlord shall provide two (2) conduits for telephone
service into the Premises to a point determined by Landlord or its architect
and approved by Tenant.
H. Heating and Air Conditioning: Tenant's area, except toilet, shall be
provided with an individually controlled, refrigerated air conditioning and
heating system, sufficient to maintain an inside temperature of 70 degrees in
heating season and 78 degrees in cooling season in accordance with design
criteria established by ASHRAE for the local area to meet the need for a
typical bank. supervision of the Landlord or his architect. System to be
completely installed with ducting and separate thermostats.
I. Toilet Room: Landlord shall furnish, at a location in the Premises
determined by Landlord, three standard type lavatory and water closets, exhaust
per code, finish on enclosing walls as required by building code, on the
interior walls. One hollow core wood door with privacy latch set and hinges
will be provided. Toilet shall be designed to meet handicap requirements.
Restrooms to be rough plumbed for hot water heater.
<PAGE> 38
J. ELECTRICAL: Landlord shall provide:
-- 120/208 single phase service to a
-- 300 amp panel board for power and lighting (location to
be determined by Landlord)
-- All required convenience outlets for floors and walls and once
convenience outlet in the restroom will also be provided by the Landlord. Size
and capacity of all the aforementioned electrical services shall be in
accordance with Tenant's requirements up to a maximum of 300 ampere service.
Landlord's electrical service shall include meter socket only. Landlord shall
provide electrical service to each sign location.
K. PLUMBING:
WATER SERVICE: If the demised space includes a toilet room, the suite
will be served by one 3/4" minimum domestic water service with shut-off valve
to Tenant's ceiling. Such water service will be used to supply the toilet room.
Tenant may tap such water service for his required uses, subject to all
applicable codes.
SEWER SERVICE: All laterals, hook-up charges, and capacity fees shall
be paid by Landlord on an unimproved shell. All additional fees and costs due
to Tenant's specific use will be paid by Tenant. If the demised space includes
a toilet room, the Landlord will provide a 4" domestic waste pipe to the
demised space with which to serve such toilet room. The Tenant may use such
domestic waste pipes for his specific requirements up to a maximum of 20
additional fixture units, subject to all applicable codes.
NATURAL GAS: Natural gas service will be provided by the Landlord to
the building. The cost of that service will be shared by those Tenants who are
served by it on a pro-rata basis. Secondary gas piping will be the specific
responsibility of the Tenant.
Plans and engineering for such water, sewer, and natural gas piping
will be prepared by the Landlord's consultant at the expense of the Tenant per
paragraph II.B.4. of this Exhibit "B".
Installation shall be per paragraph IV.T. of this Exhibit "B".
IV. TENANT'S WORK:
The work to be performed by Landlord in satisfying its obligation to
construct Tenant's store on the Premises shall be limited to that which is
described under section III. All items of work not set forth under section III
shall be provided by Tenant at Tenant's expense, and are called "Tenant's Work".
Tenant's Work shall include, but not be limited to, the purchase and/or
installation and/or performance of any and all of the following items, including
all applicable permits, licenses, architectural and engineering fees therefor:
A. All interior partitions and curtain wall within the Premises, except as
provided in paragraph III.D.
<PAGE> 39
B. All electrical work, except as provided in paragraphs III.H., III.I.,
and III.J., shall be provided by Tenant, including installation of electrical
meter and arrangements for same with local utility company.
C. Light coves and special hung or furred ceilings.
D. Internal communication systems and alarm systems.
E. Store fixtures and furnishings.
F. Plumbing and plumbing fixtures, except as provided in paragraphs
III.I. and III.K.
G. Show window display platforms, window backs.
H. Special heating, cooling, or ventilating, except as provided in
paragraph III.H..
I. Special lighting fixtures.
J. All interior finish in show window.
K. Special finish of walls and ceilings on the inside of the glass line
shall be paid for by Tenant beyond that described in paragraphs III.D. and
III.E.
L. All finish painting, floor coverings, and base.
M. Hot water heater.
N. All work, other than the Landlord's construction as set forth in
section III.
O. Any and all other items required by Tenant.
P. All interior and exterior signing in accordance with Landlord's sign
criteria, Exhibit "C" to this Lease.
Q. Comply with all building codes, regulations, and ordinances; and
provide all required bonds and insurance.
R. Permission for Landlord to provide plumbing, electrical, and telephone
runs from other stores in building to pass through the Premises in concealed
areas.
S. Payment for roofing repairs required as a result of penetrating the
existing roof, which repairs shall be performed solely by Landlord's roofing
contractor.
T. Use of only Landlord's designated contractor for any changes in,
alterations to, or additions to the fire protection, heating and air
conditioning, plumbing, or electrical systems serving the Premises.
U. Permission for the Landlord to install a water meter within the
Tenant's ceiling and to occasionally and regularly read such meter for the
purpose of billing Tenant for his water use.
<PAGE> 40
ADDENDUM TO LEASE BY AND BETWEEN RESEDA INVESTORS
(LANDLORD) AND VALLE DE ORO BANK (TENANT)
1. Landlord's Work EXHIBIT 'B' (Page #3 continued)
K. Canopy: Landlord to construct an approximately 20 foot by 20 foot
canopy over the two (2) drive through lanes adjacent to Tenant's space, per
Tenant's specifications.
L. Drive-Up Islands: Landlord to provide cement islands, trenching, paving
and stripping for (2) drive through lanes.
2. Landlord to provide Tenant with a $10.00 per square foot allowance on
building (4,000 square feet) for tenant's use in additional improvements.
3. Landlord to provide Tenant with a minimum of twenty (20) parking spaces
marked "thirty (30) minute parking," adjacent to subject building.
5. In case of insolvency, the F.D.I.C. has the right to step in and assume full
responsibility and maintain lease.
6. Lease is subject to approval by Board of Directors of Valle de Oro Bank by
November 30, 1987.
7. Tenant to be allowed to place exterior signage on four (4) sides building
per Landlord's sign criteria. Tenant also to have exclusive right to monument
sign along Jamacha Road in front of subject building. Signage to be approved by
Landlord and Home Capital.
8. Providing the Tenant is not in default of any of the terms or conditions of
this lease, Tenant shall have the right to extend this Lease for two (2)
additional terms of five (5) years each under the same terms and conditions as
the initial lease term.
9. Tenant shall have the right to place a double faced movable temporary sign
in the vicinity of the premises indicating the future location of its business
and its quarters. Construction Landlord shall cooperate in maintaining the
temporary sign until construction is complete. Sign to be approved by Landlord
and Home Capital.
<PAGE> 41
EXHIBIT C
SIGN CRITERIA
-------------
These criteria have been established for the purpose of assuring an outstanding
shopping center, and for the mutual benefit of all tenants. Conformance will be
strictly enforced; and any installed non-conforming or unapproved signs must be
brought into conformance at the expense of the tenant.
A. GENERAL REQUIREMENTS
1. Each tenant shall submit or cause to be submitted to the Project
Architect for approval before fabrication at least four copies of
detailed drawings indicating the location, size, layout, design and
color of the proposed signs, including all lettering and/or graphics.
2. All permits for signs and their installation shall be obtained by the
tenant or tenant's representative prior to installation.
3. Tenant shall be responsible for the fulfillment of all requirements and
specifications.
4. All signs shall be constructed and installed at tenant's expense.
5. All signs shall be reviewed by the Owner and his designated Project
Architect for conformance with this criteria and overall design
quality. Approval or disapproval of sign submittal based on aesthetics
of design shall remain the sole right of the Owner.
6. Tenant sign contractor to be responsible to obtain all required City
Approvals.
B. GENERAL SPECIFICATIONS
1. Tenant signs will be internally illuminated channel letters - minimum
24 GA. G.I. metal with 1/8" plastic face (no cross over neon or wiring
permitted). Refer to detail sheets attached.
<PAGE> 42
2. No audible, flashing or animated signs will be permitted.
3. No projections above or below the sign panel will be permitted. Sign
must be within dimensional limits as indicated on the attached
drawings.
4. No script or other style of letter than that detailed will be permitted
on sign panels unless it is part of any established trademark of the
tenant, used on other locations.
5. Under-canopy signs shall be restricted to a maximum of 4 square feet of
sign area, maximum height of 12 inches and a maximum width of 48".
6. Tenant shall be responsible for the installation and maintenance of all
signs.
7. Wording of signs shall not include the product sold except as part of
the tenant trade name or insignia.
8. Each tenant shall have a maximum 1.4 square feet of signing for each 1
foot of building frontage. Letters shall be a maximum of 24 inches in
height. Sign shall center on store unless prior approvals are obtained
from the Owner.
9. Tenant's sign contractor shall repair any damage to any work caused by
his work.
10. Tenant shall be fully responsible for the operations of the tenant's
sign contractors.
11. Electrical service to all signs will be connected to tenant's meter.
C. CONSTRUCTION REQUIREMENTS
1. Letter fastening and clips are to be concealed and be of galvanized,
stainless aluminum, brass or bronze metals. Letters may be attached
with approved adhesives.
2. No labels will be permitted on the exposed surface of signs, except
those required by local ordinance which shall be placed in an
inconspicuous location.
<PAGE> 43
3. Tenants shall have identification signs designed in a manner
compatible with and complimentary to adjacent and facing storefronts
and the overall design concept of the center.
4. Design, layout and materials for tenants signs shall conform in all
respects with the sign design drawings included with this criteria.
The maximum height for letters in the body of the sign shall be as
indicated in these documents.
5. All penetrations of the building structure required for sign
installation shall be sealed in a water-tight condition and shall be
patched to match adjacent finish.
D. MISCELLANEOUS REQUIREMENTS
1. Each tenant shall be permitted to place upon each entrance of its
demised premises not more than 144 square inches of gold leaf or decal
application lettering not to exceed two inches in height, indicating
hours of business, emergency telephone numbers, etc.
2. Except as provided herein, no advertising placards, banners, pennants,
names, insignia, trademarks, or other descriptive material, shall be
affixed or maintained upon the glass panes and supports of the show
windows and doors, or upon the exterior walls of buildings without the
written previous approval of the landlord.
3. Each tenant who has a non-customer door for receiving merchandise may
have uniformly applied on said door in location, as directed by the
Project Architect, in three (3) inch high block letters, the tenant's
name and address. Where more than one tenant uses the same door, each
name and address shall be applied. Colors of letters shall match
Ameritone #189A Dark Brown.
4. Contractors installing signs are to be State registered contractors
and are to have a current city business license.
E. MAJOR TENANTS
The provisions of the Exhibit, except as otherwise expressly
SIGN CRITERIA-Page 3
<PAGE> 44
provided in this Exhibit, shall not be applicable to the identification
signs of markets, drug stores or other occupancy designated by the
landlord as a "Major Tenant" that may be located in the shopping center,
it being understood and agreed that these occupants may have their usual
identification signs on their buildings, as the same exist from time to
time of similar buildings operated by them in California; provided,
however, there shall be no roof-top signs which are flashing, moving or
audible and provided said sign is architecturally compatible and has
been approved by the Project Architect.
