<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A - No. 1(Mark One)
X AMENDMENT NO. 1 TO ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998 or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 2-77519-LA
SARATOGA BANCORP
(Exact name of registrant as specified in its charter)
California 94-2817587
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) Identification No.)
12000 Saratoga-Sunnyvale Road
Saratoga, California 95070
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408)973-1111
Securities registered pursuant to Section 12 (b) of the Act:
Name of each exchange
Title of each class on which registered
NONE
Securities registered pursuant to Section 12 (g) of the Act:
NONE
(Title of class)
Saratoga Bancorp (1) has filed all reports required to be
filed by section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No .
Indicate by checkmark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
Saratoga Bancorp on March 31, 1999 was $21,216,622.
As of March 31, 1999, Saratoga Bancorp had 1,594,788 shares of common stock
outstanding.
Portions of the Registrant's Definitive Proxy Statement dated April 22, 1999
are incorporated into Part III, Items 10 through 13.
Exhibit Index is on page 5.
Page 1 of 17 pages
<PAGE> 2
Saratoga Bancorp
Amendment to Items 10 through 13
of Form 10-K filed on March 29, 1999
The Registrant hereby amends Items 10, 11,12 and 13 of
the Registrant's Form 10-K filed with the Securities and
Exchange commission on March 29, 1999 by attaching certain
portions of its Definitive Proxy Statement dated April 22,
1999 (the "Definitive Proxy Statement").
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this item is set forth on
pages 4 through 6 of the Definitive Proxy Statement, copies of
which pages are attached hereto and incorporated herein by
reference.
Item 11. Executive Compensation
The information required by this item is set forth on
page1 7 through 10 of the Definitive Proxy Statement, copies
of which pages are attached hereto and incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The information required by this Item is set forth on
pages 2 through 3 of the Definitive Proxy Statement, copies of
which pages are attached hereto and incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions
The information required by this Item is set forth on
page 11 of the Definitive Proxy Statement, a copy of which
page is attached hereto and incorporated herein by reference.
<PAGE> 3
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K
(a) (99.9) The Registrant's Definitive proxy Statement
dated April 22, 1999.
<PAGE> 4
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SARATOGA BANCORP
Date: April 30, 1999 RICHARD L. MOUNT
Richard L. Mount, President
(Principal Executive Officer)
Date: April 30, 1999 MARY PAGE ROURKE
Mary Page Rourke, Treasurer
(Principal Financial and
Accounting Officer)
<PAGE> 5
INDEX TO EXHIBITS
Sequentially
Number Exhibits Numbered Page
99.1 The Registrant's Definitive proxy
Statement dated April 22, 1999, which
is furnished for the information of
the Securities and Exchange Commission
and, except for those portions which
are expressly incorporated by reference
in this filing, is not to be deemed
"filed" as part of this filing. 6 - 17
<PAGE> 6
Mailed to Shareholders
on or about April 22, 1999
PROXY STATEMENT
INFORMATION CONCERNING THE SOLICITATION
This Proxy Statement is being furnished to the shareholders of Saratoga
Bancorp, a California corporation (the "Corporation"), in connection with the
solicitation of proxies by the Board of Directors for use at the Annual Meeting
of Shareholders to be held at 12000 Saratoga-Sunnyvale Rd., Saratoga, CA on May
19,1999 (the "Meeting"). Only shareholders of record on April 8, 1999 (the
"Record Date") will be entitled to notice of the Meeting and to vote at the
Meeting. At the close of business on the Record Date, the Corporation had
outstanding and entitled to be voted 1,612,725 shares of its no par value common
stock (the "Common Stock").
Shareholders are entitled to one vote for each share held, except that for
the election of directors each shareholder has cumulative voting rights and is
entitled to as many votes as shall equal the number of shares held by such
shareholder multiplied by the number of directors to be elected. Each share-
holder may cast all his or her votes for a single candidate or distribute such
votes among any or all of the candidates as he or she chooses. However, no
shareholder shall be entitled to cumulate votes (in other words, cast for any
candidate a number of votes greater than the number of shares of stock held by
such shareholder) unless such candidate's name has been placed in nomination
prior to the voting and the shareholder has given notice at the Meeting prior
to the voting of the shareholder's intention to cumulate his or her votes.
If any shareholder has given such notice, all shareholders may cumulate their
votes for candidates in nomination. Prior to voting, an opportunity will be
given for shareholders or their proxies at the Meeting to announce their
intention to cumulate their votes. The proxy holders are given, under the terms
of the proxy, discretionary authority to cumulate votes on shares for which
they hold a proxy.
