<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1999 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
NONE
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (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 (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of the latest practicable date.
CLASS SHARES OUTSTANDING AT JULY 29, 1999
Common Stock 1,586,588
Exhibit Index at Page 26
Page 1 of 176 pages
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Condensed Financial Statements
<TABLE>
<CAPTION>
SARATOGA BANCORP AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
June 30, December 31,
1999 1998*
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks $ 7,212,000 $ 6,549,000
Federal funds sold 16,900,000 14,450,000
Total cash and equivalents 24,112,000 20,999,000
Interest bearing deposits in
other banks 1,789,000 1,789,000
Securities available for sale 32,507,000 30,811,000
Securities held to maturity 10,791,000 9,304,000
Loans, net 68,261,000 73,847,000
Premises and equipment 3,742,000 2,268,000
Other assets 7,356,000 5,784,000
TOTAL ASSETS $148,558,000 $144,802,000
=========== ===========
LIABILITIES
Deposits:
Non interest-bearing $ 30,038,000 $ 27,460,000
Interest-bearing 79,606,000 75,955,000
Total deposits 109,644,000 103,415,000
Federal funds purchased - 2,000,000
Other borrowings 22,613,000 22,697,000
Accrued expenses and
other liabilities 1,447,000 1,433,000
TOTAL LIABILITIES 133,704,000 129,545,000
SHAREHOLDERS' EQUITY
Common stock, no par value;
Authorized: 20,000,000 shares;
Issued and outstanding:
1,586,588 shares at June 30,
1999 and 1,629,357 shares at
December 31, 1998 4,434,000 4,684,000
Retained earnings 10,857,000 10,591,000
Accumulated other comprehensive
income, net of taxes of $257,000
and $11,000, respectively (437,000) (18,000)
TOTAL SHAREHOLDERS' EQUITY 14,854,000 15,257,000
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $148,558,000 $144,802,000
=========== ===========
</TABLE>
*Derived from the December 31, 1998 audited balance sheet included in
the Company's 1998 Annual Report on Form 10-K.
See notes to consolidated condensed financial statements.
<PAGE> 3
SARATOGA BANCORP AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans $1,716,000 $1,536,000 $3,465,000 $3,094,000
Investment securities 636,000 698,000 1,254,000 1,446,000
Federal funds sold 194,000 189,000 321,000 293,000
Total interest income 2,546,000 2,423,000 5,040,000 4,833,000
INTEREST EXPENSE:
Deposits 799,000 726,000 1,575,000 1,443,000
Other 337,000 353,000 674,000 705,000
Total interest expense 1,136,000 1,079,000 2,249,000 2,148,000
NET INTEREST INCOME
BEFORE PROVISION
FOR CREDIT LOSSES 1,410,000 1,344,000 2,791,000 2,685,000
Provision for credit
losses 26,000 51,000 66,000 102,000
Net interest income
after provision for
credit losses 1,384,000 1,293,000 2,725,000 2,583,000
Other income 278,000 133,000 508,000 292,000
Other expenses 903,000 729,000 1,728,000 1,505,000
INCOME BEFORE INCOME TAXES 759,000 697,000 1,505,000 1,370,000
Provision for income taxes 281,000 264,000 557,000 520,000
NET INCOME 478,000 433,000 948,000 850,000
OTHER COMPREHENSIVE INCOME,
NET OF TAX:
Unrealized (losses)gains
on securities (288,000) 15,000 (419,000) 39,000
COMPREHENSIVE INCOME $ 190,000 $ 448,000 $ 529,000 $ 889,000
========== ========== ========== ==========
EARNINGS PER SHARE:
Basic $ 0.30 $ 0.26 $ 0.59 $ 0.52
========== ========== ========== ==========
Diluted $ 0.27 $ 0.24 $ 0.53 $ 0.47
========== ========== ========== ==========
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE> 4
SARATOGA BANCORP AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1999 1998
<S> <C> <C>
OPERATIONS:
Net income $ 948,000 $ 850,000
Adjustments to reconcile net income to
net cash provided by operating
activities:
Provision for credit losses 66,000 102,000
Depreciation and amortization 194,000 90,000
Gain on sale of premises and
equipment 33,000 -
Other, net (73,000) 158,000
Net cash provided by operating activities 1,168,000 1,200,000
INVESTING ACTIVITIES:
Net increase in interest bearing
deposits in other banks - (100,000)
Proceeds from maturities or sale of `
investments available for sale 3,283,000 13,309,000
Proceeds from maturities of investments
held to maturity 200,000 3,012,000
Purchase of securities available for sale (5,637,000) (7,000,000)
Purchase of securities held to maturity (1,695,000) (2,985,000)
Net decrease (increase) in loans 5,520,000 (653,000)
Purchase of life insurance policies (1,238,000)
Purchases of premises and equipment (2,182,000) (473,000)
Proceeds from sale of premises and
equipment 481,000 -
Net cash provided by (used in) investing
activities (1,268,000) 5,110,000
FINANCING ACTIVITIES:
Net increase (decrease) in deposits 6,229,000 1,373,000
Issuance of common stock 35,000 20,000
Payment of cash dividends (160,000) (112,000)
Repurchase of common stock (807,000) -
Net (decrease) increase in other borrowings (84,000) (111,000)
Decrease in federal funds purchased (2,000,000) (2,000,000)
Net cash (used in) provided by financing
activities 3,213,000 (830,000)
NET INCREASE (DECREASE)IN CASH
AND EQUIVALENTS 3,113,000 5,480,000
Cash and equivalents, beginning of period 20,999,000 15,260,000
Cash and equivalents, end of period $24,112,000 $20,740,000
=========== ===========
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE> 5
SARATOGA BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
QUARTERS ENDED JUNE 30, 1999 AND 1998
1. The unaudited consolidated condensed financial statements
reflect all adjustments (which include only normal recurring
adjustments) which are, in the opinion of management,
necessary to state fairly the results for the periods
presented. The results for the periods are not necessarily
indicative of the results to be expected for the full fiscal
year.
2. Basic Earnings Per Share is computed by dividing net
income by the weighted average common shares outstanding
during the period. Diluted Earnings Per Share reflects the
potential dilution if securities or other contracts to issue
common stock are exercised or converted into common stock.
Diluted earnings per share is computed by dividing net income
by the average shares outstanding for the period plus the
dilutive effect of stock options. The weighted average shares
used in computing earnings per share are as follows:
<TABLE>
<CAPTION>
Quarters ended June 30,
1999 1998
<S> <C> <C>
Weighted average shares used
in computing:
Basic earnings per share 1,588,000 1,644,000
Diluted potential common shares
from exercise of stock options,
using the treasury stock method 182,000 185.000
Diluted earnings per share 1,770,000 1,829,000
</TABLE>
<TABLE>
<CAPTION>
Six Months ended June 30,
1999 1998
<S> <C> <C>
Weighted average shares used
in computing:
Basic earnings per share 1,598,000 1,642,000
Diluted potential common shares
from exercise of stock options,
using the treasury stock method 179,000 178.000
Diluted earnings per share 1,777,000 1,820,000
</TABLE>
3. In 1998, the Company adopted SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information",which
<PAGE> 6
establishes annual and interim reporting standards for an
enterprise's operating segments and related disclosures about
its products, services, geographic areas and major customers.
Management has determined that since all of the commercial
banking products and services offered by the Bank are
available in each branch of the Bank, all branches are located
within the same economic environment and management does not
allocate resources based on the performance of different
lending or transaction activities, it is appropriate to
aggregate the Bank's operations into a single operating
segment.
4. Effective July 1, 1998, the Company adopted SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities",
which establishes accounting and reporting standards for
derivative instruments and hedging activities. In connection
with the adoption of SFAS 133 the Company reclassified certain
securities with an amortized cost of $19,751,000 and a fair
value of $19,967,000 from held-to-maturity to available-for-
sale. Adoption of this statement did not have any other
impact on the Company's consolidated financial position and
had no impact on the Company's results of operations or cash
flows.
5. During the six months ended June 30, 1999 and 1998, cash
paid for taxes was $220,000 and $627,000, respectively.
During the six months ended June 30, 1999 and 1998, cash paid
for interest was $2,232,000 and $2,083,000, respectively.
<PAGE> 7
SARATOGA BANCORP AND SUBSIDIARY
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Certain matters discussed or incorporated by reference
in this Quarterly Report on Form 10-Q are forward-looking
statements that are subject to risks and uncertainties that
could cause actual results to differ materially from those
projected. Changes to such risks and uncertainties, which
could impact future financial performance, include, among
others, (1) competitive pressures in the banking industry;
(2)changes in interest rate environment; (3)general economic
conditions, nationally, regionally and in operating market
areas; (4) changes in the regulatory environment; (5)
changes in business conditions and inflation; (6) changes in
securities markets; and (7) Year 2000 compliance problems.
Therefore, the information set forth herein should be
carefully considered when evaluating business prospects of
the Company and the Bank.
SUMMARY OF FINANCIAL RESULTS
At June 30, 1999, total assets were $148,558,000, an
increase of $3,756,000 (2.6%) from $144,802,000 at December
31, 1998. Net loans decreased $5,586,000 (7.6%) from
$73,847,000 at December 31, 1998 to $68,261,000 at June 30,
1999. Total deposits increased $6,229,000 (6.0%) from
$103,415,000 at December 31, 1998 to $109,644,000 at June
30, 1999.
Net income for the second quarter of 1999 was $478,000
($0.30 basic earnings per share, $0.27 diluted earnings per
share) compared to $433,000 ($0.26 basic earnings per share,
$0.24 diluted earnings per share) for the comparable period
in 1998. Net income for the first six months of 1999 was
$948,000 ($0.59 basic earnings per share, $0.53 diluted
earnings per share) compared to $850,000 ($0.52 basic
earnings per share, $0.47 diluted earnings per share) for
the comparable period in 1998.
The increase in income resulted primarily from an increase
in the volume of earning assets, offset in part by a
decrease in the yield on earning assets and an increase in
interest expense due to the increased volume of interest-
bearing liabilities.
<PAGE> 8
RESULTS OF OPERATIONS
SECOND QUARTER OF 1999 AND 1998
An analysis of the results of operations of the Company for
the second quarter of 1999 compared to the second quarter
of 1998 is presented below:
NET INTEREST INCOME
Net interest income, the difference between interest earned
on loans and investments and interest paid on deposits, is
the principal component of the Bank's earnings. The
components of net interest income are as follows:
<TABLE>
<CAPTION>
Three months ended June 30,
1999 1998
Average Average Average Average
Balance Interest Yield(1) Balance Interest Yield(1)
(In thousands, except percentages) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Earning assets:
Loans (2) $ 72,971 $1,716 9.4% $ 62,494 $1,536 9.8%
Investment
securities 45,310 636 5.6 45,837 698 6.1
Federal funds sold 16,258 194 4.8 13,805 189 5.5
Total interest
earning assets 134,539 2,546 7.6 122,136 2,423 7.9
Cash and due from
banks 6,883 5,053
Other assets (3) 9,659 2,754
$151,081 $129,943
======== ========
Liabilities and
Shareholders'
Equity:
Interest-bearing
liabilities:
Demand deposits $ 42,388 339 3.2 $ 39,130 351 3.6
Time deposits 40,258 460 4.6 28,025 375 5.4
Other borrowings 22,641 337 6.0 22,910 353 6.2
Total interest-
bearing
liabilities 105,287 1,136 4.3 90,065 1,079 4.8
Demand deposits 28,756 24,632
Other liabilities 2,097 1,240
Total liabilities 136,140 115,937
Shareholders' equity 14,941 14,006
$151,081 $129,943
======= =======
Net interest income
and margin(4) $1,410 4.2% $1,344 4.4%
====== ======
</TABLE>
(1) Annualized.
(2) Loan interest income includes loan fee income of
$105,000 and $98,000 for the quarters ended June 30,
1999 and 1998,respectively.
(3) Net of the average allowance for loan losses of
$772,000 and $668,000 and deferred loan fees of
$294,000 and $317,000 for the quarters ended June 30,
1999 and 1998, respectively.
(4) Net interest margin is computed by dividing net
interest income by total average interest earning
assets.
<PAGE> 9
PROVISION FOR CREDIT LOSSES
The Bank maintains an allowance for possible credit losses
which is based, in part, on the Bank's historical loss
experience, the impact of forecasted economic conditions
within the Bank's market area, and, as applicable, the State
of California, the value of the underlying collateral, loan
performance and inherent risks in the loan portfolio. The
allowance is reduced by charge-offs and increased by
provisions for credit losses charged to operating expense
and recoveries of previously charged-off loans. During the
second quarter of 1999 the Bank provided $26,000 for the
allowance for credit losses as compared to $51,000 for the
second quarter of 1998. There were no loans charged-off and
$44,000 in recoveries in the second quarter of 1999, as
compared to $14,000 in loans charged-off and $20,000 in
recoveries in the second quarter of 1998.
At June 30, 1999, the allowance for credit losses was
$826,000 or 1.21% of total loans, compared to $716,000 or
0.96% at December 31, 1998. There were no nonaccrual loans
at June 30, 1999 or December 31, 1998.
At June 30, 1999 and December 31, 1998, there were no loans
past due 90 days or more as to principal or interest and
still accruing interest. There were no loans at June 30,
1999 which were troubled debt restructurings as defined in
Statement of Financial Accounting Standards No. 15,
"Accounting by Debtors and Creditors for Troubled Debt
Restructuring." At June 30, 1999, there were three
potential problem loans having a combined principal balance
of $1,719,000 ($259,000 at December 31, 1998). Potential
problem loans are loans which are generally current as to
principal and interest but have been identified by the
Company as potential problem loans due either to a decrease
in the underlying value of the property securing the credit
or some other deterioration in the creditworthiness of the
borrower. All of the three loans identified as potential
problem loans are secured by real estate and personal
property.
There was no Other Real Estate owned ("OREO")at June 30,
1999 or December 31, 1998.
<PAGE> 10
Nonperforming loans and other real estate owned are
summarized below:
<TABLE>
<S> <C> <C>
June 30, 1999 December 31, 1998
Nonperforming loans:
Past due 90 days or more $ - $ -
Nonaccrual - -
Total - -
Other real estate owned - -
Total nonperforming loans
and other real estate
owned $ - $ -
========== ==========
</TABLE>
Management is of the opinion that the allowance for credit
losses is maintained at an adequate level for known and
currently anticipated future risks inherent in the loan
portfolio. However, the Bank's loan portfolio, which
includes approximately $49,000,000 in real estate loans
representing approximately 71% of the portfolio, could be
adversely affected if California economic conditions and the
real estate market in the Bank's market area weaken. The
effect of such events could result in an increase in the
level of nonperforming loans and OREO and the level of the
allowance for loan losses which could adversely affect the
Company's and the Bank's future growth and profitability.
NONINTEREST INCOME
Other income consists of service charges on deposit
accounts, income from assets acquired for lease and fees for
other miscellaneous services. Total other income increased
from $133,000 in the second quarter of 1998 to $278,000 in
the second quarter of 1999. This increase is primarily
attributable to an increase in rental income on leased
assets of $110,000 and an increase in the cash surrender
value of life insurance policies of $74,000, offset, in
part, by the decrease in gain on sale of securities of
$59,000.
NONINTEREST EXPENSE
Other expenses increased from $729,000 in the second quarter
of 1998 to $903,000 in the second quarter of 1999. The
increase is primarily attributable to an increase in
deferred compensation expense of $47,000 and an increase in
depreciation expense on leased assets of $88,000. As a
percentage of average earning assets, other expenses for the
second quarter, on an annualized basis, increased from 2.4%
in 1998 to 2.7% in 1999.
<PAGE> 11
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
An analysis of the results of operations of the Company for
the six month period ended June 30, 1999 compared to the
comparable period in 1998 is as follows:
NET INTEREST INCOME
Net interest income, the difference between interest earned
on loans and investments and interest paid on deposits, is
the principal component of the Bank's earnings. The
components of net interest income are as follows:
<TABLE>
<CAPTION>
Six months ended June 30,
1999 1998
Average Average Average Average
Balance Interest Yield(1) Balance Interest Yield(1)
(In thousands, except percentages) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Earning assets:
Loans (2) $ 74,346 $3,465 9.3% $62,976 $3,094 9.8%
Investment
securities 44,561 1,254 5.6 46,945 1,446 6.2
Federal funds sold 13,561 321 4.7 10,745 293 5.5
Total interest
earning assets 132,468 5,040 7.6 120,666 4,833 8.0
Cash and due from
banks 6,481 4,963
Other assets (3) 8,452 2,786
$147,401 $128,415
======== =======
Liabilities and
Shareholders'
Equity:
Interest-bearing
liabilities:
Demand deposits $ 43,606 629 2.9 $38,577 633 3.3
Time deposits 36,923 946 5.1 28,429 810 5.7
Other borrowings 22,696 674 5.9 22,948 705 6.1
Total interest-
bearing
liabilities 103,225 2,249 4.4 89,954 2,148 4.8
Demand deposits 27,411 23,192
Other liabilities 1,795 1,338
Total liabilities 132,431 114,484
Shareholders' equity 14,970 13,931
$147,401 $128,415
======== =======
Net interest income
and margin(4) $2,791 4.2% $2,685 4.5%
====== ======
</TABLE>
(1) Annualized.
(2) Loan interest income includes loan fee income of
$187,000 and $180,000 for the six months ended June
30, 1999 and 1998, respectively.
(3) Net of the average allowance for loan losses of
$752,000 and $637,000, and deferred loan fees of
$295,000 and $318,000 for the six months ended June 30,
1999 and 1998, respectively.
(4) Net interest margin is computed by dividing net
interest income by total average interest earning
assets.
<PAGE> 11
PROVISION FOR CREDIT LOSSES
During the first six months of 1999, the Bank provided $66,000
to the provision for credit losses as compared to $102,000 for
the fist six months of 1998. There were no loans charged off
and $44,000 in recoveries for the six months ended June 30,
1999, compared to $14,000 in loans charged off and $32,000 in
recoveries for the first six months of 1998.
NONINTEREST INCOME
Other income consists of service charges on deposit accounts,
income on assets acquired for lease and fees for other
miscellaneous services. Total other income increased from
$292,000 in 1998 to $508,000 in 1999. The increase is
primarily attributable to an increase in rental income on
leased assets of $147,000 and an increase of $105,000 in the
cash surrender value value of life insurance policies.
NONINTEREST EXPENSE
Other expenses have increased from $1,505,000 in 1998 to
$1,728,000 in 1999 due primarily to an increase of $94,000 in
deferred compensation expense and an increase of $105,000 in
depreciation expense on leased assets. As a percentage of
average earning assets, other expenses, on an annualized
basis, increased from 2.5% in 1998 to 2.6% in 1999.
<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES
The Bank manages its liquidity to provide adequate funds at an
acceptable cost to support borrowing requirements and deposit
flows of its customers. Liquid assets as a percentage of
deposits were 53% and 52% at June 30, 1999 and December 31,
1998, respectively. In addition to cash and due from banks,
liquid assets include short-term time deposits with other
banks, Federal funds sold and investment securities available
for sale. The Bank has $11.0 million in Federal funds lines
of credit available with correspondent banks to meet liquidity
needs.
Management regularly reviews general economic and financial
conditions, both external and internal, and determines whether
the positions taken with respect to liquidity and interest
rate sensitivity continue to be appropriate. The Bank also
utilizes a monthly "Gap" report which identifies rate
sensitivity over the short- and long-term.
The following table sets forth the distribution of repricing
opportunities, based on contractual terms, of the Company's
earning assets and interest-bearing liabilities at June 30,
1999, the interest rate sensitivity gap (i.e. interest rate
sensitive assets less interest rate sensitive liabilities),
the cumulative interest rate sensitivity gap, the interest
rate sensitivity gap ratio (i.e. interest rate sensitive
assets divided by interest rate sensitive liabilities) and the
cumulative interest rate sensitivity gap ratio.
<PAGE> 14
<TABLE>
<CAPTION>
DISTRIBUTION OF REPRICING OPPORTUNITIES
At June 30, 1999
(Dollars in thousands) (unaudited)
After Three After Six After One
Within Months But Months But Year But After
Three Within Six Within One Within Five
Months Months Year Five Years Years Total
<S> <C> <C> <C> <C> <C> <C>
Federal
funds sold $16,900 - - - - $16,900
Interest bearing
deposits in
other banks 1,789 - - - - 1,789
Municipal
securities 250 - $ - $ 1,901 $ 8,550 10,701
U.S. Treasury
and agency
securities 2,915 1,003 291 10,717 14,734 29,660
FRB stock - - - - 2,937 2,937
Loans 30,068 2,172 2,397 12,656 22,117 69,410
Total
earning assets $51,922 $ 3,175 $ 2,688 $25,274 $48,338 131,397
Interest bearing
demand
accounts $38,442 - - - - 38,442
Savings
accounts 4,878 - - - - 4,878
Time
certificates
of deposit of
$100,000 or
more 9,355 $ 8,802 $ 3,027 $ 2,224 100 23,508
Other time
deposits 3,390 3,486 3,723 2,179 - 12,778
Other borrowings 25 - 2,000 12,497 $ 8,091 22,613
Total interest-
bearing
liabilities $56,090 $12,288 $ 8,750 $16,900 $ 8,191 102,219
Interest rate
sensitivity
gap $(4,168) $(9,113) $(6,062) $ 8,374 $40,147 $ 29,178
======= ======= ======= ======== ======= ========
Cumulative
interest rate
sensitivity
gap $(4,168) $(13,281) $(19,343) $(10,969) $29,178
======= ======== ======== ======== =======
Interest rate
sensitivity
gap ratio 0.93% 0.26% 0.31% 1.50% 5.90%
Cumulative
interest rate
sensitivity
gap ratio 0.93% 0.81% 0.75% 0.88% 1.29%
</TABLE>
<PAGE>
The Company and the Bank are subject to capital adequacy guidelines
issued by the Board of Governors of the Federal Reserve System (the
"BGFRS") and the Office of the Comptroller of the Currency ("OCC").
The Company and the Bank are required to maintain total capital
equal to at least 8% of assets and commitments to extend credit,
weighted by risk, of which at least 4% must consist primarily of
common equity including retained earnings (Tier 1 capital) and the
remainder may consist of limited life (and in the case of banks,
cumulative) preferred stock, mandatory convertible securities,
subordinated debt and a limited amount of loan loss reserves.
Effective October 1, 1998, the BGFRS and other federal agencies
approved including in Tier 2 capital up to 45% of the pretax net
unrealized gains on certain available-for-sale equity securities
having readily determinable fair values (i.e. the excess, if any,
of fair market value over the book value or historical cost of the
investment security). The federal regulatory agencies reserve the
right to exclude all or a portion of the unrealized gains upon a
determination that the equity securities are not prudently valued.
Unrealized gains and losses on other types of assets, such as bank
premises and available-for-sale debt securities, are not included
in Tier 2 capital, but may be taken into account in the evaluation
of overall capital adequacy and net unrealized losses on available-
for-sale equity securities will continue to be deducted from Tier
1 capital as a cushion against risk. Certain assets and commitments
to extend credit present less risk than others and will be assigned
to lower risk-weighted categories requiring less capital allocation
than the 8% total ratio. For example, cash and government
securities are assigned to a 0% risk-weighted category, most home
mortgage loans are assigned to a 50% risk-weighted category
requiring a 4% capital allocation and commercial loans are assigned
to a 100% risk-weighted category requiring an 8% capital
allocation. As of June 30, 1999, the Company's total risk-based
capital ratio was approximately 16.7% (approximately 16.2% for the
Bank) compared to approximately 16.8% (approximately 16.4% for the
Bank) at December 31, 1998.
The Board of Governors and other federal banking agencies have
adopted a revised minimum leverage ratio for bank holding companies
and banks as a supplement to the risk-weighted capital guidelines.
The old rule established a 3% minimum leverage standard for well-run
banking organizations (bank holding companies and banks) with
diversified risk profiles. Banking organizations which did not
exhibit such characteristics or had greater risk due to significant
growth, among other factors, were required to maintain a minimum
leverage ratio 1% to 2% higher. The old rule did not take into
account the implementation of the market risk capital measure set
forth in the federal regulatory agency capital adequacy guidelines.
The revised leverage ratio establishes a minimum Tier 1 ratio of 3%
(Tier 1 capital to total assets) for the highest rated bank holding
companies and banks. All other bank holding companies must maintain
a minimum Tier 1 leverage ratio of 4% with higher leverage capital
ratios required for banking organizations that have significant
<PAGE> 16
financial and/or operational weaknesses, a high risk profile, or
are undergoing or anticipating rapid growth.
The following table reflects the Company's leverage, Tier 1 and
total risk-based capital ratios as of June 30, 1999 and December
31, 1998.
June 30, 1999 December 31, 1998
Leverage ratio 10.1% 11.0%
Tier 1 capital ratio 15.8% 16.0%
Total risk-based capital ratio 16.7% 16.8%
On December 19, 1991, the President signed the Federal Deposit
Insurance Corporation Improvement Act of 1991 (the "FDICIA"). The
FDICIA, among other matters, substantially revised banking
regulations and established a framework for determination of
capital adequacy of financial institutions. Under the FDICIA,
financial institutions are placed into one of five capital adequacy
catagories as follows: (1) "Well capitalized" - consisting of
institutions with a total risk-based capital ratio of 10% or
greater, a Tier 1 risk-based capital ratio of 6% or greater and a
leverage ratio of 5% or greater, and the institution is not subject
to an order, written agreement, capital directive or prompt
corrective action directive; (2) "Adequately capitalized" -
consisting of institutions with a total risk-based capital ratio of
8% or greater, a Tier 1 risk-based capital ratio of 4% or greater
and a leverage ratio of 4% or greater, and the institution does not
meet the definition of a "well capitalized" institution; (3)
"Undercapitalized" - consisting of institutions with a total risk-based
capital ratio less than 8%, a Tier 1 risk-based capital ratio
of less than 4%, or a leverage ratio of less than 4%; (4)
"Significantly undercapitalized" - consisting of institutions with
a total risk-based capital ratio of less than 6%, a Tier 1 risk-based capital
ratio of less than 3%, or a leverage ratio of less
than 3%; (5) "Critically undercapitalized" - consisting of an
institution with a ratio of tangible equity to total assets that is
equal to or less than 2%.
Financial institutions classified as undercapitalized or below are
subject to various limitations including, among other matters,
certain supervisory actions by bank regulatory authorities and
restrictions related to (i) growth of assets, (ii) payment of
interest on subordinated indebtedness, (iii) payment of dividends
or other capital distributions, and (iv) payment of management fees
to a parent holding company. The FDICIA requires bank regulatory
authorities to initiate corrective action regarding financial
institutions which fail to meet minimum capital requirements. Such
action may result in orders to, among other matters, augment
capital and reduce total assets. Critically undercapitalized
financial institutions may also be subject to appointment of a
receiver or implementation of a capitalization plan.
<PAGE> 17
OTHER MATTERS
From time to time, the Board of Directors and management of the
Company consult with its investment banking, accounting and legal
advisors, regarding banking industry trends and developments, as
well as internal and external opportunities, in order to maximize
shareholder value. Such external opportunities include potential
mergers, acquisitions, reorganizations, and other transactions with
third parties which may be in the interests of the Company's
shareholders. The Company has been engaged in discussions and
negotiations with another California-based financial institution
about a possible transaction which, if consummated, would result in
a merger of the Company with and into such other institution. The
proposed terms and conditions of such transaction remain under
negotiation and are subject to the approval of the Company's Board
of Directors. Thus, no assurance can be given as to whether the
proposed transaction will be consummated. Any definitive agreement,
if approved by the Company's Board of Directors, would be subject
to the satisfaction of certain other terms and conditions,
including shareholder and regulatory approvals.
YEAR 2000
As the year 2000 approaches, a critical issue has emerged regarding
how existing application software programs and operating systems
can accommodate this date value. In brief, many existing
application software products were designed to only accommodate a
two digit date position which represents the year (e.g. "97" is
stored on the system and represents the year 1997.) As a result,
the year 1999 (i.e. "99") could be the maximum date value these
systems will be able to accurately process. This is not just a
banking problem, as corporations around the world and in all
industries are similarly impacted.
During 1997, the Company began a plan that includes the five phases
of Year 2000 compliance as defined by the FFIEC, awareness,
assessment, renovation, validation, and implementation. The
Company's Year 2000 Plan (the "Plan") addresses the proper function
of the Company's in-house computer hardware and software, along
with other products and services which the Company utilizes and
which have potential for Year 2000 difficulties.
Awareness and Assessment Phases The Company completed the
Awareness and Assessment Phases, as defined by the FFIEC, during
early 1998 and continues to update its assessment as needed.
Management of the Company reports at least monthly to the Board of
Directors on its Year 2000 efforts.
Renovation Phase The FFIEC guideline date for institutions to
substantially complete program changes and system upgrades for
mission critical systems was December 31, 1998. By that date, the
Company had completed replacements of all hardware and software
<PAGE> 18
components with the exception of the item processing subsystem of
the mainframe. The replacement of this system was completed in
March 1999.
Validation and Implementation Phases To reduce the possibility of
unexpected failure of the Company's systems during and after the
century date change, which could have an impact on the Company and
its customers, the company continues to test its systems in
accordance with a test strategy and plan developed in 1998. The
FFIEC guideline date for institutions to begin testing their
mission critical applications and systems was September 1, 1998.
During April 1998, the Company began testing various mission
critical and non-mission critical systems. The Company had
completed this testing by the end of the second quarter of 1999.
Business Relationships As a part of the Company's Plan, all third
party suppliers and service providers have been contacted and
assessed as to their Year 2000 preparedness. In addition, the Bank
has communicated with its large borrowers and major depositors to
determine the extent to which the Company might be vulnerable if
those third parties fail to resolve their Year 2000 issues.
Because the Company recognizes that its business and operations
could be adversely affected if key businesses fail to achieve
timely Year 2000 compliance, the Company is evaluating strategies
to manage and mitigate the risk to the Company from their Year 2000
failures.
Contingency Plans FFIEC guidelines indicate that contingency
plans covering mission critical systems in the event of Year 2000
problems are a prudent business practice. The Company has
developed contingency plans for applications and systems used by
the Bank that are deemed mission critical as well as plans to cover
many non-mission critical applications and systems. The
contingency plans are based on a review of various emergency
scenarios ranging from the Year 2000 failure of a single software
or hardware component to the total loss of systems and
applications. Because business resumption planning is a dynamic
process, the Company may further refine and test these plans
throughout 1999.
Costs to Address Year 2000 Issues The majority of the costs
associated with the Company's Year 2000 preparedness efforts would
have been incurred in the normal course of business, as the Company
regularly upgrades its various systems in an effort to more
efficiently and effectively serve its clientele and conduct its
operations. The Company estimates the total cost of compliance
will be approximately $150,000, with the majority of this expense
earmarked for the new item processing subsystem. The costs
incurred in 1998 did not have a material effect on the Company's
net income for 1998, and the Company does not expect the costs that
will be incurred in 1999 to have a material impact on the Company's
net income for 1999.
<PAGE> 19
Even with all of the Company's preparation, there can be no
assurance that problems will not arise which could have an adverse
impact due, among other matters, to the complexities involved in
computer programming related to resolution of Year 2000 problems
and the fact that the systems of other companies on which the
Company may rely must also be corrected on a timely basis.
Delays, mistakes or failures in correcting Year 2000 system
problems by such other companies could have a significant adverse
impact upon the Company and its ability to mitigate the risk of
adverse impact of Year 2000 problems for its customers.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Disclosures under this item are not required for the current
fiscal year as the Company qualifies as a "Small Business" filer.
<PAGE> 20
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
The shareholders of Saratoga Bancorp took the following
action at the Annual Meeting of Shareholders held on May
19, 1999 at the Company's main office located at
12000 Saratoga-Sunnyvale Road, Saratoga, California:
1. Approved the election of management's slate of nominees
for directors, each of whom were incumbent directors, as
follows:
Votes
For Withheld
Victor Aboukhater 966,954 7,027
Robert G. Egan 966,954 7,027
William D. Kron 966,954 7,027
John F. Lynch, III 966,954 7,027
V. Ronald Mancuso 966,954 7,027
Richard L. Mount 971,916 2,065
2. Ratified appointment of Deloitte & Touche LLP as
independent auditors of the Company for the fiscal
year ending December 31, 1999.
VOTES
FOR 969,360
AGAINST -
ABSTAIN 4,621
Item 5. Other Information
Not applicable
<PAGE> 21
Item 6. Exhibits and Reports on Form 8-K
(a) (3) Exhibits. The exhibits listed on the
accompanying Exhibit Index are filed
as part of this report.
(3.1) Articles of Incorporation, as amended, are
incorporated by reference herein to Exhibit
3.1 of Registrant's Annual Report on Form 10-
K for the fiscal year ended December 31, 1988,
as filed with the Securitiesand Exchange
Commission on March 27, 1989.
(3.2) By-laws, as amended, are incorporated by
reference herein to Exhibit 3.2 of
Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993 as
filed with the Securities and Exchange
Commission on March 29, 1994.
(4.1) Specimen stock certificate is incorporated by
reference to Exhibit 4.1 of Registrant's
Annual Report on Form 10-K for the fiscal
year ended December 31, 1994 as filed with
the Securities and Exchange Commission on
March 30, 1995.
(10.1) Lease agreement dated 10/19/87 for 15405 Los
Gatos Blvd., Suite 103, Los Gatos, CA is
incorporated by reference herein to Exhibit
10.1 of Registrant's Annual Report on Form
10-K for the fiscal year ended December 31,
1987 as filed with the Securities and Exchange
Commission on March 31, 1988.
(10.2) Agreement of Purchase and Sale dated July 27,
1988 for 12000 Saratoga-Sunnyvale Road,
Saratoga, CA is incorporated by reference
herein to Exhibit 10.1 of Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1988, as filed with the
Securities and Exchange Commission on March
27, 1989.
*(10.3) Indemnification Agreements with directors and
Executive Officers of the Registrant are
incorporated by reference herein to Exhibit
10.2 of Registrant's Annual Report on Form
10-K for the fiscal year ended December 31,
1988, as filed with the Securities and Exchange
Commission on March 27, 1989.
<PAGE> 22
(10.4) Lease agreement dated 1/17/89 for 160 West Santa
Clara Street, San Jose, California is
incorporated by reference herein to Exhibit
10.4 of Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1989,
as filed with the Securities and Exchange Commission
on March 27, 1990.
(10.5) Bank of the West Master Profit Sharing and
Savings Plan and Amendment, amended as of
March, 1990 are incorporated by reference
herein to Exhibit 10.5 of Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1990, as filed with the
Securities and Exchange Commission on March
20, 1991.
*(10.6) Employment Agreement and Management
Continuity Agreement and Chief Executive
Officer Compensation Plan/Richard L. Mount is
incorporated by reference herein to Exhibit
10.6 of Registrant's Annual Report on Form
10-K for the fiscal year ended December 31,
1990, as filed with the Securities and
Exchange Commission on March 20, 1991.
*(10.7) Saratoga Bancorp 1982 Stock Option Plan is
incorporated by reference herein to the
exhibits to Registration Statement No. 33-
34674 on Form S-8 as filed with the
Securities and Exchange Commission on May
7, 1990.
*(10.8) Saratoga National Bank Savings Plan dated
June 19, 1995 is incorporated by reference
herein to Exhibit 10.8 of Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1995, as filed with the
Securities and Exchange Commission on March
27, 1996.
*(10.9) Saratoga Bancorp 1994 Stock Option Plan dated
March 18, 1994 is incorporated by referencce
herein to Appendix A of Proxy Statement dated
April 19, 1994 as filed with the Securities
and Exchange Commission on April 27, 1994.
<PAGE> 23
*(10.10) Forms of Incentive Stock Option Agreement,
Non-Statutory Stock Option Agreement and
Non-Statutory Agreement for Outside Directors,
as amended is incorporated by reference
herein to Exhibit 10.8 of Registrant's
Quarterly Report on Form 10-Q for the Quarter
ended June 30, 1994 as filed with the
Securities and Exchange Commission on August
15, 1994.
*(10.11) Form if Director Supplemental Compensation
Agreement dated September 24, 1998 between
Saratoga National Bank and Robert G. Egan,
John F. Lynch III and V. Ronald Mancuso,
respectively.
*(10.12) Form of Director Life Insurance Endorsement
method Split Dollar Plan Agreement dated
September 24, 1998 between Robert G. Egan,
John F. Lynch III and V. Ronald Mancuso,
respectively.
*(10.13) Form of Director Surrogate Supplemental
Compensation Agreement dated September
24, 1998 between Saratoga National Bank
and Victor E. Aboukhater and William D.
Kron, respectively.
*(10.14) Form of Director Surrogate Life Insurance
Endorsement Method Split Dollar Plan
Agreement dated September 24, 1998 between
Saratoga National Bank and Victor Aboukhater
and William D. Kron, respectively.
*(10.15) Form of Officer Supplemental Compensation
Agreement dated September 24, 1998 between
Saratoga National Bank and Earl L. Lanna, Mary
Rourke, Sandra Swenson, Barbara Resop and
Cathe Franklin, respectively.
*(10.16) Form of Officer Life Insurance Endorsement
Method Split Dollar Plan Agreement dated
September 24, 1998 between Saratoga National
Bank and Earl L. Lanna, Mary Rourke, Sandra
Swenson, Barbara Resop and Cathe Franklin,
respectively.
*(10.17) Richard L. Mount Executive Benefits Agreement
dated June 18, 1999.
<PAGE> 24
*(10.18) Richard L. Mount Life Insurance Endorsement
Method Split Dollar Plan Agreement dated
September 24, 1998.
*(10.19) Richard L. Mount Employment Agreement dated
May 20, 1999.
*(10.20) Richard L. Mount Executive Supplemental
Compensation Agreement dated September 24,
1998.