F. UNDER CANOPY SIGNS
Certain tenants, as negotiated, shall have under Canopy signs. These
signs will be constructed of 2" thick cedar or redwood, stained to
conform to Rustic 1 Antique Finish. Sign background to have sandblasted
finish and smooth wood trim all around with smooth graphics. Letter
style is to be designed by each tenant individually. Size and shape of
sign is to be as illustrated on Drawing No. 6 of this criteria. Each
tenant shall submit sign design to Owner and or Architect for approval
prior to fabrication and/or installation.
<PAGE> 45
NOTES:
1. INTERNALLY ILLUMINATED INDIVIDUAL LETTERS
+ 5' DEEP X 24' HIGH MAX.
2. SIGN WIDTH SHALL NOT EXCEED 70% OF STORE FRONT WIDTH.
3. INDIVIDUAL COLORED PLASTIC LETTER WITH A GOLD TRIM AND DARK BROWN RETURN
4. 24' LETTER, MAXIMUM HEIGHT.
5. COLOR OF LETTERING AND LOGO SHALL BE SUBJECT TO APPROVAL. REFER TO LIST OF
APPROVED COLORS, (NOTE #6)
6. COLORS SHOULD BE BASIC EARTH TONES, RECOMMEND:
YELLOW # 2465 # 2016
GREEN # 2030 # 2108
ORANGE # 2564 # 2119
RCO # 2283 # 2662 #2157
BROWN ALL SHADES
BLUE # 2648 # 2051
TURQUOISE # 2308
RUST ALL SHADES
WHITE # 7328 #7420
IVORY # 2146
<PAGE> 46
[SECTION THRU TYP. TENANT SIGN BLUEPRINT]
<PAGE> 1
EXHIBIT 10.14
Consent to Assignment of Lease between Valle de Oro Bank, N.A., Alcott Estates
and Bank of America National Trust and Savings Association dated June 12, 1985
and underlying lease between Pacific Coast Properties, Inc. and Bank of America
National Trust and Savings Association dated November 9, 1960
<PAGE> 2
CONSENT TO ASSIGNMENT
THIS CONSENT TO ASSIGNMENT ("Consent Agreement") is dated as of the 22nd of
June, 1985, with reference to that certain Assignment of Lease (the
"Assignment") dated June 12, 1985 by and between Bank of America, National Trust
& Savings Association, ("Tenant") and Valle de Oro Bank N.A. ("Assignee"), and
is entered into by and between Alcott Estates, a California limited partnership,
a successor in interest ("Landlord"), Tenant and Assignee, with reference to the
following facts:
(i) Landlord and Tenant are the parties to that certain lease (the "Lease")
dated as of November 9th, 1960 as amended by a document entitled First Amendment
to Lease dated August 15th, 1973 and further amended January 30, 1985 by a
document entitled Addendum No. 1 to Lease, the initial term of which expires on
Sept. 7, 1991.
(ii) Tenant and Assignee wish to enter into the Assignment:
(iii) The Lease provides, inter alia, that Tenant may not enter into any
assignment without Landlord's prior written approval;
(iv) Tenant and Assignee have herewith presented the Assignment to Landlord
for Landlord's approval, upon all of the terms and conditions hereinafter
appearing.
NOW THEREFORE, for good and valuable consideration, the parties hereto
agree as follows:
1. Landlord hereby consents to the Assignment and the terms and conditions
thereof. The effective date of the consent shall be on or about August 1, 1985,
subject to the satisfaction of the conditions set forth in Section 13 of the
Assignment. This Consent Agreement shall not release Tenant from any existing or
future duty, obligation or liability to Landlord pursuant to the Lease, nor
shall this Consent Agreement change, modify, or amend the Lease in any manner,
except insofar as it constitutes Landlord's consent to Assign and except as
otherwise expressly provided in this Consent Agreement and in the Assignment.
2. Landlord's duties, obligations or liabilities to Assignee shall be no
greater than those possessed by Tenant under the Lease.
Landlord shall not (i) be liable to Assignee for any act, omission or
breach of this Assignment by Tenant, (ii) be subject to any offsets or defenses
which Assignee might have against Tenant, or (iii) be bound by any rent or
additional rent which Assignee might have paid in advance to Tenant.
3. Landlord (i) agrees and represents that as of the date hereof there are
no outstanding defaults of Tenant under the Lease, that the Lease is in full
force and effect and that the lease as amended are the only agreements between
Landlord and Tenant.
4. Assignee hereby (a) acknowledges that it has read and has knowledge of
all the terms, provisions, rules and regulations of the Lease and agrees not to
do or omit to do anything which would cause Tenant to be in breach of this Lease
and (b) assumes and agrees to pay and perform each covenant, agreement and
obligation contained in the lease which shall not relieve Tenant of any of its
obligations now existing or hereinafter arising under the Lease. Any such act or
omission shall also constitute a breach of this Consent Agreement and shall
entitle Landlord to recover any damage, loss, cost or expense which it thereby
suffers, from Assignee, whether or not Landlord proceeds against Tenant.
5. In the event of any litigation between or among the parties hereto with
respect to the subject matter hereof, the unsuccessful party agrees to pay to
the prevailing party all costs, expenses and reasonable attorney's fees incurred
therein by the prevailing party, which may be included as a part of a judgment
rendered therein.
6. The parties hereto acknowledge that the Assignment and this Consent
Agreement constitute the entire agreement between Tenant and Assignee with
respect to the subject matter thereof insofar as Landlord may be concerned, and
that no amendment, modification or change therein will be binding upon Landlord
unless Landlord shall have given its prior written consent thereto and that any
such purported amendment, modification or change made without such consent
shall, at the option of Landlord, be deemed a default under the Lease.
<PAGE> 3
7. This Consent Agreement shall be binding upon and shall inure to the
benefit of the parties' respective successors in interest and assigns, subject
at all times, nevertheless, to all agreements and restrictions contained in the
Lease, the Assignment, and herein, with respect to subleasing, assignment, or
other transfer. The agreements contained herein constitute the entire
understanding between the parties with respect to the subject matter hereof, and
supersede all prior agreements except the Lease, which shall remain in full
force and effect.
8. Notice required or desired to be given hereunder or under the Lease
shall be effective either upon personal delivery evidenced by a signed receipt
or upon the date of actual receipt or refusal as shown on return receipt after
deposit in the United States mail, by registered or certified mail, return
receipt requested, or when delivered by the telegraph office if sent by
telegraph, addressed to the Landlord at Suite 206; 6363 El Cajon Blvd.; San
Diego, CA 92115, or to Tenant at Bank of America, Corporate Real Estate
Division, Unit 4753, 1130 South Figueroa Street, Los Angeles, CA 90015, or
Assignee at the address of the Premises with a copy mailed to Assignee at P.O.
Box 1449; Campo at Kenwood; Spring Valley, CA 92077. Any party may change its
address by giving notice in the manner hereinabove provided.
9. Except to the extent of Landlord's obligations under the Lease as
amended, Tenant and Assignee agree to indemnify and hold Landlord harmless from
and against any loss, cost, expense, damage or liability, including reasonable
attorneys' fees, incurred as a result of a claim by any person or entity (i)
that it is entitled to a commission, finder's fee or like payment in connection
with the Assignment or (ii) relating to or arising out of the Assignment or any
related agreements or dealings.
10. Tenant and Assignee agree to execute and deliver to Landlord any and
all additional documents, instruments or agreements reasonably deemed necessary
or appropriate by Landlord to carry out the purpose, terms and provisions
hereof.
11. Tenant, Assignee and Landlord do hereby respectively warrant and agree
that neither it nor any of its agents or other parties has made any promises,
agreements, warranties or representations which have induced either of the
others to enter this transaction or otherwise, except as specifically set forth
in this Consent.
12. Landlord warrants and represents that there are no liens or
encumbrances on the Premises which will affect Tenant's or Assignee's rights
under the Lease so long as neither Tenant or Assignee are in default thereunder.
13. This Consent Agreement may be executed in any number of counterparts,
each of which shall be an original and all of which together shall constitute
and be construed as one and the same document.
-2-
<PAGE> 4
<TABLE>
<S> <C>
LANDLORD:
ALCOTT ESTATES,
a California limited partnership
By: PACIFIC VIEW CONSTRUCTION CO INC.,
general partner
Dated: By:
----------------- -----------------------------------------------
Name Title
--------------------- -------------------
TENANT:
BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION,
A National Banking Association
Dated: June 12, 1985 By: /s/ G.M. NESDALE
---------------- ----------------------------------------------
Name G.M. Nesdale Title Vice President
-------------------- ------------------
Dated: June 12, 1985 By: /s/ R.L. HATFIELD
---------------- ----------------------------------------------
Name R.L. HATFIELD Title Vice President
-------------------- ------------------
ASSIGNEE:
Valle de Oro Bank, N.A.
Dated: By:
---------------- ----------------------------------------------
Name William V. Ehlen
---------------------------------------------
Title President and Chief Executive Officer
--------------------------------------------
Dated: By:
---------------- ----------------------------------------------
Name Title
-------------------- ------------------
(0385S)
</TABLE>
-3-
<PAGE> 5
EXHIBIT "A"
A tract of land in that portion of Lot 29 of Block 8 of the subdivision of
Tract "H" of Jamacha Rancho in the County of San Diego, State of California,
according to the Map thereof No. 812 filed in the office of the County Recorder
of San Diego County February 21, 1896, described as follows:
Beginning at the intersection of the southerly and westerly lines of said Lot
29, which is also a point on the centerline of Sweetwater Road, thence North 19
degrees 10' West along the centerline of Sweetwater Road 237.76 feet; thence
North 70 degrees 50' East 91 feet to the true point of beginning; thence
continuing North 70 degrees 50' East 84 feet; thence North 19 degrees 10' West
65 feet; thence South 70 degrees 50' West 84 feet; thence South 19 degrees 10'
East 65 feet to the true point of beginning.
<PAGE> 6
RECORDED AT THE REQUEST OF: )
)
)
)
)
WHEN RECORDED MAIL TO: ) VITAL FILE
)
)
)
)
- -------------------------------------------------------------------------------
Space above for Recorder's use
SHORT FORM LEASE
THIS LEASE, executed and delivered as of this 9th day of November, 1960 by
and between PACIFIC COAST PROPERTIES, INC., a Delaware corporation,
hereinafter referred to as Landlord/Lessor, and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, hereinafter
referred to as Tenant/Lessee,
WITNESSETH:
1. For valuable considerations, receipt of which is hereby acknowledged by
the parties hereto, Landlord/Lessor does hereby lease to Tenant/Lessee and
Tenant/Lessee does hereby lease from Landlord/Lessor that certain real property
situated in the County of San Diego, State of California, and particularly
described as Exhibit A attached hereto, and by this reference made a part
hereof, for a term of approximately thirty (30) years, commencing on September
8, 1961, ending on September 30, 1991.
