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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the transition period from to
Commission File Number : 0-12499
First Financial Bancorp
(Exact name of registrant as specified in its charter)
California 94-28222858
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
701 South Ham Lane , Lodi, California 95242
(Address of principal executive offices) (Zip Code)
(209)-367-2000
(Registrant's telephone number, including area code)
NA
(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.
[ X ] Yes [ ] No
As of September 30, 1998 there were 1,346,442 shares of Common Stock, no
par value, outstanding.
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<PAGE>
FIRST FINANCIAL BANCORP
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1998
TABLE OF CONTENTS
Page
----
PART I
Item 1. Financial Statements ........................................... 1
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ....................................... 7
Item 3. Quantitative and Qualitative Disclosures about Market Risk ..... 14
PART II
Item 1. Legal Proceedings .............................................. 14
Item 2. Changes in Securities .......................................... 14
Item 3. Defaults Upon Senior Securities ................................ 14
Item 4. Submission of Matters to a Vote of Security Holders ............ 14
Item 5. Other Information .............................................. 15
Item 6. Exhibits and Reports on Form 8-K ............................... 15
i
<PAGE>
<TABLE>
ITEM 1. FINANCIAL STATEMENTS
FIRST FINANCIAL BANCORP AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands except share amounts)
<CAPTION>
Sept. 30 Dec. 31
Assets 1998 1997
-------- --------
<S> <C> <C>
Cash and due from banks $ 6,700 $ 7,183
Federal funds sold 3,700 4,900
Investment Securities:
Held-to-maturity securities at amortized cost, market value of
$1,754 and $1,785 at September 30, 1998 and Dec. 31, 1997,respectively
1,705 1,716
Available-for-sale securities, at fair value 48,818 60,201
-------- --------
Total investments 50,523 61,917
Loans 81,917 63,541
Less allowance for loan losses (Note 3) 1,375 1,313
-------- --------
Net loans 80,542 62,228
Bank premises and equipment, net 7,267 7,233
Accrued interest receivable 1,277 1,473
Other assets (Note 4) 7,068 2,916
-------- --------
$157,077 $147,850
======== ========
Liabilities and Stockholders' Equity
Liabilities:
Deposits
Noninterest bearing $ 19,160 $ 14,928
Interest bearing 123,688 118,963
-------- --------
Total deposits 142,848 133,891
Accrued interest payable 386 429
Other liabilities 301 669
-------- --------
Total liabilities 143,535 134,989
Stockholders' equity:
Common stock - no par value; authorized 9,000,000 shares, issued and
outstanding in 1998 and 1997, 1,346,442 and 1,332,842 shares 7,566 7,455
Retained earnings 5,697 5,188
Accumulated other comprehensive income (Note 1) 279 218
-------- --------
Total stockholders' equity 13,542 12,861
-------- --------
$157,077 $147,850
======== ========
</TABLE>
<PAGE>
<TABLE>
FIRST FINANCIAL BANCORP AND SUBSIDIARIES
Consolidated Statements of Income
(in thousands except per share amounts)
<CAPTION>
Three months ended Sept. 30 Nine months ended Sept. 30
1998 1997 1998 1997
------- ------- ------- -------
(Dollar amounts in thousands, (Dollar amounts in thousands,
except per share amounts) except per share amounts)
<S> <C> <C> <C> <C>
Interest income:
Loans, including fees $ 1,986 $ 1,591 $ 5,448 $ 4,919
Investment securities:
Taxable 790 908 2,515 2,407
Exempt from Federal taxes 64 56 181 202
Federal funds sold 74 78 258 280
------- ------- ------- -------
Total interest income 2,914 2,633 8,402 7,808
Interest expense:
Deposit accounts 1,049 984 3,075 2,769
------- ------- ------- -------
Total interest expense 1,049 984 3,075 2,769
------- ------- ------- -------
Net interest income 1,865 1,649 5,327 5,039
Provision for loan losses 60 -- 120 (60)
------- ------- ------- -------
Net interest income after provision for loan 1,805 1,649 5,207 5,099
losses
Noninterest income:
Service charges 218 192 662 574
Premiums and fees from SBA and mortgage operations 208 160 552 445
Miscellaneous (Note 4) 64 15 131 42
------- ------- ------- -------
Total noninterest income 490 367 1,345 1,061
Noninterest expense:
Salaries and employee benefits 835 733 2,559 2,266
Occupancy 207 156 519 422
Equipment 126 115 397 327
Other 741 694 2,119 2,006
------- ------- ------- -------
Total noninterest expense 1,909 1,698 5,594 5,021
------- ------- ------- -------
Income before provision for income taxes 386 318 958 1,139
Provision for income taxes 86 102 247 377
------- ------- ------- -------
Net income $ 300 $ 216 $ 711 $ 762
Unrealized gain on available for sale
securities, net of tax 103 104 61 79
------- ------- ------- -------
Total comprehensive income $ 403 $ 320 $ 772 $ 841
======= ======= ======= =======
Net income per share:
Basic (Note 2) $ 0.22 $ 0.16 $ 0.53 $ 0.58
======= ======= ======= =======
Diluted (Note 2) $ 0.21 $ 0.15 $ 0.50 $ 0.55
======= ======= ======= =======
</TABLE>
2
<PAGE>
<TABLE>
FIRST FINANCIAL BANCORP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
Nine Months Ended Sept. 30
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 711 $ 762
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Increase (decrease) in loans held for sale 767 (1,559)
Increase in deferred loan income 94 147
Provision for other real estate owned losses 16 70
Depreciation and amortization 783 787
Provision for loan losses 120 (60)
Provision for deferred taxes (4) 2
Decrease (increase) in accrued interest receivable 196 (341)
(Decrease) increase in accrued interest payable (43) 137
(Increase) decrease in other liabilities (368) 238
Increase in cash surrender value of life insurance (101) --
Decrease in other assets (284) (320)
-------- --------
Net cash provided by (used in) operating activities 1,887 (137)
Cash flows from investing activities:
Proceeds from maturity of held-to-maturity securities 10 70
Proceeds from maturity of available-for-sale securities 15,486 13,474
Proceeds from sale of available-for-sale securities -- 26,000
Purchases of available-for-sale securities (4,000) (59,210)
Net increase in loans made to customers (19,295) (7,510)
Proceeds from the sale of other real estate 24 227
Purchases of bank premises and equipment (536) (3,024)
Purchase of cash surrender value life insurance (4,125) --
-------- --------
Net cash used in investing activities (12,436) (29,973)
Cash flows from financing activities:
Net increase in deposits 8,957 37,007
Dividends paid (202) (198)
Proceeds from issuance of common stock 111 131
-------- --------
Net cash provided by financing activities 8,866 36,940
Net (decrease) increase in cash and
cash equivalents (1,683) 6,830
Cash and cash equivalents at beginning of period 12,083 5,848
-------- --------
Cash and cash equivalents at end of period $ 10,400 $ 12,678
======== ========
</TABLE>
3
<PAGE>
FIRST FINANCIAL BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1998 and December 31, 1997
(1) Summary of Significant Accounting Policies
The accounting and reporting policies of First Financial Bancorp (the Company)
and its subsidiaries, Bank of Lodi, N.A., (the Bank) and Western Auxiliary
Corporation (WAC) conform with generally accepted accounting principles and
prevailing practices within the banking industry. In preparing the consolidated
financial statements, Management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the date of the
balance sheet and revenue and expense for the period. Actual results could
differ from those estimates applied in the preparation of the consolidated
financial statements. The following is a description of a new accounting
standard adopted during the current period.
(a) Reporting Comprehensive Income
In June 1997, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard (SFAS) No. 130, Reporting Comprehensive Income.
SFAS No. 130 is effective for interim and annual periods beginning after
December 15, 1997 and is to be applied retroactively to all periods presented.
SFAS No. 130 establishes standards for reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
It does not, however, specify when to recognize or how to measure items that
make up comprehensive income. SFAS No. 130 was issued to address concerns over
the practice of reporting elements of comprehensive income directly in equity.
This statement requires all items that are required to be recognized under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed in equal prominence with the other
financial statements. It does not require a specific format for that financial
statement but requires that an enterprise display an amount representing total
comprehensive income for the period in that financial statement. Enterprises are
required to classify items of "other comprehensive income" by their nature in
the financial statement and display the balance of other comprehensive income
separately in the equity section of a statement of financial position.
4
<PAGE>
(2) Weighted Average Shares Outstanding
<TABLE>
Basic and diluted earnings per share for the three and nine months ended
September 30, 1998 and 1997 were computed as follows:
<CAPTION>
Income Shares Per-Share
Three months ended September 30, 1998 (numerator) (denominator) Amount
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Basic earnings per share $ 300,000 1,346,291 $ .22
Effect of dilutive securities - 83,929 -
--------------------------------------
Diluted earnings per share $ 300,000 1,430,220 $ .21
======================================
Income Shares Per-Share
Nine months ended September 30, 1998 (numerator) (denominator) Amount
------------------------------------------------------------------------------------------------------------
Basic earnings per share $ 711,000 1,339,127 $ .53
Effect of dilutive securities - 86,576 -
--------------------------------------
Diluted earnings per share $ 711,000 1,425,683 $ .50
======================================
Income Shares Per-Share
Three months ended September 30, 1997 (numerator) (denominator) Amount
-----------------------------------------------------------------------------------------------------------
Basic earnings per share $ 216,000 1,329,864 $ .16
Effect of dilutive securities - 73,894 -
--------------------------------------
Diluted earnings per share $ 216,000 1,403,758 $ .15
======================================
Income Shares Per-Share
Nine months ended September 30, 1997 (numerator) (denominator) Amount
------------------------------------------------------------------------------------------------------------
Basic earnings per share $ 762,000 1,320,250 $ .58
Effect of dilutive securities - 65,221 -
--------------------------------------
Diluted earnings per share $ 762,000 1,385,472 $ .55
======================================
</TABLE>
<TABLE>
(3) Allowance for Loan Losses
<CAPTION>
9/30/98 12/31/97
----------- ----------
<S> <C> <C>
Balance at beginning of period $ 1,313,000 1,207,000
Loans charged off (122,000) (290,000)
Recoveries 64,000 456,000
Provisions charged to operations 120,000 (60,000)
----------- ----------
Balance at end of period $ 1,375,000 1,313,000
=========== =========
</TABLE>
(4) Other Assets
Other assets includes the cash surrender value of life insurance of
$4,226,000 at September 30, 1998. The cash surrender value of life insurance
consists primarily of the Bank's contractual rights under single-premium
life insurance policies written on the lives of certain officers and the
directors of the Company and the Bank. The policies were purchased in order
to indirectly offset anticipated costs of certain benefits payable upon the
retirement, and the death or disability of the directors and officers
pursuant to deferred compensation agreements. The cash surrender value
accumulates tax-free based upon each policy's crediting rate which is
adjusted by the insurance company on an annual basis.
5
<PAGE>
(5) Supplemental Compensation Plans
Effective April 3, 1998 the Company and the Bank entered into nonqualified
supplemental compensation agreements with all of the directors and certain
executive officers for the provision of differing death, disability and
post-employment/retirement benefits. The agreement with directors includes
elective provisions for service as a director emeritus following termination
of service as a member of the Bank's Board of Directors. Directors who elect
to serve as a director emeritus receive certain benefits during such period
of service in addition to benefits applicable to all directors which
commence upon expiration of the three year emeritus period. The Company will
accrue for the compensation based on anticipated years of service and the
vesting schedule provided in the agreements. The executive officer program
is a defined contribution program whereby the benefit accruals under the
plan are the amount by which, if any, the increase in cash surrender value
of the related insurance policies exceeds a predetermined profitability
index. At September 30, 1998, accrued compensation under these plans was
$16,000.
(6) Western Auxiliary Corporation
On June 9, 1998 the Company incorporated Western Auxiliary Corporation
(WAC). The Company capitalized WAC as a wholly-owned subsidiary during the
quarter ended September 30, 1998 with an initial capitalization of $10,000.
WAC earns fee income by acting as trustee on the Bank's trust deed
transactions and receives the necessary operational resources under an
intercompany services agreement between WAC and the Bank.
(7) Prospective Accounting Pronouncements
Accounting for Derivative Instruments and Hedging Activity
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It
requires recognition of all derivatives as either assets or liabilities on
the balance sheet and measurement of those instruments at fair value. If
certain conditions are met, a derivative may be designated specifically as
(a) a hedge of the exposure to changes in the fair value of a recognized
asset or liability or an unrecognized firm commitment (a fair value hedge)
or (b) a hedge of the exposure to variable cash flows of a forecasted
transaction (a cash flow hedge). SFAS No. 133 is effective for all fiscal
quarters of fiscal years beginning after June 15, 1999. The Company adopted
the Statement beginning October 1, 1998. Management does not expect that
adoption of SFAS No. 133 will have a material impact on the Company's
consolidated financial statements.
Accounting for Mortgage-Backed Securities Retained after the Securitization
of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise
In October 1998, the FASB issued SFAS No. 134, Accounting for
Mortgage-Backed Securities Retained after the Securitization of Mortgage
Loans Held for Sale by a Mortgage Banking Enterprise. SFAS No. 134 requires
that after the securitization of mortgage loans held for sale, an entity
engaged in mortgage banking activities classify the resulting
mortgage-backed securities or other retained interests based on its ability
and intent to sell or hold those investments. SFAS No. 134 is effective for
the first fiscal quarter beginning after December 15, 1998. Management does
not expect that adoption of SFAS No. 134 will have a material impact on the
Company's consolidated financial statements.
Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use
In March 1998, the American Society of Certified Public Accountants (AICPA)
issued Statement of Position (SOP) 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. SOP 98-1 provides
guidance on accounting for the costs of computer software developed or
obtained for internal use. It specifies that computer software meeting
certain characteristics be designated as internal-use software and sets
forth criteria for expensing, capitalizing, and amortizing certain costs
related to the development or acquisition of internal-use software. SOP 98-1
is effective for fiscal years beginning after December 15, 1998. The Company
expects to adopt the Statement beginning January 1, 1999. Management does
not expect that adoption of SOP 98-1 will have a material impact on the
Company's consolidated financial statements.
Reporting on the Costs of Start-Up Activities
In April 1998, the AICPA issued SOP 98-5, Reporting on the Costs of Start-Up
Activities. SOP 98-5 provides guidance on the financial reporting of
start-up costs and organization costs. It requires costs of start-up
activities and organization costs to be expensed as incurred. SOP 98-5 is
effective for fiscal years beginning after December 15, 1998. The Company
expects to adopt the Statement beginning January 1, 1999. Management does
not expect that adoption of SOP 98-5 will have a material impact on the
Company's consolidated financial statements.
6
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Cautionary Statement for the Purposes of the Safe Harbor Provisions of the
Private Securities Litigation Reform Act of 1995.
The Company is including the following cautionary statement to take advantage of
the "Safe Harbor" provisions of the Private Securities Litigation Reform act of
1995 for any forward-looking statement made by, or on behalf of, the Company.
The factors identified in this cautionary statement are important factors (but
not necessarily all important factors) that could cause actual results to differ
materially from those expressed in any forward-looking statement made by, or on
behalf of, the Company.
Where any such forward-looking statement includes a statement of the assumptions
of bases underlying such forward-looking statement, the Company cautions that,
while it believes such assumptions or bases to be reasonable and makes them in
good faith, assumed facts or bases almost always vary from actual results, and
the differences between assumed facts or bases and actual results can be
material, depending on the circumstances. Where, in any forward-looking
statement, the Company expresses an expectation or belief as to future results,
such expectation or belief is expressed in good faith and believed to have a
reasonable basis, but there can be no assurance that the statement of
expectation or belief will result, or be achieve or accomplished.
Taking into account the foregoing, such risks and uncertainties include, but are
not limited to, the following factors: competitive pressure in the banking
industry; changes in the interest rate environment; general economic conditions,
either nationally or regionally becoming less favorable than expected and
resulting in, among other things, a deterioration in credit quality and an
increase in the provision for possible loan losses; changes in the regulatory
environment; changes in business conditions; volatility of rate sensitive
deposits; operational risks, including data processing system failures or fraud;
asset/liability matching risks and liquidity risks; and changes in the
securities markets.
In addition, the dates on which the Company believes the Year 2000 project will
be completed are based on management's best estimates, which were derived
utilizing numerous assumptions of future events, including the continued
availability of certain resources, third-party modification plans and other
factors. However, there can be no guarantee that these estimates will be
achieved, or that there will not be a delay in, or increased costs associated
with, the implementation of the Year 2000 Project. Specific factors that might
cause differences between the estimates and actual results include, but are not
limited to, the availability and cost of trained personnel, ability to locate
and correct all computer related issues, timely responses to and corrections by
third-parties and suppliers, the availability to implement interfaces between
new systems and the systems not being replaced, and similar uncertainties. Due
to the general uncertainty inherent in the Year 2000 problem, resulting in part
from the uncertainty of the Year 2000 readiness of third-parties, the Company
cannot ensure its ability to timely and cost-effectively resolve problems
associated with the Year 2000 issues that may affect its operations and
business, or expose it to third-party liability.
The following discussion addresses information pertaining to the financial
condition and results of operations of the Company that may not be otherwise
apparent from a review of the consolidated financial statements and related
footnotes. It should be read in conjunction with those statements and notes
found on pages 1 through 6, as well as other information presented throughout
this report.
Changes in Financial Condition
Consolidated total assets at September 30, 1998 were $9.2 million above the
comparable level at December 31, 1997. The 6% increase in assets was due
primarily to an increase in deposits of $9.0 million, or 7%. Noninterest bearing
deposits grew by 28%. Growth of 4% in interest bearing deposits occurred in core
NOW account deposits and certificates of deposit. The company experienced a 1%
increase in deposits during the first quarter that ran
7
<PAGE>
contrary to historical trends which reflect a seasonal decline in deposits
during the first quarter that is typically associated with the local
agricultural industry. Deposits grew an additional 5% subsequent to the first
quarter. Although management cannot determine with certainty why a seasonal
decline in deposits has not occurred, the unseasonably wet weather during the
first quarter impacted local agriculture and may have impacted deposit flows.
Nothwithstanding seasonal trends, monthly deposit account growth has ranged
between 5% and 12% through September 30, 1998 and has impacted deposit growth
favorably.
The loan portfolio increased by 29%, or $18.4 million, from December 31, 1997 to
September 30, 1998. The increase reflects the success of officer calling
disciplines within the Bank's business development program as well as economic
improvement in the Bank's market area. The real estate, construction, SBA and
commercial loan portfolios increased by 43%, 65%, 59%, and 15%, respectively.
From a geographic perspective, the fastest loan portfolio growth rate has
occurred in the markets of Galt, Plymouth, and San Andreas, California that the
Bank began to serve in February, 1997 after acquiring the local branches from
Wells Fargo Bank, and Folsom, where a loan production office was restaffed in
June of 1998. Since December 31, 1997, the loan portfolios of these offices have
increased by 98%.
The allowance for loan losses at September 30, 1998 is in excess of the December
31, 1997 allowance by $62 thousand, or 5%. Nonperforming loans declined by $123
thousand, to $282 thousand from December 31, 1997 to September 30, 1998, and the
allowance for loan losses to nonperforming loan coverage ratio increased to 4.89
times from 3.24 times. Total portfolio delinquency at September 30, 1998 was
.67%, compared to 1.09% at December 31, 1997. Management believes that the
allowance for loan losses at September 30, 1998 is adequate. The following
tables depict activity in the allowance for loan losses and allocation of
reserves for and at the nine and twelve months ended September 30, 1998 and
December 31, 1997, respectively:
<TABLE>
Analysis of the Allowance for Loan Losses
<CAPTION>
9/30/98 12/31/97
------- --------
<S> <C> <C>
Balance at beginning of period $ 1,313 1,207
Charge-offs:
Commercial 66 249
Real estate 25 --
Consumer 31 41
------- -----
Total charge-offs 122 290
Recoveries:
Commercial 46 434
Real estate -- --
Consumer 18 22
------- -----
Total recoveries 64 456
------- -----
Net charge-offs 58 (166)
additions/(reductions) charged to/(credited to) operations 120 (60)
------- -----
Balance at end of period $ 1,375 1,313
======= =====
</TABLE>
<TABLE>
Allocation of the Allowance for Loan Losses
<CAPTION>
9/30/98 9/30/98 12/31/97 12/31/97
Loan Category Amount % of Loans Amount % of Loans
------------- --------- ---------- ------ ----------
<S> <C> <C> <C> <C>
Commercial $ 203 56.71% 309 60.95%
Real Estate 146 40.78% 192 37.87%
Consumer 9 2.51% 6 1.18%
Unallocated 1,017 N/A 806 N/A
-------- ------- ------- -------
$ 1,375 100.00% 1,313 100.00%
========= ======= ======= =======
</TABLE>
8
<PAGE>
Other Assets
Other assets increased by $4.2 million, or 142%, from December 31, 1997 to
September 30, 1998. During the second quarter of 1998, the Bank's Board of
Directors adopted a director emeritus program and a supplemental retirement
compensation program for certain executive officers. Similar programs have been
endorsed by the California Bankers Association and the American Bankers
Association and have been implemented at financial institutions throughout
California and the United States. The nature of these programs enable the Bank
to fund the related financial obligations in a cost-effective manner through
investments in life insurance. Accordingly, the Bank invested $4.2 million in
single-premium life insurance contracts written on the lives of the plan
participants. The contracts provide for a cash surrender value to the Bank that
increases each year based upon a crediting rate that is adjusted annually. The
increase in cash surrender value is recognized on a tax-free basis because the
Bank's intent is to carry the policies until the death of the insured
individuals. The tax-equivalent yield on the insurance investment provides for
an incremental return over alternative investment securities that both improves
profitability and ultimately provides the funds necessary to settle the
financial obligations under the emeritus and retirement programs. Under the
supplemental retirement program for certain executive officers, retirement
benefits are credited annually only after a pre-determined profitability target
for the insurance investment is met.