(27.1) Financial Data Schedule
* Denotes management contracts, compensatory plans or
arrangements.
(b) Reports on Form 8-K
On May 4, 1999, registrant filed a current
report on Form 8-K, dated May 3, 1999 reporting
Under Item 5 (Other Events) the conclusion of
the stock repurchase program which commenced on
December 10, 1998.
On May 21, 1999, Registrant filed a Current
Report on Form 8-K, dated May 19, 1999 reporting
under Item 5 (Other Events) detailing actions
taken at the Annual Meeting of Shareholders of
Registrant held on May 19, 1999. See Item 4
herein for additional information.
<PAGE> 25
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF
1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.
SARATOGA BANCORP
Date: August 13, 1999 -------------------------
Mary Page Rourke, Treasurer
(Principal Accounting Officer)
<PAGE> 26
INDEX TO EXHIBITS
Sequentially
Numbered
Number Exhibits Page
10.11 Form of Director Supplemental
Compensation Agreement dated
September 24, 1998 27 - 47
10.12 Form of Director Life Insurance
Endorsement Method Split Dollar
Plan Agreement dated September
24, 1998 48 - 54
10.13 Form of Director Surrogate
Supplemental Compensation
Agreement dated September 24,
1998 55 - 77
10.14 Form of Director Surrogate
Life Insurance Method Split
Dollar Plan Agreement dated
September 24, 1998 78 - 85
10.15 Form of Officer Supplemental
Compensation Agreement dated
September 24, 1998 86 - 107
10.16 Form of Officer Life Insurance
Method Split Dollar Plan
Agreement dated September 24,
1998 108 - 114
10.17 Richard L. Mount Executive
Supplemental Compensation
Agreement dated September
24, 1998 115 - 136
10.18 Richard L. Mount Life Insurance
Endorsement Method Split Dollar
Plan Agreement dated September
24, 1998 137 - 142
10.19 Richard L. Mount Employment
Agreement dated May 20, 1999 143 - 155
10.20 Richard L. Mount Executive
Benefits Agreement dated
June 18, 1999 156 - 175
27.1 Financial Data Schedule 176
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 7212
<INT-BEARING-DEPOSITS> 1789
<FED-FUNDS-SOLD> 16900
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 32507
<INVESTMENTS-CARRYING> 10791
<INVESTMENTS-MARKET> 10537
<LOANS> 68261
<ALLOWANCE> 826
<TOTAL-ASSETS> 148558
<DEPOSITS> 109644
<SHORT-TERM> 25
<LIABILITIES-OTHER> 1447
<LONG-TERM> 22588
0
0
<COMMON> 4434
<OTHER-SE> 10420
<TOTAL-LIABILITIES-AND-EQUITY> 148558
<INTEREST-LOAN> 3465
<INTEREST-INVEST> 1254
<INTEREST-OTHER> 321
<INTEREST-TOTAL> 5040
<INTEREST-DEPOSIT> 1575
<INTEREST-EXPENSE> 2249
<INTEREST-INCOME-NET> 2791
<LOAN-LOSSES> 66
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1728
<INCOME-PRETAX> 1505
<INCOME-PRE-EXTRAORDINARY> 948
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 948
<EPS-BASIC> 0.59
<EPS-DILUTED> 0.53
<YIELD-ACTUAL> 4.29
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1719
<ALLOWANCE-OPEN> 716
<CHARGE-OFFS> 0
<RECOVERIES> 44
<ALLOWANCE-CLOSE> 66
<ALLOWANCE-DOMESTIC> 551
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 275
</TABLE>
<PAGE> 27
DIRECTOR SUPPLEMENTAL COMPENSATION AGREEMENT
This Agreement is made and entered into effective as of _________, 1998
by and between Saratoga National Bank, a national banking association
chartered under the federal laws of the United States of America with its
principal offices located in the City of Saratoga, Santa Clara County,
California (the "Bank"), and __________________, an individual residing in the
State of California (the "Director").
R E C I T A L S
WHEREAS, the Director is a member of the Board of Directors of the
Bank and has served in such capacity since 1982;
WHEREAS, the Bank desires to establish a compensation benefit for
directors who are not also officers or employees of the Bank in order to
attract and retain individuals with extensive and valuable experience as
directors; and
WHEREAS, the Director and the Bank wish to specify in writing the terms
and conditions upon which this additional compensatory incentive will be
provided to the Director, or as applicable, to the Director's spouse or
designated beneficiaries, as the case may be.
NOW, THEREFORE, in consideration of the services to be performed by
the Director in the future, as well as the mutual promises and covenants
contained herein, the Director and the Bank agree as follows:
A G R E E M E N T
1. Terms and Definitions.
1.1. Administrator. The Bank shall be the "Administrator"
and, solely for the purposes of ERISA as defined in subparagraph 1.9 below, the
"fiduciary" of this Agreement where a fiduciary is required by ERISA.
1.2. Applicable Percentage. The term "Applicable
Percentage" shall mean that percentage listed on Schedule "A" attached hereto
which is adjacent to the number of calendar years which shall have elapsed from
the date of the Director's commencement of service to the Bank. Notwithstanding
the foregoing or the percentages set forth on Schedule "A," but subject to all
other terms and conditions set forth herein, the "Applicable Percentage"
shall be: (i)
<PAGE> 28
provided payments have not yet begun hereunder, one hundred percent (100%)
upon the occurrence of a "Change in Control" as defined in subparagraph 1.4
below, or the Director's death, or Disability (as defined in subparagraph 1.6
below), which death or Disability occurs prior to the termination of the
Director's service on the Board of Directors of the Bank; and (ii)
notwithstanding subclause (i) of this subparagraph 1.2, zero percent (0%)
in the event the Director takes any intentional action which prevents the
Bank from collecting the proceeds of any life insurance policy which the Bank
may happen to own at the time of the Director's death and of which the Bank
is the designated beneficiary. Furthermore, notwithstanding the foregoing,
or anything contained in this Agreement to the contrary, in the event the
Director takes any intentional action which prevents the Bank from collecting
the proceeds of any life insurance policy which the Bank may happen to own at
the time of the Director's death and of which the Bank is the designated
beneficiary: (1) the Director's estate or designated beneficiary shall no
longer be entitled to receive any of the amounts payable under the terms of this
Agreement, and (2) the Bank shall have the right to recover from the Director's
estate all of the amounts paid to the Director's estate (with respect to amounts
paid prior to the Director's death or paid to the Director's estate) or
designated beneficiary (with respect to amounts paid to the designated
beneficiary) pursuant to the terms of this Agreement prior to and after
Director's death.
1.3. Beneficiary. The term "beneficiary" or "designated
beneficiary" shall mean the person or persons whom the Director shall designate
in a valid Beneficiary Designation, a copy of which is attached hereto as
Schedule "C," to receive the benefits provided hereunder. A Beneficiary
Designation shall be valid only if it is in the form attached hereto and made a
part hereof, completed and signed by the Director and received by the
Administrator prior to the Director's death.
1.4. Change in Control. The term "Change in Control" shall
mean the occurrence of any of the following events with respect to the Bank
(with the term "Bank" being defined for purposes of determining whether a
"Change in Control" has occurred to include any parent bank holding company
owning 100% of the Bank's outstanding common stock): (i) a change in control
of a nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of 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 regulatory agencies or governmental authorities having
jurisdiction over the Bank or any stock exchange on which the Bank's shares are
listed which requires the reporting of a change in control; (ii) any merger,
consolidation or reorganization of the Bank in which the Bank does not survive;
(iii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition
(in one transaction or a series of transactions) of any assets of the Bank
having an aggregate fair market value of fifty percent (50%) of the total
value of the assets of the Bank, reflected in the most recent balance sheet of
the Bank; (iv) a transaction whereby any "person" (as such term is used in the
Exchange Act) or any individual, corporation, partnership, trust or any other
entity becomes the beneficial owner, directly or indirectly, of securities of
the Bank representing twenty-five percent (25%) or more of the combined voting
<PAGE> 29
power of the Bank's then outstanding securities; or (v) a situation where, in
any one-year period, individuals who at the beginning of such period constitute
the Board of Directors of the Bank cease for any reason to constitute at least
a majority thereof, unless the election, or the nomination for election by the
Bank's shareholders, of each new director is approved by a vote of at least
three-quarters (3/4) of the directors then still in office who were directors
at the beginning of the period.
1.5. The Code. The "Code" shall mean the Internal Revenue
Code of 1986, as amended (the "Code").
1.6. Disability/Disabled. The term "Disability" or "Disabled" shall
have the same meaning given such terms in any policy of disability insurance
maintained by the Bank for the benefit of directors including the Director.
In the absence of such a policy which extends coverage to the Director in the
event of disability, the terms shall mean bodily injury or disease (mental or
physical) which wholly and continuously prevents the performance of duty for at
least three months.
1.7. Director Benefits. The term "Director Benefits" shall
mean the benefits determined in accordance with Schedule "B", and reduced or
adjusted to the extent: (i) required under the other provisions of this
Agreement, including, but not limited to, Paragraphs 5, 6 and 7 hereof; (ii)
required by reason of the lawful order of any regulatory agency or body having
jurisdiction over the Bank; or (iii) required in order for the Bank to properly
comply with any and all applicable state and federal laws, including, but not
limited to, income, employment and disability income tax laws (e.g., FICA,
FUTA, SDI).
1.8. Early Retirement Date. The term "Early Retirement
Date" shall mean the Retirement, as defined below, of the Director on a date
which occurs prior to the Director attaining sixty-two (62) years of age, but
after the Director has attained fifty-five (55) years of age.
1.9. Effective Date. The term "Effective Date" shall mean
the date first written above.
1.10. ERISA. The term "ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as amended.
1.11. Plan Year. The term "Plan Year" shall mean the Bank's
fiscal year.
1.12. Retirement. The term "Retirement" or "Retires" shall
refer to the date which the Director acknowledges in writing to the Bank to be
the last day of service as a member of the Board of Directors of the Bank.
<PAGE> 30
1.13. Surviving Spouse. The term "Surviving Spouse" shall
mean the person, if any, who shall be legally married to the Director on the
date of the Director's death.
1.14. Removal for Cause. The term "Removal for Cause"
shall mean termination of the service of the Director by reason of any of the
following determined in good faith by the Bank's Board of Directors:
(a) The willful, intentional and material breach or
the habitual and continued neglect by the
Director of his or her employment
responsibilities and duties;
(b) The continuous mental or physical incapacity of
the Director, subject to disability rights under
this Agreement;
(c) The Director's willful and intentional violation
of any federal banking or securities laws, or of
the Bylaws, rules, policies or resolutions of
Bank, or the rules or regulations of the Board of
Governors of the Federal Reserve System,
Federal Deposit Insurance Corporation, Office
of the Comptroller of the Currency, or other
regulatory agency or governmental authority
having jurisdiction over the Bank, which has a
material adverse effect upon the Bank;
(d) The written determination by a state or federal
banking agency or governmental authority
having jurisdiction over the Bank that the
Director (i) is of unsound mind, or (ii) has
committed a gross abuse of authority or
discretion with reference to the Bank, or (iii)
otherwise is not suitable to continue to serve as
a member of the Board of Directors of the
Bank;
(e) The Director's conviction of (i) any felony or
(ii) a crime involving moral turpitude, or the
Director's willful and intentional commission of
a fraudulent or dishonest act; or
(f) The Director's willful and intentional disclosure,
without authority, of any secret or confidential
information concerning Bank or taking any
action which the Bank's Board of Directors
determines, in its sole discretion and subject to
good faith, fair dealing and reasonableness,
constitutes unfair competition with or induces
any customer to breach any contract with the
Bank.
<PAGE> 31
2. Scope, Purpose and Effect.
2.1. Contract of Employment. Although this Agreement is intended
to provide the Director with an additional incentive to continue to serve
as a member of the Board of Directors of the Bank, this Agreement shall not be
deemed to constitute a contract of employment between the Director and the Bank
nor shall any provision of this Agreement restrict the right of the Bank to
remove or cause the removal of the Director including, without limitation, by
(i) refusal to nominate the Director for election for any successive term of
office as a member of the Board of Directors of the Bank, or (ii) complying
with an order or other directive from a court of competent jurisdiction or any
regulatory authority having jurisdiction over the Bank which requires the Bank
to take action to remove the Director.
2.2. Fringe Benefit. The benefits provided by this
Agreement are granted by the Bank as a fringe benefit to the Director and are
not a part of any salary reduction plan or any arrangement deferring a bonus or
a salary increase. The Director has no option to take any current payments or
bonus in lieu of the benefits provided by this Agreement.
3. Payments Upon Early Retirement or Retirement and After
Retirement.
3.1. Payments Upon Early Retirement. The Director shall
have the right to Retire on a date which constitutes an Early Retirement Date as
defined in subparagraph 1.7 above. In the event the Director elects to Retire
on a date which constitutes an Early Retirement Date, the Director shall be
entitled to be paid the Applicable Percentage of the Director Benefits, in
substantially equal monthly installments on the first day of each month,
beginning with the month following the month in which the Early Retirement Date
occurs or upon such later date as may be mutually agreed upon by the Director
and the Bank in advance of said Early Retirement Date, payable (i) for the
period designated in Schedule "D" in the case of the balance in the Benefit
Account and (ii) until the Director's death in the case of the Index Benefit
defined in Schedule "B".
3.2. Payments Upon Retirement. If the Director remains a
member of the Board of Directors of the Bank until attaining sixty-two (62)
years of age, the Director shall be entitled to be paid the Applicable
Percentage of the Director Benefits, in substantially equal monthly
installments on the first day of each month, beginning with the month following
the month in which the Director Retires or upon such later date as may be
mutually agreed upon by the Director and the Bank in advance of said Retirement
date, payable (i) for the period designated in Schedule "D" in the case of the
balance in the Benefit Account and (ii) until the Director's death in the
case of the Index Benefit defined in Schedule "B". At the Bank's sole and
absolute discretion, the Bank may increase the Director Benefits as and when
the Bank determines the same to be appropriate.
<PAGE> 32
3.3. Payments in the Event of Death After Retirement.
The Bank agrees that if the Director Retires, but shall die before receiving
all of the Director Benefits Payments specified in Schedule "B", the Bank
agrees to pay the Applicable Percentage of the Director Benefits to the
Director's designated beneficiary in lump sum. If a valid Beneficiary
Designation is not in effect, then the remaining amounts due to the Director
under the terms of this Agreement shall be paid to the Director's Surviving
Spouse. If the Director leaves no Surviving Spouse, the remaining amounts
due to the Director under the terms of this Agreement shall be paid to the
duly qualified personal representative, executor or administrator of the
Director's estate.
4. Payments in the Event Death or Disability Occurs Prior to
Retirement.
4.1. Payments in the Event of Death Prior to Retirement.
If the Director dies at any time after the Effective Date of this Agreement, but
prior to Retirement, the Bank agrees to pay the Applicable Percentage of the
Director Benefits to the Director's designated beneficiary in lump sum. If a
valid Beneficiary Designation is not in effect, then the remaining amounts due
to the Director under the terms of this Agreement shall be paid to the
Director's Surviving Spouse. If the Director leaves no Surviving Spouse, the
remaining amounts due to the Director under the terms of this Agreement shall
be paid to the duly qualified personal representative, executor or administrator
of the Director's estate.
4.2. Payments in the Event of Disability Prior to
Retirement. In the event the Director becomes Disabled at any time after the
Effective Date of this Agreement but prior to Retirement, the Director shall be
entitled to be paid the Applicable Percentage of the Director Benefits, in
substantially equal monthly installments on the first day of each month,
beginning with the month following the month in which the Director becomes
Disabled, payable (i) for the period designated in Schedule "D" in the case of
the balance in the Benefit Account and (ii) until the Director's death in the
case of the Index Benefit defined in Schedule "B".
5. Payments in the Event Service Is Terminated Prior to
Retirement. As indicated in subparagraph 2.1 above, the Bank reserves the right
to remove or cause the removal of the Director at any time prior to the
Director's Retirement. In the event that the Director shall be removed and his
or her service as a member of the Board of Directors of the Bank terminated,
other than by reason of death, Disability or Retirement, prior to the Director's
attaining sixty-two (62) years of age, then this Agreement shall terminate upon
the date of such termination of service; provided, however, that the Director
shall be entitled to the following benefits as may be applicable depending upon
the circumstances surrounding the Director's termination of service:
5.1. Termination Without Cause. If the Director's service
as a member of the Board of Directors of the Bank is terminated for reasons
other than as specified in paragraph 5.3 below, and such termination is not
subject to the provisions of subparagraph 5.4 below, the Director shall be
entitled to be paid the Applicable Percentage of the Director Benefits, in
<PAGE> 33
substantially equal monthly installments on the first day of each month,
beginning with the month following the month in which the Director attains
fifty-five (55) years of age or any month thereafter, as requested in writing by
the Director and delivered to the Bank or its successor thirty (30) days prior
to the commencement of installment payments; provided, however, that in the
event the Director does not request a commencement date as specified, such
installments shall be paid on the first day of each month, beginning with the
month following the month in which the Director attains sixty-two (62) years
of age. The installments shall be payable (i) for the period designated in
Schedule "D" in the case of the balance in the Benefit Account and (ii)
until the Director's death in the case of the Index Benefit defined in
Schedule "B".
5.2. Voluntary Termination by the Director. If the
Director's service as a member of the Board of Directors of the Bank is
terminated by voluntary resignation and such resignation is not subject to the
provisions of subparagraph 5.4 below, the Director shall be entitled to be paid
the Applicable Percentage of the Director Benefits, in substantially equal
monthly installments on the first day of each month, beginning with the month
following the month in which the Director attains fifty-five (55) years of age
or any month thereafter, as requested in writing by the Director and delivered
to the Bank or its successor thirty (30) days prior to the commencement of
installment payments; provided, however, that in the event the Director does
not request a commencement date as specified, such installments shall be paid
on the first day of each month, beginning with the month following the month in
which the Director attains sixty-two (62) years of age. The installments shall
be payable (i) for the period designated in Schedule "D" in the case of the
balance in the Benefit Account and (ii) until the Director's death in the
case of the Index Benefit defined in Schedule "B".
5.3. Termination by Removal for Cause. The Director
agrees that if the Director's service as a member of the Board of Directors of
the Bank is terminated by "removal for cause," (as defined in subparagraph 1.14
of this Agreement) and pursuant to subparagraph 1.14 (c), (d) or (e), the
Director shall forfeit any and all rights and benefits the Director may have
under the terms of this Agreement and shall have no right to be paid any of the
amounts which would otherwise be due or paid to the Director by the Bank
pursuant to the terms of this Agreement. In the event that the Director's
service as a member of the Board of Directors of the Bank is terminated by
"removal for cause" pursuant to subparagraph 1.14(a), (b) or (f), the Director
shall be entitled to be paid the Applicable Percentage of the Director Benefits,
as defined above, in substantially equal monthly installments on the first day
of each month, beginning with the month following the month in which the
Director attains fifty-five (55) years of age or any month thereafter, as
requested in writing by the Director and delivered to the Bank or its successor
thirty (30) days prior to the commencement of installment payments; provided,
however, that in the event the Director does not request a commencement date
as specified, such installments shall be paid on the first day of each month,
beginning with the month following the month in which the Director attains
sixty-two (62) years of age. The installments shall be payable
<PAGE> 34
(i) for the period designated in Schedule "D" in the case of the balance in the
Benefit Account and (ii) until the Director's death in the case of the Index
Benefit defined in Schedule "B".
5.4. Termination on Account of or After a Change in
Control. In the event: (i) the Director's service as a member of the Board of
Directors of the Bank is terminated in conjunction with, or by reason of, a
"Change in Control" (as defined in subparagraph 1.4 above); or (ii) by reason
of the Bank's actions and without the Director's prior written consent, any
change occurs in the scope of the Director's position, responsibilities,
duties, fees, benefits, or location of meetings (which in the event of
relocation of more than thirty (30) miles from the location of the Board or
committee meetings prior to a Change in Control shall constitute such a change
in location) after a Change in Control occurs, then the Director shall be
entitled to be paid the Applicable Percentage of the Director Benefits, as
defined above, in substantially equal monthly installments on the first
day of each month, beginning with the month following the month in which the
Director attains fifty-five (55) years of age or any month thereafter, as
requested in writing by the Director and delivered to the Bank or its
successor thirty (30) days prior to the commencement of installment payments;
provided, however, that in the event the Director does not request a
commencement date as specified, such installments shall be paid on the
first day of each month, beginning with the month following the month in which
the Director attains sixty-two (62) years of age. The installments shall be
payable (i) for the period designated in Schedule "D" in the case of the
balance in the Benefit Account and (ii) until the Director's death in the
case of the Index Benefit defined in Schedule "B".
5.5. Payments in the Event of Death Following
Termination. If the Director dies prior to receiving all of the Director
Benefits described in this Paragraph 5 to which the Director is entitled,
then the Bank will make such payments to the Director's designated beneficiary
in lump sum. If a valid Beneficiary Designation is not in effect, then the
remaining amounts due to the Director under the terms of this Agreement shall
be paid to the Director's Surviving Spouse. If the Director leaves no
Surviving Spouse, the remaining amounts due to the Director under the terms
of this Agreement shall be paid to the duly qualified personal
representative, executor or administrator of the Director's estate.
6. Section 280G Adjustment. The Director acknowledges and
agrees that the parties have entered into this Agreement based upon certain
financial and tax accounting assumptions. Accordingly, with full knowledge of
the potential consequences the Director agrees that, notwithstanding anything
contained herein to the contrary, in the event that any payment or benefit
received or to be received by the Director, whether payable pursuant to the
terms of this Agreement or any other plan, arrangement or agreement with the
Bank (together with the Director Benefits, the "Total Payments"), will not be
deductible (in whole or in part) as a result of Code Section 280G or other
applicable provisions of the Code, the Total Payments shall be reduced until
no portion of the Total Payments is nondeductible as a result of Section 280G
or such other applicable provisions of the Code. For purposes of this
limitation:
<PAGE> 35
(a) No portion of the Total Payments, the receipt or
enjoyment of which the Director shall have effectively waived in writing prior
to the date of payment of any future Director Benefits payments, shall be taken
into account;
(b) No portion of the Total Payments shall be taken
into account, which in the opinion of the tax counsel selected by the Bank and
acceptable to the Director, does not constitute a "parachute payment" within
the meaning of Section 280G of the Code;
(c) Any reduction of the Total Payments shall be
applied to reduce any payment or benefit received or to be received by the
Director pursuant to the terms of this Agreement and any other plan,
arrangement or agreement with the Bank in the order determined by mutual
agreement of the Bank and the Director;
(d) Future payments shall be reduced only to the
extent necessary so that the Total Payments (other than those referred to in
clauses (a) or (b) above in their entirety) constitute reasonable compensation
for services actually rendered within the meaning of Section 280G of the Code,
in the opinion of tax counsel referred to in clause (b) above; and
(e) The value of any non-cash benefit or any
deferred payment or benefit included in the Total Payments shall be determined
by independent auditors selected by the Bank and acceptable to the Director in
accordance with the principles of Section 280G of the Code.
7. Right To Determine Funding Methods. The Bank reserves the
right to determine, in its sole and absolute discretion, whether, to what extent
and by what method, if any, to provide for the payment of the amounts which may
be payable to the Director, the Director's spouse or the Director's
beneficiaries under the terms of this Agreement. In the event that the Bank
elects to fund this Agreement, in whole or in part, through the use of life
insurance or annuities, or both, the Bank shall determine the ownership and
beneficial interests of any such policy of life insurance or annuity. The Bank
further reserves the right, in its sole and absolute discretion, to terminate
any such policy, and any other device used to fund its obligations under this
Agreement, at any time, in whole or in part. Consistent with Paragraph 9 below,
neither the Director, the Director's spouse nor the Director's beneficiaries
shall have any right, title or interest in or to any funding source or amount
utilized by the Bank pursuant to this Agreement, and any such funding source
or amount shall not constitute security for the performance of the Bank's
obligations pursuant to this Agreement. In connection with the foregoing,
the Director agrees to execute such documents and undergo such medical
examinations or tests which the Bank may request and which may be reasonably
necessary to facilitate any funding for this Agreement including, without
limitation, the Bank's acquisition of any policy of insurance or annuity.
Furthermore, a refusal by the Director to consent to, participate in and undergo
any such medical examinations or tests shall result in the immediate termination
of this Agreement and the
<PAGE> 36
immediate forfeiture by the Director, the Director's spouse and the Director's
beneficiaries of any and all rights to payment hereunder.
8. Claims Procedure. The Bank shall, but only to the extent
necessary to comply with ERISA, be designated as the named fiduciary under this
Agreement and shall have authority to control and manage the operation and
administration of this Agreement. Consistent therewith, the Bank shall make all
determinations as to the rights to benefits under this Agreement. Any decision
by the Bank denying a claim by the Director, the Director's spouse, or the
Director's beneficiary for benefits under this Agreement shall be stated in
writing and delivered or mailed, via registered or certified mail, to the
Director, the Director's spouse or the Director's beneficiary, as the case may
be. Such decision shall set forth the specific reasons for the denial of a
claim. In addition, the Bank shall provide the Director, the Director's spouse
or the Director's beneficiary with a reasonable opportunity for a full and
fair review of the decision denying such claim.
9. Status as an Unsecured General Creditor. Notwithstanding
anything contained herein to the contrary: (i) neither the Director, the
Director's spouse or the Director's designated beneficiaries shall have any
legal or equitable rights, interests or claims in or to any specific property
or assets of the Bank as a result of this Agreement; (ii) none of the Bank's
assets shall be held in or under any trust for the benefit of the Director, the
Director's spouse or the Director's designated beneficiaries or held in any way
as security for the fulfillment of the obligations of the Bank under this
Agreement; (iii) all of the Bank's assets shall be and remain the general
unpledged and unrestricted assets of the Bank; (iv) the Bank's obligation
under this Agreement shall be that of an unfunded and unsecured promise by the
Bank to pay money in the future; and (v) the Director, the Director's spouse
and the Director's designated beneficiaries shall be unsecured general creditors
with respect to any benefits which may be payable under the terms of this
Agreement.
Notwithstanding subparagraphs (i) through (v) above, the Bank
and the Director acknowledge and agree that, in the event of a Change in
Control, upon request of the Director, or in the Bank's discretion if the
Director does not so request and the Bank nonetheless deems it appropriate,
the Bank shall establish, not later than the effective date of the Change in
Control, a Rabbi Trust or multiple Rabbi Trusts (the "Trust" or "Trusts")
upon such terms and conditions as the Bank, in its sole discretion, deems
appropriate and in compliance with applicable provisions of the Code, in order
to permit the Bank to make contributions and/or transfer assets to the Trust
or Trusts to discharge its obligations pursuant to this Agreement. The
principal of the Trust or Trusts and any earnings thereon shall be held separate
and apart from other funds of the Bank to be used exclusively for discharge of
the Bank's obligations pursuant to this Agreement and shall continue to be
subject to the claims of the Bank's general creditors until paid to the Director
or its beneficiaries in such manner and at such times as specified in this
Agreement.
<PAGE> 37
10. Discretion of Board to Accelerate Payout. Notwithstanding any
of the other provisions of this Agreement, the Board of Directors of the Bank
may, if determined in its sole and absolute discretion to be appropriate,
accelerate the payment of the amounts due under the terms of this Agreement,
provided that Director (or Director's spouse or designated beneficiaries):
(i) consents to the revised payout terms determined appropriate by the Bank's
Board of Directors; and (ii) does not negotiate or in anyway influence the terms
of proposed altered/accelerated payout (said decision to be made solely by the
Bank's Board of Directors and offered to the Director [or Director's spouse or
designated beneficiaries] on a "take it or leave it basis").
11. Miscellaneous.
11.1. Opportunity To Consult With Independent Advisors.
The Director acknowledges that he has been afforded the opportunity to consult
with independent advisors of his choosing including, without limitation,
accountants or tax advisors and counsel regarding both the benefits granted to
him under the terms of this Agreement and the (i) terms and conditions which
may affect the Director's right to these benefits and (ii) personal tax effects
of such benefits including, without limitation, the effects of any federal or
state taxes, Section 280G of the Code, and any other taxes, costs, expenses or
liabilities whatsoever related to such benefits, which in any of the foregoing
instances the Director acknowledges and agrees shall be the sole responsibility
of the Director notwithstanding any other term or provision of this Agreement.
The Director further acknowledges and agrees that the Bank shall have no
liability whatsoever related to any such personal tax effects or other personal
costs, expenses, or liabilities applicable to the Director and further
specifically waives any right for the Director, himself, and his heirs,
beneficiaries, legal representatives, agents, successors, and assigns to claim
or assert liability on the part of the Bank related to the matters described
above in this subparagraph 11.1. The Director further acknowledges and agrees
that he has read, understands and consents to all of the terms and conditions
of this Agreement, and that he enters into this Agreement with a full
understanding of its terms and conditions.
11.2. Arbitration of Disputes. All claims, disputes and other
matters in question arising out of or relating to this Agreement or the breach
or interpretation thereof, other than those matters which are to be determined
by the Bank in its sole and absolute discretion, shall be resolved by binding
arbitration before a representative member, selected by the mutual agreement of
the parties, of the Judicial Arbitration and Mediation Services, Inc. ("JAMS"),
located in San Francisco, California. In the event JAMS is unable or unwilling
to conduct the arbitration provided for under the terms of this Paragraph, or
has discontinued its business, the parties agree that a representative member,
selected by the mutual agreement of the parties, of the American Arbitration
Association ("AAA"), located in San Francisco, California, shall conduct the
binding arbitration referred to in this Paragraph. Notice of the demand for
arbitration shall be filed in writing with the other party to this Agreement
and with JAMS (or AAA, if necessary). In no event shall the demand for
arbitration be made after the date when institution of legal or
<PAGE> 38
equitable proceedings based on such claim, dispute or other matter in question
would be barred by the applicable statute of limitations. The arbitration shall
be subject to such rules of procedure used or established by JAMS, or if there
are none, the rules of procedure used or established by AAA. Any award rendered
by JAMS or AAA shall be final and binding upon the parties, and as applicable,
their respective heirs, beneficiaries, legal representatives, agents, successors
and assigns, and may be entered in any court having jurisdiction thereof. The
obligation of the parties to arbitrate pursuant to this clause shall be
specifically enforceable in accordance with, and shall be conducted consistently
with, the provisions of Title 9 of Part 3 of the California Code of Civil
Procedure. Any arbitration hereunder shall be conducted in Saratoga,
California, unless otherwise agreed to by the parties.
11.3. Attorneys' Fees. In the event of any arbitration or
litigation concerning any controversy, claim or dispute between the parties
hereto, arising out of or relating to this Agreement or the breach hereof, or
the interpretation hereof, the prevailing party shall be entitled to recover
from the non-prevailing party reasonable expenses, attorneys' fees and costs
incurred in connection therewith or in the enforcement or collection of any
judgment or award rendered therein. The "prevailing party" means the party
determined by the arbitrator(s) or court, as the case may be, to have most
nearly prevailed, even if such party did not prevail in all matters, not
necessarily the one in whose favor a judgment is rendered.
11.4. Notice. Any notice required or permitted of either the
Director or the Bank under this Agreement shall be deemed to have been duly
given, if by personal delivery, upon the date received by the party or its
authorized representative; if by facsimile, upon transmission to a telephone
number previously provided by the party to whom the facsimile is transmitted
as reflected in the records of the party transmitting the facsimile and upon
reasonable confirmation of such transmission; and if by mail, on the third day
after mailing via U.S. first class mail, registered or certified, postage
prepaid and return receipt requested, and addressed to the party at the address
given below for the receipt of notices, or such changed address as may be
requested in writing by a party.
If to the Bank: Saratoga National Bank
12000 Saratoga-Sunnyvale Rd.
Saratoga, California 95070
Attn: Chairman of the Board
If to the Director: ______________________
______________________
______________________
<PAGE> 39
11.5. Assignment. Neither the Director, the Director's spouse,
nor any other beneficiary under this Agreement shall have any power or right to
transfer, assign, anticipate, hypothecate, modify or otherwise encumber any part
or all of the amounts payable hereunder, nor, prior to payment in accordance
with the terms of this Agreement, shall any portion of such amounts be: (i)
subject to seizure by any creditor of any such beneficiary, by a proceeding at
law or in equity, for the payment of any debts, judgments, alimony or separate
maintenance obligations which may be owed by the Director, the Director's
spouse, or any designated beneficiary; or (ii) transferable by operation of law
in the event of bankruptcy, insolvency or otherwise. Any such attempted
assignment or transfer shall be void and unenforceable without the prior written
consent of the Bank. The Bank's consent, if any, to one or more assignments or
transfers shall not obligate the Bank to consent to or be construed as the
Bank's consent to any other or subsequent assignment or transfer.
11.6. Binding Effect/Merger or Reorganization. This Agreement shall
be binding upon and inure to the benefit of the Director and the Bank and, as
applicable, their respective heirs, beneficiaries, legal representatives,
agents, successors and assigns. Accordingly, the Bank shall not merge or
consolidate into or with another corporation, or reorganize or sell
substantially all of its assets to another corporation, firm or person, unless
and until such succeeding or continuing corporation, firm or person agrees to
assume and discharge the obligations of the Bank under this Agreement. Upon the
occurrence of such event, the term "Bank" as used in this Agreement shall be
deemed to refer to such surviving or successor firm, person, entity or
corporation.
11.7. Nonwaiver. The failure of either party to enforce at any
time or for any period of time any one or more of the terms or conditions of
this Agreement shall not be a waiver of such term(s) or condition(s) or of that
party's right thereafter to enforce each and every term and condition of this
Agreement.
11.8. Partial Invalidity. If any term, provision, covenant, or
condition of this Agreement is determined by an arbitrator or a court, as the
case may be, to be invalid, void, or unenforceable, such determination shall not
render any other term, provision, covenant or condition invalid, void or
unenforceable, and the Agreement shall remain in full force and effect
notwithstanding such partial invalidity.
11.9. Entire Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties with respect to
the subject matter of this Agreement and contains all of the covenants and
agreements between the parties with respect thereto. Each party to this
Agreement acknowledges that no other representations, inducements, promises, or
agreements, oral or otherwise, have been made by any party, or anyone acting on
behalf of any party, which are not set forth herein, and that no other
agreement, statement, or promise not contained in this Agreement shall be valid
or binding on either party.
<PAGE> 40
11.10. Modifications. Any modification of this Agreement
shall be effective only if it is in writing and signed by each party or such
party's authorized representative.
11.11. Paragraph Headings. The paragraph headings used in
this Agreement are included solely for the convenience of the parties and shall
not affect or be used in connection with the interpretation of this Agreement.
11.12. No Strict Construction. The language used in this
Agreement shall be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction will be applied
against any person.
11.13. Governing Law. The laws of the State of California,
other than those laws denominated choice of law rules, and, where applicable,
the rules and regulations of the Board of Governors of the Federal Reserve
System, Federal Deposit Insurance Corporation, Office of the Comptroller of the
Currency, or other regulatory agency or governmental authority having
jurisdiction over Bank, shall govern the validity, interpretation, construction
and effect of this Agreement.
IN WITNESS WHEREOF, the Bank and the Director have executed this
Agreement on the date first above-written in the City of Saratoga, Santa Clara
County, California.
THE BANK THE DIRECTOR
SARATOGA NATIONAL BANK
By:____________________________ _____________________________
William D. Kron __________________
Chairman of the Board
of Directors
<PAGE> 41
SCHEDULE A
CALENDAR YEAR APPLICABLE PERCENTAGE
__________, 1982 to December 31, 1998. . . . 80.00%
December 31, 1999. . . . . . . . . . . . . . 90.00%
December 31, 2000. . . . . . . . . . . . . . 100.00%
<PAGE> 42
SCHEDULE B
DIRECTOR BENEFITS
1. Director Benefits Determination.
The Director Benefits shall be determined based upon the following:
a. Benefit Account:
A Benefit Account shall be established as a liability reserve
account on the books of the Bank for the benefit of the Director.
Prior to the date on which the Director becomes eligible to receive
payments under the Agreement, such Benefit Account shall be
increased (or decreased) each Plan Year (including the Plan Year
in which the Director ceases to be employed by the Bank) by an
amount equal to the annual earnings or loss for that Plan Year
determined by the Index (described in subparagraph c below), less
the Opportunity Cost (described in subparagraph d below) for that
Plan Year.
b. Index Benefit:
After the date on which the Director becomes eligible to receive
payments under the Agreement, the Index Benefit for the Director
for any Plan Year shall be determined by subtracting the
Opportunity Cost for that Plan Year from the earnings, if any,
established by the Index.
c. Index:
The Index for any Plan Year shall be the aggregate annual after-tax
income from the life insurance contracts described hereinafter as
defined by FASB Technical Bulletin 85-4. This Index shall be
applied as if such insurance contracts were purchased on the
Effective Date.
Insurance Company(ies)/Policy Number(s):
___________________________
___________________________
___________________________
If such contracts of life insurance are actually purchased by the
Bank, then the actual policies as of the dates purchased shall be
used in calculations to determine the Index and Opportunity Cost.
If such contracts of life insurance are not purchased or are
<PAGE> 43
subsequently surrendered or lapsed, then the Bank shall receive
and use annual policy illustrations that assume the above described
policies were purchased from the above named insurance
company(ies) on the Effective Date to calculate the amount of the
Index and Opportunity Cost.
d. Opportunity Cost:
The Opportunity Cost for any Plan Year shall be calculated by
multiplying (a) the sum of (i) the total amount of premiums set
forth in the insurance policies described above, (ii) the amount of
any Index Benefits (described at subparagraph b above), and (iii)
the amount of all previous years after-tax Opportunity Costs; by
(b) the average annualized after-tax cost of funds calculated using
a one-year U.S. Treasury Bill as published in the Wall Street
Journal. The applicable tax rate used to calculate the Opportunity
Cost shall be the Bank's marginal tax rate until the Director's
Retirement, or other termination of service (including a Change in
Control). Thereafter, the Opportunity Cost shall be calculated
with the assumption of a marginal forty-two percent (42%)
corporate tax rate each year regardless of whether the actual
marginal tax rate of the Bank is higher or lower.