2. This lease is made upon the terms and conditions of that certain lease
between the parties hereto of even date herewith, which said long-form lease is
hereby referred to, and
-1-
<PAGE> 7
EXHIBIT "A"
A tract of land in that portion of Lot 29 of Block 8 of the subdivision of
Tract "H" of Jamacha Rancho in the County of San Diego, State of California,
according to the Map thereof No. 812 filed in the office of the County Recorder
of San Diego County February 21, 1896, described as follows:
Beginning at the intersection of the southerly and westerly lines of said Lot
29, which is also a point on the centerline of Sweetwater Road, thence North 19
degrees 10' west along the centerline of Sweetwater Road 237.76 feet; thence
North 70 degrees 50' East 91.00 feet to the true point of beginning; thence
continuing North 70 degrees 50' East 84.00 feet; thence North 19 degrees 10'
West 65.00 feet; thence South 70 degrees 50' West 84.00 feet; thence South 19
degrees 10' East 65.00 feet to the true point of beginning.
<PAGE> 8
by this reference made a part hereof, for further particulars.
IN WITNESS WHEREOF, the parties hereto have executed
this lease as of the day and year first hereinabove written.
PACIFIC COAST PROPERTIES, INC. BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By /s/ HARRY E. PIERSON By /s/ M.T. BARKER
__________________________ __________________________
President Assistant Vice President
By /s/ GEO. W. HENDERSON By /s/ IRENE C. IVERSEN
__________________________ __________________________
Secretary Assistant Secretary
(SEAL) LANDLORD/LESSOR
STATE OF CALIFORNIA )
)SS
COUNTY OF LOS ANGELES )
On June 1, 1966 before me, the undersigned, a Notary Public in and for said
State, personally appeared M.T. Barker, known to me to be the Asst. Vice
President, and, IRENE C. IVERSEN, known to me to be Assistant Secretary of the
corporation that executed the within Instrument, known to me to be the persons
who executed the within Instrument on behalf of the corporation therein named,
and acknowledged to me that such corporation executed the within instrument
pursuant to its by-laws or a resolution of its board of directors.
WITNESS my hand and official seal.
Signature /s/ BARBARA J. BULLMAN
_____________________________________________
Barbara J. Bullman
My commission expires March _______
_____________________________________________
Name (Typed or Printed)
[SEAL]
(This area for
Official Notarial Seal)
STATE OF CALIFORNIA )
)SS
COUNTY OF LOS ANGELES )
On June 3, 1966 before me, the undersigned, a Notary Public in and for said
State, personally appeared Harry E. Pierson, known to me to be the ____
President, and Geo. W. Henderson, known to me to be _________Secretary of the
corporation that executed the within Instrument, known to me to be the persons
who executed the within Instrument on behalf of the corporation therein named,
and acknowledged to me that such corporation executed the within Instrument
pursuant to its by-laws or a resolution of its board of directors.
WITNESS my hand and official seal.
Signature /s/ NORMA LEWIS
_____________________________________________
NORMA LEWIS
My commission expires May 21, 1969
_____________________________________________
Name (Typed or Printed)
[SEAL]
(This area for
Official Notarial Seal)
<PAGE> 9
T A B L E O F C O N T E N T S
<TABLE>
<CAPTION>
ARTICLE NO. PAGE
- ----------- ----
<S> <C> <C>
1. DEMISE.............................................. 1
2. TERM................................................ 1
3. RENTAL.............................................. 2
4. CONSTRUCTION, REPAIR, MAINTENANCE AND
RESTORATION......................................... 3
5. INDEMNIFICATION OF LAND............................. 5
6. OPTION TO EXPAND.................................... 6
7. OPTION TO RENEW..................................... 7
8. TAXES AND ASSESSMENTS............................... 8
9. USE AND SURRENDER OF PREMISES....................... 11
10. DESTRUCTION OF PREMISES DOES NOT TERMINATE
LEASE............................................... 13
11. DEFAULT............................................. 14
12. PARKING AND COMMON FACILITIES....................... 14
13. CONDEMNATION........................................ 16
14. ASSIGNMENT OR SUBLEASE.............................. 17A
15. NOTICE OF NON-RESPONSIBILITY........................ 18
16. SUBORDINATION....................................... 18
17. OFFSET STATEMENT.................................... 18
18. HOLDING-OVER BY TENANT.............................. 19
19. NOTICES............................................. 19
20. LEASE COVERS ALL OBLIGATIONS........................ 20
21. SUCCESSORS AND ASSIGNS.............................. 20
</TABLE>
<PAGE> 10
L E A S E
THIS LEASE, made and entered into this 9th day of November, 1960, between
PACIFIC COAST PROPERTIES, INC., a Delaware corporation, hereinafter referred to
as Landlord, and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a
national banking association, hereinafter referred to as Tenant.
W I T N E S S E T H :
ARTICLE 1
Demise
------
WHEREAS, Landlord is the owner of that certain real property (hereinafter
referred to as the "Shopping Center") situate in the County of San Diego, State
of California, more particularly described in Exhibit "A" hereof, copy of which
is attached hereto, incorporated herein and by this reference made a part
hereof, and being graphically delineated on Exhibit "B" hereof, copy of which
is attached hereto, incorporated herein and by this reference made a part
hereof,
NOW, THEREFORE, it is hereby mutually agreed by and between the parties
as follows:
Landlord, for and in consideration of the rents herein reserved and of the
terms, covenants, conditions and agreements on the part of Tenant to be kept and
performed, does hereby lease and demise unto Tenant and Tenant does hereby take
and hire of and from Landlord, for the term and upon the terms, covenants and
conditions hereinafter set forth, those certain premises (hereinafter referred
to as the "demised premises") more particularly described in Exhibit "C" hereof,
copy of which is attached hereto, and by this reference made a part hereof. The
demised premises consists of land having dimensions of approximately 65 feet in
frontage ?????? the provisions of Article 6 hereinafter set forth, are located
in the Shopping Center approximately as designated and outlined in red on said
Exhibit "B" hereof.
ARTICLE 2
Term
----
The term of this Lease shall commence November 1, 1960 and, except as
otherwise herein provided, shall expire thirty (30) years after the Rental
Commencement Date, as the term "Rental Commencement Date" is hereinafter
defined.
<PAGE> 11
In the event the said Rental Commencement Date shall be a date other than
the first day of a calendar month, this Lease shall continue in full force and
effect for a period of thirty (30) years from the first day of the calendar
month next succeeding said Rental Commencement Date.
ARTICLE 3
Rental
------
Section 1 -- Rental Commencement Date Defined: The term "Rental
Commencement Date" as used in this Lease is hereby defined as that date upon
which either of the following events shall first occur:
(a) The date upon which Tenant actually commences to do business in,
upon and from the demised premises; or
(b) May 1, 1961.
Section 2 -- Rental: Subject to the provisions of Article 6 hereof,
Tenant hereby covenants and agrees to pay to Landlord as rental for the demised
premises the sum of FIVE HUNDRED EIGHT and 33/100ths ($508.33) DOLLARS per
month in advance on the first day of each and every calendar month commencing
on the Rental Commencement Date and thereafter throughout the term of this
Lease. In the event the Rental Commencement Date is other than the first day of
a calendar month, the rental for such initial calendar month shall be prorated
upon the basis which the number of days in such month during which rental is
payable bears to the total number of days in such month.
Section 3 -- Payment: All rental shall be paid to Landlord at 9744
Wilshire Boulevard, Suite No. 205, Beverly Hills, California, or at such other
place within the continental limits of the United States as the Landlord shall
from time to time designate by notice to the Tenant. All amounts payable under
this Article 3, as well as all other amounts payable by the Tenant under the
terms of this Lease, shall be paid in lawful money of the United States which
shall be legal tender in payment of all debts and dues, public and private, at
the time of payment. In the event any rent or other amounts payable by the
Tenant to the Landlord under the terms of this Lease shall be due and unpaid,
the same shall bear interest until paid at the rate of five (5%) percent per
annum.
- 2 -
<PAGE> 12
ARTICLE 4
Construction, Repair, Maintenance and Restoration
Section 1 - Title: The Tenant acknowledges that it has examined the
demised premises and that no statement or representations as to the past,
present or future condition or repair thereof have been made by or on behalf of
the Landlord. The Tenant agrees to accept the demised premises in the condition
in which the same may be upon the commencement of the term hereof. Landlord
hereby represents and warrants that it has full title, right and power to
execute and perform this Lease and to grant the estate demised to Tenant
herein, and that Landlord holds said title free and clear of encumbrances
except any taxes not delinquent, easements, rights of way, covenants,
conditions, restrictions, reservations, deeds of trust and other instruments of
record.
Section 2 - Construction: The Tenant covenants and agrees that on or
before November 1, 1961, it will commence the construction on the demised
premises of a modern bank building of first-class design, and that it will
proceed with all reasonable diligence and at its sole cost, expense and risk to
complete the construction of such building in accordance with all applicable
ordinances and laws. It is expressly understood and agreed that all
improvements on the demised premises of whatsoever kind, excepting only
Tenant's movable trade fixtures, equipment and furnishings, shall at all times
be and remain the sole property of Landlord.
Section 3 - Repair: The Tenant agrees that it will at its own cost and
expense keep and maintain, or cause to be kept and maintained the demised
premises and the buildings and improvements located thereon and all additions
and improvements thereto, and each and every part thereof in first class,
orderly, secure, safe, clean, and sanitary repair and condition, and will save
and hold the Landlord free of and harmless from all expenses and liability or
claim or liability, with respect thereto.
Section 4 - Restoration: In the event any future building, buildings or
other improvements on the demised premises shall be damaged or destroyed,
whether partially or entirely, and whether by fire or any other cause
whatsoever, then Tenant will repair, restore, and/or reconstruct the damaged or
destroyed building
-3-
<PAGE> 13
or improvements at its own expense, free of liens, and in such a manner that
the value thereof after such repair, restoration and/or reconstruction shall be
no less than the value thereof immediately prior to such damage or destruction.
The Tenant agrees that such work of repair, restoration and/or reconstruction
shall be diligently prosecuted to the end that the demised premises shall be at
all times in a sound condition and state of repair.
Anything in this Article 4 to the contrary notwithstanding, in the event
that said building or improvements are damaged or destroyed during the last
five (5) years of the term of this Lease, and if said building cannot be
restored by working under normal conditions within one hundred eighty (180)
working days from the date of such damage or destruction, or in the event that
said building or improvements, exclusive of foundations and basements, are
damaged or destroyed during the last five (5) years of the term of this Lease
in an amount equal to seventy-five (75%) percent or more of its then
replacement cost, then, and in either of such events, Tenant shall have the
option to pay Landlord an amount equal to the then full replacement cost of the
building (which payment shall be made to the order of Landlord and/or any
holder of a promissory note secured by a mortgage or deed of trust affecting
the demised premises; as their respective interests may appear), and upon
payment of said sum Tenant shall be relieved of its obligation to restore,
repair, and/or reconstruct said building or improvements and this Lease shall
thereupon terminate.