Any person giving a proxy in the form accompanying this Proxy Statement
has the power to revoke that proxy prior to its exercise. The proxy may be
revoked prior to the Meeting by delivering to the Secretary of the Corporation
either a written instrument revoking the proxy or a duly executed proxy bearing
a later date. The proxy may also be revoked by the shareholder by attending and
voting at the Meeting.
Votes cast by proxy or in person at the Meeting will be counted by the
Inspectors of Election for the Meeting. The Inspectors will treat abstentions
and "broker non-votes" (shares held by brokers or nominees as to which
instructions have not been received from the beneficial owners or persons
entitled to vote and the broker or nominee does not have discretionary voting
power under applicable rules of the stock exchange or other self regulatory
organization of which the broker or nominee is a member) as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum. Abstentions and "broker non-votes" will not be counted as shares voted
for purposes of determining the outcome of any matter as may properly come
before the Meeting.
Unless otherwise instructed, each valid proxy returned which is not revoked
will be voted in the election of directors "FOR" the nominees of the Board of
Directors and "FOR" Proposal No. 2, as described in this Proxy Statement,
and, at the proxy holders' discretion, on such other matters, if any, which may
come before the Meeting (including any proposal to postpone or adjourn the
Meeting).
The Corporation will bear the entire cost of preparing, assembling,
printing and mailing proxy materials furnished by the Board of Directors to
shareholders. Copies of proxy materials will be furnished to brokerage houses,
fiduciaries and custodians to be forwarded to the beneficial owners of the
Common Stock. In addition to the solicitation of proxies by use of the mail,
some of the officers, directors and regular employees of the Corporation and the
Corporation's subsidiary, Saratoga National Bank (the "Bank") may (without
additional compensation) solicit proxies by telephone or personal interview,
the costs of which will be borne by the Corporation.
<PAGE> 7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
As of the Record Date, April 8, 1999, no individual known to the
Corporation owned more than five percent (5%) of the outstanding shares of
its Common Stock except as described below.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Class(1)
<S> <C> <C> <C>
Common Stock, Richard L. Mount (2) 175,622 (3) 10.27%
No Par Value
Common Stock, V. Ronald Mancuso (4) 109,475 (5) 6.52%
No Par Value
</TABLE>
(1) Including stock options exercisable within 60 days of the Record Date.
(2) The address for Mr. Mount, who is Chairman of the Board, President
and Chief Executive Officer of the Corporation, is the address of
the Corporation, 12000 Saratoga-Sunnyvale Road, Saratoga, CA 95070.
(3) Includes 412 shares of Common Stock owned by Branda Mount, a minor
daughter, under the Uniform Transfers to Minors Act (UTMA), Richard
L. Mount, custodian and 62,875 stock options exercisable within 60
days of the Record Date.
(4) The address for Dr. Mancuso, a member of the Corporation's Board of
Directors, is the address of the Corporation, 12000 Saratoga-Sunnyvale
Road, Saratoga, CA 95070.
(5) Includes 2,237 shares owned by Merrill Lynch as custodian for the V.
Ronald Mancuso IRA, and 32,875 stock options exercisable within 60
days of the Record Date.
<PAGE> 8
Security Ownership of Management
The following table sets forth information as of the Record Date, April 8,
1999, concerning the equity ownership of directors, nominees and executive
officers named in the Summary Compensation Table and directors and executive
officers of the Corporation and the Bank as a group. Unless otherwise
indicated, each director and executive officer listed below possesses sole
voting power and sole investment power. All of the shares shown in the
following table are owned both of record and beneficially except as indicated
in the notes to the table. The Corporation has only one class of shares
outstanding, Common Stock. The address for beneficial owners, all of whom are
incumbent directors and officers of the Corporation and the Bank, is the address
of the Corporation, 12000 Saratoga-Sunnyvale Road, Saratoga, CA 95070.
There are no current arrangements known to the Corporation, that may result in
a change in control of the Corporation.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Class(1)
<S> <C> <C> <C>
Common Stock,
No Par Value Victor E. Aboukhater 52,492 (2) 3.13%
Common Stock,
No Par Value Robert G. Egan 57,547 (3) 3.43%
Common Stock,
No Par Value William D. Kron 48,955 (4) 2.91%
Common Stock,
No Par Value Earl L. Lanna 31,024 (5) 1.85%
Common Stock,
No Par Value John F. Lynch, III 54,209 (6) 3.23%
Common Stock,
No Par Value V. Ronald Mancuso 109,475 (7) 6.52%
Common Stock,
No Par Value Richard L. Mount 175,622 (8) 10.27%
Common Stock,
No Par Value Mary Page Rourke 34,324 (9) 2.05%
All directors and executive officers of
the Corporation as a group (8 persons) 563,648 (10) 29.16%
</TABLE>
(1) Includes stock options exercisable within 60 days of the Record Date.