EXAMPLE
INDEX BENEFITS
[n] [A]
Index
End of Cash Surrender [Annual Opportunity Annual Cumulative
Year Value of Life [Policy Cost Benefit Benefit
Insurance Policy Income] A0 = premium B-C D+Dn-1
An-An-1 A0+Cn-1x.05x
(1-42%)
0 $1,000,000 -- -- -- --
1 $1,050,000 $50,000 $29,000 $21,000 $21,000
2 $1,102,500 $52,500 $29,841 $22,659 $43,659
3 $1,157,625 $55,125 $30,706 $24,419 $68,078
.
.
.
Assumptions: Initial Insurance = $1,000,000
Effective Tax Rate = 42%
One Year US Treasury Yield = 5%
<PAGE> 44
2. Director Benefits Payments.
The Director shall be entitled to payment of the Applicable Percentage of
(i) the balance in the Benefit Account in installments upon the terms as
specified in the Agreement, and (ii) the Index Benefit for each Plan Year
payable in installments until the Director's death.
<PAGE> 45
SCHEDULE C
BENEFICIARY DESIGNATION
To the Administrator of the Saratoga National Bank Director Supplemental
Compensation Agreement:
Pursuant to the Provisions of my Director Supplemental Compensation
Agreement with Saratoga National Bank, permitting the designation of a
beneficiary or beneficiaries by a participant, I hereby designate the following
persons and entities as primary and secondary beneficiaries of any benefit under
said Agreement payable by reason of my death:
Primary Beneficiary:
______________________ ____________________ _____________________________
Name Address Relationship
Secondary (Contingent) Beneficiary:
______________________ _____________________ ____________________________
Name Address Relationship
THE RIGHT TO REVOKE OR CHANGE ANY BENEFICIARY
DESIGNATION IS HEREBY RESERVED. ALL PRIOR DESIGNATIONS,
IF ANY, OF PRIMARY BENEFICIARIES AND SECONDARY
BENEFICIARIES ARE HEREBY REVOKED.
The Administrator shall pay all sums payable under the Agreement by
reason of my death to the Primary Beneficiary, if he or she survives me, and if
no Primary Beneficiary shall survive me, then to the Secondary Beneficiary,
and if no named beneficiary survives me, then the Administrator shall pay all
amounts in accordance with the terms of my Director Supplemental Compensation
Agreement. In the event that a named beneficiary survives me and dies prior to
receiving the entire benefit payable under said Agreement, then and in that
event, the remaining
<PAGE> 46
unpaid benefit payable according to the terms of my Director Supplemental
Compensation Agreement shall be payable to the personal representatives of the
estate of said beneficiary who survived me but died prior to receiving the
total benefit provided by my Director Supplemental Compensation Agreement.
Dated: ___________, 1998 __________________________
__________________
CONSENT OF THE DIRECTOR'S SPOUSE
TO THE ABOVE BENEFICIARY DESIGNATION:
I, ______________, being the spouse of __________________, after being
afforded the opportunity to consult with independent counsel of my choosing, do
hereby acknowledge that I have read, agree and consent to the foregoing
Beneficiary Designation which relates to the Director Supplemental Compensation
Agreement entered into by my spouse effective as of ___________, 1998. I
understand that the above Beneficiary Designation may affect certain rights
which I may have in the benefits provided for under the terms of the Director
Supplemental Compensation Agreement and in which I may have a marital
property interest.
Dated: ___________, 1998
______________________________
__________________
<PAGE> 47
SCHEDULE D
DISTRIBUTION ELECTION
Pursuant to the provisions of my Director Supplemental Compensation Agreement
with Saratoga National Bank, I hereby elect to have any distribution of the
balance in my Benefit Account paid to me in installments as designated below:
thirty-six (36) monthly installments with the amount of
each installment determined as of each installment date by
dividing the entire amount in my Benefit Account by the
number of installments then remaining to be paid, with
the final installment to be the entire remaining balance
in the Benefit Account.
sixty (60) monthly installments with the amount of each
installment determined as of each installment date by
dividing the entire amount in my Benefit Account by the
number of installments then remaining to be paid, with
the final installment to be the entire remaining balance
in the Benefit Account.
one hundred twenty (120) monthly installments with the
amount of each installment determined as of each
installment date by dividing the entire amount in my
Benefit Account by the number of installments then
remaining to be paid, with the final installment to be the
entire remaining balance in the Benefit Account.
one hundred eighty (180) monthly installments with the
amount of each installment determined as of each
installment date by dividing the entire amount in my
Benefit Account by the number of installments then
remaining to be paid, with the final installment to be the
entire remaining balance in the Benefit Account.
Dated: ____________, 1998
Signed: _______________________
__________________
10QEX10.11
<PAGE> 48
LIFE INSURANCE
ENDORSEMENT METHOD SPLIT DOLLAR PLAN
AGREEMENT
Insurer/Policy Number: _______________________________
Bank: Saratoga National Bank
Insured: __________________
Relationship of Insured to Bank: Director
Date: June 18, 1999
The respective rights and duties of the Bank and the Insured in the above
policy(ies) (individually and collectively referred to as the "Policy") shall
be as follows:
I. DEFINITIONS
Refer to the Policy provisions for the definition of all terms in this
Agreement.
II. POLICY TITLE AND OWNERSHIP
Title and ownership shall reside in the Bank for its use and for the use
of the Insured all in accordance with this Agreement. The Bank alone
may, to the extent of its interest, exercise the right to borrow or
withdraw the Policy cash values. Where the Bank and the Insured (or
beneficiary[ies] or assignee[s], with the consent of the Insured) mutually
agree to exercise the right to increase the coverage under the subject
split dollar Policy, then, in such event, the rights, duties and benefits
of the parties to such increased coverage shall continue to be subject to
the terms of this Agreement.
III. BENEFICIARY DESIGNATION RIGHTS
The Insured (or beneficiary[ies] or assignee[s]) shall have the right and
power to designate a beneficiary or beneficiaries to receive his or her
share of the proceeds payable upon the death of the Insured, and to elect
and change a payment option for such beneficiary, subject to any right
or interest the Bank may have in such proceeds, as provided in this
Agreement.
IV. PREMIUM PAYMENT METHOD
The Bank shall pay an amount equal to the planned premiums and any other
premium payments that might become necessary to maintain the Policy in
force.
<PAGE> 49
V. TAXABLE BENEFIT
Annually the Insured will receive a taxable benefit equal to the assumed
cost of insurance as required by the Internal Revenue Service. The Bank
(or its administrator) will report to the Insured the amount of imputed
income received each year on Form W-2 or its equivalent.
VI. DIVISION OF DEATH PROCEEDS
Subject to Paragraph VII herein, the division of the death proceeds of the
Policy is as follows:
1. The Insured's beneficiary(ies), designated in accordance with
Paragraph III, shall be entitled to an amount equal to eighty percent
(80%) of the net at risk insurance portion of the proceeds. The
net at risk insurance portion is the total proceeds less the cash
value of the Policy.
2. The Bank shall be entitled to the remainder of such proceeds.
3. The Bank and the Insured (or beneficiary[ies] or assignee[s]) shall
share in any interest due on the death proceeds on a pro rata basis in
the ratio that the proceeds due the Bank and the Insured,
respectively, bears to the total proceeds, excluding any
such interest.
VII. DIVISION OF CASH SURRENDER VALUE
The Bank shall at all times be entitled to an amount equal to the Policy's
cash value, as that term is defined in the Policy, less any Policy loans
and unpaid interest or cash withdrawals previously incurred by the Bank
and any applicable Policy surrender charges. Such cash value shall be
determined as of the date of surrender of the Policy or death of the
Insured as the case may be.
VIII. PREMIUM WAIVER
If the Policy contains a premium waiver provision, any such waived amounts
shall be considered for all purposes of this Agreement as having been paid
by the Bank.
IX. RIGHTS OF PARTIES WHERE POLICY ENDOWMENT OR ANNUITY ELECTION EXISTS
In the event the Policy involves an endowment or annuity element, the
Bank's right and interest in any endowment proceeds or annuity benefits
shall be determined under the provisions of this Agreement by regarding
such endowment proceeds or the commuted value of such annuity benefits as
the Policy's cash value. Such endowment proceeds or annuity
<PAGE> 50
benefits shall be treated like death proceeds for the purposes of division
under this Agreement.
X. TERMINATION OF AGREEMENT
This Agreement shall terminate at the option of the Bank following thirty
(30) days written
notice to the Insured upon the happening of any one of the following:
1. The Insured's right to receive benefits pursuant to the terms and
conditions of that certain Director Supplemental Compensation
Agreement effective as of ___________, 1998, shall terminate for
any reason other than the Insured's death; or
2. The Insured shall be discharged from service with the Bank as a result
of a removal for cause under subparagraph (c), (d) or (e) below.
Notwithstanding the foregoing, this Agreement shall remain in effect
in the event that the Insured is removed pursuant to subparagraph
(a), (b) or (f) below. The term "removal for cause" shall mean
termination of the service of the Insured by reason of any of the
following determined in good faith by the Bank's Board of Directors:
(a) The willful, intentional and material breach or the habitual
and continued neglect by the Insured of his or her
employment responsibilities and duties;
(b) The continuous mental or physical incapacity of the Insured,
subject to disability rights under this Agreement;
(c) The Insured's willful and intentional violation of any
federal banking or securities laws, or of the Bylaws, rules,
policies or resolutions of Bank, or the rules or regulations
of the Board of Governors of the Federal Reserve System,
Federal Deposit Insurance Corporation, Office of the
Comptroller of the Currency, or other regulatory agency
or governmental authority having jurisdiction over the Bank,
which has a material adverse effect upon the Bank;
(d) The written determination by a state or federal banking
agency or governmental authority having jurisdiction over
the Bank that the Insured (i) is of unsound mind, or (ii)
has committed a gross abuse of authority or discretion with
reference to the Bank, or (iii) otherwise is not suitable
to continue to serve as a member of the Board of Directors
of the Bank;
<PAGE> 51
(e) The Insured's conviction of (i) any felony or (ii) a crime
involving moral turpitude, or the Insured's willful and
intentional commission of a fraudulent or dishonest act;
or
(f) The Insured's willful and intentional disclosure,
without authority, of any secret or confidential information
concerning Bank or taking any action which the Bank's
Board of Directors determines, in its sole discretion and
subject to good faith, fair dealing and reasonableness,
constitutes unfair competition with or induces any customer
to breach any contract with the Bank.
Upon such termination, the Insured (or beneficiary[ies] or assignee[s])
shall have a ninety (90) day option to receive from the Bank an absolute
assignment of the Policy in consideration of a cash payment to the Bank,
whereupon this Agreement shall terminate. Such cash payment shall be the
greater of:
1. The Bank's share of the cash value of the Policy on the date of such
assignment, as defined in this Agreement.
2. The amount of the premiums which have been paid by the Bank prior to
the date of such assignment.
Should the Insured (or beneficiary[ies] or assignee[s]) fail to exercise
this option within the prescribed ninety (90) day period, the Insured (or
beneficiary[ies] or assignee[s]) agrees that all of his or her rights,
interest and claims in the Policy shall terminate as of the date of the
termination of this Agreement.
Except as provided above, this Agreement shall terminate upon distribution
of the death benefit proceeds in accordance with Paragraph VI above.
XI. INSURED'S OR ASSIGNEE'S ASSIGNMENT RIGHTS
The Insured may not, without the prior written consent of the Bank, which
shall not be unreasonably withheld, assign to any individual, trust or
other organization, any right, title or interest in the Policy nor any
rights, options, privileges or duties created under this Agreement.
XII. AGREEMENT BINDING UPON THE PARTIES
This Agreement shall be binding upon the Insured and the Bank, and their
respective heirs, successors, personal representatives and assigns, as
applicable.
XIII. NAMED FIDUCIARY AND PLAN ADMINISTRATOR
<PAGE> 52
The Bank is hereby designated the "Named Fiduciary" until resignation or
removal by its Board of Directors. As Named Fiduciary, the Bank shall be
responsible for the management, control, and administration of this Agreement
as established herein. The Named Fiduciary may allocate to others certain
aspects of the management and operations responsibilities of this Agreement,
including the employment of advisors and the delegation of any ministerial
duties to qualified individuals.
XIV. FUNDING POLICY
The funding policy for this Agreement shall be to maintain the Policy in
force by paying, when due, all premiums required.
XV. CLAIM PROCEDURES
Claim forms or claim information as to the subject Policy can be obtained
by contacting The Benefit Marketing Group, Inc. (770-952-1529). When the Named
Fiduciary has a claim which may be covered under the provisions described in
the Policy, it should contact the office named above, and they will either
complete a claim form and forward it to an authorized representative of the
Insurer or advise the named Fiduciary what further requirements are necessary.
The Insurer will evaluate and make a decision as to payment. If the claim is
payable, a benefit check will be issued to the Named Fiduciary.
In the event that a claim is not eligible under the Policy, the Insurer
will notify the Named Fiduciary of the denial pursuant to the requirements under
the terms of the Policy. If the Named Fiduciary is dissatisfied with the denial
of the claim and wishes to contest such claim denial, it should contact the
office named above and they will assist in making inquiry to the Insurer. All
objections to the Insurer's actions should be in writing and submitted to the
office named above for transmittal to the Insurer.
XVI. GENDER
Whenever in this Agreement words are used in the masculine or neuter
gender, they shall be read and construed as in the masculine, feminine or neuter
gender, whenever they should so apply.
XVII. INSURANCE COMPANY NOT A PARTY TO THIS AGREEMENT
The Insurer shall not be deemed a party to this Agreement, but will respect
the rights of the parties as set forth herein upon receiving an executed copy of
this Agreement. Payment or other performance in accordance with the Policy
provisions shall fully discharge the Insurer from any and all liability.
<PAGE> 53
IN WITNESS WHEREOF, the Insured and a duly authorized Bank officer or
director have signed this Agreement at Saratoga, California as of the date
first above written.
SARATOGA NATIONAL BANK INSURED
__________________________ ________________________________
Richard L. Mount __________________
President and Chief
Executive Officer
<PAGE> 54
BENEFICIARY DESIGNATION FORM
Primary Designation:
Name Relationship
_____________________________ _______________________________________
_____________________________ _______________________________________
_____________________________ _______________________________________
Contingent Designation:
_____________________________ _______________________________________
_____________________________ _______________________________________
_____________________________ _______________________________________
_____________________________ _____________, 1999
__________________
10QEX10.12
<PAGE> 55
DIRECTOR SUPPLEMENTAL COMPENSATION AGREEMENT
This Agreement is made and entered into effective as of _________, 1998 by
and between Saratoga National Bank, a national banking association chartered
under the federal laws of the United States of America with its principal
offices located in the City of Saratoga, Santa Clara County, California (the
"Bank"), and __________________, an individual residing in the State of
California (the "Director").
R E C I T A L S
WHEREAS, the Director is a member of the Board of Directors of the Bank
and has served in such capacity since 19__;
WHEREAS, the Bank desires to establish a compensation benefit for directors
who are not also officers or employees of the Bank in order to attract and
retain individuals with extensive and valuable experience as directors; and
WHEREAS, the Director and the Bank wish to specify in writing the terms and
conditions upon which this additional compensatory incentive will be provided
to the Director, or as applicable, to the Director's spouse or designated
beneficiaries, as the case may be.
NOW, THEREFORE, in consideration of the services to be performed by the
Director in the future, as well as the mutual promises and covenants contained
herein, the Director and the Bank agree as follows:
A G R E E M E N T
1. Terms and Definitions.
1.1. Administrator. The Bank shall be the "Administrator" and,
solely for the purposes of ERISA as defined in subparagraph 1.10 below, the
"fiduciary" of this Agreement where a fiduciary is required by ERISA.
1.2. Applicable Percentage. The term "Applicable Percentage" shall
mean that percentage listed on Schedule "A" attached hereto which is adjacent
to the number of calendar years which shall have elapsed from the date of the
Director's commencement of service to the Bank. Notwithstanding the foregoing
or the percentages set forth on Schedule "A," but subject to all other terms
and conditions set forth herein, the "Applicable Percentage" shall be: (i)
<PAGE> 56
provided payments have not yet begun hereunder, one hundred percent (100%)
upon the occurrence of a "Change in Control" as defined in subparagraph 1.4
below, or the Director's death, or Disability (as defined in subparagraph 1.7
below), which death or Disability occurs prior to the termination of the
Director's service on the Board of Directors of the Bank; and (ii)
notwithstanding subclause (i) of this subparagraph 1.2, zero percent (0%) in the
event the Director takes any intentional action which prevents the Bank from
collecting the proceeds of any life insurance policy which the Bank may happen
to own at the time of the Surrogate's death and of which the Bank is the
designated beneficiary. Furthermore, notwithstanding the foregoing, or
anything contained in this Agreement to the contrary, in the event the Director
takes any intentional action which prevents the Bank from collecting the
proceeds of any life insurance policy which the Bank may happen to own at the
time of the Surrogate's death and of which the Bank is the designated
beneficiary: (1) the Director's estate or designated beneficiary shall no
longer be entitled to receive any of the amounts payable under the terms of
this Agreement, and (2) the Bank shall have the right to recover from the
Director's estate all of the amounts paid to the Director's estate (with
respect to amounts paid prior to the Surrogate's death or paid to the
Director's estate) or designated beneficiary (with respect to amounts paid to
the designated beneficiary) pursuant to the terms of this Agreement prior to
and after Surrogate's death.
1.3. Beneficiary. The term "beneficiary" or "designated beneficiary"
shall mean the person or persons whom the Director shall designate in a valid
Beneficiary Designation, a copy of which is attached hereto as Schedule "C," to
receive the benefits provided hereunder. A Beneficiary Designation shall be
valid only if it is in the form attached hereto and made a part hereof,
completed and signed by the Director and received by the Administrator prior
to the Director's death.
1.4. Change in Control. The term "Change in Control" shall mean the
occurrence of any of the following events with respect to the Bank (with the
term "Bank" being defined for purposes of determining whether a "Change in
Control" has occurred to include any parent bank holding company owning 100%
of the Bank's outstanding common stock): (i) a change in control of a nature
that would be required to be reported in response to Item 6(e) of Schedule
14A of 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
regulatory agencies or governmental authorities having jurisdiction over the
Bank or any stock exchange on which the Bank's shares are listed which requires
the reporting of a change in control; (ii) any merger, consolidation or
reorganization of the Bank in which the Bank does not survive; (iii) any
sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one
transaction or a series of transactions) of any assets of the Bank having an
aggregate fair market value of fifty percent (50%) of the total value of the
assets of the Bank, reflected in the most recent balance sheet of the Bank;
(iv) a transaction whereby any "person" (as such term is used in the Exchange
Act) or any individual, corporation, partnership, trust or any other entity
becomes the beneficial owner, directly or indirectly, of securities of the Bank
representing twenty-five percent (25%) or
<PAGE> 57
more of the combined voting power of the Bank's then outstanding securities; or
(v) a situation where, in any one-year period, individuals who at the beginning
of such period constitute the Board of Directors of the Bank cease for any
reason to constitute at least a majority thereof, unless the election, or the
nomination for election by the Bank's shareholders, of each new director is
approved by a vote of at least three-quarters (3/4) of the directors then
still in office who were directors at the beginning of the period.
1.5. The Code. The "Code" shall mean the Internal Revenue Code of
1986, as amended (the "Code").
1.6. Director Benefits. The term "Director Benefits" shall mean the
benefits determined in accordance with Schedule "B", and reduced or adjusted to
the extent: (i) required under the other provisions of this Agreement,
including, but not limited to, Paragraphs 5, 6 and 7 hereof; (ii) required by
reason of the lawful order of any regulatory agency or body having jurisdiction
over the Bank; or (iii) required in order for the Bank to properly comply with
any and all applicable state and federal laws, including, but not limited to,
income, employment and disability income tax laws (e.g., FICA, FUTA, SDI).
1.7. Disability/Disabled. The term "Disability" or "Disabled" shall
have the same meaning given such terms in any policy of disability insurance
maintained by the Bank for the benefit of directors including the Director.
In the absence of such a policy which extends coverage to the Director in the
event of disability, the terms shall mean bodily injury or disease (mental or
physical) which wholly and continuously prevents the performance of duty for
at least three months.
1.8. Early Retirement Date. The term "Early Retirement Date" shall
mean the Retirement, as defined below, of the Director on a date which occurs
prior to the Director attaining sixty-two (62) years of age, but after the
Director has attained fifty-five (55) years of age.
1.9. Effective Date. The term "Effective Date" shall mean the date
first written above.
1.10. ERISA. The term "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended.
1.11. Plan Year. The term "Plan Year" shall mean the Bank's fiscal
year.
1.12. Removal for Cause. The term "Removal for Cause" shall mean
termination of the employment of the Director by reason of any of the following
determined in good faith by the Bank's Board of Directors:
<PAGE> 58
(a) The willful, intentional and material breach or the
habitual and continued neglect by the Director of his or
her employment responsibilities and duties;
(b) The continuous mental or physical incapacity of the
Director, subject to disability rights under this
Agreement;
(c) The Director's willful and intentional violation of any
federal banking or securities laws, or of the Bylaws,
rules, policies or resolutions of Bank, or the rules or
regulations of the Board of Governors of the Federal
Reserve System, Federal Deposit Insurance Corporation,
Office of the Comptroller of the Currency, or other
regulatory agency or governmental authority having
jurisdiction over the Bank, which has a material adverse
effect upon the Bank;
(d) The written determination by a state or federal banking
agency or governmental authority having jurisdiction over
the Bank that the Director (i) is of unsound mind, or
(ii) has committed a gross abuse of authority or
discretion with reference to the Bank, or (iii)
otherwise is not suitable to continue to serve as a
member of the Board of Directors of the Bank;
(e) The Director's conviction of (i) any felony or (ii) a
crime involving moral turpitude, or the Director's
willful and intentional commission of a fraudulent or
dishonest act; or
(f) The Director's willful and intentional disclosure, without
authority, of any secret or confidential information
concerning Bank or taking any action which the Bank's
Board of Directors determines, in its sole discretion
and subject to good faith, fair dealing and
reasonableness, constitutes unfair competition with
or induces any customer to breach any contract with the
Bank.
1.13. Retirement. The term "Retirement" or "Retires" shall refer to
the date which the Director acknowledges in writing to the Bank to be the last
day of service as a member of the Board of Directors of the Bank.
<PAGE> 59
1.14. Surrogate. The term "Surrogate" shall mean the individual
selected as a substitute insured for the Director for purposes related to any
insurance policy applicable to this Agreement.
1.15. Surviving Spouse. The term "Surviving Spouse" shall mean the
person, if any, who shall be legally married to the Director on the date of the
Director's death.
2. Scope, Purpose and Effect.
2.1. Contract of Employment. Although this Agreement is intended to
provide the Director with an additional incentive to continue to serve as a
member of the Board of Directors of the Bank, this Agreement shall not be deemed
to constitute a contract of employment between the Director and the Bank nor
shall any provision of this Agreement restrict the right of the Bank to remove
or cause the removal of the Director including, without limitation, by (i)
refusal to nominate the Director for election for any successive term of office
as a member of the Board of Directors of the Bank, or (ii) complying with an
order or other directive from a court of competent jurisdiction or any
regulatory authority having jurisdiction over the Bank which requires the Bank
to take action to remove the Director.
2.2. Fringe Benefit. The benefits provided by this Agreement are
granted by the Bank as a fringe benefit to the Director and are not a part of
any salary reduction plan or any arrangement deferring a bonus or a salary
increase. The Director has no option to take any current payments or bonus in
lieu of the benefits provided by this Agreement.
3. Payments Upon Early Retirement or Retirement and After Retirement.
3.1. Payments Upon Early Retirement. The Director shall have the
right to Retire on a date which constitutes an Early Retirement Date as defined
in subparagraph 1.8 above.
(a) In the event the Director elects to Retire on a date which
constitutes an Early Retirement Date, and provided that the Surrogate is alive
at the date the Director Retires, the Director shall be entitled to be paid the
Applicable Percentage of the Director Benefits, in substantially equal monthly
installments on the first day of each month, beginning with the month following
the month in which the Early Retirement Date occurs, payable (i) for the period
designated in Schedule "D" in the case of the balance in the Benefit Account
and (ii) until the first to occur of the Director's death or the Surrogate's
death in the case of the Index Benefit defined in Schedule "B".
<PAGE> 60
(b) In the event the Director elects to Retire on a date which
constitutes an Early Retirement Date, and provided that the Surrogate has
predeceased the Director at the date the Director Retires, the Director shall be
entitled to the payments specified in subparagraph 3.3 below.
3.2. Payments Upon Retirement.
(a) If the Director remains a member of the Board of Directors
of the Bank until attaining sixty-two (62) years of age, and provided that the
Surrogate is alive at the date the Director Retires, the Director shall be
entitled to be paid the Applicable Percentage of the Director Benefits, in
substantially equal monthly installments on the first day of each month,
beginning with the month following the month in which the Director Retires or
upon such later date as may be mutually agreed upon by the Director and the Bank
in advance of said Retirement date, payable (i) for the period designated in
Schedule "D" in the case of the balance in the Benefit Account and (ii) until
the first to occur of the Director's death or the Surrogate's death in the case
of the Index Benefit defined in Schedule "B". At the Bank's sole and absolute
discretion, the Bank may increase the Director Benefits as and when the Bank
determines the same to be appropriate.
(b) If the Director remains a member of the Board of Directors
of the Bank until attaining sixty-two (62) years of age, and provided that the
Surrogate has predeceased the Director at the date the Director Retires, the
Director shall be entitled to the payments specified in subparagraph 3.3 below.
3.3. Payments in the Event of Surrogate's Death Before Retirement.
Notwithstanding subparagraph 3.1(a) and subparagraph 3.2(a), if the Surrogate
dies before the Director Retires, then upon the Director's Retirement, the
Director Benefits to which the Director would otherwise be entitled shall be
adjusted such that the portion of such Director Benefits which is derived by
reference to an insurance policy, if any, underwritten using a surrogate insured
(a "Surrogate Policy") shall be paid as follows: the Bank shall pay to the
Director the Applicable Percentage of (i) that portion of the balance, if any,
in the Benefit Account as of the date of the Surrogate's death which is
derived by reference to a Surrogate Policy, if any, payable in substantially
equal monthly installments on the first day of each month, beginning with the
month following the month in which the Director Retires (or on such later date
as may be mutually agreed upon by the Director and the Bank in advance of said
Retirement date) for the period designated in Schedule "D". Upon the death of
the Director before receiving all of the Director Benefits to which the Director
is entitled, the Bank shall pay to the Director's designated beneficiary(ies)
the Applicable Percentage of the balance, if any, of the Benefit Account which
is derived by reference to a Surrogate Policy, if any, in lump sum. The
remaining Director Benefits to which the Director is entitled which are derived
without reference to any Surrogate Policy shall continue to be paid as specified
in the applicable provisions of this Agreement.
<PAGE> 61
3.4. Payments in the Event of Death After Retirement.
(a) If the Director Retires, but shall die before receiving
all of the Director Benefits, and provided that the Surrogate is alive at the
date of the Director's death, the Bank will pay to the Director's designated
beneficiary(ies) the Applicable Percentage of the balance, if any, of the
Benefit Account, in lump sum, and up to twenty (20) annual Index Benefit
installment payments in the amounts that otherwise would have been paid to the
Director if still alive and which are derived by reference to a Surrogate
Policy, if any, minus the number of annual Index Benefit installment payments
made to the Director prior to the Director's death. Upon the death of the
Surrogate, such installment payments shall cease whether or not any unpaid
portion of the twenty (20) installment payments shall remain unpaid.
(b) If the Director Retires, but the Surrogate shall
predecease the Director, the Director shall be entitled to receive the payments
specified in subparagraph 3.3 above.
(c) If a valid Beneficiary Designation is not in effect, then
the remaining amounts due to the Director under the terms of this Agreement
shall be paid to the Director's Surviving Spouse. If the Director leaves no
Surviving Spouse, the remaining amounts due to the Director under the terms of
this Agreement shall be paid to the duly qualified personal representative,
executor or administrator of the Director's estate.
4. Payments in the Event Death or Disability Occurs Prior to Retirement.
4.1. Payments in the Event of Death Prior to Retirement.
(a) If the Director dies at any time after the Effective Date
of this Agreement but prior to Retirement, and provided that the Surrogate is
alive at the date of the Director's death, the Bank agrees to pay to the
Director's designated beneficiary(ies) the Applicable Percentage of the balance,
if any, in the Benefit Account, in lump sum, and up to twenty (20) annual Index
Benefit installment payments in the amounts that otherwise would have
been paid to the Director if still alive and which are derived by reference to a
Surrogate Policy, if any. Upon the death of the Surrogate, such installment
payments shall cease whether or not any unpaid portion of the twenty (20)
installment payments shall remain unpaid.
(b) If the Director dies at any time after the Effective Date
of this Agreement but prior to Retirement, and provided that the Surrogate has
predeceased the Director, the Bank agrees to pay to the Director's designated
beneficiary(ies) the Applicable Percentage of the balance, if any, of the
Benefit Account in lump sum.
<PAGE> 62
(c) If a valid Beneficiary Designation is not in effect, then
the remaining amounts due to the Director under the terms of this Agreement
shall be paid to the Director's Surviving Spouse. If the Director leaves no
Surviving Spouse, the remaining amounts due to the Director under the terms of
this Agreement shall be paid to the duly qualified personal representative,
executor or administrator of the Director's estate.
4.2. Payments in the Event of Disability Prior to Retirement. In the
event the Director becomes Disabled at any time after the Effective Date of this
Agreement but prior to Retirement, the Director shall be paid the Applicable
Percentage of the Director Benefits which the Director may be entitled to
receive, in substantially equal monthly installments on the first day of each
month, beginning with the month following the month in which the Director
becomes Disabled, payable (i) for the period designated in Schedule "D" in the
case of the balance in the Benefit Account and (ii) until the first to occur of
the Director's death or the Surrogate's death in the case of the Index Benefit
defined in Schedule "B".
5. Payments in the Event Service Is Terminated Prior to Retirement. As
indicated in subparagraph 2.1 above, the Bank reserves the right to remove or
cause the removal of the Director at any time prior to the Director's
Retirement. In the event that the Director shall be removed and his or her
service as a member of the Board of Directors of the Bank terminated,
other than by reason of death, Disability or Retirement, prior to the Director's
attaining sixty-two (62) years of age, then this Agreement shall terminate upon
the date of such termination of service; provided, however, that the Director
shall be entitled to the following benefits as may be applicable depending upon
the circumstances surrounding the Director's termination of service:
5.1. Termination Without Cause. If the Director's service as a
member of the Board of Directors of the Bank is terminated for reasons other
than as specified in paragraph 5.3 below, and such termination is not subject
to the provisions of subparagraph 5.4 below, the Director shall be entitled
to be paid the Applicable Percentage of the Director Benefits, in
substantially equal monthly installments on the first day of each month,
beginning with the month following the month in which the Director attains
fifty-five (55) years of age or any month thereafter, as requested in writing
by the Director and delivered to the Bank or its successor thirty (30) days
prior to the commencement of installment payments; provided, however,
that in the event the Director does not request a commencement date as
specified, such installments shall be paid on the first day of each month,
beginning with the month following the month in which the Director attains
sixty-two (62) years of age. The installments shall be payable (i)
for the period designated in Schedule "D" in the case of the balance in the
Benefit Account and (ii) until the first to occur of the Director's death or
the Surrogate's death in the case of the Index Benefit defined in Schedule "B".
5.2. Voluntary Termination by the Director. If the Director's
service as a member of the Board of Directors of the Bank is terminated by
voluntary resignation and such
<PAGE> 63
resignation is not subject to the provisions of subparagraph 5.4 below, the
Director shall be entitled to be paid the Applicable Percentage of the Director
Benefits, in substantially equal monthly installments on the first day of each
month, beginning with the month following the month in which the Director
attains fifty-five (55) years of age or any month thereafter, as requested
in writing by the Director and delivered to the Bank or its successor
thirty (30) days prior to the commencement of installment payments; provided,
however, that in the event the Director does not request a commencement date as
specified, such installments shall be paid on the first day of each month,
beginning with the month following the month in which the Director attains
sixty-two (62) years of age. The installments shall be payable (i) for the
period designated in Schedule "D" in the case of the balance in the Benefit
Account and (ii) until the first to occur of the Director's death or the
Surrogate's death in the case of the Index Benefit defined in Schedule
"B".
5.3. Termination by Removal for Cause. The Director agrees that if
the Director's service as a member of the Board of Directors of the Bank is
terminated by "removal for cause," (as defined in subparagraph 1.12 of this
Agreement) and pursuant to subparagraph 1.12 (c), (d) or (e), the Director
shall forfeit any and all rights and benefits the Director may have
under the terms of this Agreement and shall have no right to be paid any of the
amounts which would otherwise be due or paid to the Director by the Bank
pursuant to the terms of this Agreement. In the event that the Director's
service as a member of the Board of Directors of the Bank is terminated by
"removal for cause" pursuant to subparagraph 1.12(a), (b) or (f), the
Director shall be entitled to be paid the Applicable Percentage of the Director
Benefits, as defined above, in substantially equal monthly installments on the
first day of each month, beginning with the month following the month in which
the Director attains fifty-five (55) years of age or any month thereafter, as
requested in writing by the Director and delivered to the Bank or its
successor thirty (30) days prior to the commencement of installment payments;
provided, however, that in the event the Director does not request a
commencement date as specified, such installments shall be paid on the first
day of each month, beginning with the month following the month in which the
Director attains sixty-two (62) years of age. The installments shall be payable
(i) for the period designated in Schedule "D" in the case of the balance in the
Benefit Account and (ii) until the first to occur of the Director's death or the
Surrogate's death in the case of the Index Benefit defined in Schedule "B".
5.4. Termination on Account of or After a Change in Control. In the
event: (i) the Director's service as a member of the Board of Directors of the
Bank is terminated in conjunction with, or by reason of, a "Change in Control"
(as defined in subparagraph 1.4 above); or (ii) by reason of the Bank's actions
and without the Director's prior written consent, any change occurs in the scope
of the Director's position, responsibilities, duties, fees, benefits, or
location of meetings (which in the event of relocation of more than thirty (30)
miles from the location of the Board or committee meetings prior to a Change in
Control shall constitute such a change in location) after a Change in Control
occurs, then the Director shall be entitled to be paid
<PAGE> 64
the Applicable Percentage of the Director Benefits, as defined above, in
substantially equal monthly installments on the first day of each month,
beginning with the month following the month in which the Director attains
fifty-five (55) years of age or any month thereafter, as requested in writing
by the Director and delivered to the Bank or its successor thirty (30) days
prior to the commencement of installment payments; provided, however, that in
the event the Director does not request a commencement date as specified, such
installments shall be paid on the first day of each month, beginning with the
month following the month in which the Director attains sixty-two (62) years
of age. The installments shall be payable (i) for the period designated
in Schedule "D" in the case of the balance in the Benefit Account and (ii)
until the first to occur of the Director's death or the Surrogate's death in
the case of the Index Benefit defined in Schedule "B".
5.5. Payments in the Event of Death Following Termination. If the
Director dies prior to receiving all of the Director Benefits described in this
Paragraph 5 to which the Director is entitled, then the Bank will make such
payments to the Director's designated beneficiary in lump sum. If a valid
Beneficiary Designation is not in effect, then the remaining amounts due to
the Director under the terms of this Agreement shall be paid to the
Director's Surviving Spouse. If the Director leaves no Surviving Spouse, the
remaining amounts due to the Director under the terms of this Agreement shall
be paid to the duly qualified personal representative, executor or
administrator of the Director's estate.
6. Section 280G Adjustment. The Director acknowledges and agrees that
the parties have entered into this Agreement based upon certain financial and
tax accounting assumptions. Accordingly, with full knowledge of the potential
consequences the Director agrees that, notwithstanding anything contained herein
to the contrary, in the event that any payment or benefit received or to be
received by the Director, whether payable pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Bank (together
with the Director Benefits, the "Total Payments"), will not be deductible (in
whole or in part) as a result of Code Section 280G or other applicable
provisions of the Code, the Total Payments shall be reduced until no portion
of the Total Payments is nondeductible as a result of Section 280G or such
other applicable provisions of the Code. For purposes of this limitation:
(a) No portion of the Total Payments, the receipt or enjoyment
of which the Director shall have effectively waived in writing prior to the date
of payment of any future Director Benefits payments, shall be taken into
account;
(b) No portion of the Total Payments shall be taken into
account, which in the opinion of the tax counsel selected by the Bank and
acceptable to the Director, does not constitute a "parachute payment" within the
meaning of Section 280G of the Code;
<PAGE> 65
(c) Any reduction of the Total Payments shall be applied to
reduce any payment or benefit received or to be received by the Director
pursuant to the terms of this Agreement and any other plan, arrangement or
agreement with the Bank in the order determined by mutual agreement of the Bank
and the Director;
(d) Future payments shall be reduced only to the extent
necessary so that the Total Payments (other than those referred to in clauses
(a) or (b) above in their entirety) constitute reasonable compensation for
services actually rendered within the meaning of Section 280G of the Code,
in the opinion of tax counsel referred to in clause (b) above; and
(e) The value of any non-cash benefit or any deferred payment
or benefit included in the Total Payments shall be determined by independent
auditors selected by the Bank and acceptable to the Director in accordance with
the principles of Section 280G of the Code.