In the event of any dispute between the Landlord and Tenant relative to
the provisions of this paragraph, they each shall select an arbitrator, the two
arbitrators so selected shall select a third arbitrator, and the three
arbitrators shall hear and determine the controversy, and the decision of a
majority of them thereon shall be binding and final upon both Landlord and
Tenant who shall bear the cost of such arbitration in equal shares.
It is expressly understood and agreed that Landlord shall not at any time
or under any circumstances be required to build, demolish, construct,
reconstruct, maintain or repair any building or buildings or other improvements
upon the demised premises or any part thereof, nor to incur any expense,
obligations or liability for any damage whatsoever on account thereof.
- 4 -
<PAGE> 14
Section 5 -- Mechanics Liens: The Tenant expressly covenants and agrees to
promptly pay for any and all labor done or materials furnished for any work of
demolition, construction, repair, maintenance, improvement, alteration,
addition or any other matter pertaining to or in connection with the demised
premises, and agrees to keep and hold the demised premises and the Landlord
free, clear and harmless of and from any mechanics' liens or liens of a similar
nature which might or could arise by reason of any such matter.
ARTICLE 5
Indemnification of Landlord
The Tenant further covenants and agrees with the Landlord that the Landlord
shall not be liable for any injuries or damages to persons or property from any
cause whatsoever by reason of the use, occupation, control or enjoyment of the
demised premises by the Tenant or any other person at any time during the term
of this Lease. Tenant hereby covenants and agrees to indemnify and save Landlord
and the demised premises free, clear and harmless from all liability, loss,
costs, charges, penalties, obligations, expenses, attorney's fees, litigation,
judgments, damages, claims and demands of any kind whatsoever in connection
with, arising out of or by reason of any violation of law, ordinance or
regulation by Tenant, its agents, employees, servants, contractors, subtenants
licensees or concessionaires, or by reason of any injury however occurring to
any person or persons whomsoever (including Tenant, its agents, employees,
contractors, subtenants, licensees or concessionaires), or property of any kind
whatsoever and to whomsoever belonging (including Tenant, its agents,
contractors, subtenants, licensees or concessionaires), from any cause or causes
whatsoever, while in, upon, about or in any way connected with the demised
promises or any part thereof during the term of this Lease or any extension or
renewal hereof or any occupancy hereunder. The injuries or damages referred to
in this Article 5 shall include, without limiting the generality of the
preceding provisions of this Article 5, injuries or damages arising directly or
indirectly out of my demolition, repairs, restoration, construction or
reconstruction which the Tenant may make or cause to be made upon the demised
promises or any part thereof, whether pursuant to the provisions of this Lease
or otherwise.
-5-
<PAGE> 15
ARTICLE 6
Option To Expand
Section 1 -- Optional Area: Anything herein contained to the contrary
notwithstanding, it is understood and agreed that Tenant shall have the option
during the term hereof to lease additional space (hereinafter referred to as
the "Optional Area") adjacent to the rear of the original demised premises.
Said Optional Area shall contain not more than 2,665 square feet and shall
measure not more than 41 feet in depth. In no event shall the demised premises,
as expanded by said Optional Area, exceed 65 feet in frontage from north to
south, or 125 feet in depth from west to east.
Section 2 -- Terms and Conditions: Except as otherwise herein provided,
Tenant shall use and occupy said Optional Area only upon the same terms and
conditions as are herein provided for the original demised premises. Subject to
the provisions of this Article 6, said Optional Area shall, upon commencement
of the term therefor as hereinafter provided, be deemed included in and part of
the premises originally demised hereunder for all the purposes of this Lease,
the same as if said Optional Area had been originally included hereunder.
Section 3 -- Exercise of Option: Tenant may exercise the foregoing option
to lease said Optional Area at any time during the term or any extension or
renewal of the term of this Lease by giving written notice thereof to Landlord.
Said written notice of exercise shall contain the true legal description and
specify the dimensions of said Optional Area to be leased by Tenant. The term
of the Lease for said Optional Area shall commence upon the date the Landlord
receives written notice of Tenant's exercise of this option as provided for
hereinabove, and shall expire or terminate concurrently with the expiration or
termination of the term for the premises originally demised hereunder. As soon
as reasonably possible after receipt by Landlord of Tenant's said notice of
exercise, the parties shall execute a written memorandum confirming the
incorporation of said Optional Area into the premises demised hereunder, and
the description thereof, and executed copies of said memorandum shall thereupon
be attached to this Lease, incorporated herein and
-6-
<PAGE> 16
by this reference made a part hereof.
Section 4 -- Option Area Rental: Tenant hereby covenants and agrees to pay
to Landlord as monthly rental for said Optional Area (hereinafter referred to as
"Optional Area Rental"), in addition to the rental provided for in Article 3
hereinabove and in addition to all other sums payable on the part of Tenant
hereunder, an amount equal to FIVE HUNDRED EIGHT AND 33/100ths ($508.33) DOLLARS
multiplied by a fraction, the numerator of which shall be the total number of
square feet contained in said Optional Area, and the denominator of which shall
be FIVE THOUSAND FOUR HUNDRED SIXTY (5,460).
The said Optional Area Rental shall be payable in advance on the first day
of each and every calendar month throughout the term hereof commencing on the
occurrence of either of the following events, whichever shall first occur:
(a) The date upon which Tenant actually commences to do business in,
upon and from the improvements constructed on said Optional Area; or
(b) One hundred eighty (180) days after the date Landlord receives
Tenant's said written notice of exercise of this option, as provided for
hereinabove.
In the event the date upon which said Optional Area Rental commences is a
date other than the first day of a calendar month, the Optional Area Rental for
such initial calendar month shall be prorated upon the basis which the number of
days in such month during which said Optional Area Rental is payable bears to
the total number of days in such month.
Commencing with the first day of the calendar month next succeeding
commencement of said Optional Area Rental as provided for hereinabove, the
amount of said Optional Area Rental shall be added to, deemed a part of and
paid concurrently with the rental provided for in Article 3 hereinabove.
ARTICLE 7
Option to Renew
Providing the Tenant is not in default under any of the terms, covenants
and conditions hereof, it shall have two (2) consecutive options extending the
term hereof for two (2) additional periods of ten (10) years each,
-7-
<PAGE> 17
and otherwise upon all the terms, covenants, and conditions of this Lease,
which options must be exercised by the Tenant serving the Landlord with a
written notice of its intention so to do not later than one (1) year prior to
the expiration of the term or the first renewal of the term, respectively, of
this Lease.
ARTICLE 8
Taxes and Assessments
Section 1: The Tenant shall pay as additional rent hereunder, before
delinquency, all real estate and property taxes and assessments, water rates
and water meter charges, gas, electricity and other utility rates, sewer
rentals and sewer service charges, and all other charges (whether the same or
different in kind from the foregoing) which during the term of this Lease are
assessed or become liens upon or become chargeable against or payable in
connection with or attributable to the demised premises or any part thereof, or
any or all buildings and improvements at any time thereon, or the leasehold
estate created by this Lease, or the reversionary estate, or both of such
estates; provided, however, if any such tax, assessment, rate or charge may be
paid in installments the Tenant may pay each such installment on or before the
date upon which such installment may be paid without penalty or interest; and
the Tenant shall exhibit to the Landlord for examination receipts for all such
taxes, assessments, rates or charges within ninety (90) days after the last day
upon which the same may be paid without penalty or interest.
In the event the Tenant fails to pay such taxes, assessments, rates, or
charges before delinquency, and if such default shall continue for a period of
thirty (30) days after the Landlord shall have given to the Tenant notice in
writing of the existence thereof, and if payment by the Landlord will not
prejudice the Tenant's right to contest the amount or legality of the tax,
assessment, rate or charge as provided elsewhere in this Article 8, then and in
such event the Landlord may pay said taxes, assessments, rates or charges, as
the case may be, together with all interest and penalties thereon or in
connection therewith, and the amount so paid shall be deemed to be rent then due
and payable by the Tenant to the Landlord.
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<PAGE> 18
Anything herein contained to the contrary notwithstanding, the Landlord
agrees that the Tenant shall have the right to contest the amount or legality
of any taxes, assessments, rates and charges which it is obligated to pay and
the right to make application for the reduction thereof or of any assessments
upon which the same may be based, and the Landlord hereby grants to the Tenant
the necessary power and authority to act therein in the name of the Landlord
wherever the same is permitted or required by law, without, however, any cost,
expense or liability to the Landlord. If the Tenant shall contest the amount or
legality of any such taxes, assessments, rates or charges, or make application
for the reduction thereof, or of any assessment upon which the same may be
based, the time within which the Tenant shall be required to pay the same shall
be extended until such contest or application shall have been finally
determined, but the Tenant shall at all times fully protect the title and
interest of the Landlord in the demised premises including all buildings and
improvements by paying the same before delinquency and seeking a refund, or by
depositing with the Landlord an amount sufficient to pay the same, with
appropriate instructions so that the same may be used to pay any such liability
when the same shall have been finally determined, or by furnishing to the
Landlord a bond with the Tenant as principal and in form and with a surety
satisfactory to the Landlord in an amount equal to not less than one hundred
twenty (120%) per cent of the amount of the taxes, assessments, rates or
charges so contested, which bond shall guarantee the payment thereof with
interest and penalties thereon. The Tenant agrees that it will prosecute any
such contest or application with due diligence and that it will within thirty
(30) days after final determination thereof pay the amount of any such taxes,
assessments, rates or charges which may have been the subject of such contest
or application as so determined, together with any interest and penalties,
costs and charges which may be payable in connection therewith; provided,
however, that if at any time payment of the whole or any part of the amount so
contested shall be necessary in order to prevent a sale of the demised premises
or any part thereof or interest therein because of the non-payment of such tax,
assessment, rate or charge, then the Tenant shall pay the same in time to
prevent such sale. In any
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<PAGE> 19
case, upon the full payment of such taxes, assessments, rates or charges,
together with any such interest, penalties, costs and charges, the deposit with
the Landlord in respect thereof or the part thereof not applied to such
payment, shall be returned or the bond exonerated, as the case may be.
Nothing herein contained shall be construed to require the Tenant to pay
any franchise, estate, inheritance, succession, capital levy, or transfer tax
of the Landlord growing out of or connected with this Lease or the Landlord's
reversionary interest in the demised premises, or any income, excess profits or
revenue tax, or any other tax, assessment, rate or charge upon the rentals
payable by the Tenant under this Lease, and if the Tenant shall be required by
law to pay any such tax, assessment, rate or charge specified in this paragraph
the Tenant shall have the right to deduct the amount thereof from subsequent
installments of rent or additional rent due from the Tenant under the terms of
this Lease.
With respect to any assessment which may be levied against or upon the
demised premises and which under the laws then in force may be evidenced by
improvement or other bonds, or may be paid in annual installments, the Tenant,
at its option, may cause such improvement bonds to be issued, or cause such
assessments to be paid in such annual installments, and in such event the
Tenant shall only be required to pay such installments as each thereof matures.