(2) Includes 32,875 stock options exercisable within 60 days of the Record
Date.
(3) Includes 32,875 stock options exercisable within 60 days of the Record
Date.
(4) Includes 32,875 stock options exercisable within 60 days of the Record
Date.
(5) Includes 29,362 stock options exercisable within 60 days of the Record
Date.
(6) Includes 826 shares of Common Stock owned by Joan Lynch, his wife, and
32,875 stock options exercisable within 60 days of the Record Date.
(7) Includes 2,237 shares owned by Merrill Lynch as custodian for the V.
Ronald Mancuso IRA, and 32,875 stock options exercisable within 60
days of the Record Date.
(8) Includes 412 shares of Common Stock owned by Branda Mount, a minor
daughter, under the UTMA, Richard L. Mount, Custodian and 62,875 stock
options exercisable within 60 days of the Record Date.
(9) Includes 29,362 stock options exercisable within 60 days of the Record
Date.
(10) Includes 285,974 stock options exercisable within 60 days of the
Record Date.
<PAGE> 9
PROPOSAL NO. 1
ELECTION OF DIRECTORS OF THE CORPORATION
The number of directors authorized for election at this Meeting is six (6).
Management has nominated the six (6) incumbent directors to serve as the
Corporation's directors. Each director will hold office until the next Annual
Meeting of Shareholders and until his successor is elected and qualified.
All proxies will be voted for the election of the six (6) nominees listed
below (all of whom are incumbent directors) recommended by the Board of
Directors unless authority to vote for the election of any directors is
withheld. The nominees receiving the highest number of affirmative votes of the
shares entitled to be voted for them shall be elected as directors. Abstentions
and votes cast against nominees have no effect on the election of directors. If
any of the nominees should unexpectedly decline or be unable to act as a
director, their proxies may be voted for a substitute nominee to be designated
by the Board of Directors. The Board of Directors has no reason to believe that
any nominee will become unavailable and has no present intention to nominate
persons in addition to or in lieu of those named below.
The following table sets forth certain information as of the Record Date,
April 8, 1999, with respect to those persons nominated by the Board of Directors
for election as directors, as well as all executive officers. The Corporation
knows of no arrangements, including any pledge by any person of securities of
the Corporation, the operation of which may, at a subsequent date, result in a
change in control of the Corporation. There are no arrangements or
understandings by which any of the executive officers or directors of either
the Corporation or the Bank were selected. There is no family relationship
between any of the directors or executive officers.
<TABLE>
<S> <C> <C> <C>
Name Age Position Since
Victor E. Aboukhater 56 Director 1981
Robert G. Egan 58 Director 1981
William D. Kron 55 Director 1981
Earl L. Lanna 47 Sr. Vice President
and Sr. Credit Officer 1987
(Bank only)
John F. Lynch, III 57 Director 1981
V. Ronald Mancuso 60 Director and Secretary 1982
Richard L. Mount 54 Chairman of the Board
and President 1982
Mary Page Rourke 42 Treasurer; Sr. Vice
President/Chief
Financial Officer
(Bank only) 1987
</TABLE>
The following is a brief account of the business experience of each director/
nominee and each executive officer listed above.
Victor E. Aboukhater from 1978 to 1986 was President of Victor Investment
Company, Saratoga, California. Since 1986, he has devoted all of his time to
the management of his personal investment portfolio of real estate and
securities. From 1965 to 1973, Mr. Aboukhater was employed by the Government
of Ras Al Khaima, United Arab Emirates. Mr. Aboukhater and his family moved to
Saratoga from London, England (where he owned his own export company), in
October 1978. Mr. Aboukhater is an American citizen and a member of the Knights
of Malta, and in 1970 was awarded the Medal of Chivalry by the President of
Lebanon.
Robert G. Egan is Managing Broker with Coldwell Banker Real Estate. Until
1985, Mr. Egan owned retail clothing stores. He is the 1984 Citizen of the Year
for the City of Saratoga, current Fire Commissioner, President of Saratoga
Rotary and is active in many other community organizations and affairs. Mr. Egan
has been a resident of Saratoga for over 24 years and is a past President of the
Saratoga Chamber of Commerce. Mr. Egan is a graduate of the University of San
Francisco, has completed his educational requirements for a Master's Degree in
Education and holds a Community College Supervisor and Instructor credential.
<PAGE> 10
William D. Kron is the founder and Chairman of Saratoga National Bank.
He is a principal at IBM/JBA, an international developer and implementer of
financial software. He was formerly with IBM Sales & Marketing. A fourth
generation Californian, Mr. Kron serves on the Board of Directors of Eastfield
Ming Quong, and is a member of the San Jose Rotary Club. He is a graduate of
the University of California at Berkeley.
