FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC. 20549
(Mark One)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
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 0-13528
Pacific Capital Bancorp
(Exact name of registrant as specified in its charter)
California 77-0003875
(State or other jurisdiction of (I.R.S.
Employer
incorporation or organization) Identification
Number)
1001 S. Main Street, Salinas, California 93901
(Address of principal executive offices)
(Zip Code)
(408) 757-4900
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Outstanding at
Class November 12, 1997
Common stock, no par value 4,100,537 Shares
This report contains a total of 21 pages.
PART I - FINANCIAL INFORMATION
ITEM 1 PAGE
PACIFIC CAPITAL BANCORP AND
SUBSIDIARIES UNAUDITED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS 3
CONSOLIDATED STATEMENTS OF INCOME 4
CONSOLIDATED STATEMENTS OF CASH FLOWS 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7-8
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9 - 15
PART II - OTHER INFORMATION
ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K 16
SIGNATURES 21
PART 1
ITEM 1 - FINANCIAL INFORMATION
PACIFIC CAPITAL BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
September December
30, 31,
Assets 1997 1996
Cash and due from banks $48,227 $48,126
Federal funds sold and other short term 74,659 28,119
investments
Total cash and equivalents 122,886 76,245
Investment securities:
Available-for-sale securities, at fair value 153,897 116,528
Held-to-maturity securities, at amortized
cost
(fair value of $7,469 and $9,739, 7,457 9,680
respectively)
Loans available for sale 9,725 5,821
Total loans 406,342 388,728
Less allowance for possible loan losses (4,168) (3,672)
Net loans 402,174 385,056
Premises and equipment, net 14,956 15,300
Accrued interest receivable and other, net 12,236 10,809
Total assets $723,331 $619,439
Liabilities and shareholders' equity
Deposits:
Demand, non-interest bearing $157,861 $131,332
Demand, interest bearing 86,911 84,770
Savings and money market 173,461 164,890
Time certificates 228,563 166,190
Total deposits 646,796 547,182
Accrued interest payable and other liabilities 6,292 8,611
Total liabilities 653,088 555,793
Shareholders' equity:
Preferred stock; 20,000,000 shares authorized - -
and unissued
Common stock, no par value; 20,000,000 shares
authorized;
4,100,406 and 4,083,363 shares issued and
outstanding at
September 30, 1997 and at December 31, 49,840 49,388
1996, respectively
Retained earnings 20,111 14,423
Net unrealized gains (losses) on available-for- 292 (165)
sale securities
Total shareholders' equity 70,243 63,646
Total liabilities and shareholders' equity $723,331 $619,439
See accompanying notes to unaudited consolidated financial statements.
PACIFIC CAPITAL BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Nine months Nine months
ended ended
September 30, September 30,
1997 1996
Interest income:
Interest and fees on loans $30,452 $24,603
Interest on fed funds sold 1,544 1,394
Interest on investment securities 6,672 6,118
Total interest income 38,668 32,115
Interest expense:
Interest on deposits 12,494 9,644
Other 24 22
Total interest expense 12,518 9,666
Net interest income 26,150 22,449
Provision for possible loan losses 910 185
Net interest income after provision for 25,240 22,264
possible loan losses
Other income:
Service charges 1,872 1,732
Gain on sale of loans 17 21
Net gain on securities transactions 11 15
Other 517 611
Total other income 2,417 2,379
Other expenses:
Salaries and benefits 8,211 8,252
Occupancy 1,706 1,460
Equipment 1,271 1,650
Advertising and promotion 534 478
Stationary and supplies 600 377
Legal and professional fees 658 962
Regulatory assessments 164 109
Other operating 1,813 2,168
Total other expenses 14,957 15,456
Earnings before income taxes 12,700 9,187
Income taxes 5,028 3,615
Net income $7,672 $5,572
Net income per share $1.81 $1.31
Weighted average shares outstanding 4,243,643 4,266,289
See accompanying notes to unaudited consolidated financial statements.
PACIFIC CAPITAL BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Three months Three months
ended ended
September September
30, 1997 30, 1996
Interest income:
Interest and fees on loans $10,456 $8,644
Interest on fed funds sold 812 486
Interest on investment securities 2,365 2,071
Total interest income 13,633 11,201
Interest expense:
Interest on deposits 4,510 3,402
Other 3 5
Total interest expense 4,513 3,407
Net interest income 9,120 7,794
Provision for possible loan losses 340 6
Net interest income after provision for 8,780 7,788
possible loan losses
Other income:
Service charges 632 533
Gain on sale of loans 6 6
Other 175 241
Total other income 813 780
Other expenses:
Salaries and benefits 2,768 2,762
Occupancy 582 429
Equipment 443 609
Advertising and promotion 191 195
Stationary and supplies 174 139
Legal and professional fees 237 520
Regulatory assessments 57 37
Other operating 581 892
Total other expenses 5,033 5,583
Earnings before income taxes 4,560 2,985
Income taxes 1,811 1,207
Net income $2,749 $1,778
Net income per share $0.65 $0.41
Weighted average shares outstanding 4,246,811 4,296,973
See accompanying notes to unaudited consolidated financial statements.
PACIFIC CAPITAL BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Nine months Nine months
ended ended
September September
30, 1997 30, 1996
Cash flows from operating activities:
Net income $7,672 $5,572
Adjustments to reconcile net income to net
cash used in
operating activities:
Depreciation and amortization 1,096 1,206
Provision for possible loan losses 910 185
Gain on sale of investment securities, net (11) (15)
Net originations of loans available for (3,904) (1,904)
sale
Gain on sale of loans (17) (21)
Deferral of loan origination fees 121 148
Change in accrued interest receivable and (970) (1,976)
other assets
Change in accrued interest payable and (2,291) (531)
other liabilities
Net cash provided by operating activities 2,606 2,664
Investing activities:
Net increase in loans (18,149) (57,079)
Maturities of investment securities 14,799 11,022
Purchases of investment securities (49,945) (41,833)
Proceeds from sale of available-for-sale - 25,695
securities
Capital expenditures, net (752) (2,484)
Net cash used in investing activities (54,047) (64,679)
Financing activities:
Net increase in deposits 99,614 62,719
Cash paid for retirement of stock - (551)
Proceeds from exercise of options 452 292
Cash paid for dividends (1,984) (1,531)
Net cash provided by financing activities 98,082 60,929
Net increase (decrease) in cash and 46,641 (1,086)
equivalents
Cash and equivalents at beginning of period 76,245 79,234
Cash and equivalents at end of period $122,886 $78,148
Supplemental disclosures of cash flow
information:
Cash paid during the period
Interest $12,824 $10,427
Income taxes 4,115 3,229
See accompanying notes to unaudited consolidated financial statements.
PACIFIC CAPITAL BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 - Basis of Presentation
In the opinion of the Company, the unaudited consolidated financial
statements, prepared on the accrual basis of accounting, contain
all adjustments (consisting of only normal recurring adjustments)
which are necessary to present fairly the financial position of
the Company and subsidiaries at September 30, 1997 and December
31, 1996, the results of its operations and the statements of
cash flows for the periods ended September 30, 1997 and 1996.
Certain information and note disclosures normally presented in financial
statements prepared in accordance with generally accepted
accounting principles have been omitted. The results of
operations for the period ended September 30, 1997 are not
necessarily indicative of the operating results for the full year
ending December 31, 1997.
In June 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, Reporting of
Comprehensive Income. This statement establishes standards for reporting and
displaying comprehensive income and its components in the consolidated
financial statements. It does not, however, require a specific format for
the statement, but requires the Company to display an amount representing
total comprehensive income for the period in that financial statement.
The Company is in the process of determining its preferred format. This
statement is effective for fiscal years beginning after December 15, 1997.
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information. The Statement establishes standards for
the way the public business enterprises are to report information about
operating segments in annual financial statements and requires those
enterprises to report selected information about operating segments in
interim financial reports issued to shareholders. This statement is effective
for fiscal years beginning after December 15, 1997. The Company does not
believe it has any separately reportable business segments.
In February 1997, the FASB issued SFAS No. 128, Earnings Per Share
and SFAS No. 129, Disclosure of Information about Capital Structure. SFAS
No. 128 supersedes APB Opinion No. 15 Earnings Per Share, and specifies
the computation, presentation, and disclosure requirements for earnings
per share ("EPS") for entities with publicly held common stock or
potential common stock.
SFAS No. 128 replaces Primary EPS and Fully Diluted EPS with Basic
EPS and Diluted EPS, respectively. Upon adoption, it also requires dual
presentation of Basic EPS and Diluted EPS on the face of the Statement of
Income for all entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the Basic EPS
computation to the numerator of the Diluted EPS computation.
SFAS No. 129 establishes standards for disclosing information about
an entity's capital structure for those entities deemed to have complex
capital structures.
Statements No. 128 and 129 are effective for financial statements for
interim and annual periods ending after December 15, 1997. The adoption of
these statements is not anticipated to have a material impact on the
financial condition or results of operations of the Company.
The following table represents pro forma Earnings per Share as it
would appear after adoption of SFAS No. 128.
Three Months Ended
September 30, September 30,
1997 1996
Basic Earnings per Share $0.67 $0.44
Diluted Earnings per Share $0.65 $0.41
Nine Months Ended
September 30, September 30,
1997 1996
Basic Earnings per Share $1.87 $1.36
Diluted Earnings per Share $1.81 $1.31
Note 2 - Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, First National Bank of
Central California, ("First National"), and South Valley National
Bank ("South Valley"). For purposes used herein, the term
"Subsidiary Banks" shall mean First National and South Valley,
collectively. All material intercompany accounts and transactions
have been eliminated in consolidation.
Note 3 - Loans to Directors
In the ordinary course of business, the Company has made loans to directors
of the Company and their affiliates which at September 30, 1997
amounted to approximately $10,733,000.
Note 4 - Commitments
The Company had outstanding standby letters of credit of
approximately $4,216,000 at September 30, 1997 .
Note 5 - Net Income Per Share and Dividends
Net income per share is computed using the weighted average number of
shares of common and common equivalent shares outstanding. On
January 28, April 22, and July 22, 1997, the Company declared
$0.165 per share cash dividends to shareholders of record on
March 14, June 16, and September 15, 1997, payable on March 31,
June 30, and September 30, 1997, respectively.
Note 6 - Taxes
As of September 30, 1997, the Company has a deferred tax asset of
approximately $3,290,000. The asset results primarily from the
provisions for possible loan losses and depreciation of premises
and equipment, which are recognized in the financial statements
but are not yet deductible for income tax reporting purposes.
Management of the Company believes that the net deferred tax
asset is fully realizable through sufficient taxable income
within carryback periods and current year taxable income.
PART 1
ITEM II - PACIFIC CAPITAL BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview of Changes in the Financial Statements
Net income for the nine months ended September 30, 1997 was
$7,672,000 or $1.81 per share compared to $5,572,000 or $1.31 per share
during the comparable period in 1996. This 37.7% increase in net income is
due mainly to a $3,701,000 increase in net interest income. The increase in
net interest income is due to growth in average total loans of $83,357,000
partially offset by an increase in average interest bearing deposits of
$70,250,000 as compared to the same 1996 period.
Outstanding loans were $406,342,000 at September 30, 1997 compared to
$388,728,000 at December 31, 1996, a $17,614,000 or 4.5% increase. The
increase in outstanding loans from December 31, 1996 to September 30, 1997
resulted primarily from an increase in real estate loans of $38,649,000,
partially offset by a decrease in commercial loans of $13,189,000 and a
decrease in other loans of $3,415,000.
Federal Funds Sold and Investment Securities at September 30, 1997
were $236,013,000, a $81,686,000 or 52.9% increase from December 31, 1996.
This was primarily due to the increase in total deposits which resulted in
an increase in investments in Federal Funds and investment securities.
The Company's total deposits at September 30, 1997 were $646,796,000
compared to $547,182,000 at December 31, 1996, a $99,614,000 or 18.2%
increase. Non-interest bearing demand deposits increased $26,529,000,
interest bearing demand deposits increased $2,141,000 and savings and money
market deposit accounts increased $8,571,000 in the first nine months of
1997. Certificates of deposit increased by $62,373,000 or 37.5% during the
first nine months of 1997. Management believes that the growth in deposits
is a result of the overall strength in the local tourism and agribusiness
industries. In addition, growth in housing demand and a small influx of
businesses moving into the southern Santa Clara County area have
contributed to the Company's deposit growth.
Loans
Outstanding total loans averaged $410,011,000 for the nine months
ended September 30, 1997 compared to $326,654,000 for the comparable
period in 1996, an increase of $83,357,000, or 25.5%. This increase in
loans is due to increased loan demand from qualified borrowers and reflects
stability and economic growth in most of the primary markets which the
Company serves. The Company lends primarily to small and medium sized
businesses and consumers within its markets, which are comprised
principally of Monterey, Santa Cruz, San Benito, and southern Santa Clara
counties. A majority of the Company's loan portfolio consists of loans
secured by commercial, industrial and residential real estate.
Quality of Loans
The composition of non-performing loans as of September 30, 1997
, December 31, 1996, and September 30, 1996 is summarized in the following
table.
Nonperforming Loans
(Dollars in Thousands)
September 30, December 31, September 30,
1997 1996 1996
Accruing loans
past due 90 days
or more:
Commercial $ 29 $ 15 $ 30
Consumer 17 2 32
Real Estate - - 606
Total $ 46 $ 17 $ 668
Nonaccrual loans:
Commercial 524 507 958
Consumer 111 142 116
Real Estate 1,445 915 1,720
Total $2,080 $1,564 $2,794
Total Nonperforming
Loans $2,126 $1,581 $3,462
Nonperforming Loans
To Total Loans 0.52% 0.41% 0.97%
Allowance For Possible
Loan Losses To Total
Non Performing Loans 196.05% 232.26% 101.88%
The Company does not expect to sustain losses from any of the non-
performing loans in excess of that specifically provided for in the
allowance for possible loan losses. Currently, the Company's level of non-
performing loans to total loans is below that of peer banks.
In addition to the above, the Company holds one Other Real Estate
Owned (OREO) property, which totals $1,213,000. The amount recorded
represents the lesser of the loan balance or current fair value obtained
from a current appraisal less anticipated selling costs; therefore, any
identified loss has already been recognized.
Inherent in the lending function is the fact that loan losses will be
experienced and that the risk of loss will vary with the type of loan
extended and the creditworthiness of the borrower. To reflect the
estimated risks of loss associated with its loan portfolio, additions are
made to the Company's allowance for possible loan losses. As an integral
part of this process, the allowance for possible loan losses is subject to
review and possible adjustment as a result of management's assessment of
risk or regulatory examinations conducted by governmental agencies. The
Company's entire allowance is a valuation allowance created by direct
charges against operations through the provision for possible loan losses.
The provision for possible loan losses charged against operations is
based upon the actual net loan losses incurred plus an amount for other
factors which, in management's judgment, deserve recognition in estimating
possible loan losses. The Company evaluates the adequacy of its allowance
for possible loan losses on a quarterly basis. The Company has also
contracted with an independent loan review consulting firm to evaluate
overall credit quality and the adequacy of the allowance for possible loan
losses. Both internal and external evaluations take into account the
following: specific loan conditions as determined by management; the
historical relationship between charge-offs and the level of the allowance;
the estimated future loss in all significant loans; known deterioration in
concentrations of credit, certain classes of loans or pledged collateral;
historical loss experience based on volume and types of loans; the results
of any independent review or evaluation of the loan portfolio quality
conducted by or at the direction of Company management or by bank
regulatory agencies; trends in portfolio volume, maturity and composition;
off-balance sheet credit risk; volume and trends in delinquencies and
nonaccruals; lending policies and procedures including those for charge-
off, collection and recovery; national and local economic conditions and
their effects on specific local industries; and the experience, ability and
depth of lending management and staff. These factors are essentially
judgmental and may not be reduced to a mathematical formula.
The Company closely monitors the local markets in which it conducts
its lending activities. The overall increase in loan demand from qualified
borrowers during the past year is indicative of the strength in the local
economic climate.
The table set forth below summarizes the actual loan losses and
provision for possible losses as of and for the periods ended September 30,
1997 , December 31, 1996, and September 30, 1996 :
Loan Charge-Off/Recovery Activity
(Dollars in Thousands)
Nine months Year Nine months
Ended Ended Ended
September 30, 1997 December 31,1996September 30, 1996
Loans Outstanding, at period end $406,342 $388,728
$358,204
Average Loans $410,011 $332,421 $326,654
Allowance Balance:
Beginning Of Period 3,672 3,710 3,710
Charge-Offs By Loan Category:
Commercial 357 761 347
Consumer 45 188 158
Real Estate 174 121 56
Total $ 576 $ 1,070 $ 561
Recoveries By Loan Category:
Commercial 102 239 107
Consumer 21 91 69
Real Estate 39 17 17
Total $ 162 $ 347 $ 193
Net Charge-Offs $ 414 $ 723 $ 368
Provision Charged
To Expense $910 $685 $185
Allowance Balance
End Of Period $ 4,168 $ 3,672 $ 3,527
Allowance For Possible
Loan Losses
To Period End Loans 1.03% 0.94% 0.98%
Annualized Net Charge-offs
to Average Loans 0.13% 0.22% 0.15%
The provision for possible loan losses charged against earnings is
based upon an analysis of the actual migration of loans to losses plus an
amount for other factors which, in management's judgment, deserve
recognition in estimating possible loan losses. While these factors cannot
be reduced to a mathematical formula, it is management's view that the
allowance for possible loan losses of $4,168,000 or 1.03% of total loans
was adequate as of September 30, 1997 .
Results of Operations
Nine months ended September 30, 1997
Compared with
Nine months ended September 30, 1996
Net income for the nine months ended September 30, 1997 was
$7,672,000, an increase of $2,100,000 or 37.7% as compared to the same 1996
period. The increase in net income for the period was due primarily to an
increase in net interest income of $3,701,000 partially offset by an
increase in the provision for loan losses of $725,000. The increase in net
interest income is due to growth in average total loans of $83,357,000
partially offset by an increase in average interest bearing deposits of
$70,250,000 compared to the same 1996 period.
The average balance of interest earning assets during the nine months
ended September 30, 1997 was $591,837,000, an $91,468,000 or 18.3%
increase over the comparable 1996 period. The Company's average yield on
earning assets for the nine months ended September 30, 1997 increased to
8.7% from 8.6% in the comparable 1996 period. Total interest income
increased $6,553,000 or 20.4% for the nine months ended September 30, 1997
compared to the same 1996 period due to an increase in average interest
earning assets of $91,468,000.
Average deposits for the Company for the nine months ended September
30, 1997 were $583,973,000, an $94,237,000 or 19.2% increase compared to
the same period ended September 30, 1996 . The Company's average cost of
funds for the nine months ended September 30, 1997 was 3.7% which yielded
a net interest margin of 5.9%. This compares to an average cost of funds
of 3.4% and a net interest margin of 6.0% for the comparable 1996 period.
Interest expense of $12,518,000 for the nine months ended September 30,
1997 was $2,852,000 or 29.5% over the comparable 1996 period due to an
increase in average interest bearing deposits of $70,250,000 and an
increase in the Company's cost of funds of 0.3%. Net interest income for
the nine months ended September 30, 1997 increased $3,701,000 or 16.5%.
The Company made a provision to the allowance for possible loan losses
of $910,000 in the nine months ended September 30, 1997 primarily due to
the recent growth experienced within the loan portfolio. An analysis of the
loan portfolio completed by the Company indicates that the current
allowance for loan losses is adequate based on the Company's calculated
provision requirements.
Total loans charged-off net of recoveries for the nine months ended
September 30, 1997 amounted to $414,000 compared to $368,000 for the same
period in 1996. Annualized net loan charge-offs as a percentage of average
loans for the nine months ended September 30, 1997 was 0.13% compared to
0.15% for the nine months ended September 30, 1996 and 0.22% for the year
ended December 31, 1996.
Total other income was $2,417,000 for the nine months ended September
30, 1997, a $38,000 or 1.6% increase compared to the same period in 1996.
Service charges on deposit accounts increased by $140,000 or 8.1% over the
comparable period in 1996. Other income decreased by $94,000 for the nine
months ended September 30, 1997, as compared to the same period in 1996.
Salaries and benefits expense for the nine months ended September 30,
1997 was $8,211,000, a $41,000 or 0.5% decrease from the comparable 1996
period. This variance resulted primarily from the reduction in officers as
a result of the merger between South Valley Bancorporation and the Company
in 1996. The Company employed 271 full time equivalent employees at
September 30, 1997 compared to 259 full time equivalent employees at
December 31, 1996 and 248 full time equivalent employees at September 30,
1996 .
Total other expenses, excluding salaries and benefits, for the nine
months ended September 30, 1997 , was $6,746,000, a $458,000 or 6.4%
decrease from the comparable 1996 period. This was primarily due to a
decrease in equipment expense of $379,000, a decrease in legal and
professional expense of $304,000, and a decrease in other expenses of
$355,000. These decreases were partially offset by an increase in occupancy
expense of $246,000 and an increase in stationery expense of $223,000. The
decrease in equipment expense, legal and professional expense and other
expense were a direct result of cost savings which were targeted in the
merger between South Valley Bancorporation and the Company. The increase in
stationery expense related to one-time ordering of stationery due to the
change in the address of the administrative offices of South Valley
National Bank.
Applicable income taxes of $5,028,000 for the nine months ended
September 30, 1997 were $1,413,000, or 39.1% more than the comparable 1996
period. The Company's effective tax rate for the nine months ended
September 30, 1997 was 39.6% compared to 39.4% for the same period in
1996.
Three months ended September 30, 1997
Compared with
Three months ended September 30, 1996
Net income for the three months ended September 30, 1997 was
$2,749,000, an increase of $971,000 or 54.6% as compared to the same 1996
period. The increase in net income for the period was due primarily to an
increase in net interest income of $1,326,000 partially offset by an
increase in the provision for loan losses of $334,000. The increase in net
interest income is due to growth in average total loans of $69,120,000
partially offset by an increase in average interest bearing deposits of
$75,454,000 compared to the same 1996 period.
The average balance of interest earning assets during the three months
ended September 30, 1997 was $630,282,000, a $103,806,000 or 19.7%
increase over the comparable 1996 period. The Company's average yield on
earning assets for the three months ended September 30, 1997 increased to
8.6% from 8.5% in the comparable 1996 period. Total interest income
increased $1,848,000 or 16.5% for the three months ended September 30, 1997
compared to the same 1996 period due to an increase in average interest
earning assets of $103,806,000.
Average deposits for the Company for the quarter ended September 30,
1997 were $622,493,000, a $103,304,000 or 19.9% increase compared to the
same period in 1996. The Company's average cost of funds for the three
months ended September 30, 1997 was 3.7% which yielded a net interest
margin of 5.7%. This compares to an average cost of funds of 3.4% and a
net interest margin of 5.9% for the comparable 1996 period. Interest
expense of $4,513,000 for the quarter ended September 30, 1997 was
$1,106,000 or 32.4% over the comparable 1996 period due to an increase in
average interest bearing deposits of $75,454,000 and an increase in the
Company's cost of funds of 0.3%.
During the quarter ended September 30, 1997 , the Company made a
provision to the allowance for possible loan loss of $340,000. This
compares to a provision of $6,000 which was made in the third quarter 1996
and represents an increase of $334,000.
Total other income was $813,000 for the three months ended September
30, 1997, a $33,000 or 4.2% increase compared to the same period in 1996.
Service charges on deposit accounts increased by $99,000 or 18.6% and
other income decreased by $66,000 or 27.4% from the third quarter of 1997
to the same period in 1996.
Salaries and benefits expense for the three months ended September 30,
1997 was $2,768,000, a $6,000 or 0.2% increase from the comparable 1996
period. Although the benefits component increased during this period, the
overall decrease was due to the reduction in administrative officers as a
result of the merger between South Valley Bancorporation and the Company in
1996.
Total other expenses, excluding salaries and benefits was $2,265,000,
a $556,000 or 19.7% increase from the comparable 1996 period. This was
primarily due to a decrease in equipment expense of $166,000, a decrease in
legal and professional expense of $283,000, and a decrease in other
expenses of $311,000. These decreases were partially offset by an increase
in occupancy expense of $153,000. The decrease in equipment expense, legal
and professional expense and other expense were a direct result of cost
savings which were targeted in the merger between South Valley
Bancorporation and the Company.
Applicable income taxes of $1,811,000 for the three months ended
September 30, 1997 were $604,000, or 50.0% more than the comparable 1996
period. The Company's effective tax rate for the three months ended
September 30, 1997 was 39.7% compared to 40.4% for the same period in 1996.
Liquidity Management
Liquidity represents the ability of the Company to meet the
requirements of customer borrowing needs as well as fluctuations in deposit
flows.
The Company manages its liquidity primarily by maintaining investments
in overnight fed funds, money market mutual funds, available-for-sale
securities, and by maintaining lines of credit with correspondent banks. At
September 30, 1997, the total of cash and due from banks, overnight fed
funds, money market mutual funds, and available-for-sale securities
represented $276,873,000 or 42.8% of total deposits compared to
$192,773,000 or 35.2% at year end 1996. This increase in liquid assets for
the nine months ended September 30, 1997 resulted primarily from an
increase in deposits which were invested in fed funds sold and short term
investments.
In the opinion of management, there are sufficient resources to meet
the liquidity needs of the Company at present and projected future levels.
Capital Resources
Capital management is a continuous process of providing adequate
capital for current needs and anticipated future growth. Capital serves as
a source of funds for the acquisition of fixed and other assets and
protects depositors against potential losses. As the Company's assets
increase, so do its capital requirements.