Investment Securities
The growth in the loan portfolio and other assets was funded by maturities of
investment securities in addition to the deposit growth discussed above.
Investment securities declined by $11.4 million, or 18%, from December 31, 1997
to September 30, 1998. The decline represents maturities of approximately $15
million net of investment purchases of $4.0 million. Some of the maturities
represent callable agency securities that were called by the issuer. At
September 30, 1998, the bank held approximately $14.5 million in callable agency
securities with an average maturity, months to first call, and average yield of
9 years, 6 months, and 6.99%, respectively.
Equity
Consolidated equity increased by $681 thousand from December 31, 1997 to
September 30, 1998. Consolidated equity represented 8.6% and 8.7% of
consolidated assets at September 30, 1998 and December 31, 1997, respectively.
Stock option exercises during the nine months ended September 30, 1998 increased
equity by $111 thousand. The increase in equity from earnings of $711 thousand
for the nine months ended September 30, 1998 exceeded reductions from dividend
payments of $202 thousand. Equity also increased by $61 thousand due to the
after-tax market value appreciation of the available-for-sale portion of the
investment securities portfolio. The increase in the investment security
portfolio's market value reflects the decline in the level market interest rates
at September 30, 1998 compared to December 31, 1997.
The total risk-based capital ratio for the Company's wholly owned subsidiary,
Bank of Lodi was 11.60% at September 30, 1998 compared to 12.95% at December 31,
1997. The decline in the total risk-based capital ratio is largely a function of
the increase in loan volume. Loans carry a risk weight of 100% compared to an
average risk-weight of 20% for the funds used to make loans. For each dollar in
new loans, risk-weighted assets increase by eighty cents. The Bank's leverage
capital ratio was 7.15% at September 30, 1998 versus 7.11% at December 31, 1997.
The capital ratios are in excess of the regulatory minimums for a
well-capitalized bank.
Year 2000
The potential impact of the Year 2000 compliance issue on the financial services
industry could be material, as virtually every aspect of the industry and
processing of transactions will be affected. Due to the size of the task facing
the financial services industry and the interdependent nature of its
transactions, the Company may be adversely affected by this problem, depending
on whether it and the entities with which it does business address this issue
successfully. The impact of Year 2000 issues on the Company will depend not only
on corrective actions that the Company takes, but also on the way in which Year
2000 issues are addressed by governmental agencies, businesses and other third
parties that provide services or data to, or receive services or data from, the
Company, or whose financial condition or operational capability is important to
the Company.
9
<PAGE>
The Company's State of Readiness
The Company engages the services of third-party software vendors and service
providers for substantially all of its electronic data processing. Thus, the
focus of the Company is to monitor the progress of its primary software
providers toward Year 2000 compliance and prepare to test future-data sensitive
data of the Company in simulated processing.
The Company's Year 2000 compliance program has been divided into phases, all of
them common to all sections of the process: (1) inventorying date-sensitive
information technology and other business systems; (2) assigning priorities to
identified items and assessing the efforts required for Year 2000 compliance of
those determined to be material to the Company; (3) upgrading or replacing
material items that are determined not to be Year 2000 compliant and testing
material items; (4) assessing the status of third party risks; and (5) designing
and implementing contingency and business continuation plans.
As part of the on-going supervision of the banking industry, bank regulatory
agencies are continuously surveying the Company's progression and results of
each one of these phases.
In the first phase, the Company conducted a thorough evaluation of current
information technology systems, software and embedded technologies, resulting in
the identification of 21 Mission Critical Systems that could be affected by Year
2000 issues. Non-information technology systems such as climate control systems,
elevators and vault security equipment, were also surveyed. This stage of the
Year 2000 process is complete.
In phase two of the process, results from the inventory were assessed to
determine the Year 2000 impact and what actions were required to obtain Year
2000 compliance. For the Company's mission-critical systems, actions needed
consist principally of upgrades to application versions that vendors have tested
for Year 2000 compliance. The Bank's core information system is The Phoenix
Banking System (PBS) from Phoenix International Ltd., which was developed in the
early 1990's. The Bank converted to PBS in 1996. PBS was developed with an
eight-digit date field. Phoenix International Ltd. has completed year 2000
testing on version 2.01 of PBS. No code changes to PBS were necessary to
complete those tests.
The third phase includes the upgrading, replacement and/or retirement of
systems, and testing. This stage of the Year 2000 process is ongoing and is
scheduled to be substantially completed for mission critical systems by December
31, 1998. The Company and the Bank plan to upgrade to version 2.01 of PBS during
the fourth quarter of 1998 and complete on-site testing by December 31, 1998.
The Company estimates that it is on schedule to be substantially complete with
testing of mission-critical systems by December 31, 1998. Each of the upgrades,
to the extent economically feasible, is run through a test environment before it
is implemented. It is also tested to see how well it integrates with the
Company's overall data processing environment. Final "future-date" testing of
system upgrades and replacements is scheduled to be completed by the end of the
first quarter of 1999.
The fourth phase, assessing third party risks, includes the process of
identifying and prioritizing critical suppliers and customers at the direct
interface level, as well as other material relationship with third parties,
including various exchanges, clearing houses, other banks, telecommunication
companies and public utilities. This evaluation includes communicating with the
third parties about their plans and progress in addressing Year 2000 issues.
Detailed evaluations of the most critical third parties have been initiated.
These evaluations will be followed with contingency plans, which are ongoing and
scheduled to be completed in the second quarter of 1999, with follow up reviews
scheduled through the remainder of 1999.
10
<PAGE>
Contingency Plan
The final phase of the Company's Year 2000 compliance program relates to
contingency plans. The Company maintains contingency plans in the normal course
of business designed to be deployed in the event of various potential business
interruptions. These plans have been expanded to address Year 2000-specific
interruptions such as power and telecommunication infrastructure failures, and
will continue to be supplemented if and when the results of systems integration
testing identify additional business functions at risk. The Company is defining
core business processes that are dependent upon mission-critical systems and
reviewing the business impact on those processes from the failure of mission
critical systems in order to develop specific business resumption contingency
plans.
Costs
As the Company relies upon third-party software vendors and service providers
for substantially all of its electronic data processing, the primary cost of the
Year 2000 Project has been and will continue to be the reallocation of internal
resources and, therefore, does not represent incremental expense to the Company.
Management estimates that the incremental cost of mitigating Year 2000 risk
exclusive of management time that has been redirected to focus on this matter
will be approximately $50 thousand.
Risks
Failure to correct a material Year 2000 problem could result in an interruption
in, or a failure of, certain normal business activities or operations. The
Company believes that, with the implementation of upgraded business systems and
completion of the Year 2000 Project as scheduled, the possibility of significant
interruptions of normal operations due to the failure of those systems will be
reduced. However, the Company is also dependent upon the power and
telecommunications infrastructure within the United States, and processes large
volumes of transactions through various clearing houses and correspondent banks.
The most reasonably likely worst case scenario would be that the Company may
experience disruption in its operations if any of these third-party suppliers
reported a system failure. Although the Company's Year 2000 Project will reduce
the level of uncertainty about the compliance and readiness of its material
third-party providers, due to the general uncertainty over Year 2000 readiness
of these third-party suppliers, the Company is unable to determine at this time
whether the consequences of Year 2000 failures will have a material impact.
Readers are cautioned that forward-looking statements contained in this section
should be read in conjunction with the Company's disclosures under the heading
"Cautionary Statement for the Purposes for the Safe Harbor Provisions of the
Private Securities Litigation Reform Act of 1995."
11
<PAGE>
<TABLE>
Changes in Results of Operation - Three Months ended September 30, 1998
<CAPTION>
Summary of Earnings Performance
- ------------------------------------------------------------------------------------------------------
For the three months ended September 30:
-------------------------------------------------
1998 1997
---- ----
<S> <C> <C>
Net income (in thousands) $ 300 216
- ---------------------------------------------------------------------------------------------------------
Basic net income per share $ .22 .16
Diluted net income per share .21 .15
Return on average assets 0.78% 0.61%
Return on average equity 9.00% 6.90%
Dividend payout ratio 23.81% 33.33%
- ---------------------------------------------------------------------------------------------------------
"Cash" net income (in thousands) (1) $ 354 286
Diluted "cash" net income per share .25 .20
"Cash" return on average assets 0.92% .81%
"Cash" return on average equity 10.62% 9.20%
- ---------------------------------------------------------------------------------------------------------
Operating "cash" net income (in thousands) (2) $ 354 286
Diluted operating "cash" net income per share .25 .20
Operating "cash" return on average assets 0.92% 0.81%
Operating "cash" return on average equity 10.62% 9.20%
- ---------------------------------------------------------------------------------------------------------
Average equity to average assets 8.67% 8.84%
- ---------------------------------------------------------------------------------------------------------
<FN>
(1) "Cash" net income represent net income based upon generally accepted
accounting principles plus the after-tax, non-cash effect on earnings of
the amortization of intangible assets. Following the 1997 acquisition of
three branches from Wells Fargo Bank, the "cash" earnings, return on
assets, and return on equity are the most comparable to prior year numbers.
They are also the more relevant performance measures for shareholders
because they measure the Company's ability to support growth and pay
dividends.
(2) Operating "Cash" net income is computed by excluding the after-tax impact
of significant elements of revenue or costs that obscure the operating
results of core operations. There were no adjustments for operating cash
earnings for the third quarter of 1998.
</FN>
</TABLE>
Net income for the quarter increased by 39% compared to the prior year quarter.
Net interest income increased by 13%, or $216 thousand. Noninterest income
increased by 34%, or $123 thousand, while noninterest expenses increased by 12%,
or $211 thousand. Based upon the earnings for the three months ended September
30, 1998, the Company's board of directors declared a cash dividend of $.05 per
share payable November 27, 1998 to shareholders of record on November 13, 1998.
Net Interest Income
Net interest income increased by $216 thousand, or 13%, relative to the
comparable prior year quarter. Net interest margin increased to 5.47% for the
quarter compared to 5.31% in the prior year quarter. Interest income increased
by $281 thousand, or 11%, while interest expense increased by $65 thousand, or
7%. The yield on average earning assets for the three months ended September 30,
1998 was 8.74% compared to 8.66% in the prior year period. The increase in
interest income was the result of growth in average earning assets and an
improved mix of average earning assets. The yield on average deposits for the
three months ended September 30, 1998 was 2.93% compared to 3.08% in the prior
year period. The increase in interest expense reflects growth in average
deposits, although favorable changes in the mix of deposits and cost of funds
reductions for transaction accounts offset a portion of the gross increase in
interest expense related to the increase in deposits.
12
<PAGE>
Average earning assets for the three months ended September 30, 1998 increased
by $11.9 million, or 9.6%, compared to the prior year quarter. Earning asset
growth would have been $16 million, or 13%, without the investment in life
insurance contracts discussed above under Changes in Financial Condition.
Although the insurance contracts have a cash surrender value that increases
based upon an annual earnings rate, the contracts are accounted for as other
assets, and the earnings are recorded as a component of other noninterest
income.
Loan yields declined by 10 basis points, while average loans increased by $15.8
million, or 26%, over the prior year. The increase in average loans outstanding
increased loans as a percentage of earning assets to 56% compared to 49% in the
prior year quarter. The increased mix of loans in earning assets offset the
effect of declines in investment portfolio yields, which declined by 37 basis
points. The growth in average loans was the result of persistent business
development efforts on the part of the banks officers and employees in both
existing and new-branch markets and favorable economic conditions that have
stimulated mortgage demand and real estate activity.
Average deposits for the three months ended September 30, 1998 increased by $15
million, or 11.8%, compared to the prior year quarter. Average noninterest
bearing deposits increased to 12% of average deposits from 11%. Average
certificates of deposit were 34% of average deposits compared to 33% in the
prior year quarter. The impact of the changed deposit mix offset $123 thousand
of the gross increase in interest expense that resulted from the increase in
deposits. In addition, reductions in deposit interest rates offset an additional
$42 thousand in interest expense.
Provision for Loan Losses
The provision for loan losses increased by $60 thousand compared to the prior
year quarter. The growth in the provision is attributable to general loss
reserves that have been established in connection with loan portfolio growth.
The allowance for loan losses is discussed above under Changes in Financial
Condition.
Noninterest Income
Noninterest income increased by $123 thousand, or 34%, over the prior year
quarter. Increased service charge income combined with income related to new
investment in insurance contracts combined with an increase in income from the
sale and servicing of loans. Service charge income increased by $26 thousand, or
13%, as a result of increases in deposit accounts. Other noninterest income was
$64 thousand compared to $15 thousand in the prior year due primarily to $57
thousand in income from the increase in the cash surrender value of insurance
contracts discussed above under Other Assets.
Income from the sale and servicing of loans increased by $48 thousand, or 30%,
compared to the prior year quarter. The increased mortgage income is
attributable to declining interest rates, improving economic conditions, and
business development efforts in the mortgage and construction lending area. The
increase resulted from an increase in income from the sale and servicing of
mortgage loans. Mortgage income for the quarter was 73% higher than in the prior
year. SBA loan sales income for the quarter increased by $17 thousand, or 27%.
The pipeline of SBA loans in process is currently larger than in the prior year,
however; the departments production cycle has extended due to an increase in
loans involving new construction which take longer to fully fund.
Noninterest Expenses
Noninterest expenses increased by $211 thousand, or 12%, compared to the prior
year quarter. Salaries and benefit expenses increased by $102 thousand, or 14%.
Approximately $27 thousand of the increase is related to new offices in Elk
Grove and Folsom, CA. Staffing was also increased by three full-time equivalents
in the mortgage department as a result of the increase in origination volume.
Excluding the new offices and the staffing change in the mortgage area, salaries
and benefits increased by $48 thousand, or 5.5%. Occupancy expense increased by
$51 thousand, or 33%, due primarily to the occupancy costs for the new office
locations. Occupancy increases were partially offset by increased rental income
resulting from increased occupancy at Bank of Lodi's main office building in
Lodi. Other noninterest expenses increased by $47 thousand, or 7%, and reflect
both expenses at new office locations as well as costs associated with the
business development efforts and deposit account growth.
13
<PAGE>
Changes in Results of Operation - Nine Months ended September 30, 1998
<TABLE>
Summary of Earnings Performance
<CAPTION>
- ------------------------------------------------------------------------------------------------------
For the nine months ended September 30:
-------------------------------------------------
1998 1997
---- ----
<S> <C> <C>
Net income (in thousands) $ 711 762
- -------------------------------------------------------------------------------------------------------
Basic net income per share $ .53 .58
Diluted net income per share $ .50 .55
Return on average assets 0.62% .77%
Return on average equity 7.18% 8.30%
Dividend payout ratio 30.00% 27.27%
- -------------------------------------------------------------------------------------------------------
"Cash" net income (in thousands) (1) $873 $971
Diluted "cash" net income per share .61 .70
"Cash" return on average assets 0.76% .98%
"Cash" return on average equity 8.82% 10.50%
- -------------------------------------------------------------------------------------------------------
Operating "cash" net income (in thousands) (2) $980 971
Diluted operating "cash" net income per share .69 .70
Operating "cash" return on average assets 0.85% .98%
Operating "cash" return on average equity 9.90% 10.50%
- -------------------------------------------------------------------------------------------------------
Average equity to average assets 8.63% 9.28%
- -------------------------------------------------------------------------------------------------------
<FN>
(1) "Cash" net income represent net income based upon generally accepted
accounting principles plus the after-tax, non-cash effect on earnings of
the amortization of intangible assets. Following the 1997 acquisition of
three branches from Wells Fargo Bank, the "cash" earnings, return on
assets, and return on equity are the most comparable to prior year numbers.
They are also the more relevant performance measures for shareholders
because they measure the Company's ability to support growth and pay
dividends.
(2) Operating "Cash" net income is computed by excluding the after-tax impact
of significant elements of revenue or costs that obscure the operating
results of core operations. Adjustments for the nine months ended September
30, 1998 have been made to exclude from net income the preliminary costs of
a strategic growth initiative for which the company ceased further pursuit
in May, 1998.
</FN>
</TABLE>
Net income declined by $51 thousand, or 7%, compared to the prior year period.
Operating "Cash" earnings for the nine months ended September 30, 1998 increased
by $9 thousand, or 1% compared to the prior year period. Operating "Cash"
earnings for the prior year period included a significant contribution to
performance that was realized when several loans that had been charged off in
prior periods were paid in full. The repayment of these loans resulted in the
recognition of $445 thousand in recovered interest income and a negative
provision for loan losses of $80 thousand. Excluding the after-tax impact of the
recovered interest from operating "cash" earnings for the prior year, current
year operating "cash" earnings would have exceeded the comparable prior year
amount by $267 thousand, or 37%. Excluding the prior year recovery of interest
income, net interest income for the current period increased by 15%, or $733
thousand, over the prior year period. Noninterest income increased by 22%, or
$239 thousand, while noninterest expenses increased by 7%, or $344 thousand,
before the costs associated with the strategic growth initiative discussed in
footnote two of the above table.
Net Interest Income
Excluding the prior year recovery of interest, net interest income increased by
$733 thousand, or 15%, relative to the prior year period. Net interest margin
increased to 5.42% for the quarter compared to 5.26% in the prior year period,
exclusive of the prior year recovery of interest. Interest income increased by
$1,039 thousand, or 14%, excluding the prior year recovery of interest, while
interest expense increased by $306 thousand, or 11%. The yield on average
earning assets for the nine months ended September 30, 1998 was 8.55% compared
to 8.42% in the prior year period, exclusive of the prior year recovery of
interest. The increase in interest income was the result of growth in average
earning assets combined with the 13 basis point increase in earning asset
yields. The yield on average
14
<PAGE>
deposits for the nine months ended September 30, 1998 was 2.98% compared to
3.12% in the prior year period. The increase in interest expense reflects growth
in average deposits, although favorable changes in the mix of deposits offset a
portion of the gross increase in interest expense related to the increase in
deposits.
Average earning assets for the nine months ended September 30, 1998 increased by
$14.5 million, or 12.4%, compared to the prior year period. A portion of the
increase in average earning assets relative to the prior year period is
attributable to the acquisition of three branches from Wells Fargo Bank on
February 22, 1997. Deposits totaling $34 million were acquired with these
branches and are only reflected in seven out of the nine months used to compute
the average in the prior year. Excluding the impact of the initial acquisition
of the branches, average earning assets would have increased by $7 million, or
6%. The gross earning asset growth would have been $17.3 million, or 14.8%,
without the investment in life insurance contracts discussed above under Changes
in Financial Condition. Although the insurance contracts have a cash surrender
value that increases based upon an annual earnings rate, the contracts are
accounted for as other assets, and the earnings are recorded as a component of
other noninterest income.
Loan yields declined by 4 basis points, while average loans increased by $12.6
million, or 22.2%, over the prior year period. The increase in average loans
outstanding increased loans as a percentage of earning assets to 53% compared to
49% in the prior year period. The increased mix of loans as a percentage of
earning assets offset the effect of declines in loan and investment portfolio
yields. The growth in average loans was the result of persistent business
development efforts on the part of the banks officers and employees in both
existing and new-branch markets and favorable economic conditions that have
stimulated mortgage demand and real estate activity.
Average deposits for the nine months ended September 30, 1998 increased by $19.2
million, or 16.2%, compared to the prior year period. A portion of the increase
in average deposits relative to the prior year period is attributable to the
acquisition of three branches from Wells Fargo Bank on February 22, 1997.
Deposits totaling $34 million were acquired with these branches and are only
reflected in seven out of the nine months used to compute the average in the
prior year. Excluding the impact of the initial acquisition of the branches,
average deposits would have increased by $11.6 million, or 9.2%. The mix of
deposits shifted away from higher cost certificates of deposit to lower yielding
noninterest bearing and interest bearing demand deposit accounts. Average
certificates of deposit were 33% of average deposits compared to 347% in the
prior year quarter. The impact of the changed deposit mix offset $65 thousand of
the gross increase in interest expense that resulted from the increase in
deposits. In addition, reductions in the interest rates paid on transaction
accounts offset an additional $76 thousand in interest expense.
Provision for Loan Losses
The provision for loan losses is $120 thousand in the current period compared to
the negative $60 thousand recorded in the prior year period. The principal
reasons for the increase are the significant recoveries in the prior year period
that led to the negative provision in the prior year combined with general
reserves established in the current year in connection with the growth in the
loan portfolio. Total recoveries of loans charged off in previous year added
$456 thousand to the allowance for loan losses during the prior year period
compared to $64 thousand in the current year.
Noninterest Income
Noninterest income increased by $284 thousand, or 27%, over the prior year
period. Service charge income increased by $88 thousand, or 15%, as a result of
both the acquisition of three branches from Wells Fargo Bank on February 22,
1997 and increases in deposit accounts bankwide. Other noninterest income was
$131 thousand compared to $42 thousand in the prior year due to $112 thousand in
income from the investment in insurance contracts discussed above under Other
Assets.
Income from the sale and servicing of loans increased by $107 thousand, or 24%,
compared to the prior year period. The increase was dampened by a decline in SBA
loan sales income. SBA loan sales income for the period declined by $51
thousand, or 22%, compared to the prior year period. Income from the origination
and sale of mortgage loans increased by $111 thousand, or 208%, over the prior
year period. The increased mortgage income is attributable to declining interest
rates, improving economic conditions, and business development efforts in the
mortgage and construction lending area.