Earl L. Lanna is Senior Vice President and Senior Credit Officer of
Saratoga National Bank. Prior to joining the Bank, he was employed by Bank of
the West in San Jose, CA as Assistant Vice President from June 1979 to April
1987. Mr. Lanna is past President of the West San Jose Kiwanis. He holds a
Bachelor of Science degree in Business Administration from the University of
Phoenix.
John F. Lynch, III (Jack) is Vice President for Banbeck Systems, Inc., a
manufacturer of industrial computer control systems. From December, 1982
through December, 1998 he was Vice President for Impact Systems, Inc. Prior
to December, 1982 he was Vice President for Measurex Systems Inc. He has been a
resident of Saratoga for over 20 years. Mr. Lynch has a degree in Chemical
Engineering from the University of Mississippi and an MBA from the
Harvard Business School.
Dr. V. Ronald Mancuso has been in private dental practice in Saratoga
since August 1967 and a resident since October 1966. He attended St. Johns
University in New York and received his DDS degree from Seton Hall College of
Medicine and Dentistry in 1963. Past President of the Saratoga Kiwanis Club, he
also served as Director of the Saratoga Chamber of Commerce, the Santa Clara
County Dental Society and the Academy of General Dentistry. He is presently
a member of the American Dental Association, the Academy of General Dentistry,
the California Dental Association, Santa Clara County Dental Society, and the
Western Society of Periodontology.
Richard L. Mount is Chairman of the Board, President and Chief Executive
Officer of the Corporation as well as President, Chief Executive Officer and
Director of Saratoga National Bank. Previously, Mr. Mount was Chairman of
the Board and President of Foothills National Bank in Fort Collins, Colorado,
from October 1980 to February 1982. From January to May 1980, Mr. Mount was
Executive Vice President of Central Trust Company of Newark, Ohio. He
formerly served as Director of the Federal Reserve Bank of San Francisco and is
Past President of the Independent Bankers Association of America. He was also
a member of the Securities and Exchange Commission's Market Oversight
and Financial Services Advisory Committee. He is currently Chairman of the
Independent Bankers Association Bancard. He has previously served as President
of the Saratoga Chamber of Commerce and as Chairman of the Saratoga Rotary
Art Show and Celebrate! Saratoga. He currently serves as Director for Good
Samaritan Hospital and Our Lady of Fatima. Mr. Mount received his Bachelor of
Science degree from Ohio State University in 1967. He is a graduate of the
Ohio School of Banking (1971) and the Graduate School of Banking at the
University of Wisconsin (1974).
Mary Page Rourke is Treasurer of the Corporation, and Senior Vice President
and Chief Financial Officer of Saratoga National Bank. Before joining the Bank,
Ms. Rourke was Vice President and Cashier of Bank of Los Gatos, N.A. from May
1984 to July 1987. Ms. Rourke received her Bachelor of Science degree in
Development and Resource Economics from the University of California, Davis in
1980.
None of the Corporation's or Bank's Directors is a director of any other
company with a class of securities registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended, or subject to the requirements of
Section 15(d) of such Act or any company registered as an investment company
under the Investment Company Act of 1940, whose common stock is registered
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended.
<PAGE> 11
DIRECTORS
Committees of the Board of Directors
The Audit and Compliance Committee, with the guidance of Deloitte & Touche
LLP, conducts the Annual Directors' audit. Robert G. Egan, William D. Kron and
John F. Lynch, III served on this committee, which met three times in 1998. The
purpose of this committee is to review the internal controls and financial
reporting for the Corporation and the Bank, to examine the findings and reports
of the outside auditors and bank examiners and to monitor the Bank's overall
compliance with the various laws and regulations which govern the banking
industry.
The Compensation Committee, which sets and reviews the compensation of the
Bank's Chief Executive Officer and reviews the overall compensation of the
Bank's employees, is composed of the non-employee directors. Victor Aboukhater,
Robert Egan, William D. Kron, John F. Lynch, III and V. Ronald Mancuso served on
this committee which met once in 1998.
The Shareholder Valuation Committee evaluates various opportunities for
corporate growth and share appreciation. The members of this committee are
Victor E. Aboukhater, William D. Kron, V. Ronald Mancuso and Richard L. Mount.
During 1998, the Committee met eight times.
The Board of Directors has not established a nominating committee. The
entire Board of Directors performs the functions of the nominating committee
with responsibility for considering appropriate candidates for election as
directors of the Corporation.