The Company and the Subsidiary Banks are subject to Federal Reserve
Board guidelines and regulations of the Comptroller of the Currency
("Comptroller"), respectively, governing capital adequacy. The Federal
Reserve Board has established final risk-based and leverage capital
guidelines for bank holding companies which are the same as the
Comptroller's capital regulations for national banks.
The Federal Reserve Board capital guidelines for bank holding
companies and the Comptroller's regulations for national banks set total
capital requirements and define capital in terms of "core capital elements"
(comprising Tier 1 capital) and "supplemental capital elements" (comprising
Tier 2 capital). Tier 1 capital is generally defined as the sum of the
core capital elements less goodwill. The following items are defined as
core capital elements: common shareholders' equity, qualifying
noncumulative perpetual preferred stock, and minority interests in the
equity accounts of consolidated subsidiaries. Supplementary capital
elements include: allowance for loan and lease losses (which cannot exceed
1.25% of an institution's risk weighted assets), perpetual preferred stock
not qualifying as core capital, hybrid capital instruments and mandatory
convertible debt instruments, and term subordinated debt and intermediate-
term preferred stock. The maximum amount of supplemental capital elements
which qualifies as Tier 2 capital is limited to 100% of Tier 1 capital, net
of goodwill.
Risk-based capital ratios are calculated with reference to risk-
weighted assets, including both on and off-balance sheet exposures, which
are multiplied by certain risk weights assigned by the Federal Reserve
Board to those assets. Both bank holding companies and national banks are
required to maintain a minimum ratio of qualifying total capital to risk-
weighted assets of 8%, at least one-half of which must be in the form of
Tier 1 capital. There are presently four risk-weight categories: 0% for
cash and unconditionally guaranteed government securities; 20% for
conditionally guaranteed government securities; 50% for performing
residential real estate loans secured by first liens; and 100% for
commercial loans.
The Federal Reserve Board and the Comptroller also have established a
minimum leverage ratio of 3% Tier I capital to total assets for bank
holding companies and national banks that have received the highest
composite regulatory rating and are not anticipating or experiencing any
significant growth. All other institutions will be required to maintain a
leverage ratio of at least 100 to 200 basis points above the 3% minimum.
The tables on the following page show the Company's risk-based and
leverage capital ratios as of September 30, 1997 and December 31, 1996.
The Company's capital ratios significantly exceeded the minimum capital
levels required by current federal regulations. Management believes that
the Company will continue to meet the respective minimum capital
requirements in the foreseeable future.
Risk-Based Capital Ratios
September 30, 1997 December 31, 1996
(Dollars in thousands) Amount Ratio Amount Ratio
Tier 1 Capital $69,641 14.28% $63,469 13.91%
Tier 1 Capital minimum 19,484 4.00% 18,254 4.00%
requirement
Excess 50,157 10.28% 45,215 9.91%
Total Capital 73,809 15.14% 67,141 14.71%
Total Capital minimum 38,969 8.00% 36,508 8.00%
requirement
Excess 34,840 7.14% 30,633 6.71%
Risk-adjusted assets $487,606 $456,356
Leverage Ratios
September 30, 1997 December 31, 1996
(Dollars in thousands) Amount Ratio Amount Ratio
Tier 1 Capital to average
total assets
(Leverage ratio) $69,641 9.98% 63,469 10.55%
Minimum leverage 20,925 to 3.00% to 18,045 to 3.00% to
requirement
34,875 5.00% 30,075 5.00%
Excess 34,766 to 4.98% to 33,394 to 5.55% to
48,716 6.98% 45,424 7.55%
Average total assets $697,497 $601,496
Federal banking laws impose restrictions upon the amount of dividends
the Subsidiary Banks may declare to the Company. Federal laws also impose
restrictions upon the amount of loans or advances that the Subsidiary Banks
may extend to the Company. In management's opinion, these do not affect
the ability of the Company to meet its cash obligations.
PART II -- OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) INDEX TO EXHIBITS
Exhibit Sequentially
Number Exhibit Numbered Page
3.1 Articles of incorporation of the Company as amended 1/ (*)
3.2 Bylaws of Company as amended 2/ (*)
10.1 Lease -- 601 Abrego Street, Monterey, Premises 3/ (*)
10.2 Lease for 1001 South Main Street, Salinas, Banking office 2/
(*)
10.3 Lease dated December 15, 1988 by and between the Bank (*)
and James L. Gattis for 307 Main Street, Salinas Old Town Office.
2/
10.4 Lease dated May 1, 1985 by and between the Bank (*)
and Pacific Capital Bancorp. 4/
10.5 Pacific Capital Bancorp Employee Stock Ownership (*)
Plan and Trust Agreement. 5/
10.6 Master Equipment Lease Agreement between Bank and (*)
Parker North American Corporation. 5/
10.7 Lease dated September 22, 1986 between (*)
Bank and The Saunders Company. 5/
*/ Not Applicable.
1/ Filed as Exhibits 3.1, 10.21 and 10.32, respectively, to the Company's
Annual Report on Form 10-K (File No. 0-13528) for the fiscal year ended
December 31, 1988, and are incorporated herein by reference.
2/ Filed as Exhibits 3.2 and 10.17, respectively, to the Company's Annual
Report on Form 10-K (File No. 2-87513) for the fiscal year ended December
31, 1984, which are incorporated by reference.
3/ Filed as Exhibit to the Company's Registration Statement on Form S-18
(Registration No. 2-87513), which is incorporated by reference.
4/ Filed as Exhibit 10.20 to the Company's Annual Report on Form 10-K
(File No. 0-13528) for the fiscal year ended December 31, 1985, which is
incorporated by reference.
5/ Filed as Exhibits 10.24 through 10.26, respectively, to Company's
Annual Report on Form 10-K (File No. 0-13528) for the fiscal year ended
December 31, 1986, which are incorporated by reference.
Exhibit Sequentially
Number Exhibit Numbered Page
10.8 Matrix Funding Corporation Master Lease Agreement. 1/ (*)
10.9 Lease dated January 24, 1989 by and between First National Bank
(*)
of Monterey County and Stanley R. Haynes. 6/
10.13 Amendment No. One to Pacific Capital Bancorp(*)
Employee Stock Ownership Plan. 2/
10.14 Amendment No. Two to Pacific Capital Bancorp(*)
Employee Stock Ownership Plan. 7/
10.15 Amendment No. Three to Pacific Capital Bancorp (*)
Employee Stock Ownership Plan. 7/
10.16 Lease dated August 10, 1990 by and between the (*)
Trustees of the Stanley Family Trust and Pacific
Capital Bancorp for Carmel Office. 7/
10.17 Assignment of Lease dated November 1, 1990 by and (*)
between Pacific Capital Bancorp and First National
Bank of Monterey-County for Carmel Office. 7/
10.18 Lease dated November 12, 1990 by and between(*)
First National Bank of Monterey County and Carmel
Monterey Travel for Premises located at 601 Abrego
Street, Monterey, California. 7/
10.19 Prunetree Shopping Center Lease dated June 28, 1988 (*)
by and between Dennis R. Keith and Pajaro Valley Bancorporation.
7/
6/ Filed as Exhibits 10.20 through 10.24, respectively, to the Company's
Annual Report on Form 10-K (File No. 0-13528) for the fiscal year ended
December 31, 1989, which are incorporated by reference.
7/ Filed as Exhibits 10.25 through 10.32 to the Company's Annual Report
on Form 10-K (File No. 0-13528) for the fiscal year ended December 31,
1990, which are incorporated by reference.
Exhibit Sequentially
Number Exhibit Numbered Page
10.20 Lease dated June 21, 1990 by and between Saucito (*)
Land Co. and First National Bank of Monterey County. 7/
10.22 Amendment No. Four to Pacific Capital Bancorp (*)
Employee Stock Ownership Plan. 8/
10.23 Amendment dated May 20, 1991 to Lease dated(*)
December 15, 1988 by and between the Bank and
James L. Gattis for 307 Main Street, Salinas Old Town Office. 8/
10.24 Pacific Capital Bancorp Directors' Stock Option Plan (*)
and Form of Stock Option Agreement. 8/
10.26 Pacific Capital Bancorp 1984 Stock Option Plan (*)
and Forms of Agreements as amended to date. 8/
10.30 Business Recovery Services Agreement dated September 30, 1991
(*)
by and between Bank and J.D.B. & Associates, Inc. 8/
10.31 Consolidated Agreement dated December 17, 1991 (*)
by and between Bank and Unisys with Equipment Sale Agreement,
Software License Agreement and Product License Agreement by
and between Bank and Information Technology, Inc. 8/
10.32 Fidelity and Deposit Company of Maryland Directors and Officers
(*)
Liability Insurance Policy including Bank Reimbursement. 8/
10.33 Fidelity and Deposit Company of Maryland (*)
Financial Institution Bond. 8/
10.34 Lease dated January 28, 1993 by and between J.W. and R.W. (*)
McClellan, Partners, and First National Bank of Central
California. 9/
10.35 Exercise of Lease Option as of September 19, 1992 by and between
(*)
First National Bank of Central California and James L. Gattis. 9/
8/ Filed as Exhibits 10.34 through 10.35 to the Company's Annual Report
on Form 10-K (File No. 0-13528) for the fiscal year ended December 31,
1991, which are incorporated by reference.
9/ Filed as exhibits to the Company's Annual Report on Form 10-K (File
No. 0-13528) for the fiscal year ended December 31, 1993, which are
incorporated by reference.
Exhibit Sequentially
Number Exhibit Numbered Page
10.37 Lease dated November 18, 1993 by and between Hazel Graven (*)
and Vines Stewart and First National Bank of Central California.
10/
10.38 Software License Agreement for Platform Transfer Module and
(*)
Interface dated September 15, 1993 by and between First National
Bank of Central California and Information Technology, Inc. 10/
10.39 Equipment Sale Agreement dated December 16, 1993 by and (*)
between First National Bank of Central California and
Information Technology, Inc. 10/
10.41 Applications dated December 28, 1993 by First National Bank (*)
of Central California to become a member of the California
Bankers
Clearing House Association. 10/
10.42 Consolidated Agreement for the purchase of computer hardware
(*)
dated December 20, 1993 by and between First National Bank of
Central California and Unisys Corporation. 10/
10.46 Amended Pacific Capital Bancorp 1994 Stock Option Plan and Form
of (*)
Incentive and Non-Qualified Stock Option Agreements. 9/
10.47 Amendment No. Five to Pacific Capital Bancorp Employee (*)
Stock Ownership Plan and Trust. 10/
10.48 Pacific Capital Bancorp 401(k) Profit Sharing Plan. 10/ (*)
10.49 Equipment Sale Agreement dated March 22, 1995, by and between
(*)
First National Bank of Central California and
Information Technology, Inc. 11/
10.50 Equipment Sale Agreement dated February 2, 1996, by and between
(*)
First National Bank of Central California and
Information Technology, Inc. 11/
10.51 Standard Form of Agreement between Owner (Pacific Capital
Bancorp) (*)
and Contractor (Daniels & House Construction Co.) for the
renovation
of existing building and construction of new addition for
First National Bank of Central California at 1001 S. Main Street,
Salinas, CA, 93901, dated June 15, 1995. 11/
9/ Filed as Exhibits to the Company's Registration Statement on Form S-8
(File No. 33-83848) as filed on September 8, 1994, and Amendment No. 1 to
Form S-8 as filed on November 15, 1994.
10/ Filed as exhibits to the Company's Annual Report on Form 10-K (File
No. 0-13528) for the fiscal year ended December 31, 1994, which are
incorporated by reference.
11/ Filed as exhibits to the Company's Annual Report on Form 10-K (File
No. 0-13528) for the fiscal year ended December 31, 1995, which are
incorporated by reference.
Exhibit Sequentially
Number Exhibit Numbered Page
10.52 Employee Welfare Benefit Plan Agreement dated January 1, 1995,
(*)
between Pacific Capital Bancorp and
Great-West Life & Annuity Insurance Co. 11/
10.53 Lease Agreement dated October 29, 1996 by and between James L.
(*)
Gattis and Pacific Capital Bancorp for property located at 517 S.
Main Street, Salinas /12
10.57 Employment Agreement dated November 20, 1996 between South (*)
Valley National Bank and Brad L. Smith /12
10.58 Employment Agreement dated August 26, 1997 between Pacific 23
Capital Bancorp and Clayton C. Larson
10.59 Employment Agreement dated August 26, 1997 between Pacific 32
Capital Bancorp and D. Vernon Horton
10.60 Employment Agreement dated August 26, 1997 between Pacific 41
Capital Bancorp and Dennis A. DeCius
10.61 Employment Agreement dated August 26, 1997 between Pacific 50
Capital Bancorp and Dale R. Diederick
10.62 Amended and Restated Executive Salary Continuation Agreement 59
dated September 23, 1997 between Pacific Capital Bancorp and
Clayton C. Larson
10.63 Amended and Restated Executive Salary Continuation Agreement 71
dated September 23, 1997 between Pacific Capital Bancorp and
D. Vernon Horton
10.64 Amended and Restated Executive Salary Continuation Agreement 83
dated September 23, 1997 between Pacific Capital Bancorp and
Dennis A. DeCius
10.65 Amended and Restated Executive Salary Continuation Agreement 95
dated September 23, 1997 between Pacific Capital Bancorp and
Dale R. Diederick
27. Financial Data Schedule 22
(b) REPORTS ON FORM 8-K
No reports were filed on Form 8-K for the quarter ended September
30, 1997
11/ Filed as exhibits to the Company's Annual Report on Form 10-K (File
No. 0-13528) for the fiscal year ended December 31, 1995, which are
incorporated by reference.
12/ Filed as exhibits to the Company's Annual Report on Form 10-K (File
No. 0-13528) for the fiscal year ended December 31, 1996, which are
incorporated by reference.
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.
Pacific Capital Bancorp
Date __ November 13, 1997_____ /S/ D. Vernon Horton
D. Vernon Horton
Chairman of the Board
Chief Executive Officer
Date __ November 13, 1997_______ /S/ Dennis A. DeCius
Dennis A. DeCius
Executive Vice President
Chief Financial Officer
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EMPLOYMENT AGREEMENT
This Employment Agreement (hereinafter referred to as
"Agreement") is made effective as of August 26, 1997, by and
between PACIFIC CAPITAL BANCORP (hereinafter referred to as
"Employer") and CLAYTON C. LARSON (hereinafter referred to
as "Employee").
Employer desires to employ, as its President and as an
executive officer of its subsidiary banks, a person of high
executive caliber with significant prior experience in
banking services which Employer and its subsidiary banks
provide.
Employee being willing to be employed by Employer as
indicated herein, and Employer being willing to employ
Employee on the terms, covenants and conditions hereinafter
set forth, it is agreed as follows:
1. Position. Employee is hereby employed as
President of
Employer and in such additional executive positions with
Employer and Employer's subsidiary banks as Employer may
designate from time to time.
2. Employment Term. The term of this Agreement shall
commence effective August 26, 1997, and continue for three
(3) years thereafter through August 25, 2000, unless earlier
terminated pursuant to Paragraph 6 below, either such period
being the term of this Agreement.
3. Employee Duties. Employee shall hold and perform
the
customary responsibilities and duties of his positions as
designated by the Bylaws of Employer and the subsidiary
banks and as directed by Employer and the subsidiary banks
through their Boards of Directors (hereinafter collectively
referred to as the "Board").
4. Extent of Services. Employee shall devote his
full
time, attention and energies to the business of Employer and
the subsidiary banks, and shall not, during the term of this
Agreement, engage directly or indirectly, in any other
business activity, except personal investments, without the
prior written consent of Employer.
5. Compensation and Benefits. Employee's salary
shall be
at the rate of $190,571.00 per year, prorated for any
partial year in which this Agreement is in effect (as such
salary may be adjusted during the term of this Agreement,
the "Base Salary"). Said salary shall be payable in equal
semi-monthly installments from which Employer will withhold
and deduct all applicable federal and state income, social
security and disability taxes as required by applicable law.
Any salary increase shall be at the sole discretion of the
Board. Employer agrees to review and evaluate Employee's
performance at the end of each fiscal year to determine
whether Employee should be paid a cash bonus (the "Bonus").
The amount of the Bonus, if any, will be determined in the
sole discretion of the Board. In addition, Employee shall
receive the following benefits:
(a) Automobile. Employer shall provide Employee
with a full-size automobile, the make, model and equipment
of which shall be determined by Employer, solely for his use
alone during the term of this Agreement. Employer shall pay
or reimburse Employee for all auto expenses incurred in the
use of said automobile by Employee in the performance of his
duties under this Agreement. Employer shall maintain an
automobile liability insurance policy on said automobile,
with coverage to include
Employee's operation of said automobile and in such amounts
as Employer and Employee shall agree upon.
(b) Insurance. Upon meeting all eligibility
requirements, Employee shall be a participant in such group
life insurance, health and long-term disability plans as are
maintained by Employer, at Employer's sole cost and expense.
In addition, Employer shall, at its sole cost and expense,
provide Employee with a copy of standard term life insurance
in the face amount to be determined by Employer but which in
no event shall be less than $250,000. Employee shall have
the right, in Employee's sole discretion, to designate the
beneficiary or beneficiaries of any such insurance.
(c) Vacation. Employee shall accrue four (4)
weeks paid vacation per year, prorated for any partial
calendar year in which this Agreement is in effect, which
shall be taken at such time or times as mutually agreed upon
by Employee and the Board, provided that at least two (2)
weeks of such vacation shall be taken consecutively per
calendar year. Employee acknowledges that the requirement
of two (2) consecutive weeks of vacation is required by
sound banking practices.
(d) General Expenses. Employer shall, upon
submission and approval of written statements and bills in
accordance with the then-regular procedures of Employer, pay
or reimburse Employee for any and all necessary, customary
and usual expenses incurred by him while traveling for or on
behalf of Employer or its subsidiary banks and any and all
other necessary, customary or usual expenses (including
entertainment) incurred by employee for or on behalf of
Employer or its subsidiary banks in the normal course of
business as determined to be appropriate by Employer.
(e) Other Benefits. In the event that Employer
or its subsidiary banks in the future establish any other
benefit plan for senior executives generally, Employee shall
be eligible to participate in such plan on the terms and
conditions stated in the legal documents for such plan.
6. Termination. This Agreement may be terminated
prior to
August 25, 2000, with or without cause in accordance with
this Paragraph 6(a) through 6(g). In the event of such
termination, Employee shall be released from all obligations
under this Agreement, except that Employee shall remain
subject to Paragraphs 7, 8, 12 (c), 12 (i) and 12 (j), and
Employer shall be released from all obligations under this
Agreement, except as otherwise provided in this Paragraph
and Paragraphs 12(c), 12(e), 12(i) and 12 (j).
(a) Early Termination By Employer Without Cause.
This Agreement may be terminated without cause, for any
reason whatsoever, in the sole, absolute and unreviewable
discretion of Employer, upon thirty (30) days' written
notice by Employer to Employee. If this Agreement is
terminated pursuant to this Paragraph 6(a) or the term of
this Agreement is not extended upon expiration thereof,
Employee shall receive (i) three (3) times the annual Base
Salary and Bonus as defined in Paragraph 5 of this Agreement
for the average of the three years immediately preceding the
date of such termination which amount shall be due and
payable to Employee on the date of such termination together
with any Base Salary and Bonus earned to such date and (ii)
medical and life insurance coverage for one (1) year from
the date of such termination. The foregoing shall be in
full and complete satisfaction of any and all rights which
Employee may enjoy under this Agreement and shall be the
sole compensation
and/or damages payable to Employee as the result of
termination of this Agreement without cause.
(b) Early Termination By Employer For Cause.
This Agreement may be terminated for cause by Employer
immediately upon written notice to Employee, and Employee
shall not be entitled to receive compensation or other
benefits for any period after termination for cause.
Employer's total liability to Employee in the event of
termination of Employee's employment under this Paragraph
6(b) shall be limited to the payment of Employee's Base
Salary through the effective date of termination. Employee
understands and agrees that satisfactory performance of this
Agreement on his part requires conformance with the highest
standards of integrity, diligence, competence, skill,
judgment and efficiency in the banking industry and that
failure to conform to such standards is cause for
termination of the Agreement by Employer. Cause for
termination pursuant to this Paragraph 6(b) also includes:
(1) failure to qualify for a surety bond as provided in
Paragraph 11 of this Agreement; (2) violation of any law,
rule or regulation (other than a traffic violation or
similar offense); (3) acts causing termination of Employer's
Banker's Blanket Bond with respect to Employee; (4) repeated
insobriety or use of drugs without prescription, (5)
misappropriation of property of Employer or its subsidiary
banks; (6) any act of dishonesty; (7) neglect of duties or
negligence in carrying out duties; (8) repeated unexcused
absence; (9) breach of any material provision of this
Agreement; and (10) any act or omission that is seriously
detrimental to the interests of Employer or its subsidiary
banks.
(c) Early Termination By Employee. This
Agreement may be terminated by Employee upon thirty (30)
days' written notice to Employer. Employer's total
liability in such event shall be limited to payment of
Employee's Base Salary and benefits through the date of
termination.
(d) Early Termination Upon Disability. If
Employee becomes disabled due to a physical or mental
disability so that he is unable to perform the essential
functions of his position and the disability cannot be
reasonably accommodated without undue hardship, Employer may
at its option terminate this Agreement. Employee shall be
entitled to the salary provided for in Paragraph 5 of this
Agreement for a period of not to exceed six (6) months from
the date of Employee's first absence due to the condition or
illness causing or related to the disability, but not beyond
August 25, 2000, and to accrued but unused vacation leave.
Employee's Base Salary in the event of disability and
termination under this Paragraph 6(b) shall be offset by any
payments received by Employee as a result of a disability
insurance policy purchased by Employer or its subsidiary
banks for Employee. All other benefits provided for under
this Agreement shall cease as of the date of termination.
For purposes of this Agreement, physical or mental
disability shall mean the inability of Employee to fully
perform under this Agreement for a continuous period of
ninety (90) days, as determined by a physician in the case
of physical disability, or a psychiatrist in the case of
mental disability, licensed to practice medicine in
California and selected jointly by Employer and Employee.
Upon demand by Employer, Employee shall act promptly to
select such physician or psychiatrist jointly with Employer,
shall consent to undergo any reasonable examination or test
and shall authorize release of all pertinent medical records
to Employer. Recurrent disabilities will be treated as
separate disabilities if they result from unrelated causes
or if they result from the same or related cause or causes
and are separated by a continuous period of at least six (6)
full months during
which Employee was able to perform his duties hereunder
equal to at least eighty percent (80%) of his capacity prior
to disability. Otherwise, recurrent disabilities will be
treated as a continuation of previous disabilities for the
purpose of determining the limitations established in this
paragraph.
(e) Death During Employment. This Agreement
shall terminate immediately upon the death of Employee.
Employer's total liability in such events shall be limited
to payment of Employee's Base Salary and benefits through
the date of Employee's death.
(f) Change in Control. In the event of a Change
in Control (as defined in Paragraph 13 below), Employee
shall receive (i) three (3) times the annual Base Salary and
Bonus as defined in Paragraph 5 of this Agreement for the
average of the three years immediately preceding the
effective time of such Change in Control, which amount shall
be due and payable to Employee at the effective time of such
Change in Control together with any Base Salary and Bonus
earned to such date, (ii) medical and life insurance
coverage for two (2) years from the date of such termination
and (iii) up to Fifteen Thousand Dollars ($15,000) in
outplacement services for Employee to be paid by Employer
directly to any such outplacement service.
(g) Limitation of Termination Payments.
Notwithstanding any other provisions of this Agreement, in
the event that any payments or benefits received or to be
received by Employee in connection with a termination
pursuant to Paragraph 6 hereof, (all such payments and
benefits being hereinafter called "Total Payments") would
not be deductible (in whole or part), by Employer, as a
result of Section 280G of the Code (as defined in Paragraph
14 below), then, to the extent necessary to make such
portion of the Total Payments deductible (and after taking
into account any other reduction in the Total Payments
provided by reason of Section 280G of the Code), (i) the
cash payments shall first be reduced (if necessary, to
zero), and (ii) all other noncash payments shall next be
reduced (if necessary, to zero). For purposes of this
limitation (i) no portion of the Total Payments, the receipt
or enjoyment of which Employee shall have effectively waived
in writing prior to the date of termination, shall be taken
into account, (ii) no portion of the Total Payments shall be
taken into account which in the opinion of tax counsel
selected by Employer's independent auditors and reasonably
acceptable to Employee, does not constitute a "parachute
payment" within the meaning of Section 280G(b)(2) of the
Code, including by reason of Section 280G(b)(4)(A) of the
Code, (iii) the payments shall be reduced only to the extent
necessary so that the Total Payments (other than those
referred to in clauses (i) or (ii) of this sentence) in
their entirety constitute reasonable compensation for
services actually rendered within the meaning of Section
280G(b)(4)(B) of the Code and proposed Reg. Section 1280G-1,
Q&A-42(b)(5), or are otherwise not subject to disallowance
as deductions, in the opinion of the tax counsel referred to
in clause (ii); and (iv) the value of any non-cash benefit
or any deferred payment or benefit included in the Total
Payments shall be determined by Employer's independent
auditors in accordance with the principles of Sections
280G(d)(3) and (4) of the Code.
7. Printed Material. All written or printed
materials
used by Employee in performing duties for Employer are and
shall remain the property of Employer. Upon termination of
employment, Employee shall promptly return such written or
printed materials to Employer.
8. Disclosure of Information. Employee recognizes and
acknowledges that Employer and its subsidiary banks possess
information concerning their business affairs and methods of
operation which constitute valuable, special and unique
assets of their businesses. Employee shall not, at any time
before or after termination of this Agreement, disclose to
anyone any confidential information relating to Employer,
its subsidiary banks or any affiliate thereof. For purpose
of this paragraph, confidential information includes all
information regarding products, services, processes, know-
how, customers, suppliers, product and/or service
development, business plans, research, finances, marketing,
pricing, costs and any other proprietary matters relating to
Employer, its subsidiary banks or any affiliate thereof.