15
<PAGE>
Noninterest Expenses
Noninterest expenses increased by $573 thousand, or 11%, compared to the prior
year quarter. Approximately $184 thousand of the increase represents costs
associated with a strategic growth initiative that was discontinued by the
company in May, 1998. Excluding those costs, noninterest expenses increased by
7.5%. Salaries and benefit expenses increased by $293 thousand, or 13%. A
significant portion of the increase is attributable to the acquisition of three
branches from Wells Fargo Bank on February 22, 1997. Some of the increase was
also related to a new loan production office in Folsom, California that was
opened earlier in 1998. Mortgage department staffing was also increased by three
full-time equivalents relative to the prior year as a result of the increase in
mortgage loan volume. Occupancy expense increased by $97 thousand, or 23%. The
increase in occupancy expenses is principally the result of four additional
branch locations and the new loan production office in Folsom, California. These
costs were partially offset by increased rental income resulting from increased
occupancy at Bank of Lodi's main office building in Lodi. Other noninterest
expenses increased by $113 thousand, or 6%. Approximately $72 thousand of this
increase was related to the strategic costs that were discussed earlier in this
paragraph. Excluding those costs, other noninterest expense increased by $41
thousand due to the expanded branch network, increased business development, and
deposit account transaction volumes.
Basis of Presentation
First Financial Bancorp is the holding company for Bank of Lodi, N.A. and
Western Auxiliary Corporation. In the opinion of management, the accompanying
unaudited consolidated financial statements reflect all adjustments (consisting
of normal recurring accruals and other accruals as explained above) necessary
for a fair presentation of financial position as of the dates indicated and
results of operations for the periods shown. All material intercompany accounts
and transactions have been eliminated in consolidation. In preparing the
financial statements, management is required to make estimates and assumptions
that affect the reported amounts. The results for the three and nine months
ended September 30, 1998 are not necessarily indicative of the results which may
be expected for the year ended December 31, 1998. The unaudited consolidated
financial statements presented herein should be read in conjunction with the
consolidated financial statements and notes included in the 1997 Annual Report
to Shareholders.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
While there are several varieties of market risk, the market risk material to
the Company and the Bank is interest rate risk. Within the context of interest
rate risk, market risk is the risk of loss due to changes in market interest
rates that have an adverse effect on net interest income, earnings, capital or
the fair value of financial instruments. Exposure to this type of risk is a
regular part of a financial institution's operations. The fundamental activities
of making loans, purchasing investment securities, and accepting deposits
inherently involve exposure to interest rate risk. The Company monitors the
repricing differences between assets and liabilities on a regular basis and
estimates exposure to net interest income, net income, and capital based upon
assumed changes in the market yield curve. As of and for the three and nine
months ended September 30, 1998, there were no material changes in the market
risk profile of the Company or the Bank as described in the Company's 1997 Form
10-K.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES
16
<PAGE>
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description
- ----------- -----------
3(a) Articles of Incorporation, as amended, filed as Exhibit 3.1 to
the Company's General Form for Registration of Securities on
Form 10, filed on September 21, 1983, is hereby incorporated by
reference.
3(b) Bylaws, as amended, filed as Exhibit 3(b) to the Company's
Annual Report on Form 10-K for the period ended December 31,
1997, is hereby incorporated by reference.
4 Specimen Common Stock Certificate, filed as Exhibit 4.1 to the
Company's General Form for Registration of Securities on Form
10, filed on September 21, 1983, is hereby incorporated by
reference.
10(a) First Financial Bancorp 1991 Director Stock Option Plan and
form of Nonstatutory Stock Option Agreement, filed as Exhibit
4.1 to the Company's Form S-8 Registration Statement
(Registration No. 33-40954), filed on May 31, 1991, is hereby
incorporated by reference.
10(b) Amendment to First Financial Bancorp 1991 Director Stock Option
Plan, filed as Exhibit 4.3 to the Company's Post-Effective
Amendment No. 1 to Form S-8 Registration Statement
(Registration No. 33-40954), filed as Exhibit 10 to the
Company's Quarterly Report on Form 10-Q for the period ended
March 31, 1995, is hereby incorporated by reference.
10(c) First Financial Bancorp 1991 Employee Stock Option Plan and
forms of Incentive Stock Option Agreement and Nonstatutory
Stock Option Agreement, filed as Exhibit 4.2 to the Company's
Form S-8 Registration Statement (Registration No. 33-40954),
filed on May 31, 1991, is hereby incorporated by reference.
10(d) Bank of Lodi Employee Stock Ownership Plan, filed as Exhibit 10
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1992, is hereby incorporated by reference.
17
<PAGE>
10(e) First Financial Bancorp 1997 Stock Option Plan, filed as
Exhibit 10 to the Company's Quarterly Report on Form 10-Q for
the period ended September 30, 1997, is hereby incorporated by
reference.
10(f) Bank of Lodi Incentive Compensation Plan, filed as Exhibit
10(f) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, is hereby incorporated by reference.
10(g) First Financial Bancorp 401(k) Profit Sharing Plan, filed as
Exhibit 10(g) to the Company's Annual Report on Form 10-K for
the year ended December 31, 1997, is hereby incorporated by
reference.
10(h) Employment Agreement dated as of September 30, 1998, between
First Financial Bancorp and Leon J. Zimmerman.
10(i) Employment Agreement dated as of September 30, 1998, between
First Financial Bancorp and David M. Philipp.
10(j) Executive Supplemental Compensation Agreement effective as of
April 3, 1998, between Bank of Lodi, N.A. and Leon J.
Zimmerman.
10(k) Executive Supplemental Compensation Agreement effective as of
April 3, 1998, between Bank of Lodi, N.A. and David M. Philipp.
10(l) Life Insurance Endorsement Method Split Dollar Plan Agreement
effective as of April 3, 1998, between Bank of Lodi, N.A. and
Leon J. Zimmerman.
10(m) Life Insurance Endorsement Method Split Dollar Plan Agreement
effective as of April 3, 1998, between Bank of Lodi, N.A. and
David M. Philipp.
10(n) Form of Director Supplemental Compensation Agreement, effective
as of April 3, 1998, as executed between Bank of Lodi, N.A. and
each of Benjamin R. Goehring, Michael D. Ramsey, Weldon D.
Schumacher and Dennis R. Swanson.
10(o) Form of Life Insurance Endorsement Method Split Dollar Plan
Agreement, effective as of April 3, 1998, as executed between
Bank of Lodi, N.A. and each of Benjamin R. Goehring, Michael D.
Ramsey, Weldon D. Schumacher and Dennis R. Swanson.
10(p) Form of Director Supplemental Compensation Agreement, effective
as of April 3, 1998, as executed between Bank of Lodi, N.A. and
each of Angelo J. Anagnos, Raymond H. Coldani, Bozant Katzakian
and Frank M. Sasaki.
10(q) Form of Life Insurance Endorsement Method Split Dollar Plan
Agreement, effective as of April 3, 1998, as executed between
Bank of Lodi, N.A. and each of Angelo J. Anagnos, Raymond H.
Coldani, Bozant Katzakian and Frank M. Sasaki.
11 Statement re computation of earnings per share is incorporated
herein by reference to Footnote 2 to the consolidated financial
statements included in this report.
27 Financial Data Schedule.
(b) Reports on Form 8-K
18
<PAGE>
On October 30, 1998 the Company filed a Current Report on Form
8-K regarding earnings for the quarter ended September 30, 1998
and the declaration of a cash dividend of $.05 per share
payable November 27, 1998 to shareholders of record on November
13, 1998.
19
<PAGE>
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.
FIRST FINANCIAL BANCORP
Date: November 13, 1998 /s/ David M. Philipp
---------------- ------------------------
David M. Philipp
Executive Vice-President
Chief Financial Officer
Corporate Secretary
20
<PAGE>
Index to Exhibits
Exhibit Page
------- ----
10(h) Employment Agreement dated as of September 30, 1998, 22
between First Financial Bancorp and Leon J. Zimmerman.
10(i) Employment Agreement dated as of September 30, 1998, 32
between First Financial Bancorp and David M. Philipp.
10(j) Executive Supplemental Compensation Agreement 41
effective as of April 3, 1998, between Bank of Lodi,
N.A. and Leon J. Zimmerman.
10(k) Executive Supplemental Compensation Agreement 58
effective as of April 3, 1998, between Bank of Lodi,
N.A. and David M. Philipp.
10(l) Life Insurance Endorsement Method Split Dollar Plan 75
Agreement effective as of April 3, 1998, between Bank
of Lodi, N.A. and Leon J. Zimmerman.
10(m) Life Insurance Endorsement Method Split Dollar Plan 80
Agreement effective as of April 3, 1998, between Bank
of Lodi, N.A. and David M. Philipp.
10(n) Form of Director Supplemental Compensation Agreement, 85
effective as of April 3, 1998, as executed between
Bank of Lodi, N.A. and each of Benjamin R. Goehring,
Michael D. Ramsey, Weldon D. Schumacher and Dennis R.
Swanson.
10(o) Form of Life Insurance Endorsement Method Split Dollar 101
Plan Agreement, effective as of April 3, 1998, as
executed between Bank of Lodi, N.A. and each of
Benjamin R. Goehring, Michael D. Ramsey, Weldon D.
Schumacher and Dennis R. Swanson.
10(p) Form of Director Supplemental Compensation Agreement, 106
effective as of April 3, 1998, as executed between
Bank of Lodi, N.A. and each of Angelo J. Anagnos,
Raymond H. Coldani, Bozant Katzakian and Frank M.
Sasaki.
10(q) Form of Life Insurance Endorsement Method Split Dollar 123
Plan Agreement, effective as of April 3, 1998, as
executed between Bank of Lodi, N.A. and each of Angelo
J. Anagnos, Raymond H. Coldani, Bozant Katzakian and
Frank M. Sasaki.
21
<PAGE>
Exhibit 10(h) Employment Agreement dated as of September 30, 1998,
between First Financial Bancorp and Leon J. Zimmerman.
EMPLOYMENT AGREEMENT
This Agreement is made and entered into as of September 30, 1998, by
and among FIRST FINANCIAL BANCORP, a California corporation ("Employer") and
LEON J. ZIMMERMAN ("Employee").
WHEREAS, Employer is the sole shareholder and holding company of Bank
of Lodi, N.A., a national banking association ("Bank"); and
WHEREAS, Employee is presently serving as President and Chief Executive
Officer of Employer and as President and Chief Executive Officer and Director of
Bank; and
WHEREAS, Employer recognizes that the contributions of Employee to the
growth and success of Employer and Bank have been and will continue to be
substantial and desires to assure Employer and Bank of the continued service of
Employee, and Employee desires to continue in the employment of Employer and
Bank;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, Employer and Employee agree as follows:
1. Term of Employment. Employer employs Employee and Employee hereby
accepts employment with Employer, upon the terms and conditions hereinafter set
forth, for a period of one (1) year commencing on May 1, 1998, and ending on
April 30, 1999, subject to the early termination provisions of Paragraph 15
hereof. Employee's term of employment will be automatically extended for
additional one-year periods (without any action by either party) on completion
of each year of employment under this Agreement, unless Employer gives Employee
at least sixty (60) days prior written notice that Employee's employment is to
terminate at the end of the current period, subject at all times to the early
termination provisions of Paragraph 15 hereof.
2. Duties and Obligations of Employee. Employee shall serve as an
executive officer of Employer and Bank with the titles of President and Chief
Executive Officer of Employer and Bank and shall perform the customary duties of
such office and such other duties as may from time to time be reasonably
requested of him by the respective Boards of Directors of Employer and Bank,
including, without limitation, the following:
(a) Participating in community affairs which are beneficial
to Employer and Bank;
(b) Maintaining a cordial relationship with Employer's Board
of Directors and shareholders and with Bank's Board of Directors;
(c) Maintaining a professional relationship with regulatory
agencies and governmental authorities having jurisdiction over Employer and
Bank;
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(d) Providing leadership in planning and implementing the
conduct of Employer's and Bank's business and in setting the strategic
objectives of Employer and Bank;
(e) Hiring and firing of all other officers, employees and
agents of Employer and Bank, subject at all times to the policies and directives
set by the respective Boards of Directors of Employer and Bank.
So long as Employee shall serve as the President and Chief Executive
Officer of Bank, he shall also serve as a Director of Bank and on such
committees of the Bank Board of Directors as the Board shall from time to time
designate. At the first regular meeting of the Employer Board of Directors held
after the execution and delivery of this Agreement, the Board of Directors
undertakes and agrees to increase and fix the number of Board members at nine
(9) and to appoint Employee to the vacancy thereby created. Thereafter, so long
as Employee shall serve as President and Chief Executive Officer of Employer, he
shall also serve as a Director of Employer and on such committees of the
Employer Board of Directors as the Board shall from time to time designate. Upon
termination of service as President and Chief Executive Officer of Employer or
Bank for any reason, Employee agrees to immediately resign from the Employer
Board of Directors and the Bank Board of Directors, effective as of the same
date as termination of his employment.
The salary and other compensation and benefits to which Employee is
entitled as an executive officer of Employer and Bank shall include his services
as a Director and committee member for Employer and Bank. Employee shall not be
entitled to receive any fees for attending meetings as a Director or committee
member. Employee shall be entitled to coverage under any director and officer
liability insurance policy obtained by Employer or Bank for directors and
officers of Employer and Bank as a group. Employee shall also be entitled to
indemnification for actions taken by Employee in good faith and in a manner
Employee reasonably believes to be in the best interests of Employer and Bank in
accordance with Employer's Articles of Incorporation and Bylaws and Bank's
Articles of Association and Bylaws and applicable laws and regulations.
3. Devotion to Employer's Business.
(a) Employee shall devote his full time, ability, and
attention to the business of Employer and Bank during the term of this Agreement
and shall not during the term of this Agreement 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, without the prior
approval of Employer's Board of Directors. However, the expenditure of
reasonable amounts of time, for which Employee shall not be compensated by
Employer or Bank, 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.
(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 a reasonable person,
or to prejudice Employer or Bank or the banking industry in general.
(c) Employee hereby represents and agrees that the services to
be performed 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. Subject to Paragraph 3 hereof, and
absent the prior written consent of Employer, Employee shall not, during the
term of this Agreement, directly or indirectly, either as an employee,
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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, provided, however, that a
passive portfolio investment in shares of stock of a publicly traded company, in
an amount not exceeding five percent (5%) of the outstanding shares of said
company, would not be prevented by this Paragraph 4.
5. Indemnification.
(a) To the extent required by law, Employee shall indemnify
and hold Employer and Bank harmless from all liability for loss, damage, or
injury to persons or property resulting from the gross negligence or intentional
misconduct of 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 or
Bank 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 interests of Employer and Bank (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 executive
officer of Employer and Bank.
6. Disclosure of Information. Employee shall not, either before or
after termination of this Agreement, disclose to anyone any information relating
to Employer or 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 or Bank. Employee recognizes
and acknowledges that any financial information concerning any of Employer's or
Bank's customers, as it may exist from time to time, is strictly confidential
and is a valuable, special and unique asset of Employer's and Bank's business.
Employee shall not, either before or after termination of this Agreement,
disclose to anyone said financial information or any part thereof, for any
reason or purpose whatsoever, except as required by way of legal process, notice
of which will be provided to Employer and Bank prior to disclosure. This
Paragraph 6 shall survive the expiration or termination of this Agreement.
7. Written or Printed Material. All written or printed materials,
notebooks and records used by Employee in performing duties for Employer and
Bank, other than Employee's personal notes, personal files 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) 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 and Bank
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 or
Bank. If Employee cannot qualify for a surety bond at any time during the term
of this Agreement, Employer shall have the option to terminate this Agreement
immediately without any further obligation to Employee other than to pay accrued
salary, benefits or reimbursements.
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) per annum, payable in equal installments during the
term of this Agreement on the first and fifteenth days of each month, subject to
applicable adjustments for withholding taxes and prorations for any partial
employment period. Such base salary shall be reviewed annually by the Board of
Directors of Employer at the same time as all other executive officers are
reviewed. Each annual
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review shall be conducted diligently and concluded as expeditiously as
practicable. Any increase in such base salary that may be approved by the Board
of Directors shall be considered effective on January 1 of each succeeding
calendar year, beginning January 1, 1999.
10. Incentive Compensation. As further consideration for Employee's
services under this Agreement, Employee shall be entitled to participate in any
officer bonus plan or employee profit sharing plan which may be established by
Employer or Bank for their officers and/or employees generally or for Employee
personally and Employer shall pay Employee annually incentive compensation as
determined by the Board of Directors of Employer or Bank in accordance with the
provisions of said plans.
11. 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 or the end of the term of this Agreement, whichever
shall first occur; provided, however, that payments from Employer shall cease
upon qualification of Employee for long-term disability benefits under any
Employer paid insurance program. For purposes of this Paragraph 11, "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 self-inflicted disability resulting from the
deliberate, intentional actions of Employee, such as, but not limited to,
attempted suicide or chemical dependence of Employee.
12. Stock Options. Employer acknowledges and agrees that Employee shall
be eligible for the grant of stock options for the purchase of shares of the
Common Stock of Employer under and pursuant to the terms of the First Financial
Bancorp 1997 Stock Option Plan. Any such grants, the vesting schedule of said
options and other terms and conditions consistent with such Plan shall be
evidenced by stock option agreements entered into between Employer and Employee.
Employer hereby acknowledges and confirms the stock option agreement between
Employer and Employee currently outstanding under the First Financial Bancorp
1991 Employee Stock Option Plan.
13. Other Benefits. Employee shall be entitled to those employee
benefits adopted by Employer and Bank for all employees of Employer and Bank,
subject to applicable qualification requirements and regulatory approval
requirements, if any. This includes participation in the Bank of Lodi, N.A.
Employee Stock Ownership Plan and the First Financial Bancorp 401(k) Profit
Sharing Plan. 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 four (4) 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. Employee shall take at
least two (2) consecutive weeks of vacation annually.
(b) Group Insurance. Employer and Bank shall provide, during
the term of this Agreement, group life, health (including medical, dental and
hospitalization), accident and disability insurance coverage for Employee and
his dependents through the insurer(s) selected by Employer and provided to all
employees generally. The premium costs for such group insurance shall be shared
and borne by Employer/Bank and Employee on the basis of the same percentages
applicable to all other participating employees.
(c) Automobile. Employer shall provide Employee with an
automobile for Employee's personal and business use during the term of this
Agreement or until this Agreement is terminated as provided herein. Employee
acknowledges that he is currently provided with an automobile that meets the
requirements of this
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paragraph. Any replacement for such automobile shall be selected by Employee and
then purchased by Employer with a purchase price not to exceed $40,000,
exclusive of tax and license charges. Employer agrees to procure and maintain
liability, collision and comprehensive insurance coverage for any such
automobile. All expenses incurred by Employee in utilizing any such automobile
in the performance of his duties hereunder will be paid for or reimbursed to
Employee in accordance with Employer's expense allowance guidelines for such
matters.
14. Business Expenses. Employee shall be reimbursed for ordinary and
necessary expenses incurred by Employee in connection with his employment,
subject to expense account guidelines established by the Board of Directors of
Employer. Employee shall also be reimbursed for expenses incurred in activities
associated with promoting the business of Employer that are specifically
authorized from time to time by the Board of Directors of Employer, including
expenses for entertainment, travel and similar items. Travel and other expenses
for attendance at conventions and educational programs that are approved in
advance by the Board of Directors of Employer shall also be reimbursed. 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. The parties agree that any expense advanced by Employee that is
not reimbursed by Employer for budget or other purposes pursuant to this
Paragraph, but which constitutes an ordinary and necessary business expense,
shall be subject to deduction on Employee's personal income tax return.
15. Termination of Agreement.
(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, determined in good faith by the
Board of Directors of Employer, 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 date upon which the event occurs:
(1) The occurrence of circumstances that make it impossible
or impractical for Employer or Bank 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 of duty by
Employee in the course of his employment.
(6) The habitual and continued neglect by Employee of his
employment duties and obligations under this Agreement.
(7) The continuous mental or physical incapacity of Employee
which precludes Employee from performing services under
this Agreement.
(8) Employee's willful and intentional violation of any
federal banking laws, or of the Bylaws, rules, policies
or resolutions of Employer or Bank, or of the rules or
regulations of the Office of the Comptroller of the
Currency, Federal Deposit Insurance Corporation or the
Board of Governors of the Federal Reserve System, or
other regulatory agency or governmental authority having
jurisdiction over Employer or Bank.
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(9) The written determination by a state or federal banking
agency or governmental authority having jurisdiction
over Employer or Bank that Employee is not suitable to
act in the capacity for which he is employed by Employer
or Bank.
(10) Employee is convicted of any felony or a crime involving
moral turpitude or wilfully and intentionally commits a
fraudulent or dishonest act.
(11) Employee's willful and intentional disclosure, without
authority, of any secret or confidential information
concerning Employer or Bank or Employee takes any action
which the Board of Directors of Employer or Bank
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 Employer or Bank contrary to
the best interests of Employer or Bank.
(12) Either party breaches a material term or provision of
this Agreement.