During the last full fiscal year all directors attended at least seventy-
five percent (75%) of the aggregate of the total number of meetings of the Board
of Directors and the number of meetings of the committees on which they served.
<PAGE> 12
EXECUTIVE COMPENSATION
Summary Compensation Table
Set forth below is the summary compensation paid or accrued during the
fiscal years ended December 31, 1996, 1997 and 1998 to Richard L. Mount,
Earl L. Lanna and Mary Page Rourke, the only executive officers of the
Corporation and the Bank.
<TABLE>
Summary Compensation Table
<CAPTION<
Secur-
ities
Other Res- under All
Name and Annual tricted lying LTIP Other
Principal Compen- Stock Options Pay- Compen-
Position Year Salary($) Bonus($) sation($) Award(s)SARs (#) outs($)sation
1/ 2/ 3/ ($) 4/ ($) 5/
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Richard L.
Mount 1998 $140,000 $15,000 - - 10,000 - $27,067
President 1997 $135,000 $15,000 - - - - $19,859
& CEO 1996 $135,000 $29,045 - - 10,000 - $27,067
Earl L.
Lanna
Sr.Vice
President
& sr.
Credit
Officer 1998 $ 77,690 $17,000 - - 2,000 - $ 500
1997 $ 72,454 $16,000 - - - - $ 500
1996 $ 71,378 $12,000 - - - - $ 500
Mary Page
Rourke
Sr. Vice
President
& Chief
Financial
Officer 1998 $65,208 $17,000 - - 2,000 - $ 500
1997 $61,800 $15,000 - - - - $ 500
1996 $60,000 $12,000 - - - - $ 500
</TABLE>
1/ Amounts shown include cash and non-cash compensation earned and received by
executive officers as well as amounts earned but deferred at the election of
those officers under the 401(k) Plan. Amounts deferred during 1996 under the
401(k) Plan were $9,450 for Richard L. Mount, $4,234 for Earl L. Lanna and
$3,600 for Mary Page Rourke. Amounts deferred during 1997 under the 401(k) Plan
were $9,450 for Richard L. Mount, $4,347 for Earl L. Lanna and $3,696 for Mary
Page Rourke. Amounts deferred during 1998 under the 401(k) Plan were $10,000
for Richard L. Mount, $4,683 for Earl L. Lanna and $4,839 for Mary Page Rourke.
2/ Amounts indicated as bonus payments were earned for performance during 1996,
1997 and 1998, but paid in the first quarters of 1997, 1998 and 1999,
respectively.
3/ No executive officer received perquisites or other personal benefits in
excess of the lesser of $50,000 or 10% of each such officer's total annual
salary and bonus during 1996, 1997 or 1998.
4/ The Corporation's 1982 Amended Stock Option Plan (the "1982 Plan") expired
by its terms on October 26, 1992. Therefore, no options were granted by the
Corporation during 1995, 1996 or 1997 under the 1982 Plan. Prior to expiration
of the 1982 Plan, options were granted to key, full-time salaried officers and
employees of the Corporation and its subsidiary. Options granted under the 1982
Plan were either incentive options or non-statutory options. Options granted
under the 1982 Plan become exercisable in accordance with a vesting schedule
established at the time of grant. Vesting may not extend beyond ten years from
the date of grant. Upon a change in control of the Corporation, all outstanding
options under the 1982 Plan will become fully vested and exercisable. Options
granted under the 1982 Plan are adjusted to protect against dilution in
the event of certain changes in the Corporation's capitalization, including
stock splits and stock dividends. The Corporation's 1994 Stock Option
Plan (the "1994 Plan") is substantially similar to the 1982 Plan regarding
provisions related to option grants, vesting and dilution. Upon a change
in control, options do not become fully vested and exercisable, but may be
assumed or equivalent options may be substituted by a successor corporation.
There were no options granted in 1996 or 1997 to any of the named executive
officers. During 1998, options for 10,000 shares of common stock at an exercise
price of $15.88 were issued to Richard L. Mount, options for 2,000 shares of
common stock at an exercise price of $15.88 were issued to Earl L. Lanna and
options for 2,000 share of common stock at an exercise price of $15.88 were
issued to Mary Page Rourke.
5/ Amounts shown for Richard L. Mount include $18,000 in director fees, $4,734
in term life insurance premiums and $500 in 401(k) matching contributions in
1996, $18,000 in director fees, $1,359 in term life insurance premiums and $500
in 401(k) matching contributions in 1997 and $24,000 in director fees, $2,567 in
term life insurance premiums and $500 in 401(k) matching contributions in 1998.
Amounts shown in 1996, 1997 and 1998 for all other executive officers are 401(k)
matching contributions.
<PAGE> 13
The following table sets forth certain information concerning the granting of
options under the 1994 Plan to the named executive officers during the year
ended December 31, 1998.