Employee recognizes and acknowledges that all financial
information concerning any of the customers of Employer's
subsidiary banks is strictly confidential, and Employee
shall not at any time before or after termination of this
Agreement disclose to anyone any such financial information
or any part thereof, for any reason or purpose whatsoever.
9. Noncompetition by Employee. During the term of this
Agreement, Employee shall not, directly or indirectly,
either as an employee, employer, consultant, agent,
principal, partner, stockholder, corporate officer,
director, or in any other individual or representative
capacity, engage or participate in any competing banking
business; provided, however, Employee shall not be
restricted by this paragraph from owning securities of
corporations listed on a national securities exchange or
regularly traded by national securities dealers, so long as
such investment does not exceed one percent (1%) of the
market value of the outstanding securities of such
corporation.
10. Moral Conduct. 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 degrade him or to bring him
into public hatred, contempt or ridicule or that will
reasonably tend to shock or offend the community or to
prejudice Employer, its subsidiary banks or the banking
industry in general.
11. Surety Bond. Employee agrees that he will furnish
all information and take any steps necessary to enable
Employer or its subsidiary banks to obtain or maintain a
fidelity bond, satisfactory to Employer, 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 this employment.
Employer or its subsidiary banks shall pay all premiums on
the bond. 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.
12. General Provisions. This Agreement is further
governed by the following provisions:
(a) Entire Agreement. This Agreement supersedes
any and all other agreements, either oral or in writing,
among the parties hereto with respect to the employment of
Employee by Employer and contains all of the covenants and
agreements among the parties with respect to such
employment. Each party acknowledges that no
representations, inducements, promises or agreements, oral
or otherwise, have been made by any party or anyone acting
on behalf of a party which are not embodied herein, and that
no other agreement, statement, representation, inducement or
promise not contained in this Agreement shall be valid or
binding. Any modification, waiver or amendment of this
Agreement will be effective only if it is in writing and
signed by the party to be charged.
(b) Waiver. Any waiver by any party of a breach
of any provision of this Agreement shall not operate as or
be construed to be a waiver of any other breach of such
provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict
adherence to any term of this Agreement on one or more
occasions shall not be considered a waiver or deprive that
party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement.
(c) Choice of Law and Forum. This Agreement
shall be governed by and construed in accordance with the
laws of the State of California, except to the extent
preempted by the laws of the United States, including, but
not limited to, the National Bank Act. Any action or
proceeding brought upon or arising out of this Agreement or
its termination or the termination of Employee's employment
shall be brought in a forum located within the State of
California.
(d) Binding Effect of Agreement. This Agreement
shall inure to the benefit of and be binding upon Employer,
its successors and assigns, including without limitation,
any person, partnership or corporation which may acquire all
or substantially all of Employer's assets and business or
with or into which Employer or its subsidiary banks may be
consolidated, merged or otherwise reorganized, and this
provision shall apply in the event of any subsequent merger,
consolidation reorganization or transfer. The provisions of
this Agreement shall be binding upon and inure to the
benefit of Employee and his heirs and personal
representatives. The rights and obligations of Employee
under this Agreement shall not be transferable by Employee
by assignment or otherwise and such rights shall not be
subject to commutation, encumbrance or the claims of
Employee's creditors, and any attempt to do any of the
foregoing shall be void.
(e) Indemnification. Employer and its subsidiary
banks shall indemnify Employee to the maximum extent
permitted under their articles of association, bylaws and
applicable law for any liability or loss arising out of
Employee's actual or asserted misfeasance or nonfeasance in
the good faith performance of his duties or out of any
actual or asserted wrongful act against or by Employer,
including, but not limited to, judgments, fines, settlements
and expenses incurred in the defense of actions, proceedings
and appeals therefrom. If available at reasonable rates,
which shall be determined by the Employer in its sole
discretion, Employer shall endeavor to apply for and obtain
directors' and officers' liability insurance to indemnify
and insure Employer and Employee from such liability or
loss.
(f) Severability. In the event that any term or
condition contained in this Agreement shall, for any reason
be held by a court of competent jurisdiction to be invalid,
illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other
term or condition of this Agreement, but this Agreement
shall be construed as if such invalid or illegal or
unenforceable term or condition had never been contained
herein.
(g) Headings. The headings in this Agreement are
solely for convenience of reference and shall be given no
effect in the construction or interpretation of this
Agreement.
(h) Notices. Any notices to be given hereunder
by any
party to another party may be effected either by personal
delivery, in writing or by mail, registered or certified,
postage prepaid with return receipt requested. Mailed
notices shall be addressed to the parties at the addresses
indicated at the end of this Agreement, but each party may
change his or her address by written notice in accordance
with this paragraph. Notices delivered personally shall be
deemed communicated as of actual receipt; mailed notices
shall be deemed communicated as of five (5) days after
mailing.
(i) Arbitration. Any controversy or claim
arising out of or relating to this Agreement or alleged
breach of this Agreement or in any way arising out of the
termination of Employee's employment shall be settled by
arbitration in accordance with the then current Employment
Dispute Resolution Rules of the American Arbitration
Association, and judgment on the award rendered by the
arbitrators may be entered in any court having jurisdiction.
Each party shall pay the fees of the arbitrator he/it
selects and of his/its own attorneys, and the expenses of
his/its witnesses and all other expenses connected with
presenting his/its case. Except as otherwise required by
law, other costs of the arbitration, including the cost of
any record or transcripts of the arbitration, administrative
fees and all other fees and costs shall be borne equally by
the parties. Full discovery shall be permitted to the
parties to any such arbitration, including depositions of
all relevant witnesses.
(j) Attorneys' Fees and Costs. If any action at
law or in equity is brought by a party upon or arising out
of this Agreement, its termination or the termination of
Employee's employment, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary
disbursements incurred in the action, in addition to any
other relief to which it may be entitled.
13. Change in Control. A "Change in Control" shall be
deemed to have occurred if the conditions set forth in any
one of the following paragraphs shall have been satisfied:
(a) after the date of this Agreement, any Person
(as defined below) becomes the Beneficial Owner (as defined
below), directly or indirectly, of securities of Employer
representing 25% or more of the combined voting power of
Employer's then outstanding securities; or
(b) during any period of two consecutive years
(not including any period prior to the date of this
Agreement), individuals who at the beginning of such period
constitute the Board and any new director (other than a
director designated by a Person who has entered into an
agreement with Employer to effect a transaction described in
this Paragraph 13) whose election by the Board or nomination
for election by Employer's shareholders was approved by a
vote of at least two-thirds (2/3) of the directors then
still in office who either were directors at the beginning
of the period or whose election or nomination for election
was previously so approved, cease for any reason to
constitute a majority thereof; or
(c) the shareholders of Employer approve a merger
or consolidation of Employer with any other corporation,
other than (i) a merger or consolidation which would result
in the voting securities of Employer outstanding immediately
prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity), in combination with the ownership of
any trustee or other fiduciary holding securities under an
employee benefit plan of Employer, at least 51% of the
combined voting power of the voting
securities of Employer or such surviving entity outstanding
immediately after such merger or consolidation, or (ii) a
merger or consolidation effected to implement a
recapitalization of Employer (or similar transaction) in
which no Person acquires more than 49% of the combined
voting power of Employer's then outstanding securities; or
(d) the shareholders of Employer approve a plan
of complete liquidation of Employer or an agreement for the
sale or disposition by Employer of all or substantially all
of Employer's assets.
For the purposes of this Paragraph 13, "Person" shall
have the meaning given in Section 3(a)(9) of the Securities
Exchange Act of 1934 as amended (the "Exchange Act"), as
modified and used in Sections 13(d) and 14(d) thereof;
however, a Person shall not include (i) Employer or any of
its subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the company or
any of its subsidiaries, or (iii) an underwriter temporarily
holding securities pursuant to an offering of such
securities. "Beneficial Owner" shall have the meaning
defined in Rule 13d-3 under the Exchange Act.
14. Code. "Code" means the Internal Revenue Code of
1986, as amended from time to time, and any regulations
relating thereto.
The parties hereto have executed this Agreement as of the
date first written above, in the City of Salinas, County of
Monterey, State of California.
EMPLOYER: PACIFIC CAPITAL BANCORP
By: /s/ Robert B. Sheppard
Its: Chairman, Human Resources
Committee
EMPLOYEE: /s/ Clayton C. Larson
Clayton C. Larson
2 La Pradera
Carmel, CA
93923
EMPLOYMENT AGREEMENT
This Employment Agreement (hereinafter referred to as
"Agreement") is made effective as of August 26, 1997, by and
between PACIFIC CAPITAL BANCORP (hereinafter referred to as
"Employer") and D. VERNON HORTON (hereinafter referred to as
"Employee").
Employer desires to employ, as its President and as an
executive officer of its subsidiary banks, a person of high
executive caliber with significant prior experience in banking
services which Employer and its subsidiary banks provide.
Employee being willing to be employed by Employer as
indicated herein, and Employer being willing to employ Employee
on the terms, covenants and conditions hereinafter set forth, it
is agreed as follows:
1. Position. Employee is hereby employed as President of
Employer and in such additional executive positions with Employer
and Employer's subsidiary banks as Employer may designate from
time to time.
2. Employment Term. The term of this Agreement shall
commence effective August 26, 1997, and continue for three (3)
years thereafter through August 25, 2000, unless earlier
terminated pursuant to Paragraph 6 below, either such period
being the term of this Agreement.
3. Employee Duties. Employee shall hold and perform the
customary responsibilities and duties of his positions as
designated by the Bylaws of Employer and the subsidiary banks and
as directed by Employer and the subsidiary banks through their
Boards of Directors (hereinafter collectively referred to as the
"Board").
4. Extent of Services. Employee shall devote his full
time, attention and energies to the business of Employer and the
subsidiary banks, and shall not, during the term of this
Agreement, engage directly or indirectly, in any other business
activity, except personal investments, without the prior written
consent of Employer.
5. Compensation and Benefits. Employee's salary shall be
at the rate of $196,894.00 per year, prorated for any partial
year in which this Agreement is in effect (as such salary may be
adjusted during the term of this Agreement, the "Base Salary").
Said salary shall be payable in equal semi-monthly installments
from which Employer will withhold and deduct all applicable
federal and state income, social security and disability taxes as
required by applicable law. Any salary increase shall be at the
sole discretion of the Board. Employer agrees to review and
evaluate Employee's performance at the end of each fiscal year to
determine whether Employee should be paid a cash bonus (the
"Bonus"). The amount of the Bonus, if any, will be determined in
the sole discretion of the Board. In addition, Employee shall
receive the following benefits:
(a) Automobile. Employer shall provide Employee with
a full-size automobile, the make, model and equipment of which
shall be determined by Employer, solely for his use alone during
the term of this Agreement. Employer shall pay or reimburse
Employee for all auto expenses incurred in the use of said
automobile by Employee in the performance of his duties under
this Agreement. Employer shall maintain an automobile liability
insurance policy on said automobile, with coverage to include
Employee's operation of said automobile and in such amounts as
Employer and Employee shall agree upon.
(b) Insurance. Upon meeting all eligibility
requirements, Employee shall be a participant in such group life
insurance, health and long-term disability plans as are
maintained by Employer, at Employer's sole cost and expense. In
addition, Employer shall, at its sole cost and expense, provide
Employee with a copy of standard term life insurance in the face
amount to be determined by Employer but which in no event shall
be less than $250,000. Employee shall have the right, in
Employee's sole discretion, to designate the beneficiary or
beneficiaries of any such insurance.
(c) Vacation. Employee shall accrue four (4) weeks
paid vacation per year, prorated for any partial calendar year in
which this Agreement is in effect, which shall be taken at such
time or times as mutually agreed upon by Employee and the Board,
provided that at least two (2) weeks of such vacation shall be
taken consecutively per calendar year. Employee acknowledges
that the requirement of two (2) consecutive weeks of vacation is
required by sound banking practices.
(d) General Expenses. Employer shall, upon submission
and approval of written statements and bills in accordance with
the then-regular procedures of Employer, pay or reimburse
Employee for any and all necessary, customary and usual expenses
incurred by him while traveling for or on behalf of Employer or
its subsidiary banks and any and all other necessary, customary
or usual expenses (including entertainment) incurred by employee
for or on behalf of Employer or its subsidiary banks in the
normal course of business as determined to be appropriate by
Employer.
(e) Other Benefits. In the event that Employer or its
subsidiary banks in the future establish any other benefit plan
for senior executives generally, Employee shall be eligible to
participate in such plan on the terms and conditions stated in
the legal documents for such plan.
6. Termination. This Agreement may be terminated prior to
August 25, 2000, with or without cause in accordance with this
Paragraph 6(a) through 6(g). In the event of such termination,
Employee shall be released from all obligations under this
Agreement, except that Employee shall remain subject to
Paragraphs 7, 8, 12 (c), 12 (i) and 12 (j), and Employer shall be
released from all obligations under this Agreement, except as
otherwise provided in this Paragraph and Paragraphs 12(c), 12(e),
12(i) and 12 (j).
(a) Early Termination By Employer Without Cause. This
Agreement may be terminated without cause, for any reason
whatsoever, in the sole, absolute and unreviewable discretion of
Employer, upon thirty (30) days' written notice by Employer to
Employee. If this Agreement is terminated pursuant to this
Paragraph 6(a) or the term of this Agreement is not extended upon
expiration thereof, Employee shall receive (i) three (3) times
the annual Base Salary and Bonus as defined in Paragraph 5 of
this Agreement for the average of the three years immediately
preceding the date of such termination which amount shall be due
and payable to Employee on the date of such termination together
with any Base Salary and Bonus earned to such date and (ii)
medical and life insurance coverage for one (1) year from the
date of such termination. The foregoing shall be in full and
complete satisfaction of any and all rights which Employee may
enjoy under this Agreement and shall be the sole compensation
and/or damages payable to Employee as the result of termination
of this Agreement without cause.
(b) Early Termination By Employer For Cause. This
Agreement may be terminated for cause by Employer immediately
upon written notice to Employee, and Employee shall not be
entitled to receive compensation or other benefits for any period
after termination for cause. Employer's total liability to
Employee in the event of termination of Employee's employment
under this Paragraph 6(b) shall be limited to the payment of
Employee's Base Salary through the effective date of termination.
Employee understands and agrees that satisfactory performance of
this Agreement on his part requires conformance with the highest
standards of integrity, diligence, competence, skill, judgment
and efficiency in the banking industry and that failure to
conform to such standards is cause for termination of the
Agreement by Employer. Cause for termination pursuant to this
Paragraph 6(b) also includes: (1) failure to qualify for a surety
bond as provided in Paragraph 11 of this Agreement; (2) violation
of any law, rule or regulation (other than a traffic violation or
similar offense); (3) acts causing termination of Employer's
Banker's Blanket Bond with respect to Employee; (4) repeated
insobriety or use of drugs without prescription, (5)
misappropriation of property of Employer or its subsidiary banks;
(6) any act of dishonesty; (7) neglect of duties or negligence in
carrying out duties; (8) repeated unexcused absence; (9) breach
of any material provision of this Agreement; and (10) any act or
omission that is seriously detrimental to the interests of
Employer or its subsidiary banks.
(c) Early Termination By Employee. This Agreement may
be terminated by Employee upon thirty (30) days' written notice
to Employer. Employer's total liability in such event shall be
limited to payment of Employee's Base Salary and benefits through
the date of termination.
(d) Early Termination Upon Disability. If Employee
becomes disabled due to a physical or mental disability so that
he is unable to perform the essential functions of his position
and the disability cannot be reasonably accommodated without
undue hardship, Employer may at its option terminate this
Agreement. Employee shall be entitled to the salary provided for
in Paragraph 5 of this Agreement for a period of not to exceed
six (6) months from the date of Employee's first absence due to
the condition or illness causing or related to the disability,
but not beyond August 25, 2000, and to accrued but unused
vacation leave. Employee's Base Salary in the event of
disability and termination under this Paragraph 6(b) shall be
offset by any payments received by Employee as a result of a
disability insurance policy purchased by Employer or its
subsidiary banks for Employee. All other benefits provided for
under this Agreement shall cease as of the date of termination.
For purposes of this Agreement, physical or mental disability
shall mean the inability of Employee to fully perform under this
Agreement for a continuous period of ninety (90) days, as
determined by a physician in the case of physical disability, or
a psychiatrist in the case of mental disability, licensed to
practice medicine in California and selected jointly by Employer
and Employee. Upon demand by Employer, Employee shall act
promptly to select such physician or psychiatrist jointly with
Employer, shall consent to undergo any reasonable examination or
test and shall authorize release of all pertinent medical records
to Employer. Recurrent disabilities will be treated as separate
disabilities if they result from unrelated causes or if they
result from the same or related cause or causes and are separated
by a continuous period of at least six (6) full months during
which Employee was able to perform his duties hereunder equal to
at least eighty percent (80%) of his capacity prior to
disability. Otherwise, recurrent disabilities will be treated as
a continuation of previous disabilities for the purpose of
determining the limitations established in this paragraph.
(e) Death During Employment. This Agreement shall
terminate immediately upon the death of Employee. Employer's
total liability in such events shall be limited to payment of
Employee's Base Salary and benefits through the date of
Employee's death.
(f) Change in Control. In the event of a Change in
Control (as defined in Paragraph 13 below), Employee shall
receive (i) three (3) times the annual Base Salary and Bonus as
defined in Paragraph 5 of this Agreement for the average of the
three years immediately preceding the effective time of such
Change in Control, which amount shall be due and payable to
Employee at the effective time of such Change in Control together
with any Base Salary and Bonus earned to such date, (ii) medical
and life insurance coverage for two (2) years from the date of
such termination and (iii) up to Fifteen Thousand Dollars
($15,000) in outplacement services for Employee to be paid by
Employer directly to any such outplacement service.
(g) Limitation of Termination Payments.
Notwithstanding any other provisions of this Agreement, in the
event that any payments or benefits received or to be received by
Employee in connection with a termination pursuant to Paragraph 6
hereof, (all such payments and benefits being hereinafter called
"Total Payments") would not be deductible (in whole or part), by
Employer, as a result of Section 280G of the Code (as defined in
Paragraph 14 below), then, to the extent necessary to make such
portion of the Total Payments deductible (and after taking into
account any other reduction in the Total Payments provided by
reason of Section 280G of the Code), (i) the cash payments shall
first be reduced (if necessary, to zero), and (ii) all other non-
cash payments shall next be reduced (if necessary, to zero). For
purposes of this limitation (i) no portion of the Total Payments,
the receipt or enjoyment of which Employee shall have effectively
waived in writing prior to the date of termination, shall be
taken into account, (ii) no portion of the Total Payments shall
be taken into account which in the opinion of tax counsel
selected by Employer's independent auditors and reasonably
acceptable to Employee, does not constitute a "parachute payment"
within the meaning of Section 280G(b)(2) of the Code, including
by reason of Section 280G(b)(4)(A) of the Code, (iii) the
payments shall be reduced only to the extent necessary so that
the Total Payments (other than those referred to in clauses (i)
or (ii) of this sentence) in their entirety constitute reasonable
compensation for services actually rendered within the meaning of
Section 280G(b)(4)(B) of the Code and proposed Reg. Section 1-
280G-1, Q&A-42(b)(5), or are otherwise not subject to
disallowance as deductions, in the opinion of the tax counsel
referred to in clause (ii); and (iv) the value of any non-cash
benefit or any deferred payment or benefit included in the Total
Payments shall be determined by Employer's independent auditors
in accordance with the principles of Sections 280G(d)(3) and (4)
of the Code.
7. Printed Material. All written or printed materials
used by Employee in performing duties for Employer are and shall
remain the property of Employer. Upon termination of employment,
Employee shall promptly return such written or printed materials
to Employer.
8. Disclosure of Information. Employee recognizes and
acknowledges that Employer and its subsidiary banks possess
information concerning their business affairs and methods of
operation which constitute valuable, special and unique assets of
their businesses. Employee shall not, at any time before or
after termination of this Agreement, disclose to anyone any
confidential information relating to Employer, its subsidiary
banks or any affiliate thereof. For purpose of this paragraph,
confidential information includes all information regarding
products, services, processes, know-how, customers, suppliers,
product and/or service development, business plans, research,
finances, marketing, pricing, costs and any other proprietary
matters relating to Employer, its subsidiary banks or any
affiliate thereof. Employee recognizes and acknowledges that all
financial information concerning any of the customers of
Employer's subsidiary banks is strictly confidential, and
Employee shall not at any time before or after termination of
this Agreement disclose to anyone any such financial information
or any part thereof, for any reason or purpose whatsoever.
9. Noncompetition by Employee. During the term of this
Agreement, Employee shall not, directly or indirectly, either as
an employee, employer, consultant, agent, principal, partner,
stockholder, corporate officer, director, or in any other
individual or representative capacity, engage or participate in
any competing banking business; provided, however, Employee shall
not be restricted by this paragraph from owning securities of
corporations listed on a national securities exchange or
regularly traded by national securities dealers, so long as such
investment does not exceed one percent (1%) of the market value
of the outstanding securities of such corporation.
10. Moral Conduct. 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 degrade him or to bring him into public
hatred, contempt or ridicule or that will reasonably tend to
shock or offend the community or to prejudice Employer, its
subsidiary banks or the banking industry in general.
11. Surety Bond. Employee agrees that he will furnish all
information and take any steps necessary to enable Employer or
its subsidiary banks to obtain or maintain a fidelity bond,
satisfactory to Employer, 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 this employment. Employer or its subsidiary
banks shall pay all premiums on the bond. 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.
12. General Provisions. This Agreement is further governed
by the following provisions:
(a) Entire Agreement. This Agreement supersedes any
and all other agreements, either oral or in writing, among the
parties hereto with respect to the employment of Employee by
Employer and contains all of the covenants and agreements among
the parties with respect to such employment. Each party
acknowledges that no representations, inducements, promises or
agreements, oral or otherwise, have been made by any party or
anyone acting on behalf of a party which are not embodied herein,
and that no other agreement, statement, representation,
inducement or promise not contained in this Agreement shall be
valid or binding. Any modification, waiver or amendment of this
Agreement will be effective only if it is in writing and signed
by the party to be charged.
(b) Waiver. Any waiver by any party of a breach of
any provision of this Agreement shall not operate as or be
construed to be a waiver of any other breach of such provision or
of any breach of any other provision of this Agreement. The
failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions shall not be considered a
waiver or deprive that party of the right thereafter to insist
upon strict adherence to that term or any other term of this
Agreement.
(c) Choice of Law and Forum. This Agreement shall be
governed by and construed in accordance with the laws of the
State of California, except to the extent preempted by the laws
of the United States, including, but not limited to, the National
Bank Act. Any action or proceeding brought upon or arising out
of this Agreement or its termination or the termination of
Employee's employment shall be brought in a forum located within
the State of California.
(d) Binding Effect of Agreement. This Agreement shall
inure to the benefit of and be binding upon Employer, its
successors and assigns, including without limitation, any person,
partnership or corporation which may acquire all or substantially
all of Employer's assets and business or with or into which
Employer or its subsidiary banks may be consolidated, merged or
otherwise reorganized, and this provision shall apply in the
event of any subsequent merger, consolidation reorganization or
transfer. The provisions of this Agreement shall be binding upon
and inure to the benefit of Employee and his heirs and personal
representatives. The rights and obligations of Employee under
this Agreement shall not be transferable by Employee by
assignment or otherwise and such rights shall not be subject to
commutation, encumbrance or the claims of Employee's creditors,
and any attempt to do any of the foregoing shall be void.
(e) Indemnification. Employer and its subsidiary
banks shall indemnify Employee to the maximum extent permitted
under their articles of association, bylaws and applicable law
for any liability or loss arising out of Employee's actual or
asserted misfeasance or nonfeasance in the good faith performance
of his duties or out of any actual or asserted wrongful act
against or by Employer, including, but not limited to, judgments,
fines, settlements and expenses incurred in the defense of
actions, proceedings and appeals therefrom. If available at
reasonable rates, which shall be determined by the Employer in
its sole discretion, Employer shall endeavor to apply for and
obtain directors' and officers' liability insurance to indemnify
and insure Employer and Employee from such liability or loss.
(f) Severability. In the event that any term or
condition contained in this Agreement shall, for any reason be
held by a court of competent jurisdiction to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other term or condition of
this Agreement, but this Agreement shall be construed as if such
invalid or illegal or unenforceable term or condition had never
been contained herein.
(g) Headings. The headings in this Agreement are
solely for convenience of reference and shall be given no effect
in the construction or interpretation of this Agreement.
(h) Notices. Any notices to be given hereunder by any
party to another party may be effected either by personal
delivery, in writing or by mail, registered or certified, postage
prepaid with return receipt requested. Mailed notices shall be
addressed to the parties at the addresses indicated at the end of
this Agreement, but each party may change his or her address by
written notice in accordance with this paragraph. Notices
delivered personally shall be deemed communicated as of actual
receipt; mailed notices shall be deemed communicated as of five
(5) days after mailing.
(i) Arbitration. Any controversy or claim arising out
of or relating to this Agreement or alleged breach of this
Agreement or in any way arising out of the termination of
Employee's employment shall be settled by arbitration in
accordance with the then current Employment Dispute Resolution
Rules of the American Arbitration Association, and judgment on
the award rendered by the arbitrators may be entered in any court
having jurisdiction. Each party shall pay the fees of the
arbitrator he/it selects and of his/its own attorneys, and the
expenses of his/its witnesses and all other expenses connected
with presenting his/its case. Except as otherwise required by
law, other costs of the arbitration, including the cost of any
record or transcripts of the arbitration, administrative fees and
all other fees and costs shall be borne equally by the parties.