7. Right To Determine Funding Methods. The Bank reserves the right to
determine, in its sole and absolute discretion, whether, to what extent and by
what method, if any, to provide for the payment of the amounts which may be
payable to the Director, the Director's spouse or the Director's beneficiaries
under the terms of this Agreement. In the event that the Bank elects to fund
this Agreement, in whole or in part, through the use of life insurance or
annuities, or both, the Bank shall determine the ownership and beneficial
interests of any such policy of life insurance or annuity. The Bank further
reserves the right, in its sole and absolute discretion, to terminate any
such policy, and any other device used to fund its obligations under
this Agreement, at any time, in whole or in part. Consistent with Paragraph 9
below, neither the Director, the Director's spouse nor the Director's
beneficiaries shall have any right, title or interest in or to any funding
source or amount utilized by the Bank pursuant to this Agreement, and any
such funding source or amount shall not constitute security for the performance
of the Bank's obligations pursuant to this Agreement. In connection with the
foregoing, the Director agrees to execute such documents and undergo such
medical examinations or tests which the Bank may request and which may be
reasonably necessary to facilitate any funding for this Agreement
including, without limitation, the Bank's acquisition of any policy of insurance
or annuity. Furthermore, a refusal by the Director to consent to, participate
in and undergo any such medical examinations or tests shall result in the
immediate termination of this Agreement and the immediate forfeiture by the
Director, the Director's spouse and the Director's beneficiaries of any
and all rights to payment hereunder.
8. Claims Procedure. The Bank shall, but only to the extent necessary to
comply with ERISA, be designated as the named fiduciary under this Agreement and
shall have authority to control and manage the operation and administration of
this Agreement. Consistent therewith, the Bank shall make all determinations
as to the rights to benefits under this Agreement. Any decision by the Bank
denying a claim by the Director, the Director's spouse, or the Director's
<PAGE> 66
beneficiary for benefits under this Agreement shall be stated in writing and
delivered or mailed, via registered or certified mail, to the Director, the
Director's spouse or the Director's beneficiary, as the case may be. Such
decision shall set forth the specific reasons for the denial of a claim. In
addition, the Bank shall provide the Director, the Director's spouse or the
Director's beneficiary with a reasonable opportunity for a full and fair review
of the decision denying such claim.
9. Status as an Unsecured General Creditor. Notwithstanding anything
contained herein to the contrary: (i) neither the Director, the Director's
spouse or the Director's designated beneficiaries shall have any legal or
equitable rights, interests or claims in or to any specific property or assets
of the Bank as a result of this Agreement; (ii) none of the Bank's assets shall
be held in or under any trust for the benefit of the Director, the Director's
spouse or the Director's designated beneficiaries or held in any way as security
for the fulfillment of the obligations of the Bank under this Agreement; (iii)
all of the Bank's assets shall be and remain the general unpledged and
unrestricted assets of the Bank; (iv) the Bank's obligation under this
agreement shall be that of an unfunded and unsecured promise by the Bank to pay
money in the future; and (v) the Director, the Director's spouse and the
Director's designated beneficiaries shall be unsecured general creditors with
respect to any benefits which may be payable under the terms of this
Agreement.
Notwithstanding subparagraphs (i) through (v) above, the Bank and the
Director acknowledge and agree that, in the event of a Change in Control, upon
request of the Director, or in the Bank's discretion if the Director does not
so request and the Bank nonetheless deems it appropriate, the Bank shall
establish, not later than the effective date of the Change in Control, a
Rabbi Trust or multiple Rabbi Trusts (the "Trust" or "Trusts") upon such terms
and conditions as the Bank, in its sole discretion, deems appropriate and in
compliance with applicable provisions of the Code, in order to permit the Bank
to make contributions and/or transfer assets to the Trust or Trusts to discharge
its obligations pursuant to this Agreement. The principal of the Trust or
Trusts and any earnings thereon shall be held separate and apart from other
funds of the Bank to be used exclusively for discharge of the Bank's obligations
pursuant to this Agreement and shall continue to be subject to the claims of
the Bank's general creditors until paid to the Director or its beneficiaries
in such manner and at such times as specified in this Agreement.
10. Discretion of Board to Accelerate Payout. Notwithstanding any of the
other provisions of this Agreement, the Board of Directors of the Bank may, if
determined in its sole and absolute discretion to be appropriate, accelerate
the payment of the amounts due under the terms of this Agreement, provided that
Director (or Director's spouse or designated beneficiaries): (i) consents to
the revised payout terms determined appropriate by the Bank's Board of
Directors; and (ii) does not negotiate or in anyway influence the terms of
proposed altered/accelerated payout (said decision to be made solely by the
Bank's Board of Directors and offered to the Director [or Director's spouse or
designated beneficiaries] on a "take it or leave it basis").
<PAGE> 67
11. Miscellaneous.
11.1. Opportunity To Consult With Independent Advisors. The Director
acknowledges that he has been afforded the opportunity to consult with
independent advisors of his choosing including, without limitation, accountants
or tax advisors and counsel regarding both the benefits granted to him under
the terms of this Agreement and the (i) terms and conditions which may affect
the Director's right to these benefits and (ii) personal tax effects
of such benefits including, without limitation, the effects of any federal or
state taxes, Section 280G of the Code, and any other taxes, costs, expenses or
liabilities whatsoever related to such benefits, which in any of the foregoing
instances the Director acknowledges and agrees shall be the sole responsibility
of the Director notwithstanding any other term or provision of this Agreement.
The Director further acknowledges and agrees that the Bank shall have no
liability whatsoever related to any such personal tax effects or other personal
costs, expenses, or liabilities applicable to the Director and further
specifically waives any right for the Director, himself, and his heirs,
beneficiaries, legal representatives, agents, successors, and assigns to claim
or assert liability on the part of the Bank related to the matters described
above in this subparagraph 11.1. The Director further acknowledges and agrees
that he has read, understands and consents to all of the terms and conditions
of this Agreement, and that he enters into this Agreement with a full
understanding of its terms and conditions.
11.2. Arbitration of Disputes. All claims, disputes and other matters
in question arising out of or relating to this Agreement or the breach or
interpretation thereof, other than those matters which are to be determined by
the Bank in its sole and absolute discretion, shall be resolved by binding
arbitration before a representative member, selected by the mutual agreement
of the parties, of the Judicial Arbitration and Mediation Services, Inc.
("JAMS"), located in San Francisco, California. In the event JAMS is unable or
unwilling to conduct the arbitration provided for under the terms of this
Paragraph, or has discontinued its business, the parties agree that a
representative member, selected by the mutual agreement of the parties, of the
American Arbitration Association ("AAA"), located in San Francisco, California,
shall conduct the binding arbitration referred to in this Paragraph. Notice of
the demand for arbitration shall be filed in writing with the other party to
this Agreement and with JAMS (or AAA, if necessary). In no event shall the
demand for arbitration be made after the date when institution of legal or
equitable proceedings based on such claim, dispute or other matter in question
would be barred by the applicable statute of limitations. The arbitration shall
be subject to such rules of procedure used or established by JAMS, or if there
are none, the rules of procedure used or established by AAA. Any award rendered
by JAMS or AAA shall be final and binding upon the parties, and as applicable,
their respective heirs, beneficiaries, legal representatives, agents,
successors and assigns, and may be entered in any court having jurisdiction
thereof. The obligation of the parties to arbitrate pursuant to this clause
shall be specifically enforceable in accordance with, and shall be conducted
consistently with, the provisions of Title 9 of Part 3 of the California
Code of Civil
<PAGE> 68
Procedure. Any arbitration hereunder shall be conducted in Saratoga,
California, unless otherwise agreed to by the parties.
11.3. Attorneys' Fees. In the event of any arbitration or litigation
concerning any controversy, claim or dispute between the parties hereto,
arising out of or relating to this Agreement or the breach hereof, or the
interpretation hereof, the prevailing party shall be entitled to recover from
the non-prevailing party reasonable expenses, attorneys' fees and costs incurred
in connection therewith or in the enforcement or collection of any judgment or
award rendered therein. The "prevailing party" means the party determined by
the arbitrator(s) or court, as the case may be, to have most nearly prevailed,
even if such party did not prevail in all matters, not necessarily the one in
whose favor a judgment is rendered.
11.4. Notice. Any notice required or permitted of either the Director
or the Bank under this Agreement shall be deemed to have been duly given, if by
personal delivery, upon the date received by the party or its authorized
representative; if by facsimile, upon transmission to a telephone number
previously provided by the party to whom the facsimile is transmitted as
reflected in the records of the party transmitting the facsimile and upon
reasonable confirmation of such transmission; and if by mail, on the third day
after mailing via U.S. first class mail, registered or certified, postage
prepaid and return receipt requested, and addressed to the party at the
address given below for the receipt of notices, or such changed address as may
be requested in writing by a party.
If to the Bank: Saratoga National Bank
12000 Saratoga-Sunnyvale Rd.
Saratoga, California 95070
Attn: Chairman of the Board
If to the Director: ______________________
______________________
______________________
11.5. Assignment. Neither the Director, the Director's spouse, nor
any other beneficiary under this Agreement shall have any power or right to
transfer, assign, anticipate, hypothecate, modify or otherwise encumber any
part or all of the amounts payable hereunder, nor, prior to payment in
accordance with the terms of this Agreement, shall any portion of such
amounts be: (i) subject to seizure by any creditor of any such beneficiary,
by a proceeding at law or in equity, for the payment of any debts, judgments,
alimony or separate maintenance obligations which may be owed by the Director,
the Director's spouse, or any designated beneficiary; or (ii) transferable by
operation of law in the event of bankruptcy, insolvency or otherwise. Any such
attempted assignment or transfer shall be void and unenforceable without
the prior written consent of the Bank. The Bank's consent, if any, to one or
more assignments or
<PAGE> 69
transfers shall not obligate the Bank to consent to or be construed as the
Bank's consent to any other or subsequent assignment or transfer.
11.6. Binding Effect/Merger or Reorganization. This Agreement shall
be binding upon and inure to the benefit of the Director and the Bank and, as
applicable, their respective heirs, beneficiaries, legal representatives,
agents, successors and assigns. Accordingly, the Bank shall not merge or
consolidate into or with another corporation, or reorganize or sell
substantially all of its assets to another corporation, firm or person, unless
and until such succeeding or continuing corporation, firm or person agrees to
assume and discharge the obligations of the Bank under this Agreement. Upon
the occurrence of such event, the term "Bank" as used in this Agreement shall
be deemed to refer to such surviving or successor firm, person, entity or
corporation.
11.7. Nonwaiver. The failure of either party to enforce at any time
or for any period of time any one or more of the terms or conditions of this
Agreement shall not be a waiver of such term(s) or condition(s) or of that
party's right thereafter to enforce each and every term and condition of this
Agreement.
11.8. Partial Invalidity. If any term, provision, covenant, or
condition of this agreement is determined by an arbitrator or a court, as the
case may be, to be invalid, void, or unenforceable, such determination shall
not render any other term, provision, covenant or condition invalid, void or
unenforceable, and the Agreement shall remain in full force and effect
notwithstanding such partial invalidity.
11.9. Entire Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties with respect to the
subject matter of this Agreement and contains all of the covenants and
agreements between the parties with respect thereto. Each party to this
Agreement acknowledges that no other representations, inducements,
promises, or agreements, oral or otherwise, have been made by any party, or
anyone acting on behalf of any party, which are not set forth herein, and that
no other agreement, statement, or promise not contained in this Agreement shall
be valid or binding on either party.
11.10. Modifications. Any modification of this Agreement shall
be effective only if it is in writing and signed by each party or such party's
authorized representative.
11.11. Paragraph Headings. The paragraph headings used in this
Agreement are included solely for the convenience of the parties and shall not
affect or be used in connection with the interpretation of this Agreement.
<PAGE> 70
11.12. No Strict Construction. The language used in this
Agreement shall be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction will be applied
against any person.
11.13. Governing Law. The laws of the State of California, other
than those laws denominated choice of law rules, and, where applicable, the
rules and regulations of the Board of Governors of the Federal Reserve System,
Federal Deposit Insurance Corporation, Office of the Comptroller of the
Currency, or other regulatory agency or governmental authority having
jurisdiction over Bank, shall govern the validity, interpretation, construction
and effect of this Agreement.
IN WITNESS WHEREOF, the Bank and the Director have executed this
Agreement on the date first above-written in the City of Saratoga, Santa Clara
County, California.
THE BANK THE DIRECTOR
SARATOGA NATIONAL BANK
By:____________________________ _____________________________
Richard L. Mount __________________
President and Chief
Executive Officer
<PAGE> 71
SCHEDULE A
CALENDAR YEAR APPLICABLE PERCENTAGE
__________, 1981 to December 31, 1998. . . . 80.00%
December 31, 1999. . . . . . . . . . . . . . 90.00%
December 31, 2000. . . . . . . . . . . . . . 100.00%
<PAGE> 72
SCHEDULE B
DIRECTOR BENEFITS
1. Director Benefits Determination.
The Director Benefits shall be determined based upon the following:
a. Benefit Account:
A Benefit Account shall be established as a liability reserve account
on the books of the Bank for the benefit of the Director. Prior to
the date on which the Director becomes eligible to receive payments
under the Agreement, such Benefit Account shall be increased (or
decreased) each Plan Year (including the Plan Year in which the
Director ceases to be employed by the Bank) by an amount equal to
the annual earnings or loss for that Plan Year determined by the
Index (described in subparagraph c below), less the Opportunity Cost
(described in subparagraph d below) for that Plan Year.
b. Index Benefit:
After the date on which the Director becomes eligible to receive
payments under the Agreement, the Index Benefit for the Director
for any Plan Year shall be determined by subtracting the Opportunity
Cost for that Plan Year from the earnings, if any, established by the
Index.
c. Index:
The Index for any Plan Year shall be the aggregate annual after-tax
income from the life insurance contracts described hereinafter as
defined by FASB Technical Bulletin 85-4. This Index shall be applied
as if such insurance contracts were purchased on the Effective Date.
Insurance Company(ies)/Policy Number(s):
_____________________________
_____________________________
If such contracts of life insurance are actually purchased by the
Bank, then the actual policies as of the dates purchased shall be
used in calculations to determine the Index and Opportunity Cost.
If such contracts of life insurance are not purchased or are
subsequently surrendered or lapsed, then the Bank shall receive
<PAGE> 73
and use annual policy illustrations that assume the above described
policies were purchased from the above named insurance company(ies)
on the Effective Date to calculate the amount of the Index and
Opportunity Cost.
d. Opportunity Cost:
The Opportunity Cost for any Plan Year shall be calculated by
multiplying (a) the sum of (i) the total amount of premiums set forth in the
insurance policies described above, (ii) the amount of any Index Benefits
(described at subparagraph b above), and (iii) the amount of all previous years
after-tax Opportunity Costs; by (b) the average annualized after-tax cost of
funds calculated using a one-year U.S. Treasury Bill as published in the Wall
Street Journal. The applicable tax rate used to calculate the Opportunity Cost
shall be the Bank's marginal tax rate until the Director's Retirement, or other
termination of service (including a Change in Control). Thereafter, the
Opportunity Cost shall be calculated with the assumption of a marginal forty-two
percent (42%) corporate tax rate each year regardless of whether the actual
marginal tax rate of the Bank is higher or lower.
EXAMPLE
INDEX BENEFITS
[n] [A] [B] [C] [D]
End of Cash Surrender Index Opportunity Annual Cumulative
Year Value of Life [Annual Cost Benefit Benefit
Insurance Policy Policy A0=premium B-C D+Dn-1
Income] A0+Cn-1x.05x
An-An-1 (1-42%)
0 $1, 000,000 -- -- -- --
1 $1,050,000 $50,000 $29,000 $21,000 $21,000
2 $1,102,500 $52,500 $29,841 $22,659 $43,659
3 $1,157,625 $55,125 $30,706 $24,419 $68,078
.
.
.
Assumptions: Initial Insurance = $1,000,000
Effective Tax Rate = 42%
One Year US Treasury Yield = 5%
<PAGE> 74
2. Director Benefits Payments.
The Director shall be entitled to payment of the Applicable Percentage of
(i) the balance in the Benefit Account in installments, and (ii) the Index
Benefit for each Plan Year payable in installments, upon the terms as specified
in the Agreement until the Director's death.
<PAGE> 75
SCHEDULE C
BENEFICIARY DESIGNATION
To the Administrator of the Saratoga National Bank Director Supplemental
Compensation Agreement:
Pursuant to the Provisions of my Director Supplemental Compensation
Agreement with Saratoga National Bank, permitting the designation of a
beneficiary or beneficiaries by a participant, I hereby designate the following
persons and entities as primary and secondary beneficiaries of any benefit
under said Agreement payable by reason of my death:
Primary Beneficiary:
______________________ ____________________ _____________________________
Name Address Relationship
Secondary (Contingent) Beneficiary:
______________________ _____________________ ____________________________
Name Address Relationship
THE RIGHT TO REVOKE OR CHANGE ANY BENEFICIARY DESIGNATION IS
HEREBY RESERVED. ALL PRIOR DESIGNATIONS, IF ANY, OF PRIMARY
BENEFICIARIES AND SECONDARY BENEFICIARIES ARE HEREBY REVOKED.
The Administrator shall pay all sums payable under the Agreement by reason
of my death to the Primary Beneficiary, if he or she survives me, and if no
Primary Beneficiary shall survive me, then to the Secondary Beneficiary, and if
no named beneficiary survives me, then the Administrator shall pay all amounts
in accordance with the terms of my Director Supplemental Compensation
Agreement. In the event that a named beneficiary survives me and dies prior
to receiving the entire benefit payable under said Agreement, then and in that
event, the remaining unpaid benefit payable according to the terms of my
Director Supplemental Compensation Agreement
<PAGE> 76
shall be payable to the personal representatives of the estate of said
beneficiary who survived me but died prior to receiving the total benefit
provided by my Director Supplemental Compensation Agreement.
Dated: ___________, 1998 __________________________
__________________
CONSENT OF THE DIRECTOR'S SPOUSE
TO THE ABOVE BENEFICIARY DESIGNATION:
I, ____________, being the spouse of __________________, after being
afforded the opportunity to consult with independent counsel of my choosing, do
hereby acknowledge that I have read, agree and consent to the foregoing
Beneficiary Designation which relates to the Director Supplemental Compensation
Agreement entered into by my spouse effective as of ___________, 1998. I
understand that the above Beneficiary Designation may affect certain
rights which I may have in the benefits provided for under the terms of the
Director Supplemental Compensation Agreement and in which I may have a marital
property interest.
Dated: ___________, 1998
______________________________
_________________
<PAGE> 77
SCHEDULE D
DISTRIBUTION ELECTION
Pursuant to the provisions of my Director Supplemental Compensation Agreement
with Saratoga National Bank, I hereby elect to have any distribution of the
balance in my Benefit Account paid to me in installments as designated below:
thirty-six (36) monthly installments with the amount of each
installment determined as of each installment date by
dividing the entire amount in my Benefit Account by the
number of installments then remaining to be paid, with the
final installment to be the entire remaining balance in
the Benefit Account.
sixty (60) monthly installments with the amount of each
installment determined as of each installment date by
dividing the entire amount in my Benefit Account by the
number of installments then remaining to be paid, with the
final installment to be the entire remaining balance in
the Benefit Account.
one hundred twenty (120) monthly installments with the
amount of each installment determined as of each installment
date by dividing the entire amount in my Benefit Account
by the number of installments then remaining to be paid,
with the final installment to be the entire remaining
balance in the Benefit Account.
one hundred eighty (180) monthly installments with the
amount of each installment determined as of each installment
date by dividing the entire amount in my Benefit Account by
the number of installments then remaining to be paid, with
the final installment to be the entire remaining balance
in the Benefit Account.
Dated: ____________, 1998
Signed: _______________________
__________________
<PAGE> 78
LIFE INSURANCE
ENDORSEMENT METHOD SPLIT DOLLAR PLAN
AGREEMENT
Insurer/Policy Number: ________________________
Bank: Saratoga National Bank
Participant: _________________
Insured: ______________, as the insured surrogate for Participant
Relationship of Participant to Bank: Director
Date: June 18, 1999
The respective rights and duties of the Bank and the Participant in the above
policy(ies) (the "Policy" or "Policies") shall be as follows:
I. DEFINITIONS
Refer to the Policy provisions for the definition of all terms in this
Agreement. Notwithstanding the foregoing, whenever the term "Insured" is used
in the Policies, unless the Policy provisions otherwise require, it shall mean
[Director's Name] for purposes of any beneficial interest or right to proceeds
from any insurance policy to which this Agreement refers.
II. POLICY TITLE AND OWNERSHIP
Title and ownership shall reside in the Bank for its use and for the use of
the Participant all in accordance with this Agreement. The Bank alone may, to
the extent of its interest, exercise the right to borrow or withdraw the Policy
cash values. Where the Bank and the Participant (or beneficiary[ies] or
assignee[s], with the consent of the Participant) mutually agree to exercise
the right to increase the coverage under the subject split dollar Policy,
then, in such event, the rights, duties and benefits of the parties to such
increased coverage shall continue to be subject to the terms of this Agreement.
III. BENEFICIARY DESIGNATION RIGHTS
<PAGE> 79
The Participant (or beneficiary[ies] or assignee[s]) shall have the right
and power to designate a beneficiary or beneficiaries to receive his or her
share of the proceeds payable upon the death of the Insured, and to elect and
change a payment option for such beneficiary, subject to any right or interest
the Bank may have in such proceeds, as provided in this Agreement.
IV. PREMIUM PAYMENT METHOD
The Bank shall pay an amount equal to the planned premiums and any other
premium payments that might become necessary to maintain the Policy in force.
V. TAXABLE BENEFIT
Annually the Participant will receive a taxable benefit equal to the
assumed cost of insurance as required by the Internal Revenue Service. The Bank
(or its administrator) will report to the Participant the amount of imputed
income received each year on Form W-2 or its equivalent.
VI. DIVISION OF DEATH PROCEEDS
Subject to Paragraph VII herein, the division of the death proceeds of the
Policy is as follows:
A. 1. Subject to paragraph VI.A.2 below, upon the death of the
Participant, the Participant's beneficiary(ies) designated in accordance with
Paragraph III shall be entitled to an amount equal to the net at risk insurance
portion of the proceeds under all Policies. The net at risk insurance portion
is the total proceeds less the cash value of the Policy. Notwithstanding the
foregoing, in the event the Participant [or his or her beneficiary(ies)]
becomes entitled to receive the foregoing death benefit prior to the
Participant becoming entitled to receive 100% of the benefits, if any,
specified in that certain Director Supplemental Compensation Agreement between
the Bank and the Participant, effective __________, 1998 (the "Compensation
Agreement"), then the Participant [or his or her beneficiary(ies)] shall be
entitled to receive the same percentage of the foregoing death benefit as the
percentage applicable to the Participant's benefits, if any, under such
Compensation Agreement immediately prior to the Participant's death or, if
earlier, the date on which the Participant [or his or her beneficiary(ies)]
commences receiving such death benefit.
2. Notwithstanding paragraph VI.A.1 above:
(a) If the Insured predeceases the Participant prior to the date
on which the Participant Retires, becomes Disabled, or otherwise terminates
service as a director (as defined or described in the Compensation Agreement),
then that portion of the death proceeds equal to the amount to which the
Participant is entitled under paragraph VI.A.1 of this Agreement shall be held
by the Bank
<PAGE> 80
in trust for the Participant under the terms of this Agreement. Such death
proceeds shall be deposited into a separate, segregated interest bearing
account. Neither the Participant nor the Participant's beneficiary(ies)
shall have any right to or interest in such account or the funds therein except
as provided in this Agreement. Such interest bearing account shall be
selected by the Bank in its sole discretion and may be an account at the Bank or
at another financial institution. The Bank shall have no liability whatsoever
with respect to the rate of interest actually earned on such death proceeds.
Accrued interest earned on such death proceeds shall be paid to the Participant
within fifteen (15) days after the end of each calendar quarter (or on such
other periodic basis as may be mutually agreed upon by the Bank and the
Participant). The Participant shall be responsible for payment of all
taxes imposed on any income earned, and shall assume all risk of loss, with
respect to such funds. Upon the date on which the Participant Retires after
attaining sixty-two (62) years of age, or becomes Disabled, or otherwise
terminates service as a director (other than by "removal for cause" as defined
in the Compensation Agreement) whichever first occurs, the Participant shall
be entitled to the amount determined in accordance with paragraph VI.A.1,
reduced by the amount of any Index Benefit Payments (or payments made in
lieu of such Index Benefit Payments) made to the Participant or the
Participant's beneficiary(ies) pursuant to the terms of the Compensation
Agreement, payable in lump sum or in such periodic installments as may
be mutually agreed upon by the Bank and the Participant. Upon the death
of the Participant, the remaining unpaid balance of the death benefit to which
the Participant is entitled shall be paid to the Participant's beneficiary(ies)
in lump sum. In no event shall the Participant and/or the Participant's
beneficiary(ies) receive an aggregate benefit under this Agreement exceeding
the amount to which the Participant is entitled under paragraph VI.A.1 above.
(b) If the Insured predeceases the Participant after the
Participant Retires, becomes Disabled, or otherwise terminates service as a
director (as defined or described in the Compensation Agreement), then that
portion of the death proceeds equal to the amount to which the Participant
is entitled under paragraph VI.A.1 of this Agreement, reduced by the amount of
any Index Benefit Payments (or payments made in lieu of such Index Benefit
Payments) made to the Participant or the Participant's beneficiary(ies) pursuant
to the terms of the Compensation Agreement, shall be paid to the Participant in
lump sum or in such periodic installments as may be mutually agreed upon by
the Bank and the Participant. Upon the death of the Participant, the
remaining unpaid balance of the death benefit to which the Participant is
entitled shall be paid to the Participant's beneficiary(ies) in lump sum. In
no event shall the Participant and/or the Participant's beneficiary(ies)
receive an aggregate
<PAGE> 81
benefit under this Agreement exceeding the amount to which the Participant is
entitled under paragraph VI.A.1 above.
B. The Bank shall be entitled to all remaining death proceeds of the
Policy(ies), including any balance remaining in the account referenced
in paragraph VI.A.2 above.
C. The Bank and the Participant (or beneficiary[ies] or assignee[s])
shall share in any interest due on the death proceeds on a pro rata
basis in the ratio that the proceeds due the Bank and the Participant,
respectively, bears to the total proceeds, excluding any such
interest.
VII. DIVISION OF CASH SURRENDER VALUE
The Bank shall at all times be entitled to an amount equal to the Policy's
cash value, as that term is defined in the Policy, less any Policy loans
and unpaid interest or cash withdrawals previously incurred by the Bank
and any applicable Policy surrender charges. Such cash value shall be
determined as of the date of surrender of the Policy or death of the
Insured as the case may be.
VIII. PREMIUM WAIVER
If the Policy contains a premium waiver provision, any such waived amounts
shall be considered for all purposes of this Agreement as having been paid
by the Bank.
IX. RIGHTS OF PARTIES WHERE POLICY ENDOWMENT OR ANNUITY ELECTION EXISTS
In the event the Policy involves an endowment or annuity element, the
Bank's right and interest in any endowment proceeds or annuity benefits
shall be determined under the provisions of this Agreement by regarding
such endowment proceeds or the commuted value of such annuity benefits as
the Policy's cash value. Such endowment proceeds or annuity benefits
shall be treated like death proceeds for the purposes of division under
this Agreement.
X. TERMINATION OF AGREEMENT
This Agreement shall terminate at the option of the Bank following thirty
(30) days written notice to the Participant upon the happening of any one
of the following:
1. The Participant's right to receive benefits pursuant to the terms and
conditions of that certain Director Supplemental Compensation
Agreement effective as of ___________, 1998, shall terminate for any
reason other than the Participant's or the Insured's death; or
<PAGE> 82
2. The Insured shall be discharged from service with the Bank as a result
of a removal for cause under subparagraph (c), (d) or (e) below.
Notwithstanding the foregoing, this Agreement shall remain in effect
in the event that the Insured is removed pursuant to subparagraph (a),
(b) or (f) below. The term "removal for cause" shall mean termination
of the service of the Insured by reason of any of the following
determined in good faith by the Bank's Board of Directors:
(a) The willful, intentional and material breach or the
habitual and continued neglect by the Insured of his or
her employment responsibilities and duties;
(b) The continuous mental or physical incapacity of the Insured,
subject to disability rights under this Agreement;
(c) The Insured's willful and intentional violation of any
federal banking or securities laws, or of the Bylaws, rules,
policies or resolutions of Bank, or the rules or regulations
of the Board of Governors of the Federal Reserve System,
Federal Deposit Insurance Corporation, Office of the
Comptroller of the Currency, or other regulatory agency
or governmental authority having jurisdiction over the Bank,
which has a material adverse effect upon the Bank;
(d) The written determination by a state or federal banking
agency or governmental authority having jurisdiction over
the Bank that the Insured (i) is of unsound mind, or (ii)
has committed a gross abuse of authority or discretion with
reference to the Bank, or (iii) otherwise is not suitable
to continue to serve as a member of the Board of Directors
of the Bank;
(e) The Insured's conviction of (i) any felony or (ii) a crime
involving moral turpitude, or the Insured's willful and
intentional commission of a fraudulent or dishonest act; or
(f) The Insured's willful and intentional disclosure, without
authority, of any secret or confidential information
concerning Bank or taking any action which the Bank's Board
of Directors determines, in its sole discretion and subject
to good faith, fair dealing and reasonableness,
constitutes unfair competition with or induces any
customer to breach any contract with the Bank.
Upon such termination, the Participant (or beneficiary[ies] or assignee[s])
shall have a ninety (90) day option to receive from the Bank an absolute
assignment of the Policy in
<PAGE> 83
consideration of a cash payment to the Bank, whereupon this Agreement shall
terminate. Such cash payment shall be the greater of:
1. The Bank's share of the cash value of the Policy on the date of such
assignment, as defined in this Agreement.
2. The amount of the premiums which have been paid by the Bank prior to
the date of such assignment.
Should the Participant (or beneficiary[ies] or assignee[s]) fail to
exercise this option within the prescribed ninety (90) day period, the
Participant (or beneficiary[ies] or assignee[s]) agrees that all of his or her
rights, interest and claims in the Policy shall terminate as of the date of
the termination of this Agreement.
Except as provided above, this Agreement shall terminate upon distribution
of the death benefit proceeds in accordance with Paragraph VI above.
XI. PARTICIPANT'S OR ASSIGNEE'S ASSIGNMENT RIGHTS
The Participant may not, without the prior written consent of the Bank,
which shall not be unreasonably withheld, assign to any individual, trust or
other organization, any right, title or interest in the Policy nor any rights,
options, privileges or duties created under Agreement.
XII. AGREEMENT BINDING UPON THE PARTIES
This Agreement shall be binding upon the Participant and the Bank, and
their respective heirs, successors, personal representatives and assigns, as
applicable.
XIII. NAMED FIDUCIARY AND PLAN ADMINISTRATOR
The Bank is hereby designated the "Named Fiduciary" until resignation or
removal by its Board of Directors. As Named Fiduciary, the Bank shall be
responsible for the management, control, and administration of this Agreement
as established herein. The Named Fiduciary may allocate to others certain
aspects of the management and operations responsibilities of this Agreement,
including the employment of advisors and the delegation of any ministerial
duties to qualified individuals.
XIV. FUNDING POLICY
The funding policy for this Agreement shall be to maintain the Policy in
force by paying, when due, all premiums required.
<PAGE> 84
XV. CLAIM PROCEDURES
Claim forms or claim information as to the subject Policy can be obtained
by contacting The Benefit Marketing Group, Inc. (770-952-1529). When the Named
Fiduciary has a claim which may be covered under the provisions described in
the Policy, it should contact the office named above, and they will either
complete a claim form and forward it to an authorized representative of the
Insurer or advise the named Fiduciary what further requirements are necessary.
The Insurer will evaluate and make a decision as to payment. If the claim is
payable, a benefit check will be issued to the Named Fiduciary.
In the event that a claim is not eligible under the Policy, the Insurer
will notify the Named Fiduciary of the denial pursuant to the requirements
under the terms of the Policy. If the Named Fiduciary is dissatisfied with the
denial of the claim and wishes to contest such claim denial, it should contact
the office named above and they will assist in making inquiry to the Insurer.
All objections to the Insurer's actions should be in writing and submitted to
the office named above for transmittal to the Insurer.
XVI. GENDER
Whenever in this Agreement words are used in the masculine or neuter
gender, they shall be read and construed as in the masculine, feminine or
neuter gender, whenever they should so apply.
XVII. INSURANCE COMPANY NOT A PARTY TO THIS AGREEMENT
The Insurer shall not be deemed a party to this Agreement, but will
respect the rights of the parties as set forth herein upon receiving an
executed copy of this Agreement. Payment or other performance in accordance
with the Policy provisions shall fully discharge the Insurer from any and all
liability.
IN WITNESS WHEREOF, the Participant and a duly authorized Bank officer
or director have signed this Agreement at Saratoga, California as of the date
first above written.
SARATOGA NATIONAL BANK
__________________________ ________________________________
Richard L. Mount ___________________
President and Chief
Executive Officer
<PAGE> 85
BENEFICIARY DESIGNATION FORM
Primary Designation:
Name Relationship
_____________________________ _______________________________________
_____________________________ _______________________________________
_____________________________ _______________________________________
Contingent Designation:
_____________________________ _______________________________________
_____________________________ _______________________________________
_____________________________ _______________________________________
_____________________________ _____________, 1999
_____________________
<PAGE> 86
EXECUTIVE SUPPLEMENTAL COMPENSATION AGREEMENT
This Agreement is made and entered into effective as of ______________,
1998 by and between Saratoga National Bank, a national banking association
chartered under the federal laws of the United States of America with its
principal offices located in the City of Saratoga, Santa Clara County,
California (the "Employer"), and __________________, an individual residing in
the State of California (the "Executive").
R E C I T A L S
WHEREAS, the Executive has been an employee of the Employer since
_____________, 19__, and is currently serving as its
_________________________;
WHEREAS, the Employer desires to establish a compensation benefit
program as a fringe benefit for executive officers of the Employer in order to
attract and retain individuals with extensive and valuable experience in the
banking industry;
WHEREAS, the Executive's experience and knowledge of the affairs of the
Employer and the banking industry are extensive and valuable;
WHEREAS, it is deemed to be in the best interests of the Employer to
provide the Executive with certain fringe benefits, on the terms and conditions
set forth herein, in order to reasonably induce the Executive to remain in the
Employer's employment and to compensate the Employee for valuable services
heretofore rendered to the Employer; and
WHEREAS, the Executive and the Employer wish to specify in writing the
terms and conditions upon which this additional compensatory incentive will be
provided to the Executive, or to the Executive's spouse or the Executive's
designated beneficiaries, as the case may be.
NOW, THEREFORE, in consideration of the services to be performed by
the Executive in the future, as well as the mutual promises and covenants
contained herein, the Executive and the Employer agree as follows:
A G R E E M E N T
1. Terms and Definitions.
<PAGE> 87
1.1. Administrator. The Employer shall be the
"Administrator" and, solely for the purposes of ERISA as defined in subparagraph
1.9 below, the "fiduciary" of this Agreement where a fiduciary is required by
ERISA.
1.2. Applicable Percentage. The term "Applicable
Percentage" shall mean that percentage listed on Schedule "A" attached hereto
which is adjacent to the number of calendar years which shall have elapsed from
the date of the Executive's commencement of service to the Employer.
Notwithstanding the foregoing or the percentages set forth on Schedule "A," but
subject to all other terms and conditions set forth herein, the "Applicable
Percentage" shall be: (i) provided payments have not yet begun hereunder, one
hundred percent (100%) upon the occurrence of a "Change in Control" as defined
in subparagraph 1.4 below, or the Executive's death, or Disability (as defined
in subparagraph 1.6 below), which death or Disability occurs prior to the
termination of the Executive's employment by the Employer; and (ii)
notwithstanding subclause (i) of this subparagraph 1.2, zero percent (0%) in the
event the Executive takes any intentional action which prevents the Employer
from collecting the proceeds of any life insurance policy which the Employer
may happen to own at the time of the Executive's death and of which the Employer
is the designated beneficiary. Furthermore, notwithstanding the foregoing, or
anything contained in this Agreement to the contrary, in the event the Executive
takes any intentional action which prevents the Employer from collecting the
proceeds of any life insurance policy which the Employer may happen to own at
the time of the Executive's death and of which the Employer is the designated
beneficiary: (1) the Executive's estate or designated beneficiary shall no
longer be entitled to receive any of the amounts payable under the terms of
this Agreement, and (2) the Employer shall have the right to recover from
the Executive's estate all of the amounts paid to the Executive's estate
(with respect to amounts paid prior to the Executive's death or paid to the
Executive's estate) or designated beneficiary (with respect to amounts
paid to the designated beneficiary) pursuant to the terms of this Agreement
prior to and after Executive's death.
1.3. Beneficiary. The term "beneficiary" or "designated
beneficiary" shall mean the person or persons whom the Executive shall designate
in a valid Beneficiary Designation, a copy of which is attached hereto as
Schedule "C," to receive the benefits provided hereunder. A Beneficiary
Designation shall be valid only if it is in the form attached hereto and
made a part hereof, completed and signed by the Executive and received by the
Administrator prior to the Executive's death.