Upon the expiration of the term of this Lease the Tenant shall be liable
only for such proportion of the taxes, assessments, rates or charges which
shall be payable with respect to the demised premises or any part thereof or
the buildings and improvements therefrom or the leasehold estate or the
reversionary estate, for the tax fiscal year in which this Lease expires as the
part of said fiscal year during which this Lease is in effect shall bear to the
whole of said fiscal year, and if the Tenant shall have paid more than such
proportion, the Landlord shall refund the excess to the Tenant.
All taxes for the tax fiscal year in which the term of this Lease shall
commence shall be prorated as between the Landlord and Tenant as of the date of
the commencement of the term hereof. The Landlord agrees to attempt to have a
tax segregation made wherein the demised premises will be taxed separately.
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<PAGE> 20
In the event the demised premises are not separately assessed or if more than
the demised premises are included in any such assessment, then the amount
thereof shall be prorated and there shall be attributed to the demised premises
and paid by Tenant only that portion of such tax or assessment which is equal to
the proportion thereof which the number of square feet in the demised premises
bears to the total number of square feet of building area included in such
assessment.
ARTICLE 9
Use and Surrender of Premises
Section 1 - Use: The Tenant in the use, occupancy, control and
enjoyment of the demised premises and in the prosecution or conduct of any
business therein shall comply with all requirements of all laws, orders,
ordinances, rules and regulations of the federal, state, county, municipal and
other authorities, and which any direction or certificate of occupancy, pursuant
to law, of any public officer or officers, which shall impose any duty upon
Landlord or Tenant with respect to the demised premises or the use, occupancy,
control or enjoyment thereof, or the conduct of any business therein, and shall
not make or suffer any waste, or any improper or offensive use of said premises
or any part thereof and subject to provisions of Article 13 hereof the Tenant
agrees to use the demised premises only for the purpose of conducting therein a
general banking business.
The Tenant shall have the right, at its own cost and expense, to
contest or review by legal proceedings the validity or legality of any such law,
order, ordinance, rule, regulation, direction or certificate of occupancy, and
during such contest the Tenant may refrain from complying therewith; provided,
if requested to do so by the Landlord, the Tenant shall first furnish to the
Landlord a bond in form and amount approved by the Landlord (which approval the
Landlord agrees not unreasonably to withhold) guaranteeing to the Landlord
compliance by the Tenant with such law, order, ordinance, rule or regulation, if
required.
The Tenant covenants and agrees that it will not use or permit to be
used the demised premises, or any part thereof, for any dangerous, noxious or
offensive trade or business or for any unlawful or immoral purpose whatsoever
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<PAGE> 21
or for any purpose which will substantially deteriorate the value of the demised
premises (ordinary wear and tear excepted) or impair the reputation or rental
value thereof. The Tenant shall not cause or maintain any nuisance in, at or
upon the demised premises. In the event that during the term of this Lease any
order of abatement or any order or judgment preventing the use of the demised
premises by the Tenant shall be made upon the ground that the demised premises
or any part thereof constitute a nuisance or are used or have been used in
violation of law, the Tenant covenants that it shall not be relieved thereby or
by reason of its loss of the possession of the demised premises of any of its
liabilities and obligations under this Lease. The Tenant shall keep the demised
premises, the windows, sidewalks, front and rear entrances clean and neat, and
not use the sidewalks for the sale or storage of merchandise, or location of
vending machines or other use, except ingress and egress. The Tenant shall have
the right to inscribe, paint, or affix any signs, advertisements or placards
relating to its business on the exterior and/or roof of the building to be
erected by the Tenant on the demised premises; provided, however, that such
signs and advertisements are customary and usual signs relating to the Tenant's
business, but the size, appearance and location of all roof signs must first be
approved in writing by Landlord (which approval shall not be unreasonably
withheld); and provided further, if the Tenant subleases all or any part of the
demised premises (subject to the provisions of Article 14 hereof) then the
Landlord shall have the right to approve any signs by such sublessee or
assignee.
Section 2 - Surrender: The Tenant, upon the expiration or sooner
termination of this Lease for any reason whatsoever, shall surrender to the
Landlord all buildings, ??????, improvements and building equipment in and upon
the demised premises, together with all alterations and replacements thereof, in
good order, condition and repair except for reasonable wear and use thereof. All
alterations, additions, building equipment, and improvements (except trade
fixtures and vault doors, furniture and equipment other than building equipment)
which may be made or installed by either the Landlord or the Tenant upon the
demised premises shall, except as otherwise herein provided, upon the making or
installation thereof be and become a part of the demised
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<PAGE> 22
premises and shall remain upon and be surrendered with the demised premises as
a part thereof at the termination of this Lease.
Trade fixtures, furniture and equipment (other than building equipment)
which may be installed on the demised premises, shall not become a part of the
demised premises and may be removed by the Tenant from the demised premises;
provided, however, no trade fixtures, furniture or equipment shall be removed
while Tenant is in default of any of its obligations under this Lease except
with the prior written consent of the Landlord first had and obtained; and
provided further, that the Tenant shall at all events, at its sole cost and
expense, repair any and all damage to the demised premises resulting from or
caused by the removal of any trade fixtures, furniture or equipment pursuant to
the provisions of this Article 9.
The term "building equipment" wherever used in this Lease shall include
all equipment primarily used or useful in the operation of any building or
buildings as such upon the demised premises as distinguished from equipment
primarily used or useful in the operation of the business or businesses
conducted with such building or buildings. Vault doors shall be deemed trade
fixtures for the purposes hereof.
ARTICLE 10
Destruction of Premises Does Not Terminate Lease
It is mutually covenanted and agreed that damage to or destruction of any
portion of all of the buildings, structures, or improvements upon the demised
premises by fire, the elements or any other cause whatsoever, whether with or
without fault on the part of the Tenant, shall not terminate this Lease or
entitle the Tenant to surrender the demised premises, except as hereinabove set
forth in Article 4, or entitle the Tenant to any abatement of or reduction in
rent or other charges payable by the Tenant hereunder, or otherwise affect the
respective obligations of the parties hereto, any law to the contrary
notwithstanding; and further, that if the use of the demised premises for any
purpose should at any time during the term of this lease be prohibited by law or
ordinance, or other governmental authority, or prevented by injunction or other
local interference by any private person, firm or corporation, this Lease ?????
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<PAGE> 23
surrender the demised premises, or to any statement or reduction in rent or
other charges payable by Tenant hereunder, or otherwise affect the respective
obligations of the parties hereto.
ARTICLE 11
DEFAULT
This Lease is made upon the condition that if default be made in the
payment of the said rent and such default shall continue for more than twenty
(20) days after receipt of a written demand by Landlord to Tenant therefor, or
if Tenant fails or neglects to perform any of the Tenant's obligations hereunder
for a period of twenty (20) days after receipt of written demand by Landlord to
Tenant for such performance (provided however, that if the default cannot be
remedied by Tenant within twenty (20) days after receipt of said written demand,
its obligation shall be satisfied if it commences to cure the particular default
during said period and proceeds thereafter with reasonable diligence to complete
the curing of same), or if Tenant shall abandon or vacate the demised premises,
or if the estate hereby created shall be taken on execution, and such execution
shall not be cancelled, satisfied or otherwise removed within thirty (20) days
after notice by Landlord, or if the Tenant shall be adjudicated bankrupt or
insolvent according to law, or if any assignment of its property shall be made
for the benefit of creditors, then and in any of said events, Landlord or the
legal representative of Landlord at its option within notice or demand, may
lawfully declare said term ended, and re-enter said premises or any part
thereof, either with or without process of law, and expel, remove and put out
Tenant or any person or persons occupying said premises and may remove all
personal property therefrom using such force as may be necessary to again
repossess and enjoy said premises as before this demise, without prejudice to
any remedies which might otherwise be used for arrears of rent or preceding
breach of covenant or condition and without liability to any person for damages
sustained by reason of such removal.
ARTICLE 12
PARKING AND COMMON FACILITIES
Landlord hereby grants to Tenant, during the term and any removal or
extension of the term hereof only, for use by Tenant, its subtenants, licensees,
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<PAGE> 24
business invitees, customers, agents, representatives and employees, for the
purpose of ingress and egress to and from the Shopping Center and for parking
and driving of automobiles, light vehicles of transportation and service trucks
and vehicles serving the demised premises, a non-exclusive right in common with
others over, across and upon, all of those certain areas within the Shopping
Center (hereinafter collectively referred to as the "Common Facilities") not
otherwise improved with store rooms and/or storeroom buildings, including, but
not limited to parking areas, service areas, open means of ingress and egress,
plants and planting therein, areas containing signs, pylons or structures
advertising the common name given for the Shopping Center together with such
signs, pylons or structures contained therein and all other areas or facilities
within the Shopping Center intended for common usage, and all as more
particularly set forth on Exhibit "B" hereof.
The Common Facilities shall be subject to the exclusive management and
control of Landlord, and Landlord shall have the right from time to time to
establish, promulgate and enforce such reasonable rules and regulations
concerning said Common Facilities as it may deem necessary or desirable for the
proper and efficient management and operation thereof.
Tenant shall pay to Landlord as additional rental hereunder Tenant's pro
rata share of all expenses of said Common Facilities. Tenant's pro rata share of
expenses of said Common Facilities shall be that portion of all such expenses
which is equal to the proportion thereof which the number of square feet in the
ground floor area of the demised premises bears to the total number of square
feet of ground floor area leased in the entire Shopping Center.
It is understood and agreed that the phrase "expenses of said Common
Facilities" as used herein shall include, but not be limited to, all sums
expended by Landlord concerning said Common Facilities for all general
maintenance and repairs, surfacing, painting and restriping, cleaning, sweeping
and janitorial services, directional signs and other markers, lighting and
other utilities, landscaping and ornamental planting, reasonable depreciation
allowances on maintenance, equipment and other expense items, real and personal
property taxes and assessments, adequate public liability insurance (under
which Tenant shall be
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<PAGE> 25
named as an additional assured) and all other things necessary to keep and
maintain said Common Facilities in a state of good and sanitary order,
condition and repair.
Landlord shall keep and maintain accurate and detailed records of all
expenses of said Common facilities and the same shall upon demand be made
available at reasonable times at the offices of Landlord for inspection by
Tenant.
ARTICLE 13
Condemnation
If all of the demised premises, or such part thereof be taken or condemned
under the power of eminent domain so that there does not remain a portion
thereof reasonably susceptible for Tenant's use and occupancy hereunder, this
Lease may be terminated by Tenant upon written notice to Landlord within
fifteen (15) days after the date title shall vest in the condemnor.
If any part of the demised premises shall be so taken or condemned and the
remaining portion thereof can reasonably be used by Tenant hereunder, this Lease
shall, only as to the part so taken, terminate as of the date title shall vest
in the condemnor, and the rent payable hereunder shall thereafter be adjusted so
that Tenant shall be required to pay for the remainder of the term only such
portion of such rent as the fair market value of the portion remaining after
condemnation bears to the fair market value of the entire demised premises prior
to the date of condemnation. Said fair market value shall be determined by a
consensus of at least two (2) of three (3) appraisers appointed for the purpose
of making such determination, as follows: one such appraiser to be appointed by
Landlord; one to be appointed by Tenant; and the third to be appointed jointly
by the other two.