Option/SAR Grants in Last Fiscal Year
Individual Grants
<TABLE>
<CAPTION>
Number of % of Total
Name Securities Options/Sars
Underlying Granted to
Options/SARs Employees in Exercise or Expiration
Name Granted(#)1/ Fiscal Year Base Price Date
<S> <C> <C> <C> <C>
Richard L. Mount 10,000 12% $15.88 6/24/2008
Earl L. Lanna 2,000 2% $15.88 6/24/2008
Mary Page Rourke 2,000 2% $15.88 6/24/2008
</TABLE>
1/ Options granted under the 1994 Plan become exercisable in accordance with a
vesting schedule established at the time the options are granted. The vesting
schedule may not extend beyond ten years from the date of grant. The options
granted to Richard L. Mount are immediately exercisable. The options granted
to Earl L. Lanna and Mary Page Rourke vest in increments of 33.3% per year
commencing with the second year through the fourth year following the date of
grant. The 1994 Plan provides for adjustment in the number of shares of Common
Stock authorized under the Plan or granted to an optionee to protect against
dilution in the event of certain changes in the Corporation's capitalization,
including stock splits and stock dividends. Upon a change in control, options
do not become fully vested and exercisable, but may be assumed or equivalent
options may be substituted by a successor corporation.
2/ The exercise price was determined based upon the closing price of the
Company's Common Stock on the grant date.
Option/SAR Exercises and Year-End Value Table
The following table sets forth certain information concerning exercised and
unexercised options under the 1982 and 1994 Plans as of December 31, 1998.
Aggregated Option/SAR Exercises in Last Fiscal Year, and Fiscal Year-End Option/
SAR Values
<TABLE>
<CAPTION>
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options/SARs
Options/SARs at Fiscal
at Fiscal Year-End
Year-End (#) ($)
<S> <C> <C> <C> <C>
Shares acquired Value Exercisable/ Exercisable/
Name upon Exercise (#) Realized Unexercisable Unexercisable
Richard L. Mount ---- $0.00 62,875/0 $510,042/$0.00
Earl L. Lanna ---- $0.00 29,362/2,000 $295,064/$0.00
Mary Page Rourke 3,307 $38,781 29,362/2,000 $295,064/$0.00
</TABLE>
1/ At December 31, 1998, the high and low bid prices of the Corporation's
common stock were each $14.38. The aggregate value has been determined based
upon the bid price of $14.38, minus the exercise price or base price.
<PAGE> 14
Set forth below are the Long-Term Incentive Plan Awards accrued during
the fiscal year ended December 31, 1998 to Richard L. Mount, the only executive
officer of the Corporation and the Bank who received awards under a Long-Term
Incentive Plan.
Long-Term Incentive Plans - Awards in Last Fiscal Year
<TABLE>
<CAPTION>
Estimated Future Payouts under
Non-Stock Price-Based Plans
<S> <C> <C> <C> <C> <C>
Performance
or Other
Number of Period Until
Shares,Units or Maturation
Name Other Rights or Payout Threshold Target Maximum
Richard L. Mount 15,000 Vesting - 5
years Payout
- beginning
2000 1/ $0.00 2/
</TABLE>
1/ Threshold payout amounts are not readily determinable due to the yearly
adjustment to reflect Return on Assets (ROA) on the Plan awards prior to the
payout beginning in 2000, but could result in no payouts.
2/ Maximum payout amounts are not specifically limited or readily determinable
due to the yearly adjustment to reflect Return on Assets (ROA) on the Plan
awards prior to the payout beginning in 2000.
Compensation of Directors
Each member of the Board of Directors was paid a monthly retainer fee
of $2,000.00 in 1998. Dr. V. Ronald Mancuso received an additional $500.00 per
month for his services as Secretary in 1998. In 1999, each member will
continue to receive a monthly retainer fee of $2,000.00. Dr. V. Ronald Mancuso
will continue to receive an additional $500.00 per month for his services as
Secretary in 1999.