1.4. Change in Control. The term "Change in Control" shall
mean the occurrence of any of the following events with respect to the Employer
(with the term "Employer" being defined for purposes of determining whether a
"Change in Control" has occurred to include any parent bank holding company
owning 100% of the Employer's outstanding common stock): (i) a change in
control of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated under the
<PAGE> 88
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or in
response to any other form or report to the regulatory agencies or governmental
authorities having jurisdiction over the Employer or any stock exchange on which
the Employer's shares are listed which requires the reporting of a change in
control; (ii) any merger, consolidation or reorganization of the Employer in
which the Employer does not survive; (iii) any sale, lease, exchange, mortgage,
pledge, transfer or other disposition (in one transaction or a series of
transactions) of any assets of the Employer having an aggregate fair market
value of fifty percent (50%) of the total value of the assets of the Employer,
reflected in the most recent balance sheet of the Employer; (iv) a transaction
whereby any "person" (as such term is used in the Exchange Act) or any
individual, corporation, partnership, trust or any other entity becomes the
beneficial owner, directly or indirectly, of securities of the Employer
representing twenty-five percent (25%) or more of the combined voting power of
the Employer's then outstanding securities; or (v) a situation where, in any
one-year period, individuals who at the beginning of such period constitute
the Board of Directors of the Employer cease for any reason to constitute at
least a majority thereof, unless the election, or the nomination for election
by the Employer's shareholders, of each new director is approved by a vote of
at least three-quarters (3/4) of the directors then still in office who were
directors at the beginning of the period.
1.5. The Code. The "Code" shall mean the Internal Revenue
Code of 1986, as amended (the "Code").
1.6. Disability/Disabled. The term "Disability" or "Disabled"
shall have the same meaning given such terms in any policy of disability
insurance maintained by the Employer for the benefit of employees including
the Executive. In the absence of such a policy which extends coverage to the
Executive in the event of disability, the terms shall mean bodily injury or
disease (mental or physical) which wholly and continuously prevents the
performance of duty for at least three months.
1.7. Early Retirement Date. The term "Early Retirement
Date" shall mean the Retirement, as defined below, of the Executive on a date
which occurs prior to the Executive attaining sixty-two (62) years of age, but
after the Executive has attained fifty-five (55) years of age.
1.8. Effective Date. The term "Effective Date" shall mean
the date first written above.
1.9. ERISA. The term "ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as amended.
1.10. Executive Benefits. The term "Executive Benefits" shall
mean the benefits determined in accordance with Schedule "B", and reduced or
adjusted to the extent: (i)
<PAGE> 89
required under the other provisions of this Agreement, including, but not
limited to, Paragraphs 5, 6 and 7 hereof; (ii) required by reason of the
lawful order of any regulatory agency or body having jurisdiction over the
Employer; or (iii) required in order for the Employer to properly comply with
any and all applicable state and federal laws, including, but not limited to,
income, employment and disability income tax laws (e.g., FICA, FUTA, SDI).
1.11. Plan Year. The term "Plan Year" shall mean the
Employer's fiscal year.
1.12. Retirement. The term "Retirement" or "Retires" shall
refer to the date which the Executive acknowledges in writing to Employer to be
the last day the Executive will provide any significant personal services,
whether as an employee or independent consultant or contractor, to Employer.
For purposes of this Agreement, the phrase "significant personal services" shall
mean more than ten (10) hours of personal services rendered to one or more
individuals or entities in any thirty (30) day period.
1.13. Surviving Spouse. The term "Surviving Spouse" shall
mean the person, if any, who shall be legally married to the Executive on the
date of the Executive's death.
1.14. Termination for Cause. The term "Termination for
Cause" shall mean termination of the employment of the Executive by reason of
any of the following determined in good faith by the Employer's Board of
Directors:
(a) The willful, intentional and material breach or
the habitual and continued neglect by the
Executive of his or her employment
responsibilities and duties;
(b) The continuous mental or physical incapacity of
the Executive, subject to disability rights under
this Agreement;
(c) The Executive's willful and intentional violation
of any federal banking or securities laws, or of
the Bylaws, rules, policies or resolutions of
Employer, or the rules or regulations of the
Board of Governors of the Federal Reserve
System, Federal Deposit Insurance Corporation,
Office of the Comptroller of the Currency, or
other regulatory agency or governmental
authority having jurisdiction over the Employer,
which has a material adverse effect upon the
Employer;
(d) The written determination by a state or federal
banking agency or governmental authority
having jurisdiction over the Employer that
<PAGE> 90
Executive is not suitable to act in the capacity
for which he or she is employed by Employer;
(e) The Executive's conviction of (i) any felony or
(ii) a crime involving moral turpitude, or the
Executive's willful and intentional commission
of a fraudulent or dishonest act; or
(f) The Executive's willful and intentional
disclosure, without authority, of any secret or
confidential information concerning Employer
or taking any action which the Employer's
Board of Directors determines, in its sole
discretion and subject to good faith, fair dealing
and reasonableness, constitutes unfair
competition with or induces any customer to
breach any contract with the Employer.
2. Scope, Purpose and Effect.
2.1. Contract of Employment. Although this Agreement is
intended to provide the Executive with an additional incentive to remain in the
employ of the Employer, this Agreement shall not be deemed to constitute a
contract of employment between the Executive and the Employer nor shall any
provision of this Agreement restrict or expand the right of the Employer to
terminate the Executive's employment. This Agreement shall have no impact or
effect upon any separate written Employment Agreement which the Executive may
have with the Employer, it being the parties' intention and agreement that
unless this Agreement is specifically referenced in said Employment Agreement
(or any modification thereto), this Agreement (and the Employer's obligations
hereunder) shall stand separate and apart and shall have no effect on or be
affected by, the terms and provisions of said Employment Agreement.
2.2. Fringe Benefit. The benefits provided by this
Agreement are granted by the Employer as a fringe benefit to the Executive and
are not a part of any salary reduction plan or any arrangement deferring a bonus
or a salary increase. The Executive has no option to take any current payments
or bonus in lieu of the benefits provided by this Agreement.
3. Payments Upon Early Retirement or Retirement and After
Retirement.
3.1. Payments Upon Early Retirement. The Executive
shall have the right to Retire on a date which constitutes an Early Retirement
Date as defined in subparagraph 1.7 above. In the event the Executive elects to
Retire on a date which constitutes an Early Retirement Date, the Executive shall
be entitled to be paid the Applicable Percentage of the Executive Benefits, in
substantially equal monthly installments on the first day of each month,
beginning with the month following the month in which the Early Retirement Date
occurs or upon
<PAGE> 91
such later date as may be mutually agreed upon by the Executive and the
Employer in advance of said Early Retirement Date, payable (i) for the period
designated in Schedule "D" in the case of the balance in the Benefit Account and
(ii) until the Executive's death in the case of the Index Benefit defined in
Schedule "B".
3.2. Payments Upon Retirement. If the Executive remains
in the employment of the Employer until attaining sixty-two (62) years of age,
the Executive shall be entitled to be paid the Applicable Percentage of the
Executive Benefits, in substantially equal monthly installments on the first day
of each month, beginning with the month following the month in which the
Executive Retires or upon such later date as may be mutually agreed upon by the
Executive and the Employer in advance of said Retirement date, payable (i) for
the period designated in Schedule "D" in the case of the balance in the Benefit
Account and (ii) until the Executive's death in the case of the Index Benefit
defined in Schedule "B". At the Employer's sole and absolute discretion, the
Employer may increase the Executive Benefits as and when the Employer determines
the same to be appropriate.
3.3. Payments in the Event of Death After Retirement.
The Employer agrees that if the Executive Retires, but shall die before
receiving all of the Executive Benefits Payments specified in Schedule "B", the
Employer agrees to pay the Applicable Percentage of the Executive Benefits to
the Executive's designated beneficiary in lump sum. If a valid Beneficiary
Designation is not in effect, then the remaining amounts due to the Executive
under the terms of this Agreement shall be paid to the Executive's Surviving
Spouse. If the Executive leaves no Surviving Spouse, the remaining amounts due
to the Executive under the terms of this Agreement shall be paid to the duly
qualified personal representative, executor or administrator of the Executive's
estate.
4. Payments in the Event Death or Disability Occurs Prior to
Retirement.
4.1. Payments in the Event of Death Prior to Retirement.
If the Executive dies at any time after the Effective Date of this Agreement,
but prior to Retirement, the Employer agrees to pay the Applicable Percentage of
the Executive Benefits to the Executive's designated beneficiary in lump sum.
If a valid Beneficiary Designation is not in effect, then the remaining amounts
due to the Executive under the terms of this Agreement shall be paid to the
Executive's Surviving Spouse. If the Executive leaves no Surviving Spouse, the
remaining amounts due to the Executive under the terms of this Agreement shall
be paid to the duly qualified personal representative, executor or administrator
of the Executive's estate.
4.2. Payments in the Event of Disability Prior to
Retirement. In the event the Executive becomes Disabled at any time after the
Effective Date of this Agreement but prior to Retirement, the Executive shall be
entitled to be paid the Applicable Percentage of the Executive Benefits, in
substantially equal monthly installments on the first day of each month,
<PAGE> 92
beginning with the month following the month in which the Executive becomes
Disabled, payable (i) for the period designated in Schedule "D" in the case of
the balance in the Benefit Account and (ii) until the Executive's death in the
case of the Index Benefit defined in Schedule "B".
5. Payments in the Event Employment Is Terminated Prior to
Retirement. As indicated in subparagraph 2.1 above, the Employer reserves the
right to terminate the Executive's employment, with or without cause but subject
to any written employment agreement which may then exist, at any time prior to
the Executive's Retirement. In the event that the employment of the Executive
shall be terminated, other than by reason of death, Disability or Retirement,
prior to the Executive's attaining sixty-two (62) years of age, then this
Agreement shall terminate upon the date of such termination of employment;
provided, however, that the Executive shall be entitled to the following
benefits as may be applicable depending upon the circumstances surrounding the
Executive's termination:
5.1. Termination Without Cause. If the Executive's
employment is terminated by the Employer without cause, and such termination is
not subject to the provisions of subparagraph 5.4 below, the Executive shall be
entitled to be paid the Applicable Percentage of the Executive Benefits, in
substantially equal monthly installments on the first day of each month,
beginning with the month following the month in which the Executive attains
fifty-five (55) years of age or any month thereafter, as requested in writing by
the Executive and delivered to the Employer or its successor thirty (30) days
prior to the commencement of installment payments; provided, however, that in
the event the Executive does not request a commencement date as specified, such
installments shall be paid on the first day of each month, beginning with the
month following the month in which the Executive attains sixty-two (62) years
of age. The installments shall be payable (i) for the period designated in
Schedule "D" in the case of the balance in the Benefit Account and (ii) until
the Executive's death in the case of the Index Benefit defined in Schedule "B".
5.2. Voluntary Termination by the Executive. If the
Executive's employment is terminated by voluntary resignation and such
resignation is not subject to the provisions of subparagraph 5.4 below, the
Executive shall be entitled to be paid the Applicable Percentage of the
Executive Benefits, in substantially equal monthly installments on the first day
of each month, beginning with the month following the month in which the
Executive attains fifty-five (55) years of age or any month thereafter, as
requested in writing by the Executive and delivered to the Employer or its
successor thirty (30) days prior to the commencement of installment payments;
provided, however, that in the event the Executive does not request a
commencement date as specified, such installments shall be paid on the first
day of each month, beginning with the month following the month in which the
Executive attains sixty-two (62) years of age. The installments shall be payable
(i) for the period designated in Schedule "D" in the case of the balance in the
Benefit Account and (ii) until the Executive's death in the case of the Index
Benefit defined in Schedule "B".
<PAGE> 93
5.3. Termination for Cause. The Executive agrees that if
the Executive's employment with the Employer is terminated "for cause" (as
defined in subparagraph 1.14 of this Agreement) and pursuant to subparagraph
1.14(c), (d) or (e), the Executive shall forfeit any and all rights and benefits
the Executive may have under the terms of this Agreement and shall have no right
to be paid any of the amounts which would otherwise be due or paid to the
Executive by the Employer pursuant to the terms of this Agreement. In the event
that the Executive's employment with the Employer is terminated "for cause"
pursuant to subparagraph 1.14(a), (b) or (f), the Executive shall be entitled to
be paid the Applicable Percentage of the Executive Benefits, in substantially
equal monthly installments on the first day of each month, beginning with the
month following the month in which the Executive attains fifty-five (55) years
of age or any month thereafter, as requested in writing by the Executive and
delivered to the Employer or its successor thirty (30) days prior to the
commencement of installment payments; provided, however, that in the event
the Executive does not request a commencement date as specified, such
installments shall be paid on the first day of each month, beginning with the
month following the month in which the Executive attains sixty-two (62) years
of age. The installments shall be payable (i) for the period designated in
Schedule "D" in the case of the balance in the Benefit Account and (ii) until
the Executive's death in the case of the Index Benefit defined in Schedule "B".
5.4. Termination by the Employer on Account of or After
a Change in Control. In the event: (i) the Executive's employment with the
Employer is terminated by the Employer in conjunction with, or by reason of, a
"Change in Control" (as defined in subparagraph 1.4 above); or (ii) by reason of
the Employer's actions any adverse and material change occurs in the scope of
the Executive's position, responsibilities, duties, salary, benefits, or
location of employment (which in the event of relocation of more than thirty
(30) miles from the location of the Executive's office prior to a Change in
Control shall constitute such an adverse and material change) after a Change
in Control occurs; or (iii) the Employer 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 in
Control occurs, then the Executive shall be entitled to be paid the Applicable
Percentage of the Executive Benefits, as defined above, in substantially
equal monthly installments on the first day of each month, beginning with the
month following the month in which the Executive attains fifty-five (55) years
of age or any month thereafter, as requested in writing by the Executive and
delivered to the Employer or its successor thirty (30) days prior to the
commencement of installment payments; provided, however, that in the event the
Executive does not request a commencement date as specified, such installments
shall be paid on the first day of each month, beginning with the month following
the month in which the Executive attains sixty-two (62) years of age.
The installments shall be payable (i) for the period designated in Schedule "D"
in the case of the balance in the Benefit Account and (ii) until the Executive's
death in the case of the Index Benefit defined in Schedule "B". In the absence
of the occurrence of an
<PAGE> 94
event described above in this subparagraph 5.4 (i), (ii) or (iii), the
provisions of this Agreement shall remain in full force and effect, provided,
however, that the Executive shall not be entitled to receive any payments or
benefits under this Agreement in the event of the Executive's voluntary
termination by resignation under subparagraph 5.2 of this Agreement within six
(6) months following a Change in Control.
5.5. Payments in the Event of Death Following Termination.
If the Executive dies prior to receiving all of the Executive Benefits described
in this Paragraph 5 to which the Executive is entitled, then the Employer
will make such payments to the Executive's designated beneficiary in lump sum.
If a valid Beneficiary Designation is not in effect, then the remaining amounts
due to the Executive under the terms of this Agreement shall be paid to the
Executive's Surviving Spouse. If the Executive leaves no Surviving Spouse, the
remaining amounts due to the Executive under the terms of this Agreement shall
be paid to the duly qualified personal representative, executor or administrator
of the Executive's estate.
6. Section 280G Adjustment. The Executive acknowledges and
agrees that the parties have entered into this Agreement based upon certain
financial and tax accounting assumptions. Accordingly, with full knowledge of
the potential consequences the Executive agrees that, notwithstanding anything
contained herein to the contrary, in the event that any payment or benefit
received or to be received by the Executive, whether payable pursuant to the
terms of this Agreement or any other plan, arrangement or agreement with the
Employer (together with the Executive Benefits, the "Total Payments"), will not
be deductible (in whole or in part) as a result of Code Section 280G or other
applicable provisions of the Code, the Total Payments shall be reduced until no
portion of the Total Payments is nondeductible as a result of Section 280G or
such other applicable provisions of the Code. For purposes of this limitation:
(a) No portion of the Total Payments, the receipt or
enjoyment of which the Executive shall have effectively waived in writing prior
to the date of payment of any future Executive Benefits payments, shall be taken
into account;
(b) No portion of the Total Payments shall be taken
into account, which in the opinion of the tax counsel selected by the Employer
and acceptable to the Executive, does not constitute a "parachute payment"
within the meaning of Section 280G of the Code;
(c) Any reduction of the Total Payments shall be
applied to reduce any payment or benefit received or to be received by the
Executive pursuant to the terms of this Agreement and any other plan,
arrangement or agreement with the Employer in the order determined by mutual
agreement of the Employer and the Executive;
(d) Future payments shall be reduced only to the
extent necessary so that the Total Payments (other than those referred to in
clauses (a) or (b) above in their
<PAGE> 95
entirety) constitute reasonable compensation for services actually rendered
within the meaning of Section 280G of the Code, in the opinion of tax counsel
referred to in clause (b) above; and
(e) The value of any non-cash benefit or any
deferred payment or benefit included in the Total Payments shall be determined
by independent auditors selected by the Employer and acceptable to the Executive
in accordance with the principles of Section 280G of the Code.
7. Right To Determine Funding Methods. The Employer reserves
the right to determine, in its sole and absolute discretion, whether, to what
extent and by what method, if any, to provide for the payment of the amounts
which may be payable to the Executive, the Executive's spouse or the Executive's
beneficiaries under the terms of this Agreement. In the event that the Employer
elects to fund this Agreement, in whole or in part, through the use of life
insurance or annuities, or both, the Employer shall determine the ownership and
beneficial interests of any such policy of life insurance or annuity.
The Employer further reserves the right, in its sole and absolute discretion, to
terminate any such policy, and any other device used to fund its obligations
under this Agreement, at any time, in whole or in part. Consistent with
Paragraph 9 below, neither the Executive, the Executive's spouse nor the
Executive's beneficiaries shall have any right, title or interest in or
to any funding source or amount utilized by the Employer pursuant to this
Agreement, and any such funding source or amount shall not constitute security
for the performance of the Employer's obligations pursuant to this Agreement.
In connection with the foregoing, the Executive agrees to execute such documents
and undergo such medical examinations or tests which the Employer may request
and which may be reasonably necessary to facilitate any funding for this
Agreement including, without limitation, the Employer's acquisition of any
policy of insurance or annuity. Furthermore, a refusal by the Executive to
consent to, participate in and undergo any such medical examinations or tests
shall result in the immediate termination of this Agreement and the immediate
forfeiture by the Executive, the Executive's spouse and the Executive's
beneficiaries of any and all rights to payment hereunder.
8. Claims Procedure. The Employer shall, but only to the extent
necessary to comply with ERISA, be designated as the named fiduciary under this
Agreement and shall have authority to control and manage the operation and
administration of this Agreement. Consistent therewith, the Employer shall make
all determinations as to the rights to benefits under this Agreement. Any
decision by the Employer denying a claim by the Executive, the Executive's
spouse, or the Executive's beneficiary for benefits under this Agreement shall
be stated in writing and delivered or mailed, via registered or certified mail,
to the Executive, the Executive's spouse or the Executive's beneficiary, as the
case may be. Such decision shall set forth the specific reasons for the denial
of a claim. In addition, the Employer shall provide the Executive, the
Executive's spouse or the Executive's beneficiary with a reasonable opportunity
for a full and fair review of the decision denying such claim.
<PAGE> 96
9. Status as an Unsecured General Creditor. Notwithstanding
anything contained herein to the contrary: (i) neither the Executive, the
Executive's spouse or the Executive's designated beneficiaries shall have any
legal or equitable rights, interests or claims in or to any specific property or
assets of the Employer as a result of this Agreement; (ii) none of the
Employer's assets shall be held in or under any trust for the benefit of the
Executive, the Executive's spouse or the Executive's designated beneficiaries
or held in any way as security for the fulfillment of the obligations of the
Employer under this Agreement; (iii) all of the Employer's assets shall be and
remain the general unpledged and unrestricted assets of the Employer; (iv) the
Employer's obligation under this Agreement shall be that of an unfunded and
unsecured promise by the Employer to pay money in the future; and (v) the
Executive, the Executive's spouse and the Executive's designated beneficiaries
shall be unsecured general creditors with respect to any benefits which may be
payable under the terms of this Agreement.
Notwithstanding subparagraphs (i) through (v) above, the
Employer and the Executive acknowledge and agree that, in the event of a Change
in Control, upon request of the Executive, or in the Employer's discretion if
the Executive does not so request and the Employer nonetheless deems it
appropriate, the Employer shall establish, not later than the effective date of
the Change in Control, a Rabbi Trust or multiple Rabbi Trusts (the "Trust" or
"Trusts") upon such terms and conditions as the Employer, in its sole
discretion, deems appropriate and in compliance with applicable provisions of
the Code, in order to permit the Employer to make contributions and/or transfer
assets to the Trust or Trusts to discharge its obligations pursuant to this
Agreement. The principal of the Trust or Trusts and any earnings thereon shall
be held separate and apart from other funds of the Employer to be used
exclusively for discharge of the Employer's obligations pursuant to this
Agreement and shall continue to be subject to the claims of the Employer's
general creditors until paid to the Executive or its beneficiaries in such
manner and at such times as specified in this Agreement.
10. Discretion of Board to Accelerate Payout. Notwithstanding any
of the other provisions of this Agreement, the Board of Directors of the
Employer may, if determined in its sole and absolute discretion to be
appropriate, accelerate the payment of the amounts due under the terms of
this Agreement, provided that Executive (or Executive's spouse or designated
beneficiaries): (i) consents to the revised payout terms determined
appropriate by the Employer's Board of Directors; and (ii) does not negotiate
or in anyway influence the terms of proposed altered/accelerated payout (said
decision to be made solely by the Employer's Board of Directors and offered
to the Executive [or Executive's spouse or designated beneficiaries] on a "take
it or leave it basis").
11. Miscellaneous.
11.1. Opportunity To Consult With Independent Advisors.
The Executive acknowledges that he has been afforded the opportunity to consult
with independent
<PAGE> 97
advisors of his choosing including, without limitation, accountants or tax
advisors and counsel regarding both the benefits granted to him under the
terms of this Agreement and the (i) terms and conditions which may affect the
Executive's right to these benefits and (ii) personal tax effects of such
benefits including, without limitation, the effects of any federal or state
taxes, Section 280G of the Code, and any other taxes, costs, expenses or
liabilities whatsoever related to such benefits, which in any of the foregoing
instances the Executive acknowledges and agrees shall be the sole responsibility
of the Executive notwithstanding any other term or provision of this Agreement.
The Executive further acknowledges and agrees that the Employer shall have no
liability whatsoever related to any such personal tax effects or other personal
costs, expenses, or liabilities applicable to the Executive and further
specifically waives any right for the Executive, himself, and his heirs,
beneficiaries, legal representatives, agents, successors, and assigns to claim
or assert liability on the part of the Employer related to the matters described
above in this subparagraph 11.1. The Executive further acknowledges and agrees
that he has read, understands and consents to all of the terms and conditions of
this Agreement, and that he enters into this Agreement with a full understanding
of its terms and conditions.
11.2. Arbitration of Disputes. All claims, disputes and other
matters in question arising out of or relating to this Agreement or the breach
or interpretation thereof, other than those matters which are to be determined
by the Employer in its sole and absolute discretion, shall be resolved by
binding arbitration before a representative member, selected by the mutual
agreement of the parties, of the Judicial Arbitration and Mediation Services,
Inc. ("JAMS"), located in San Francisco, California. In the event JAMS is
unable or unwilling to conduct the arbitration provided for under the terms of
This Paragraph, or has discontinued its business, the parties agree that a
representative member, selected by the mutual agreement of the parties, of the
American Arbitration Association ("AAA"), located in San Francisco, California,
shall conduct the binding arbitration referred to in this Paragraph. Notice of
the demand for arbitration shall be filed in writing with the other party to
this Agreement and with JAMS (or AAA, if necessary). In no event shall the
demand for arbitration be made after the date when institution of legal or
equitable proceedings based on such claim, dispute or other matter in question
would be barred by the applicable statute of limitations. The arbitration shall
be subject to such rules of procedure used or established by JAMS, or if there
are none, the rules of procedure used or established by AAA. Any award rendered
by JAMS or AAA shall be final and binding upon the parties, and as applicable,
their respective heirs, beneficiaries, legal representatives, agents,
successors and assigns, and may be entered in any court having jurisdiction
thereof. The obligation of the parties to arbitrate pursuant to this clause
shall be specifically enforceable in accordance with, and shall be conducted
consistently with, the provisions of Title 9 of Part 3 of the California Code
of Civil Procedure. Any arbitration hereunder shall be conducted in Saratoga,
California, unless otherwise agreed to by the parties.
11.3. Attorneys' Fees. In the event of any arbitration or
litigation concerning any controversy, claim or dispute between the parties
hereto, arising out of or relating to this
<PAGE> 98
Agreement or the breach hereof, or the interpretation hereof, the prevailing
party shall be entitled to recover from the non-prevailing party reasonable
expenses, attorneys' fees and costs incurred in connection therewith or in the
enforcement or collection of any judgment or award rendered therein. The
"prevailing party" means the party determined by the arbitrator(s) or court,
as the case may be, to have most nearly prevailed, even if such party did not
prevail in all matters, not necessarily the one in whose favor a judgment is
rendered.
11.4. Notice. Any notice required or permitted of either the
Executive or the Employer under this Agreement shall be deemed to have been
duly given, if by personal delivery, upon the date received by the party or its
authorized representative; if by facsimile, upon transmission to a telephone
number previously provided by the party to whom the facsimile is transmitted as
reflected in the records of the party transmitting the facsimile and upon
reasonable confirmation of such transmission; and if by mail, on the third day
after mailing via U.S. first class mail, registered or certified, postage
prepaid and return receipt requested, and addressed to the party at the address
given below for the receipt of notices, or such changed address as may be
requested in writing by a party.
If to the Employer: Saratoga National Bank
12000 Saratoga-Sunnyvale Rd.
Saratoga, California 95070
Attn: Chairman of the Board
If to the Executive: ______________________
______________________
______________________
11.5. Assignment. Neither the Executive, the Executive's
spouse, nor any other beneficiary under this Agreement shall have any power or
right to transfer, assign, anticipate, hypothecate, modify or otherwise encumber
any part or all of the amounts payable hereunder, nor, prior to payment in
accordance with the terms of this Agreement, shall any portion of such amounts
be: (i) subject to seizure by any creditor of any such beneficiary, by a
proceeding at law or in equity, for the payment of any debts, judgments, alimony
or separate maintenance obligations which may be owed by the Executive, the
Executive's spouse, or any designated beneficiary; or (ii) transferable by
operation of law in the event of bankruptcy, insolvency or otherwise. Any such
attempted assignment or transfer shall be void and unenforceable without the
prior written consent of the Employer. The Employer's consent, if any, to one
or more assignments or transfers shall not obligate the Employer to consent to
or be construed as the Employer's consent to any other or subsequent assignment
or transfer.
<PAGE> 99
11.6. Binding Effect/Merger or Reorganization. This Agreement
shall be binding upon and inure to the benefit of the Executive and the
Employer and, as applicable, their respective heirs, beneficiaries, legal
representatives, agents, successors and assigns. Accordingly, the Employer
shall not merge or consolidate into or with another corporation, or reorganize
or sell substantially all of its assets to another corporation, firm or person,
unless and until such succeeding or continuing corporation, firm or person
agrees to assume and discharge the obligations of the Employer under this
Agreement. Upon the occurrence of such event, the term "Employer" as used in
this Agreement shall be deemed to refer to such surviving or successor firm,
person, entity or corporation.
11.7. Nonwaiver. The failure of either party to enforce at any time
or for any period of time any one or more of the terms or conditions of this
Agreement shall not be a waiver of such term(s) or condition(s) or of that
party's right thereafter to enforce each and every term and condition of this
Agreement.
11.8. Partial Invalidity. If any term, provision, covenant, or
condition of this Agreement is determined by an arbitrator or a court, as the
case may be, to be invalid, void, or unenforceable, such determination shall
not render any other term, provision, covenant or condition invalid, void or
unenforceable, and the Agreement shall remain in full force and effect
notwithstanding such partial invalidity.
11.9. Entire Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties with respect to
the subject matter of this Agreement and contains all of the covenants and
agreements between the parties with respect thereto. Each party to this
Agreement acknowledges that no other representations, inducements, promises, or
agreements, oral or otherwise, have been made by any party, or anyone acting on
behalf of any party, which are not set forth herein, and that no other
agreement, statement, or promise not contained in this Agreement shall be valid
or binding on either party.
11.10. Modifications. Any modification of this Agreement shall
be effective only if it is in writing and signed by each party or such party's
authorized representative.
11.11. Paragraph Headings. The paragraph headings used in this
Agreement are included solely for the convenience of the parties and shall not
affect or be used in connection with the interpretation of this Agreement.
11.12. No Strict Construction. The language used in this
Agreement shall be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction will be applied
against any person.
<PAGE> 100
11.13. Governing Law. The laws of the State of California, other
than those laws denominated choice of law rules, and, where applicable, the
rules and regulations of the Board of Governors of the Federal Reserve System,
Federal Deposit Insurance Corporation, Office of the Comptroller of the
Currency, or other regulatory agency or governmental authority having
jurisdiction over Employer, shall govern the validity, interpretation,
construction and effect of this Agreement.
IN WITNESS WHEREOF, the Employer and the Executive have executed this
Agreement on the date first above-written in the City of Saratoga, Santa Clara
County, California.
THE EMPLOYER THE EXECUTIVE
SARATOGA NATIONAL BANK
By:____________________________ _____________________________
Richard L. Mount, __________________
President and Chief
Executive Officer
<PAGE> 101
SCHEDULE A
CALENDAR YEAR APPLICABLE PERCENTAGE
___________, 1987 to December 31, 1998 . . . 50.00%
December 31, 1999. . . . . . . . . . . . . . 60.00%
December 31, 2000. . . . . . . . . . . . . . 70.00%
December 31, 2001. . . . . . . . . . . . . . 80.00%
December 31, 2002. . . . . . . . . . . . . . 90.00%
December 31, 2003. . . . . . . . . . . . . . 100.00%
<PAGE> 102
SCHEDULE B
EXECUTIVE BENEFITS
1. Executive Benefits Determination.
The Executive Benefits shall be determined based upon the following:
a. Benefit Account:
A Benefit Account shall be established as a liability reserve
account on the books of the Employer for the benefit of the
Executive. Prior to the date on which the Executive becomes
eligible to receive payments under the Agreement, such Benefit
Account shall be increased (or decreased) each Plan Year
(including the Plan Year in which the Executive ceases to be
employed by the Employer) by an amount equal to the annual
earnings or loss for that Plan Year determined by the Index
(described in subparagraph c below), less the Opportunity Cost
(described in subparagraph d below) for that Plan Year.
b. Index Benefit:
After the date on which the Executive becomes eligible to receive
payments under the Agreement, the Index Benefit for the
Executive for any Plan Year shall be determined by subtracting the
Opportunity Cost for that Plan Year from the earnings, if any,
established by the Index.
c. Index:
The Index for any Plan Year shall be the aggregate annual after-tax
income from the life insurance contracts described hereinafter as
defined by FASB Technical Bulletin 85-4. This Index shall be
applied as if such insurance contracts were purchased on the
Effective Date.
Insurance Company(ies)/Policy Number(s):
_________________________
_________________________
If such contracts of life insurance are actually purchased by the
Employer, then the actual policies as of the dates purchased shall
be used in calculations to determine the Index and Opportunity
Cost. If such contracts of life insurance are not purchased or are
subsequently surrendered or lapsed, then the Employer shall
<PAGE> 103
receive and use annual policy illustrations that assume the above
described policies were purchased from the above named insurance
company(ies) on the Effective Date to calculate the amount of the
Index and Opportunity Cost.
d. Opportunity Cost:
The Opportunity Cost for any Plan Year shall be calculated by
multiplying (a) the sum of (i) the total amount of premiums set
forth in the insurance policies described above, (ii) the amount of
any Index Benefits (described at subparagraph b above), and (iii)
the amount of all previous years after-tax Opportunity Costs; by
(b) the average annualized after-tax cost of funds calculated using
a one-year U.S. Treasury Bill as published in the Wall Street
Journal. The applicable tax rate used to calculate the Opportunity
Cost shall be the Employer's marginal tax rate until the Executive's
Retirement, or other termination of service (including a Change in
Control). Thereafter, the Opportunity Cost shall be calculated
with the assumption of a marginal forty-two percent (42%)
corporate tax rate each year regardless of whether the actual
marginal tax rate of the Employer is higher or lower.
EXAMPLE
INDEX BENEFITS
[n]
End of Cash Surrender Index Opportunity Annual Cumulative
Year Value of Life [Annual Cost Benefit Benefit
Insurance Policy Policy A0=premium B-C D+Dn-1
Income] A0+Cn-1x.05x
An-An-1 (1-42%)
0 $1,000,000 -- -- -- --
1 $1,050,000 $50,000 $29,000 $21,000 $21,000
2 $1,102,500 $52,500 $29,840 $22,650 $43,659
3 $1,157,620 $55,120 $30,700 $24,410 $68,078
.
.
.
Assumptions: Initial Insurance = $1,000,000
Effective Tax Rate = 42%
One Year US Treasury Yield = 5%
<PAGE> 104
2. Executive Benefits Payments.
The Executive shall be entitled to payment of the Applicable Percentage of
(i) the balance in the Benefit Account in installments upon the terms as
specified in the Agreement, and (ii) the Index Benefit for each Plan Year
payable in installments until the Executive's death.
<PAGE> 105
SCHEDULE C
BENEFICIARY DESIGNATION
To the Administrator of the Saratoga National Bank Executive Supplemental
Compensation Agreement:
Pursuant to the Provisions of my Executive Supplemental Compensation
Agreement with Saratoga National Bank, permitting the designation of a
beneficiary or beneficiaries by a participant, I hereby designate the following
persons and entities as primary and secondary beneficiaries of any benefit under
said Agreement payable by reason of my death:
Primary Beneficiary:
______________________ ____________________ _____________________________
Name Address Relationship
Secondary (Contingent) Beneficiary:
______________________ _____________________ ____________________________
Name Address Relationship
THE RIGHT TO REVOKE OR CHANGE ANY BENEFICIARY
DESIGNATION IS HEREBY RESERVED. ALL PRIOR DESIGNATIONS,
IF ANY, OF PRIMARY BENEFICIARIES AND SECONDARY
BENEFICIARIES ARE HEREBY REVOKED.
The Administrator shall pay all sums payable under the Agreement by reason
of my death to the Primary Beneficiary, if he or she survives me, and if no
Primary Beneficiary shall survive me, then to the Secondary Beneficiary, and if
no named beneficiary survives me, then the Administrator shall pay all amounts
in accordance with the terms of my Executive Supplemental Compensation
Agreement. In the event that a named beneficiary survives me and dies prior to
receiving the entire benefit payable under said Agreement, then and in that
event, the remaining
<PAGE> 106
unpaid benefit payable according to the terms of my Executive Supplemental
Compensation Agreement shall be payable to the personal representatives of the
estate of said beneficiary who survived me but died prior to receiving the total
benefit provided by my Executive Supplemental Compensation Agreement.
Dated: _____________, 1998 ________________________
__________________
CONSENT OF THE EXECUTIVE'S SPOUSE
TO THE ABOVE BENEFICIARY DESIGNATION:
I, _____________, being the spouse of __________________, after being
afforded the opportunity to consult with independent counsel of my choosing, do
hereby acknowledge that I have read, agree and consent to the foregoing
Beneficiary Designation which relates to the Executive Supplemental
Compensation Agreement entered into by my spouse effective as of _________,
1998. I understand that the above Beneficiary Designation may affect certain
rights which I may have in the benefits provided for under the terms of the
Executive Supplemental Compensation Agreement and in which I may have a
marital property interest.
Dated: _____________, 1998
___________________________
_________________
<PAGE> 107
SCHEDULE D
DISTRIBUTION ELECTION
Pursuant to the Provisions of my Executive Supplemental Compensation Agreement
with Saratoga National Bank, I hereby elect to have any distribution of the
balance in my Benefit Account paid to me in installments as designated below:
thirty-six (36) monthly installments with the amount of each installment
determined as of each installment date by dividing the entire amount in
my Benefit account by the number of installments then remaining to be
paid, with the final installment to be the entire remaining balance in the
Benefit Account.
sixty (60) monthly installments with the amount of each installment
determined as of each installment date by dividing the entire amount in
my Benefit Account by the number of installments then remaining to be
paid, with the final installment to be the entire remaining balance in
the Benefit Account.
one hundred twenty (120) monthly installments with the amount of each
installment determined as of each installment date by dividing the
entire amount in my Benefit Account by the number of installments then
remaining to be paid, with the final installment to be the entire
remaining balance in the Benefit Account.
one hundred eighty (180) monthly installments with the amount of each
installment determined as of each installment date by dividing the
entire amount in my Benefit Account by the number of installments then
remaining to be paid, with he final installment to be the entire
remaining balance in the Benefit Account.
Dated: _______________, 1998
Signed: _____________________________
__________________
<PAGE> 108
LIFE INSURANCE
ENDORSEMENT METHOD SPLIT DOLLAR PLAN
AGREEMENT
Insurer/Policy Number: ______________________
______________________
Bank: Saratoga National Bank
Insured: __________________
Relationship of Insured to Bank: ____________________
Date: _____________, 1998
The respective rights and duties of the Bank and the Insured in the above
policy(ies) (individually and collectively referred to as the "Policy") shall be
as follows:
I. DEFINITIONS
Refer to the Policy provisions for the definition of all terms in this
Agreement.
II. POLICY TITLE AND OWNERSHIP
Title and ownership shall reside in the Bank for its use and for the use
of the Insured all in accordance with this Agreement. The Bank alone
may, to the extent of its interest, exercise the right to borrow or
withdraw the Policy cash values. Where the Bank and the Insured (or
beneficiary[ies] or assignee[s], with the consent of the Insured)
mutually agree to exercise the right to increase the coverage under the
subject split dollar Policy, then, in such event, the rights, duties and
benefits of the parties to such increased coverage shall continue to be
subject to the terms of this Agreement.
III. BENEFICIARY DESIGNATION RIGHTS
The Insured (or beneficiary[ies] or assignee[s]) shall have the right and
power to designate a beneficiary or beneficiaries to receive his or her
share of the proceeds payable upon the death of the Insured, and to
elect and change a payment option for such beneficiary, subject to any
right or interest the Bank may have in such proceeds, as provided in
this Agreement.