If any portion of the common facilities in the shopping center shall be
taken for a public or quasi-public purpose under the power of eminent domain
and such taking deprives Tenant, its sub-tenants, licensees, concessionaires,
business invitees, customers, suppliers, agents, representatives or employees
of reasonable ingress and egress to and from the shopping center and/or the
demised premises, or if such taking reduces the area of the customer vehicle
parking portions of the common facilities by an amount in excess of twenty-five
(25%) per
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<PAGE> 26
cent thereof, then and in either such event Tenant shall have the right, within
thirty (30) days after the date of such actual taking, to cancel and terminate
this Lease by giving Landlord at least thirty (30) days written notice of its
election so to do; provided, however, Tenant shall have no such right to cancel
or terminate this Lease if Landlord takes immediate steps to restore reasonable
means of ingress and egress and/or to restore the customer vehicle parking
portions of the common facilities to not less than seventy-five (75%) percent
of their area immediately prior to such taking by substituting therefor other
lands within the shopping center and/or reasonably adjacent thereto, and cause
such restoration within a reasonable period thereafter. In the event Tenant
shall elect to remain in possession, or if this Lease be not otherwise
terminated in accordance with the provisions of this paragraph, there shall be
no reduction, change or abatement of any rental or other charge whatsoever
payable on the part of Tenant to Landlord hereunder, and this Lease shall
continue in all respects in full force and effect.
All damages awarded or other sums paid on account of any condemnation or
taking under the power of eminent domain of the demised premises or any portion
or portions thereof shall, except as otherwise herein provided, belong to and be
the sole property of Landlord, whether such damages or other sums are awarded as
compensation for diminution in value of the leasehold or for the fee or the
demised premises or the improvements hereon or otherwise, and in no event shall
Tenant have any claim whatsoever against Landlord for diminution in value of the
leasehold or for the value of my unexpired term of this Lease, Tenant hereby
expressly waiving any such right or claim; provided, however, Tenant shall be
entitled to receive all awards, if any, made for or on account of any cost,
loss or damage sustained by Tenant for the taking of Tenant's fixtures or as
the result of any alterations, modifications or repairs which may be reasonably
required of Tenant in order to restore the portion of the demised premises not
so condemned to a condition suitable for Tenant's further occupancy. Anything
to the contrary notwithstanding contained in this Lease, Tenant shall be
entitled to receive that portion of any awards made for improvements to the
desired premises which is determined by taking the percentage thereof which
the then unexpired
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term of the Lease, including the option to extend, bears to the total term of
the Lease.
A voluntary sale by Landlord to any public or quasi-public body, agency
or person, corporate or otherwise, having the power of eminent domain, either
under threat of condemnation or while condemnation proceedings are pending,
shall be deemed to be a taking under the power of eminent domain for the
purposes of this Article 13.
In the event this Lease is cancelled or terminated pursuant to any of the
provisions of this Article 13, all rentals and other charges payable on the
part of Tenant to Landlord hereunder shall be paid up to the date upon which
actual physical possession shall be taken by the condemnor, and the parties
shall thereupon be released from all further liability hereunder.
ARTICLE 14
ASSIGNMENT OR SUBLEASE
----------------------
Tenant shall not have the right to sublet the demised premises, or any
part thereof, or to assign this Lease without the written consent of Landlord
being first had and obtained.
All subleases made by the Tenant with the approval of Landlord as
hereinabove provided shall contain the same provisions as are contained in this
Lease as to restriction on the use of the demised premises. Should any subtenant
engage in any unlawful business or use the premises in a manner forbidden by
this Lease, the Tenant shall promptly dispossess such subtenant, but if the
sublease contains the provisions required hereby the Tenant shall not be deemed
in default for delay involved in legal proceedings being taken and had against
the subtenant with all due diligence and dispatch, provided, however, the
Tenant shall in no event be excused from any of its obligations to indemnify
and hold harmless the Landlord and/or the demised premises.
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<PAGE> 28
ARTICLE 15
NOTICE OF NON-RESPONSIBILITY
----------------------------
The Landlord or its agent shall at all reasonable times and from time to
time have the right to post and to keep posted on the demised premises notices
provided for by Section 1183.1 of the Code of Civil Procedure of the State of
California or by any other law of said State, or which the Landlord may deem to
be for the protection of the Landlord and/or the demised premises from
mechanics' liens or other liens of a similar nature.
ARTICLE 16
SUBORDINATION
-------------
Tenant agrees upon request of Landlord to subordinate its rights
hereunder to the lien of any mortgage, deed of trust or other encumbrance,
together with any conditions, renewals, extensions or replacements thereof, now
or hereafter placed, charged or enforced against the demised premises, or any
land, buildings or improvements included therein or of which the demised
premises are a part, or any portion or portions thereof. In connection with the
foregoing, Tenant further agrees to execute at any time and from time to time
such documents as may be required to effectuate such subordination of its
rights hereunder; provided, however, Tenant shall not be required to effectuate
such subordination unless it shall be expressly provided that so long as Tenant
is not in default of any of the terms, covenants or conditions of this Lease,
neither this Lease nor any of the rights of Tenant hereunder shall be
terminated or subject to termination by any trustee's sale or by any action or
proceeding in foreclosure.
ARTICLE 17
OFFSET STATEMENT
----------------
Tenant agrees during the term of this Lease and any extension or renewal
thereof, within ten (10) days after request therefor by Landlord, to deliver in
recordable form a certificate to any proposed mortgage or purchaser, or to
Landlord, certifying that this Lease is in full force and effect and that there
are no defenses or offsets thereto, or stating those claimed by Tenant.
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<PAGE> 29
ARTICLE 18
Holding-over by Tenant
If the Tenant holds over or remains in the possession or occupancy of the
demised premises after the expiration of the term of this Lease, or after any
sooner termination thereof, with the consent of the Landlord expressed or
implied, without any written Lease of the demised premises being actually made
and entered into between the Tenant and Landlord, such holding-over or
continued possession or occupancy, shall create only a tenancy from month to
month at the last monthly rental and upon the terms (other than the length of
term or option to renew) herein specified; and such month to month tenancy may
be terminated at any time by either the Landlord or the Tenant's upon giving to
the other, thirty (30) days' notice of intention to terminate the same. The
Tenant agrees to deliver to the Landlord on the expiration of this Lease, or
any sooner termination thereof, a good and sufficient quitclaim deed covering
the demised premises together with the improvements thereon and appertinances
thereto.
ARTICLE 19
Notices
Any notices or demands which shall be required or permitted by law or any
provisions of this Lease shall be in writing; and if the same is to be served
upon the Landlord, may be personally delivered to Landlord or may be deposited
in the United States mail, certified, return receipt requested, postage
prepaid, addressed to the Landlord at 9744 Wilshire Boulevard, Suite No. 203,
Beverly Hills, California, or at such other address as Landlord may designate
in writing.
If such notice or demands are to be served upon Tenant, said notices or
demands shall be in writing and may be personally delivered to Tenant or may be
deposited in the United States mail, certified, return receipt requested,
postage prepaid, addressed to the Tenant c/o Continental Service Company, 1335
South Grand Avenue, Los Angeles 15, California, or such other address as
Tenant may designate in writing.
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<PAGE> 30
In case of service by mail, service shall be deemed completed upon
deposit thereof in the United States mail in accordance with the foregoing
provisions of this Article 19.
ARTICLE 20
Lease Covers All Obligations
The Landlord has made no representation or promises with respect to the
demised premises except as specifically contained herein. This Lease covers in
full each and every obligation of every kind or nature whatsoever from either
party to the other concerning the demised premises, and shall not be varied,
modified or amended other than by an agreement in writing executed by Landlord
and Tenant.
ARTICLE 21
Successors and Assigns
Subject to the provisions of Article 14 hereof, each and all of the
provisions and agreements herein contained shall be binding upon and shall inure
to the benefit of the parties hereto, their successors and assigns.
The Language and all parts of this Lease shall in all cases be construed
as a whole and according to its fair meaning, and not strictly for nor against
either the Landlord or the Tenant,
IN WITNESS WHEREOF, the Landlord and Tenant have executed and delivered
this Lease the day and year first above written.
PACIFIC COAST PROPERTIES, INC.
By Harvey Illegible
-------------------------------
By Illegible
-------------------------------
Landlord
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By Illegible
-------------------------------
By Irene C. Iversen
-------------------------------
Assistant Secretary
Tenant
<PAGE> 31
EXHIBIT "A"
LEGAL DESCRIPTION OF SPRING VALLEY SHOPPING CENTER
That portion of Lots 20, 21, 28 and 29 in Block 8 of the Subdivision of
Tract "N" of Jomocha Rancho in the County of San Diego, State of California,
according to the Map thereof No. 812 filed in the Office of the Recorder of San
Diego County February 21, 1896, together with a portion of the unnamed Street
lying between said Lots 28 and 29 and 20 and 21 as vacated and closed to public
use on December 22, 1941, by Resolution of the Board of Supervisors of said San
Diego County, a certified copy of which was recorded December 27, 1941, in Block
1297, Page 54, Official Records described as follows:
Commencing at a point on the Northerly line of Lot 27 in said Block 8 distant
thereon South 89 degrees 13' 40" West 200.00 feet from the Northeast corner
thereof, said point being the Northwest corner of land conveyed to Jack
Tarentino et al by Deed dated March 14, 1950, and recorded in Book 3618, Page
392 Official Records; thence along the boundary of said land, South 0 degrees
33' 45" West 890.09 feet (record South 1 degree 25' West 890.00 feet more or
less) and North 89 degrees 40' 24" East 200.00 feet (record South 89 degrees 29'
East 200.00 feet more or less) to the Easterly line of said Lot 27; thence South
0 degrees 33' 45" West along said Easterly line 30.00 feet to the Northwest
corner of said Lot 21; thence North 89 degrees 40' 24" East along the Northerly
line of said Lot a distance of 282.18 feet; thence South 0 degrees 19' 36" East
183.00 feet; thence South 89 degrees 40' 24" West 60 feet to the true point of
beginning, being the point of beginning of a non tangent 25.00 foot radius curve
concave Southeasterly the center of which bears South 89 degrees 40' 24" West
from said point; thence Northwesterly along the arc of said curve through a
central angle of 90 degrees 00' a distance of 39.27 feet; thence tangent to said
curve, South 89 degrees 40' 24" West 875.43 feet to the beginning of a tangent
270.00 foot radius curve concave Southerly; thence Westerly along said curve
through a central angle of 18 degrees 50' 24" a distance of 88.78 feet; thence
tangent to said curve South 70 degrees 50' West 205.00 feet to the beginning of
a 25.00 foot radius curve concave Southeasterly; thence Southerly along said
curve through a central angle of 90 degrees, a distance of 39.27 ft; thence on a
radial line of said curve South 70 degrees 50' West, 35.00 feet to the Westerly
line of said Lot 28; thence along said Westerly line and along the Southerly
prolongation of said Westerly line and along the Westerly line of said Lot 29;
South 19 degrees 10' ast 1036.89 feet to the Southwest corner of said Lot 29;
thence South 89 degrees 45' 20" East along the Southerly line of said Lot, a
distance of 142. 24 feet to a point on the center line of the County Road as
shown on the Map of Road Survey NO. 1343 on file in the office of the Surveyor
of said San Diego County; thence along said cener line North 70 degrees 50' East
30.74 feet to the beginning of a tangent 955.00 feet radius curve concave
Northwesterly; thence Northeasterly along said curve through a central angle of
24 degrees 53' 31" a distance of 414.90 feet; thence tangent to said curve,
North 45 degrees 56' 29" East 198.24 feet to the beginning of a tangent 955.00
foot radius curve concave Southeasterly thence Northeasterly along said curve
through a central angle of 18 degrees 11' 58" a distance of 303.35 feet; thence
leaving said center line, North 25 degrees 51' 33" West 50.00 feet to
EXHIBIT "A" - PAGE 1
<PAGE> 32
the point of beginning of a non-tangent 25.00 feet radius curve concave
Northwesterly, the center of which bears North 25 degrees 51' 33" West from said
point; thence Northerly along the arc of said curve through a central angle of
73 degrees 02' 55" a distance of 31.87 feet to the beginning of a reverse curve
concave Easterly having a radius of 1030.00 feet; thence Northerly along said
curve through a central angle of 8 degrees 34' 52" a distance of 154.26 feet;
thence tangent to said curve, North 0 degrees 19' 36" West 323.20 feet to the
true point of beginning.