Full discovery shall be permitted to the parties to any such
arbitration, including depositions of all relevant witnesses.
(j) Attorneys' Fees and Costs. If any action at law
or in equity is brought by a party upon or arising out of this
Agreement, its termination or the termination of Employee's
employment, the prevailing party shall be entitled to reasonable
attorneys' fees, costs and necessary disbursements incurred in
the action, in addition to any other relief to which it may be
entitled.
13. Change in Control. A "Change in Control" shall be
deemed to have occurred if the conditions set forth in any one of
the following paragraphs shall have been satisfied:
(a) after the date of this Agreement, any Person (as
defined below) becomes the Beneficial Owner (as defined below),
directly or indirectly, of securities of Employer representing
25% or more of the combined voting power of Employer's then
outstanding securities; or
(b) during any period of two consecutive years (not
including any period prior to the date of this Agreement),
individuals who at the beginning of such period constitute the
Board and any new director (other than a director designated by a
Person who has entered into an agreement with Employer to effect
a transaction described in this Paragraph 13) whose election by
the Board or nomination for election by Employer's shareholders
was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to
constitute a majority thereof; or
(c) the shareholders of Employer approve a merger or
consolidation of Employer with any other corporation, other than
(i) a merger or consolidation which would result in the voting
securities of Employer outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity),
in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of
Employer, at least 51% of the combined voting power of the voting
securities of Employer or such surviving entity outstanding
immediately after such merger or consolidation, or (ii) a merger
or consolidation effected to implement a recapitalization of
Employer (or similar transaction) in which no Person acquires
more than 49% of the combined voting power of Employer's then
outstanding securities; or
(d) the shareholders of Employer approve a plan of
complete liquidation of Employer or an agreement for the sale or
disposition by Employer of all or substantially all of Employer's
assets.
For the purposes of this Paragraph 13, "Person" shall have
the meaning given in Section 3(a)(9) of the Securities Exchange
Act of 1934 as amended (the "Exchange Act"), as modified and used
in Sections 13(d) and 14(d) thereof; however, a Person shall not
include (i) Employer or any of its subsidiaries, (ii) a trustee
or other fiduciary holding securities under an employee benefit
plan of the company or any of its subsidiaries, or (iii) an
underwriter temporarily holding securities pursuant to an
offering of such securities. "Beneficial Owner" shall have the
meaning defined in Rule 13d-3 under the Exchange Act.
14. Code. "Code" means the Internal Revenue Code of 1986,
as amended from time to time, and any regulations relating
thereto.
The parties hereto have executed this Agreement as of the
date first written above, in the City of Salinas, County of
Monterey, State of California.
EMPLOYER: PACIFIC CAPITAL BANCORP
By: /s/ Robert B. Sheppard
Its: Chairman, Human Resources Committee
EMPLOYEE: /s/ D. Vernon Horton
D. Vernon Horton
19535 Redding Dr.
Salinas, CA 93908
EMPLOYMENT AGREEMENT
This Employment Agreement (hereinafter referred to as
"Agreement") is made effective as of August 26, 1997, by and
between PACIFIC CAPITAL BANCORP (hereinafter referred to as
"Employer") and DENNIS A. DECIUS (hereinafter referred to as
"Employee").
Employer desires to employ, as its President and as an
executive officer of its subsidiary banks, a person of high
executive caliber with significant prior experience in banking
services which Employer and its subsidiary banks provide.
Employee being willing to be employed by Employer as
indicated herein, and Employer being willing to employ Employee
on the terms, covenants and conditions hereinafter set forth, it
is agreed as follows:
1. Position. Employee is hereby employed as Executive
Vice President and Chief Financial Officer and in such additional
executive positions with Employer and Employer's subsidiary banks
as Employer may designate from time to time.
2. Employment Term. The term of this Agreement shall
commence effective August 26, 1997, and continue for three (3)
years thereafter through August 25, 2000, unless earlier
terminated pursuant to Paragraph 6 below, either such period
being the term of this Agreement.
3. Employee Duties. Employee shall hold and perform the
customary responsibilities and duties of his positions as
designated by the Bylaws of Employer and the subsidiary banks and
as directed by Employer and the subsidiary banks through their
Boards of Directors (hereinafter collectively referred to as the
"Board").
4. Extent of Services. Employee shall devote his full
time, attention and energies to the business of Employer and the
subsidiary banks, and shall not, during the term of this
Agreement, engage directly or indirectly, in any other business
activity, except personal investments, without the prior written
consent of Employer.
5. Compensation and Benefits. Employee's salary shall be
at the rate of $125,408.00 per year, prorated for any partial
year in which this Agreement is in effect (as such salary may be
adjusted during the term of this Agreement, the "Base Salary").
Said salary shall be payable in equal semi-monthly installments
from which Employer will withhold and deduct all applicable
federal and state income, social security and disability taxes as
required by applicable law. Any salary increase shall be at the
sole discretion of the Board. Employer agrees to review and
evaluate Employee's performance at the end of each fiscal year to
determine whether Employee should be paid a cash bonus (the
"Bonus"). The amount of the Bonus, if any, will be determined in
the sole discretion of the Board. In addition, Employee shall
receive the following benefits:
(a) Automobile. Employer shall provide Employee with
a full-size automobile, the make, model and equipment of which
shall be determined by Employer, solely for his use alone during
the term of this Agreement. Employer shall pay or reimburse
Employee for all auto expenses incurred in the use of said
automobile by Employee in the performance of his duties under
this Agreement. Employer shall maintain an automobile liability
insurance policy on said automobile, with coverage to include
Employee's operation of said automobile and in such amounts as
Employer and Employee shall agree upon.
(b) Insurance. Upon meeting all eligibility
requirements, Employee shall be a participant in such group life
insurance, health and long-term disability plans as are
maintained by Employer, at Employer's sole cost and expense. In
addition, Employer shall, at its sole cost and expense, provide
Employee with a copy of standard term life insurance in the face
amount to be determined by Employer but which in no event shall
be less than $250,000. Employee shall have the right, in
Employee's sole discretion, to designate the beneficiary or
beneficiaries of any such insurance.
(c) Vacation. Employee shall accrue four (4) weeks
paid vacation per year, prorated for any partial calendar year in
which this Agreement is in effect, which shall be taken at such
time or times as mutually agreed upon by Employee and the Board,
provided that at least two (2) weeks of such vacation shall be
taken consecutively per calendar year. Employee acknowledges
that the requirement of two (2) consecutive weeks of vacation is
required by sound banking practices.
(d) General Expenses. Employer shall, upon submission
and approval of written statements and bills in accordance with
the then-regular procedures of Employer, pay or reimburse
Employee for any and all necessary, customary and usual expenses
incurred by him while traveling for or on behalf of Employer or
its subsidiary banks and any and all other necessary, customary
or usual expenses (including entertainment) incurred by employee
for or on behalf of Employer or its subsidiary banks in the
normal course of business as determined to be appropriate by
Employer.
(e) Other Benefits. In the event that Employer or its
subsidiary banks in the future establish any other benefit plan
for senior executives generally, Employee shall be eligible to
participate in such plan on the terms and conditions stated in
the legal documents for such plan.
6. Termination. This Agreement may be terminated prior to
August 25, 2000, with or without cause in accordance with this
Paragraph 6(a) through 6(g). In the event of such termination,
Employee shall be released from all obligations under this
Agreement, except that Employee shall remain subject to
Paragraphs 7, 8, 12 (c), 12 (i) and 12 (j), and Employer shall be
released from all obligations under this Agreement, except as
otherwise provided in this Paragraph and Paragraphs 12(c), 12(e),
12(i) and 12 (j).
(a) Early Termination By Employer Without Cause. This
Agreement may be terminated without cause, for any reason
whatsoever, in the sole, absolute and unreviewable discretion of
Employer, upon thirty (30) days' written notice by Employer to
Employee. If this Agreement is terminated pursuant to this
Paragraph 6(a) or the term of this Agreement is not extended upon
expiration thereof, Employee shall receive (i) three (3) times
the annual Base Salary and Bonus as defined in Paragraph 5 of
this Agreement for the average of the three years immediately
preceding the date of such termination which amount shall be due
and payable to Employee on the date of such termination together
with any Base Salary and Bonus earned to such date and (ii)
medical and life insurance coverage for one (1) year from the
date of such termination. The foregoing shall be in full and
complete satisfaction of any and all rights which Employee may
enjoy under this Agreement and shall be the sole compensation
and/or damages payable to Employee as the result of termination
of this Agreement without cause.
(b) Early Termination By Employer For Cause. This
Agreement may be terminated for cause by Employer immediately
upon written notice to Employee, and Employee shall not be
entitled to receive compensation or other benefits for any period
after termination for cause. Employer's total liability to
Employee in the event of termination of Employee's employment
under this Paragraph 6(b) shall be limited to the payment of
Employee's Base Salary through the effective date of termination.
Employee understands and agrees that satisfactory performance of
this Agreement on his part requires conformance with the highest
standards of integrity, diligence, competence, skill, judgment
and efficiency in the banking industry and that failure to
conform to such standards is cause for termination of the
Agreement by Employer. Cause for termination pursuant to this
Paragraph 6(b) also includes: (1) failure to qualify for a surety
bond as provided in Paragraph 11 of this Agreement; (2) violation
of any law, rule or regulation (other than a traffic violation or
similar offense); (3) acts causing termination of Employer's
Banker's Blanket Bond with respect to Employee; (4) repeated
insobriety or use of drugs without prescription, (5)
misappropriation of property of Employer or its subsidiary banks;
(6) any act of dishonesty; (7) neglect of duties or negligence in
carrying out duties; (8) repeated unexcused absence; (9) breach
of any material provision of this Agreement; and (10) any act or
omission that is seriously detrimental to the interests of
Employer or its subsidiary banks.
(c) Early Termination By Employee. This Agreement may
be terminated by Employee upon thirty (30) days' written notice
to Employer. Employer's total liability in such event shall be
limited to payment of Employee's Base Salary and benefits through
the date of termination.
(d) Early Termination Upon Disability. If Employee
becomes disabled due to a physical or mental disability so that
he is unable to perform the essential functions of his position
and the disability cannot be reasonably accommodated without
undue hardship, Employer may at its option terminate this
Agreement. Employee shall be entitled to the salary provided for
in Paragraph 5 of this Agreement for a period of not to exceed
six (6) months from the date of Employee's first absence due to
the condition or illness causing or related to the disability,
but not beyond August 25, 2000, and to accrued but unused
vacation leave. Employee's Base Salary in the event of
disability and termination under this Paragraph 6(b) shall be
offset by any payments received by Employee as a result of a
disability insurance policy purchased by Employer or its
subsidiary banks for Employee. All other benefits provided for
under this Agreement shall cease as of the date of termination.
For purposes of this Agreement, physical or mental disability
shall mean the inability of Employee to fully perform under this
Agreement for a continuous period of ninety (90) days, as
determined by a physician in the case of physical disability, or
a psychiatrist in the case of mental disability, licensed to
practice medicine in California and selected jointly by Employer
and Employee. Upon demand by Employer, Employee shall act
promptly to select such physician or psychiatrist jointly with
Employer, shall consent to undergo any reasonable examination or
test and shall authorize release of all pertinent medical records
to Employer. Recurrent disabilities will be treated as separate
disabilities if they result from unrelated causes or if they
result from the same or related cause or causes and are separated
by a continuous period of at least six (6) full months during
which Employee was able to perform his duties hereunder equal to
at least eighty percent (80%) of his capacity prior to
disability. Otherwise, recurrent disabilities will be treated as
a continuation of previous disabilities for the purpose of
determining the limitations established in this paragraph.
(e) Death During Employment. This Agreement shall
terminate immediately upon the death of Employee. Employer's
total liability in such events shall be limited to payment of
Employee's Base Salary and benefits through the date of
Employee's death.
(f) Change in Control. In the event of a Change in
Control (as defined in Paragraph 13 below), Employee shall
receive (i) one and a half (1.5) times the annual Base Salary and
Bonus as defined in Paragraph 5 of this Agreement for the average
of the three years immediately preceding the effective time of
such Change in Control, which amount shall be due and payable to
Employee at the effective time of such Change in Control together
with any Base Salary and Bonus earned to such date, (ii) medical
and life insurance coverage for two (2) years from the date of
such termination and (iii) up to Fifteen Thousand Dollars
($15,000) in outplacement services for Employee to be paid by
Employer directly to any such outplacement service.
(g) Limitation of Termination Payments.
Notwithstanding any other provisions of this Agreement, in the
event that any payments or benefits received or to be received by
Employee in connection with a termination pursuant to Paragraph 6
hereof, (all such payments and benefits being hereinafter called
"Total Payments") would not be deductible (in whole or part), by
Employer, as a result of Section 280G of the Code (as defined in
Paragraph 14 below), then, to the extent necessary to make such
portion of the Total Payments deductible (and after taking into
account any other reduction in the Total Payments provided by
reason of Section 280G of the Code), (i) the cash payments shall
first be reduced (if necessary, to zero), and (ii) all other non-
cash payments shall next be reduced (if necessary, to zero). For
purposes of this limitation (i) no portion of the Total Payments,
the receipt or enjoyment of which Employee shall have effectively
waived in writing prior to the date of termination, shall be
taken into account, (ii) no portion of the Total Payments shall
be taken into account which in the opinion of tax counsel
selected by Employer's independent auditors and reasonably
acceptable to Employee, does not constitute a "parachute payment"
within the meaning of Section 280G(b)(2) of the Code, including
by reason of Section 280G(b)(4)(A) of the Code, (iii) the
payments shall be reduced only to the extent necessary so that
the Total Payments (other than those referred to in clauses (i)
or (ii) of this sentence) in their entirety constitute reasonable
compensation for services actually rendered within the meaning of
Section 280G(b)(4)(B) of the Code and proposed Reg. Section 1-
280G-1, Q&A-42(b)(5), or are otherwise not subject to
disallowance as deductions, in the opinion of the tax counsel
referred to in clause (ii); and (iv) the value of any non-cash
benefit or any deferred payment or benefit included in the Total
Payments shall be determined by Employer's independent auditors
in accordance with the principles of Sections 280G(d)(3) and (4)
of the Code.
7. Printed Material. All written or printed materials
used by Employee in performing duties for Employer are and shall
remain the property of Employer. Upon termination of employment,
Employee shall promptly return such written or printed materials
to Employer.
8. Disclosure of Information. Employee recognizes and
acknowledges that Employer and its subsidiary banks possess
information concerning their business affairs and methods of
operation which constitute valuable, special and unique assets of
their businesses. Employee shall not, at any time before or
after termination of this Agreement, disclose to anyone any
confidential information relating to Employer, its subsidiary
banks or any affiliate thereof. For purpose of this paragraph,
confidential information includes all information regarding
products, services, processes, know-how, customers, suppliers,
product and/or service development, business plans, research,
finances, marketing, pricing, costs and any other proprietary
matters relating to Employer, its subsidiary banks or any
affiliate thereof. Employee recognizes and acknowledges that all
financial information concerning any of the customers of
Employer's subsidiary banks is strictly confidential, and
Employee shall not at any time before or after termination of
this Agreement disclose to anyone any such financial information
or any part thereof, for any reason or purpose whatsoever.
9. Noncompetition by Employee. During the term of this
Agreement, Employee shall not, directly or indirectly, either as
an employee, employer, consultant, agent, principal, partner,
stockholder, corporate officer, director, or in any other
individual or representative capacity, engage or participate in
any competing banking business; provided, however, Employee shall
not be restricted by this paragraph from owning securities of
corporations listed on a national securities exchange or
regularly traded by national securities dealers, so long as such
investment does not exceed one percent (1%) of the market value
of the outstanding securities of such corporation.
10. Moral Conduct. 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 degrade him or to bring him into public
hatred, contempt or ridicule or that will reasonably tend to
shock or offend the community or to prejudice Employer, its
subsidiary banks or the banking industry in general.
11. Surety Bond. Employee agrees that he will furnish all
information and take any steps necessary to enable Employer or
its subsidiary banks to obtain or maintain a fidelity bond,
satisfactory to Employer, 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 this employment. Employer or its subsidiary
banks shall pay all premiums on the bond. 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.
12. General Provisions. This Agreement is further governed
by the following provisions:
(a) Entire Agreement. This Agreement supersedes any
and all other agreements, either oral or in writing, among the
parties hereto with respect to the employment of Employee by
Employer and contains all of the covenants and agreements among
the parties with respect to such employment. Each party
acknowledges that no representations, inducements, promises or
agreements, oral or otherwise, have been made by any party or
anyone acting on behalf of a party which are not embodied herein,
and that no other agreement, statement, representation,
inducement or promise not contained in this Agreement shall be
valid or binding. Any modification, waiver or amendment of this
Agreement will be effective only if it is in writing and signed
by the party to be charged.
(b) Waiver. Any waiver by any party of a breach of
any provision of this Agreement shall not operate as or be
construed to be a waiver of any other breach of such provision or
of any breach of any other provision of this Agreement. The
failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions shall not be considered a
waiver or deprive that party of the right thereafter to insist
upon strict adherence to that term or any other term of this
Agreement.
(c) Choice of Law and Forum. This Agreement shall be
governed by and construed in accordance with the laws of the
State of California, except to the extent preempted by the laws
of the United States, including, but not limited to, the National
Bank Act. Any action or proceeding brought upon or arising out
of this Agreement or its termination or the termination of
Employee's employment shall be brought in a forum located within
the State of California.
(d) Binding Effect of Agreement. This Agreement shall
inure to the benefit of and be binding upon Employer, its
successors and assigns, including without limitation, any person,
partnership or corporation which may acquire all or substantially
all of Employer's assets and business or with or into which
Employer or its subsidiary banks may be consolidated, merged or
otherwise reorganized, and this provision shall apply in the
event of any subsequent merger, consolidation reorganization or
transfer. The provisions of this Agreement shall be binding upon
and inure to the benefit of Employee and his heirs and personal
representatives. The rights and obligations of Employee under
this Agreement shall not be transferable by Employee by
assignment or otherwise and such rights shall not be subject to
commutation, encumbrance or the claims of Employee's creditors,
and any attempt to do any of the foregoing shall be void.
(e) Indemnification. Employer and its subsidiary
banks shall indemnify Employee to the maximum extent permitted
under their articles of association, bylaws and applicable law
for any liability or loss arising out of Employee's actual or
asserted misfeasance or nonfeasance in the good faith performance
of his duties or out of any actual or asserted wrongful act
against or by Employer, including, but not limited to, judgments,
fines, settlements and expenses incurred in the defense of
actions, proceedings and appeals therefrom. If available at
reasonable rates, which shall be determined by the Employer in
its sole discretion, Employer shall endeavor to apply for and
obtain directors' and officers' liability insurance to indemnify
and insure Employer and Employee from such liability or loss.
(f) Severability. In the event that any term or
condition contained in this Agreement shall, for any reason be
held by a court of competent jurisdiction to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other term or condition of
this Agreement, but this Agreement shall be construed as if such
invalid or illegal or unenforceable term or condition had never
been contained herein.
(g) Headings. The headings in this Agreement are
solely for convenience of reference and shall be given no effect
in the construction or interpretation of this Agreement.
(h) Notices. Any notices to be given hereunder by any
party to another party may be effected either by personal
delivery, in writing or by mail, registered or certified, postage
prepaid with return receipt requested. Mailed notices shall be
addressed to the parties at the addresses indicated at the end of
this Agreement, but each party may change his or her address by
written notice in accordance with this paragraph. Notices
delivered personally shall be deemed communicated as of actual
receipt; mailed notices shall be deemed communicated as of five
(5) days after mailing.
(i) Arbitration. Any controversy or claim arising out
of or relating to this Agreement or alleged breach of this
Agreement or in any way arising out of the termination of
Employee's employment shall be settled by arbitration in
accordance with the then current Employment Dispute Resolution
Rules of the American Arbitration Association, and judgment on
the award rendered by the arbitrators may be entered in any court
having jurisdiction. Each party shall pay the fees of the
arbitrator he/it selects and of his/its own attorneys, and the
expenses of his/its witnesses and all other expenses connected
with presenting his/its case. Except as otherwise required by
law, other costs of the arbitration, including the cost of any
record or transcripts of the arbitration, administrative fees and
all other fees and costs shall be borne equally by the parties.
Full discovery shall be permitted to the parties to any such
arbitration, including depositions of all relevant witnesses.
(j) Attorneys' Fees and Costs. If any action at law
or in equity is brought by a party upon or arising out of this
Agreement, its termination or the termination of Employee's
employment, the prevailing party shall be entitled to reasonable
attorneys' fees, costs and necessary disbursements incurred in
the action, in addition to any other relief to which it may be
entitled.
13. Change in Control. A "Change in Control" shall be
deemed to have occurred if the conditions set forth in any one of
the following paragraphs shall have been satisfied:
(a) after the date of this Agreement, any Person (as
defined below) becomes the Beneficial Owner (as defined below),
directly or indirectly, of securities of Employer representing
25% or more of the combined voting power of Employer's then
outstanding securities; or
(b) during any period of two consecutive years (not
including any period prior to the date of this Agreement),
individuals who at the beginning of such period constitute the
Board and any new director (other than a director designated by a
Person who has entered into an agreement with Employer to effect
a transaction described in this Paragraph 13) whose election by
the Board or nomination for election by Employer's shareholders
was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to
constitute a majority thereof; or
(c) the shareholders of Employer approve a merger or
consolidation of Employer with any other corporation, other than
(i) a merger or consolidation which would result in the voting
securities of Employer outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity),
in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of
Employer, at least 51% of the combined voting power of the voting
securities of Employer or such surviving entity outstanding
immediately after such merger or consolidation, or (ii) a merger
or consolidation effected to implement a recapitalization of
Employer (or similar transaction) in which no Person acquires
more than 49% of the combined voting power of Employer's then
outstanding securities; or
(d) the shareholders of Employer approve a plan of
complete liquidation of Employer or an agreement for the sale or
disposition by Employer of all or substantially all of Employer's
assets.
For the purposes of this Paragraph 13, "Person" shall have
the meaning given in Section 3(a)(9) of the Securities Exchange
Act of 1934 as amended (the "Exchange Act"), as modified and used
in Sections 13(d) and 14(d) thereof; however, a Person shall not
include (i) Employer or any of its subsidiaries, (ii) a trustee
or other fiduciary holding securities under an employee benefit
plan of the company or any of its subsidiaries, or (iii) an
underwriter temporarily holding securities pursuant to an
offering of such securities. "Beneficial Owner" shall have the
meaning defined in Rule 13d-3 under the Exchange Act.
14. Code. "Code" means the Internal Revenue Code of 1986,
as amended from time to time, and any regulations relating
thereto.
The parties hereto have executed this Agreement as of the
date first written above, in the City of Salinas, County of
Monterey, State of California.
EMPLOYER: PACIFIC CAPITAL BANCORP
By: /s/ Robert B. Sheppard
Its: Chairman, Human Resources Committee
EMPLOYEE: /s/ Dennis A. DeCius
Dennis A. DeCius
182 Kern St. #42
Salinas, CA 93905
EMPLOYMENT AGREEMENT
This Employment Agreement (hereinafter referred to as
"Agreement") is made effective as of August 26, 1997, by and
between PACIFIC CAPITAL BANCORP (hereinafter referred to as
"Employer") and DALE R. DIEDERICK (hereinafter referred to as
"Employee").
Employer desires to employ, as its President and as an
executive officer of its subsidiary banks, a person of high
executive caliber with significant prior experience in banking
services which Employer and its subsidiary banks provide.
Employee being willing to be employed by Employer as
indicated herein, and Employer being willing to employ Employee
on the terms, covenants and conditions hereinafter set forth, it
is agreed as follows:
1. Position. Employee is hereby employed as Executive
Vice President and Credit Administrator and in such additional
executive positions with Employer and Employer's subsidiary banks
as Employer may designate from time to time.
2. Employment Term. The term of this Agreement shall
commence effective August 26, 1997, and continue for three (3)
years thereafter through August 25, 2000, unless earlier
terminated pursuant to Paragraph 6 below, either such period
being the term of this Agreement.
3. Employee Duties. Employee shall hold and perform the
customary responsibilities and duties of his positions as
designated by the Bylaws of Employer and the subsidiary banks and
as directed by Employer and the subsidiary banks through their
Boards of Directors (hereinafter collectively referred to as the
"Board").
4. Extent of Services. Employee shall devote his full
time, attention and energies to the business of Employer and the
subsidiary banks, and shall not, during the term of this
Agreement, engage directly or indirectly, in any other business
activity, except personal investments, without the prior written
consent of Employer.
5. Compensation and Benefits. Employee's salary shall be
at the rate of $102,624.00 per year, prorated for any partial
year in which this Agreement is in effect (as such salary may be
adjusted during the term of this Agreement, the "Base Salary").
Said salary shall be payable in equal semi-monthly installments
from which Employer will withhold and deduct all applicable
federal and state income, social security and disability taxes as
required by applicable law. Any salary increase shall be at the
sole discretion of the Board. Employer agrees to review and
evaluate Employee's performance at the end of each fiscal year to
determine whether Employee should be paid a cash bonus (the
"Bonus"). The amount of the Bonus, if any, will be determined in
the sole discretion of the Board. In addition, Employee shall
receive the following benefits:
(a) Automobile. Employer shall provide Employee with
a full-size automobile, the make, model and equipment of which
shall be determined by Employer, solely for his use alone during
the term of this Agreement. Employer shall pay or reimburse
Employee for all auto expenses incurred in the use of said
automobile by Employee in the performance of his duties under
this Agreement. Employer shall maintain an automobile liability
insurance policy on said automobile, with coverage to include
Employee's operation of said automobile and in such amounts as
Employer and Employee shall agree upon.