(b) Termination by Employer. Employer, acting through its
Board of Directors, 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 sub-paragraph 15(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 15(b) or automatic termination
based upon Paragraph 15 (a)(1),15(a)(4) or 15(a)(12) (to the extent of
Employer's breach), of this Agreement, Employee shall be entitled to receive
severance pay at Employee's rate of salary immediately preceding such
termination equal to twelve (12) months' salary (in addition to incentive
compensation or bonus payments due Employee, if any), payable in installments
bi-monthly on the first and fifteenth days of each month. During such twelve
(12) month period, Employee shall be entitled to continuation of the group
insurance benefits described in Paragraph 13(b) hereof, with the premium costs
shared and borne by Employer/Bank and Employee on the basis of the same
percentages applicable to all other participating employees. Notwithstanding the
foregoing: Employee shall not be entitled to severance pay pursuant to this
sub-paragraph (d) unless and until Employee has submitted his written
resignation from the Employer Board of Directors and the Bank Board of Directors
in compliance with Paragraph 2 above; and 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 sub-paragraph (d) and any rights of Employee to
severance pay shall be limited to such rights as are specified in sub-paragraph
(e) below. Employee acknowledges and agrees that severance pay pursuant to this
sub-paragraph (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 15(b) or
pursuant to certain provisions of Paragraph 15(a) as described herein.
(e) Severance Pay - Change in Control. Upon a "change in
control" as defined herein, and
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within a period of two (2) years following consummation of such a change in
control, if (i) Employee's employment is terminated; or (ii) without Employee's
prior written 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, in such event, Employee shall be
entitled to receive severance pay in addition to any bonus or incentive
compensation payments otherwise due Employee. Any such severance pay due
Employee shall be in an amount equal to two (2) times Employee's average annual
compensation for the two (2) 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 which was includable in Employee's
gross income for federal income tax purposes for such two (2) tax years of
Employee's employment by Employer ending immediately prior to the change in
control, divided by such number of years. During such two year period (assuming
Employee elects to receive the payment of such severance in bi-monthly
installments), and until Employee becomes a full-time employee with some other
company or bank, Employee shall be entitled to continuation of the group
insurance benefits described in Paragraph 13(d) hereof, with the premium costs
shared and borne by Employer/Bank and Employee on the basis of the same
percentages applicable to all other participating employees.
If all or any portion of the amounts payable to Employee pursuant to
this Paragraph 15 (e) alone, or together with other payments which Employee has
the right to receive from 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), such amounts payable hereunder
shall be reduced to the extent necessary, after first applying any similar
reduction in payments to be received from any other plan or program sponsored by
Employer from which Employee has a right to receive payments subject to Sections
280G and 4999 of the Code, so as to cause a reduction of any excise tax pursuant
to Section 4999 of the Code to equal "zero".
Any such severance pay shall be payable in a lump sum or in
substantially equal installments bi-monthly on the first and fifteenth days of
each month until paid in full, at the election of Employee. 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
15 (d) of this Agreement. This sub-paragraph (e) shall be binding upon and inure
to the benefit of the parties hereto and any successors or assigns or 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 sub-paragraph
(e) in the event of an occurrence described in Paragraph 15, sub-paragraphs (5),
(6), (8), (10), (11) or (12, to the extent of an Employee breach), or in the
event of a determination pursuant to sub-paragraph (9) thereof, or in the event
Employee terminates employment in accordance with Paragraph 15 (c) and the
termination is not a result of or based upon the occurrence of any event
described in Paragraph 15 (e)(ii) above.
A "change in control" of Employer for purposes of this Agreement and
sub-paragraph (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 Bank): (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 Employer or any
stock exchange on which Employer's shares are listed which requires the
reporting of a change in control; (ii) any merger, consolidation or
reorganization of Employer in which 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 Employer having an
aggregate fair market value of fifty percent (50%) of the total value of the
assets of Employer, reflected in the most recent balance sheet of Employer; (iv)
a transaction whereby any "person" (as such term is used in the Exchange Act or
any individual,
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corporation, partnership, trust or any other entity) is or becomes the
beneficial owner, directly or indirectly, of securities of Employer representing
25% or more of the combined voting power of Employer's then outstanding
securities; (v) if in any one year period, individuals who at the beginning of
such period constitute the Board of Directors of Employer cease for any reason
to constitute at least a majority thereof, unless the election, or the
nomination for election by Employer's shareholders, of each new director is
approved by a vote of a least three-quarters of the directors then still in
office who were directors at the beginning of the period; (iv) a majority of the
members of the Board of Directors of Employer in office prior to the happening
of any event determines in its sole discretion that as a result of such event
there has been a change in control. Notwithstanding the foregoing or anything
else contained herein to the contrary, there shall not be a "change of control"
for purposes of this Agreement if the event which would otherwise come within
the meaning of the term "change of control" involves an Employee Stock Ownership
Plan or similar plan sponsored by Employer or Bank which is the party that
acquires "control" or is the principal participant in the transaction
constituting a "change in control," as described above.
16. 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, postage prepaid with return receipt requested.
Mailed notices shall be addressed to the parties at the addresses listed as
follows:
Employer: 701 South Ham Lane
Lodi, California 95242
Employee:
with a copy to: Kevin W. Finck
Attorney at Law
Two Embarcadero Center, Suite 1670
San Francisco, California 94111
Each party may change the address for receipt of notices by written
notice in accordance with this Paragraph 16. 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.
17. 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., San Francisco,
California ("JAMS"), 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, San Francisco, California ("AAA"), 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 Lodi, California, unless otherwise agreed to by the parties.
18. Attorneys' Fees and Costs. In the event of litigation, arbitration
or any other action or proceeding
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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 his or its costs related to any such action or
proceeding and his or 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.
19. 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 Bank and contains all of the covenants
and agreements between the parties with respect to the employment of Employee by
Employer and Bank. 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.
20. Modifications. Any modification of this Agreement will be
effective only if it is in writing and signed by the parties or their authorized
representatives.
21. 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.
22. 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.
23. 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.
24. Governing Law and Venue. The laws of the United States of America
and the State of California, and the rules and regulations of the Office of the
Comptroller of the Currency, Federal Deposit Insurance Corporation and the Board
of Governors of the Federal Reserve System shall govern the validity,
construction and effect of this Agreement.
25. 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.
26. Opportunity to Consult with Independent Advisors. Employee
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
Employee'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
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any other taxes, costs, expenses or liabilities whatsoever related to such
benefits, which in any of the foregoing instances, Employee acknowledges and
agrees shall be the sole responsibility of Employee notwithstanding any other
term or provision of this Agreement. Employee further acknowledges and agrees
that Employer and Bank shall have no liability whatsoever related to any such
personal tax effects or other personal costs, expenses, or liabilities
applicable to Employee and further specifically waives any right for Employee,
his heirs, beneficiaries, legal representatives, agents successors and assigns
to claim or assert liability on the part of Employer related to the matters
described in this Paragraph 26. Employee 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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above, and, as to Employer, by an officer of Employer duly
authorized by appropriate resolution of its Board of Directors.
EMPLOYER: EMPLOYEE:
FIRST FINANCIAL BANCORP
By: ___________________________________ ___________________________________
Leon J. Zimmerman
Title: ________________________________
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Exhibit 10(i) Employment Agreement dated as of September 30, 1998,
between First Financial Bancorp and David M. Philipp.
EMPLOYMENT AGREEMENT
This Agreement is made and entered into as of September 30, 1998, by
and among FIRST FINANCIAL BANCORP, a California corporation ("Employer") and
DAVID M. PHILIPP ("Employee").
WHEREAS, Employer is the sole shareholder and holding company of Bank
of Lodi, N.A., a national banking association ("Bank"); and
WHEREAS, Employee is presently serving as Executive Vice President,
Chief Financial Officer and Secretary of Employer and Bank; and
WHEREAS, Employer recognizes that the contributions of Employee to the
growth and success of Employer and Bank have been and will continue to be
substantial and desires to assure Employer and Bank of the continued service of
Employee, and Employee desires to continue in the employment of Employer and
Bank;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, Employer and Employee agree as follows:
1. Term of Employment. Employer employs Employee and Employee hereby
accepts employment with Employer, upon the terms and conditions hereinafter set
forth, for a period of one (1) year commencing on May 1, 1998, and ending on
April 30, 1999, subject to the early termination provisions of Paragraph 15
hereof. Employee's term of employment will be automatically extended for
additional one-year periods (without any action by either party) on completion
of each year of employment under this Agreement, unless Employer gives Employee
at least sixty (60) days prior written notice that Employee's employment is to
terminate at the end of the current period, subject at all times to the early
termination provisions of Paragraph 15 hereof.
2. Duties and Obligations of Employee. Employee shall serve as an
executive officer of Employer and Bank with the titles of Executive Vice
President, Chief Financial Officer and Secretary of Employer and Bank and shall
perform the customary duties of such office and such other duties as may from
time to time be reasonably requested of him by the Board of Directors of
Employer and Bank, including, without limitation, the following:
(a) Participating in community affairs which are beneficial to
Employer and Bank;
(b) Maintaining a cordial relationship with Employer's Board of
Directors and shareholders and with Bank's Board of Directors;
(c) Maintaining a professional relationship with regulatory
agencies and governmental authorities having jurisdiction over Employer and
Bank;
(d) Providing leadership in planning and implementing the conduct
of Employer's and Bank's business and in setting the strategic objectives of
Employer and Bank;
(e) Hiring and firing of all employees other than the other
executive officers of Employer and Bank, subject at all times to the policies
and directives set by the respective Boards of Directors of Employer and Bank.
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So long as Employee shall serve as an executive officer of Employer and
Bank, he shall also serve on such committees of each Board of Directors as the
Boards may from time to time designate. The salary and other compensation and
benefits to which Employee is entitled as an executive officer of Employer and
Bank shall include his services a committee member. Employee shall be entitled
to coverage under any director and officer liability insurance policy obtained
by Employer or Bank for directors and officers of Employer and Bank as a group.
Employee shall also be entitled to indemnification for actions taken by Employee
in good faith and in a manner Employee reasonably believes to be in the best
interests of Employer and Bank in accordance with Employer's Articles of
Incorporation and Bylaws and Bank's Articles of Association and Bylaws and
applicable laws and regulations.
3. Devotion to Employer's Business.
(a) Employee shall devote his full time, ability, and attention to
the business of Employer and Bank during the term of this Agreement and shall
not during the term of this Agreement 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, without the prior approval
of Employer's Board of Directors. However, the expenditure of reasonable amounts
of time, for which Employee shall not be compensated by Employer or Bank, 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.
(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 a reasonable person, or to
prejudice Employer or Bank or the banking industry in general.
(c) Employee hereby represents and agrees that the services to be
performed 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. Subject to Paragraph 3 hereof, and
absent the prior written consent of Employer, 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, provided, however, that a passive
portfolio investment in shares of stock of a publicly traded company, in an
amount not exceeding five percent (5%) of the outstanding shares of said
company, would not be prevented by this Paragraph 4.
5. Indemnification.
(a) To the extent required by law, Employee shall indemnify and
hold Employer and Bank harmless from all liability for loss, damage, or injury
to persons or property resulting from the gross negligence or intentional
misconduct of 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 or
Bank 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
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Employee reasonably believed to be in the best interests of Employer and Bank
(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 executive officer of Employer and Bank.
6. Disclosure of Information. Employee shall not, either before or
after termination of this Agreement, disclose to anyone any information relating
to Employer or 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 or Bank. Employee recognizes
and acknowledges that any financial information concerning any of Employer's or
Bank's customers, as it may exist from time to time, is strictly confidential
and is a valuable, special and unique asset of Employer's and Bank's business.
Employee shall not, either before or after termination of this Agreement,
disclose to anyone said financial information or any part thereof, for any
reason or purpose whatsoever, except as required by way of legal process, notice
of which will be provided to Employer and Bank prior to disclosure. This
Paragraph 6 shall survive the expiration or termination of this Agreement.
7. Written or Printed Material. All written or printed materials,
notebooks and records used by Employee in performing duties for Employer and
Bank, other than Employee's personal notes, personal files 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) 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 and Bank
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 or
Bank. If Employee cannot qualify for a surety bond at any time during the term
of this Agreement, Employer shall have the option to terminate this Agreement
immediately without any further obligation to Employee other than to pay accrued
salary, benefits or reimbursements.
9. Base Salary. In consideration for the services to be performed
hereunder, Employee shall receive a salary at the rate of Ninety Seven Thousand
Eight Hundred Dollars ($97,800) per annum, payable in equal installments during
the term of this Agreement on the first and fifteenth days of each month,
subject to applicable adjustments for withholding taxes and prorations for any
partial employment period. Such base salary shall be reviewed annually by the
Board of Directors of Employer at the same time as all other executive officers
are reviewed. Each annual review shall be conducted diligently and concluded as
expeditiously as practicable. Any increase in such base salary that may be
approved by the Board of Directors shall be considered effective on January 1 of
each succeeding calendar year, beginning January 1, 1999.
10. Incentive Compensation. As further consideration for Employee's
services under this Agreement, Employee shall be entitled to participate in any
officer bonus plan or employee profit sharing plan which may be established by
Employer or Bank for their officers and/or employees generally or for Employee
personally and Employer shall pay Employee annually incentive compensation as
determined by the Board of Directors of Employer or Bank in accordance with the
provisions of said plans.
11. 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
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months from the date of disability or the end of the term of this Agreement,
whichever shall first occur; provided, however, that payments from Employer
shall cease upon qualification of Employee for long-term disability benefits
under any Employer paid insurance program. For purposes of this Paragraph 11,
"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 self-inflicted disability resulting from the
deliberate, intentional actions of Employee, such as, but not limited to,
attempted suicide or chemical dependence of Employee.
12. Stock Options. Employer acknowledges and agrees that Employee shall
be eligible for the grant of stock options for the purchase of shares of the
Common Stock of Employer under and pursuant to the terms of the First Financial
Bancorp 1997 Stock Option Plan. Any such grants, the vesting schedule of said
options and other terms and conditions consistent with such Plan shall be
evidenced by stock option agreements entered into between Employer and Employee.
Employer hereby acknowledges and confirms the stock option agreement between
Employer and Employee currently outstanding under the First Financial Bancorp
1991 Employee Stock Option Plan.
13. Other Benefits. Employee shall be entitled to those employee
benefits adopted by Employer and Bank for all employees of Employer and Bank,
subject to applicable qualification requirements and regulatory approval
requirements, if any. This includes participation in the Bank of Lodi, N.A.
Employee Stock Ownership Plan and the First Financial Bancorp 401(k) Profit
Sharing Plan. 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 four (4) 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. Employee shall take at least two (2)
consecutive weeks of vacation annually.
(b) Group Insurance. Employer and Bank shall provide, during the
term of this Agreement, group life, health (including medical, dental and
hospitalization), accident and disability insurance coverage for Employee and
his dependents through the insurer(s) selected by Employer and provided to all
employees generally. The premium costs for such group insurance shall be shared
and borne by Employer/Bank and Employee on the basis of the same percentages
applicable to all other participating employees.
14. Business Expenses. Employee shall be reimbursed for ordinary and
necessary expenses incurred by Employee in connection with his employment,
subject to expense account guidelines established by the Board of Directors of
Employer. Employee shall also be reimbursed for expenses incurred in activities
associated with promoting the business of Employer that are specifically
authorized from time to time by the Board of Directors of Employer, including
expenses for entertainment, travel and similar items. Travel and other expenses
for attendance at conventions and educational programs that are approved in
advance by the Board of Directors of Employer shall also be reimbursed. 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. The parties agree that any expense advanced by Employee that is
not reimbursed by Employer for budget or other purposes pursuant to this
Paragraph, but which constitutes an ordinary and necessary business expense,
shall be subject to deduction on Employee's personal income tax return.
15. Termination of Agreement.
(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, determined in good faith by the
Board of Directors of Employer, 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
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be payable to Employee under this Agreement through the date upon which the
event occurs:
(1) The occurrence of circumstances that make it impossible
or impractical for Employer or Bank 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 of duty by
Employee in the course of his employment.
(6) The habitual and continued neglect by Employee of his
employment duties and obligations under this Agreement.
(7) The continuous mental or physical incapacity of Employee
which precludes Employee from performing services under
this Agreement.
(8) Employee's willful and intentional violation of any
federal banking laws, or of the Bylaws, rules, or
policies or resolutions of Employer or Bank, or of the
rules or regulations of the Office of the Comptroller of
the Currency, Federal Deposit Insurance Corporation or
the Board of Governors of the Federal Reserve System, or
other regulatory agency or governmental authority having
jurisdiction over Employer or Bank.
(9) The written determination by a state or federal banking
agency or governmental authority having jurisdiction
over Employer or Bank that Employee is not suitable to
act in the capacity for which he is employed by Employer
or Bank.
(10) Employee is convicted of any felony or a crime involving
moral turpitude or willfully and intentionally commits a
fraudulent or dishonest act.
(11) Employee's willful and intentional disclosure, without
authority, or any secret or confidential information
concerning Employer or Bank or Employee takes any action
which the Board of Directors of Employer or Bank
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 Employer or Bank contrary to
the best interests of Employer or Bank.
(12) Either party breaches a material term or provision of
this Agreement.
(b) Termination by Employer. Employer, acting through its
Board of Directors, 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 pay specified in sub-paragraph 15(d) below.
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(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 15(b) or automatic termination
based upon Paragraph 15 (a)(1), 15(a)(4) or 15(a)(12) (to the extent of
Employer's breach), of this Agreement, Employee shall be entitled to receive
severance pay at Employee's rate of salary immediately preceding such
termination equal to twelve (12) months' salary (in addition to incentive
compensation or bonus payments due Employee, if any), payable in installments
bi-monthly on the first and fifteenth days of each month. During such twelve
(12) month period, Employee shall be entitled to continuation of the group
insurance benefits described in Paragraph 13(b) hereof, with the premium costs
shared and borne by Employer/Bank and Employee on the basis of the same
percentages applicable to all other participating employees. 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
sub-paragraph (d) and any rights of Employee to severance pay shall be limited
to such rights as are specified in sub-paragraph (e) below. Employee
acknowledges and agrees that severance pay pursuant to this sub-paragraph (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 15(b) or pursuant to
certain provisions of Paragraph 15(a) as described herein.
(e) Severance Pay - Change in Control. Upon a "change in
control" as defined herein, and within a period of two (2) years following
consummation of such a change in control, if (i) Employee's employment is
terminated; or (ii) without Employee's prior written 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, in such event, Employee shall be entitled to receive severance pay in
addition to any bonus or incentive compensation payments otherwise due Employee.
Any such severance pay due Employee shall be in an amount equal to two (2) times
Employee's average annual compensation for the two (2) 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 which was
includable in Employee's gross income for federal income tax purposes for such
two (2) tax years of Employee's employment by Employer ending immediately prior
to the change in control, divided by such number of years. During such two year
period (assuming Employee elects to receive the payment of such severance in
bi-monthly installments), and until Employee becomes a full-time employee with
some other company or bank, Employee shall be entitled to continuation of the
group insurance benefits described in Paragraph 13(d) hereof, with the premium
costs shared and borne by Employer/Bank and Employee on the basis of the same
percentages applicable to all other participating employees.
If all or any portion of the amounts payable to Employee pursuant to
this Paragraph 15 (e) alone, or together with other payments which Employee has
the right to receive from 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), such amounts payable hereunder
shall be reduced to the extent necessary, after first applying any similar
reduction in payments to be received from any other plan or program sponsored by
Employer from which Employee has a right to receive payments subject to Sections
280G and 4999 of the Code, so as to cause a reduction of any excise tax pursuant
to Section 4999 of the Code to equal "zero".
Any such severance pay shall be payable in a lump sum or in
substantially equal installments bi-monthly on the first and fifteenth days of
each month until paid in full, at the election of Employee. Such severance
payment, if
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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 15 (d) of
this Agreement. This sub-paragraph (e) shall be binding upon and inure to the
benefit of the parties hereto and any successors or assigns or 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 sub-paragraph
(e) in the event of an occurrence described in Paragraph 15, sub-paragraphs (5),
(6), (8), (10), (11) or (12, to the extent of an Employee breach), or in the
event of a determination pursuant to sub-paragraph (9) thereof, or in the event
Employee terminates employment in accordance with Paragraph 15 (c) and the
termination is not a result of or based upon the occurrence of any event
described in Paragraph 15 (e)(ii) above.
A "change in control" of Employer for purposes of this Agreement and
sub-paragraph (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 Bank): (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 Employer or any
stock exchange on which Employer's shares are listed which requires the
reporting of a change in control; (ii) any merger, consolidation or
reorganization of Employer in which 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 Employer having an
aggregate fair market value of fifty percent (50%) of the total value of the
assets of Employer, reflected in the most recent balance sheet of 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 Employer
representing 25% or more of the combined voting power of Employer's then
outstanding securities; (v) if in any one year period, individuals who at the
beginning of such period constitute the Board of Directors of Employer cease for
any reason to constitute at least a majority thereof, unless the election, or
the nomination for election by Employer's shareholders, of each new director is
approved by a vote of a least three-quarters of the directors then still in
office who were directors at the beginning of the period; (iv) a majority of the
members of the Board of Directors of Employer in office prior to the happening
of any event determines in its sole discretion that as a result of such event
there has been a change in control. Notwithstanding the foregoing or anything
else contained herein to the contrary, there shall not be a "change of control"
for purposes of this Agreement if the event which would otherwise come within
the meaning of the term "change of control" involves an Employee Stock Ownership
Plan or similar plan sponsored by Employer or Bank which is the party that
acquires "control" or is the principal participant in the transaction
constituting a "change in control," as described above.
16. 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, postage prepaid with return receipt requested.
Mailed notices shall be addressed to the parties at the addresses listed as
follows:
Employer: 701 South Ham Lane
Lodi, California 95242
Employee:
with a copy to: Kevin W. Finck
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Attorney at Law
Two Embarcadero Center, Suite 1670
San Francisco, California 94111
Each party may change the address for receipt of notices by written
notice in accordance with this Paragraph 15. 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.