IV. PREMIUM PAYMENT METHOD
<PAGE> 109
The Bank shall pay an amount equal to the planned premiums and any
other premium payments that might become necessary to maintain the
Policy in force.
V. TAXABLE BENEFIT
Annually the Insured will receive a taxable benefit equal to the
assumed cost of insurance as required by the Internal Revenue
Service. The Bank (or its administrator) will report to the Insured the
amount of imputed income received each year on Form W-2 or its
equivalent.
VI. DIVISION OF DEATH PROCEEDS
Subject to Paragraph VII herein, the division of the death proceeds of
the Policy is as follows:
1. The Insured's beneficiary(ies), designated in accordance with
Paragraph III, shall be entitled to an amount equal to eighty
percent (80%) of the net at risk insurance portion of the
proceeds. The net at risk insurance portion is the total
proceeds less the cash value of the Policy.
2. The Bank shall be entitled to the remainder of such proceeds.
3. The Bank and the Insured (or beneficiary[ies] or assignee[s])
shall share in any interest due on the death proceeds on a pro
rata basis in the ratio that the proceeds due the Bank and the
Insured, respectively, bears to the total proceeds, excluding
any such interest.
VII. DIVISION OF CASH SURRENDER VALUE
The Bank shall at all times be entitled to an amount equal to the
Policy's cash value, as that term is defined in the Policy, less any
Policy loans and unpaid interest or cash withdrawals previously
incurred by the Bank and any applicable Policy surrender charges.
Such cash value shall be determined as of the date of surrender of the
Policy or death of the Insured as the case may be.
VIII. PREMIUM WAIVER
If the Policy contains a premium waiver provision, any such waived
amounts shall be considered for all purposes of this Agreement as
having been paid by the Bank.
IX. RIGHTS OF PARTIES WHERE POLICY ENDOWMENT OR
ANNUITY ELECTION EXISTS
In the event the Policy involves an endowment or annuity element, the
Bank's right and interest in any endowment proceeds or annuity
benefits shall be determined under the
<PAGE> 110
provisions of this Agreement by
regarding such endowment proceeds or the commuted value of such
annuity benefits as the Policy's cash value. Such endowment proceeds
or annuity benefits shall be treated like death proceeds for the
purposes of division under this Agreement.
X. TERMINATION OF AGREEMENT
This Agreement shall terminate at the option of the Bank following
thirty (30) days written notice to the Insured upon the happening of
any one of the following:
1. The Insured's right to receive benefits pursuant to the terms
and conditions of that certain Executive Supplemental
Compensation Agreement effective as of ___________, 1998,
shall terminate for any reason other than the Insured's death;
or
2. The Insured shall be discharged from service with the Bank as
a result of a termination for cause under subparagraph (c), (d)
or (e) below. Notwithstanding the foregoing, this Agreement
shall remain in effect in the event that the Insured is terminated
pursuant to subparagraph (a), (b) or (f) below. The term
"termination for cause" shall mean termination of the
employment of the Insured by reason of any of the following
determined in good faith by the Bank's Board of Directors:
(a) The willful, intentional and material breach or
the habitual and continued neglect by the
Insured of his or her employment
responsibilities and duties;
(b) The continuous mental or physical incapacity
of the Insured, subject to disability rights
under this Agreement;
(c) The Insured's willful and intentional violation
of any federal banking or securities laws, or of
the Bylaws, rules, policies or resolutions of
Bank, or the rules or regulations of the Board
of Governors of the Federal Reserve System,
Federal Deposit Insurance Corporation, Office
of the Comptroller of the Currency, or other
regulatory agency or governmental authority
having jurisdiction over the Bank, which has a
material adverse effect upon the Bank;
(d) The written determination by a state or federal
banking agency or governmental authority
having jurisdiction over the Bank that the
Insured is not suitable to act in the capacity for
which he or she is employed by the Bank;
<PAGE> 111
(e) The Insured's conviction of (i) any felony or
(ii) a crime involving moral turpitude, or the
Insured's willful and intentional commission of
a fraudulent or dishonest act; or
(f) The Insured's willful and intentional disclosure,
without authority, of any secret or confidential
information concerning the Bank or taking any
action which the Bank's Board of Directors
determines, in its sole discretion and subject to
good faith, fair dealing and reasonableness,
constitutes unfair competition with or induces
any customer to breach any contract with the
Bank.
Upon such termination, the Insured (or beneficiary[ies] or assignee[s])
shall have a ninety (90) day option to receive from the Bank an
absolute assignment of the Policy in consideration of a cash payment
to the Bank, whereupon this Agreement shall terminate. Such cash
payment shall be the greater of:
1. The Bank's share of the cash value of the Policy on the date of
such assignment, as defined in this Agreement.
2. The amount of the premiums which have been paid by the
Bank prior to the date of such assignment.
Should the Insured (or beneficiary[ies] or assignee[s]) fail to exercise
this option within the prescribed ninety (90) day period, the Insured
(or beneficiary[ies] or assignee[s]) agrees that all of his or her rights,
interest and claims in the Policy shall terminate as of the date of the
termination of this Agreement.
Except as provided above, this Agreement shall terminate upon
distribution of the death benefit proceeds in accordance with
Paragraph VI above.
XI. INSURED'S OR ASSIGNEE'S ASSIGNMENT RIGHTS
The Insured may not, without the prior written consent of the Bank,
which shall not be unreasonably withheld, assign to any individual,
trust or other organization, any right, title or interest in the Policy nor
any rights, options, privileges or duties created under this Agreement.
XII. AGREEMENT BINDING UPON THE PARTIES
This Agreement shall be binding upon the Insured and the Bank, and
their respective heirs, successors, personal representatives and assigns,
as applicable.
XIII. NAMED FIDUCIARY AND PLAN ADMINISTRATOR
<PAGE> 112
The Bank is hereby designated the "Named Fiduciary" until
resignation or removal by its Board of Directors. As Named
Fiduciary, the Bank shall be responsible for the management, control,
and administration of this Agreement as established herein. The
Named Fiduciary may allocate to others certain aspects of the
management and operations responsibilities of this Agreement,
including the employment of advisors and the delegation of any
ministerial duties to qualified individuals.
XIV. FUNDING POLICY
The funding policy for this Agreement shall be to maintain the Policy
in force by paying, when due, all premiums required.
XV. CLAIM PROCEDURES
Claim forms or claim information as to the subject Policy can be
obtained by contacting The Benefit Marketing Group, Inc. (770-952-1529).
When the Named Fiduciary has a claim which may be covered
under the provisions described in the Policy, it should contact the
office named above, and they will either complete a claim form and
forward it to an authorized representative of the Insurer or advise the
named Fiduciary what further requirements are necessary. The
Insurer will evaluate and make a decision as to payment. If the claim
is payable, a benefit check will be issued to the Named Fiduciary.
In the event that a claim is not eligible under the Policy, the Insurer
will notify the Named Fiduciary of the denial pursuant to the
requirements under the terms of the Policy. If the Named Fiduciary
is dissatisfied with the denial of the claim and wishes to contest such
claim denial, it should contact the office named above and they will
assist in making inquiry to the Insurer. All objections to the Insurer's
actions should be in writing and submitted to the office named above
for transmittal to the Insurer.
XVI. GENDER
Whenever in this Agreement words are used in the masculine or
neuter gender, they shall be read and construed as in the masculine,
feminine or neuter gender, whenever they should so apply.
XVII. INSURANCE COMPANY NOT A PARTY TO THIS AGREEMENT
The Insurer shall not be deemed a party to this Agreement, but will
respect the rights of the parties as set forth herein upon receiving an
executed copy of this Agreement. Payment or other performance in
accordance with the Policy provisions shall fully discharge the Insurer
from any and all liability.
<PAGE> 113
IN WITNESS WHEREOF, the Insured and a duly authorized Bank
officer or director have signed this Agreement at Saratoga, California as of the
date first above written.
SARATOGA NATIONAL BANK INSURED
__________________________ ________________________________
Richard L. Mount _____________________
President and Chief Executive Officer
<PAGE> 114
BENEFICIARY DESIGNATION FORM
Primary Designation:
Name Relationship
_____________________________ _______________________________________
_____________________________ _______________________________________
_____________________________ _______________________________________
Contingent Designation:
_____________________________ _______________________________________
_____________________________ _______________________________________
_____________________________ _______________________________________
_____________________________ _____________, 1998
___________________
<PAGE> 156
SARATOGA NATIONAL BANK
ESP EXECUTIVE BENEFITS AGREEMENT
THIS EXECUTIVE BENEFITS AGREEMENT is entered into on
June 18, 1999 by and between Saratoga National Bank ("Employer") and
Richard L. Mount ("Executive") for the purposes set forth hereinafter.
RECITALS
WHEREAS, the Executive has been an employee of the Employer
since April 15, 1982, and is currently serving as its President and Chief
Executive Officer;
WHEREAS, the Employer and the Executive desire to establish a
benefit arrangement for the Executive to be funded through insurance
premium contributions by the Executive and certain supplemental insurance
premium contributions by the Employer;
WHEREAS, it is deemed to be in the best interests of the Employer
to provide the Executive with such supplemental insurance premium
contributions in order to eliminate certain unresolved benefit deficiencies
in connection with that certain Executive Supplemental Compensation
Agreement between the Employer and the Executive, dated September 24,
1998, on the terms and conditions set forth herein; and
WHEREAS, the Executive and the Employer wish to specify in
writing the terms and conditions upon which this additional benefit will be
provided to the Executive, or to the Executive's spouse or other designated
beneficiary, as the case may be.
NOW, THEREFORE, in consideration of the services to be
performed by the Executive in the future, as well as the mutual promises
and covenants contained herein, the Executive and the Employer agree as
follows:
<PAGE> 157
AGREEMENT
ARTICLE I
DEFINITIONS AND TERMS
1.1 Administrator. The Benefits Marketing Group, Inc. shall be
the "Administrator" and, solely for the purposes of ERISA as defined in
subparagraph 1.10 below, the "fiduciary" of this Agreement where a
fiduciary is required by ERISA.
1.2 Anniversary Date. The term "Anniversary Date" shall mean
the first day of each Policy Year.
1.3 Beneficiary. The term "Beneficiary" shall mean the
person(s) or entity(ies) whom the Executive shall designate in a valid
Beneficiary Designation, a copy of which is attached hereto as Schedule
"A," to receive the benefits provided hereunder. A Beneficiary Designation
shall be valid only if it is in the form attached hereto and made a part
hereof, completed and signed by the Executive and received by the
Administrator prior to the Executive's death.
1.4 Change in Control. The term "Change in Control" shall
mean the occurrence of any of the following events with respect to the
Employer (with the term "Employer" being defined for purposes of
determining whether a "Change in Control" has occurred to include any
parent bank holding company owning 100% of the Employer's outstanding
common stock): (i) a change in control of a nature that would be required
to be reported in response to Item 6(e) of Schedule 14A of 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
regulatory agencies or governmental authorities having jurisdiction over the
Employer or any stock exchange on which the Employer's shares are listed
which requires the reporting of a change in control; (ii) any merger,
consolidation or reorganization of the Employer in which the Employer
does not survive; (iii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition (in one transaction
<PAGE> 158
or a series of transactions) of any assets of the Employer having an aggregate
fair market value of fifty percent (50%) of the total value of the assets of
the Employer, reflected in the most recent balance sheet of the Employer; (iv)
a transaction whereby any "person" (as such term is used in the Exchange Act)
or any individual, corporation, partnership, trust or any other entity becomes
the beneficial owner, directly or indirectly, of securities of the Employer
representing twenty-five percent (25%) or more of the combined voting power of
the Employer's then outstanding securities; or (v) a situation where, in any
one-year period, individuals who at the beginning of such period constitute the
Board of Directors of the Employer cease for any reason to constitute at
least a majority thereof, unless the election, or the nomination for election
by the Employer's shareholders, of each new director is approved by a vote
of at least three-quarters (3/4) of the directors then still in office who were
directors at the beginning of the period.
1.5 Code. The "Code" shall mean the Internal Revenue Code of
1986, as amended (the "Code").
1.6 Committee. The Compensation Committee of the Board of
Directors of Employer.
1.7 Compensation. Compensation, with respect to any
Executive, means the portion of total compensation paid by the Employer,
including base salary, any Employer-paid bonuses, and excluding any non-taxable
fringe benefits provided by the Employer.
1.8 Disability. The term "Disability" shall have the same
meaning given such term in any policy of disability insurance maintained by
the Employer for the benefit of employees including the Executive. In the
absence of such a policy which extends coverage to the Executive in the
event of disability, the term shall mean bodily injury or disease (mental or
physical) which wholly and continuously prevents the performance of duty
for at least three months.
1.9 Effective Date. June 18, 1999.
<PAGE> 159
1.10 ERISA. The term "ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as amended.
1.11 Insurance Company. The Company(s) listed in Schedule
"B".
1.12 Plan Year. The initial Plan Year shall be the period
commencing on June 18, 1999 and ending on December 31, 1999.
Thereafter, the Plan Year shall be the same as the Policy Year.
1.13 Policy. The Policy purchased from the Insurance Company
pursuant to the terms of this Agreement and listed in Schedule "B".
1.14 Policy Year. The calendar year.
1.15 Retirement Date. The date of termination of the Executive's
employment with the Employer for any reason, including Disability,
voluntary or involuntary termination.
1.16 Surviving Spouse. The term "Surviving Spouse" shall mean
the person, if any, who shall be legally married to the Executive on the date
of the Executive's death.
ARTICLE II
SCOPE, PURPOSE AND EFFECT
2.1 Contract of Employment. Although this Agreement is
intended to provide the Executive with an additional incentive to remain in
the employ of the Employer, this Agreement shall not be deemed to
constitute a contract of employment between the Executive and the
Employer nor shall any provision of this Agreement restrict or expand the
right of the Employer to terminate the Executive's employment. This
Agreement shall have no impact or effect upon any separate written
Employment Agreement which the Executive may have with the Employer,
it being the parties' intention and agreement that unless this Agreement is
specifically referenced in said Employment Agreement (or any modification
thereto), this Agreement (and the Employer's obligations hereunder) shall
stand separate and apart and shall have no effect on or be affected by,
<PAGE> 160
the terms and provisions of said Employment Agreement.
2.2 Fringe Benefit. The benefits provided by this Agreement
are granted by the Employer as a fringe benefit to the Executive and are
not a part of any salary reduction plan or any arrangement deferring a
bonus or a salary increase. The Executive has no option to take any
current payments or bonus in lieu of the benefits provided by this
Agreement.
ARTICLE III
POLICY APPLICATION AND DATA
3.1 Application. The Employer and the Executive shall apply to
the Insurance Company for the Policy at the earliest practicable date.
When the Policy is issued, it shall be subject to the terms of this
Agreement.
3.2 Policy Data. The Insurance Company, Policy number,
initial amount of death benefit, and such other Policy data as may be
necessary or advisable to properly identify the Policy and benefits
thereunder shall be recorded on Schedule "B" attached hereto.
ARTICLE IV
PREMIUM/BONUS PAYMENTS
4.1 Executive Premiums. The Executive shall make five (5)
annual premium payments ("Executive's Premiums") each in an amount
equal to $42,079 individually and $210,395 in the aggregate.
4.2 Employer Premiums. The Employer shall make five (5)
annual premium payments ("Employer's Premiums") each in an amount
equal to $28,058 individually and $140,290 in the aggregate.
4.3 Premium Payment Date. The Executive's Premiums and the
Employer's Premiums shall be paid to the Insurance Company concurrently
on such date during the first five (5) Plan
<PAGE> 161
Years as may be required by the Insurance Company to comply with the terms of
this Agreement.
4.4 Bonus Payments/Taxes. The Employer shall make five (5)
annual bonus compensation payments to the Executive in the amount of
$70,137 individually and $350,685 in the aggregate (the "Bonus
Payments"). The Bonus Payments shall be paid not later than thirty (30)
days prior to the date that Employer Premiums and Executive Premiums
are required to be paid to the Insurance Company during the first five (5)
Plan Years pursuant to this Agreement. The Executive shall be responsible
for the payment of all taxes attributable to his receipt of such bonus
compensation payments from the Employer. ARTICLE V
OWNERSHIP AND ALLOCATION OF INSURANCE
5.1 Insurance Ownership. The ownership of the Policy cash
surrender value and death benefit shall be as follows:
(a) Cash Surrender Value. The Employer shall own that
portion of the total cash surrender value of the Policy equal to the total
amount of the Employer's Premiums and the Executive shall own the
remaining balance of the cash surrender value.
(b) Death Benefit. The Employer shall own that portion of
the death benefit pursuant to the Policy equal to the total of the Employer's
Premiums, plus interest on each of the Employer's Premiums accruing at
the rate of six (6%) percent per annum from the date of each premium
payment until the date of death, compounded annually. The remaining
balance of the death benefit shall be owned by the Executive's Beneficiary.
5.2 Limited Rights. Neither the Employer or the Executive
shall have or exercise any right in and to the portion of the Policy cash
surrender value or death benefit which is owned by or is payable to the
other party, including the right to borrow against or from the other party's
<PAGE> 162
portion of the cash surrender value of the Policy, the right to collect the
proceeds of the other party's portion of the death benefits of the Policy, or
take any actions which would reduce the other party's interest in the Policy.
5.3 Policy Possession. The Employer shall maintain possession
of the Policy. The Employer shall make the Policy available to the
Insurance Company to the extent necessary for the purpose of
endorsements or filing any change of Beneficiary in accordance with the
provisions of this Agreement. The Policy shall be returned promptly to the
Employer after any such action shall have been accomplished.
ARTICLE VI
POLICY BENEFIT PAYMENTS
6.1 Policy Withdrawals/Loans. Upon written notice to the
Administrator from the Executive on or after the Executive's Retirement
Date, the Executive shall be entitled to begin receiving Policy benefit
payments through withdrawals and/or loans of the Policy cash surrender
value to the extent of the Executive's ownership interest therein as set forth
in subparagraph 5.1 (a). Such benefit payments shall be received by the
Executive in annual installments beginning on the Anniversary Date
coincident with or next following the Retirement Date, based on a schedule
that may be changed from time to time, at the discretion of the Executive.
The calculation of the installments will be based on the crediting rate of the
Policy as of the Retirement Date. Should the crediting rate of the
Insurance Company fluctuate during the period of distribution, the amount
of the remaining installments shall be recalculated on an annual basis as of
each Anniversary Date. Upon the death of the Executive, the Beneficiary
shall receive any remaining amount pursuant to the death benefit payment
option which is elected as set forth in subparagraph 7.3.
6.2 Benefit Payment Determination. Prior to the receipt by the
Executive of any
<PAGE> 163
benefit payments under the Policy, the amounts available
for withdrawals and/or loans of the Policy cash surrender value shall be
determined by the Administrator and the Insurance Company and promptly
communicated to the Executive not later than thirty (30) days following
receipt of notice from the Executive to the Administrator of intention to
commence benefit payments. The Executive shall complete all necessary
forms prescribed by the Insurance Company in order to begin receiving
such benefit payments.
6.3 Third Party Loans. In any Plan Year, the Employer shall
have the right to obtain loans from unrelated persons or entities, including
loans from the Insurance Company or other creditors, and to secure the
repayment obligation arising therefrom, including all interest charges
related to any such loans, by the assignment of its portion of the Policy
cash surrender value and/or death benefit. The amount of such loans,
together with the interest accrued thereon, shall at no time exceed the
portion of the Policy cash surrender value which the Employer owns as
described in subparagraph 5.1 (a). ARTICLE VII
DEATH BENEFITS
7.1 Cooperation/Prompt Action. Upon the Executive's death,
the Employer, Administrator and Beneficiary shall cooperate and promptly
take all reasonable action to cause the Insurance Company to pay the
Policy death benefits in accordance with this Agreement.
7.2 Spousal Consent. The Beneficiary shall be the Executive's
Surviving Spouse unless the Surviving Spouse consents to the designation
of another Beneficiary by signing the consent at Schedule "A" or in the
event that there is no such Surviving Spouse. The identity of the
Beneficiary shall also be designated in the Policy in conformity with
Schedule "A".
7.3 Beneficiary Payment Option. Notwithstanding any other
provision of this Agreement, upon the Executive's death, the Beneficiary
shall have the right to receive the benefit
<PAGE> 164
payment to which the Beneficiary is entitled in a single lump sum, or the
Beneficiary may elect to receive such benefit payment in accordance with the
death benefit payment option(s) which are available under the Policy.
ARTICLE VIII
INSURANCE COMPANY LIABILITY
8.1 Non-Binding Effect. The Insurance Company shall be
bound only by the provisions of any endorsements on the Policy, and any
payments made or action taken by it in accordance therewith shall fully
discharge it from all claims, suits and demands of all persons whatsoever.
Except as specifically provided by endorsement on the Policy, no
provisions of this Agreement shall be binding upon the Insurance
Company.
ARTICLE IX
CLAIMS/UNSECURED CREDITOR STATUS
9.1 Claims Procedure. The Employer shall, but only to the
extent necessary to comply with ERISA, be designated as the
Administrator and named fiduciary under this Agreement and shall have
authority to control and manage the operation and administration of this
Agreement, until such time, if any, as a successor Administrator shall be
named. The Administrator shall make all determinations as to the rights to
benefits under this Agreement. Any decision by the Administrator denying
a claim by the Executive, the Executive's Surviving Spouse, or the
Beneficiary, for benefits under this Agreement shall be stated in writing and
delivered or mailed, via registered or certified mail, to the Executive, the
Executive's Surviving Spouse or the Beneficiary, as the case may be. Such
decision shall set forth the specific reasons for the denial of a claim. In
addition, the Administrator shall provide the Executive, the Executive's
Surviving
<PAGE> 165
Spouse or the Executive's Beneficiary with a reasonable
opportunity for a full and fair review of the decision denying such claim.
9.2 Status as an Unsecured General Creditor. Notwithstanding
anything contained herein to the contrary: (i) neither the Executive, the
Executive's Surviving Spouse or the Executive's Beneficiary shall have any
legal or equitable rights, interests or claims in or to any specific property or
assets of the Employer as a result of this Agreement; (ii) none of the
Employer's assets shall be held in or under any trust for the benefit of the
Executive, the Executive's Surviving Spouse or the Executive's Beneficiary
or held in any way as security for the fulfillment of the obligations of the
Employer under this Agreement; (iii) all of the Employer's assets shall be
and remain the general unpledged and unrestricted assets of the Employer;
(iv) the Employer's obligation under this Agreement shall be that of an
unfunded and unsecured promise by the Employer to pay the Employer
Premiums and to permit the payment of the Executive's Premiums from the
distributions of bonus compensation paid by the Employer to the Executive
and (v) the Executive, the Executive's Surviving Spouse and the
Executive's Beneficiary shall be unsecured general creditors with respect to
any unpaid Employer Premiums and Executive Premiums which may be
payable under the terms of this Agreement.
Notwithstanding subparagraphs 9.2 (i) through (v) above,
the Employer and the Executive acknowledge and agree that, in the event
of a Change in Control, upon request of the Executive, or in the
Employer's discretion if the Executive does not so request and the
Employer nonetheless deems it appropriate, the Employer shall establish,
not later than the effective date of the Change in Control, a Rabbi Trust or
multiple Rabbi Trusts (the "Trust" or "Trusts") upon such terms and
conditions as the Employer, in its sole discretion, deems appropriate and in
compliance with applicable provisions of the Code, in order to permit the
Employer to make contributions and/or transfer assets to the Trust or
Trusts to discharge its obligations pursuant to this
<PAGE> 166
Agreement. The principal of the Trust or Trusts and any earnings thereon shall
be held separate and apart from other funds of the Employer to be used
exclusively for discharge of the Employer's obligations pursuant to this
Agreement and shall continue to be subject to the claims of the Employer's
general creditors until paid to the Executive or the Executive's Surviving
Spouse, or Beneficiary in such manner and at such times as specified in this
Agreement.
ARTICLE X
TERMINATION OF AGREEMENT
10.1 This Agreement may be terminated prior to the Executive's
death by mutual agreement of the Executive and the Employer.
10.2 In the event of termination in accordance with subparagraph
10.1 above, the date of termination of this Agreement shall be the last day
of the month coincident with or next following the date of mutual
agreement to terminate. The requirement of annual premium payments by
the Executive and the Employer shall cease after the termination date and
ownership of the Policy by the Employer and the Executive shall be
recognized by the Insurance Company as described in subparagraph 5.1.
ARTICLE XI
MISCELLANEOUS
11.1 Miscellaneous.
(a) Administrator Payment. If the Administrator shall find
that any person to whom any amount is payable under this Agreement is
unable to care for his affairs because of illness or accident, or is a minor,
any payment due (unless a prior claim therefor shall have been made by a
duly appointed guardian, committee or other legal representative) may be
paid to the spouse, a child, a parent, or a brother or sister, or to any person
deemed by the Administrator to have incurred expense for such person
otherwise entitled to payment, in such manner and
<PAGE> 167
proportions as the Administrator may determine consistent with the provisions
of this Agreement.
(b) Opportunity To Consult With Independent Advisors.
The Executive acknowledges that he has been afforded the opportunity to
consult with independent advisors of his choosing including, without
limitation, accountants or tax advisors and counsel regarding the (i)
benefits granted to him under the provisions of this Agreement, (ii) terms
and conditions which may affect the Executive's right to these benefits, and
(iii) personal tax effects of such benefits including, without limitation, the
effects of any federal or state taxes, Section 280G of the Code, and any
other taxes, costs, expenses or liabilities whatsoever related to such
benefits, which in any of the foregoing instances the Executive
acknowledges and agrees shall be the sole responsibility of the Executive
notwithstanding any other provision of this Agreement. The Executive
further acknowledges and agrees that the Employer shall have no liability
whatsoever related to any such personal tax effects or other personal costs,
expenses, or liabilities applicable to the Executive and further specifically
waives any right for the Executive, his Surviving Spouse or Beneficiary,
and any other of his heirs, beneficiaries, legal representatives, agents,
successors, and assigns, to claim or assert liability on the part of the
Employer related to the matters described above in this subparagraph 11.1
(b). The Executive further acknowledges and agrees that he has read,
understands and consents to all of the terms and conditions of this
Agreement, and that he enters into this Agreement with a full
understanding of its terms and conditions.
(c) Arbitration of Disputes. All claims, disputes and other
matters in question arising out of or relating to this Agreement or the
breach or interpretation thereof, other than those matters which are to be
determined by the Employer or the Administrator in their respective sole
and absolute discretion, shall be resolved by binding arbitration before a
representative member, selected by the mutual agreement of the parties, of
the Judicial Arbitration and Mediation Services, Inc. ("JAMS"), located in
San Francisco, California. In the event JAMS is
<PAGE> 168
unable or unwilling to
conduct the arbitration provided for under the terms of this subparagraph
11.1 (c), or has discontinued its business, the parties agree that a
representative member, selected by the mutual agreement of the parties, of
the American Arbitration Association ("AAA"), located in San Francisco,
California, shall conduct the binding arbitration referred to in this
subparagraph 11.1 (c). Notice of the demand for arbitration shall be filed
in writing with the other party to this Agreement and with JAMS (or AAA,
if necessary). In no event shall the demand for arbitration be made after the
date when institution of legal or equitable proceedings based on such claim,
dispute or other matter in question would be barred by the applicable
statute of limitations. The arbitration shall be subject to such rules of
procedure used or established by JAMS, or if there are none, the rules of
procedure used or established by AAA. Any award rendered by JAMS or
AAA shall be final and binding upon the parties, and as applicable, their
respective heirs, beneficiaries, legal representatives, agents, successors and
assigns, and may be entered in any court having jurisdiction thereof. The
obligation of the parties to arbitrate pursuant to this subparagraph 11.1 (c)
shall be specifically enforceable in accordance with, and shall be conducted
consistently with, the provisions of Title 9 of Part 3 of the California Code
of Civil Procedure. Any arbitration hereunder shall be conducted in
Saratoga, California, unless otherwise agreed to by the parties.
(d) Attorneys' Fees. In the event of any arbitration or
litigation concerning any controversy, claim or dispute between the parties
hereto, arising out of or relating to this Agreement or the breach hereof, or
the interpretation hereof, the prevailing party shall be entitled to recover
from the non-prevailing party reasonable expenses, attorneys' fees and
costs incurred in connection therewith or in the enforcement or collection
of any judgment or award rendered therein. The "prevailing party" means
the party determined by the arbitrator(s) or court, as the case may be, to
have most nearly prevailed, even if such party did not prevail in all matters,
not necessarily the one in whose favor a judgment is rendered.
<PAGE> 169
(e) Notice. Any notice required or permitted of either the
Executive or the Employer under this Agreement shall be deemed to have
been duly given, if by personal delivery, upon the date received by the party
or its authorized representative; if by facsimile, upon transmission to a
telephone number previously provided by the party to whom the facsimile
is transmitted as reflected in the records of the party transmitting the
facsimile and upon reasonable confirmation of such transmission; and if by
mail, on the third day after mailing via U.S. first class mail, registered or
certified, postage prepaid and return receipt requested, and addressed to
the party at the address given below for the receipt of notices, or such
changed address as may be requested in writing by a party.
If to the Employer: Saratoga National Bank
12000 Saratoga-Sunnyvale Rd.
Saratoga, California 95070
Attn: Chairman of the Board
If to the Executive: Richard L. Mount
20564 Verde Court
Saratoga, CA 95070
(f) Assignment. Neither the Executive, the Executive's
spouse, nor any other Beneficiary under this Agreement shall have any
power or right to transfer, assign, anticipate, hypothecate, modify or
otherwise encumber any part or all of the amounts payable hereunder, nor,
prior to payment in accordance with the terms of this Agreement, shall any
portion of such amounts be: (i) subject to seizure by any creditor of any
such Beneficiary, by a proceeding at law
<PAGE> 170
or in equity, for the payment of
any debts, judgments, alimony or separate maintenance obligations which
may be owed by the Executive, the Executive's spouse, or any such
Beneficiary; or (ii) transferable by operation of law in the event of
bankruptcy, insolvency or otherwise. Any such attempted assignment or
transfer shall be void and unenforceable without the prior written consent
of the Employer. The Employer's consent, if any, to one or more
assignments or transfers shall not obligate the Employer to consent to or be
construed as the Employer's consent to any other or subsequent
assignment or transfer.
(g) Binding Effect/Merger or Reorganization. This
Agreement shall be binding upon and inure to the benefit of the Executive
and the Employer and, as applicable, their respective heirs, beneficiaries,
legal representatives, agents, successors and assigns. Accordingly, the
Employer shall not merge or consolidate into or with another corporation,
or reorganize or sell substantially all of its assets to another corporation,
firm or person, unless and until such succeeding or continuing corporation,
firm or person agrees to assume and discharge the obligations of the
Employer under this Agreement. Upon the occurrence of such event, the
term "Employer" as used in this Agreement shall be deemed to refer to
such surviving or successor firm, person, entity or corporation.
(h) Nonwaiver. The failure of either party to enforce at any
time or for any period of time any one or more of the terms or conditions
of this Agreement shall not be a waiver of such term(s) or condition(s) or
of that party's right thereafter to enforce each and every term and condition
of this Agreement.
(i) Partial Invalidity. If any term, provision, covenant, or
condition of this Agreement is determined by an arbitrator or a court, as
the case may be, to be invalid, void, or unenforceable, such determination
shall not render any other term, provision, covenant or condition invalid,
void or unenforceable, and the Agreement shall remain in full force and
effect
<PAGE> 171
notwithstanding such partial invalidity.
(j) Entire Agreement. This Agreement supersedes any and
all other agreements, either oral or in writing, between the parties with
respect to the subject matter of this Agreement and contains all of the
covenants and agreements between the parties with respect thereto. Each
party to this Agreement acknowledges that no other representations,
inducements, promises, or agreements, oral or otherwise, have been made
by any party, or anyone acting on behalf of any party, which are not set
forth herein, and that no other agreement, statement, or promise not
contained in this Agreement shall be valid or binding on either party.
(k) Modifications. Any modification of this Agreement
shall be effective only if it is in writing and signed by each party or such
party's authorized representative.
(l) Paragraph Headings/Construction. The article,
paragraph and subparagraph headings used in this Agreement are included
solely for the convenience of the parties and shall not affect or be used in
connection with the interpretation of this Agreement. Masculine
terminology and use of the singular shall be construed to include the
feminine and the plural, respectively, and vice versa, to the extent the
context may otherwise require.
(m) No Strict Construction. The language used in this
Agreement shall be deemed to be the language chosen by the parties hereto
to express their mutual intent, and no rule of strict construction will be
applied against any person.
(n) Governing Law. The laws of the State of California,
other than those laws denominated choice of law rules, and, where
applicable, the rules and regulations of the Board of Governors of the
Federal Reserve System, Federal Deposit Insurance Corporation, Office of
the Comptroller of the Currency, or other regulatory agency or
governmental authority having jurisdiction over Employer, shall govern the
validity, interpretation, construction and effect of this Agreement.
<PAGE> 172
IN WITNESS WHEREOF, the Employer and the Executive have
executed this Agreement on the date first above-written in the City of
Saratoga, Santa Clara County, California.
THE EMPLOYER THE EXECUTIVE
SARATOGA NATIONAL BANK
By:______________________________ _____________________________
V. Ronald Mancuso Richard L. Mount
Compensation Committee Chairman
<PAGE> 173
SCHEDULE A
BENEFICIARY DESIGNATION
To the Administrator of the Saratoga National Bank Executive
Benefits Agreement:
Pursuant to the Provisions of my Executive Benefits Agreement
with Saratoga National Bank, permitting my designation of a beneficiary or
beneficiaries, I hereby designate the following person(s) and entit(y)ies as
primary and secondary beneficiaries of any Benefits under said Agreement
payable by reason of my death:
Primary Beneficiary:
______________________ ____________________ _____________________________
Name Address Relationship
Secondary (Contingent) Beneficiary:
______________________ _____________________ ____________________________
Name Address Relationship
THE RIGHT TO REVOKE OR CHANGE ANY BENEFICIARY
DESIGNATION IS HEREBY RESERVED. ALL PRIOR
DESIGNATIONS, IF ANY, OF PRIMARY BENEFICIARIES AND
SECONDARY BENEFICIARIES ARE HEREBY REVOKED.
The Administrator shall pay all sums payable under the Agreement
by reason of my death to the Primary Beneficiary, if he or she survives me,
and if no Primary Beneficiary shall survive me, then to the Secondary
Beneficiary, and if no named beneficiary survives me, then the
Administrator shall pay all amounts in accordance with the terms of my
Executive Benefits Agreement. In the event that a named beneficiary
survives me and dies prior to receiving the entire Benefits payable under said
Agreement, then and in that event, the remaining unpaid
<PAGE> 174
Benefits payable according to the terms of my Executive
Benefits Agreement shall be payable to the personal representatives of the
estate of said beneficiary who survived me but died prior to receiving the
total Benefits provided by my Executive Benefits Agreement.
Dated: June 18, 1999 __________________________
Richard L. Mount
CONSENT OF THE EXECUTIVE'S SPOUSE
TO THE ABOVE BENEFICIARY DESIGNATION:
I, Patricia A. Mount, being the spouse of Richard L. Mount, after
being afforded the opportunity to consult with independent counsel of my
choosing, do hereby acknowledge that I have read, agree and consent to
the foregoing Beneficiary Designation which relates to the Executive
Benefits Agreement entered into by my spouse effective as of June 18,
1999. I understand that the above Beneficiary Designation may affect
certain rights which I may have in the benefits provided for under the terms
of the Executive Benefits Agreement and in which I may have a marital
property interest.
Dated: June 18, 1999 ______________________________
Patricia A. Mount
<PAGE> 175
SCHEDULE B
Insurance Company: Jefferson Pilot Financial Life Insurance Company
Policy No.: ________________________
Initial Death Benefit: $_________________________
Policy
Data:________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
________________
<PAGE> 136
LIFE INSURANCE
ENDORSEMENT METHOD SPLIT DOLLAR PLAN
AGREEMENT
Insurer/Policy Number: Canada Life Assurance/US2651090
Southland Life Insurance/0600080553
Transamerica Life/50335062
Bank: Saratoga National Bank
Insured: Richard L. Mount
Relationship of Insured to Bank: President and Chief Executive Officer
Date: _____________, 1998
The respective rights and duties of the Bank and the Insured in the above
policy(ies) (individually and collectively referred to as the "Policy") shall
be as follows:
I. DEFINITIONS
Refer to the Policy provisions for the definition of all terms in this
Agreement.
II. POLICY TITLE AND OWNERSHIP
Title and ownership shall reside in the Bank for its use and for the use of
the Insured all in accordance with this Agreement. The Bank alone may, to
the extent of its interest, exercise the right to borrow or withdraw the Policy
cash values. Where the Bank and the Insured (or beneficiary[ies] or
assignee[s], with the consent of the Insured) mutually agree to exercise the
right to increase the coverage under the subject split dollar Policy, then, in
such event, the rights, duties and benefits of the parties to such increased
coverage continue to be subject to the terms of this Agreement.
III. BENEFICIARY DESIGNATION RIGHTS
The Insured (or beneficiary[ies] or assignee[s]) shall have the right and
power to designate a beneficiary or beneficiaries to receive his or her share of
the proceeds payable upon the death of the Insured, and to elect and change
a payment option for such beneficiary, subject to any right or interest the
Bank may have in such proceeds, as provided in this Agreement.
<PAGE> 137
IV. PREMIUM PAYMENT METHOD
The Bank shall pay an amount equal to the planned premiums and any
other premium payments that might become necessary to maintain the Policy
in force.
V. TAXABLE BENEFIT
Annually the Insured will receive a taxable benefit equal to the assumed
cost of insurance as required by the Internal Revenue Service. The Bank (or
its administrator) will report to the Insured the amount of imputed income
received each year on Form W-2 or its equivalent.