(b) Insurance. Upon meeting all eligibility
requirements, Employee shall be a participant in such group life
insurance, health and long-term disability plans as are
maintained by Employer, at Employer's sole cost and expense. In
addition, Employer shall, at its sole cost and expense, provide
Employee with a copy of standard term life insurance in the face
amount to be determined by Employer but which in no event shall
be less than $250,000. Employee shall have the right, in
Employee's sole discretion, to designate the beneficiary or
beneficiaries of any such insurance.
(c) Vacation. Employee shall accrue four (4) weeks
paid vacation per year, prorated for any partial calendar year in
which this Agreement is in effect, which shall be taken at such
time or times as mutually agreed upon by Employee and the Board,
provided that at least two (2) weeks of such vacation shall be
taken consecutively per calendar year. Employee acknowledges
that the requirement of two (2) consecutive weeks of vacation is
required by sound banking practices.
(d) General Expenses. Employer shall, upon submission
and approval of written statements and bills in accordance with
the then-regular procedures of Employer, pay or reimburse
Employee for any and all necessary, customary and usual expenses
incurred by him while traveling for or on behalf of Employer or
its subsidiary banks and any and all other necessary, customary
or usual expenses (including entertainment) incurred by employee
for or on behalf of Employer or its subsidiary banks in the
normal course of business as determined to be appropriate by
Employer.
(e) Other Benefits. In the event that Employer or its
subsidiary banks in the future establish any other benefit plan
for senior executives generally, Employee shall be eligible to
participate in such plan on the terms and conditions stated in
the legal documents for such plan.
6. Termination. This Agreement may be terminated prior to
August 25, 2000, with or without cause in accordance with this
Paragraph 6(a) through 6(g). In the event of such termination,
Employee shall be released from all obligations under this
Agreement, except that Employee shall remain subject to
Paragraphs 7, 8, 12 (c), 12 (i) and 12 (j), and Employer shall be
released from all obligations under this Agreement, except as
otherwise provided in this Paragraph and Paragraphs 12(c), 12(e),
12(i) and 12 (j).
(a) Early Termination By Employer Without Cause. This
Agreement may be terminated without cause, for any reason
whatsoever, in the sole, absolute and unreviewable discretion of
Employer, upon thirty (30) days' written notice by Employer to
Employee. If this Agreement is terminated pursuant to this
Paragraph 6(a) or the term of this Agreement is not extended upon
expiration thereof, Employee shall receive (i) three (3) times
the annual Base Salary and Bonus as defined in Paragraph 5 of
this Agreement for the average of the three years immediately
preceding the date of such termination which amount shall be due
and payable to Employee on the date of such termination together
with any Base Salary and Bonus earned to such date and (ii)
medical and life insurance coverage for one (1) year from the
date of such termination. The foregoing shall be in full and
complete satisfaction of any and all rights which Employee may
enjoy under this Agreement and shall be the sole compensation
and/or damages payable to Employee as the result of termination
of this Agreement without cause.
(b) Early Termination By Employer For Cause. This
Agreement may be terminated for cause by Employer immediately
upon written notice to Employee, and Employee shall not be
entitled to receive compensation or other benefits for any period
after termination for cause. Employer's total liability to
Employee in the event of termination of Employee's employment
under this Paragraph 6(b) shall be limited to the payment of
Employee's Base Salary through the effective date of termination.
Employee understands and agrees that satisfactory performance of
this Agreement on his part requires conformance with the highest
standards of integrity, diligence, competence, skill, judgment
and efficiency in the banking industry and that failure to
conform to such standards is cause for termination of the
Agreement by Employer. Cause for termination pursuant to this
Paragraph 6(b) also includes: (1) failure to qualify for a surety
bond as provided in Paragraph 11 of this Agreement; (2) violation
of any law, rule or regulation (other than a traffic violation or
similar offense); (3) acts causing termination of Employer's
Banker's Blanket Bond with respect to Employee; (4) repeated
insobriety or use of drugs without prescription, (5)
misappropriation of property of Employer or its subsidiary banks;
(6) any act of dishonesty; (7) neglect of duties or negligence in
carrying out duties; (8) repeated unexcused absence; (9) breach
of any material provision of this Agreement; and (10) any act or
omission that is seriously detrimental to the interests of
Employer or its subsidiary banks.
(c) Early Termination By Employee. This Agreement may
be terminated by Employee upon thirty (30) days' written notice
to Employer. Employer's total liability in such event shall be
limited to payment of Employee's Base Salary and benefits through
the date of termination.
(d) Early Termination Upon Disability. If Employee
becomes disabled due to a physical or mental disability so that
he is unable to perform the essential functions of his position
and the disability cannot be reasonably accommodated without
undue hardship, Employer may at its option terminate this
Agreement. Employee shall be entitled to the salary provided for
in Paragraph 5 of this Agreement for a period of not to exceed
six (6) months from the date of Employee's first absence due to
the condition or illness causing or related to the disability,
but not beyond August 25, 2000, and to accrued but unused
vacation leave. Employee's Base Salary in the event of
disability and termination under this Paragraph 6(b) shall be
offset by any payments received by Employee as a result of a
disability insurance policy purchased by Employer or its
subsidiary banks for Employee. All other benefits provided for
under this Agreement shall cease as of the date of termination.
For purposes of this Agreement, physical or mental disability
shall mean the inability of Employee to fully perform under this
Agreement for a continuous period of ninety (90) days, as
determined by a physician in the case of physical disability, or
a psychiatrist in the case of mental disability, licensed to
practice medicine in California and selected jointly by Employer
and Employee. Upon demand by Employer, Employee shall act
promptly to select such physician or psychiatrist jointly with
Employer, shall consent to undergo any reasonable examination or
test and shall authorize release of all pertinent medical records
to Employer. Recurrent disabilities will be treated as separate
disabilities if they result from unrelated causes or if they
result from the same or related cause or causes and are separated
by a continuous period of at least six (6) full months during
which Employee was able to perform his duties hereunder equal to
at least eighty percent (80%) of his capacity prior to
disability. Otherwise, recurrent disabilities will be treated as
a continuation of previous disabilities for the purpose of
determining the limitations established in this paragraph.
(e) Death During Employment. This Agreement shall
terminate immediately upon the death of Employee. Employer's
total liability in such events shall be limited to payment of
Employee's Base Salary and benefits through the date of
Employee's death.
(f) Change in Control. In the event of a Change in
Control (as defined in Paragraph 13 below), Employee shall
receive (i) one and a half (1.5) times the annual Base Salary and
Bonus as defined in Paragraph 5 of this Agreement for the average
of the three years immediately preceding the effective time of
such Change in Control, which amount shall be due and payable to
Employee at the effective time of such Change in Control together
with any Base Salary and Bonus earned to such date, (ii) medical
and life insurance coverage for two (2) years from the date of
such termination and (iii) up to Fifteen Thousand Dollars
($15,000) in outplacement services for Employee to be paid by
Employer directly to any such outplacement service.
(g) Limitation of Termination Payments.
Notwithstanding any other provisions of this Agreement, in the
event that any payments or benefits received or to be received by
Employee in connection with a termination pursuant to Paragraph 6
hereof, (all such payments and benefits being hereinafter called
"Total Payments") would not be deductible (in whole or part), by
Employer, as a result of Section 280G of the Code (as defined in
Paragraph 14 below), then, to the extent necessary to make such
portion of the Total Payments deductible (and after taking into
account any other reduction in the Total Payments provided by
reason of Section 280G of the Code), (i) the cash payments shall
first be reduced (if necessary, to zero), and (ii) all other non-
cash payments shall next be reduced (if necessary, to zero). For
purposes of this limitation (i) no portion of the Total Payments,
the receipt or enjoyment of which Employee shall have effectively
waived in writing prior to the date of termination, shall be
taken into account, (ii) no portion of the Total Payments shall
be taken into account which in the opinion of tax counsel
selected by Employer's independent auditors and reasonably
acceptable to Employee, does not constitute a "parachute payment"
within the meaning of Section 280G(b)(2) of the Code, including
by reason of Section 280G(b)(4)(A) of the Code, (iii) the
payments shall be reduced only to the extent necessary so that
the Total Payments (other than those referred to in clauses (i)
or (ii) of this sentence) in their entirety constitute reasonable
compensation for services actually rendered within the meaning of
Section 280G(b)(4)(B) of the Code and proposed Reg. Section 1-
280G-1, Q&A-42(b)(5), or are otherwise not subject to
disallowance as deductions, in the opinion of the tax counsel
referred to in clause (ii); and (iv) the value of any non-cash
benefit or any deferred payment or benefit included in the Total
Payments shall be determined by Employer's independent auditors
in accordance with the principles of Sections 280G(d)(3) and (4)
of the Code.
7. Printed Material. All written or printed materials
used by Employee in performing duties for Employer are and shall
remain the property of Employer. Upon termination of employment,
Employee shall promptly return such written or printed materials
to Employer.
8. Disclosure of Information. Employee recognizes and
acknowledges that Employer and its subsidiary banks possess
information concerning their business affairs and methods of
operation which constitute valuable, special and unique assets of
their businesses. Employee shall not, at any time before or
after termination of this Agreement, disclose to anyone any
confidential information relating to Employer, its subsidiary
banks or any affiliate thereof. For purpose of this paragraph,
confidential information includes all information regarding
products, services, processes, know-how, customers, suppliers,
product and/or service development, business plans, research,
finances, marketing, pricing, costs and any other proprietary
matters relating to Employer, its subsidiary banks or any
affiliate thereof. Employee recognizes and acknowledges that all
financial information concerning any of the customers of
Employer's subsidiary banks is strictly confidential, and
Employee shall not at any time before or after termination of
this Agreement disclose to anyone any such financial information
or any part thereof, for any reason or purpose whatsoever.
9. Noncompetition by Employee. During the term of this
Agreement, Employee shall not, directly or indirectly, either as
an employee, employer, consultant, agent, principal, partner,
stockholder, corporate officer, director, or in any other
individual or representative capacity, engage or participate in
any competing banking business; provided, however, Employee shall
not be restricted by this paragraph from owning securities of
corporations listed on a national securities exchange or
regularly traded by national securities dealers, so long as such
investment does not exceed one percent (1%) of the market value
of the outstanding securities of such corporation.
10. Moral Conduct. 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 degrade him or to bring him into public
hatred, contempt or ridicule or that will reasonably tend to
shock or offend the community or to prejudice Employer, its
subsidiary banks or the banking industry in general.
11. Surety Bond. Employee agrees that he will furnish all
information and take any steps necessary to enable Employer or
its subsidiary banks to obtain or maintain a fidelity bond,
satisfactory to Employer, 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 this employment. Employer or its subsidiary
banks shall pay all premiums on the bond. 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.
12. General Provisions. This Agreement is further governed
by the following provisions:
(a) Entire Agreement. This Agreement supersedes any
and all other agreements, either oral or in writing, among the
parties hereto with respect to the employment of Employee by
Employer and contains all of the covenants and agreements among
the parties with respect to such employment. Each party
acknowledges that no representations, inducements, promises or
agreements, oral or otherwise, have been made by any party or
anyone acting on behalf of a party which are not embodied herein,
and that no other agreement, statement, representation,
inducement or promise not contained in this Agreement shall be
valid or binding. Any modification, waiver or amendment of this
Agreement will be effective only if it is in writing and signed
by the party to be charged.
(b) Waiver. Any waiver by any party of a breach of
any provision of this Agreement shall not operate as or be
construed to be a waiver of any other breach of such provision or
of any breach of any other provision of this Agreement. The
failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions shall not be considered a
waiver or deprive that party of the right thereafter to insist
upon strict adherence to that term or any other term of this
Agreement.
(c) Choice of Law and Forum. This Agreement shall be
governed by and construed in accordance with the laws of the
State of California, except to the extent preempted by the laws
of the United States, including, but not limited to, the National
Bank Act. Any action or proceeding brought upon or arising out
of this Agreement or its termination or the termination of
Employee's employment shall be brought in a forum located within
the State of California.
(d) Binding Effect of Agreement. This Agreement shall
inure to the benefit of and be binding upon Employer, its
successors and assigns, including without limitation, any person,
partnership or corporation which may acquire all or substantially
all of Employer's assets and business or with or into which
Employer or its subsidiary banks may be consolidated, merged or
otherwise reorganized, and this provision shall apply in the
event of any subsequent merger, consolidation reorganization or
transfer. The provisions of this Agreement shall be binding upon
and inure to the benefit of Employee and his heirs and personal
representatives. The rights and obligations of Employee under
this Agreement shall not be transferable by Employee by
assignment or otherwise and such rights shall not be subject to
commutation, encumbrance or the claims of Employee's creditors,
and any attempt to do any of the foregoing shall be void.
(e) Indemnification. Employer and its subsidiary
banks shall indemnify Employee to the maximum extent permitted
under their articles of association, bylaws and applicable law
for any liability or loss arising out of Employee's actual or
asserted misfeasance or nonfeasance in the good faith performance
of his duties or out of any actual or asserted wrongful act
against or by Employer, including, but not limited to, judgments,
fines, settlements and expenses incurred in the defense of
actions, proceedings and appeals therefrom. If available at
reasonable rates, which shall be determined by the Employer in
its sole discretion, Employer shall endeavor to apply for and
obtain directors' and officers' liability insurance to indemnify
and insure Employer and Employee from such liability or loss.
(f) Severability. In the event that any term or
condition contained in this Agreement shall, for any reason be
held by a court of competent jurisdiction to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other term or condition of
this Agreement, but this Agreement shall be construed as if such
invalid or illegal or unenforceable term or condition had never
been contained herein.
(g) Headings. The headings in this Agreement are
solely for convenience of reference and shall be given no effect
in the construction or interpretation of this Agreement.
(h) Notices. Any notices to be given hereunder by any
party to another party may be effected either by personal
delivery, in writing or by mail, registered or certified, postage
prepaid with return receipt requested. Mailed notices shall be
addressed to the parties at the addresses indicated at the end of
this Agreement, but each party may change his or her address by
written notice in accordance with this paragraph. Notices
delivered personally shall be deemed communicated as of actual
receipt; mailed notices shall be deemed communicated as of five
(5) days after mailing.
(i) Arbitration. Any controversy or claim arising out
of or relating to this Agreement or alleged breach of this
Agreement or in any way arising out of the termination of
Employee's employment shall be settled by arbitration in
accordance with the then current Employment Dispute Resolution
Rules of the American Arbitration Association, and judgment on
the award rendered by the arbitrators may be entered in any court
having jurisdiction. Each party shall pay the fees of the
arbitrator he/it selects and of his/its own attorneys, and the
expenses of his/its witnesses and all other expenses connected
with presenting his/its case. Except as otherwise required by
law, other costs of the arbitration, including the cost of any
record or transcripts of the arbitration, administrative fees and
all other fees and costs shall be borne equally by the parties.
Full discovery shall be permitted to the parties to any such
arbitration, including depositions of all relevant witnesses.
(j) Attorneys' Fees and Costs. If any action at law
or in equity is brought by a party upon or arising out of this
Agreement, its termination or the termination of Employee's
employment, the prevailing party shall be entitled to reasonable
attorneys' fees, costs and necessary disbursements incurred in
the action, in addition to any other relief to which it may be
entitled.
13. Change in Control. A "Change in Control" shall be
deemed to have occurred if the conditions set forth in any one of
the following paragraphs shall have been satisfied:
(a) after the date of this Agreement, any Person (as
defined below) becomes the Beneficial Owner (as defined below),
directly or indirectly, of securities of Employer representing
25% or more of the combined voting power of Employer's then
outstanding securities; or
(b) during any period of two consecutive years (not
including any period prior to the date of this Agreement),
individuals who at the beginning of such period constitute the
Board and any new director (other than a director designated by a
Person who has entered into an agreement with Employer to effect
a transaction described in this Paragraph 13) whose election by
the Board or nomination for election by Employer's shareholders
was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to
constitute a majority thereof; or
(c) the shareholders of Employer approve a merger or
consolidation of Employer with any other corporation, other than
(i) a merger or consolidation which would result in the voting
securities of Employer outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity),
in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of
Employer, at least 51% of the combined voting power of the voting
securities of Employer or such surviving entity outstanding
immediately after such merger or consolidation, or (ii) a merger
or consolidation effected to implement a recapitalization of
Employer (or similar transaction) in which no Person acquires
more than 49% of the combined voting power of Employer's then
outstanding securities; or
(d) the shareholders of Employer approve a plan of
complete liquidation of Employer or an agreement for the sale or
disposition by Employer of all or substantially all of Employer's
assets.
For the purposes of this Paragraph 13, "Person" shall have
the meaning given in Section 3(a)(9) of the Securities Exchange
Act of 1934 as amended (the "Exchange Act"), as modified and used
in Sections 13(d) and 14(d) thereof; however, a Person shall not
include (i) Employer or any of its subsidiaries, (ii) a trustee
or other fiduciary holding securities under an employee benefit
plan of the company or any of its subsidiaries, or (iii) an
underwriter temporarily holding securities pursuant to an
offering of such securities. "Beneficial Owner" shall have the
meaning defined in Rule 13d-3 under the Exchange Act.
14. Code. "Code" means the Internal Revenue Code of 1986,
as amended from time to time, and any regulations relating
thereto.
The parties hereto have executed this Agreement as of the
date first written above, in the City of Salinas, County of
Monterey, State of California.
EMPLOYER: PACIFIC CAPITAL BANCORP
By: /s/ Robert B. Sheppard
Its: Chairman, Human Resources Committee
EMPLOYEE: /s/ Dale R. Diederick
Dale R. Diederick
13
AMENDED AND RESTATED
EXECUTIVE SALARY CONTINUATION BENEFITS AGREEMENT
This Agreement was originally made and entered into on
August 22, 1989, by and between FIRST NATIONAL BANK OF
CENTRAL CALIFORNIA, a national banking association (the
"Bank") and CLAYTON C. LARSON (the "Executive"), as modified
on June 22, 1994. PACIFIC CAPITAL BANCORP, a California
corporation and the sole owner of the Bank (the
"Corporation"), and the Executive wish to amend and restate
the prior Agreement in its entirety as of September 23, 1997.
A. The Executive is employed by the Corporation as its
President;
B. The Executive's experience and knowledge of the
affairs of the Corporation and reputation and contacts in the
banking industry are so valuable that the Executive's
continued service is essential for the future growth and
profits of the Corporation and its subsidiaries;
C. It is in the best interest of the Corporation to
arrange terms for continued employment of the Executive so as
to reasonably ensure that the Executive remains in the
Corporation's employment during the Executive's lifetime or
until the age of retirement;
D. The Corporation desires that the Executive's
services be retained as hereinafter provided;
E. The Executive is willing to continue in the employ
of the Corporation, provided that the Corporation agrees to
pay to the Executive or the Executive's Designated
Beneficiaries (as defined below), certain benefits in
accordance with the terms and conditions hereinafter set
forth; and
F. Both the Executive and the Corporation acknowledge
and agree that in order to retain the Executive and provide
him with appropriate benefits, the prior Agreement is amended
and restated in its entirety as follows.
In consideration of the services to be performed in the
future, as well as the mutual promises and covenants herein
contained, it is agreed as follows:
ARTICLE 1
DEFINITIONS
1.1. Change of Control shall be deemed to have occurred
if the conditions set forth in any one of the following
paragraphs shall have been satisfied after the date of this
Agreement:
(a) any Person (as defined below) becomes the
Beneficial Owner (as defined below), directly
or indirectly, of securities of the
Corporation representing 25% or more of the
combined voting power of the Corporation's
then outstanding securities; or
(b) the majority of the Board of Directors of the
Corporation ceases to be comprised of the
members of the Board on the date hereof or the
nominees of such members; or
(c) the shareholders of the Corporation approve a
merger or consolidation of the Corporation
with any other corporation, other than (i) a
merger or consolidation which would result in
the voting securities of the Corporation
outstanding immediately prior thereto
continuing to represent (either by remaining
outstanding or by being converted into voting
securities of the surviving entity), in
combination with the ownership of any trustee
or other fiduciary holding securities under an
employee benefit plan of the Corporation, at
least 51% of the combined voting power of the
voting securities of the Corporation or such
surviving entity outstanding immediately after
such merger or consolidation, or (ii) a merger
or consolidation effected to implement a
recapitalization of the Corporation (or
similar transaction) in which no Person
acquires more than 49% of the combined voting
power of the Corporation's then outstanding
securities; or
(d) the shareholders of the Corporation approve a
plan of complete liquidation of the
Corporation or an agreement for the sale or
disposition by the Corporation of all or
substantially all of the Corporation's assets.
For the purposes of this Paragraph 1.1, "Person" shall
have the meaning given in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as
modified and used in Sections 13(d) and 14(d) thereof;
however, a Person shall not include (i) the Corporation or
any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the
Corporation or any of its subsidiaries, or (iii) an
underwriter temporarily holding securities pursuant to an
offering of such securities. "Beneficial Owner" shall have
the meaning defined in Rule 13d-3 under the Exchange Act.
1.2. Designated Beneficiary shall mean the person or
persons whom the Executive shall designate in a valid
Beneficiary Designation Notice to receive the benefits
provided hereunder. A Beneficiary Designation Notice shall
be valid only if:
(a) it is in the form attached hereto as Exhibit A
and made a part hereof; and
(b) it is received by the Named Fiduciary and Plan
Administrator prior to the Executive's death.
1.2. Disability shall mean an inability to substantially
perform the essential functions of the Executive's position
at the Corporation for a period of one hundred eighty (180)
days due to a physical or mental disability, as determined by
a physician in the case of physical disability, or
psychiatrist in the case of mental disability, licensed to
practice medicine in California and selected jointly by the
Corporation and the Executive.
1.3. Employment Agreement shall mean the written
employment agreement, if any, between the Executive and the
Corporation.
1.4. Named Fiduciary and Plan Administrator shall mean
the Corporation.
1.5. Surviving Spouse shall mean the person, if any, who
is legally married to the Executive on the date of the
Executive's death.
1.6. Termination for Cause shall mean termination of the
employment of the Executive by reason of any of the
following:
(a) willful material breach of duty in the course
of employment unless waived by the
Corporation;
(b) materially dishonest or illegal conduct; or
(c) habitual neglect of duties or habitual
negligence in carrying out duties.
ARTICLE 2
EMPLOYMENT
2.1. Employment. The Corporation agrees to employ the
Executive as President or in such other capacity as the
Corporation may from time to time determine in accordance
with the Employment Agreement with the Executive. The
Executive shall continue in the employ of the Corporation in
such capacity and shall hold and perform the customary
responsibilities and duties of this position as designated by
the Bylaws of the Corporation and as directed by the
Corporation through its Boards of Directors in accordance
with the Employment Agreement. The Executive has a separate
Employment Agreement with the Corporation, and in the event
of any discrepancy or different treatment of any term or
condition in this Agreement from such Employment Agreement,
or any renewal or extension thereof, such Employment
Agreement shall control, except that such Employment
Agreement shall not limit in any way the timing or the amount
of benefits to be paid to the Executive under this Agreement.
2.2. Full Efforts. The Executive agrees to devote his
full time and attention exclusively to the business and
affairs of the Corporation and the subsidiary banks except
during vacation periods, and to use his best efforts to
furnish faithfully and satisfactorily services to the
Corporation.
2.3. Fringe Benefits. The salary continuation benefits
provided by this Agreement are granted by the Corporation as
an additional 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 these
salary continuation benefits.
ARTICLE 3
BENEFITS PAYABLE UPON NORMAL RETIREMENT
3.1. Normal Retirement. If the Executive shall continue
in the employment of the Corporation at least until attaining
the age of sixty-five (65) years, the Executive may retire
from active daily employment as of the first day of the month
following attainment of the age of sixty-five (65), or upon
such later date as may be mutually agreed upon by the
Executive and the Corporation ("Normal Retirement").
Notwithstanding anything to the contrary, this Section 3.1
does not prohibit the Executive from continuing to work after
the age of sixty-five (65) years.
3.2. Normal Retirement Benefits. Upon Normal
Retirement, the Corporation shall pay to the Executive, One
Hundred Twenty Thousand Dollars ($120,000.00) per year,
payable in equal monthly installments commencing on the first
day of the first month following the date of Normal
Retirement, for a period of One Hundred Eighty (180) months,
subject to the conditions and limitations hereafter set forth
("Normal Retirement Benefits"). The One Hundred Twenty
Thousand Dollar ($120,000.00) annual payment shall be
adjusted in the first year in which it is to be paid to
reflect changes in the federally determined Cost of Living
Index issued by the Bureau of Labor Statistics 1988=100, then
currently in effect, and shall be adjusted annually for each
payment year thereafter to reflect further changes in said
federally determined Cost of Living Index, using the date of
retirement as a base line. The Normal Retirement Benefits
shall be in lieu of any other retirement, death, disability
or termination benefits under this Agreement.
3.3. Payment of Normal Retirement Benefits to Designated
Beneficiary or Surviving Spouse. In the event the Executive
dies before receiving the full amount of Normal Retirement
Benefits to which he is entitled under Section 3.2, the
Corporation will continue to make payments of the remaining
balance of the Normal Retirement Benefits to the Designated
Beneficiary. If there is no Designated Beneficiary prior to
the Executive's death, the Corporation will continue to make
payments of the remaining balance of the Normal Retirement
Benefits to the Executive's Surviving Spouse at the time of
death, or if there is no Surviving Spouse, to a duly
qualified personal representative, executor or administrator
of the Executive's estate.