EXHIBIT "A" - PAGE 2
<PAGE> 33
EXHIBIT "C"
A tract of land in that portion of Lot 29 of Block 8 of the subdivision of Tract
"H" of Jamacha Rancho in the County of San Diego, State of California, according
to the Map thereof No. 812 filed in the office of the County Recorder of San
Diego County February 21, 1896, described as follows:
Beginning at the intersection of the southerly and westerly lines of said Lot
29, which is also a point on the centerline of Sweetwater Road, thence North 19
degrees 10' West along the centerline of Sweetwater Road 237.76 feet; thence
North 70 degrees 50 East 91.00 feet to the true point of beginning; thence
continuing North 70 degrees 50 East 84.00 feet; thence North 19 degrees 10 West
65.00 feet; thence South 70 degrees 50 West 84.00 feet; thence South 19 degrees
10 East 65.00 feet to the true point of beginning.
<PAGE> 34
STATE OF CALIFORNIA )
) ss
COUNTY OF LOS ANGELES)
On this 3rd day of December, 1960, before me, the undersigned, a Notary
Public in and for said County and State, personally appeared Harry E. Pierson,
known to me to be the President and David B. Sherwood, known to me to be the
Secretary of the PACIFIC COAST PROPERTIES, INC., the Corporation that executed
the within Instrument, known to me to be the persons who executed the within
Instrument on behalf of said Corporation, and acknowledged to me that such
Corporation executed the same, pursuant to a Resolution of its Board of
Directors.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this Certificate first above written.
/s/ M. BETH KILLAM
----------------------------------------
Notary Public in and for said County and
State
STATE OF CALIFORNIA )
) ss
COUNTY OF LOS ANGELES)
On this 27th day of December, 1960, before me, the undersigned, a Notary
Public in and for said County and State, personally appeared J. P. Murray,
known to me to be the Assistant Vice President and Irene C. Iverson, known to
me to be the Assistant Secretary of the BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, the Corporation that executed the within Instrument, known
to me to be the persons who execute the within instruments on behalf of said
Corporation, and acknowledged to me that such Corporation executed the terms,
pursuant to a Resolution of its Board of Directors.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this Certificate first above written.
/s/ MARJORIE L. BERNING
----------------------------------------
Notary Public in and for said County and
State
<PAGE> 35
EXHIBIT "B"
VITAL FILE
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE, made and entered into as of this 15th day
of August, 1973, by and between ALCOTT ESTATES, a limited partnership, as
Landlord, and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a
national banking association, as Tenant,
W I T N E S S E T H:
WHEREAS, Landlord and Tenant are the parties to that certain Lease dated
November 9, 1960 (the "Lease"), Landlord having acquired its interest from
United California Bank, as Trustee of Trust No. 1-41-155-0, that in turn
acquired its interest from Pacific Coast Properties, a Delaware Corporation,
wherein and whereby that certain real property situated in Spring Valley,
County of San Diego, State of California, more particularly described in the
Lease, was leased to Tenant; and
WHEREAS, Tenant exercised its Option to Lease the "Optional Area" as set
forth in the Lease by letter dated October 10, 1972, which letter was received
by Landlord on October 13, 1972, and in addition thereto, Tenant desires to
lease more area than is described as the Optional Area in the Lease (said
additional area, together with the Optional Area being collectively referred to
herein as the "Expansion Area"); and
WHEREAS, it is the mutual desire and intention of the parties hereto to
amend the Lease to add the Expansion Area to the demised premises, to modify
certain of the Lease provisions in the light of such addition and to effect
certain other Lease amendments, all in the manner and to the extent more
particularly hereinafter set forth,
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth, the parties
-1-
<PAGE> 36
hereto hereby amend the Lease as follows, effective as of the date hereof:
1. The effective date of the addition of the Expansion Area to the demised
premises under the Lease is August 15, 1973. From and after said effective date
Tenant acknowledges that all of Tenant's obligations under the Lease, except
for the commencement of payment of the Expansion Area Rental, apply to the
Expansion Area without exception.
2. Tenant agrees to pay Expansion Area Rental in the amount of $729.91 per
month commencing on the date hereof. Said Expansion Area Rental shall be in
addition to all rental or other sums due under the Lease from Tenant.
3. There parties hereto agree that the demised premises, including the
Expansion Area, measure 100 feet in frontage from north to south, and 133 feet
in depth from west to east. The final sentence of Section 1, Article 6 of the
Lease is hereby deleted.
4. Tenant expressly covenants and agrees that the work of constructing
improvements, including a drive-up teller window, on the Expansion Area shall
be done and completed at Tenant's sole cost and expense and in full and
complete compliance with the Lease and all local, county, state or federal
laws, codes or ordinances, as each may apply to said work. Tenant further
expressly covenants and agrees that all improvements constructed on the
Expansion Area, excepting only Tenant's moveable trade fixtures, equipment and
furnishings, shall at all times be and remain the sole property of Landlord.
5. Tenant agrees to provide Landlord with two sets of complete plans and
specifications for the work to be constructed on the Expansion Area, for
Landlord's approval prior to commencement of the work. Landlord shall approve
or disapprove said plans and specifications within ten (10) days after receipt
thereof from Tenant. If Landlord shall not have dissapproved said plans and
specifications within the stated ten (10) days time period, they shall be
deemed approved.
-2-
<PAGE> 37
6. Exhibit "A" (Legal description of Spring Valley Shopping Center)
attached to the Lease is hereby deleted therefrom, and Exhibit "A" (Revised
Legal Description of Spring Valley Shopping Center) is hereby substituted
therefor.
7. Exhibit "B" (Plot plan of Spring Valley Shopping Center) attached to
the Lease is hereby deleted therefrom, and Exhibit "B" (Revised plot plan of
Spring Valley Shopping Center) attached hereto is hereby substituted therefor.
8. Exhibit "C" (Legal description of the demised premises) attached to the
Lease is hereby deleted therefrom, and Exhibit "C" (Legal description of the
demised premises including the Expansion Area) attached hereto is hereby
substituted therefor.
9. Except as expressly amended hereby, the Lease and all the provisions
thereof are and shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
Lease to be executed and delivered by their proper officers respectively
thereunto duly authorized on the date first above written.
LANDLORD: ALCOTT ESTATES, a limited partnership
By PACIFIC VIEW CONSTRUCTION CO., INC.
General Partner
By: /s/ [SIG]
-----------------------------------------
By: President
-----------------------------------------
TENANT: BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /s/ [SIG]
-----------------------------------------
Asst. Vice President
By: /s/ [SIG]
-----------------------------------------
Asst. Secretary
-3-
<PAGE> 38
EXHIBIT "A"
That portion of Lots 20, 21, 28 and 29 in Block 8 of the Subdivision
of Tract "H" of Jamacha Rancho in the County of San Diego, State of
California, according to Map thereof No. 812, filed in the office of
the County Recorder of San Diego County, February 21, 1896, TOGETHER
WITH a portion of the unnamed street lying between said Lots 28 and
29 and 20 and 21 as vacated and closed to public use on December 22,
1941 by Resolution of the Board of Supervisors of said San Diego
County, a certified copy of which was recorded December 27, 1941 in
Book 1297, page 54 of Official Records, described as follows:
Commencing at a point on the Northerly line of Lot 27 in said Block
8 distant thereon South 89 degrees 13'40" West 200.00 feet from the
Northeast corner thereof, said point being the Northwest corner of
land conveyed to Jack Tarantino, et al, by Deed dated March 14, 1950
and recorded in Book 3618, page 392 of Official Records; thence
along the boundary of said land, South 00 degrees 33'45" West 890.09
feet (record-South 01 degrees 25'00" West 890.00 feet, more or less)
and North 89 degrees 40'24" East 200.00 feet (record-South 89
degrees 29'00" East 200.00 feet more or less) to the Easterly line
of said Lot 27; thence South 00 degrees 33'45" West along said
Easterly line 30.00 feet to the Northwest corner of said Lot 21;
thence North 89 degrees 40'24" East along the Northerly line of said
lot a distance of 282.18 feet; thence South 00 degrees 19'36" East
183.00 feet; thence South 89 degrees 40'24" West 60.00 feet to the
TRUE POINT OF BEGINNING, being the Point of Beginning of a
non-tangent 25.00 foot radius curve, concave Southwesterly, a radial
line of said curve bears North 89 degrees 40'24" East to said point;
thence Northwesterly along the arc of said curve through a central
angle of 90 degrees 00'00" a distance of 39.27 feet; thence tangent
to said curve, South 89 degrees 40'24" West 875.43 feet to the
beginning of a tangent 270.00 foot radius curve concave Southerly;
thence Westerly along said curve through a central angle of 18
degrees 50'24" a distance of 88.78 feet; thence tangent to said
curve South 70 degrees 50'00" West 205.00 feet to the beginning of a
25.00 foot radius curve concave Southeasterly; thence Southerly
along said curve through a central angle of 90 degrees 00'00", a
distance of 39.27 feet; thence along the prolongation of a radial
line of said curve South 70 degrees 50'00" West 35.00 feet to the
Westerly line of said Lot 28; thence along said Westerly line and
along the Southerly prolongation of said Westerly line and along the
Westerly line of said Lot 29, South 19 degrees 10'00" East 1036.09
feet to the Southwest corner of said Lot 29; thence South 89 degrees
45'20" East along the Southerly line of said lot, a distance of
142.24 feet to a point on the center line of the County Road as
shown on the Map of Road Survey No. 1343 on file in the office of
the Surveyor of said San Diego County; thence along said center
line, North 70 degrees 50'00" East 30.74 feet to the beginning of a
tangent 955.00 foot radius curve concave Northwesterly; thence
Northeasterly along said curve through a central angle of 24 degrees
53'31" a distance of 414.90 feet; thence tangent to said curve,
North 45 degrees 56'29" East 198.24 feet to the beginning of a
tangent 955.00 foot radius curve concave Southeasterly; thence
Northeasterly along said curve through a central angle of 18 degrees
11'58" a distance of 303.35 feet; thence leaving said center line,
North 25 degrees 51'33" West 50.00 feet to the Point of Beginning of
a non-tangent 25.00 foot radius curve concave Northwesterly, a
radial line of said curve bears South 25 degrees 51'33" East to said
point; thence Northerly along the arc of said curve through a
H-507821 central angle of 73 degrees 02'55", a
Page 1 of 2
<PAGE> 39
distance of 31.87 feet to the beginning of a reverse curve concave Easterly
having a radius of 1030.00 feet; thence Northerly along said curve through a
central angle of 08 degrees 34'52" a distance of 154.26 feet; thence tangent to
said curve, North 00 degrees 19'36" West 323.20 feet to the TRUE POINT OF
BEGINNING.