17. 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., San Francisco,
California ("JAMS"), 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, San Francisco, California ("AAA"), 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 Lodi, California, unless otherwise agreed to by the parties.
18. 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 his or its
costs related to any such action or proceeding and his or 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.
19. 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 Bank and contains all of the covenants
and agreements between the parties with respect to the employment of Employee by
Employer and Bank. 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.
20. Modifications. Any modification of this Agreement will be effective
only if it is in writing and signed by the parties or their authorized
representatives.
21. 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,
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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.
22. 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.
23. 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.
24. Governing Law and Venue. The laws of the United States of America
and the State of California, and the rules and regulations of the Office of the
Comptroller of the Currency,
Federal Deposit Insurance Corporation and the Board of Governors of the Federal
Reserve System shall govern the validity, construction and effect of this
Agreement.
25. 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.
26. Opportunity to Consult with Independent Advisors. Employee
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
Employee'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, Employee acknowledges and agrees shall be the sole responsibility of
Employee notwithstanding any other term or provision of this Agreement. Employee
further acknowledges and agrees that Employer and Bank shall have no liability
whatsoever related to any such personal tax effects or other personal costs,
expenses, or liabilities applicable to Employee and further specifically waives
any right for Employee, his heirs, beneficiaries, legal representatives, agents
successors and assigns to claim or assert liability on the part of Employer
related to the matters described in this Paragraph 26. Employee 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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above, and, as to Employer, by an officer of Employer duly
authorized by appropriate resolution of its Board of Directors.
EMPLOYER: EMPLOYEE:
FIRST FINANCIAL BANCORP
By:
David M. Philipp
Title: ________________________________
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Exhibit 10(j) Executive Supplemental Compensation Agreement effective
as of April 3, 1998, between Bank of Lodi, N.A. and Leon
J. Zimmerman.
EXECUTIVE SUPPLEMENTAL COMPENSATION AGREEMENT
This Agreement is made and entered into effective as of April 3, 1998 by
and between Bank of Lodi, N.A., a national banking association chartered under
the federal laws of the United States of America with its principal offices
located in the City of Lodi, San Joaquin County, California (the "Employer"),
and Leon J. Zimmerman, 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 April
2, 1990, 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.
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 and ending on the date
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payments are to first begin under the terms of this Agreement. Notwithstanding
the foregoing or the percentages set forth on Schedule "A," but subject to all
other terms and conditions set forth herein, the "Applicable Percentage" shall
be: (i) provided payments have not yet begun hereunder, one hundred percent
(100%) upon the occurrence of a "Change in Control" as defined in subparagraph
1.4 below, or the 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 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 and is received by the Administrator prior to the Executive's death.
1.4. Change in Control. The term "Change in Control" shall mean the
occurrence of any of the following events with respect to the Employer (with the
term "Employer" being defined for purposes of determining whether a "Change in
Control" has occurred to include any parent bank holding company organized at
the direction of the Employer to own 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 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. Notwithstanding the foregoing or anything else
contained herein to the contrary, there shall not be a "Change of Control" for
purposes of this Agreement if the event which would otherwise come within the
meaning of the term "Change of Control" involves (i) a reorganization at the
direction of the Employer solely to form a parent bank holding company which
owns 100% of the Employer's common stock following the reorganization, or (ii)
an Employee Stock Ownership Plan sponsored by the Employer or its parent holding
company which is the party that acquires "control" or is the principal
participant in the transaction constituting a "Change in Control," as described
above.
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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 any and all applicable state and federal laws, including, but not
limited to, income, employment and disability income tax laws (e.g., FICA, FUTA,
SDI).
1.11. Plan Year. The term "Plan Year" shall mean the Employer's
fiscal year.
1.12. Retirement. The term "Retirement" or "Retires" shall refer to
the date which the Executive acknowledges in writing to Employer to be the last
day he will provide any significant personal services, whether as an employee or
independent consultant or contractor, to Employer or to, for, or on behalf of,
any other business entity conducting, performing or making available to any
person or entity banking or other financial services of any kind. 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 of duty by
Executive in the course of his employment.
(b) The habitual and continued neglect by Executive of his
employment duties and obligations under this Agreement.
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(c) The continuous mental or physical incapacity of
Executive, subject to Executive's disability rights
under this Agreement.
(d) Executive's willful and intentional violation of any
federal banking laws, or of the Bylaws, rules, policies
or resolutions of Employer, or of 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 Employer.
(e) The written determination by a state or federal banking
agency or governmental authority having jurisdiction
over Employer that Executive is not suitable to act in
the capacity for which he is employed by Employer.
(f) Executive is convicted of any felony or a crime
involving moral turpitude or willfully and intentionally
commits a fraudulent or dishonest act.
(g) Executive's willful and intentional disclosure, without
authority, of any secret or confidential information
concerning Employer or Executive takes any action which
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
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 upon, nor 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, 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 Early
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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 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 shall remain
in the continuous 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, 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 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 while actively employed by the Employer 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 while actively employed by the
Employer 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, 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 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
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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".
5.2. Voluntary Termination by the Executive. If the
Executive's employment is terminated by voluntary resignation prior to the date
specified in Schedule A which corresponds to an Applicable Percentage equal to
one hundred percent (100%), and such resignation is not subject to the
provisions of subparagraph 5.4 below, the Executive shall forfeit any and all
rights and benefits he may have under the terms of this Agreement and shall have
no right to be paid any of the amounts which would otherwise be due or paid to
the Executive by the Employer pursuant to the terms of this Agreement.
5.3. Termination for Cause. The Executive agrees that if his
employment with the Employer is terminated "for cause," as defined in
subparagraph 1.14 of this Agreement, he shall forfeit any and all rights and
benefits he may have under the terms of this Agreement and shall have no right
to be paid any of the amounts which would otherwise be due or paid to the
Executive by the Employer pursuant to the terms of this Agreement.
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 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".
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
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knowledge of the potential consequences the Executive agrees that,
notwithstanding anything contained herein to the contrary, in the event that any
payment or benefit received or to be received by the Executive, whether payable
pursuant to the terms of this Agreement or any other plan, arrangement or
agreement with the Employer (together with the Executive Benefits, the "Total
Payments"), will not be deductible (in whole or in part) as a result of Code
Section 280G or other applicable provisions of the Code, the Total Payments
shall be reduced until no portion of the Total Payments is nondeductible as a
result of Section 280G or such other applicable provisions of the Code. For
purposes of this limitation:
(a) No portion of the Total Payments, the receipt or
enjoyment of which the Executive shall have effectively waived in writing prior
to the date of payment of any future Executive Benefits payments, shall be taken
into account;
(b) No portion of the Total Payments shall be taken into
account, which in the opinion of the tax counsel selected by the Employer and
acceptable to the Executive, does not constitute a "parachute payment" within
the meaning of Section 280G of the Code;
(c) Any reduction of the Total Payments shall be applied to
reduce any payment or benefit received or to be received by the Executive
pursuant to the terms of this Agreement and any other plan, arrangement or
agreement with the Employer in the order determined by mutual agreement of the
Employer and the Executive;
(d) Future payments shall be reduced only to the extent
necessary so that the Total Payments (other than those referred to in clauses
(a) or (b) above in their entirety) constitute reasonable compensation for
services actually rendered within the meaning of Section 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
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operation and administration of this Agreement. Consistent therewith, the
Employer shall make all determinations as to the rights to benefits under this
Agreement. Any decision by the Employer denying a claim by the Executive, the
Executive's spouse, or the Executive's beneficiary for benefits under this
Agreement shall be stated in writing and delivered or mailed, via registered or
certified mail, to the Executive, the Executive's spouse or the Executive's
beneficiary, as the case may be. Such decision shall set forth the specific
reasons for the denial of a claim. In addition, the Employer shall provide the
Executive, the Executive's spouse or the Executive's beneficiary with a
reasonable opportunity for a full and fair review of the decision denying such
claim.
9. Status as an Unsecured General Creditor. Notwithstanding
anything contained herein to the contrary: (i) neither the Executive, the
Executive's spouse or the Executive's designated beneficiaries shall have any
legal or equitable rights, interests or claims in or to any specific property or
assets of the Employer as a result of this Agreement; (ii) none of the
Employer's assets shall be held in or under any trust for the benefit of the
Executive, the Executive's spouse or the Executive's designated beneficiaries or
held in any way as security for the fulfillment of the obligations of the
Employer under this Agreement; (iii) all of the Employer's assets shall be and
remain the general unpledged and unrestricted assets of the Employer; (iv) the
Employer's obligation under this Agreement shall be that of an unfunded and
unsecured promise by the Employer to pay money in the future; and (v) the
Executive, the Executive's spouse and the Executive's designated beneficiaries
shall be unsecured general creditors with respect to any benefits which may be
payable under the terms of this Agreement.
Notwithstanding subparagraphs (i) through (v) above, the
Employer and the Executive acknowledge and agree that, in the event of a Change
in Control, 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
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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 Lodi, 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 losing 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: Bank of Lodi, N.A.
701 S. Ham Lane
Lodi, California 95242-3537
Attn: Chairman of the Board
If to the Executive: Leon J. Zimmerman
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with a copy to: Kevin W. Finck
Attorney at Law
Two Embarcadero Center, Suite 1670
San Francisco, CA 94111
11.5. Assignment. Neither the Executive, the Executive's
spouse, nor any other beneficiary under this Agreement shall have any power or
right to transfer, assign, anticipate, hypothecate, modify or otherwise encumber
any part or all of the amounts payable hereunder, nor, prior to payment in
accordance with the terms of this Agreement, shall any portion of such amounts
be: (i) subject to seizure by any creditor of any such beneficiary, by a
proceeding at law or in equity, for the payment of any debts, judgments, alimony
or separate maintenance obligations which may be owed by the Executive, the
Executive's spouse, or any designated beneficiary; or (ii) transferable by
operation of law in the event of bankruptcy, insolvency or otherwise. Any such
attempted assignment or transfer shall be void and shall terminate this
Agreement, and the Employer shall thereupon have no further liability hereunder.
11.6. Binding Effect/Merger or Reorganization. This Agreement
shall be binding upon and inure to the benefit of the Executive and the Employer
and, as applicable, their respective heirs, beneficiaries, legal
representatives, agents, successors and assigns. Accordingly, the Employer shall
not merge or consolidate into or with another corporation, or reorganize or sell
substantially all of its assets to another corporation, firm or person, unless
and until such succeeding or continuing corporation, firm or person agrees to
assume and discharge the obligations of the Employer under this Agreement. Upon
the occurrence of such event, the term "Employer" as used in this Agreement
shall be deemed to refer to such surviving or successor firm, person, entity or
corporation.
11.7. Nonwaiver. The failure of either party to enforce at
any time or for any period of time any one or more of the terms or conditions of
this Agreement shall not be a waiver of such term(s) or condition(s) or of that
party's right thereafter to enforce each and every term and condition of this
Agreement.
11.8. Partial Invalidity. If any term, provision, covenant,
or condition of this Agreement is determined by an arbitrator or a court, as the
case may be, to be invalid, void, or unenforceable, such determination shall not
render any other term, provision, covenant or condition invalid, void or
unenforceable, and the Agreement shall remain in full force and effect
notwithstanding such partial invalidity.
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.
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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.
IN WITNESS WHEREOF, the Employer and the Executive have executed this
Agreement on the date first above-written in the City of Lodi, San Joaquin
County, California.
THE EMPLOYER THE EXECUTIVE
Bank of Lodi, N.A.
By: /s/ Benjamin R. Goehring /s/ Leon J. Zimmerman
------------------------ ---------------------
Benjamin R. Goehring, Leon J. Zimmerman
Chairman of the Board
of Directors
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SCHEDULE A
CALENDAR YEAR APPLICABLE PERCENTAGE
- ------------- ---------------------
April 2, 1990 to April 1, 1998................................ 60.00%
April 2, 1999................................................. 80.00%
April 2, 2000................................................. 100.00%
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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 Executive's Retirement or other
termination of service under the Agreement, such Benefit
Account shall be increased each Plan Year (including the Plan
Year in which the Executive ceases to be employed by the
Employer) by an amount as may equal any annual earnings 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.
<TABLE>
b. Index Benefit:
After the Executive's Retirement or other termination of
service 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.
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
EXAMPLE
INDEX BENEFIT CALCULATION
- --------------------------------------------------------------------------------------------------------------------
Assume Initial Insurance = $1,000,000
- --------------------------------------------------------------------------------------------------------------------
End of Year Cash Surrender Value of Life Index Opportunity Cost Benefit
Insurance Policy [Annual Policy [After Tax One Year U.S. Account
Income] Treasury Yield (5.00%)] [cumulative]
- ------------ --------------------------------- ----------------- ----------------------------- ---------------------
<S> <C> <C> <C> <C> <C>
1 $1,050,000 $50,000 $(30,000) $20,000
- ------------ --------------------------------- ----------------- ----------------------------- ---------------------
2 $1,102,500 $52,500 $(31,500) $41,000
- ------------ --------------------------------- ----------------- ----------------------------- ---------------------
3 $1,157,625 $55,125 $(33,075) $63,050
- ------------ --------------------------------- ----------------- ----------------------------- ---------------------
</TABLE>
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: TransAmerica Assurance Company
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Option: A Face Amount: $309,000
Policy Form: Flex Premium Premiums Paid: $300,000
Adjustable Life Number of Premium Payments:
Policy Name: Tac Saver One
Insured's Age and Sex: 55/Male Assumed Purchase Date:
Riders: None 04/03/98
Ratings: According to the
health of the insured
Insurance Company: The Canada Life Assurance Company
Option: A Face Amount: $2,748,259
Policy Form: Whole Life Premiums Paid: $1,200,000
Policy Name: CL/1 Number of Premium Payments:
Insured's Age and Sex: 55/Male One
Riders: None Assumed Purchase Date:
Ratings: According to the 04/03/98
health of the insured
If such contracts of life insurance are actually purchased by
the Employer, then the actual policies as of the dates
purchased shall be used in calculations to determine the
Index and Opportunity Cost. If such contracts of life
insurance are not purchased or are subsequently surrendered
or lapsed, then the Employer shall receive and use annual
policy illustrations that assume the above described policies
were purchased from the above named insurance company(ies) on
the Effective Date to calculate the amount of the Index and
Opportunity Cost.
d. Opportunity Cost:
The Opportunity Cost for any Plan Year shall be calculated by
multiplying (a) the sum of (i) the total amount of premiums
set forth in the insurance policies described above, (ii) the
amount of any Index Benefits (described at subparagraph b
above), and (iii) the amount of all previous years after-tax
Opportunity Costs; by (b) the average annualized after-tax
cost of funds calculated using the average monthly one-year
CMT (Constant Maturity Treasury) for the Plan Year as
published by the Board of Governors of the Federal Reserve
System, Publication H.15(519). The applicable tax rate used
to calculate the Opportunity Cost shall be the Employer's
average marginal tax rate based upon Employer's average
taxable income for each Plan Year 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.
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.
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<PAGE>
SCHEDULE C
BENEFICIARY DESIGNATION
To the Administrator of the Bank of Lodi, N.A. Executive Supplemental
Compensation Agreement:
Pursuant to the Provisions of my Executive Supplemental Compensation
Agreement with Bank of Lodi, N.A., permitting the designation of a beneficiary
or beneficiaries by a participant, I hereby designate the following persons and
entities as primary and secondary beneficiaries of any benefit under said
Agreement payable by reason of my death:
Primary Beneficiary:
- ---------------------- -------------------- -----------------------------
Name Address Relationship
Secondary (Contingent) Beneficiary:
- ---------------------- --------------------- ----------------------------
Name Address Relationship
THE RIGHT TO REVOKE OR CHANGE ANY BENEFICIARY DESIGNATION IS HEREBY RESERVED.
ALL PRIOR DESIGNATIONS, IF ANY, OF PRIMARY BENEFICIARIES AND SECONDARY
BENEFICIARIES ARE HEREBY REVOKED.
The Administrator shall pay all sums payable under the Agreement by
reason of my death to the Primary Beneficiary, if he or she survives me, and if
no Primary Beneficiary shall survive me, then to the Secondary Beneficiary, and
if no named beneficiary survives me, then the Administrator shall pay all
amounts in accordance with the terms of my Executive Supplemental Compensation
Agreement. In the event that a named beneficiary survives me and dies prior to
receiving the entire benefit payable under said Agreement, then and in that
event, the remaining unpaid benefit payable according to the terms of my
Executive Supplemental Compensation Agreement 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 _____________________________________________
Leon J. Zimmerman
55
<PAGE>
CONSENT OF THE EXECUTIVE'S SPOUSE
TO THE ABOVE BENEFICIARY DESIGNATION:
I, ______________, being the spouse of Leon J. Zimmerman, 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
------------------------------------------
56
<PAGE>
SCHEDULE D
DISTRIBUTION ELECTION
Pursuant to the Provisions of my Executive Supplemental Compensation Agreement
with Bank of Lodi, N.A., 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:
Leon J. Zimmerman
57
<PAGE>
Exhibit 10(k) Executive Supplemental Compensation Agreement effective
as of April 3, 1998, between Bank of Lodi, N.A. and
David M. Philipp.
EXECUTIVE SUPPLEMENTAL COMPENSATION AGREEMENT
This Agreement is made and entered into effective as of April 3, 1998 by
and between Bank of Lodi, N.A., a national banking association chartered under
the federal laws of the United States of America with its principal offices
located in the City of Lodi, San Joaquin County, California (the "Employer"),
and David M. Philipp, 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 April
6, 1992, and is currently serving as its Executive Vice President, Chief
Financial Officer and Secretary;
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.
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
58
<PAGE>
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 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 and is received by the Administrator prior to the Executive's death.
1.4. Change in Control. The term "Change in Control" shall
mean the occurrence of any of the following events with respect to the Employer
(with the term "Employer" being defined for purposes of determining whether a
"Change in Control" has occurred to include any parent bank holding company
organized at the direction of the Employer to own 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 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. Notwithstanding the foregoing
or anything else contained herein to the contrary, there shall not be a "Change
of Control" for purposes of this Agreement if the event which would otherwise
come within the meaning of the term "Change of Control" involves (i) a
reorganization at the direction of the Employer solely to form a parent bank
holding company which owns 100% of the Employer's common stock following the
reorganization, or (ii) an Employee Stock Ownership Plan sponsored by the
Employer or its parent holding company which is the party that acquires
"control" or is the principal participant in the transaction constituting a
"Change in Control," as described above.
1.5. The Code. The "Code" shall mean the Internal Revenue
Code of 1986, as amended (the "Code").
59
<PAGE>
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 any and all applicable state and federal laws, including,
but not limited to, income, employment and disability income tax laws (e.g.,
FICA, FUTA, SDI).
1.11. Plan Year. The term "Plan Year" shall mean the
Employer's fiscal year.
1.12. Retirement. The term "Retirement" or "Retires" shall
refer to the date which the Executive acknowledges in writing to Employer to be
the last day he will provide any significant personal services, whether as an
employee or independent consultant or contractor, to Employer or to, for, or on
behalf of, any other business entity conducting, performing or making available
to any person or entity banking or other financial services of any kind. 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 of
duty by Executive in the course of his employment.
(b) The habitual and continued neglect by Executive of
his employment duties and obligations under this
Agreement.
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<PAGE>
(c) The continuous mental or physical incapacity of
Executive, subject to Executive's disability
rights under this Agreement.
(d) Executive's willful and intentional violation of
any federal banking laws, or of the Bylaws, rules,
policies or resolutions of Employer, or of 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
Employer.
(e) The written determination by a state or federal
banking agency or governmental authority having
jurisdiction over Employer that Executive is not
suitable to act in the capacity for which he is
employed by Employer.
(f) Executive is convicted of any felony or a crime
involving moral turpitude or willfully and
intentionally commits a fraudulent or dishonest
act.
(g) Executive's willful and intentional disclosure,
without authority, of any secret or confidential
information concerning Employer or Executive takes
any action which 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 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 upon, nor 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, 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 Early
Retirement Date occurs or
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<PAGE>
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 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 shall remain
in the continuous 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, 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 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 while actively employed by the Employer 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 while actively employed by the
Employer 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, 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 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:
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5.1. Termination Without Cause. If the Executive's employment
is terminated by the Employer without cause, and such termination is not subject
to the provisions of subparagraph 5.4 below, the Executive shall be entitled to
be paid the Applicable Percentage of the Executive Benefits, as defined above,
in substantially equal monthly installments on the first day of each month,
beginning with the month following the month in which the Executive attains
fifty-five (55) years of age or any month thereafter, as requested in writing by
the Executive and delivered to the Employer or its successor thirty (30) days
prior to the commencement of installment payments; provided, however, that in
the event the Executive does not request a commencement date as specified, such
installments shall be paid on the first 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 prior to the date
specified in Schedule A which corresponds to an Applicable Percentage equal to
one hundred percent (100%), and such resignation is not subject to the
provisions of subparagraph 5.4 below, the Executive shall forfeit any and all
rights and benefits he may have under the terms of this Agreement and shall have
no right to be paid any of the amounts which would otherwise be due or paid to
the Executive by the Employer pursuant to the terms of this Agreement.
5.3. Termination for Cause. The Executive agrees that if his
employment with the Employer is terminated "for cause," as defined in
subparagraph 1.14 of this Agreement, he shall forfeit any and all rights and
benefits he may have under the terms of this Agreement and shall have no right
to be paid any of the amounts which would otherwise be due or paid to the
Executive by the Employer pursuant to the terms of this Agreement.
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 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".
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.