ARTICLE 4
BENEFITS PAYABLE UPON DEATH OR DISABILITY
4.1. Death Benefits. In the event the Executive should
die while actively employed by the Corporation at any time
after the date of this Agreement, but prior to (a) Early
Retirement (as defined in Article 6.1), (b) Normal Retirement
or (c) retirement after the age of sixty-five (65), the
Corporation will pay to the benefits set forth in Section 3.2
commencing on the first day of the first month following the
Executive's death ("Death Benefits") in accordance with the
payment provisions set forth in Section 3.2 and 3.3. Death
Benefits shall be in lieu of any other retirement disability
or termination benefits under this Agreement.
4.2. Disability Benefits. In the event the Executive
incurs a Disability while actively employed by the
Corporation at any time after the date of the Agreement, but
prior to (a) Early Retirement (as defined in Article 6.1),
(b) Normal Retirement or (c) retirement after the age of
sixty-five (65), the Corporation will pay to the Executive
the benefits set forth in Section 3.2 commencing on the first
day of the first month following the Executive's Disability
("Disability Benefits"). Disability benefits shall be paid
in accordance with the payment provisions set forth in
Sections 3.2 and 3.3. The Disability Benefits shall be
payable to the Executive in equal monthly installments over a
period not to exceed One Hundred Eighty (180) months as
mutually agreed upon by the Corporation and the Executive
commencing on the first day of the first month following the
Disability Determination Date. The Disability Benefits shall
be in lieu of any other retirement, death or termination
benefits under this Agreement.
ARTICLE 5
BENEFITS PAYABLE UPON TERMINATION OF EMPLOYMENT
BY THE CORPORATION AND CHANGE OF CONTROL
5.1. Termination of Employment. The Corporation
reserves the right to terminate employment of the Executive
at any time prior to retirement in accordance with the
Employment Agreement. In the event that the employment of
the Executive is terminated prior to (a) Early Retirement (as
defined in Article 6.1), (b) Normal Retirement or
(c) retirement after the age of sixty-five (65), the
Executive shall be entitled to the following benefits under
the following circumstances:
(a) Termination Without Cause. If the Executive's
termination of employment is not a Voluntary
Termination, nor a Termination For Cause, the
Corporation shall pay to the Executive benefits set
forth in Section 3.2 commencing on the first day of the
first month following such date of termination of
employment subject to the conditions and limitations
hereafter set forth ("Termination Benefits").
Termination Benefits shall be paid in accordance with
the payment provisions set forth in Sections 3.2 and
3.3. The Termination Benefits shall be in lieu of any
other retirement disability, death or termination
benefits under this Agreement. In the event the
Executive dies before receiving the full amount of
Termination Benefits to which he is entitled, the
Termination Benefits shall be payable pursuant to the
payment provisions set forth in Section 3.3.
(b) Termination for Cause. If the Executive's
termination of employment is Termination For Cause, then
the Executive shall not be entitled to any benefits or
payments under this Agreement.
(c) Voluntary Termination. It is understood and
acknowledged by the Executive that the purpose of this
Agreement is to ensure the Executive's continued
employment with the Corporation. In the event the
Executive voluntarily terminates his employment with the
Corporation for reason other than an Early Retirement
defined in Section 6.1 or Change of Control, then the
Executive shall not be entitled to any benefits or
payments under this Agreement.
5.2. Change of Control. In the event of a Change of
Control, the Executive shall be paid the benefits set forth
in Section 3.2 commencing on the first day of the first month
after the date of such Change of Control. Said full amount
is referred to in this Subsection 5.2 as the "Change of
Control Payment". The Change of Control Payment shall be
paid in accordance with the payment provisions of
Section 3.2. The Change of Control Payment shall be in lieu
of any other retirement, disability, death or termination
benefits under this Agreement, but shall be in addition to
any payment under the Executive's Employment Agreement. In
the event the Executive dies before receiving the full amount
of Change of Control Payment to which he is entitled, such
Change of Control Payment shall be payable pursuant to the
payment provisions set forth in Section 3.3. The Executive
acknowledges that the Change of Control Payment paid to the
Executive may be characterized as "excess parachute payment"
under Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code") and subject to an excise tax. The
Executive also acknowledges that the payment of such excise
tax is the sole responsibility of the Executive.
ARTICLE 6
EARLY RETIREMENT
6.1. Early Retirement. The Executive shall have the
right to retire before reaching Normal Retirement, provided
he shall have attained the age of fifty-five (55) years and
shall have completed ten (10) years of full time service with
the Corporation, including any period of service with any
predecessor of the Corporation ("Early Retirement").
6.2. Early Retirement Benefits. Upon the Executive's
election for Early Retirement, he shall be entitled to
receive retirement benefits determined by the following
formula:
Multiplying the Normal Retirement Benefits
determined under Section 3.2 by a fraction, the
numerator of which is the actual number of months
the Executive has been employed by the Corporation
(including any period of service with any
predecessor of the Corporation) until the Early
Retirement Date, and the denominator of which is
the total number of months the Executive would
have been employed by the Corporation (including
any period of service with any predecessor of the
Corporation) at the date the Executive would have
attained age 65 ("Early Retirement Benefits").
6.3. Payment. The Early Retirement Benefits shall be
payable in one hundred eighty (180) equal monthly
installments commencing on the first day of the first month
after the date of Early Retirement. The Early Retirement
Benefits shall be in lieu of any other retirement,
disability, death or termination benefits under this
Agreement.
6.4. Payment of Early Retirement Benefits to Designated
Beneficiary or Surviving Spouse. In the event the Executive
dies before receiving the full amount of Early Retirement
Benefits to which he is entitled under Section 6.2, the
Corporation will continue to make payments of the remaining
balance of the Early Retirement Benefits in accordance with
Article 3.3.
ARTICLE 7
RIGHTS AS UNSECURED GENERAL CREDITOR
7.1 Unsecured General Creditor. The Executive and the
Executive's Designated Beneficiary shall have no legal or
equitable rights, interest or claims in or to any property or
assets of the Corporation. All the Corporation's assets
shall be and remain the general unpledged, unrestricted
assets of the Corporation. The Corporation's obligation
under this Agreement shall be that of an unfunded and
unsecured promise by the Corporation to pay money in the
future. The Executive and his Designated Beneficiary shall
be unsecured creditors with respect to any benefits
hereunder.
ARTICLE 8
CLAIMS PROCEDURE
8.1. Filing of Claim. The Executive or his Designated
Beneficiary (the "Claimant") may file a claim for a benefit
pursuant to this Agreement. The claim shall be deemed filed
when a written, signed communication is delivered by the
Claimant or the Claimant's authorized representative to the
Company. The claim must state the name of the Claimant and
the basis on which the claim is made.
8.2. Action on Claim. Each claim must be acted upon and
approved or disapproved by the Company in writing within
thirty (30) days of the date on which the Company received
the claim, unless special circumstances require further time
for processing and the Claimant is advised of the extension.
In no event shall the Company fail to act for more than forty-
five (45) days after the Company received the claim. If the
Claimant does not receive such written notice within such 45-
day period, the claim shall be deemed to be denied. If the
claim is denied, in whole or in part, the written notice
shall set forth, in a manner calculated to be understood by
the Claimant, the following matters:
1. the specific reason or reasons for the denial;
2.specific reference to pertinent provisions of this
Agreement on which the denial is based;
3.a description of any additional material or
information necessary for the Claimant to perfect the
claim and an explanation of why such material or
information is necessary; and
4.an explanation of this Agreement's review
procedures.
8.3. Claim Review Procedure. If a claim is denied in
whole or in part, the Claimant or his authorized
representative may file a request for review of the decision
of denial within ten (10) days after receipt by the Claimant
of the written notice of denial. The request for review
shall be in writing and shall be delivered to the Company.
The request must specify issues or comments which the
Claimant deems pertinent to the Claim. A decision by the
Board of Directors on the request for review shall be made
promptly, but not later than ten (10) days after the Company
receives the Claimant's request for review. The Board's
decision on review will be in writing and will include
specific reasons for the Board's decision written in a manner
calculated to be understood by the Claimant.
ARTICLE 9
GENERAL PROVISIONS
9.1. Right to Terminate Employment. No provisions under
the Agreement shall restrict the right of the Corporation to
terminate the employment of the Executive.
9.2. Entire Agreement. This Agreement supersedes any
and all other agreements, either oral or in writing, among
the parties hereto with respect to the salary continuation
benefits of the Executive by the Corporation and contains all
of the covenants and agreements among the parties, subject to
the terms of the Employment Agreement. Each party
acknowledges that no representations, inducements, promises
or agreements, oral or otherwise, have been made by any party
or anyone acting on behalf of a party which are not embodied
herein, and that no other agreement, statement,
representation, inducement or promise regarding the subject
matter of this Agreement not contained in this Agreement
shall be valid or binding. Any modification, waiver or
amendment of this Agreement will be effective only if it is
in writing and signed by the party to be charged.
9.3. Waiver. Any waiver by any party of a breach of any
provision of this Agreement shall not operate as or be
construed to be a waiver of any other breach of such
provision or of any breach of any other provision of this
Agreement. Any failure of a party to assert his or its
rights under any provision of this Agreement at any time
(including his right to claim a Change of Control Payment),
shall not prevent such person from asserting and receiving
the full benefit of such rights at any subsequent time. The
failure of a party to insist upon strict adherence to any
term of this Agreement on one or more occasions shall not be
considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or
any other term of this Agreement.
9.4. Choice of Law and Forum. This Agreement shall be
governed by and construed in accordance with the laws of the
State of California. Any action or proceeding brought upon
or arising out of this Agreement or its termination shall be
brought in a forum located within the State of California.
9.5. Binding Effect of Agreement. This Agreement shall
inure to the benefit of and be binding upon the Corporation,
its successors and assigns, including without limitation, any
person, partnership or corporation which may acquire all or
substantially all of the Corporation's assets and business or
with or into which the Corporation or its subsidiary banks
may be consolidated, merged or otherwise reorganized, and
this provision shall apply in the event of any subsequent
merger, consolidation, reorganization or transfer. The
provisions of this Agreement shall be binding upon and inure
to the benefit of Executive and his heirs and personal
representatives. The benefits payable to the Executive under
this Agreement shall not be transferable by the Executive or
his Designated Beneficiary or Surviving Spouse by assignment
or otherwise and such rights shall not be subject to
commutation, encumbrance or the claims of the creditors the
Executive, his Designated Beneficiary or Surviving Spouse and
any attempt to do any of the foregoing shall be void.
9.6. Severability. In the event that any term or
condition contained in this Agreement shall for any reason be
held by a court of competent jurisdiction to be invalid,
illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other
term or condition of this Agreement, but this Agreement shall
be construed as if such invalid or illegal or unenforceable
term or condition had never been contained herein.
9.7. Headings. The headings in this Agreement are
solely for convenience of reference and shall be given no
effect in the construction or interpretation of this
Agreement.
9.8. Notices. Any notices to be given hereunder by any
party to another party may be effected either by personal
delivery, in writing or by mail, registered or certified,
postage prepaid with return receipt requested, or by
confirmed electronic mail. Mailed notices shall be addressed
to the parties at the addresses indicated at the end of this
Agreement, but each party may change his or her address by
written notice in accordance with this paragraph. Notices
delivered personally shall be deemed communicated as of
actual receipt; mailed notices shall be deemed communicated
as of five (5) days after mailing.
9.9. Arbitration. Any controversy or claim arising out
of or relating to this Agreement or alleged breach of this
Agreement not resolved through the Claims Procedure set forth
in Article 8.1 shall be settled by arbitration in accordance
with the then current rules of the American Arbitration
Association pertaining to employment disputes, and judgment
on the award rendered by the arbitrators may be entered in
any court having jurisdiction. Each party shall pay the fees
of the arbitrator he/it selects and of his/its own attorneys,
and the expenses of his/its witnesses and all other expenses
connected with presenting his/its case. Except as otherwise
required by law, other costs of the arbitration, including
the cost of any record or transcripts of the arbitration,
administrative fees and all other fees and costs, shall be
borne equally by the parties. Full discovery shall be
permitted to the parties to any such arbitration, including
depositions of all relevant witnesses.
9.10. Attorneys' Fees and Costs. If any action at
law or in equity is brought by a party upon or arising out of
this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary disbursements
incurred in the action, in addition to any other relief to
which it may be entitled.
IN WITNESS WHEREOF, the Corporation and the Executive
have executed this Agreement on the date and year first above
written.
PACIFIC CAPITAL BANCORP
"Corporation"
By: /s/ Robert B. Sheppard
Robert B. Sheppard
Chairman, Human Resources Committee
"Executive"
/s/ Clayton C. Larson
Clayton C. Larson
EXHIBIT A
BENEFICIARY DESIGNATION NOTICE
UNDER THE AMENDED AND RESTATED EXECUTIVE SALARY
CONTINUATION BENEFITS AGREEMENT (THE "AGREEMENT")
Name of Executive: Clayton C. Larson
If I shall die prior to the full receipt of benefits
under the Agreement, then all rights under this Agreement
that I hereby hold upon my death, to the extent not
previously terminated or forfeited, shall be transferred to
Sharon J. Larson in the manner provided for in the Agreement.
/s/ Clayton C. Larson_______________________
Clayton C. Larson
Date: September 24, 1997
Receipt acknowledged on behalf of PACIFIC CAPITAL
BANCORP by:
/s/ Naomi Kinney_________________
Naomi Kinney, Director of Human Resources
Date: September 24, 1997
13
AMENDED AND RESTATED
EXECUTIVE SALARY CONTINUATION BENEFITS AGREEMENT
This Agreement was originally made and entered into on
August 22, 1989, by and between FIRST NATIONAL BANK OF
CENTRAL CALIFORNIA, a national banking association (the
"Bank") and D. VERNON HORTON (the "Executive"), as modified
on June 22, 1994. PACIFIC CAPITAL BANCORP, a California
corporation and the sole owner of the Bank (the
"Corporation"), and the Executive wish to amend and restate
the prior Agreement in its entirety as of September 23, 1997.
A. The Executive is employed by the Corporation as its
Chairman of the Board;
B. The Executive's experience and knowledge of the
affairs of the Corporation and reputation and contacts in the
banking industry are so valuable that the Executive's
continued service is essential for the future growth and
profits of the Corporation and its subsidiaries;
C. It is in the best interest of the Corporation to
arrange terms for continued employment of the Executive so as
to reasonably ensure that the Executive remains in the
Corporation's employment during the Executive's lifetime or
until the age of retirement;
D. The Corporation desires that the Executive's
services be retained as hereinafter provided;
E. The Executive is willing to continue in the employ
of the Corporation, provided that the Corporation agrees to
pay to the Executive or the Executive's Designated
Beneficiaries (as defined below), certain benefits in
accordance with the terms and conditions hereinafter set
forth; and
F. Both the Executive and the Corporation acknowledge
and agree that in order to retain the Executive and provide
him with appropriate benefits, the prior Agreement is amended
and restated in its entirety as follows.
In consideration of the services to be performed in the
future, as well as the mutual promises and covenants herein
contained, it is agreed as follows:
ARTICLE 1
DEFINITIONS
1.1. Change of Control shall be deemed to have occurred
if the conditions set forth in any one of the following
paragraphs shall have been satisfied after the date of this
Agreement:
(a) any Person (as defined below) becomes the
Beneficial Owner (as defined below), directly
or indirectly, of securities of the
Corporation representing 25% or more of the
combined voting power of the Corporation's
then outstanding securities; or
(b) the majority of the Board of Directors of the
Corporation ceases to be comprised of the
members of the Board on the date hereof or the
nominees of such members; or
(c) the shareholders of the Corporation approve a
merger or consolidation of the Corporation
with any other corporation, other than (i) a
merger or consolidation which would result in
the voting securities of the Corporation
outstanding immediately prior thereto
continuing to represent (either by remaining
outstanding or by being converted into voting
securities of the surviving entity), in
combination with the ownership of any trustee
or other fiduciary holding securities under an
employee benefit plan of the Corporation, at
least 51% of the combined voting power of the
voting securities of the Corporation or such
surviving entity outstanding immediately after
such merger or consolidation, or (ii) a merger
or consolidation effected to implement a
recapitalization of the Corporation (or
similar transaction) in which no Person
acquires more than 49% of the combined voting
power of the Corporation's then outstanding
securities; or
(d) the shareholders of the Corporation approve a
plan of complete liquidation of the
Corporation or an agreement for the sale or
disposition by the Corporation of all or
substantially all of the Corporation's assets.
For the purposes of this Paragraph 1.1, "Person" shall
have the meaning given in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as
modified and used in Sections 13(d) and 14(d) thereof;
however, a Person shall not include (i) the Corporation or
any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the
Corporation or any of its subsidiaries, or (iii) an
underwriter temporarily holding securities pursuant to an
offering of such securities. "Beneficial Owner" shall have
the meaning defined in Rule 13d-3 under the Exchange Act.
1.2. Designated Beneficiary shall mean the person or
persons whom the Executive shall designate in a valid
Beneficiary Designation Notice to receive the benefits
provided hereunder. A Beneficiary Designation Notice shall
be valid only if:
(a) it is in the form attached hereto as Exhibit A
and made a part hereof; and
(b) it is received by the Named Fiduciary and Plan
Administrator prior to the Executive's death.
1.2. Disability shall mean an inability to substantially
perform the essential functions of the Executive's position
at the Corporation for a period of one hundred eighty (180)
days due to a physical or mental disability, as determined by
a physician in the case of physical disability, or
psychiatrist in the case of mental disability, licensed to
practice medicine in California and selected jointly by the
Corporation and the Executive.
1.3. Employment Agreement shall mean the written
employment agreement, if any, between the Executive and the
Corporation.
1.4. Named Fiduciary and Plan Administrator shall mean
the Corporation.
1.5. Surviving Spouse shall mean the person, if any, who
is legally married to the Executive on the date of the
Executive's death.
1.6. Termination for Cause shall mean termination of the
employment of the Executive by reason of any of the
following:
(a) willful material breach of duty in the course
of employment unless waived by the
Corporation;
(b) materially dishonest or illegal conduct; or
(c) habitual neglect of duties or habitual
negligence in carrying out duties.
ARTICLE 2
EMPLOYMENT
2.1. Employment. The Corporation agrees to employ the
Executive as Chairman of the Board or in such other capacity
as the Corporation may from time to time determine in
accordance with the Employment Agreement with the Executive.
The Executive shall continue in the employ of the Corporation
in such capacity and shall hold and perform the customary
responsibilities and duties of this position as designated by
the Bylaws of the Corporation and as directed by the
Corporation through its Boards of Directors in accordance
with the Employment Agreement. The Executive has a separate
Employment Agreement with the Corporation, and in the event
of any discrepancy or different treatment of any term or
condition in this Agreement from such Employment Agreement,
or any renewal or extension thereof, such Employment
Agreement shall control, except that such Employment
Agreement shall not limit in any way the timing or the amount
of benefits to be paid to the Executive under this Agreement.
2.2. Full Efforts. The Executive agrees to devote his
full time and attention exclusively to the business and
affairs of the Corporation and the subsidiary banks except
during vacation periods, and to use his best efforts to
furnish faithfully and satisfactorily services to the
Corporation.
2.3. Fringe Benefits. The salary continuation benefits
provided by this Agreement are granted by the Corporation as
an additional 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 these
salary continuation benefits.
ARTICLE 3
BENEFITS PAYABLE UPON NORMAL RETIREMENT
3.1. Normal Retirement. If the Executive shall continue
in the employment of the Corporation at least until attaining
the age of sixty-five (65) years, the Executive may retire
from active daily employment as of the first day of the month
following attainment of the age of sixty-five (65), or upon
such later date as may be mutually agreed upon by the
Executive and the Corporation ("Normal Retirement").
Notwithstanding anything to the contrary, this Section 3.1
does not prohibit the Executive from continuing to work after
the age of sixty-five (65) years.
3.2. Normal Retirement Benefits. Upon Normal
Retirement, the Corporation shall pay to the Executive, One
Hundred Twenty-five Thousand Dollars ($125,000.00) per year,
payable in equal monthly installments commencing on the first
day of the first month following the date of Normal
Retirement, for a period of One Hundred Eighty (180) months,
subject to the conditions and limitations hereafter set forth
("Normal Retirement Benefits"). The One Hundred Twenty-five
Thousand Dollar ($125,000.00) annual payment shall be
adjusted in the first year in which it is to be paid to
reflect changes in the federally determined Cost of Living
Index issued by the Bureau of Labor Statistics 1988=100, then
currently in effect, and shall be adjusted annually for each
payment year thereafter to reflect further changes in said
federally determined Cost of Living Index, using the date of
retirement as a base line. The Normal Retirement Benefits
shall be in lieu of any other retirement, death, disability
or termination benefits under this Agreement.
3.3. Payment of Normal Retirement Benefits to Designated
Beneficiary or Surviving Spouse. In the event the Executive
dies before receiving the full amount of Normal Retirement
Benefits to which he is entitled under Section 3.2, the
Corporation will continue to make payments of the remaining
balance of the Normal Retirement Benefits to the Designated
Beneficiary. If there is no Designated Beneficiary prior to
the Executive's death, the Corporation will continue to make
payments of the remaining balance of the Normal Retirement
Benefits to the Executive's Surviving Spouse at the time of
death, or if there is no Surviving Spouse, to a duly
qualified personal representative, executor or administrator
of the Executive's estate.
ARTICLE 4
BENEFITS PAYABLE UPON DEATH OR DISABILITY
4.1. Death Benefits. In the event the Executive should
die while actively employed by the Corporation at any time
after the date of this Agreement, but prior to (a) Early
Retirement (as defined in Article 6.1), (b) Normal Retirement
or (c) retirement after the age of sixty-five (65), the
Corporation will pay to the benefits set forth in Section 3.2
commencing on the first day of the first month following the
Executive's death ("Death Benefits") in accordance with the
payment provisions set forth in Section 3.2 and 3.3. Death
Benefits shall be in lieu of any other retirement disability
or termination benefits under this Agreement.
4.2. Disability Benefits. In the event the Executive
incurs a Disability while actively employed by the
Corporation at any time after the date of the Agreement, but
prior to (a) Early Retirement (as defined in Article 6.1),
(b) Normal Retirement or (c) retirement after the age of
sixty-five (65), the Corporation will pay to the Executive
the benefits set forth in Section 3.2 commencing on the first
day of the first month following the Executive's Disability
("Disability Benefits"). Disability benefits shall be paid
in accordance with the payment provisions set forth in
Sections 3.2 and 3.3. The Disability Benefits shall be
payable to the Executive in equal monthly installments over a
period not to exceed One Hundred Eighty (180) months as
mutually agreed upon by the Corporation and the Executive
commencing on the first day of the first month following the
Disability Determination Date. The Disability Benefits shall
be in lieu of any other retirement, death or termination
benefits under this Agreement.
ARTICLE 5
BENEFITS PAYABLE UPON TERMINATION OF EMPLOYMENT
BY THE CORPORATION AND CHANGE OF CONTROL
5.1. Termination of Employment. The Corporation
reserves the right to terminate employment of the Executive
at any time prior to retirement in accordance with the
Employment Agreement. In the event that the employment of
the Executive is terminated prior to (a) Early Retirement (as
defined in Article 6.1), (b) Normal Retirement or
(c) retirement after the age of sixty-five (65), the
Executive shall be entitled to the following benefits under
the following circumstances:
(a) Termination Without Cause. If the Executive's
termination of employment is not a Voluntary
Termination, nor a Termination For Cause, the
Corporation shall pay to the Executive benefits set
forth in Section 3.2 commencing on the first day of the
first month following such date of termination of
employment subject to the conditions and limitations
hereafter set forth ("Termination Benefits").
Termination Benefits shall be paid in accordance with
the payment provisions set forth in Sections 3.2 and
3.3. The Termination Benefits shall be in lieu of any
other retirement disability, death or termination
benefits under this Agreement. In the event the
Executive dies before receiving the full amount of
Termination Benefits to which he is entitled, the
Termination Benefits shall be payable pursuant to the
payment provisions set forth in Section 3.3.
(b) Termination for Cause. If the Executive's
termination of employment is Termination For Cause, then
the Executive shall not be entitled to any benefits or
payments under this Agreement.
(c) Voluntary Termination. It is understood and
acknowledged by the Executive that the purpose of this
Agreement is to ensure the Executive's continued
employment with the Corporation. In the event the
Executive voluntarily terminates his employment with the
Corporation for reason other than an Early Retirement
defined in Section 6.1 or Change of Control, then the
Executive shall not be entitled to any benefits or
payments under this Agreement.
5.2. Change of Control. In the event of a Change of
Control, the Executive shall be paid the benefits set forth
in Section 3.2 commencing on the first day of the first month
after the date of such Change of Control. Said full amount
is referred to in this Subsection 5.2 as the "Change of
Control Payment". The Change of Control Payment shall be
paid in accordance with the payment provisions of
Section 3.2. The Change of Control Payment shall be in lieu
of any other retirement, disability, death or termination
benefits under this Agreement, but shall be in addition to
any payment under the Executive's Employment Agreement. In
the event the Executive dies before receiving the full amount
of Change of Control Payment to which he is entitled, such
Change of Control Payment shall be payable pursuant to the
payment provisions set forth in Section 3.3. The Executive
acknowledges that the Change of Control Payment paid to the
Executive may be characterized as "excess parachute payment"
under Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code") and subject to an excise tax. The
Executive also acknowledges that the payment of such excise
tax is the sole responsibility of the Executive.
ARTICLE 6
EARLY RETIREMENT
6.1. Early Retirement. The Executive shall have the
right to retire before reaching Normal Retirement, provided
he shall have attained the age of fifty-five (55) years and
shall have completed ten (10) years of full time service with
the Corporation, including any period of service with any
predecessor of the Corporation ("Early Retirement").