VI. DIVISION OF DEATH PROCEEDS
Subject to Paragraph VII herein, the division of the death proceeds of
the Policy is as follows:
1. The Insured's beneficiary(ies), designated in accordance with
Paragraph III, shall be entitled to an amount equal to eighty percent
(80%) of the net at risk insurance portion of the proceeds. The net
at risk insurance portion is the total proceeds less the cash value of
the Policy.
2. The Bank shall be entitled to the remainder of such proceeds.
3. The Bank and the Insured (or beneficiary[ies] or assignee[s]) shall
share in any interest due on the death proceeds on a pro rata basis in
the ratio that the proceeds due the Bank and the Insured,
respectively, bears to the total proceeds, excluding any such
interest.
VII. DIVISION OF CASH SURRENDER VALUE
The Bank shall at all times be entitled to an amount equal to the Policy's
cash value, as that term is defined in the Policy, less any Policy loans and
unpaid interest or cash withdrawals previously incurred by the Bank and any
applicable Policy surrender charges. Such cash value shall be determined
as of the date of surrender of the Policy or death of the Insured as the case
may be.
VIII. PREMIUM WAIVER
If the Policy contains a premium waiver provision, any such waived
amounts shall be considered for all purposes of this Agreement as having been
paid by the Bank.
IX. RIGHTS OF PARTIES WHERE POLICY ENDOWMENT OR ANNUITY ELECTION EXISTS
<PAGE> 138
In the event the Policy involves an endowment or annuity element, the
Bank's right and interest in any endowment proceeds or annuity benefits shall be
determined under the provisions of this Agreement by regarding such
endowment proceeds or the commuted value of such annuity benefits as
the Policy's cash value. Such endowment proceeds or annuity benefits shall
be treated like death proceeds for the purposes of division under this
Agreement.
X. TERMINATION OF AGREEMENT
This Agreement shall terminate at the option of the Bank following thirty
(30) days written notice to the Insured upon the happening of any one of the
following:
1. The Insured's right to receive benefits pursuant to the terms and
conditions of that certain Executive Supplemental Compensation
Agreement effective as of ___________, 1998, shall terminate for
any reason other than the Insured's death; or
2. The Insured shall be discharged from service with the Bank as a
result of a termination for cause under subparagraph (c), (d) or (e)
below. Notwithstanding the foregoing, this Agreement shall remain in
effect in the event that the Insured is terminated pursuant to
subparagraph a), (b) or (f) below. The term "termination for cause"
shall mean termination of the employment of the Insured by reason of
any of the following determined in good faith by the Bank's Board of
Directors:
(a) The willful, intentional and material breach or the
habitual and continued neglect by the Insured of his or
her employment responsibilities and duties;
(b) The continuous mental or physical incapacity of the
Insured, subject to disability rights under this
Agreement;
(c) The Insured's willful and intentional violation of any
federal banking or securities laws, or of the Bylaws,
rules, policies or resolutions of Bank, or the rules or
regulations of the Board of Governors of the Federal
Reserve System, Federal Deposit Insurance
Corporation, Office of the Comptroller of the
Currency, or other regulatory agency or governmental
authority having jurisdiction over the Bank, which has
a material adverse effect upon the Bank;
(d) The written determination by a state or federal banking
agency or governmental authority having jurisdiction
over the Bank that the Insured is not suitable to act in
the capacity for which he or she is employed by the
Bank;
<PAGE> 139
(e) The Insured's conviction of (i) any felony or (ii) a
crime involving moral turpitude, or the Insured's
willful and intentional commission of a fraudulent or
dishonest act; or
(f) The Insured's willful and intentional disclosure,
without authority, of any secret or confidential
information concerning the Bank or taking any action
which the Bank's Board of Directors determines, in its
sole discretion and subject to good faith, fair dealing
and reasonableness, constitutes unfair competition
with or induces any customer to breach any contract
with the Bank.
Upon such termination, the Insured (or beneficiary[ies] or assignee[s])
shall have a ninety (90) day option to receive from the Bank an absolute
assignment of the Policy in consideration of a cash payment to the Bank,
whereupon this Agreement shall terminate. Such cash payment shall be the
greater of:
1. The Bank's share of the cash value of the Policy on the date of such
assignment, as defined in this Agreement.
2. The amount of the premiums which have been paid by the Bank prior
to the date of such assignment.
Should the Insured (or beneficiary[ies] or assignee[s]) fail to exercise
this option within the prescribed ninety (90) day period, the Insured (or
beneficiary[ies] or assignee[s]) agrees that all of his or her rights,
interest and claims in the Policy shall terminate as of the date of the
termination of this Agreement.
Except as provided above, this Agreement shall terminate upon
distribution of the death benefit proceeds in accordance with Paragraph VI
above.
XI. INSURED'S OR ASSIGNEE'S ASSIGNMENT RIGHTS
The Insured may not, without the prior written consent of the Bank,
which shall not be unreasonably withheld, assign to any individual, trust or
other organization, any right, title or interest in the Policy nor any rights,
options, privileges or duties created under this Agreement.
XII. AGREEMENT BINDING UPON THE PARTIES
This Agreement shall be binding upon the Insured and the Bank, and
their respective heirs, successors, personal representatives and assigns, as
applicable.
XIII. NAMED FIDUCIARY AND PLAN ADMINISTRATOR
<PAGE> 140
The Bank is hereby designated the "Named Fiduciary" until resignation
or removal by its Board of Directors. As Named Fiduciary, the Bank shall
be responsible for the management, control, and administration of this
Agreement as established herein. The Named Fiduciary may allocate to
others certain aspects of the management and operations responsibilities of this
Agreement, including the employment of advisors and the delegation of
any ministerial duties to qualified individuals.
XIV. FUNDING POLICY
The funding policy for this Agreement shall be to maintain the Policy in
force by paying, when due, all premiums required.
XV. CLAIM PROCEDURES
Claim forms or claim information as to the subject Policy can be
obtained by contacting The Benefit Marketing Group, Inc. (770-952-1529). When
the Named Fiduciary has a claim which may be covered under the provisions
described in the Policy, it should contact the office named above, and
they will either complete a claim form and forward it to an authorized
representative of the Insurer or advise the named Fiduciary what further
requirements are necessary. The Insurer will evaluate and make a decision
as to payment. If the claim is payable, a benefit check will be issued to the
Named Fiduciary.
In the event that a claim is not eligible under the Policy, the Insurer
will notify the Named Fiduciary of the denial pursuant to the requirements under
the terms of the Policy. If the Named Fiduciary is dissatisfied with the denial
of the claim and wishes to contest such claim denial, it should contact the
office named above and they will assist in making inquiry to the Insurer. All
objections to the Insurer's actions should be in writing and submitted to
the office named above for transmittal to the Insurer.
XVI. GENDER
Whenever in this Agreement words are used in the masculine or neuter
gender, they shall be read and construed as in the masculine, feminine or
neuter gender, whenever they should so apply.
XVII. INSURANCE COMPANY NOT A PARTY TO THIS AGREEMENT
The Insurer shall not be deemed a party to this Agreement, but will
respect the rights of the parties as set forth herein upon receiving an executed
copy of this Agreement. Payment or other performance in accordance with
the Policy provisions shall fully discharge the Insurer from any and all
liability.
<PAGE> 141
IN WITNESS WHEREOF, the Insured and a duly authorized Bank
officer or director have signed this Agreement at Saratoga, California as of
the date first above written.
SARATOGA NATIONAL BANK INSURED
__________________________ ________________________________
William D. Kron Richard L. Mount
Chairman of the Board
of Directors
<PAGE> 142
BENEFICIARY DESIGNATION FORM
Primary Designation:
Name Relationship
____________________________ _______________________________________
_____________________________ _______________________________________
_____________________________ _______________________________________
Contingent Designation:
_____________________________ _______________________________________
_____________________________ _______________________________________
_____________________________ _______________________________________
_____________________________ _____________, 1998
Richard L. Mount
<PAGE> 143
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into on May 20, 1999
by and between SARATOGA NATIONAL BANK, a national banking
association ("Employer"), and Richard L. Mount ("Employee") and is
effective as of January 1, 1999.
RECITALS
WHEREAS, Employer and Employee 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 commercial banking
industry;
WHEREAS, Employer is the wholly-owned subsidiary of Saratoga
Bancorp, a California corporation, for which Employee provides services
without direct compensation and currently holds positions as the Chairman
of the Board of Directors, President and Chief Executive Officer; and
WHEREAS, unless expressly stated or the context otherwise
requires, any reference in this Agreement to "Employer" shall include
Saratoga Bancorp.
NOW, THEREFORE, in consideration of the mutual covenants
and agreements contained herein, the Employer and Employee agree as
follows:
AGREEMENT
1. Termination of Existing Agreements/Term of Employment.
Employer and Employee acknowledge and agree that this Agreement shall
supercede and replace (i) the existing employment agreement between
Employer and Employee dated August 30, 1995, effective January 1,
1995, and as amended February 22, 1996, (ii) the Management Continuity
Agreement dated July 9, 1990 and (iii) the deferred benefit entitlement
under the Chief Executive Officer Incentive Compensation Plan dated
August 30, 1995 and effective as of January 1, 1995, which are each
hereby terminated effective with the date of this Agreement. Pursuant to
this Agreement, Employer employs Employee and Employee hereby
accepts employment with Employer, upon the terms and conditions
hereinafter set forth, for a period of three (3) years from the effective date
hereof. Upon the occurrence of the third annual anniversary of the
effective date of this Agreement, and on each anniversary date thereafter,
the term of this Agreement shall be deemed automatically extended for an
additional one (1) year term, subject to the termination provisions of
paragraph 16.
2. Duties and Obligations of Employee. Employee shall serve
as the President and Chief Executive Officer of Employer and shall
perform the customary duties of such office in the commercial banking
industry as may from time to time be reasonably requested of him by the
Board of Directors of Employer in addition to the following:
<PAGE> 144
(a) Voting as a member of the Board of Directors of
Employer and such committees thereof as the Board of Directors of
Employer shall designate;
(b) Providing leadership in planning and implementing
the conduct of business and the affairs of the Employer;
(c) Participating in community affairs which are
beneficial to the Employer;
(d) Maintaining a good relationship with Employer's
Board of Directors, management officers and shareholders;
(e) Maintaining a good relationship with regulatory
agencies and governmental authorities having jurisdiction over Employer;
and
(f) Hiring and firing of all employees other than
executive officers of the Employer, subject at all
times to the policies and directives set by the
Employer's Board of Directors.
3. Devotion to Employer's Business.
(a) Employee shall devote his full business time,
ability, and attention to the business of Employer during the term of this
Agreement and shall not during the term of this Agreement, without the
prior written consent of Employer's Board of Directors, engage in any
other business activities, duties, or pursuits whatsoever, or directly or
indirectly render any services of a business, commercial, or professional
nature to any other person or organization, whether for compensation or
otherwise, which are in conflict with Employer's business. However, the
expenditure of reasonable amounts of time for educational, charitable, or
professional activities shall not be deemed a breach of this Agreement if
those activities do not materially interfere with the services required of
Employee under this Agreement. Nothing in this Agreement shall be
interpreted to prohibit Employee from making passive personal
investments. However, Employee shall not directly or indirectly acquire,
hold, or retain any material interest in any business competing with or
similar in nature to the business of Employer.
(b) Employee agrees to conduct himself at all times
with due regard to public conventions and morals. Employee further
agrees not to do or commit any act that will reasonably tend to shock or
offend the community, or to prejudice Employer or the banking industry
in general.
(c) Employee hereby represents and agrees that the
services to be performed
<PAGE> 145
under the terms of this Agreement are of a
special, unique, unusual, extraordinary, and intellectual character that
gives them a peculiar value, the loss of which cannot be reasonably or
adequately compensated in damages in an action at law. Employee
therefore expressly agrees
that Employer, in addition to any other rights or remedies that Employer
may possess, shall be
entitled to injunctive and other equitable relief to prevent or remedy a
breach of this Agreement by Employee.
4. Noncompetition by Employee. Employee shall not, during
the term of this Agreement, directly or indirectly, either as an employee,
employer, consultant, agent, principal, stockholder, officer, director, or in
any other individual or representative capacity, engage or participate in
any competitive banking or financial services business.
5. Indemnification.
(a) Employee shall indemnify and hold Employer
harmless from all liability for loss, damage, or injury to persons or
property resulting from the gross negligence or intentional misconduct of
the Employee.
(b) To the extent permitted by law, Employer shall
indemnify Employee if he was or is a party or is threatened to be made a
party in any action brought by a third party against Employee (whether or
not Employer is joined as a party defendant) against expenses, judgments,
fines, settlements and other amounts actually and reasonably incurred in
connection with said action if Employee acted in good faith and in a
manner Employee reasonably believed to be in the best interest of
Employer (and with respect to a criminal proceeding if Employee had no
reasonable cause to believe his conduct was unlawful), provided that the
alleged conduct of Employee arose out of and was within the course and
scope of his employment as an officer or employee of Employer. Any
conflict or inconsistency between this indemnification provision and the
terms of any Indemnification Agreement between Employer and Employee
shall be resolved in favor of the terms of such Indemnification Agreement.
6. Disclosure of Information. Employee shall not, either
before or after termination of this Agreement, without the prior written
consent of Employer's Board of Directors or except as required by law to
comply with legal process including, without limitation, by oral questions,
interrogatories, requests for information or documents, subpoena, civil
investigative demand or similar process, disclose to anyone any financial
information, trade or business secrets, customer lists, computer software
or other information not otherwise publicly available concerning the
business or operations of Employer. Employee further recognizes and
acknowledges that any financial information concerning any customers of
Employer, 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
<PAGE> 146
termination of this Agreement, without
such consent or except as required by law, disclose to anyone said
financial information or any part thereof, for any reason or purpose
whatsoever. In the event Employee is required by law to disclose such
information described in this paragraph 6, Employee will provide
Employer and its respective counsel with immediate notice of such request
so that they may consider seeking a protective order. If in the absence of
a protective order or the receipt of a waiver hereunder, Employee is
nonetheless, in the written opinion of knowledgeable counsel, compelled
to disclose any of such information to any tribunal or any other party or
else stand liable for contempt or suffer other material censure or material
penalty, then Employee may disclose (on an 'as needed" basis only)
such information to such tribunal or other party without liability
hereunder. This paragraph 6 shall survive the expiration or termination of
this Agreement.
7. Written, Printed or Electronic Material. All written,
printed or electronic material, notebooks and records, including, without
limitation, computer disks used by Employee in performing duties for
Employer, other than Employee's personal notes and diaries, are and shall
remain the sole property of Employer. Upon termination of employment,
Employee shall promptly return all such material (including all copies,
extracts and summaries thereof) to Employer. This paragraph 7 shall
survive expiration or termination of this Agreement.
8. Surety Bond. Employee agrees that he will furnish all
information and take any other steps necessary from time to time to enable
Employer to obtain or maintain a fidelity bond conditional on the
rendering of a true account by Employee of all monies, goods, or other
property which may come into the custody, charge, or possession of
Employee during the term of his employment. The surety company
issuing the bond and the amount of the bond must be acceptable to
Employer. All premiums on the bond shall be paid by Employer.
Employer shall have no obligation to pay severance benefits to Employee
in accordance with paragraph 16 (d) of this Agreement in the event that
the Employee's employment is terminated in connection with the
Employee's failure to qualify for a surety bond at any time during the
term of this Agreement and such failure to qualify results from an
occurrence described in paragraph 16(a) (5), (7), (8), (9), (10) or (11, to
the extent of an Employee breach).
9. Base Salary. In consideration for the services to be
performed hereunder, Employee shall receive a salary at the rate of One
Hundred Forty Thousand Dollars ($140,000.00) per annum, payable in
installments during the term of this Agreement of approximately Five
Thousand Eight Hundred Thirty-Three Dollars and Thirty-Three Cents
($5,833.33) on the fifteenth and last day of each month, subject to
applicable adjustments for withholding taxes and prorations for any partial
employment period. Employee shall receive such annual adjustments in
salary, if any, as may be determined by Employer's Board of Directors, in
its sole discretion, resulting from the Board of Directors annual review of
Employee's compensation each year during the term of this Agreement.
<PAGE> 147
10. Salary Continuation During Disability. If Employee for
any reason (except as expressly provided below) becomes temporarily or
permanently disabled so that he is unable to perform the duties under this
Agreement, Employer agrees to pay Employee the base salary otherwise
payable to Employee pursuant to paragraph 9 of this Agreement, reduced
by the amounts received by Employee from state disability insurance, or
worker's compensation or other similar insurance benefits through policies
provided by Employer, for a period of six (6) months from the date of
disability.
For purposes of this paragraph 10, "disability" shall be defined as
provided in Employer's disability insurance program. Notwithstanding
anything herein to the contrary, Employer shall have no obligation to
make payments for a disability resulting from the deliberate, intentional
actions of Employee, such as, but not limited to, attempted suicide or
chemical dependence of Employee.
11. Incentive Compensation. Employee currently participates
in the Chief Executive Officer Incentive Compensation Plan effective as
of January 1, 1995 (the "Incentive Plan"). Under the Incentive Plan,
Employee is entitled to receive annual cash bonus payments and certain
deferred bonus payments in the future. Employee has agreed to waive his
entitlement to the deferred bonus payments in consideration for benefits
provided under this Agreement, but remains entitled to receive the annual
cash bonus payments pursuant to the Incentive Plan. In addition,
Employee shall be entitled to receive any other bonus or incentive
compensation that the Board of Directors, in its sole discretion,
determines to be appropriate following review of Employee's performance
and Employer's results of operations each year during the term of this
Agreement. Under no circumstance shall a right to receive bonus or
incentive compensation other than pursuant to the Incentive Plan, exist in
favor of or accrue to or for the benefit of Employee prior to actual
receipt.
12. Stock Options. Employer has previously granted stock
options to Employee. Employer may, but is not obligated to, grant
additional stock options to Employee in the future which grants, if any,
shall be within the sole discretion of the Board of Directors of Employer
and subject to the terms and provisions of Employer's stock option plan
pursuant to which such grants are effected. Any such grants shall be
evidenced by a stock option agreement entered into between Employer and
Employee pursuant to such stock option plan and a copy of each such
stock option agreement shall be attached to this Agreement as an exhibit.
Notwithstanding any provision of any such stock option plan or any such
stock option agreement to the contrary, no rights of employment shall be
conferred upon Employee or result from any such stock option plan or any
stock option agreement entered into between Employer and Employee.
Any employment rights and corresponding duties of Employee pursuant to
his employment by Employer shall be limited to and interpreted solely in
accordance with the terms and provisions of this Agreement.
13. Other Benefits. Employee shall be entitled to those
employee benefits adopted by Employer for all employees of Employer,
subject to applicable qualification requirements
<PAGE> 148
and regulatory approval
requirements, if any. Employee shall be further entitled to the following
additional benefits which shall supplement or replace, to the extent
duplicative of any part or all of the general employee benefits, the benefits
otherwise provided to Employee:
(a) Vacation. Employee shall be entitled to five (5)
weeks annual vacation leave at his then existing rate of full salary each
year during the term of this Agreement. Employee may be absent from
his employment for vacation as long as such leave is reasonable and does
not jeopardize his responsibilities and duties specified in this Agreement.
The length of vacation should not exceed two (2) weeks without the
approval of Employer's Executive Committee of the Board of Directors.
Vacation time will accrue in accordance with Employer's personnel
policies.
(b) Automobile and Insurance. Employer shall (i)
provide to Employee an automobile for his business and personal use,
suitable to his position; (ii) reimburse Employee for costs to maintain it in
good condition and repair; (iii) maintain public liability insurance and
property damage insurance policies with insurer(s) acceptable to Employer
and Employe with such coverages in such amounts as may be acceptable
to Employer and Employee from time to time; and (iv) cause Employee to
be named as an additional insured on such policies.
(c) Personal Insurance. Employer shall provide during
the term of this Agreement at Employer's sole cost, a policy or policies of
term life insurance in the amount of Five Hundred Thousand Dollars
($500,000) and group life, health (including medical, dental and
hospitalization), accident and disability insurance coverage for Employee
and his dependents through a policy or policies provided by insurer(s)
selected by Employer in its sole discretion.
(d) Supplemental Compensation. Employer and
Employee have entered into an agreement which provides supplemental
compensation benefits to Employee payable upon retirement or as
otherwise set forth in such agreement.
14. Annual Physical Examination. Employer shall pay or
reimburse Employee for the cost of an annual physical examination
conducted by a California licensed physician selected by Employee and
reasonably acceptable to Employer.
15. Business Expenses. Employee shall be reimbursed for all
ordinary and necessary expenses incurred by Employee in connection with
his employment. Employee shall also be reimbursed for reasonable
expenses incurred in activities associated with promoting the business of
Employer, including expenses for entertainment, travel, conventions,
educational programs, club memberships and similar items. Employer
will pay for or will reimburse Employee for such expenses upon
presentation by Employee from time to time of receipts or other
appropriate evidence of such expenditures.
16. Termination of Agreement.
<PAGE> 149
(a) Automatic Termination. This Agreement shall
terminate automatically without further act of the parties and immediately
upon the occurrence of any one of the following events, subject to either
party's right, without any obligation whatsoever, to waive an event
reasonably susceptible of waiver, and the obligation of Employer to pay
the amounts which would otherwise be payable to Employee under this
Agreement through the end of the month in which the event occurs,
except that only in the event of termination based upon subparagraphs (1),
(4) or (11, to the extent of Employer's breach) below shall Employee be
entitled to receive severance payments based upon automatic termination
pursuant to paragraph 16 (d) of this Agreement:
(1) The occurrence of circumstances that make it
impossible or impractical for Employer to
conduct or continue its business.
(2) The death of Employee.
(3) The loss by Employee of legal capacity.
(4) The loss by Employer of legal capacity to
contract.
(5) The willful, intentional and material breach or
the habitual and continued neglect by the
Employee of his employment responsibilities
and duties;
(6) The continuous mental or physical incapacity
of the Employee, subject to disability rights
under this Agreement;
(7) The Employee's willful and intentional
violation of any federal banking or securities
laws, or of the Bylaws, rules, policies or
resolutions of Employer, or the rules or
regulations of the Board of Governors of the
Federal Reserve System, Federal Deposit
Insurance Corporation, Office of the
Comptroller of the Currency, or other
regulatory agency or governmental authority
having jurisdiction over the Employer, which
has a material adverse effect upon the
Employer;
(8) The written determination by a state or federal
banking agency or governmental authority
having jurisdiction over the Employer that
Employee is not suitable to act in the capacity
for which he is employed by Employer;
(9) The Employee's conviction of (i) any felony or
(ii) a crime involving moral turpitude, or the
Employee's willful and intentional commission
of a fraudulent or dishonest act; or
<PAGE> 150
(10) The Employee's willful and intentional
disclosure, without authority, of any secret or
confidential information concerning Employer
or taking any action which the Employer's
Board of Directors determines, in its sole
discretion and subject to good faith, fair
dealing and reasonableness, constitutes unfair
competition with or induces any customer to
breach any contract with the Employer.
(11) Either party breaches the terms or provisions
of this Agreement.
(b) Termination by Employer. Employer may, at its
election and in its sole discretion, terminate this Agreement for any
reason, or for no reason, by giving not less than thirty (30) days' prior
written notice of termination to Employee, without prejudice to any other
remedy to which Employer may be entitled either at law, in equity or
under this Agreement. Upon such termination, Employee shall be entitled
to receive any employment benefits which shall have accrued prior to such
termination and the severance pay specified in paragraph 16 (d) below.
(c) Termination by Employee. This Agreement may be
terminated by Employee for any reason, or no reason, by giving not less
than thirty (30) days' prior written notice of termination to Employer.
Upon such termination, all rights and obligations accruing to Employee
under this Agreement shall cease, except that such termination shall not
prejudice Employee's rights regarding employment benefits which shall
have accrued prior to such termination and any other remedy which
Employee may have at law, in equity or under this Agreement, which
remedy accrued prior to such termination.
(d) Severance Pay - Termination by Employer. In the
event of termination by Employer pursuant to paragraph 16 (b) or
automatic termination based upon paragraph 16 (a) (1), (4) or (11, to the
extent of Employer's breach) of this Agreement, Employee shall be
entitled to receive severance pay equal to one-half (1/2) Employee's
aggregate annual compensation during the year the termination occurs
(including salary and any bonus, director's fees, deferred compensation,
incentive or other payments due Employee), payable in twenty-four (24)
substantially equal installments on the fifteenth and last day of each month
following such termination. Notwithstanding the foregoing, in the event
of a "change in control" as defined in subparagraph (e) below, Employee
shall not be entitled to severance pay pursuant to this subparagraph (d) and
any rights of Employee to severance pay shall be limited to such rights as
are specified in subparagraph (e) below. Employee acknowledges and
agrees that severance pay pursuant to this subparagraph (d) is in lieu of all
damages, payments and liabilities on account of the early termination of
this Agreement and the sole and exclusive remedy for Employee
terminated at the will of Employer pursuant to paragraph 16 (b) or
pursuant to certain provisions of paragraph 16 (a) described herein.
(e) Severance Pay - Change in Control. In the event of
a "change in
<PAGE> 151
control" as defined herein and within a period of one and
one-half (1and 1/2) years following consummation of such a change in
control (i) Employee's employment is terminated; or (ii) without
Employee's consent there occurs (A) any adverse change in the nature and
scope of Employee's position, responsibilities, duties, salary, benefits or
location of employment, or (B) any event which reasonably constitutes a
demotion, significant diminution or constructive termination (by
resignation or otherwise) of Employee's employment, then Employee shall
be entitled to receive severance pay in addition to any salary, bonus or
incentive compensation payments due Employee. Any such severance pay
due Employee shall be in an amount equal to one and one-half (1 and 1/2)
times Employee's average annual compensation for the five (5) years
immediately preceding the change in control. Employee's average annual
compensation shall be the average of the aggregate compensation paid by
Employer to Employee (including salary and any bonus, director's fees,
amounts deferred during the year at the election of the Employee,
incentive and other payments paid to Employee) for each of the five (5)
tax years ending immediately prior to the change in control divided by the
number five (5). If the Employee was employed by Employer for fewer
than five (5) years immediately preceding the change in control,
Employee's average annual compensation shall be determined by the same
procedure described above, provided that in lieu of using five (5) years in
such calculation, the number equal to the years that Employee was
employed by Employer immediately prior to the change in control shall be
used.
In addition to the "change in control" severance
payment rights of Employee described in this paragraph (e), and
notwithstanding any other provisions of this Agreement, Employee shall
be entitled to receive the severance payments specified in this paragraph
(e) in the event that Employee voluntarily terminates his employment with
Employer or its successor effective as of a date within the period of
twelve (12) months immediately following a change in control, provided
that Employee has given written notice to Employer, delivered within the
period of six (6) months immediately following a change in control, of his
intention to terminate employment, which notice shall specify the effective
date of termination.
If all or any portion of the amounts payable to the
Employee under this Agreement, either alone or together with other
payments which the Employee has the right to receive from the Employer,
constitute "excess parachute payments" within the meaning of Section 280G
of the Internal Revenue Code of 1986, as amended (the "Code"), that are
subject to the excise tax imposed by Section 4999 of the Code (or similar tax
and/or assessment), the Employee shall be responsible for the payment of
such excise tax and the Employer (and its successor) shall be responsible for
any loss of deductibility related thereto. If, at a later date, it is
determined (pursuant to final regulations or published rulings of the Internal
Revenue Service, final judgment of a court of competent jurisdiction, or
otherwise) that the amount of excise taxes payable by the Employee is greater
than the amount initially so determined, then the Employee shall pay an amount
equal to the sum of such additional excise taxes and any interest, fines and
penalties resulting from such underpayment. The determination of the
amount of any such excise taxes shall be made by the independent
accounting firm employed by the Employer immediately prior to the change
in control, subject to the mutual agreement of the Employer and Employee.
<PAGE> 152
Any such severance shall be payable in thirty-six (36)
substantially equal installments on the fifteenth and last day of each month
following such termination. Such severance payment, if any, shall be in
lieu of all damages, payments and liabilities on account of the events
described above for which such severance payment, if any, may be due
Employee and any severance payment rights of Employee under paragraph
16 (d) of this Agreement. This subparagraph (e) shall be binding upon
and inure to the benefit of the parties and any successors or assigns of
Employer or any "person" as defined herein.
Notwithstanding the foregoing, Employee shall not be
entitled to receive nor shall Employer, its successors, assigns or any
"person" as defined herein be obligated to pay severance payments
pursuant to this subparagraph (e) in the event of an occurrence described
in paragraph 16 (a), subparagraphs (5), (7), (8), (9), (10) or (11, to the
extent of an Employee breach), or in the event Employee terminates
employment in accordance with paragraph 16 (c) and the termination is
not a result of or based upon the occurrence of any event described in
paragraph 16 (e)(ii) above or a voluntary termination within the thirty (30)
day period immediately after the expiration of the sixth (6th) month
following a change in control as described above.
A "change in control" of Employer for purposes of this
Agreement and subparagraph (e) shall mean the occurrence of any of the
following events with respect to Employer (with the term "Employer"
being defined for such a change in control to include any parent bank
holding company): (i) a change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of
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 regulatory agencies or governmental authorities having jurisdiction over
the Employer or any stock exchange on which the Employer's shares are
listed which requires the reporting of a change in control; (ii) any merger,
consolidation or reorganization of the Employer in which the Employer does
not survive; (iii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions) of any assets
of the Employer having an aggregate fair market value of fifty percent (50%)
of the total value of the assets of the Employer, reflected in the most recent
balance sheet of the Employer; (iv) a transaction whereby any "person" (as
such term is used in the Exchange Act) or any individual, corporation,
partnership, trust or any other entity is or becomes the beneficial owner,
directly or indirectly, of securities of the Employer representing twenty-five
percent (25%) or more of the combined voting power of the Employer's then
outstanding securities; or (v) a situation where, in any one-year period,
individuals who at the beginning of such period constitute the Board of
Directors of the Employer cease for any reason to constitute at least a
majority thereof, unless the election, or the nomination for election by the
Employer's shareholders, of each new director is approved by a vote of at
least three-quarters (3/4) of the directors then still in office who were
directors at the beginning of the period.
17. Notices. Any notices to be given hereunder by either party
to the other shall be in writing and may be transmitted by personal
delivery or by U.S. mail, registered or certified,
<PAGE> 153
postage prepaid with
return receipt requested. Mailed notices shall be addressed to the parties
at the addresses listed as follows:
Employer: Principal place of business
Employee: Principal place of business as shown in Employer's
Personnel Records and Employee's personal file.
Each party may change the address for receipt of notices by written notice
in accordance with this paragraph 17. Notices delivered personally shall
be deemed communicated as of the date of actual receipt; mailed notices
shall be deemed communicated as of three (3) days after the date of
mailing.
18. Arbitration. All claims, disputes and other matters in
question arising out of or relating to this Agreement or the breach or
interpretation thereof, other than those matters which are to be determined
by the Employer in its sole and absolute discretion, shall be resolved by
binding arbitration before a representative member, selected by the mutual
agreement of the parties, of the Judicial Arbitration and Mediation
Services, Inc. ("JAMS"), presently located in San Francisco, California,
in accordance with the rules and procedures of JAMS then in effect. In
the event JAMS is unable or unwilling to conduct such arbitration, or has
discontinued its business, the parties agree that a representative member,
selected by the mutual agreement of the parties, of the American
Arbitration Association ("AAA"), presently located in San Francisco,
California, shall conduct such binding arbitration in accordance with the
rules and procedures of the AAA then in effect. Notice of the demand for
arbitration shall be filed in writing with the other party to this Agreement
and with JAMS (or AAA, if necessary). In no event shall the demand for
arbitration be made after the date when institution of legal or equitable
proceedings based on such claim, dispute or other matter in question
would be barred by the applicable statute of limitations. Any award
rendered by JAMS or AAA shall be final and binding upon the parties,
and as applicable, their respective heirs, beneficiaries, legal
representatives, agents, successors and assigns, and may be entered in any
court having jurisdiction thereof. The obligation of the parties to arbitrate
pursuant to this clause shall be specifically enforceable in accordance
with, and shall be conducted consistently with, the provisions of Title 9 of
Part 3 of the California Code of Civil Procedure. Any arbitration
hereunder shall be conducted in Saratoga, California, unless otherwise
agreed to by the parties.
<PAGE> 154
19. Attorneys' Fees and Costs. In the event of litigation,
arbitration or any other action or proceeding between the parties to
interpret or enforce this Agreement or any part thereof or otherwise
arising out of or relating to this Agreement, the prevailing party shall be
entitled to recover its costs related to any such action or proceeding and its
reasonable fees of attorneys, accountants and expert witnesses incurred by
such party in connection with any such action or proceeding. The
prevailing party shall be deemed to be the party which obtains
substantially the relief sought by final resolution, compromise or
settlement, or as may otherwise be determined by order of a court of
competent jurisdiction in the event of litigation, an award or decision of
one or more arbitrators in the event of arbitration, or a decision of a
comparable official in the event of any other action or proceeding. Every
obligation to indemnify under this Agreement includes the obligation to
pay reasonable fees of attorneys, accountants and expert witnesses
incurred by the indemnified party in connection with matters subject to
indemnification.
20. Entire Agreement. This Agreement supersedes any and all
other agreements, either oral or in writing, between the parties with
respect to the employment of Employee by Employer and contains all of
the covenants and agreements between the parties with respect to the
employment of Employee by Employer. Each party to this Agreement
acknowledges that no other representations, inducements, promises, or
agreements, oral or otherwise, have been made by any party, or anyone
acting on behalf of any party, which are not set forth herein, and that no
other agreement, statement, or promise not contained in this Agreement
shall be valid or binding on either party.
21. Modifications. Any modification of this Agreement will be
effective only if it is in writing and signed by a party or its authorized
representative.
22. Waiver. The failure of either party to insist on strict
compliance with any of the terms, provisions, covenants, or conditions of
this Agreement by the other party shall not be deemed a waiver of any
term, provision, covenant, or condition, individually or in the aggregate,
unless such waiver is in writing, nor shall any waiver or relinquishment of
any right or power at any one time or times be deemed a waiver or
relinquishment of that right or power for all or any other times.
23. 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 and effect without being impaired or invalidated in any way.
24. Interpretation. This Agreement shall be construed without
regard to the party responsible for the preparation of the Agreement and
shall be deemed to have been prepared jointly by the parties. Any
ambiguity or uncertainty existing in this Agreement shall not be
interpreted against either party, but according to the application of other
rules of contract interpretation, if an ambiguity or uncertainty exists.
<PAGE> 155
25. Governing Law and Venue. The laws of the State of
California, other than those laws denominated choice of law rules, shall
govern the validity, construction and effect of this Agreement. Any
action which in any way involves the rights, duties and obligations of the
parties hereunder shall be brought in the courts of the State of California
and venue for any action or proceeding shall be in Santa Clara County or
in the United States District Court for the Northern District of California,
and the parties hereby submit to the personal jurisdiction of said courts.
26. Payments Due Deceased Employee. If Employee dies prior
to the expiration of the term of his employment, any payments that may
be due Employee from Employer under this Agreement as of the date of
death shall be paid to Employee's executors, administrators, heirs,
personal representatives, successors, or assigns.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written in the City of Saratoga,
County of Santa Clara, State of California.
EMPLOYER: EMPLOYEE:
SARATOGA NATIONAL BANK
By:______________________________ __________________________
V. Ronald Mancuso Richard L.Mount
Compensation Committee Chairman
SARATOGA BANCORP
By:______________________________
V. Ronald Mancuso
Compensation Committee Chairman
<PAGE> 115
EXECUTIVE SUPPLEMENTAL COMPENSATION AGREEMENT
This Agreement is made and entered into effective as of
_______________, 1998 by and between Saratoga National Bank, a national
banking association chartered under the federal laws of the United States of
America with its principal offices located in the City of Saratoga, Santa Clara
County, California (the "Employer"), and Richard L. Mount, an individual
residing in the State of California (the "Executive").
R E C I T A L S
WHEREAS, the Executive has been an employee of the Employer
since _____________, 1982, and is currently serving as its President and
Chief Executive Officer;
WHEREAS, the Employer desires to establish a compensation benefit
program as a fringe benefit for executive officers of the Employer in order to
attract and retain individuals with extensive and valuable experience in the
banking industry;
WHEREAS, the Executive's experience and knowledge of the affairs
of the Employer and the banking industry are extensive and valuable;
WHEREAS, it is deemed to be in the best interests of the Employer
to provide the Executive with certain fringe benefits, on the terms and
conditions set forth herein, in order to reasonably induce the Executive to
remain in the Employer's employment and to compensate the Employee for
valuable services heretofore rendered to the Employer; and
WHEREAS, the Executive and the Employer wish to specify in
writing the terms and conditions upon which this additional compensatory
incentive will be provided to the Executive, or to the Executive's spouse or
the Executive's designated beneficiaries, as the case may be.
NOW, THEREFORE, in consideration of the services to be
performed by the Executive in the future, as well as the mutual promises and
covenants contained herein, the Executive and the Employer agree as
follows:
A G R E E M E N T
1. Terms and Definitions.
1.1. Administrator. The Employer shall be the
"Administrator" and, solely for the purposes of ERISA as defined in
subparagraph 1.9 below, the "fiduciary" of this Agreement where a fiduciary
is required by ERISA.