EXCEPTING therefrom that portion described as follows:
Commencing at the Southeasterly corner of Spring Valley Estates Unit No. 1,
according to Map thereof No. 3947, filed in the office of the County Recorder
of San Diego County, August 20, 1958' thence along the boundary of said Map No.
3947, South 89 degrees 40'24" West, 60.00 feet to an angle point therein and
the TRUE POINT OF BEGINNING; thence continuing along the boundary of said Map
No. 3947 as follows: Northwesterly and Westerly along the arc of a 25.00 foot
radius curve, concave Southwesterly through a central angle of 90 degrees
00'00" a distance of 39.27 feet; and South 89 degrees 40'24" West, 230.15 feet;
thence leaving said boundary South 05 degrees 06'17" West, 102.60 feet; thence
South 19 degrees 06'05" East, 144.08 feet; thence South 19 degrees 08'49" East,
65.29 feet; thence South 19 degrees 09'02" East, 195.55 feet to a point on the
arc of a 1105.00 foot radius curve, concave Southeasterly, a radial line of
said curve bears North 31 degrees 04'59" West to said point, and being also a
point on the Northwesterly line of land described under Exhibit 1 in that
certain instrument recorded October 21, 1965 as File No. 191876 (known as Al's
Car Wash); thence along the Northwesterly line of said land, Northeasterly
along the arc of said curve through a central angle of 01 degrees 28'53" a
distance of 28.57 feet to the West line of land described in that certain
Memorandum of Lease between Pacific Coast Properties, Inc. (Lessor) and Shell
Oil Company (Lessee), recorded September 4, 1962 as File No. 152758; thence
along the boundary of said Shell Lease land as follows: North 87.33 feet to the
Northwest corner of said land; and East 109.73 feet to the Westerly line of
Spring Valley Estates Unit No. 2, according to Map thereof No. 3981, filed in
the office of the County Recorder of San Diego County, October 7, 1958 being a
point on the arc of a 1030.00 foot radius curve, a radial line of said curve
bears South 87 degrees 39'22" West to said point; thence along the Westerly
boundary of said Map No. 3981 as follows: Northerly along the arc of said curve
through a central angle of 02 degrees 01'02" a distance of 36.26 feet; and
North 00 degrees 19'36" West, 323.20 feet to the TRUE POINT OF BEGINNING.
TYPED
7-13-73
H-507821
Page 2 of 2
<PAGE> 40
[SPRING VALLEY SHOPPING CENTER MAP]
EXHIBIT "B"
<PAGE> 41
RE-REVISED LEGAL DESCRIPTION (Net)
BANK OF AMERICA
Parcel 7
All that portion of Lot 29 in Block 8 of Subdivision of Tract "H" of JAMACHA
RANCHO, in the County of San Diego, State of California, according to Map
thereof No. 812, filed in the Office of the Recorder of said County, February
21, 1896, described as follows:
Beginning at the intersection of the Southerly and Westerly lines of said Lot
29, being a point on the center line of Sweetwater Road, Road Survey No. 609,
said point being also illustrated on Map No. 3947 of Spring Valley Estates Unit
No. 1 filed in the Office of the Recorder of San Diego County;
Thence, North 19 degrees 10'00" West along said center line of Sweetwater Road
237.76 feet;
Thence, North 70 degrees 50'00" East 83.02 feet to the TRUE POINT OF BEGINNING;
Thence, North 70 degrees 51'15" East 133.00 feet;
Thence, North 19 degrees 10'00" West 100.00 feet;
Thence, South 70 degrees 51'15" West 133.00 feet;
Thence, South 19 degrees 10'00" East 100.00 feet to the true point of beginning.
EXHIBIT "C"
<PAGE> 42
EXHIBIT "C"
ADDENDUM NO. 1 TO LEASE DATED NOVEMBER 9, 1960, BETWEEN PACIFIC COAST
PROPERTIES INC. AND ASSIGNED TO ALCOTT ESTATES, A LIMITED PARTNERSHIP, AS
LANDLORD AND BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, A NATIONAL
BANKING ASSOCIATION, AS TENANT, AGREE TO THE FOLLOWING EFFECTIVE JANUARY 1,
1985:
1. Common area and Tenant's Contribution (Page 14 Art. 12) and Real Property
Taxes (Page 8 Art. 8 Section 1) will be determined as follows:
Each lease or calendar year, the sum of all of the above items average for
the previous twelve (12) months, plus ten percent (10%) rounded of to an even
dollar amount shall be paid during the next twelve months in equal monthly
installments as additional rent, together with Tenant's Guaranteed Minimum
Monthly Rental. Also at the end of each lease or calendar year, the items
referred to above for the previous twelve (12) months (common area, taxes etc.),
will be recapped and adjusted for the next twelve (12) months and any
under-payment or over-payment will be adjusted through PAYMENT or CREDIT by
Tenant or Landlord within ten (10) days after a recap of all charges is sent to
Tenant. The present fixed averaged monthly payment for the balance of the
current lease or calendar year is $940.00.
Dated: 1-10-85 Date: 1-30-85
______________ ______________
LANDLORD: TENANT:
ALCOTT ESTATES, A Limited Partnership BANK OF AMERICA NT & SA,
By: PACIFIC VIEW CONSTRUCTION CO., INC. a banking association
General Partner
By: /s/ J.M. HOUCH By: /s/ SANDRA RODRIGUES
________________________
______________________ Asst. Vice President
OR J.M. Houch
Vice President By: [SIG]
________________________
Vice President
By:
________________________
By:
________________________
<PAGE> 1
EXHIBIT 24.0
POWERS OF ATTORNEY
DIRECTORS OF VALLEY NATIONAL CORPORATION
Know all men by these presents that each person whose name is signed
below has made, constituted and appointed, and by this instrument does make,
constitute and appoint William V. Ehlen and C.K. Hill, or either one of them,
his true and lawful attorney with full power of substitution and resubstitution
to affix for him and in his name, place and stead, as attorney-in-fact, his
signature as director or officer, or both, of Valley National Corporation, a
Delaware corporation (the "Holding Company"), to a Registration Statement on
Form S-4 registering under the Securities Act of 1933, common stock to be issued
in connection with the acquisition of Valle de Oro Bank, N.A., and to any and
all amendments, post effective amendments and exhibits to that Registration
Statement, and to any and all applications and other documents pertaining
thereto, giving and granting to such attorney-in-fact full power and authority
to do and perform every act and thing whatsoever necessary to be done in the
premises, as fully as he might or could do if personally present, and hereby
ratifying and confirming all that said attorney-in-fact or any such substitute
shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, this Power of Attorney has been signed at El Cajon,
California, this 5th day of November, 1998.
/s/ WILLIAM V. EHLEN /s/ C.K. HILL
- --------------------------------- -----------------------------------
William V. Ehlen, Director C.K. Hill, O.D., Director
/s/ JAMES F. CARROLL /s/ PHILIP J. GELBER
- --------------------------------- -----------------------------------
James F. Carroll, Director Philip J. Gelber, M.D., Director
/s/ SAMUEL M. CICCATI /s/ OBERT D. "DALE" CONWAY
- --------------------------------- -----------------------------------
Samuel M. Ciccati, Ph.D., Director Obert D. "Dale" Conway, Director
/s/ PAUL M. CABLE
- ---------------------------------
Paul M. Cable, Treasurer and
Chief Financial Officer
<PAGE> 1
EXHIBIT 99.A
Proxy for Special Meeting of the Stockholders
of Valle de Oro Bank, N.A.
The undersigned stockholder of Valle de Oro Bank, N.A., El Cajon,
California, does hereby nominate, constitute, and appoint William V. Ehlen and
C.K. Hill, or either of them (with full power of substitution for me and in my
name, place and stead) to vote all the common stock of said Corporation,
standing in my name on its books on ______________, 199___, at the Special
Meeting of its shareholders to be held at 1234 East Main Street, El Cajon, CA
92021, on February 16, 1998 at 8:00 a.m. (local time), or any adjournments
thereof with all the powers the undersigned would possess if personally present
as follows:
1. To approve and vote upon the formation of a holding company by the
adoption of a Consolidation Agreement, which provides for: (i) the
consolidation of Valle De Oro Interim Bank, a wholly-owned subsidiary of
Valley National Corporation, a Delaware corporation (the "Holding
Company"), with the Bank under the name and charter of the Bank with
stockholders of the Bank receiving two shares of Holding Company stock
for each share of Bank stock held by them.
[ ] For [ ] Against [ ] Abstain
2. To transact such other business as may properly come before the meeting
or any adjournment thereof including adjournment of the meeting.
This proxy confers authority to vote "for" the propositions listed above
unless "against" or "abstain" is indicated. If any other business is presented
at said meeting, this proxy shall be voted in accordance with the
recommendations of management. All shares represented by properly executed
proxies will be voted as directed.
The Board of Directors recommends a vote "for" the propositions. This
proxy is solicited on behalf of the Board of Directors and may be revoked prior
to its exercise by either written notice or personally at the meeting or by a
subsequently dated proxy.
PLEASE SIGN ON REVERSE SIDE
1
<PAGE> 2
INSERT LABEL
Date
---------------------------
--------------------------------------
(STOCKHOLDER SIGNATURE)
--------------------------------------
(STOCKHOLDER SIGNATURE)
Please Print Name
-----------------------------
Please Print Number of Shares
-----------------
(When signing as attorney, executor, administrator, trustee, guardian, please
give full title. If more than one trustee, all should sign. All joint owners
must sign.)
PLEASE SIGN AND RETURN IMMEDIATELY
EXHIBIT 99.A 2
21692