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6. Section 280G Adjustment. The Executive acknowledges and
agrees that the parties have entered into this Agreement based upon certain
financial and tax accounting assumptions. Accordingly, with full knowledge of
the potential consequences the Executive agrees that, notwithstanding anything
contained herein to the contrary, in the event that any payment or benefit
received or to be received by the Executive, whether payable pursuant to the
terms of this Agreement or any other plan, arrangement or agreement with the
Employer (together with the Executive Benefits, the "Total Payments"), will not
be deductible (in whole or in part) as a result of Code Section 280G or other
applicable provisions of the Code, the Total Payments shall be reduced until no
portion of the Total Payments is nondeductible as a result of Section 280G or
such other applicable provisions of the Code. For purposes of this limitation:
(a) No portion of the Total Payments, the receipt or
enjoyment of which the Executive shall have effectively waived in writing prior
to the date of payment of any future Executive Benefits payments, shall be taken
into account;
(b) No portion of the Total Payments shall be taken into
account, which in the opinion of the tax counsel selected by the Employer and
acceptable to the Executive, does not constitute a "parachute payment" within
the meaning of Section 280G of the Code;
(c) Any reduction of the Total Payments shall be applied to
reduce any payment or benefit received or to be received by the Executive
pursuant to the terms of this Agreement and any other plan, arrangement or
agreement with the Employer in the order determined by mutual agreement of the
Employer and the Executive;
(d) Future payments shall be reduced only to the extent
necessary so that the Total Payments (other than those referred to in clauses
(a) or (b) above in their entirety) constitute reasonable compensation for
services actually rendered within the meaning of Section 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.
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8. Claims Procedure. The Employer shall, but only to the extent
necessary to comply with ERISA, be designated as the named fiduciary under this
Agreement and shall have authority to control and manage the operation and
administration of this Agreement. Consistent therewith, the Employer shall make
all determinations as to the rights to benefits under this Agreement. Any
decision by the Employer denying a claim by the Executive, the Executive's
spouse, or the Executive's beneficiary for benefits under this Agreement shall
be stated in writing and delivered or mailed, via registered or certified mail,
to the Executive, the Executive's spouse or the Executive's beneficiary, as the
case may be. Such decision shall set forth the specific reasons for the denial
of a claim. In addition, the Employer shall provide the Executive, the
Executive's spouse or the Executive's beneficiary with a reasonable opportunity
for a full and fair review of the decision denying such claim.
9. Status as an Unsecured General Creditor. Notwithstanding
anything contained herein to the contrary: (i) neither the Executive, the
Executive's spouse or the Executive's designated beneficiaries shall have any
legal or equitable rights, interests or claims in or to any specific property or
assets of the Employer as a result of this Agreement; (ii) none of the
Employer's assets shall be held in or under any trust for the benefit of the
Executive, the Executive's spouse or the Executive's designated beneficiaries or
held in any way as security for the fulfillment of the obligations of the
Employer under this Agreement; (iii) all of the Employer's assets shall be and
remain the general unpledged and unrestricted assets of the Employer; (iv) the
Employer's obligation under this Agreement shall be that of an unfunded and
unsecured promise by the Employer to pay money in the future; and (v) the
Executive, the Executive's spouse and the Executive's designated beneficiaries
shall be unsecured general creditors with respect to any benefits which may be
payable under the terms of this Agreement.
Notwithstanding subparagraphs (i) through (v) above, the
Employer and the Executive acknowledge and agree that, in the event of a Change
in Control, 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
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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 Lodi, 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 losing 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.
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If to the Employer: Bank of Lodi, N.A.
701 S. Ham Lane
Lodi, California 95242-3537
Attn: Chairman of the Board
If to the Executive: David M. Philipp
with a copy to: Kevin W. Finck
Attorney at Law
Two Embarcadero Center, Suite 1670
San Francisco, CA 94111
11.5. Assignment. Neither the Executive, the Executive's
spouse, nor any other beneficiary under this Agreement shall have any power or
right to transfer, assign, anticipate, hypothecate, modify or otherwise encumber
any part or all of the amounts payable hereunder, nor, prior to payment in
accordance with the terms of this Agreement, shall any portion of such amounts
be: (i) subject to seizure by any creditor of any such beneficiary, by a
proceeding at law or in equity, for the payment of any debts, judgments, alimony
or separate maintenance obligations which may be owed by the Executive, the
Executive's spouse, or any designated beneficiary; or (ii) transferable by
operation of law in the event of bankruptcy, insolvency or otherwise. Any such
attempted assignment or transfer shall be void and shall terminate this
Agreement, and the Employer shall thereupon have no further liability hereunder.
11.6. Binding Effect/Merger or Reorganization. This Agreement
shall be binding upon and inure to the benefit of the Executive and the Employer
and, as applicable, their respective heirs, beneficiaries, legal
representatives, agents, successors and assigns. Accordingly, the Employer shall
not merge or consolidate into or with another corporation, or reorganize or sell
substantially all of its assets to another corporation, firm or person, unless
and until such succeeding or continuing corporation, firm or person agrees to
assume and discharge the obligations of the Employer under this Agreement. Upon
the occurrence of such event, the term "Employer" as used in this Agreement
shall be deemed to refer to such surviving or successor firm, person, entity or
corporation.
11.7. Nonwaiver. The failure of either party to enforce at
any time or for any period of time any one or more of the terms or conditions of
this Agreement shall not be a waiver of such term(s) or condition(s) or of that
party's right thereafter to enforce each and every term and condition of this
Agreement.
11.8. Partial Invalidity. If any term, provision, covenant,
or condition of this Agreement is determined by an arbitrator or a court, as the
case may be, to be invalid, void, or unenforceable, such determination shall not
render any other term, provision, covenant or condition invalid, void or
unenforceable, and the Agreement shall remain in full force and effect
notwithstanding such partial invalidity.
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.
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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.
IN WITNESS WHEREOF, the Employer and the Executive have executed this
Agreement on the date first above-written in the City of Lodi, San Joaquin
County, California.
THE EMPLOYER THE EXECUTIVE
Bank of Lodi, N.A.
By: /s/ Benjamin R. Goehring /s/ David M. Philipp
------------------------ --------------------
Benjamin R. Goehring, David M. Philipp
Chairman of the Board
of Directors
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SCHEDULE A
CALENDAR YEAR APPLICABLE PERCENTAGE
- ------------- ---------------------
April 6, 1992 to April 5, 1998................................... 20.00%
April 6, 1999.................................................... 40.00%
April 6, 2000.................................................... 60.00%
April 6, 2001.................................................... 80.00%
April 6, 2002.................................................... 100.00%
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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 Executive's Retirement or other termination
of service under the Agreement, such Benefit Account shall be
increased each Plan Year (including the Plan Year in which the
Executive ceases to be employed by the Employer) by an amount as
may equal any annual earnings 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.
<TABLE>
b. Index Benefit:
After the Executive's Retirement or other termination of service
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.
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
EXAMPLE
INDEX BENEFIT CALCULATION
- --------------------------------------------------------------------------------------------------------------------
Assume Initial Insurance = $1,000,000
- --------------------------------------------------------------------------------------------------------------------
End of Year Cash Surrender Value of Life Index Opportunity Cost Benefit
Insurance Policy [Annual Policy [After Tax One Year U.S. Account
Income] Treasury Yield (5.00%)] [cumulative]
- ------------ --------------------------------- ----------------- ----------------------------- ---------------------
<S> <C> <C> <C> <C> <C>
1 $1,050,000 $50,000 $(30,000) $20,000
- ------------ --------------------------------- ----------------- ----------------------------- ---------------------
2 $1,102,500 $52,500 $(31,500) $41,000
- ------------ --------------------------------- ----------------- ----------------------------- ---------------------
3 $1,157,625 $55,125 $(33,075) $63,050
- ------------ --------------------------------- ----------------- ----------------------------- ---------------------
</TABLE>
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: TransAmerica Assurance Company
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Option: A Face Amount: $143,611
Policy Form: Flex Premium Adjustable Life Premiums Paid: $ 50,000
Policy Name: Tac-Saver Number of Premium Payments:
Insured's Age and Sex: 35/Male One
Riders: None Assumed Purchase Date:
Ratings: According to the health 04/03/98
of the insured
Insurance Company: The Canada Life Assurance Company
Option: A Face Amount: $711,107
Policy Form: Whole Life Premiums Paid: $150,000
Policy Name: CL/1 Number of Premium Payments:
Insured's Age and Sex: 35/Male One
Riders: None Assumed Purchase Date:
Ratings: According to the health 04/03/98
of the insured
If such contracts of life insurance are actually purchased by the
Employer, then the actual policies as of the dates purchased shall
be used in calculations to determine the Index and Opportunity
Cost. If such contracts of life insurance are not purchased or are
subsequently surrendered or lapsed, then the Employer shall receive
and use annual policy illustrations that assume the above described
policies were purchased from the above named insurance company(ies)
on the Effective Date to calculate the amount of the Index and
Opportunity Cost.
d. Opportunity Cost:
The Opportunity Cost for any Plan Year shall be calculated by
multiplying (a) the sum of (i) the total amount of premiums set
forth in the insurance policies described above, (ii) the amount of
any Index Benefits (described at subparagraph b above), and (iii)
the amount of all previous years after-tax Opportunity Costs; by
(b) the average annualized after-tax cost of funds calculated using
the average monthly one-year CMT (Constant Maturity Treasury) for
the Plan Year as published by the Board of Governors of the Federal
Reserve System, Publication H.15(519). The applicable tax rate used
to calculate the Opportunity Cost shall be the Employer's average
marginal tax rate based upon Employer's average taxable income for
each Plan Year 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.
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.
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SCHEDULE C
BENEFICIARY DESIGNATION
To the Administrator of the Bank of Lodi, N.A. Executive Supplemental
Compensation Agreement:
Pursuant to the Provisions of my Executive Supplemental Compensation
Agreement with Bank of Lodi, N.A., permitting the designation of a beneficiary
or beneficiaries by a participant, I hereby designate the following persons and
entities as primary and secondary beneficiaries of any benefit under said
Agreement payable by reason of my death:
Primary Beneficiary:
- ---------------------- -------------------- -----------------------------
Name Address Relationship
Secondary (Contingent) Beneficiary:
- ---------------------- --------------------- ----------------------------
Name Address Relationship
THE RIGHT TO REVOKE OR CHANGE ANY BENEFICIARY DESIGNATION IS HEREBY RESERVED.
ALL PRIOR DESIGNATIONS, IF ANY, OF PRIMARY BENEFICIARIES AND SECONDARY
BENEFICIARIES ARE HEREBY REVOKED.
The Administrator shall pay all sums payable under the Agreement by
reason of my death to the Primary Beneficiary, if he or she survives me, and if
no Primary Beneficiary shall survive me, then to the Secondary Beneficiary, and
if no named beneficiary survives me, then the Administrator shall pay all
amounts in accordance with the terms of my Executive Supplemental Compensation
Agreement. In the event that a named beneficiary survives me and dies prior to
receiving the entire benefit payable under said Agreement, then and in that
event, the remaining unpaid benefit payable according to the terms of my
Executive Supplemental Compensation Agreement 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 _____________________________________________
David M. Philipp
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CONSENT OF THE EXECUTIVE'S SPOUSE
TO THE ABOVE BENEFICIARY DESIGNATION:
I, ______________, being the spouse of David M. Philipp, 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
------------------------------------------
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SCHEDULE D
DISTRIBUTION ELECTION
Pursuant to the Provisions of my Executive Supplemental Compensation Agreement
with Bank of Lodi, N.A., 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:
David M. Philipp
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Exhibit 10(l) Life Insurance Endorsement Method Split Dollar Plan
Agreement effective as of April 3, 1998, between Bank of
Lodi, N.A. and Leon J. Zimmerman.
LIFE INSURANCE
ENDORSEMENT METHOD SPLIT DOLLAR PLAN
AGREEMENT
Insurer/Policy Number: TransAmerica Assurance Company
Canada Life Assurance Company
Bank: Bank of Lodi, N.A.
Insured: Leon J. Zimmerman
Relationship of Insured to Bank: President and Chief Executive Officer
The respective rights and duties of the Bank and the Insured in the above policy
(the "Policy") shall be as follows:
I. DEFINITIONS
Refer to the Policy provisions for the definition of all terms 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
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.
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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 Employee the amount
of imputed income received each year on Form W-2 or its equivalent.
VI. DIVISION OF DEATH PROCEEDS
Subject to Paragraph VII herein, the division of the death proceeds of
the Policy is as follows:
A. The Insured's beneficiary(ies), designated in accordance with
Paragraph III, shall be entitled to the lesser of (i) an
amount equal to eighty percent (80%) of the net at risk
insurance portion of the proceeds, or (ii) One Million Five
Hundred Thousand Dollars ($1,500,000). The net at risk
insurance portion is the total proceeds less the cash value of
the Policy.
B. The Bank shall be entitled to the remainder of such proceeds.
C. The Bank and the Insured (or beneficiary[ies] or assignee[s])
shall share in any interest due on the death proceeds on a pro
rata basis in the ratio that the proceeds due the Bank and the
Insured, respectively, bears to the total proceeds, excluding
any such interest.
VII. DIVISION OF CASH SURRENDER VALUE
The Bank shall at all times be entitled to an amount equal to the
Policy's cash value, as that term is defined in the Policy, less any
Policy loans and unpaid interest or cash withdrawals previously
incurred by the Bank and any applicable Policy surrender charges. Such
cash value shall be determined as of the date of surrender of the
Policy or death of the Insured as the case may be.
VIII. PREMIUM WAIVER
If the Policy contains a premium waiver provision, any such waived
amounts shall be considered for all purposes of this Agreement as
having been paid by the Bank.
IX. RIGHTS OF PARTIES WHERE POLICY ENDOWMENT OR ANNUITY ELECTION EXISTS
In the event the Policy involves an endowment or annuity element, the
Bank's right and interest in any endowment proceeds or annuity benefits
shall be determined under the provisions of this Agreement by regarding
such endowment proceeds or the commuted value of such annuity benefits
as the Policy's cash value. Such endowment proceeds or annuity benefits
shall be treated like death proceeds for the purposes of division under
this Agreement.
X. TERMINATION OF AGREEMENT
This Agreement shall terminate at the option of the Bank following
thirty (30) days written notice to the Insured upon the happening of
any one of the following:
1. The Insured shall be in violation of the terms and conditions
of that certain Executive Supplemental Compensation Agreement
effective as of April 3, 1998, or
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2. The Insured shall be discharged from service with the Bank for
cause. The term "for cause" shall have the meaning given that
term in the Insured's Executive Supplemental Compensation
Agreement effective as of April 3, 1998.
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
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
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further requirements are necessary. The Insurer will evaluate and make
a decision as to payment. If the claim is payable, a benefit check will
be issued to the Named Fiduciary.
In the event that a claim is not eligible under the Policy, the Insurer
will notify the Named Fiduciary of the denial pursuant to the
requirements under the terms of the Policy. If the Named Fiduciary is
dissatisfied with the denial of the claim and wishes to contest such
claim denial, it should contact the office named above and they will
assist in making inquiry to the Insurer. All objections to the
Insurer's actions should be in writing and submitted to the office
named above for transmittal to the Insurer.
XVI. GENDER
Whenever in this Agreement words are used in the masculine or neuter
gender, they shall be read and construed as in the masculine, feminine
or neuter gender, whenever they should so apply.
XVII. INSURANCE COMPANY NOT A PARTY TO THIS AGREEMENT
The Insurer shall not be deemed a party to this Agreement, but will
respect the rights of the parties as set forth herein upon receiving an
executed copy of this Agreement. Payment or other performance in
accordance with the Policy provisions shall fully discharge the Insurer
from any and all liability.
IN WITNESS WHEREOF, the Insured and a duly authorized Bank officer have
signed this Agreement as of Third day of April, 1998.
BANK OF LODI, N.A. INSURED
/s/ Benjamin R. Goehring /s/ Leon J. Zimmerman
- ------------------------ ---------------------
Benjamin R. Goehring Leon J. Zimmerman
Chairman of the Board
of Directors
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BENEFICIARY DESIGNATION FORM
Primary Designation:
Name Relationship
_____________________________ _______________________________________
_____________________________ _______________________________________
_____________________________ _______________________________________
Contingent Designation:
_____________________________ _______________________________________
_____________________________ _______________________________________
_____________________________ _______________________________________
_____________________________ _________, 1998
Leon J. Zimmerman
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Exhibit 10(m) Life Insurance Endorsement Method Split Dollar Plan
Agreement effective as of April 3, 1998, between Bank of
Lodi, N.A. and David M. Philipp.
LIFE INSURANCE
ENDORSEMENT METHOD SPLIT DOLLAR PLAN
AGREEMENT
Insurer/Policy Number: TransAmerica Assurance Company
Canada Life Assurance Company
Bank: Bank of Lodi, N.A.
Insured: David M. Philipp
Relationship of Insured to Bank: Executive Vice President, Chief Financial
Officer and Secretary
The respective rights and duties of the Bank and the Insured in the above policy
(the "Policy") shall be as follows:
I. DEFINITIONS
Refer to the Policy provisions for the definition of all terms 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
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.
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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 Employee the amount
of imputed income received each year on Form W-2 or its equivalent.
VI. DIVISION OF DEATH PROCEEDS
Subject to Paragraph VII herein, the division of the death proceeds of
the Policy is as follows:
A. The Insured's beneficiary(ies), designated in accordance with
Paragraph III, shall be entitled to an amount equal to eighty
percent (80%) of the net at risk insurance portion of the
proceeds. The net at risk insurance portion is the total
proceeds less the cash value of the Policy.
B. The Bank shall be entitled to the remainder of such proceeds.
C. The Bank and the Insured (or beneficiary[ies] or assignee[s])
shall share in any interest due on the death proceeds on a pro
rata basis in the ratio that the proceeds due the Bank and the
Insured, respectively, bears to the total proceeds, excluding
any such interest.
VII. DIVISION OF CASH SURRENDER VALUE
The Bank shall at all times be entitled to an amount equal to the
Policy's cash value, as that term is defined in the Policy, less any
Policy loans and unpaid interest or cash withdrawals previously
incurred by the Bank and any applicable Policy surrender charges. Such
cash value shall be determined as of the date of surrender of the
Policy or death of the Insured as the case may be.
VIII. PREMIUM WAIVER
If the Policy contains a premium waiver provision, any such waived
amounts shall be considered for all purposes of this Agreement as
having been paid by the Bank.
IX. RIGHTS OF PARTIES WHERE POLICY ENDOWMENT OR ANNUITY ELECTION EXISTS
In the event the Policy involves an endowment or annuity element, the
Bank's right and interest in any endowment proceeds or annuity benefits
shall be determined under the provisions of this Agreement by regarding
such endowment proceeds or the commuted value of such annuity benefits
as the Policy's cash value. Such endowment proceeds or annuity benefits
shall be treated like death proceeds for the purposes of division under
this Agreement.
X. TERMINATION OF AGREEMENT
This Agreement shall terminate at the option of the Bank following
thirty (30) days written notice to the Insured upon the happening of
any one of the following:
1. The Insured shall be in violation of the terms and conditions
of that certain Executive Supplemental Compensation Agreement
effective as of April 3, 1998, or
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<PAGE>
2. The Insured shall be discharged from service with the Bank for
cause. The term "for cause" shall have the meaning given that
term in the Insured's Executive Supplemental Compensation
Agreement effective as of April 3, 1998.
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
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
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claim form and forward it to an authorized representative of the
Insurer or advise the named Fiduciary what further requirements are
necessary. The Insurer will evaluate and make a decision as to payment.
If the claim is payable, a benefit check will be issued to the Named
Fiduciary.
In the event that a claim is not eligible under the Policy, the Insurer
will notify the Named Fiduciary of the denial pursuant to the
requirements under the terms of the Policy. If the Named Fiduciary is
dissatisfied with the denial of the claim and wishes to contest such
claim denial, it should contact the office named above and they will
assist in making inquiry to the Insurer. All objections to the
Insurer's actions should be in writing and submitted to the office
named above for transmittal to the Insurer.
XVI. GENDER
Whenever in this Agreement words are used in the masculine or neuter
gender, they shall be read and construed as in the masculine, feminine
or neuter gender, whenever they should so apply.
XVII. INSURANCE COMPANY NOT A PARTY TO THIS AGREEMENT
The Insurer shall not be deemed a party to this Agreement, but will
respect the rights of the parties as set forth herein upon receiving an
executed copy of this Agreement. Payment or other performance in
accordance with the Policy provisions shall fully discharge the Insurer
from any and all liability.
IN WITNESS WHEREOF, the Insured and a duly authorized Bank officer have
signed this Agreement as of the Third day of April, 1998.
BANK OF LODI, N.A. INSURED
/s/ Benjamin R. Goehring /s/ David M. Philipp
- ------------------------ --------------------
Benjamin R. Goehring David M. Philipp
Chairman of the Board
of Directors
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<PAGE>
BENEFICIARY DESIGNATION FORM
Primary Designation:
Name Relationship
_____________________________ _______________________________________
_____________________________ _______________________________________
_____________________________ _______________________________________
Contingent Designation:
_____________________________ _______________________________________
_____________________________ _______________________________________
_____________________________ _______________________________________
_____________________________ _________, 1998
David M. Philipp
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<PAGE>
Exhibit 10(n) Form of Director Supplemental Compensation Agreement,
effective as of April 3, 1998, as executed between Bank
of Lodi, N.A. and each of Benjamin R. Goehring, Michael
D. Ramsey, Weldon D. Schumacher and Dennis R. Swanson.
DIRECTOR SUPPLEMENTAL COMPENSATION AGREEMENT
This Agreement is made and entered into effective as of April 3, 1998 by
and between Bank of Lodi, N.A., a national banking association chartered under
the federal laws of the United States of America with its principal offices
located in the City of Lodi, San Joaquin County, California (the "Employer"),
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 the Bank was authorized to conduct
business on July 18, 1983;
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
to establish a director emeritus succession plan; and
WHEREAS, the Director and the Bank wish to specify in writing the terms
and conditions upon which this additional compensatory incentive will be
provided to the Director, or as applicable, to the Director's spouse or
designated beneficiaries, as the case may be.