<PAGE> 116
1.2. Applicable Percentage. The term "Applicable
Percentage" shall mean that percentage listed on Schedule "A" attached
hereto which is adjacent to the number of calendar years which shall have
elapsed from the date of the Executive's commencement of service to the
Employer. Notwithstanding the foregoing or the percentages set forth on
Schedule "A," but subject to all other terms and conditions set forth herein,
the "Applicable Percentage" shall be: (i) provided payments have not yet
begun hereunder, one hundred percent (100%) upon the occurrence of a
"Change in Control" as defined in subparagraph 1.4 below, or the
Executive's death, or Disability (as defined in subparagraph 1.6 below),
which death or Disability occurs prior to the termination of the Executive's
employment by the Employer; and (ii) notwithstanding subclause (i) of this
subparagraph 1.2, zero percent (0%) in the event the Executive takes any
intentional action which prevents the Employer from collecting the proceeds
of any life insurance policy which the Employer may happen to own at the
time of the Executive's death and of which the Employer is the designated
beneficiary. Furthermore, notwithstanding the foregoing, or anything
contained in this Agreement to the contrary, in the event the Executive takes
any intentional action which prevents the Employer from collecting the
proceeds of any life insurance policy which the Employer may happen to
own at the time of the Executive's death and of which the Employer is the
designated beneficiary: (1) the Executive's estate or designated beneficiary
shall no longer be entitled to receive any of the amounts payable under the
terms of this Agreement, and (2) the Employer shall have the right to
recover from the Executive's estate all of the amounts paid to the Executive's
estate (with respect to amounts paid prior to the Executive's death or paid to
the Executive's estate) or designated beneficiary (with respect to amounts
paid to the designated beneficiary) pursuant to the terms of this Agreement
prior to and after Executive's death.
1.3. Beneficiary. The term "beneficiary" or
"designated beneficiary" shall mean the person or persons whom the
Executive shall designate in a valid Beneficiary Designation, a copy of which
is attached hereto as Schedule "C," to receive the benefits provided
hereunder. A Beneficiary Designation shall be valid only if it is in the form
attached hereto and made a part hereof, completed and signed by the
Executive and received by the Administrator prior to the Executive's death.
1.4. Change in Control. The term "Change in
Control" shall mean the occurrence of any of the following events with
respect to the Employer (with the term "Employer" being defined for
purposes of determining whether a "Change in Control" has occurred to
include any parent bank holding company owning 100% of the Employer's
outstanding common stock): (i) a change in control of a nature that would
be required to be reported in response to Item 6(e) of Schedule 14A of
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 regulatory agencies or governmental authorities having jurisdiction over
the Employer or any stock exchange on which the Employer's shares are
listed which requires the reporting of a change in control; (ii) any merger,
consolidation or reorganization of the Employer
<PAGE> 117
in which the Employer does
not survive; (iii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions) of any assets
of the Employer having an aggregate fair market value of fifty percent (50%)
of the total value of the assets of the Employer, reflected in the most recent
balance sheet of the Employer; (iv) a transaction whereby any "person" (as
such term is used in the Exchange Act) or any individual, corporation,
partnership, trust or any other entity becomes the beneficial owner, directly
or indirectly, of securities of the Employer representing twenty-five percent
(25%) or more of the combined voting power of the Employer's then
outstanding securities; or (v) a situation where, in any one-year period,
individuals who at the beginning of such period constitute the Board of
Directors of the Employer cease for any reason to constitute at least a
majority thereof, unless the election, or the nomination for election by the
Employer's shareholders, of each new director is approved by a vote of at
least three-quarters (3/4) of the directors then still in office who were
directors at the beginning of the period.
1.5. The Code. The "Code" shall mean the Internal
Revenue Code of 1986, as amended (the "Code").
1.6. Disability/Disabled. The term "Disability" or
"Disabled" shall have the same meaning given such terms in any policy of
disability insurance maintained by the Employer for the benefit of employees
including the Executive. In the absence of such a policy which extends
coverage to the Executive in the event of disability, the terms shall mean
bodily injury or disease (mental or physical) which wholly and continuously
prevents the performance of duty for at least three months.
1.7. Early Retirement Date. The term "Early
Retirement Date" shall mean the Retirement, as defined below, of the
Executive on a date which occurs prior to the Executive attaining sixty-two
(62) years of age, but after the Executive has attained fifty-five (55) years of
age.
1.8. Effective Date. The term "Effective Date" shall
mean the date first written above.
1.9. ERISA. The term "ERISA" shall mean the
Employee Retirement Income Security Act of 1974, as amended.
1.10. Executive Benefits. The term "Executive
Benefits" shall mean the benefits determined in accordance with Schedule
"B", and reduced or adjusted to the extent: (i) required under the other
provisions of this Agreement, including, but not limited to, Paragraphs 5, 6
and 7 hereof; (ii) required by reason of the lawful order of any regulatory
agency or body having jurisdiction over the Employer; or (iii) required in
order for the Employer to properly comply with
<PAGE> 118
any and all applicable state
and federal laws, including, but not limited to, income, employment and
disability income tax laws (e.g., FICA, FUTA, SDI).
1.11. Plan Year. The term "Plan Year" shall mean the
Employer's fiscal year.
1.12. Retirement. The term "Retirement" or "Retires"
shall refer to the date which the Executive acknowledges in writing to
Employer to be the last day the Executive will provide any significant
personal services, whether as an employee or independent consultant or
contractor, to Employer. For purposes of this Agreement, the phrase
"significant personal services" shall mean more than ten (10) hours of
personal services rendered to one or more individuals or entities in any thirty
(30) day period.
1.13. Surviving Spouse. The term "Surviving Spouse"
shall mean the person, if any, who shall be legally married to the Executive
on the date of the Executive's death.
1.14. Termination for Cause. The term "Termination
for Cause" shall mean termination of the employment of the Executive by
reason of any of the following determined in good faith by the Employer's
Board of Directors:
(a) The willful, intentional and material
breach or the habitual and continued
neglect by the Executive of his or her
employment responsibilities and duties;
(b) The continuous mental or physical
incapacity of the Executive, subject to
disability rights under this Agreement;
(c) The Executive's willful and intentional
violation of any federal banking or
securities laws, or of the Bylaws, rules,
policies or resolutions of Employer, or the
rules or regulations of the Board of
Governors of the Federal Reserve System,
Federal Deposit Insurance Corporation,
Office of the Comptroller of the
Currency, or other regulatory agency or
governmental authority having jurisdiction
over the Employer, which has a material
adverse effect upon the Employer;
(d) The written determination by a state or
federal banking agency or governmental
authority having jurisdiction over the
Employer that Executive is not suitable to
act in the capacity for which he or she is
employed by Employer;
<PAGE> 119
(e) The Executive's conviction of (i) any
felony or (ii) a crime involving moral
turpitude, or the Executive's willful and
intentional commission of a fraudulent or
dishonest act; or
(f) The Executive's willful and intentional
disclosure, without authority, of any
secret or confidential information
concerning Employer or taking any action
which the Employer's Board of Directors
determines, in its sole discretion and
subject to good faith, fair dealing and
reasonableness, constitutes unfair
competition with or induces any customer
to breach any contract with the Employer.
2. Scope, Purpose and Effect.
2.1. Contract of Employment. Although this
Agreement is intended to provide the Executive with an additional incentive
to remain in the employ of the Employer, this Agreement shall not be
deemed to constitute a contract of employment between the Executive and
the Employer nor shall any provision of this Agreement restrict or expand
the right of the Employer to terminate the Executive's employment. This
Agreement shall have no impact or effect upon any separate written
Employment Agreement which the Executive may have with the Employer,
it being the parties' intention and agreement that unless this Agreement is
specifically referenced in said Employment Agreement (or any modification
thereto), this Agreement (and the Employer's obligations hereunder) shall
stand separate and apart and shall have no effect on or be affected by, the
terms and provisions of said Employment Agreement.
2.2. Fringe Benefit. The benefits provided by this
Agreement are granted by the Employer as a fringe benefit to the Executive
and are not a part of any salary reduction plan or any arrangement deferring
a bonus or a salary increase. The Executive has no option to take any
current payments or bonus in lieu of the benefits provided by this
Agreement.
3. Payments Upon Early Retirement or Retirement and
After Retirement.
3.1. Payments Upon Early Retirement. The
Executive shall have the right to Retire on a date which constitutes an Early
Retirement Date as defined in subparagraph 1.7 above. In the event the
Executive elects to Retire on a date which constitutes an Early Retirement
Date, the Executive shall be entitled to be paid the Applicable Percentage of
the Executive Benefits, in substantially equal monthly installments on the
first day of each month, beginning with the month following the month in
which the Early Retirement Date occurs or upon such later date as may be
mutually agreed upon by the Executive and the Employer in advance of said
Early Retirement Date, payable (i) for the period designated in Schedule "D"
in the case of
<PAGE> 120
the balance in the Benefit Account and (ii) until the Executive's
death in the case of the Index Benefit defined in Schedule "B".
3.2. Payments Upon Retirement. If the Executive
remains in the employment of the Employer until attaining sixty-two (62)
years of age, the Executive shall be entitled to be paid the Applicable
Percentage of the Executive Benefits, in substantially equal monthly
installments on the first day of each month, beginning with the month
following the month in which the Executive Retires or upon such later date
as may be mutually agreed upon by the Executive and the Employer in
advance of said Retirement date, payable (i) for the period designated in
Schedule "D" in the case of the balance in the Benefit Account and (ii) until
the Executive's death in the case of the Index Benefit defined in Schedule
"B". At the Employer's sole and absolute discretion, the Employer may
increase the Executive Benefits as and when the Employer determines the
same to be appropriate.
3.3. Payments in the Event of Death After
Retirement. The Employer agrees that if the Executive Retires, but shall
die before receiving all of the Executive Benefits Payments specified in
Schedule "B", the Employer agrees to pay the Applicable Percentage of the
Executive Benefits to the Executive's designated beneficiary in lump sum. If
a valid Beneficiary Designation is not in effect, then the remaining amounts
due to the Executive under the terms of this Agreement shall be paid to the
Executive's Surviving Spouse. If the Executive leaves no Surviving Spouse,
the remaining amounts due to the Executive under the terms of this
Agreement shall be paid to the duly qualified personal representative,
executor or administrator of the Executive's estate.
4. Payments in the Event Death or Disability Occurs Prior
to Retirement.
4.1. Payments in the Event of Death Prior to
Retirement. If the Executive dies at any time after the Effective Date of
this Agreement, but prior to Retirement, the Employer agrees to pay the
Applicable Percentage of the Executive Benefits to the Executive's
designated beneficiary in lump sum. If a valid Beneficiary Designation is not
in effect, then the remaining amounts due to the Executive under the terms
of this Agreement shall be paid to the Executive's Surviving Spouse. If the
Executive leaves no Surviving Spouse, the remaining amounts due to the
Executive under the terms of this Agreement shall be paid to the duly
qualified personal representative, executor or administrator of the
Executive's estate.
4.2. Payments in the Event of Disability Prior to
Retirement. In the event the Executive becomes Disabled at any time after
the Effective Date of this Agreement but prior to Retirement, the Executive
shall be entitled to be paid the Applicable Percentage of the Executive
Benefits, in substantially equal monthly installments on the first day of each
month, beginning with the month following the month in which the
Executive becomes Disabled, payable
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(i) for the period designated in
Schedule "D" in the case of the balance in the Benefit Account and (ii) until
the Executive's death in the case of the Index Benefit defined in Schedule
"B".
5. Payments in the Event Employment Is Terminated Prior
to Retirement. As indicated in subparagraph 2.1 above, the Employer
reserves the right to terminate the Executive's employment, with or without
cause but subject to any written employment agreement which may then
exist, at any time prior to the Executive's Retirement. In the event that the
employment of the Executive shall be terminated, other than by reason of
death, Disability or Retirement, prior to the Executive's attaining sixty-two
(62) years of age, then this Agreement shall terminate upon the date of such
termination of employment; provided, however, that the Executive shall be
entitled to the following benefits as may be applicable depending upon the
circumstances surrounding the Executive's termination:
5.1. Termination Without Cause. If the Executive's
employment is terminated by the Employer without cause, and such
termination is not subject to the provisions of subparagraph 5.4 below, the
Executive shall be entitled to be paid the Applicable Percentage of the
Executive Benefits, in substantially equal monthly installments on the first
day of each month, beginning with the month following the month in which
the Executive attains fifty-five (55) years of age or any month thereafter, as
requested in writing by the Executive and delivered to the Employer or its
successor thirty (30) days prior to the commencement of installment
payments; provided, however, that in the event the Executive does not
request a commencement date as specified, such installments shall be paid on
the first day of each month, beginning with the month following the month in
which the Executive attains sixty-two (62) years of age. The installments
shall be payable (i) for the period designated in Schedule "D" in the case of
the balance in the Benefit Account and (ii) until the Executive's death in the
case of the Index Benefit defined in Schedule "B".
5.2. Voluntary Termination by the Executive. If the
Executive's employment is terminated by voluntary resignation and such
resignation is not subject to the provisions of subparagraph 5.4 below, the
Executive shall be entitled to be paid the Applicable Percentage of the
Executive Benefits, in substantially equal monthly installments on the first
day of each month, beginning with the month following the month in which
the Executive attains fifty-five (55) years of age or any month thereafter, as
requested in writing by the Executive and delivered to the Employer or its
successor thirty (30) days prior to the commencement of installment
payments; provided, however, that in the event the Executive does not
request a commencement date as specified, such installments shall be paid on
the first day of each month, beginning with the month following the month in
which the Executive attains sixty-two (62) years of age. The installments
shall be payable (i) for the period designated in Schedule "D" in the case of
the balance in the Benefit Account and (ii) until the Executive's death in the
case of the Index Benefit defined in Schedule "B".
<PAGE> 122
5.3. Termination for Cause. The Executive agrees
that if the Executive's employment with the Employer is terminated "for
cause" (as defined in subparagraph 1.14 of this Agreement) and pursuant to
subparagraph 1.14(c), (d) or (e), the Executive shall forfeit any and all rights
and benefits the Executive may have under the terms of this Agreement and
shall have no right to be paid any of the amounts which would otherwise be
due or paid to the Executive by the Employer pursuant to the terms of this
Agreement. In the event that the Executive's employment with the
Employer is terminated "for cause" pursuant to subparagraph 1.14(a), (b) or
(f), the Executive shall be entitled to be paid the Applicable Percentage of
the Executive Benefits, in substantially equal monthly installments on the
first day of each month, beginning with the month following the month in
which the Executive attains fifty-five (55) years of age or any month
thereafter, as requested in writing by the Executive and delivered to the
Employer or its successor thirty (30) days prior to the commencement of
installment payments; provided, however, that in the event the Executive
does not request a commencement date as specified, such installments shall
be paid on the first day of each month, beginning with the month following
the month in which the Executive attains sixty-two (62) years of age. The
installments shall be payable (i) for the period designated in Schedule "D" in
the case of the balance in the Benefit Account and (ii) until the Executive's
death in the case of the Index Benefit defined in Schedule "B".
5.4. Termination by the Employer on Account of or
After a Change in Control. In the event: (i) the Executive's employment
with the Employer is terminated by the Employer in conjunction with, or by
reason of, a "Change in Control" (as defined in subparagraph 1.4 above); or
(ii) by reason of the Employer's actions and without the Executive's prior
written consent, any change occurs in the scope of the Executive's position,
responsibilities, duties, salary, benefits, or location of employment (which in
the event of relocation of more than thirty (30) miles from the location of the
Executive's office prior to a Change in Control shall constitute such a change
in location) after a Change in Control occurs; or (iii) the Employer 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 in Control occurs; or (iv) the Executive's
employment with the Employer is terminated within twelve (12) months after
a Change in Control occurs and the Executive notified the Employer of his
intention to terminate in a writing delivered to the Employer within six (6)
months after the occurrence of a Change in Control, then the Executive shall
be entitled to be paid the Applicable Percentage of the Executive Benefits, as
defined above, in substantially equal monthly installments on the first day of
each month, beginning with the month following the month in which the
Executive attains fifty-five (55) years of age or any month thereafter, as
requested in writing by the Executive and delivered to the Employer or its
successor thirty (30) days prior to the commencement of installment
payments; provided, however, that in the event the Executive does not
request a commencement date as specified, such installments shall be paid on
the first day of each month, beginning with the month following the month in
which the Executive attains sixty-two (62) years of age. The installments
<PAGE> 123
shall be payable (i) for the period designated in Schedule "D" in the case of
the balance in the Benefit Account and (ii) until the Executive's death in the
case of the Index Benefit defined in Schedule "B".
5.5. Payments in the Event of Death Following
Termination. If the Executive dies prior to receiving all of the Executive
Benefits described in this Paragraph 5 to which the Executive is entitled,
then the Employer will make such payments to the Executive's designated
beneficiary in lump sum. If a valid Beneficiary Designation is not in effect,
then the remaining amounts due to the Executive under the terms of this
Agreement shall be paid to the Executive's Surviving Spouse. If the
Executive leaves no Surviving Spouse, the remaining amounts due to the
Executive under the terms of this Agreement shall be paid to the duly
qualified personal representative, executor or administrator of the
Executive's estate.
6. Section 280G Adjustment. If all or any portion of the
amounts payable to the Employee under this Agreement, either alone or
together with other payments which the Employee has the right to receive
from the Employer, constitute "excess parachute payments" within the
meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), that are subject to the excise tax imposed by Section 4999 of
the Code (or similar tax and/or assessment), the Employee shall be
responsible for the payment of such excise tax and the Employer (and its
successor) shall be responsible for any loss of deductibility related thereto.
If, at a later date, it is determined (pursuant to final regulations or
published rulings of the Internal Revenue Service, final judgment of a court of
competent jurisdiction, or otherwise) that the amount of excise taxes payable
by the Employee is greater than the amount initially so determined, then the
Employee shall pay an amount equal to the sum of such additional excise
taxes and any interest, fines and penalties resulting from such underpayment.
The determination of the amount of any such excise taxes shall be made by
the independent accounting firm employed by the Employer immediately
prior to the change in control, subject to the mutual agreement of the
Employer and Employee.
7. Right To Determine Funding Methods. The Employer
reserves the right to determine, in its sole and absolute discretion, whether,
to what extent and by what method, if any, to provide for the payment of the
amounts which may be payable to the Executive, the Executive's spouse or
the Executive's beneficiaries under the terms of this Agreement. In the event
that the Employer elects to fund this Agreement, in whole or in part, through
the use of life insurance or annuities, or both, the Employer shall determine
the ownership and beneficial interests of any such policy of life insurance or
annuity. The Employer further reserves the right, in its sole and absolute
discretion, to terminate any such policy, and any other device used to fund
its obligations under this Agreement, at any time, in whole or in part.
Consistent with Paragraph 9 below, neither the Executive, the Executive's
spouse nor the Executive's beneficiaries shall have any right, title or interest
in or to any funding source or amount utilized by the Employer pursuant to
this Agreement, and any such funding source or amount shall not constitute
security for the
<PAGE> 124
performance of the Employer's obligations pursuant to this
Agreement. In connection with the foregoing, the Executive agrees to
execute such documents and undergo such medical examinations or tests
which the Employer may request and which may be reasonably necessary to
facilitate any funding for this Agreement including, without limitation, the
Employer's acquisition of any policy of insurance or annuity. Furthermore, a
refusal by the Executive to consent to, participate in and undergo any such
medical examinations or tests shall result in the immediate termination of this
Agreement and the immediate forfeiture by the Executive, the Executive's
spouse and the Executive's beneficiaries of any and all rights to payment
hereunder.
8. Claims Procedure. The Employer shall, but only to the
extent necessary to comply with ERISA, be designated as the named
fiduciary under this Agreement and shall have authority to control and
manage the operation and administration of this Agreement. Consistent
therewith, the Employer shall make all determinations as to the rights to
benefits under this Agreement. Any decision by the Employer denying a
claim by the Executive, the Executive's spouse, or the Executive's beneficiary
for benefits under this Agreement shall be stated in writing and delivered or
mailed, via registered or certified mail, to the Executive, the Executive's
spouse or the Executive's beneficiary, as the case may be. Such decision
shall set forth the specific reasons for the denial of a claim. In addition,
the Employer shall provide the Executive, the Executive's spouse or the
Executive's beneficiary with a reasonable opportunity for a full and fair
review of the decision denying such claim.
9. Status as an Unsecured General Creditor.
Notwithstanding anything contained herein to the contrary: (i) neither the
Executive, the Executive's spouse or the Executive's designated beneficiaries
shall have any legal or equitable rights, interests or claims in or to any
specific property or assets of the Employer as a result of this Agreement; (ii)
none of the Employer's assets shall be held in or under any trust for the
benefit of the Executive, the Executive's spouse or the Executive's
designated beneficiaries or held in any way as security for the fulfillment of
the obligations of the Employer under this Agreement; (iii) all of the
Employer's assets shall be and remain the general unpledged and unrestricted
assets of the Employer; (iv) the Employer's obligation under this Agreement
shall be that of an unfunded and unsecured promise by the Employer to pay
money in the future; and (v) the Executive, the Executive's spouse and the
Executive's designated beneficiaries shall be unsecured general creditors with
respect to any benefits which may be payable under the terms of this
Agreement.
<PAGE> 125
Notwithstanding subparagraphs (i) through (v) above, the
Employer and the Executive acknowledge and agree that, in the event of a
Change in Control, upon request of the Executive, or in the Employer's
discretion if the Executive does not so request and the Employer nonetheless
deems it appropriate, the Employer shall establish, not later than the effective
date of the Change in Control, a Rabbi Trust or multiple Rabbi Trusts (the
"Trust" or "Trusts") upon such terms and conditions as the Employer, in its
sole discretion, deems appropriate and in compliance with applicable
provisions of the Code, in order to permit the Employer to make
contributions and/or transfer assets to the Trust or Trusts to discharge its
obligations pursuant to this Agreement. The principal of the Trust or Trusts
and any earnings thereon shall be held separate and apart from other funds of
the Employer to be used exclusively for discharge of the Employer's
obligations pursuant to this Agreement and shall continue to be subject to
the claims of the Employer's general creditors until paid to the Executive or
its beneficiaries in such manner and at such times as specified in this
Agreement.
10. Discretion of Board to Accelerate Payout.
Notwithstanding any of the other provisions of this Agreement, the Board of
Directors of the Employer may, if determined in its sole and absolute
discretion to be appropriate, accelerate the payment of the amounts due
under the terms of this Agreement, provided that Executive (or Executive's
spouse or designated beneficiaries): (i) consents to the revised payout terms
determined appropriate by the Employer's Board of Directors; and (ii) does
not negotiate or in anyway influence the terms of proposed
altered/accelerated payout (said decision to be made solely by the Employer's
Board of Directors and offered to the Executive [or Executive's spouse or
designated beneficiaries] on a "take it or leave it basis").
11. Miscellaneous.
11.1. Opportunity To Consult With Independent
Advisors. The Executive acknowledges that he has been afforded the
opportunity to consult with independent advisors of his choosing including,
without limitation, accountants or tax advisors and counsel regarding both
the benefits granted to him under the terms of this Agreement and the (i)
terms and conditions which may affect the Executive's right to these benefits
and (ii) personal tax effects of such benefits including, without limitation,
the effects of any federal or state taxes, Section 280G of the Code, and any
other taxes, costs, expenses or liabilities whatsoever related to such benefits,
which in any of the foregoing instances the Executive acknowledges and
agrees shall be the sole responsibility of the Executive notwithstanding any
other term or provision of this Agreement. The Executive further
acknowledges and agrees that the Employer shall have no liability
whatsoever related to any such personal tax effects or other personal costs,
expenses, or liabilities applicable to the Executive and further specifically
waives any right for the Executive, himself, and his heirs, beneficiaries, legal
representatives, agents, successors, and assigns to claim or assert liability on
the part of the Employer related to the matters described above in this
subparagraph
<PAGE> 126
11.1. The Executive further acknowledges and agrees that he
has read, understands and consents to all of the terms and conditions of this
Agreement, and that he enters into this Agreement with a full understanding
of its terms and conditions.
11.2. Arbitration of Disputes. All claims, disputes and
other matters in question arising out of or relating to this Agreement or the
breach or interpretation thereof, other than those matters which are to be
determined by the Employer in its sole and absolute discretion, shall be
resolved by binding arbitration before a representative member, selected by
the mutual agreement of the parties, of the Judicial Arbitration and
Mediation Services, Inc. ("JAMS"), located in San Francisco, California. In
the event JAMS is unable or unwilling to conduct the arbitration provided
for under the terms of this Paragraph, or has discontinued its business, the
parties agree that a representative member, selected by the mutual agreement
of the parties, of the American Arbitration Association ("AAA"), located in
San Francisco, California, shall conduct the binding arbitration referred to in
this Paragraph. Notice of the demand for arbitration shall be filed in writing
with the other party to this Agreement and with JAMS (or AAA, if
necessary). In no event shall the demand for arbitration be made after the
date when institution of legal or equitable proceedings based on such claim,
dispute or other matter in question would be barred by the applicable statute
of limitations. The arbitration shall be subject to such rules of procedure
used or established by JAMS, or if there are none, the rules of procedure
used or established by AAA. Any award rendered by JAMS or AAA shall
be final and binding upon the parties, and as applicable, their respective
heirs, beneficiaries, legal representatives, agents, successors and assigns, and
may be entered in any court having jurisdiction thereof. The obligation of the
parties to arbitrate pursuant to this clause shall be specifically enforceable
in accordance with, and shall be conducted consistently with, the provisions of
Title 9 of Part 3 of the California Code of Civil Procedure. Any arbitration
hereunder shall be conducted in Saratoga, California, unless otherwise
agreed to by the parties.
11.3. Attorneys' Fees. In the event of any arbitration or
litigation concerning any controversy, claim or dispute between the parties
hereto, arising out of or relating to this Agreement or the breach hereof, or
the interpretation hereof, the prevailing party shall be entitled to recover
from the non-prevailing party reasonable expenses, attorneys' fees and costs
incurred in connection therewith or in the enforcement or collection of any
judgment or award rendered therein. The "prevailing party" means the party
determined by the arbitrator(s) or court, as the case may be, to have most
nearly prevailed, even if such party did not prevail in all matters, not
necessarily the one in whose favor a judgment is rendered.
11.4. Notice. Any notice required or permitted of either
the Executive or the Employer under this Agreement shall be deemed to
have been duly given, if by personal delivery, upon the date received by the
party or its authorized representative; if by facsimile, upon transmission to a
telephone number previously provided by the party to whom the facsimile is
transmitted as reflected in the records of the party transmitting the facsimile
and upon reasonable
<PAGE> 127
confirmation of such transmission; and if by mail, on
the third day after mailing via U.S. first class mail, registered or certified,
postage prepaid and return receipt requested, and addressed to the party at
the address given below for the receipt of notices, or such changed address
as may be requested in writing by a party.
If to the Employer: Saratoga National Bank
12000 Saratoga-Sunnyvale Rd.
Saratoga, California 95070
Attn: Chairman of the Board
If to the Executive: Richard L. Mount
______________________
______________________
11.5. Assignment. Neither the Executive, the
Executive's spouse, nor any other beneficiary under this Agreement shall
have any power or right to transfer, assign, anticipate, hypothecate, modify
or otherwise encumber any part or all of the amounts payable hereunder,
nor, prior to payment in accordance with the terms of this Agreement, shall
any portion of such amounts be: (i) subject to seizure by any creditor of any
such beneficiary, by a proceeding at law or in equity, for the payment of any
debts, judgments, alimony or separate maintenance obligations which may be
owed by the Executive, the Executive's spouse, or any designated
beneficiary; or (ii) transferable by operation of law in the event of
bankruptcy, insolvency or otherwise. Any such attempted assignment or
transfer shall be void and unenforceable without the prior written consent of
the Employer. The Employer's consent, if any, to one or more assignments
or transfers shall not obligate the Employer to consent to or be construed as
the Employer's consent to any other or subsequent assignment or transfer.
11.6. Binding Effect/Merger or Reorganization. This
Agreement shall be binding upon and inure to the benefit of the Executive
and the Employer and, as applicable, their respective heirs, beneficiaries,
legal representatives, agents, successors and assigns. Accordingly, the
Employer shall not merge or consolidate into or with another corporation, or
reorganize or sell substantially all of its assets to another corporation, firm
or person, unless and until such succeeding or continuing corporation, firm or
person agrees to assume and discharge the obligations of the Employer
under this Agreement. Upon the occurrence of such event, the term
"Employer" as used in this Agreement shall be deemed to refer to such
surviving or successor firm, person, entity or corporation.
11.7. Nonwaiver. The failure of either party to enforce
at any time or for any period of time any one or more of the terms or
conditions of this Agreement shall not be a waiver
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of such term(s) or condition(s) or of that party's right thereafter to enforce
each and every term and condition of this Agreement.
11.8. Partial Invalidity. If any term, provision,
covenant, or condition of this Agreement is determined by an arbitrator or a
court, as the case may be, to be invalid, void, or unenforceable, such
determination shall not render any other term, provision, covenant or
condition invalid, void or unenforceable, and the Agreement shall remain in
full force and effect notwithstanding such partial invalidity.
11.9. Entire Agreement. This Agreement supersedes
any and all other agreements, either oral or in writing, between the parties
with respect to the subject matter of this Agreement and contains all of the
covenants and agreements between the parties with respect thereto. Each
party to this Agreement acknowledges that no other representations,
inducements, promises, or agreements, oral or otherwise, have been made by
any party, or anyone acting on behalf of any party, which are not set forth
herein, and that no other agreement, statement, or promise not contained in
this Agreement shall be valid or binding on either party.
11.10. Modifications. Any modification of this
Agreement shall be effective only if it is in writing and signed by each party
or such party's authorized representative.
11.11. Paragraph Headings. The paragraph headings
used in this Agreement are included solely for the convenience of the parties
and shall not affect or be used in connection with the interpretation of this
Agreement.
11.12. No Strict Construction. The language used in
this Agreement shall be deemed to be the language chosen by the parties
hereto to express their mutual intent, and no rule of strict construction will
be applied against any person.
11.13. Governing Law. The laws of the State of
California, other than those laws denominated choice of law rules, and,
where applicable, the rules and regulations of the Board of Governors of the
Federal Reserve System, Federal Deposit Insurance Corporation, Office of
the Comptroller of the Currency, or other regulatory agency or
governmental authority having jurisdiction over Employer, shall govern the
validity, interpretation, construction and effect of this Agreement.
<PAGE> 129
IN WITNESS WHEREOF, the Employer and the Executive have
executed this Agreement on the date first above-written in the City of
Saratoga, Santa Clara County, California.
THE EMPLOYER THE EXECUTIVE
SARATOGA NATIONAL BANK
By:______________________________ _____________________________
V. Ronald Mancuso Richard L. Mount
Compensation Committee Chairman
<PAGE> 130
SCHEDULE A
CALENDAR YEAR APPLICABLE PERCENTAGE
__________, 1982 to December 31, 1998. . . . 80.00%
December 31, 1999. . . . . . . . . . . . . . 90.00%
December 31, 2000. . . . . . . . . . . . . . 100.00%
<PAGE> 131
SCHEDULE B
EXECUTIVE BENEFITS
1. Executive Benefits Determination.
The Executive Benefits shall be determined based upon the following:
a. Benefit Account:
A Benefit Account shall be established as a liability reserve
account on the books of the Employer for the benefit of the
Executive. Prior to the date on which the Executive
becomes eligible to receive payments under the Agreement,
such Benefit Account shall be increased (or decreased) each
Plan Year (including the Plan Year in which the Executive
ceases to be employed by the Employer) by an amount equal
to the annual earnings or loss for that Plan Year determined
by the Index (described in subparagraph c below), less the
Opportunity Cost (described in subparagraph d below) for
that Plan Year.
b. Index Benefit:
After the date on which the Executive becomes eligible to
receive payments under the Agreement, the Index Benefit for
the Executive for any Plan Year shall be determined by
subtracting the Opportunity Cost for that Plan Year from the
earnings, if any, established by the Index.
c. Index:
The Index for any Plan Year shall be the aggregate annual
after-tax income from the life insurance contracts described
hereinafter as defined by FASB Technical Bulletin 85-4.
This Index shall be applied as if such insurance contracts
were purchased on the Effective Date.
Insurance Company(ies)/Policy Number(s):
Canada Life Assurance/US2651090
Southland Life Insurance/0600080553
Transamerica Life/50335062
If such contracts of life insurance are actually purchased by
the Employer, then the actual policies as of the dates
purchased shall be used in calculations to determine the
Index and Opportunity Cost. If such contracts of life
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insurance are not purchased or are subsequently surrendered
or lapsed, then the Employer shall receive and use annual
policy illustrations that assume the above described policies
were purchased from the above named insurance
company(ies) on the Effective Date to calculate the amount
of the Index and Opportunity Cost.
d. Opportunity Cost:
The Opportunity Cost for any Plan Year shall be calculated
by multiplying (a) the sum of (i) the total amount of
premiums set forth in the insurance policies described above,
(ii) the amount of any Index Benefits (described at
subparagraph b above), and (iii) the amount of all previous
years after-tax Opportunity Costs; by (b) the average
annualized after-tax cost of funds calculated using a one-year U.S.
Treasury Bill as published in the Wall Street
Journal. The applicable tax rate used to calculate the
Opportunity Cost shall be the Employer's marginal tax rate
until the Executive's Retirement, or other termination of
service (including a Change in Control). Thereafter, the
Opportunity Cost shall be calculated with the assumption of
a marginal forty-two percent (42%) corporate tax rate each
year regardless of whether the actual marginal tax rate of the
Employer is higher or lower.
EXAMPLE
INDEX BENEFITS
[n] [A] [B] [C] [D]
End of Cash Surrender Index Opportunity Annual Cumulative
Year Value of Life [Annual Cost Benefit Benefit
Insurance Policy Policy A0=premium B-C D+Dn-1
Income] A0+Cn-1x.05x
An-An-1 (1-42%)
0 $1, 000,000 -- -- -- --
1 $1,050,000 $50,000 $29,000 $21,000 $21,000
2 $1,102,500 $52,500 $29,841 $22,659 $43,659
3 $1,157,625 $55,125 $30,706 $24,419 $68,078
.
.
.
Assumptions: Initial Insurance = $1,000,000
Effective Tax Rate = 42%
One Year US Treasury Yield = 5%
<PAGE> 133
2. Executive Benefits Payments.
The Executive shall be entitled to payment of the Applicable
Percentage of (i) the balance in the Benefit Account in installments
upon the terms as specified in the Agreement, and (ii) the Index
Benefit for each Plan Year payable in installments until the Executive's
death.
<PAGE> 134
SCHEDULE C
BENEFICIARY DESIGNATION
To the Administrator of the Saratoga National Bank Executive
Supplemental Compensation Agreement:
Pursuant to the Provisions of my Executive Supplemental
Compensation Agreement with Saratoga National Bank, permitting the
designation of a beneficiary or beneficiaries by a participant, I hereby
designate the following persons and entities as primary and secondary
beneficiaries of any benefit under said Agreement payable by reason of my
death:
Primary Beneficiary:
______________________ ____________________ _____________________________
Name Address Relationship
Secondary (Contingent) Beneficiary:
______________________ _____________________ ____________________________
Name Address Relationship
THE RIGHT TO REVOKE OR CHANGE ANY BENEFICIARY DESIGNATION IS HEREBY RESERVED.
ALL PRIOR DESIGNATIONS, IF ANY, OF PRIMARY BENEFICIARIES AND SECONDARY
BENEFICIARIES ARE HEREBY REVOKED.
The Administrator shall pay all sums payable under the Agreement by
reason of my death to the Primary Beneficiary, if he or she survives me, and
if no Primary Beneficiary shall survive me, then to the Secondary
Beneficiary, and if no named beneficiary survives me, then the Administrator
shall pay all amounts in accordance with the terms of my Executive
Supplemental Compensation Agreement. In the event that a named
beneficiary survives me and dies prior to receiving the entire benefit payable
under said Agreement, then and in that event, the remaining unpaid benefit
<PAGE> 135
payable according to the terms of my Executive Supplemental Compensation
Agreement shall be payable to the personal representatives of the estate of
said beneficiary who survived me but died prior to receiving the total benefit
provided by my Executive Supplemental Compensation Agreement.
Dated: ___________, 1998 __________________________
Richard L. Mount
CONSENT OF THE EXECUTIVE'S SPOUSE TO THE ABOVE BENEFICIARY DESIGNATION:
I, Patricia A. Mount, being the spouse of Richard L. Mount, after
being afforded the opportunity to consult with independent counsel of my
choosing, do hereby acknowledge that I have read, agree and consent to the
foregoing Beneficiary Designation which relates to the Executive
Supplemental Compensation Agreement entered into by my spouse effective
as of ___________, 1998. I understand that the above Beneficiary
Designation may affect certain rights which I may have in the benefits
provided for under the terms of the Executive Supplemental Compensation
Agreement and in which I may have a marital property interest.
Dated: ___________, 1998
______________________________
Patricia A. Mount
<PAGE> 136
SCHEDULE D
DISTRIBUTION ELECTION
Pursuant to the Provisions of my Executive Supplemental Compensation
Agreement with Saratoga National Bank, I hereby elect to have any
distribution of the balance in my Benefit Account paid to me in installments
as designated below:
thirty-six (36) monthly installments with the
amount of each installment determined as of each
installment date by dividing the entire amount in my
Benefit Account by the number of installments then
remaining to be paid, with the final installment to
be the entire remaining balance in the Benefit
Account.
sixty (60) monthly installments with the amount of
each installment determined as of each installment
date by dividing the entire amount in my Benefit
Account by the number of installments then
remaining to be paid, with the final installment to
be the entire remaining balance in the Benefit
Account.
one hundred twenty (120) monthly installments
with the amount of each installment determined as
of each installment date by dividing the entire
amount in my Benefit Account by the number of
installments then remaining to be paid, with the
final installment to be the entire remaining balance
in the Benefit Account.
one hundred eighty (180) monthly installments with
the amount of each installment determined as of
each installment date by dividing the entire amount
in my Benefit Account by the number of
installments then remaining to be paid, with the
final installment to be the entire remaining balance
in the Benefit Account.
Dated: ____________, 1998
Signed: _______________________
Richard L. Mount