6.2. Early Retirement Benefits. Upon the Executive's
election for Early Retirement, he shall be entitled to
receive retirement benefits determined by the following
formula:
Multiplying the Normal Retirement Benefits
determined under Section 3.2 by a fraction, the
numerator of which is the actual number of months
the Executive has been employed by the Corporation
(including any period of service with any
predecessor of the Corporation) until the Early
Retirement Date, and the denominator of which is
the total number of months the Executive would
have been employed by the Corporation (including
any period of service with any predecessor of the
Corporation) at the date the Executive would have
attained age 65 ("Early Retirement Benefits").
6.3. Payment. The Early Retirement Benefits shall be
payable in one hundred eighty (180) equal monthly
installments commencing on the first day of the first month
after the date of Early Retirement. The Early Retirement
Benefits shall be in lieu of any other retirement,
disability, death or termination benefits under this
Agreement.
6.4. Payment of Early Retirement Benefits to Designated
Beneficiary or Surviving Spouse. In the event the Executive
dies before receiving the full amount of Early Retirement
Benefits to which he is entitled under Section 6.2, the
Corporation will continue to make payments of the remaining
balance of the Early Retirement Benefits in accordance with
Article 3.3.
ARTICLE 7
RIGHTS AS UNSECURED GENERAL CREDITOR
7.1 Unsecured General Creditor. The Executive and the
Executive's Designated Beneficiary shall have no legal or
equitable rights, interest or claims in or to any property or
assets of the Corporation. All the Corporation's assets
shall be and remain the general unpledged, unrestricted
assets of the Corporation. The Corporation's obligation
under this Agreement shall be that of an unfunded and
unsecured promise by the Corporation to pay money in the
future. The Executive and his Designated Beneficiary shall
be unsecured creditors with respect to any benefits
hereunder.
ARTICLE 8
CLAIMS PROCEDURE
8.1. Filing of Claim. The Executive or his Designated
Beneficiary (the "Claimant") may file a claim for a benefit
pursuant to this Agreement. The claim shall be deemed filed
when a written, signed communication is delivered by the
Claimant or the Claimant's authorized representative to the
Company. The claim must state the name of the Claimant and
the basis on which the claim is made.
8.2. Action on Claim. Each claim must be acted upon and
approved or disapproved by the Company in writing within
thirty (30) days of the date on which the Company received
the claim, unless special circumstances require further time
for processing and the Claimant is advised of the extension.
In no event shall the Company fail to act for more than forty-
five (45) days after the Company received the claim. If the
Claimant does not receive such written notice within such 45-
day period, the claim shall be deemed to be denied. If the
claim is denied, in whole or in part, the written notice
shall set forth, in a manner calculated to be understood by
the Claimant, the following matters:
1. the specific reason or reasons for the denial;
2.specific reference to pertinent provisions of this
Agreement on which the denial is based;
3.a description of any additional material or
information necessary for the Claimant to perfect the
claim and an explanation of why such material or
information is necessary; and
4.an explanation of this Agreement's review
procedures.
8.3. Claim Review Procedure. If a claim is denied in
whole or in part, the Claimant or his authorized
representative may file a request for review of the decision
of denial within ten (10) days after receipt by the Claimant
of the written notice of denial. The request for review
shall be in writing and shall be delivered to the Company.
The request must specify issues or comments which the
Claimant deems pertinent to the Claim. A decision by the
Board of Directors on the request for review shall be made
promptly, but not later than ten (10) days after the Company
receives the Claimant's request for review. The Board's
decision on review will be in writing and will include
specific reasons for the Board's decision written in a manner
calculated to be understood by the Claimant.
ARTICLE 9
GENERAL PROVISIONS
9.1. Right to Terminate Employment. No provisions under
the Agreement shall restrict the right of the Corporation to
terminate the employment of the Executive.
9.2. Entire Agreement. This Agreement supersedes any
and all other agreements, either oral or in writing, among
the parties hereto with respect to the salary continuation
benefits of the Executive by the Corporation and contains all
of the covenants and agreements among the parties, subject to
the terms of the Employment Agreement. Each party
acknowledges that no representations, inducements, promises
or agreements, oral or otherwise, have been made by any party
or anyone acting on behalf of a party which are not embodied
herein, and that no other agreement, statement,
representation, inducement or promise regarding the subject
matter of this Agreement not contained in this Agreement
shall be valid or binding. Any modification, waiver or
amendment of this Agreement will be effective only if it is
in writing and signed by the party to be charged.
9.3. Waiver. Any waiver by any party of a breach of any
provision of this Agreement shall not operate as or be
construed to be a waiver of any other breach of such
provision or of any breach of any other provision of this
Agreement. Any failure of a party to assert his or its
rights under any provision of this Agreement at any time
(including his right to claim a Change of Control Payment),
shall not prevent such person from asserting and receiving
the full benefit of such rights at any subsequent time. The
failure of a party to insist upon strict adherence to any
term of this Agreement on one or more occasions shall not be
considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or
any other term of this Agreement.
9.4. Choice of Law and Forum. This Agreement shall be
governed by and construed in accordance with the laws of the
State of California. Any action or proceeding brought upon
or arising out of this Agreement or its termination shall be
brought in a forum located within the State of California.
9.5. Binding Effect of Agreement. This Agreement shall
inure to the benefit of and be binding upon the Corporation,
its successors and assigns, including without limitation, any
person, partnership or corporation which may acquire all or
substantially all of the Corporation's assets and business or
with or into which the Corporation or its subsidiary banks
may be consolidated, merged or otherwise reorganized, and
this provision shall apply in the event of any subsequent
merger, consolidation, reorganization or transfer. The
provisions of this Agreement shall be binding upon and inure
to the benefit of Executive and his heirs and personal
representatives. The benefits payable to the Executive under
this Agreement shall not be transferable by the Executive or
his Designated Beneficiary or Surviving Spouse by assignment
or otherwise and such rights shall not be subject to
commutation, encumbrance or the claims of the creditors the
Executive, his Designated Beneficiary or Surviving Spouse and
any attempt to do any of the foregoing shall be void.
9.6. Severability. In the event that any term or
condition contained in this Agreement shall for any reason be
held by a court of competent jurisdiction to be invalid,
illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other
term or condition of this Agreement, but this Agreement shall
be construed as if such invalid or illegal or unenforceable
term or condition had never been contained herein.
9.7. Headings. The headings in this Agreement are
solely for convenience of reference and shall be given no
effect in the construction or interpretation of this
Agreement.
9.8. Notices. Any notices to be given hereunder by any
party to another party may be effected either by personal
delivery, in writing or by mail, registered or certified,
postage prepaid with return receipt requested, or by
confirmed electronic mail. Mailed notices shall be addressed
to the parties at the addresses indicated at the end of this
Agreement, but each party may change his or her address by
written notice in accordance with this paragraph. Notices
delivered personally shall be deemed communicated as of
actual receipt; mailed notices shall be deemed communicated
as of five (5) days after mailing.
9.9. Arbitration. Any controversy or claim arising out
of or relating to this Agreement or alleged breach of this
Agreement not resolved through the Claims Procedure set forth
in Article 8.1 shall be settled by arbitration in accordance
with the then current rules of the American Arbitration
Association pertaining to employment disputes, and judgment
on the award rendered by the arbitrators may be entered in
any court having jurisdiction. Each party shall pay the fees
of the arbitrator he/it selects and of his/its own attorneys,
and the expenses of his/its witnesses and all other expenses
connected with presenting his/its case. Except as otherwise
required by law, other costs of the arbitration, including
the cost of any record or transcripts of the arbitration,
administrative fees and all other fees and costs, shall be
borne equally by the parties. Full discovery shall be
permitted to the parties to any such arbitration, including
depositions of all relevant witnesses.
9.10. Attorneys' Fees and Costs. If any action at
law or in equity is brought by a party upon or arising out of
this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary disbursements
incurred in the action, in addition to any other relief to
which it may be entitled.
IN WITNESS WHEREOF, the Corporation and the Executive
have executed this Agreement on the date and year first above
written.
PACIFIC CAPITAL BANCORP
"Corporation"
By: /s/ Robert B. Sheppard
Robert B. Sheppard
Chairman, Human Resources Committee
"Executive"
/s/ D. Vernon Horton
D. Vernon Horton
EXHIBIT A
BENEFICIARY DESIGNATION NOTICE
UNDER THE AMENDED AND RESTATED EXECUTIVE SALARY
CONTINUATION BENEFITS AGREEMENT (THE "AGREEMENT")
Name of Executive: D. Vernon Horton
If I shall die prior to the full receipt of benefits
under the Agreement, then all rights under this Agreement
that I hereby hold upon my death, to the extent not
previously terminated or forfeited, shall be transferred to
the D. Vernon Horton and Joyce Marie Horton Revocable Trust
UA Sep 09 94 in the manner provided for in the Agreement.
/s/ D. Vernon Horton_____________
D. Vernon Horton
Date: September 24, 1997
Receipt acknowledged on behalf of PACIFIC CAPITAL
BANCORP by:
/s/ Naomi Kinney_________________
Naomi Kinney, Director of Human Resources
Date: September 24, 1997
13
AMENDED AND RESTATED
EXECUTIVE SALARY CONTINUATION BENEFITS AGREEMENT
This Agreement was originally made and entered into on
August 22, 1989, by and between FIRST NATIONAL BANK OF
CENTRAL CALIFORNIA, a national banking association (the
"Bank") and DENNIS A. DE CIUS (the "Executive"), as modified
on June 22, 1994. PACIFIC CAPITAL BANCORP, a California
corporation and the sole owner of the Bank (the
"Corporation"), and the Executive wish to amend and restate
the prior Agreement in its entirety as of September 23, 1997.
A. The Executive is employed by the Corporation as its
Executive Vice President;
B. The Executive's experience and knowledge of the
affairs of the Corporation and reputation and contacts in the
banking industry are so valuable that the Executive's
continued service is essential for the future growth and
profits of the Corporation and its subsidiaries;
C. It is in the best interest of the Corporation to
arrange terms for continued employment of the Executive so as
to reasonably ensure that the Executive remains in the
Corporation's employment during the Executive's lifetime or
until the age of retirement;
D. The Corporation desires that the Executive's
services be retained as hereinafter provided;
E. The Executive is willing to continue in the employ
of the Corporation, provided that the Corporation agrees to
pay to the Executive or the Executive's Designated
Beneficiaries (as defined below), certain benefits in
accordance with the terms and conditions hereinafter set
forth; and
F. Both the Executive and the Corporation acknowledge
and agree that in order to retain the Executive and provide
him with appropriate benefits, the prior Agreement is amended
and restated in its entirety as follows.
In consideration of the services to be performed in the
future, as well as the mutual promises and covenants herein
contained, it is agreed as follows:
ARTICLE 1
DEFINITIONS
1.1. Change of Control shall be deemed to have occurred
if the conditions set forth in any one of the following
paragraphs shall have been satisfied after the date of this
Agreement:
(a) any Person (as defined below) becomes the
Beneficial Owner (as defined below), directly
or indirectly, of securities of the
Corporation representing 25% or more of the
combined voting power of the Corporation's
then outstanding securities; or
(b) the majority of the Board of Directors of the
Corporation ceases to be comprised of the
members of the Board on the date hereof or the
nominees of such members; or
(c) the shareholders of the Corporation approve a
merger or consolidation of the Corporation
with any other corporation, other than (i) a
merger or consolidation which would result in
the voting securities of the Corporation
outstanding immediately prior thereto
continuing to represent (either by remaining
outstanding or by being converted into voting
securities of the surviving entity), in
combination with the ownership of any trustee
or other fiduciary holding securities under an
employee benefit plan of the Corporation, at
least 51% of the combined voting power of the
voting securities of the Corporation or such
surviving entity outstanding immediately after
such merger or consolidation, or (ii) a merger
or consolidation effected to implement a
recapitalization of the Corporation (or
similar transaction) in which no Person
acquires more than 49% of the combined voting
power of the Corporation's then outstanding
securities; or
(d) the shareholders of the Corporation approve a
plan of complete liquidation of the
Corporation or an agreement for the sale or
disposition by the Corporation of all or
substantially all of the Corporation's assets.
For the purposes of this Paragraph 1.1, "Person" shall
have the meaning given in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as
modified and used in Sections 13(d) and 14(d) thereof;
however, a Person shall not include (i) the Corporation or
any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the
Corporation or any of its subsidiaries, or (iii) an
underwriter temporarily holding securities pursuant to an
offering of such securities. "Beneficial Owner" shall have
the meaning defined in Rule 13d-3 under the Exchange Act.
1.2. Designated Beneficiary shall mean the person or
persons whom the Executive shall designate in a valid
Beneficiary Designation Notice to receive the benefits
provided hereunder. A Beneficiary Designation Notice shall
be valid only if:
(a) it is in the form attached hereto as Exhibit A
and made a part hereof; and
(b) it is received by the Named Fiduciary and Plan
Administrator prior to the Executive's death.
1.2. Disability shall mean an inability to substantially
perform the essential functions of the Executive's position
at the Corporation for a period of one hundred eighty (180)
days due to a physical or mental disability, as determined by
a physician in the case of physical disability, or
psychiatrist in the case of mental disability, licensed to
practice medicine in California and selected jointly by the
Corporation and the Executive.
1.3. Employment Agreement shall mean the written
employment agreement, if any, between the Executive and the
Corporation.
1.4. Named Fiduciary and Plan Administrator shall mean
the Corporation.
1.5. Surviving Spouse shall mean the person, if any, who
is legally married to the Executive on the date of the
Executive's death.
1.6. Termination for Cause shall mean termination of the
employment of the Executive by reason of any of the
following:
(a) willful material breach of duty in the course
of employment unless waived by the
Corporation;
(b) materially dishonest or illegal conduct; or
(c) habitual neglect of duties or habitual
negligence in carrying out duties.
ARTICLE 2
EMPLOYMENT
2.1. Employment. The Corporation agrees to employ the
Executive as Chairman of the Board or in such other capacity
as the Corporation may from time to time determine in
accordance with the Employment Agreement with the Executive.
The Executive shall continue in the employ of the Corporation
in such capacity and shall hold and perform the customary
responsibilities and duties of this position as designated by
the Bylaws of the Corporation and as directed by the
Corporation through its Boards of Directors in accordance
with the Employment Agreement. The Executive has a separate
Employment Agreement with the Corporation, and in the event
of any discrepancy or different treatment of any term or
condition in this Agreement from such Employment Agreement,
or any renewal or extension thereof, such Employment
Agreement shall control, except that such Employment
Agreement shall not limit in any way the timing or the amount
of benefits to be paid to the Executive under this Agreement.
2.2. Full Efforts. The Executive agrees to devote his
full time and attention exclusively to the business and
affairs of the Corporation and the subsidiary banks except
during vacation periods, and to use his best efforts to
furnish faithfully and satisfactorily services to the
Corporation.
2.3. Fringe Benefits. The salary continuation benefits
provided by this Agreement are granted by the Corporation as
an additional 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 these
salary continuation benefits.
ARTICLE 3
BENEFITS PAYABLE UPON NORMAL RETIREMENT
3.1. Normal Retirement. If the Executive shall continue
in the employment of the Corporation at least until attaining
the age of sixty-five (65) years, the Executive may retire
from active daily employment as of the first day of the month
following attainment of the age of sixty-five (65), or upon
such later date as may be mutually agreed upon by the
Executive and the Corporation ("Normal Retirement").
Notwithstanding anything to the contrary, this Section 3.1
does not prohibit the Executive from continuing to work after
the age of sixty-five (65) years.
3.2. Normal Retirement Benefits. Upon Normal
Retirement, the Corporation shall pay to the Executive,
Eighty-two Thousand Five Hundred Dollars ($82,500.00) per
year, payable in equal monthly installments commencing on the
first day of the first month following the date of Normal
Retirement, for a period of One Hundred Eighty (180) months,
subject to the conditions and limitations hereafter set forth
("Normal Retirement Benefits"). The Eighty-two Thousand Five
Hundred Dollar ($82,500.00) annual payment shall be adjusted
in the first year in which it is to be paid to reflect
changes in the federally determined Cost of Living Index
issued by the Bureau of Labor Statistics 1988=100, then
currently in effect, and shall be adjusted annually for each
payment year thereafter to reflect further changes in said
federally determined Cost of Living Index, using the date of
retirement as a base line. The Normal Retirement Benefits
shall be in lieu of any other retirement, death, disability
or termination benefits under this Agreement.
3.3. Payment of Normal Retirement Benefits to Designated
Beneficiary or Surviving Spouse. In the event the Executive
dies before receiving the full amount of Normal Retirement
Benefits to which he is entitled under Section 3.2, the
Corporation will continue to make payments of the remaining
balance of the Normal Retirement Benefits to the Designated
Beneficiary. If there is no Designated Beneficiary prior to
the Executive's death, the Corporation will continue to make
payments of the remaining balance of the Normal Retirement
Benefits to the Executive's Surviving Spouse at the time of
death, or if there is no Surviving Spouse, to a duly
qualified personal representative, executor or administrator
of the Executive's estate.
ARTICLE 4
BENEFITS PAYABLE UPON DEATH OR DISABILITY
4.1. Death Benefits. In the event the Executive should
die while actively employed by the Corporation at any time
after the date of this Agreement, but prior to (a) Early
Retirement (as defined in Article 6.1), (b) Normal Retirement
or (c) retirement after the age of sixty-five (65), the
Corporation will pay to the benefits set forth in Section 3.2
commencing on the first day of the first month following the
Executive's death ("Death Benefits") in accordance with the
payment provisions set forth in Section 3.2 and 3.3. Death
Benefits shall be in lieu of any other retirement disability
or termination benefits under this Agreement.
4.2. Disability Benefits. In the event the Executive
incurs a Disability while actively employed by the
Corporation at any time after the date of the Agreement, but
prior to (a) Early Retirement (as defined in Article 6.1),
(b) Normal Retirement or (c) retirement after the age of
sixty-five (65), the Corporation will pay to the Executive
the benefits set forth in Section 3.2 commencing on the first
day of the first month following the Executive's Disability
("Disability Benefits"). Disability benefits shall be paid
in accordance with the payment provisions set forth in
Sections 3.2 and 3.3. The Disability Benefits shall be
payable to the Executive in equal monthly installments over a
period not to exceed One Hundred Eighty (180) months as
mutually agreed upon by the Corporation and the Executive
commencing on the first day of the first month following the
Disability Determination Date. The Disability Benefits shall
be in lieu of any other retirement, death or termination
benefits under this Agreement.
ARTICLE 5
BENEFITS PAYABLE UPON TERMINATION OF EMPLOYMENT
BY THE CORPORATION AND CHANGE OF CONTROL
5.1. Termination of Employment. The Corporation
reserves the right to terminate employment of the Executive
at any time prior to retirement in accordance with the
Employment Agreement. In the event that the employment of
the Executive is terminated prior to (a) Early Retirement (as
defined in Article 6.1), (b) Normal Retirement or
(c) retirement after the age of sixty-five (65), the
Executive shall be entitled to the following benefits under
the following circumstances:
(a) Termination Without Cause. If the Executive's
termination of employment is not a Voluntary
Termination, nor a Termination For Cause, the
Corporation shall pay to the Executive benefits set
forth in Section 3.2 commencing on the first day of the
first month following such date of termination of
employment subject to the conditions and limitations
hereafter set forth ("Termination Benefits").
Termination Benefits shall be paid in accordance with
the payment provisions set forth in Sections 3.2 and
3.3. The Termination Benefits shall be in lieu of any
other retirement disability, death or termination
benefits under this Agreement. In the event the
Executive dies before receiving the full amount of
Termination Benefits to which he is entitled, the
Termination Benefits shall be payable pursuant to the
payment provisions set forth in Section 3.3.
(b) Termination for Cause. If the Executive's
termination of employment is Termination For Cause, then
the Executive shall not be entitled to any benefits or
payments under this Agreement.
(c) Voluntary Termination. It is understood and
acknowledged by the Executive that the purpose of this
Agreement is to ensure the Executive's continued
employment with the Corporation. In the event the
Executive voluntarily terminates his employment with the
Corporation for reason other than an Early Retirement
defined in Section 6.1 or Change of Control, then the
Executive shall not be entitled to any benefits or
payments under this Agreement.
5.2. Change of Control. In the event of a Change of
Control, the Executive shall be paid the benefits set forth
in Section 3.2 commencing on the first day of the first month
after the date of such Change of Control. Said full amount
is referred to in this Subsection 5.2 as the "Change of
Control Payment". The Change of Control Payment shall be
paid in accordance with the payment provisions of
Section 3.2. The Change of Control Payment shall be in lieu
of any other retirement, disability, death or termination
benefits under this Agreement, but shall be in addition to
any payment under the Executive's Employment Agreement. In
the event the Executive dies before receiving the full amount
of Change of Control Payment to which he is entitled, such
Change of Control Payment shall be payable pursuant to the
payment provisions set forth in Section 3.3. The Executive
acknowledges that the Change of Control Payment paid to the
Executive may be characterized as "excess parachute payment"
under Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code") and subject to an excise tax. The
Executive also acknowledges that the payment of such excise
tax is the sole responsibility of the Executive.
ARTICLE 6
EARLY RETIREMENT
6.1. Early Retirement. The Executive shall have the
right to retire before reaching Normal Retirement, provided
he shall have attained the age of fifty-five (55) years and
shall have completed ten (10) years of full time service with
the Corporation, including any period of service with any
predecessor of the Corporation ("Early Retirement").
6.2. Early Retirement Benefits. Upon the Executive's
election for Early Retirement, he shall be entitled to
receive retirement benefits determined by the following
formula:
Multiplying the Normal Retirement Benefits
determined under Section 3.2 by a fraction, the
numerator of which is the actual number of months
the Executive has been employed by the Corporation
(including any period of service with any
predecessor of the Corporation) until the Early
Retirement Date, and the denominator of which is
the total number of months the Executive would
have been employed by the Corporation (including
any period of service with any predecessor of the
Corporation) at the date the Executive would have
attained age 65 ("Early Retirement Benefits").
6.3. Payment. The Early Retirement Benefits shall be
payable in one hundred eighty (180) equal monthly
installments commencing on the first day of the first month
after the date of Early Retirement. The Early Retirement
Benefits shall be in lieu of any other retirement,
disability, death or termination benefits under this
Agreement.
6.4. Payment of Early Retirement Benefits to Designated
Beneficiary or Surviving Spouse. In the event the Executive
dies before receiving the full amount of Early Retirement
Benefits to which he is entitled under Section 6.2, the
Corporation will continue to make payments of the remaining
balance of the Early Retirement Benefits in accordance with
Article 3.3.
ARTICLE 7
RIGHTS AS UNSECURED GENERAL CREDITOR
7.1 Unsecured General Creditor. The Executive and the
Executive's Designated Beneficiary shall have no legal or
equitable rights, interest or claims in or to any property or
assets of the Corporation. All the Corporation's assets
shall be and remain the general unpledged, unrestricted
assets of the Corporation. The Corporation's obligation
under this Agreement shall be that of an unfunded and
unsecured promise by the Corporation to pay money in the
future. The Executive and his Designated Beneficiary shall
be unsecured creditors with respect to any benefits
hereunder.
ARTICLE 8
CLAIMS PROCEDURE
8.1. Filing of Claim. The Executive or his Designated
Beneficiary (the "Claimant") may file a claim for a benefit
pursuant to this Agreement. The claim shall be deemed filed
when a written, signed communication is delivered by the
Claimant or the Claimant's authorized representative to the
Company. The claim must state the name of the Claimant and
the basis on which the claim is made.
8.2. Action on Claim. Each claim must be acted upon and
approved or disapproved by the Company in writing within
thirty (30) days of the date on which the Company received
the claim, unless special circumstances require further time
for processing and the Claimant is advised of the extension.
In no event shall the Company fail to act for more than forty-
five (45) days after the Company received the claim. If the
Claimant does not receive such written notice within such 45-
day period, the claim shall be deemed to be denied. If the
claim is denied, in whole or in part, the written notice
shall set forth, in a manner calculated to be understood by
the Claimant, the following matters:
1. the specific reason or reasons for the denial;
2.specific reference to pertinent provisions of this
Agreement on which the denial is based;
3.a description of any additional material or
information necessary for the Claimant to perfect the
claim and an explanation of why such material or
information is necessary; and
4.an explanation of this Agreement's review
procedures.
8.3. Claim Review Procedure. If a claim is denied in
whole or in part, the Claimant or his authorized
representative may file a request for review of the decision
of denial within ten (10) days after receipt by the Claimant
of the written notice of denial. The request for review
shall be in writing and shall be delivered to the Company.
The request must specify issues or comments which the
Claimant deems pertinent to the Claim. A decision by the
Board of Directors on the request for review shall be made
promptly, but not later than ten (10) days after the Company
receives the Claimant's request for review. The Board's
decision on review will be in writing and will include
specific reasons for the Board's decision written in a manner
calculated to be understood by the Claimant.
ARTICLE 9
GENERAL PROVISIONS
9.1. Right to Terminate Employment. No provisions under
the Agreement shall restrict the right of the Corporation to
terminate the employment of the Executive.
9.2. Entire Agreement. This Agreement supersedes any
and all other agreements, either oral or in writing, among
the parties hereto with respect to the salary continuation
benefits of the Executive by the Corporation and contains all
of the covenants and agreements among the parties, subject to
the terms of the Employment Agreement. Each party
acknowledges that no representations, inducements, promises
or agreements, oral or otherwise, have been made by any party
or anyone acting on behalf of a party which are not embodied
herein, and that no other agreement, statement,
representation, inducement or promise regarding the subject
matter of this Agreement not contained in this Agreement
shall be valid or binding. Any modification, waiver or
amendment of this Agreement will be effective only if it is
in writing and signed by the party to be charged.