NOW, THEREFORE, in consideration of the services to be performed by the
Director in the future, as well as the mutual promises and covenants contained
herein, the Director and the Bank agree as follows:
A G R E E M E N T
1. Terms and Definitions.
1.1. Administrator. The Bank shall be the "Administrator"
and, solely for the purposes of ERISA as defined in subparagraph 1.9 below, the
"fiduciary" of this Agreement where a fiduciary is required by ERISA.
1.2. Applicable Percentage. The term "Applicable Percentage"
shall mean that percentage listed on Schedule "A" attached hereto which is
adjacent to the number of calendar years which shall have elapsed from the date
of the Director's commencement of service as a member of the Board of Directors
of the Bank and ending on the date payments are to first begin under the terms
of this Agreement. Notwithstanding the foregoing or the percentages set forth on
Schedule "A," but subject to all other terms and conditions set forth herein,
the "Applicable Percentage" shall be: (i) provided payments have not yet begun
hereunder, one hundred percent (100%) upon the occurrence of a "Change in
Control" as defined in subparagraph 1.4 below, or the Director's Disability (as
defined in subparagraph 1.6 below); and (ii) notwithstanding subclause (i) of
this subparagraph 1.2, zero percent (0%) in the event the Director takes any
intentional action which prevents the Bank from collecting the proceeds of any
life insurance policy which the Bank may happen to own at the time of the
Director's death and of which the Bank is the designated beneficiary.
Furthermore, notwithstanding the foregoing, or anything contained in
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<PAGE>
this Agreement to the contrary, in the event the Director takes any intentional
action which prevents the Bank from collecting the proceeds of any life
insurance policy which the Bank may happen to own at the time of the Director's
death and of which the Bank is the designated beneficiary: (1) the Director's
estate or designated beneficiary shall no longer be entitled to receive the
amounts, if any, payable under the terms of this Agreement, and (2) the Bank
shall have the right to recover from the Director's estate all of the amounts
paid to the Director's estate (with respect to amounts, if any, paid prior to
the Director's death or paid to the Director's estate) or designated beneficiary
(with respect to amounts, if any, paid to the designated beneficiary) pursuant
to the terms of this Agreement prior to and after Director's death.
1.3. Beneficiary. The term "beneficiary" or "designated
beneficiary" shall mean the person or persons whom the Director shall designate
in a valid Beneficiary Designation, a copy of which is attached hereto as
Schedule "C," to receive the benefits, if any, as provided hereunder. A
Beneficiary Designation shall be valid only if it is in the form attached hereto
and made a part hereof and is 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
organized at the direction of the Bank to own 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 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. Notwithstanding the foregoing or anything else
contained herein to the contrary, there shall not be a "Change of Control" for
purposes of this Agreement if the event which would otherwise come within the
meaning of the term "Change of Control" involves (i) a reorganization at the
direction of the Bank solely to form a parent bank holding company which owns
100% of the Bank's common stock following the reorganization, or (ii) an
Employee Stock Ownership Plan sponsored by the Bank or its parent holding
company which is the party that acquires "control" or is the principal
participant in the transaction constituting a "Change in Control," as described
above.
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 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.
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<PAGE>
1.7. Effective Date. The term "Effective Date" shall mean the
date first written above.
1.8. ERISA. The term "ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as amended.
1.9. 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).
1.10. Normal Retirement Date. The term "Normal Retirement
Date" shall mean the Retirement, as defined below, of the Director upon
attainment of age sixty-five (65).
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<PAGE>
1.11. Plan Year. The term "Plan Year" shall mean the Bank's
fiscal year.
1.12. Retirement. The term "Retirement" or "Retires" shall
refer to the date which the Director acknowledges in writing to the Bank to be
the last day of service as a member of the Board of Directors of the Bank.
1.13. Removal for Cause. The term "removal for cause" shall
mean the termination of the Director's service as a member of the Bank's Board
of Directors by reason of any of the following determined in good faith by
disinterested members of the Bank's Board of Directors:
(a) The willful, intentional and material breach or
habitual and continued neglect by the Director of his responsibilities 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 the 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 any other regulatory agency or governmental
authority having jurisdiction over the Bank, which has a material adverse effect
upon the Bank;
(d) The written determination by a state or federal
court, banking agency or other governmental authority having jurisdiction over
the Bank, that the Director (i) is of unsound mind, or (ii) has committed a
gross abuse of authority or discretion with reference to the Bank, or (iii)
otherwise is not suitable to continue to serve as a member of the Board of
Directors of the Bank;
(e) The Director is convicted of any felony or a crime
involving moral turpitude or willfully and intentionally commits a fraudulent or
dishonest act; or
(f) The Director's willful and intentional disclosure,
without authority, of any secret or confidential information not otherwise
publicly available concerning the Bank or taking any action which the Bank's
Board of Directors determines, in its sole discretion and subject to good faith,
fair dealing and reasonableness, constitutes unfair competition with or
inducement of any customer to breach any contract with the Bank.
2. Scope, Purpose and Effect.
2.1. Contract of Employment. Although this Agreement is
intended to provide the Director with an additional incentive to 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.
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<PAGE>
2.2. Fringe Benefit. The benefits provided by this Agreement
are granted by the Bank as a fringe benefit to the Director and are not a part
of any salary reduction plan or any arrangement deferring a bonus or a salary
increase. The Director has no option to take any current payments or bonus in
lieu of the benefits provided by this Agreement.
3. Director Benefits Payments.
3.1. Payments for Service as Director Emeritus. If the
Director shall continue to serve as a member of the Board of Directors until the
Normal Retirement Date, the Director shall be entitled to serve the Bank as a
Director Emeritus in accordance with the procedures and policies established by
the Bank's Board of Directors applicable to service as a Director Emeritus. If
the Director elects to serve as a Director Emeritus, the Director shall be paid
the Applicable Percentage of the Director Emeritus Payments specified in
Schedule B for a three (3) year period, payable annually in twelve (12)
substantially equal installments, commencing with the Retirement Date and ending
on the third anniversary thereof. If the Director declines or is unable to serve
as a Director Emeritus, the Director shall forfeit any entitlement to the
Director Emeritus Benefits.
3.2. Payments After Expiration of the Director Emeritus
Period. After the expiration of the three (3) year period described above in
Paragraph 3.1, the Bank shall pay to the Director the Applicable Percentage of
the Retirement Benefit Payments specified in Schedule B. The Retirement Benefit
Payments shall commence on the third anniversary of the Director's Retirement,
payable annually in twelve (12) substantially equal installments and continue
until the Director's death.
4. Payments in the Event of Disability Prior to Retirement. In
the event the Director becomes Disabled while serving as a member of the Board
of Directors of the Bank at any time after the Effective Date of this Agreement,
but prior to Retirement, the Director shall be entitled to the Applicable
Percentage of the Retirement Benefit Payments specified in Schedule B. The
Retirement Benefit Payments shall commence on the first day of the month
following the month in which the Director becomes Disabled, payable annually in
twelve (12) substantially equal installments and continue until the Director's
death.
5. Payments in the Event Director Is Terminated Prior to
Retirement. As indicated in subparagraph 2.1 above, the Bank reserves the right
to remove or cause the removal of the Director under certain circumstances, at
any time prior to the Director's Retirement. In the event that the service of
the Director shall be terminated, other than by reason of death, Disability or
Retirement, prior to the Director's Normal Retirement Date, then this Agreement
shall terminate upon the date of such termination; provided, however, that the
Director shall be entitled to the following benefits as may be applicable
depending upon the circumstances surrounding the Director's termination:
5.1. Termination Without Cause. If the Director's service as
a member of the Board of Directors of the Bank is terminated for reasons other
than as specified in paragraph 5.3 below, and such termination is not subject to
the provisions of subparagraph 5.4 below, the Director shall be entitled to be
paid the Applicable Percentage of the Retirement Benefit Payments. The
Retirement Benefit Payments shall commence on the first day of the month
following the month in which the Director is terminated, payable annually in
twelve (12) substantially equal installments and continue until the Director's
death.
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5.2. Voluntary Termination by the Director. If the Director's
service on the Board of Directors is terminated by voluntary resignation on a
date when the Applicable Percentage is less than one hundred percent (100%), and
such resignation is not subject to the provisions of subparagraph 5.4 below, the
Director shall forfeit any and all rights and benefits he may have under the
terms of this Agreement and shall have no right to be paid any of the amounts
which would otherwise be due or paid to the Director by the Employer pursuant to
the terms of this Agreement. If the Applicable Percentage is one hundred percent
(100%) on the date of such voluntary resignation, the Director shall be paid the
Applicable Percentage of the Retirement Benefit Payments. The Retirement Benefit
Payments shall commence on the first day of the month following the month in
which the Director terminated services as a member of the Board of Directors,
payable annually in twelve (12) substantially equal installments and continue
until the Director's death.
5.3. Termination by Removal for Cause. The Director agrees
that if his service as a member of the Board of Directors of the Bank is
terminated by "removal for cause," as defined in subparagraph 1.13 of this
Agreement, he shall forfeit any and all rights and benefits he may have under
the terms of this Agreement and shall have no right to be paid any of the
amounts which would otherwise be due or paid to the Director by the Bank
pursuant to the terms of this Agreement.
5.4. Termination by the Bank on Account of or After a Change
in Control. In the event that the Director's service as a member of the Board of
Directors of the Bank is terminated in conjunction with, or by reason of, a
"Change in Control" (as defined in subparagraph 1.4 above), the Director shall
be entitled to be paid the Applicable Percentage of the Retirement Benefit
Payments. The Retirement Benefit Payments shall commence on the first day of the
month following the month in which the Director terminated services as a member
of the Board of Directors, payable annually in twelve (12) substantially equal
installments and continue until the Director's death.
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
Employer (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 Employer
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 Employer in the order determined by mutual agreement of
the Employer and the Director;
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(d) Future payments shall be reduced only to the
extent necessary so that the Total Payments (other than those referred to in
clauses (a) or (b) above in their entirety) constitute reasonable compensation
for services actually rendered within the meaning of Section 280G of the Code,
in the opinion of tax counsel referred to in clause (b) above; and
(e) The value of any non-cash benefit or any deferred
payment or benefit included in the Total Payments shall be determined by
independent auditors selected by the Employer and acceptable to the Director in
accordance with the principles of Section 280G of the Code.
7. Right To Determine Funding Methods. The Bank reserves the
right to determine, in its sole and absolute discretion, whether, to what extent
and by what method, if any, to provide for the payment of the amounts which may
be payable to the Director, or as applicable, the Director's spouse or
beneficiaries, under the terms of this Agreement. In the event that the Bank
elects to fund this Agreement, in whole or in part, through the use of life
insurance or annuities, or both, the Bank shall determine the ownership and
beneficial interests of any such policy of life insurance or annuity. The Bank
further reserves the right, in its sole and absolute discretion, to terminate
any such policy, and any other device used to fund its obligations under this
Agreement, at any time, 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, or as applicable, the
Director's spouse and 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, or as applicable, the Director's
spouse or beneficiaries, for benefits under this Agreement shall be stated in
writing and delivered or mailed, via registered or certified mail, to the
Director, the Director's
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spouse or the Director's beneficiaries, as the case may be. Such decision shall
set forth the specific reasons for the denial of a claim. In addition, the Bank
shall provide the Director, or as applicable, the Director's spouse or
beneficiaries, with a reasonable opportunity for a full and fair review of the
decision denying such claim.
9. Status as an Unsecured General Creditor. Notwithstanding
anything contained herein to the contrary: (i) neither the Director, the
Director's spouse or beneficiaries shall have any legal or equitable rights,
interests or claims in or to any specific property or assets of the Bank as a
result of this Agreement; (ii) none of the Bank's assets shall be held in or
under any trust for the benefit of the Director, the Director's spouse or
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 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 Director acknowledge and agree that, in the event of a Change
in Control, upon request of the Director, or in the Employer's discretion if the
Director 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
Director, or as applicable, the Director's spouse or beneficiaries, in such
manner and at such times as specified in this Agreement.
10. Discretion of Board to Accelerate Payout. Notwithstanding any
of the other provisions of this Agreement, the Board of Directors of the Bank
may, if determined in its sole and absolute discretion to be appropriate,
accelerate the payment of the amounts due under the terms of this Agreement,
provided that the Director (or as applicable, the Director's spouse or
beneficiaries): (i) consents to the revised payout terms determined appropriate
by the Bank's Board of Directors; and (ii) does not negotiate or in 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 the
Director's spouse or beneficiaries] on a "take it or leave it basis").
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11. Miscellaneous.
11.1. Opportunity To Consult With Independent Advisors. The
Director acknowledges that he has been afforded the opportunity to consult with
independent advisors of his choosing including, without limitation, accountants
or tax advisors and counsel regarding both the benefits granted to him under the
terms of this Agreement and the (i) terms and conditions which may affect the
Director's right to these benefits and (ii) personal tax effects of such
benefits including, without limitation, the effects of any federal or state
taxes, Section 280G of the Code, and any other taxes, costs, expenses or
liabilities whatsoever related to such benefits, which in any of the foregoing
instances the Director acknowledges and agrees shall be the sole responsibility
of the Director notwithstanding any other term or provision of this Agreement.
The Director further acknowledges and agrees that the Bank shall have no
liability whatsoever related to any such personal tax effects or other personal
costs, expenses, or liabilities applicable to the Director and further
specifically waives any right for himself or herself, and his or her heirs,
beneficiaries, legal representatives, agents, successors and assigns to claim or
assert liability on the part of the Bank related to the matters described above
in this subparagraph 11.1. The Director further acknowledges 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
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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 Lodi, 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 losing 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: Bank of Lodi, N.A.
701 S. Ham Lane
Lodi, California 95242-3537
Attn: President
If to the Director: ______________________
______________________
______________________
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11.5. Assignment. Neither the Director, or as applicable, the
Director's spouse or beneficiaries, shall have any power or right to transfer,
assign, anticipate, hypothecate, modify or otherwise encumber any part or all of
the amounts payable hereunder, nor, prior to payment in accordance with the
terms of this Agreement, shall any portion of such amounts be: (i) subject to
seizure by any creditor of the Director, or the Director's spouse or
beneficiaries, by a proceeding at law or in equity, for the payment of any
debts, judgments, alimony or separate maintenance obligations which may be owed
by the Director, the Director's spouse or beneficiaries; or (ii) transferable by
operation of law in the event of bankruptcy, insolvency or otherwise. Any such
attempted assignment or transfer shall be void and shall terminate this
Agreement, and the Bank shall thereupon have no further liability hereunder.
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.
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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 any other regulatory agency or governmental authority having
jurisdiction over the 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 Lodi, San Jaoquin
County, California.
BANK DIRECTOR
Bank of Lodi, N.A.
By: /s/ Leon J. Zimmerman /s/_________________
----------------------
Leon J. Zimmerman,
President and Chief
Executive Officer
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SCHEDULE A
CALENDAR YEAR APPLICABLE PERCENTAGE
- ------------- ---------------------
July 18, 1983 to July 17, 1988 ................................ 0.00%
July 18, 1989 ................................................. 20.00%
July 18, 1990 ................................................. 40.00%
July 18, 1991 ................................................. 60.00%
July 18, 1992 ................................................. 80.00%
July 18, 1993 ................................................. 100.00%
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SCHEDULE B
DIRECTOR BENEFITS
1. Director Emeritus Payments.
Upon the Director's Retirement, the Director shall be entitled to serve
as a Director Emeritus in accordance with the procedures and policies
adopted by the Board of Directors of the Bank applicable to service as a
Director Emeritus. If the Director elects to serve as a Director
Emeritus, the Bank shall pay to the Director the Applicable Percentage
of seven thousand five hundred dollars ($7,500) commencing on the
Director's Retirement, payable annually in twelve (12) substantially
equal installments and continuing until the third anniversary of the
Director's Retirement.
2. Retirement Benefit Payments.
The Bank shall pay to the Director the Applicable Percentage of seven
thousand five hundred dollars ($7,500) commencing on the third
anniversary of the Director's Retirement, payable annually in twelve
(12) substantially equal installments and continuing until the
Director's death.
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SCHEDULE C
BENEFICIARY DESIGNATION
To the Administrator of the Bank of Lodi, N.A. Director Supplemental
Compensation Agreement:
Pursuant to the Provisions of my Director Supplemental Compensation
Agreement with Bank of Lodi, N.A., 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 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 _________________________________________
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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
------------------------------------------
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Exhibit 10(o) Form of Life Insurance Endorsement Method Split Dollar
Plan Agreement, effective as of April 3, 1998, as
executed between Bank of Lodi, N.A. and each of Benjamin
R. Goehring, Michael D. Ramsey, Weldon D. Schumacher and
Dennis R. Swanson.
LIFE INSURANCE
ENDORSEMENT METHOD SPLIT DOLLAR PLAN
AGREEMENT
Insurer: ___________________
Policy Number: _____________
Bank: Bank of Lodi, N.A.
Insured: __________________
Relationship of Insured to Bank: Director
Date: ____________, 1998
The respective rights and duties of the Bank and the Insured in the above policy
(the "Policy") shall be as follows:
I. DEFINITIONS
Refer to the Policy provisions for the definition of all terms 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
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.
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IV. PREMIUM PAYMENT METHOD
The Bank shall pay an amount equal to the planned premiums and any
other premium payments that might become necessary to maintain the
Policy in force.
V. TAXABLE BENEFIT
Annually the Insured will receive a taxable benefit equal to the
assumed cost of insurance as required by the Internal Revenue Service.
The Bank (or its administrator) will report to the Insured the amount
of imputed income received each year on Form W-2 or its equivalent.
VI. DIVISION OF DEATH PROCEEDS
Subject to Paragraph VII herein, the division of the death proceeds of
the Policy is as follows:
A. The Insured's beneficiary(ies), designated in accordance with
Paragraph III, shall be entitled to an amount equal to the
lesser of one hundred thousand dollars ($100,000) or one
hundred percent (100%) of the net at risk insurance portion of
the proceeds. The net at risk insurance portion is the total
proceeds less the cash value of the Policy.
B. The Bank shall be entitled to the remainder of such proceeds.
C. The Bank and the Insured (or beneficiary[ies] or assignee[s])
shall share in any interest due on the death proceeds on a pro
rata basis in the ratio that the proceeds due the Bank and the
Insured, respectively, bears to the total proceeds, excluding
any such interest.
VII. DIVISION OF CASH SURRENDER VALUE
The Bank shall at all times be entitled to an amount equal to the
Policy's cash value, as that term is defined in the Policy, less any
Policy loans and unpaid interest or cash withdrawals previously
incurred by the Bank and any applicable Policy surrender charges. Such
cash value shall be determined as of the date of surrender of the
Policy or death of the Insured as the case may be.
VIII. PREMIUM WAIVER
If the Policy contains a premium waiver provision, any such waived
amounts shall be considered for all purposes of this Agreement as
having been paid by the Bank.
IX. RIGHTS OF PARTIES WHERE POLICY ENDOWMENT OR ANNUITY ELECTION EXISTS
In the event the Policy involves an endowment or annuity element, the
Bank's right and interest in any endowment proceeds or annuity benefits
shall be determined under the provisions of this Agreement by regarding
such endowment proceeds or the commuted value of such annuity benefits
as the Policy's cash value. Such endowment proceeds or annuity benefits
shall be treated like death proceeds for the purposes of division under
this Agreement.
X. TERMINATION OF AGREEMENT
This Agreement shall terminate at the option of the Bank following
thirty (30) days written notice to the Insured upon the happening of
any one of the following:
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1. The Insured shall be in violation of the terms and conditions
of that certain Director Supplemental Compensation Agreement
effective as of _______, 1998, or
2. The Insured shall be discharged from service with the Bank by
removal for cause. The term "removal for cause" shall have the
meaning given that term in the Insured's Director Supplemental
Compensation Agreement effective as of _________, 1998.
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,
assign to any individual, trust or other organization, any right, title
or interest in the Policy nor any rights, options, privileges or duties
created under this Agreement.
XII. AGREEMENT BINDING UPON THE PARTIES
This Agreement shall be binding upon the Insured and the Bank, and
their respective heirs, successors, personal representatives and
assigns, as applicable.
XIII. NAMED FIDUCIARY AND PLAN ADMINISTRATOR
The Bank is hereby designated the "Named Fiduciary" until resignation
or removal by its Board of Directors. As Named Fiduciary, the Bank
shall be responsible for the management, control, and administration of
this Agreement as established herein. The Named Fiduciary may allocate
to others certain aspects of the management and operations
responsibilities of this Agreement, including the employment of
advisors and the delegation of any ministerial duties to qualified
individuals.
XIV. FUNDING POLICY
The funding Policy for this Agreement shall be to maintain the Policy
in force by paying, when due, all premiums required.
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XV. CLAIM PROCEDURES
Claim forms or claim information as to the subject Policy can be
obtained by contacting The Benefit Marketing Group, Inc.
(770-952-1529). When the Named Fiduciary has a claim which may be
covered under the provisions described in the Policy, it should contact
the office named above, and they will either complete a claim form and
forward it to an authorized representative of the Insurer or advise the
named Fiduciary what further requirements are necessary. The Insurer
will evaluate and make a decision as to payment. If the claim is
payable, a benefit check will be issued to the Named Fiduciary.