Employment Contracts and Termination of Employment and Change in Control
Arrangements
The Bank and Richard L. Mount, President and Chief Executive Officer of
the Bank, entered into an Employment Agreement dated August 30, 1995, effective
as of January 1, 1995, which was subsequently amended and restated as of
February 22, 1996, for a term of one year from the effective date, subject to
annual renewal in the discretion of the Board if Directors, pursuant to which
Mr. Mount will receive during the term of the agreement (i) base salary in an
amount as described in the Summary Compensation Table above, subject to annual
increase in the discretion of the Board of Directors; (ii) incentive
compensation based upon factors including the increase in the Bank's average
assets in excess of the median percentage change in assets among certain other
California banks of comparable asset size and return on average assets ("ROA")
less the median ROA among the same California bank peer group, with payment
divided into current incentive award payments following an annual audit of the
Bank's financial results and a deferred payment award component; (iii) reim-
bursement for all ordinary and necessary expenses incurred in connection with
Bank business, including club memberships, entertainment, travel and attendance
at seminars and conventions; (iv) an automobile for personal and Bank business
use and related insurance coverages during the term of the Agreement; (v) a
term life insurance policy in the face amount of $500,000 and group insurance
coverages for health (including medical, dental and hospitalization), accident
and disability; (vi) customary vacation and disability benefits; (vii) severance
equal to six months base salary in the event of termination without cause by
the Bank; and (viii) severance payments upon a change in control of the
Corporation or the Bank pursuant to a Management Continuity Agreement as
described below.
<PAGE> 15
The Bank and Mr. Mount also entered into a Management Continuity
Agreement dated July 9, 1990 with an initial term of three years subject to
renewal in the discretion of the Board of Directors of the Bank, which provided
for severance benefits to be paid to Mr. Mount in the event of a change in
control of the Corporation or the Bank which shall be deemed to have occurred
in the event of a change in control of a nature required to be reported in
response to Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or in response to any other form or
report to the Securities and Exchange Commission or any stock exchange in which
the Corporation's shares are listed which requires the reporting of a change in
control; or in the event any "person" (as such term is used in the Exchange Act)
is or becomes the beneficial owner, directly or indirectly, of securities of the
Corporation or the Bank representing 25% or more of the combined voting power of
the Corporation's or the Bank's then outstanding securities; or in any one year,
individuals who at the beginning of such period constitute the Board of
Directors of the Corporation cease for any reason to constitute a majority of
the Board of Directors of the Corporation, unless the election, or the
nomination for election by the Corporation's shareholders of each new director
is approved by a vote of at least three-quarters of the directors then still in
office who were directors at the beginning of the period; or a majority of the
members of the Board of Directors in office prior to the happening of any event
determines in its sole discretion that as a result of such event there has been
a change in control. Severance benefits pursuant to the Agreement are payable
in the event of actual or constructive termination of Mr. Mount other than for
cause within a period of one and one-half years following a change in control
of the Corporation or the Bank calculated at the rate of 1.5 times Mr. Mount's
average annual compensation based upon aggregate compensation paid by the Bank
to Mr. Mount includable in gross income for Federal income tax purposes for the
five tax years ending immediately prior to any change in control. Such
severance payments are subject to reduction for each month and portion of a
month of Mr. Mount's continued employment with the Bank or any successor entity
following a change in control up to the expiration of one and one-half years
thereafter. In the event Mr. Mount's employment with the Bank or any successor
entity continues for the entire one and one-half year period following a change
in control, no severance benefit shall be payable pursuant to the Agreement.
Mr. Mount may elect to have the severance benefit paid in annual installments
over a period not exceeding five years following the date of termination. All
severance benefits under the Agreement are in addition to any other accrued or
vested benefits Mr. Mount may be entitled to under his employment agreement with
the Bank.
Supplemental Compensation Agreements
Effective September 24, 1998, the Bank has entered into Supplemental
Compensation Agreements ("SCA") with each of the named executive officers,
Richard L. Mount, Earl L. Lanna and Mary Page Rourke, each of the five non-
employee directors of the Bank, Msrrs. Aboukhater, Egan, Kron, Lynch and
Mancuso, and three other Bank officer employees. Each SCA provides lifetime
annual income benefits to the respective participants. At the same time, the
Bank has invested in single-premium life insurance policies written on the
lives of the participants or surrogate lives for the benefit of participants.
The Bank is the designated beneficiary on all of the policies. The policies
were purchased in order to indirectly offset the anticipated costs of benefits
payable pursuant to the SCAs. The Bank also entered into a Split Dollar Plan
Agreement with each participant in order to provide for the division of death
proceeds of such policies as between the Bank and the participant's designated
beneficiary(ies).
Each SCA provides for the payment of certain benefits upon retirement
(age 62 or older) or early retirement (prior at attaining age 62), upon death
or disability prior to retirement, or in the event employment or service is
terminated prior to retirement. If employment or service is terminated prior
to attaining age 62, other than by reason of death, disability or retirement,
the amount of benefit entitlement under the SCA will depend on whether
termination of employment or service occurs (i) in connection with a change in
control of the Corporation or the Bank, (ii) by voluntary resignation, or (iii)
with or without cause. In the event of such a change in control, all benefits
vest 100%. Benefits are forfeited upon termination for certain specified "for
cause" reasons. Termination without cause, voluntary resignation and
termination for certain other specified reasons will result in payment of the
benefits to the extent vested at the date of such occurrence.