9.3. Waiver. Any waiver by any party of a breach of any
provision of this Agreement shall not operate as or be
construed to be a waiver of any other breach of such
provision or of any breach of any other provision of this
Agreement. Any failure of a party to assert his or its
rights under any provision of this Agreement at any time
(including his right to claim a Change of Control Payment),
shall not prevent such person from asserting and receiving
the full benefit of such rights at any subsequent time. The
failure of a party to insist upon strict adherence to any
term of this Agreement on one or more occasions shall not be
considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or
any other term of this Agreement.
9.4. Choice of Law and Forum. This Agreement shall be
governed by and construed in accordance with the laws of the
State of California. Any action or proceeding brought upon
or arising out of this Agreement or its termination shall be
brought in a forum located within the State of California.
9.5. Binding Effect of Agreement. This Agreement shall
inure to the benefit of and be binding upon the Corporation,
its successors and assigns, including without limitation, any
person, partnership or corporation which may acquire all or
substantially all of the Corporation's assets and business or
with or into which the Corporation or its subsidiary banks
may be consolidated, merged or otherwise reorganized, and
this provision shall apply in the event of any subsequent
merger, consolidation, reorganization or transfer. The
provisions of this Agreement shall be binding upon and inure
to the benefit of Executive and his heirs and personal
representatives. The benefits payable to the Executive under
this Agreement shall not be transferable by the Executive or
his Designated Beneficiary or Surviving Spouse by assignment
or otherwise and such rights shall not be subject to
commutation, encumbrance or the claims of the creditors the
Executive, his Designated Beneficiary or Surviving Spouse and
any attempt to do any of the foregoing shall be void.
9.6. Severability. In the event that any term or
condition contained in this Agreement shall for any reason be
held by a court of competent jurisdiction to be invalid,
illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other
term or condition of this Agreement, but this Agreement shall
be construed as if such invalid or illegal or unenforceable
term or condition had never been contained herein.
9.7. Headings. The headings in this Agreement are
solely for convenience of reference and shall be given no
effect in the construction or interpretation of this
Agreement.
9.8. Notices. Any notices to be given hereunder by any
party to another party may be effected either by personal
delivery, in writing or by mail, registered or certified,
postage prepaid with return receipt requested, or by
confirmed electronic mail. Mailed notices shall be addressed
to the parties at the addresses indicated at the end of this
Agreement, but each party may change his or her address by
written notice in accordance with this paragraph. Notices
delivered personally shall be deemed communicated as of
actual receipt; mailed notices shall be deemed communicated
as of five (5) days after mailing.
9.9. Arbitration. Any controversy or claim arising out
of or relating to this Agreement or alleged breach of this
Agreement not resolved through the Claims Procedure set forth
in Article 8.1 shall be settled by arbitration in accordance
with the then current rules of the American Arbitration
Association pertaining to employment disputes, and judgment
on the award rendered by the arbitrators may be entered in
any court having jurisdiction. Each party shall pay the fees
of the arbitrator he/it selects and of his/its own attorneys,
and the expenses of his/its witnesses and all other expenses
connected with presenting his/its case. Except as otherwise
required by law, other costs of the arbitration, including
the cost of any record or transcripts of the arbitration,
administrative fees and all other fees and costs, shall be
borne equally by the parties. Full discovery shall be
permitted to the parties to any such arbitration, including
depositions of all relevant witnesses.
9.10. Attorneys' Fees and Costs. If any action at
law or in equity is brought by a party upon or arising out of
this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary disbursements
incurred in the action, in addition to any other relief to
which it may be entitled.
IN WITNESS WHEREOF, the Corporation and the Executive
have executed this Agreement on the date and year first above
written.
PACIFIC CAPITAL BANCORP
"Corporation"
By: /s/ Robert B. Sheppard
Robert B. Sheppard
Chairman, Human Resources Committee
"Executive"
/s/ Dennis A. DeCius
Dennis A. DeCius
EXHIBIT A
BENEFICIARY DESIGNATION NOTICE
UNDER THE AMENDED AND RESTATED EXECUTIVE SALARY
CONTINUATION BENEFITS AGREEMENT (THE "AGREEMENT")
Name of Executive: Dennis A. DeCius
If I shall die prior to the full receipt of benefits
under the Agreement, then all rights under this Agreement
that I hereby hold upon my death, to the extent not
previously terminated or forfeited, shall be transferred to
the Dennis A. DeCius & Rae M. DeCius TR UA 06-06-94, 1994
DeCius Revocable Trust, in the manner provided for in the
Agreement.
/s/ Dennis A. DeCius_____________
Dennis A. DeCius
Date: September 24, 1997
Receipt acknowledged on behalf of PACIFIC CAPITAL
BANCORP by:
/s/ Naomi Kinney_________________
Naomi Kinney, Director of Human Resources
Date: September 24, 1997
13
AMENDED AND RESTATED
EXECUTIVE SALARY CONTINUATION BENEFITS AGREEMENT
This Agreement is made and entered into on September 23,
1997, by and between PACIFIC CAPITAL BANCORP, a California
corporation (the "Corporation"), and DALE R. DIEDERICK (the
"Executive").
A. The Executive is employed by the Corporation as its
Executive Vice President;
B. The Executive's experience and knowledge of the
affairs of the Corporation and reputation and contacts in the
banking industry are so valuable that the Executive's
continued service is essential for the future growth and
profits of the Corporation and its subsidiaries;
C. It is in the best interest of the Corporation to
arrange terms for continued employment of the Executive so as
to reasonably ensure that the Executive remains in the
Corporation's employment during the Executive's lifetime or
until the age of retirement;
D. The Corporation desires that the Executive's
services be retained as hereinafter provided;
E. The Executive is willing to continue in the employ
of the Corporation, provided that the Corporation agrees to
pay to the Executive or the Executive's Designated
Beneficiaries (as defined below), certain benefits in
accordance with the terms and conditions hereinafter set
forth; and
F. Both the Executive and the Corporation acknowledge
and agree that in order to retain the Executive and provide
him with appropriate benefits, the prior Agreement is amended
and restated in its entirety as follows.
In consideration of the services to be performed in the
future, as well as the mutual promises and covenants herein
contained, it is agreed as follows:
ARTICLE 1
DEFINITIONS
1.1. Change of Control shall be deemed to have occurred
if the conditions set forth in any one of the following
paragraphs shall have been satisfied after the date of this
Agreement:
(a) any Person (as defined below) becomes the
Beneficial Owner (as defined below), directly
or indirectly, of securities of the
Corporation representing 25% or more of the
combined voting power of the Corporation's
then outstanding securities; or
(b) the majority of the Board of Directors of the
Corporation ceases to be comprised of the
members of the Board on the date hereof or the
nominees of such members; or
(c) the shareholders of the Corporation approve a
merger or consolidation of the Corporation
with any other corporation, other than (i) a
merger or consolidation which would result in
the voting securities of the Corporation
outstanding immediately prior thereto
continuing to represent (either by remaining
outstanding or by being converted into voting
securities of the surviving entity), in
combination with the ownership of any trustee
or other fiduciary holding securities under an
employee benefit plan of the Corporation, at
least 51% of the combined voting power of the
voting securities of the Corporation or such
surviving entity outstanding immediately after
such merger or consolidation, or (ii) a merger
or consolidation effected to implement a
recapitalization of the Corporation (or
similar transaction) in which no Person
acquires more than 49% of the combined voting
power of the Corporation's then outstanding
securities; or
(d) the shareholders of the Corporation approve a
plan of complete liquidation of the
Corporation or an agreement for the sale or
disposition by the Corporation of all or
substantially all of the Corporation's assets.
For the purposes of this Paragraph 1.1, "Person" shall
have the meaning given in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as
modified and used in Sections 13(d) and 14(d) thereof;
however, a Person shall not include (i) the Corporation or
any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the
Corporation or any of its subsidiaries, or (iii) an
underwriter temporarily holding securities pursuant to an
offering of such securities. "Beneficial Owner" shall have
the meaning defined in Rule 13d-3 under the Exchange Act.
1.2. Designated Beneficiary shall mean the person or
persons whom the Executive shall designate in a valid
Beneficiary Designation Notice to receive the benefits
provided hereunder. A Beneficiary Designation Notice shall
be valid only if:
(a) it is in the form attached hereto as Exhibit A
and made a part hereof; and
(b) it is received by the Named Fiduciary and Plan
Administrator prior to the Executive's death.
1.2. Disability shall mean an inability to substantially
perform the essential functions of the Executive's position
at the Corporation for a period of one hundred eighty (180)
days due to a physical or mental disability, as determined by
a physician in the case of physical disability, or
psychiatrist in the case of mental disability, licensed to
practice medicine in California and selected jointly by the
Corporation and the Executive.
1.3. Employment Agreement shall mean the written
employment agreement, if any, between the Executive and the
Corporation.
1.4. Named Fiduciary and Plan Administrator shall mean
the Corporation.
1.5. Surviving Spouse shall mean the person, if any, who
is legally married to the Executive on the date of the
Executive's death.
1.6. Termination for Cause shall mean termination of the
employment of the Executive by reason of any of the
following:
(a) willful material breach of duty in the course
of employment unless waived by the
Corporation;
(b) materially dishonest or illegal conduct; or
(c) habitual neglect of duties or habitual
negligence in carrying out duties.
ARTICLE 2
EMPLOYMENT
2.1. Employment. The Corporation agrees to employ the
Executive as Chairman of the Board or in such other capacity
as the Corporation may from time to time determine in
accordance with the Employment Agreement with the Executive.
The Executive shall continue in the employ of the Corporation
in such capacity and shall hold and perform the customary
responsibilities and duties of this position as designated by
the Bylaws of the Corporation and as directed by the
Corporation through its Boards of Directors in accordance
with the Employment Agreement. The Executive has a separate
Employment Agreement with the Corporation, and in the event
of any discrepancy or different treatment of any term or
condition in this Agreement from such Employment Agreement,
or any renewal or extension thereof, such Employment
Agreement shall control, except that such Employment
Agreement shall not limit in any way the timing or the amount
of benefits to be paid to the Executive under this Agreement.
2.2. Full Efforts. The Executive agrees to devote his
full time and attention exclusively to the business and
affairs of the Corporation and the subsidiary banks except
during vacation periods, and to use his best efforts to
furnish faithfully and satisfactorily services to the
Corporation.
2.3. Fringe Benefits. The salary continuation benefits
provided by this Agreement are granted by the Corporation as
an additional 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 these
salary continuation benefits.
ARTICLE 3
BENEFITS PAYABLE UPON NORMAL RETIREMENT
3.1. Normal Retirement. If the Executive shall continue
in the employment of the Corporation at least until attaining
the age of sixty-five (65) years, the Executive may retire
from active daily employment as of the first day of the month
following attainment of the age of sixty-five (65), or upon
such later date as may be mutually agreed upon by the
Executive and the Corporation ("Normal Retirement").
Notwithstanding anything to the contrary, this Section 3.1
does not prohibit the Executive from continuing to work after
the age of sixty-five (65) years.
3.2. Normal Retirement Benefits. Upon Normal
Retirement, the Corporation shall pay to the Executive, Sixty
Thousand Dollars ($60,000.00) per year, payable in equal
monthly installments commencing on the first day of the first
month following the date of Normal Retirement, for a period
of One Hundred Eighty (180) months, subject to the conditions
and limitations hereafter set forth ("Normal Retirement
Benefits"). The Sixty Thousand Dollar ($60,000.00) annual
payment shall be adjusted in the first year in which it is to
be paid to reflect changes in the federally determined Cost
of Living Index issued by the Bureau of Labor Statistics
1988=100, then currently in effect, and shall be adjusted
annually for each payment year thereafter to reflect further
changes in said federally determined Cost of Living Index,
using the date of retirement as a base line. The Normal
Retirement Benefits shall be in lieu of any other retirement,
death, disability or termination benefits under this
Agreement.
3.3. Payment of Normal Retirement Benefits to Designated
Beneficiary or Surviving Spouse. In the event the Executive
dies before receiving the full amount of Normal Retirement
Benefits to which he is entitled under Section 3.2, the
Corporation will continue to make payments of the remaining
balance of the Normal Retirement Benefits to the Designated
Beneficiary. If there is no Designated Beneficiary prior to
the Executive's death, the Corporation will continue to make
payments of the remaining balance of the Normal Retirement
Benefits to the Executive's Surviving Spouse at the time of
death, or if there is no Surviving Spouse, to a duly
qualified personal representative, executor or administrator
of the Executive's estate.
ARTICLE 4
BENEFITS PAYABLE UPON DEATH OR DISABILITY
4.1. Death Benefits. In the event the Executive should
die while actively employed by the Corporation at any time
after the date of this Agreement, but prior to (a) Early
Retirement (as defined in Article 6.1), (b) Normal Retirement
or (c) retirement after the age of sixty-five (65), the
Corporation will pay to the benefits set forth in Section 3.2
commencing on the first day of the first month following the
Executive's death ("Death Benefits") in accordance with the
payment provisions set forth in Section 3.2 and 3.3. Death
Benefits shall be in lieu of any other retirement disability
or termination benefits under this Agreement.
4.2. Disability Benefits. In the event the Executive
incurs a Disability while actively employed by the
Corporation at any time after the date of the Agreement, but
prior to (a) Early Retirement (as defined in Article 6.1),
(b) Normal Retirement or (c) retirement after the age of
sixty-five (65), the Corporation will pay to the Executive
the benefits set forth in Section 3.2 commencing on the first
day of the first month following the Executive's Disability
("Disability Benefits"). Disability benefits shall be paid
in accordance with the payment provisions set forth in
Sections 3.2 and 3.3. The Disability Benefits shall be
payable to the Executive in equal monthly installments over a
period not to exceed One Hundred Eighty (180) months as
mutually agreed upon by the Corporation and the Executive
commencing on the first day of the first month following the
Disability Determination Date. The Disability Benefits shall
be in lieu of any other retirement, death or termination
benefits under this Agreement.
ARTICLE 5
BENEFITS PAYABLE UPON TERMINATION OF EMPLOYMENT
BY THE CORPORATION AND CHANGE OF CONTROL
5.1. Termination of Employment. The Corporation
reserves the right to terminate employment of the Executive
at any time prior to retirement in accordance with the
Employment Agreement. In the event that the employment of
the Executive is terminated prior to (a) Early Retirement (as
defined in Article 6.1), (b) Normal Retirement or
(c) retirement after the age of sixty-five (65), the
Executive shall be entitled to the following benefits under
the following circumstances:
(a) Termination Without Cause. If the Executive's
termination of employment is not a Voluntary
Termination, nor a Termination For Cause, the
Corporation shall pay to the Executive benefits set
forth in Section 3.2 commencing on the first day of the
first month following such date of termination of
employment subject to the conditions and limitations
hereafter set forth ("Termination Benefits").
Termination Benefits shall be paid in accordance with
the payment provisions set forth in Sections 3.2 and
3.3. The Termination Benefits shall be in lieu of any
other retirement disability, death or termination
benefits under this Agreement. In the event the
Executive dies before receiving the full amount of
Termination Benefits to which he is entitled, the
Termination Benefits shall be payable pursuant to the
payment provisions set forth in Section 3.3.
(b) Termination for Cause. If the Executive's
termination of employment is Termination For Cause, then
the Executive shall not be entitled to any benefits or
payments under this Agreement.
(c) Voluntary Termination. It is understood and
acknowledged by the Executive that the purpose of this
Agreement is to ensure the Executive's continued
employment with the Corporation. In the event the
Executive voluntarily terminates his employment with the
Corporation for reason other than an Early Retirement
defined in Section 6.1 or Change of Control, then the
Executive shall not be entitled to any benefits or
payments under this Agreement.
5.2. Change of Control. In the event of a Change of
Control, the Executive shall be paid the benefits set forth
in Section 3.2 commencing on the first day of the first month
after the date of such Change of Control. Said full amount
is referred to in this Subsection 5.2 as the "Change of
Control Payment". The Change of Control Payment shall be
paid in accordance with the payment provisions of
Section 3.2. The Change of Control Payment shall be in lieu
of any other retirement, disability, death or termination
benefits under this Agreement, but shall be in addition to
any payment under the Executive's Employment Agreement. In
the event the Executive dies before receiving the full amount
of Change of Control Payment to which he is entitled, such
Change of Control Payment shall be payable pursuant to the
payment provisions set forth in Section 3.3. The Executive
acknowledges that the Change of Control Payment paid to the
Executive may be characterized as "excess parachute payment"
under Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code") and subject to an excise tax. The
Executive also acknowledges that the payment of such excise
tax is the sole responsibility of the Executive.
ARTICLE 6
EARLY RETIREMENT
6.1. Early Retirement. The Executive shall have the
right to retire before reaching Normal Retirement, provided
he shall have attained the age of fifty-five (55) years and
shall have completed ten (10) years of full time service with
the Corporation, including any period of service with any
predecessor of the Corporation ("Early Retirement").
6.2. Early Retirement Benefits. Upon the Executive's
election for Early Retirement, he shall be entitled to
receive retirement benefits determined by the following
formula:
Multiplying the Normal Retirement Benefits
determined under Section 3.2 by a fraction, the
numerator of which is the actual number of months
the Executive has been employed by the Corporation
(including any period of service with any
predecessor of the Corporation) until the Early
Retirement Date, and the denominator of which is
the total number of months the Executive would
have been employed by the Corporation (including
any period of service with any predecessor of the
Corporation) at the date the Executive would have
attained age 65 ("Early Retirement Benefits").
6.3. Payment. The Early Retirement Benefits shall be
payable in one hundred eighty (180) equal monthly
installments commencing on the first day of the first month
after the date of Early Retirement. The Early Retirement
Benefits shall be in lieu of any other retirement,
disability, death or termination benefits under this
Agreement.
6.4. Payment of Early Retirement Benefits to Designated
Beneficiary or Surviving Spouse. In the event the Executive
dies before receiving the full amount of Early Retirement
Benefits to which he is entitled under Section 6.2, the
Corporation will continue to make payments of the remaining
balance of the Early Retirement Benefits in accordance with
Article 3.3.
ARTICLE 7
RIGHTS AS UNSECURED GENERAL CREDITOR
7.1 Unsecured General Creditor. The Executive and the
Executive's Designated Beneficiary shall have no legal or
equitable rights, interest or claims in or to any property or
assets of the Corporation. All the Corporation's assets
shall be and remain the general unpledged, unrestricted
assets of the Corporation. The Corporation's obligation
under this Agreement shall be that of an unfunded and
unsecured promise by the Corporation to pay money in the
future. The Executive and his Designated Beneficiary shall
be unsecured creditors with respect to any benefits
hereunder.
ARTICLE 8
CLAIMS PROCEDURE
8.1. Filing of Claim. The Executive or his Designated
Beneficiary (the "Claimant") may file a claim for a benefit
pursuant to this Agreement. The claim shall be deemed filed
when a written, signed communication is delivered by the
Claimant or the Claimant's authorized representative to the
Company. The claim must state the name of the Claimant and
the basis on which the claim is made.
8.2. Action on Claim. Each claim must be acted upon and
approved or disapproved by the Company in writing within
thirty (30) days of the date on which the Company received
the claim, unless special circumstances require further time
for processing and the Claimant is advised of the extension.
In no event shall the Company fail to act for more than forty-
five (45) days after the Company received the claim. If the
Claimant does not receive such written notice within such 45-
day period, the claim shall be deemed to be denied. If the
claim is denied, in whole or in part, the written notice
shall set forth, in a manner calculated to be understood by
the Claimant, the following matters:
1. the specific reason or reasons for the denial;
2.specific reference to pertinent provisions of this
Agreement on which the denial is based;
3.a description of any additional material or
information necessary for the Claimant to perfect the
claim and an explanation of why such material or
information is necessary; and
4.an explanation of this Agreement's review
procedures.
8.3. Claim Review Procedure. If a claim is denied in
whole or in part, the Claimant or his authorized
representative may file a request for review of the decision
of denial within ten (10) days after receipt by the Claimant
of the written notice of denial. The request for review
shall be in writing and shall be delivered to the Company.
The request must specify issues or comments which the
Claimant deems pertinent to the Claim. A decision by the
Board of Directors on the request for review shall be made
promptly, but not later than ten (10) days after the Company
receives the Claimant's request for review. The Board's
decision on review will be in writing and will include
specific reasons for the Board's decision written in a manner
calculated to be understood by the Claimant.
ARTICLE 9
GENERAL PROVISIONS
9.1. Right to Terminate Employment. No provisions under
the Agreement shall restrict the right of the Corporation to
terminate the employment of the Executive.
9.2. Entire Agreement. This Agreement supersedes any
and all other agreements, either oral or in writing, among
the parties hereto with respect to the salary continuation
benefits of the Executive by the Corporation and contains all
of the covenants and agreements among the parties, subject to
the terms of the Employment Agreement. Each party
acknowledges that no representations, inducements, promises
or agreements, oral or otherwise, have been made by any party
or anyone acting on behalf of a party which are not embodied
herein, and that no other agreement, statement,
representation, inducement or promise regarding the subject
matter of this Agreement not contained in this Agreement
shall be valid or binding. Any modification, waiver or
amendment of this Agreement will be effective only if it is
in writing and signed by the party to be charged.
9.3. Waiver. Any waiver by any party of a breach of any
provision of this Agreement shall not operate as or be
construed to be a waiver of any other breach of such
provision or of any breach of any other provision of this
Agreement. Any failure of a party to assert his or its
rights under any provision of this Agreement at any time
(including his right to claim a Change of Control Payment),
shall not prevent such person from asserting and receiving
the full benefit of such rights at any subsequent time. The
failure of a party to insist upon strict adherence to any
term of this Agreement on one or more occasions shall not be
considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or
any other term of this Agreement.
9.4. Choice of Law and Forum. This Agreement shall be
governed by and construed in accordance with the laws of the
State of California. Any action or proceeding brought upon
or arising out of this Agreement or its termination shall be
brought in a forum located within the State of California.
9.5. Binding Effect of Agreement. This Agreement shall
inure to the benefit of and be binding upon the Corporation,
its successors and assigns, including without limitation, any
person, partnership or corporation which may acquire all or
substantially all of the Corporation's assets and business or
with or into which the Corporation or its subsidiary banks
may be consolidated, merged or otherwise reorganized, and
this provision shall apply in the event of any subsequent
merger, consolidation, reorganization or transfer. The
provisions of this Agreement shall be binding upon and inure
to the benefit of Executive and his heirs and personal
representatives. The benefits payable to the Executive under
this Agreement shall not be transferable by the Executive or
his Designated Beneficiary or Surviving Spouse by assignment
or otherwise and such rights shall not be subject to
commutation, encumbrance or the claims of the creditors the
Executive, his Designated Beneficiary or Surviving Spouse and
any attempt to do any of the foregoing shall be void.
9.6. Severability. In the event that any term or
condition contained in this Agreement shall for any reason be
held by a court of competent jurisdiction to be invalid,
illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other
term or condition of this Agreement, but this Agreement shall
be construed as if such invalid or illegal or unenforceable
term or condition had never been contained herein.
9.7. Headings. The headings in this Agreement are
solely for convenience of reference and shall be given no
effect in the construction or interpretation of this
Agreement.
9.8. Notices. Any notices to be given hereunder by any
party to another party may be effected either by personal
delivery, in writing or by mail, registered or certified,
postage prepaid with return receipt requested, or by
confirmed electronic mail. Mailed notices shall be addressed
to the parties at the addresses indicated at the end of this
Agreement, but each party may change his or her address by
written notice in accordance with this paragraph. Notices
delivered personally shall be deemed communicated as of
actual receipt; mailed notices shall be deemed communicated
as of five (5) days after mailing.
9.9. Arbitration. Any controversy or claim arising out
of or relating to this Agreement or alleged breach of this
Agreement not resolved through the Claims Procedure set forth
in Article 8.1 shall be settled by arbitration in accordance
with the then current rules of the American Arbitration
Association pertaining to employment disputes, and judgment
on the award rendered by the arbitrators may be entered in
any court having jurisdiction. Each party shall pay the fees
of the arbitrator he/it selects and of his/its own attorneys,
and the expenses of his/its witnesses and all other expenses
connected with presenting his/its case. Except as otherwise
required by law, other costs of the arbitration, including
the cost of any record or transcripts of the arbitration,
administrative fees and all other fees and costs, shall be
borne equally by the parties. Full discovery shall be
permitted to the parties to any such arbitration, including
depositions of all relevant witnesses.
9.10. Attorneys' Fees and Costs. If any action at
law or in equity is brought by a party upon or arising out of
this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary disbursements
incurred in the action, in addition to any other relief to
which it may be entitled.
IN WITNESS WHEREOF, the Corporation and the Executive
have executed this Agreement on the date and year first above
written.
PACIFIC CAPITAL BANCORP
"Corporation"
By: /s/ Rebert B. Sheppard
Robert B. Sheppard
Chairman, Human Resources Committee
"Executive"
/s/ Dale R. Diederick
Dale R. Diederick
EXHIBIT A
BENEFICIARY DESIGNATION NOTICE
UNDER THE AMENDED AND RESTATED EXECUTIVE SALARY
CONTINUATION BENEFITS AGREEMENT (THE "AGREEMENT")
Name of Executive: Dale R. Diederick
If I shall die prior to the full receipt of benefits
under the Agreement, then all rights under this Agreement
that I hereby hold upon my death, to the extent not
previously terminated or forfeited, shall be transferred to
Marie G. Diederick in the manner provided for in the
Agreement.
/s/ Dale R. Diederick____________
Dale R. Diederick
Date: September 24, 1997
Receipt acknowledged on behalf of PACIFIC CAPITAL
BANCORP by:
/s/ Naomi Kinney_________________
Naomi Kinney, Director of Human Resources
Date: September 24, 1997