In the event that a claim is not eligible under the Policy, the Insurer
will notify the Named Fiduciary of the denial pursuant to the
requirements under the terms of the Policy. If the Named Fiduciary is
dissatisfied with the denial of the claim and wishes to contest such
claim denial, it should contact the office named above and they will
assist in making inquiry to the Insurer. All objections to the
Insurer's actions should be in writing and submitted to the office
named above for transmittal to the Insurer.
XVI. GENDER
Whenever in this Agreement words are used in the masculine or neuter
gender, they shall be read and construed as in the masculine, feminine
or neuter gender, whenever they should so apply.
XVII. INSURANCE COMPANY NOT A PARTY TO THIS AGREEMENT
The Insurer shall not be deemed a party to this Agreement, but will
respect the rights of the parties as set forth herein upon receiving an
executed copy of this Agreement. Payment or other performance in
accordance with the Policy provisions shall fully discharge the Insurer
from any and all liability.
IN WITNESS WHEREOF, the Insured and a duly authorized Bank officer have
signed this Agreement as of the above written date.
BANK OF LODI, N.A. INSURED
- -------------------------- --------------------------------
Leon J. Zimmerman
President and Chief
Executive Officer
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BENEFICIARY DESIGNATION FORM
Primary Designation:
Name Relationship
_____________________________ _______________________________________
_____________________________ _______________________________________
_____________________________ _______________________________________
Contingent Designation:
_____________________________ _______________________________________
_____________________________ _______________________________________
_____________________________ _______________________________________
_____________________________ __________, 1998
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Exhibit 10(p) Form of Director Supplemental Compensation Agreement,
effective as of April 3, 1998, as executed between Bank
of Lodi, N.A. and each of Angelo J. Anagnos, Raymond H.
Coldani, Bozant Katzakian and Frank M. Sasaki.
DIRECTOR SUPPLEMENTAL COMPENSATION AGREEMENT
This Agreement is made and entered into effective as of April 3, 1998 by
and between Bank of Lodi, N.A., a national banking association chartered under
the federal laws of the United States of America with its principal offices
located in the City of Lodi, San Joaquin County, California (the "Employer"),
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 the Bank was authorized to conduct
business on July 18, 1983;
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
to establish a director emeritus succession plan; and
WHEREAS, the Director and the Bank wish to specify in writing the terms
and conditions upon which this additional compensatory incentive will be
provided to the Director, or as applicable, to the Director's spouse or
designated beneficiaries, as the case may be.
NOW, THEREFORE, in consideration of the services to be performed by the
Director in the future, as well as the mutual promises and covenants contained
herein, the Director and the Bank agree as follows:
A G R E E M E N T
1. Terms and Definitions.
1.1. Administrator. The Bank shall be the "Administrator"
and, solely for the purposes of ERISA as defined in subparagraph 1.9 below, the
"fiduciary" of this Agreement where a fiduciary is required by ERISA.
1.2. Applicable Percentage. The term "Applicable Percentage"
shall mean that percentage listed on Schedule "A" attached hereto which is
adjacent to the number of calendar years which shall have elapsed from the date
of the Director's commencement of service as a member of the Board of Directors
of the Bank and ending on the date payments are to first begin under the terms
of this Agreement. Notwithstanding the foregoing or the percentages set forth on
Schedule "A," but subject to all other terms and conditions set forth herein,
the "Applicable Percentage" shall be: (i) provided payments have not yet begun
hereunder, one hundred percent (100%) upon the occurrence of a "Change in
Control" as defined in subparagraph 1.4 below, or the Director's Disability (as
defined in subparagraph 1.6 below); and (ii) notwithstanding subclause (i) of
this subparagraph 1.2, zero percent (0%) in the event the Director takes any
intentional action which prevents the Bank from collecting the proceeds of any
life insurance policy which the Bank may happen to own at the time of the
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
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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 the amounts, if any, 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, if any, paid prior to the Surrogate's death or paid to the
Director's estate) or designated beneficiary (with respect to amounts, if any,
paid to the designated beneficiary) pursuant to the terms of this Agreement
prior to and after 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 benefits, if any, as provided hereunder. A Beneficiary
Designation shall be valid only if it is in the form attached hereto and made a
part hereof and is 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
organized at the direction of the Bank to own 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 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. Notwithstanding the foregoing or anything else
contained herein to the contrary, there shall not be a "Change of Control" for
purposes of this Agreement if the event which would otherwise come within the
meaning of the term "Change of Control" involves (i) a reorganization at the
direction of the Bank solely to form a parent bank holding company which owns
100% of the Bank's common stock following the reorganization, or (ii) an
Employee Stock Ownership Plan sponsored by the Bank or its parent holding
company which is the party that acquires "control" or is the principal
participant in the transaction constituting a "Change in Control," as described
above.
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 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. Effective Date. The term "Effective Date" shall mean the
date first written above.
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1.8. ERISA. The term "ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as amended.
1.9. 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).
1.10. Normal Retirement Date. The term "Normal Retirement
Date" shall mean the Retirement, as defined below, of the Director upon
attainment of age sixty-five (65).
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1.11. Plan Year. The term "Plan Year" shall mean the Bank's
fiscal year.
1.12. Retirement. The term "Retirement" or "Retires" shall
refer to the date which the Director acknowledges in writing to the Bank to be
the last day of service as a member of the Board of Directors of the Bank.
1.13. Surrogate. The term "Surrogate" shall mean the
individual selected as a substitute insured in connection with any insurance
policy owned by the Bank as may be referenced in this Agreement.
1.14. Removal for Cause. The term "removal for cause" shall
mean the termination of the Director's service as a member of the Bank's Board
of Directors by reason of any of the following determined in good faith by
disinterested members of the Bank's Board of Directors:
(a) The willful, intentional and material breach or
habitual and continued neglect by the Director of his responsibilities 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 the 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 any other regulatory agency or governmental
authority having jurisdiction over the Bank, which has a material adverse effect
upon the Bank;
(d) The written determination by a state or federal
court, banking agency or other governmental authority having jurisdiction over
the Bank, that the Director (i) is of unsound mind, or (ii) has committed a
gross abuse of authority or discretion with reference to the Bank, or (iii)
otherwise is not suitable to continue to serve as a member of the Board of
Directors of the Bank;
(e) The Director is convicted of any felony or a
crime involving moral turpitude or willfully and intentionally commits a
fraudulent or dishonest act; or
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(f) The Director's willful and intentional
disclosure, without authority, of any secret or confidential information not
otherwise publicly available concerning the Bank or taking any action which the
Bank's Board of Directors determines, in its sole discretion and subject to good
faith, fair dealing and reasonableness, constitutes unfair competition with or
inducement of any customer to breach any contract with the Bank.
2. Scope, Purpose and Effect.
2.1. Contract of Employment. Although this Agreement is
intended to provide the Director with an additional incentive to 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. Director Benefits Payments.
3.1. Payments for Service as Director Emeritus. If the
Director shall continue to serve as a member of the Board of Directors until the
Normal Retirement Date, the Director shall be entitled to serve the Bank as a
Director Emeritus in accordance with the procedures and policies established by
the Bank's Board of Directors applicable to service as a Director Emeritus. If
the Director elects to serve as a Director Emeritus, the Director shall be paid
the Applicable Percentage of the Director Emeritus Payments specified in
Schedule B for a three (3) year period, payable annually in twelve (12)
substantially equal installments, commencing with the Retirement Date and
continuing for the period specified in Schedule B. If the Director declines or
is unable to serve as a Director Emeritus, the Director shall forfeit any
entitlement to the Director Emeritus Benefits.
3.2. Payments After Expiration of the Director Emeritus
Period. After the expiration of the three (3) year period described above in
Paragraph 3.1, the Bank shall pay the Applicable Percentage of the Retirement
Benefit Payments specified in Schedule B to the Director commencing on the third
anniversary of the Director's Retirement, payable annually in twelve (12)
substantially equal installments for the period specified in Schedule B.
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4. Payments in the Event of Disability Prior to Retirement. In
the event the Director becomes Disabled while serving as a member of the Board
of Directors of the Bank at any time after the Effective Date of this Agreement,
but prior to Retirement, the Bank shall pay the Applicable Percentage of the
Retirement Benefit Payments specified in Schedule B to the Director commencing
on the first day of the month following the month in which the Director becomes
Disabled, payable annually in twelve (12) substantially equal installments for
the period specified in Schedule B.
5. Payments in the Event Director Is Terminated Prior to
Retirement. As indicated in subparagraph 2.1 above, the Bank reserves the right
to remove or cause the removal of the Director under certain circumstances, at
any time prior to the Director's Retirement. In the event that the service of
the Director shall be terminated, other than by reason of death, Disability or
Retirement, prior to the Director's Normal Retirement Date, then this Agreement
shall terminate upon the date of such termination; provided, however, that the
Director shall be entitled to the following benefits as may be applicable
depending upon the circumstances surrounding the Director's termination:
5.1. Termination Without Cause. If the Director's service as
a member of the Board of Directors of the Bank is terminated for reasons other
than as specified in paragraph 5.3 below, and such termination is not subject to
the provisions of subparagraph 5.4 below; the Bank shall pay the Applicable
Percentage of the Retirement Benefit Payments specified in Schedule B to the
Director commencing on the first day of the month following the month in which
the Director is terminated, payable annually in twelve (12) substantially equal
installments for the period specified in Schedule B.
5.2. Voluntary Termination by the Director. If the Director's
service on the Board of Directors is terminated by voluntary resignation on a
date when the Applicable Percentage is less than one hundred percent (100%), and
such resignation is not subject to the provisions of subparagraph 5.4 below, the
Director shall forfeit any and all rights and benefits he may have under the
terms of this Agreement and shall have no right to be paid any of the amounts
which would otherwise be due or paid to the Director by the Employer pursuant to
the terms of this Agreement. If the Applicable Percentage is one hundred percent
(100%) on the date of such voluntary resignation, the Bank shall pay the
Applicable Percentage of the Retirement Benefit Payments specified in Schedule B
to the Director commencing on the first day of the month following the month in
which the Director terminated service as a member of the Board of Directors,
payable annually in twelve (12) substantially equal installments for the period
specified in Schedule B.
5.3. Termination by Removal for Cause. The Director agrees
that if his service as a member of the Board of Directors of the Bank is
terminated by "removal for cause," as defined in subparagraph 1.14 of this
Agreement, he shall forfeit any and all rights and benefits he may have under
the terms of this Agreement and shall have no right to be paid any of the
amounts which would otherwise be due or paid to the Director by the Bank
pursuant to the terms of this Agreement.
5.4. Termination by the Bank on Account of or After a Change
in Control. In the event that the Director's service as a member of the Board of
Directors of the Bank is terminated in conjunction with, or by reason of, a
"Change in Control" (as defined in subparagraph 1.4 above), the Bank shall pay
the Applicable Percentage of the Retirement Benefit Payments specified in
Schedule B to the Director commencing on the first day of the month following
the month in which the Director terminated service as a member of the Board of
Directors, payable annually in twelve (12) substantially equal installments for
the period specified in Schedule B.
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
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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
Employer (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 Employer
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 Employer in the order determined by mutual agreement of
the Employer 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 Employer and acceptable to the Director in
accordance with the principles of Section 280G of the Code.
7. Right To Determine Funding Methods. The Bank reserves
the right to determine, in its sole and absolute discretion, whether, to what
extent and by what method, if any, to provide for the payment of the amounts
which may be payable to the Director, or as applicable, the Director's spouse or
beneficiaries, under the terms of this Agreement. In the event that the Bank
elects to fund this Agreement, in whole or in part, through the use of life
insurance or annuities, or both, the Bank shall determine the ownership and
beneficial interests of any such policy of life insurance or annuity. The Bank
further reserves the right, in its sole and absolute discretion, to terminate
any such policy, and any other device used to fund its obligations under this
Agreement, at any time, 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, or as applicable, the
Director's spouse and 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
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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, or as applicable, the
Director's spouse or beneficiaries, for benefits under this Agreement shall be
stated in writing and delivered or mailed, via registered or certified mail, to
the Director, the Director's spouse or beneficiaries, as the case may be. Such
decision shall set forth the specific reasons for the denial of a claim. In
addition, the Bank shall provide the Director, or as applicable, the Director's
spouse or beneficiaries, with a reasonable opportunity for a full and fair
review of the decision denying such claim.
9. Status as an Unsecured General Creditor. Notwithstanding
anything contained herein to the contrary: (i) neither the Director, the
Director's spouse or beneficiaries shall have any legal or equitable rights,
interests or claims in or to any specific property or assets of the Bank as a
result of this Agreement; (ii) none of the Bank's assets shall be held in or
under any trust for the benefit of the Director, the Director's spouse or
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 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 Director acknowledge and agree that, in the event of a Change
in Control, upon request of the Director, or in the Employer's discretion if the
Director 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
Director, or as applicable, the Director's spouse or beneficiaries, in such
manner and at such times as specified in this Agreement.
10. Discretion of Board to Accelerate Payout.
Notwithstanding any of the other provisions of this Agreement, the Board of
Directors of the Bank may, if determined in its sole and absolute discretion to
be appropriate, accelerate the payment of the amounts due under the terms of
this Agreement, provided that the Director (or as applicable, the Director's
spouse or beneficiaries): (i) consents to the revised payout terms determined
appropriate by the Bank's Board of Directors; and (ii) does not negotiate or in
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 as applicable, the Director's spouse or beneficiaries] on a "take it or
leave it basis").
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11. Miscellaneous.
11.1. Opportunity To Consult With Independent Advisors. The
Director acknowledges that he has been afforded the opportunity to consult with
independent advisors of his choosing including, without limitation, accountants
or tax advisors and counsel regarding both the benefits granted to him under the
terms of this Agreement and the (i) terms and conditions which may affect the
Director's right to these benefits and (ii) personal tax effects of such
benefits including, without limitation, the effects of any federal or state
taxes, Section 280G of the Code, and any other taxes, costs, expenses or
liabilities whatsoever related to such benefits, which in any of the foregoing
instances the Director acknowledges and agrees shall be the sole responsibility
of the Director notwithstanding any other term or provision of this Agreement.
The Director further acknowledges and agrees that the Bank shall have no
liability whatsoever related to any such personal tax effects or other personal
costs, expenses, or liabilities applicable to the Director and further
specifically waives any right for himself or herself, and his or her heirs,
beneficiaries, legal representatives, agents, successors and assigns to claim or
assert liability on the part of the Bank related to the matters described above
in this subparagraph 11.1. The Director further acknowledges 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
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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 Lodi, 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 losing 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: Bank of Lodi, N.A.
701 S. Ham Lane
Lodi, California 95242-3537
Attn: President
If to the Director: __________________
__________________
__________________
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11.5. Assignment. Neither the Director, or as applicable, the
Director's spouse or beneficiaries, shall have any power or right to transfer,
assign, anticipate, hypothecate, modify or otherwise encumber any part or all of
the amounts payable hereunder, nor, prior to payment in accordance with the
terms of this Agreement, shall any portion of such amounts be: (i) subject to
seizure by any creditor of the Director, or the Director's spouse or
beneficiaries, by a proceeding at law or in equity, for the payment of any
debts, judgments, alimony or separate maintenance obligations which may be owed
by the Director, the Director's spouse or beneficiaries; or (ii) transferable by
operation of law in the event of bankruptcy, insolvency or otherwise. Any such
attempted assignment or transfer shall be void and shall terminate this
Agreement, and the Bank shall thereupon have no further liability hereunder.
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.
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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 any other regulatory agency or governmental authority having
jurisdiction over the Bank, shall govern the validity, interpretation,
construction and effect of this Agreement.
117
<PAGE>
IN WITNESS WHEREOF, the Bank and the Director have executed this
Agreement on the date first above-written in the City of Lodi, San Jaoquin
County, California.
BANK DIRECTOR
Bank of Lodi, N.A.
By: /s/ Leon J. Zimmerman /s/___________________________
---------------------
Leon J. Zimmerman,
President and Chief
Executive Officer
118
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SCHEDULE A
CALENDAR YEAR APPLICABLE PERCENTAGE
- ------------- ---------------------
July 18, 1983 to July 17, 1988 ................................. 0.00%
July 18, 1989 .................................................. 20.00%
July 18, 1990 .................................................. 40.00%
July 18, 1991 .................................................. 60.00%
July 18, 1992 .................................................. 80.00%
July 18, 1993 .................................................. 100.00%
119
<PAGE>
SCHEDULE B
DIRECTOR BENEFITS
1. Director Emeritus Payments.
Upon the Director's Retirement, the Director shall be entitled to serve
as a Director Emeritus in accordance with the procedures and policies
adopted by the Board of Directors of the Bank applicable to service as a
Director Emeritus. If the Director elects to serve as a Director
Emeritus, the Bank shall pay to the Director the Applicable Percentage
of seven thousand five hundred dollars ($7,500) commencing on the
Director's Retirement, payable annually in twelve (12) substantially
equal installments and continuing until the earlier of the third
anniversary of the Director's Retirement, or the death of either the
Director or a Surrogate under any insurance policy owned by the Bank.
2. Retirement Benefit Payments.
The Bank shall pay to the Director the Applicable Percentage of seven
thousand five hundred dollars ($7,500) commencing on the third
anniversary of the Director's Retirement, payable annually in twelve
(12) substantially equal installments and continuing until the earlier
of the death of either the Director or a Surrogate under any insurance
policy owned by the Bank.
120
<PAGE>
SCHEDULE C
BENEFICIARY DESIGNATION
To the Administrator of the Bank of Lodi, N.A. Director Supplemental
Compensation Agreement:
Pursuant to the Provisions of my Director Supplemental Compensation
Agreement with Bank of Lodi, N.A., 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 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 _________________________________________
121
<PAGE>
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
_____________________________
122
<PAGE>
Exhibit 10(q) Form of Life Insurance Endorsement Method Split Dollar
Plan Agreement, effective as of April 3, 1998, as
executed between Bank of Lodi, N.A. and each of Angelo
J. Anagnos, Raymond H. Coldani, Bozant Katzakian and
Frank M. Sasaki.
LIFE INSURANCE
ENDORSEMENT METHOD SPLIT DOLLAR PLAN
AGREEMENT
Insurer: Canada Life Assurance Company
Policy Number:
Bank: Bank of Lodi, N.A.
Participant: _________________________
Insured: __________________________________________________________________
Relationship of Participant to Bank: Director
Date: ____________, 1998
The respective rights and duties of the Bank and the Participant in the above
policy (the "Policy") 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
"Participant" is used in this Agreement, unless the Policy provisions
or the context otherwise require, it shall mean _________________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
The Participant (or beneficiary[ies] or assignee[s]) shall have the
right and power to designate a beneficiary or beneficiaries to receive
his 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.
123
<PAGE>
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, upon the Insured's death, the division
of the death proceeds of the Policy is as follows:
A. The Participant, if alive, or if the Participant predeceased
the Insured, the Participant's beneficiary(ies) designated in
accordance with Paragraph III, shall be entitled to an amount
equal to the lesser of one hundred thousand dollars ($100,000)
or one hundred percent (100%) of the net at risk insurance
portion of the proceeds. The net at risk insurance portion is
the total proceeds less the cash value of the Policy.
B. The Bank shall be entitled to the remainder of such proceeds.
C. The Bank and the 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.
124
<PAGE>
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 shall be in violation of the terms and
conditions of the Participant's Director Supplemental
Compensation Agreement effective as of _______, 1998, or
2. The Participant shall be discharged from service with the Bank
by removal for cause. The term "removal for cause" shall have
the meaning given that term in the Participant's Director
Supplemental Compensation Agreement effective as of _________,
1998.
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 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,
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 Participant and the Bank, and
their respective heirs, successors, personal representatives and
assigns, as applicable.
125
<PAGE>
XIII. NAMED FIDUCIARY AND PLAN ADMINISTRATOR
The Bank is hereby designated the "Named Fiduciary" until resignation
or removal by its Board of Directors. As Named Fiduciary, the Bank
shall be responsible for the management, control, and administration of
this Agreement as established herein. The Named Fiduciary may allocate
to others certain aspects of the management and operations
responsibilities of this Agreement, including the employment of
advisors and the delegation of any ministerial duties to qualified
individuals.
XIV. FUNDING POLICY
The funding Policy for this Agreement shall be to maintain the Policy
in force by paying, when due, all premiums required.
XV. CLAIM PROCEDURES
Claim forms or claim information as to the subject Policy can be
obtained by contacting The Benefit Marketing Group, Inc.
(770-952-1529). When the Named Fiduciary has a claim which may be
covered under the provisions described in the Policy, it should contact
the office named above, and they will either complete a claim form and
forward it to an authorized representative of the Insurer or advise the
named Fiduciary what further requirements are necessary. The Insurer
will evaluate and make a decision as to payment. If the claim is
payable, a benefit check will be issued to the Named Fiduciary.
In the event that a claim is not eligible under the Policy, the Insurer
will notify the Named Fiduciary of the denial pursuant to the
requirements under the terms of the Policy. If the Named Fiduciary is
dissatisfied with the denial of the claim and wishes to contest such
claim denial, 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
have signed this Agreement as of the above written date.
BANK OF LODI, N.A.
__________________________ ________________________________
Leon J. Zimmerman
President and Chief
Executive Officer
126
<PAGE>
BENEFICIARY DESIGNATION FORM
Primary Designation:
Name Relationship
_____________________________ _______________________________________
_____________________________ _______________________________________
_____________________________ _______________________________________
Contingent Designation:
_____________________________ _______________________________________
_____________________________ _______________________________________
_____________________________ _______________________________________
_____________________________ __________, 1998
127
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0
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