Participants are credited with varying years of service to the Bank
under the SCA based upon their respective dates of commencement of employment
or service. Benefits generally vest in increments of ten percent per year
following initial credit for years of employment or service which results in
vesting as of December 31, 1998 of eighty percent for Mr. Mount, fifty percent
each for Mr. Lanna and Ms. Rourke, and eighty percent for each non-employee
director. Based upon current projections under the SCA, the annual benefit
entitlement for Mr. Mount, Mr. Lanna and Ms. Rourke is approximately $82,000,
$58,000 and $57,000, respectively, and an average amount of approximately
$13,323 for non-employee directors.
<PAGE> 16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Others
There have been no transactions, or series of similar transactions,
during 1998, or any currently proposed transaction, or series of similar
transactions, to which the Corporation or the Bank was or is to be a party, in
which the amount involved exceeded or will exceed $60,000 and in which any
director (or nominee for director) of the Corporation or the Bank, executive
officer of the Corporation or the Bank, any shareholder owning of record or
beneficially 5% or more of the Corporation's Common Stock, or any member of
the immediate family of any of the foregoing persons, had, or will have, a
direct or indirect material interest.
Indebtedness of Management
The Corporation, through the Bank, has had, and expects in the future
to have banking transactions in the ordinary course of its business with many
of the Corporation's directors and officers and their associates, including
transactions with corporations of which such persons are directors, officers
or controlling shareholders, on substantially the same terms (including interest
rates and collateral) as those prevailing for comparable transactions with
others. Management believes that in 1998 such transactions comprising loans
did not involve more than the normal risk of collectibility or present other
unfavorable features. Loans to executive officers of the Corporation and the
Bank are subject to limitations as to amount and purposes prescribed in part
by the Federal Reserve Act, as amended, and the regulations of the Comptroller
of the Currency.
PROPOSAL NO. 2
RATIFICATION AND APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Deloitte & Touche LLP served the Corporation as independent
public accountants for the 1998 fiscal year. Deloitte & Touche LLP has no
interest, financial or otherwise, in the Corporation. The services rendered by
Deloitte & Touche LLP during the 1998 fiscal year were audit services,
consultation in connection with various accounting matters and preparation of
corporation income tax returns. The Board of Directors of the Corporation
approved each professional service rendered by Deloitte & Touche LLP during the
1998 fiscal year, and the possible effect of each such service on the
independence of that firm was considered by the Board of Directors before such
service was rendered.
Representatives of Deloitte & Touche LLP are expected to be present at the
Meeting, and will have an opportunity to make a statement if they so desire and
respond to appropriate questions.
The Board of Directors of the Corporation has selected Deloitte & Touche
LLP to serve as the independent public accountants for the 1999 fiscal year and
recommend that the shareholders vote "FOR" approval to ratify the selection of
Deloitte & Touche LLP as the Corporation's independent public accountants for
the 1999 fiscal year.
ANNUAL REPORT
The Annual Report of the Corporation containing audited financial
statements for the fiscal year ended December 31, 1998 is included in this
mailing to shareholders.
<PAGE> 17
FORM 10-K
A COPY OF THE CORPORATION'S ANNUAL REPORT ON FORM 10-K FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, IS AVAILABLE TO SHAREHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO
V. RONALD MANCUSO, SECRETARY, SARATOGA BANCORP, 12000 SARATOGA-SUNNYVALE ROAD,
SARATOGA, CALIFORNIA 95070.
SHAREHOLDERS' PROPOSALS
Next year's Annual Meeting of Shareholders will be held on May 18, 2000.
The deadline for shareholders to submit proposals for inclusion in the Proxy
Statement and form of Proxy for the 1999 Annual Meeting of Shareholders
is December 22, 1999. Management of the Corporation will have discretionary
authority to vote proxies obtained by it in connection with any shareholder
proposal not submitted on or before the December 22, 1999 deadline. All
proposals should be submitted by Certified Mail - Return Receipt Requested,
to V. Ronald Mancuso, Secretary, Saratoga Bancorp, 12000 Saratoga-Sunnyvale
Road, Saratoga, California 95070.
OTHER MATTERS
The Board of Directors knows of no other matters which will be brought
before the Meeting, but if such matters are properly presented to the Meeting,
proxies solicited hereby will be voted in accordance with the judgment of the
persons holding such proxies. All shares represented by duly executed
proxies will be voted at the Meeting in accordance with the terms of such
proxies.
SARATOGA BANCORP
Saratoga, California
April 22, 1999 By: V. Ronald Mancuso, Secretary
