Saratoga National Bank
CHIEF EXECUTIVE OFFICER
INCENTIVE COMPENSATION PLAN
July 8, 1995
1. AGREEMENT
1.1 This Chief Executive Officer Incentive Compensation Plan (the Plan)
states the understanding between Richard L. Mount (Mount) and
Saratoga National Bank regarding incentive compensation of Mount
as Chief Executive Officer of Saratoga
National Bank ("SNB"). This Plan supersedes the prior Chief Executive
Officer Compensation Plan. Any employment agreement, management
continuity agreement, or other agreement that may exist between
Mount and SNB is separate from and shall not affect or be affected
by this Plan.
2. SALARY
2.1 SNB will pay Mount a base salary at a rate approved by resolution
of the Board of Directors (the Board). That base salary amount
earned during the year will be used in
calculating awards under this Plan. This Plan does not establish a
salary in addition to
any salary established by any other agreement between SNB and Mount.
2.2 Any Director fees or other amounts that SNB may pay Mount that are
not base salary will not be included as part of salary for the
purpose of this Plan.
3. INCENTIVE AWARDS
3.1 Mount will be eligible each year for a cash award and a deferred
award. The cash award will combine a growth award and a ROA award.
4. GROWTH AWARD
4.1 The Growth Award will equal one and one-half times the percentage
point difference (positive or negative) of SNB's percentage change
in assets for the year, minus the
median percentage change in assets among other Bay Area banks in
the same asset group (currently Group B: $50-$100 million).
Growth Award = 1.5 x (SNB Assets Change% - Group Median Assets Change%)
4.2 Growth Award example (illustrative data, not actual):
SNB Assets 12/31/94 $ 80,000,000
SNB Assets 12/31/95 $ 91,200,000
SNB Assets Change 14.00%
Bay Area Group B Median Change 8.00%
Assets Change Difference 6.00%
Growth Award (1.5 x Assets Chng Diff) 9.00%
4.3 The percentage change in assets will be calculated from the end
of the prior year to the end of the incentive period.
5. ROA AWARD
5.1 The ROA Award will equal 50 times the percentage point difference
(positive or negative) of SNB's ROA percentage for the year, minus
the median ROA percentage among other Bay Area banks in the same
asset group.
ROA Award = 50 x (SNB ROA% - Group Median ROA%)
5.2 ROA Award example (illustrative data, not actual):
SNB ROA 1995 1.20%
Bay Area Group B Median 0.80%
ROA Difference 0.40%
ROA Award (50 x ROA Diff) 20.00%
5.3 ROA will be calculated as net income for the period, divided by
average assets from the beginning of the first month through the
beginning of the final month.
6. CASH AWARD
6.1 The Cash Award will equal Mount's base salary for the year
multiplied by the Growth Award percentage (positive or negative)
added to the ROA Award percentage (positive or negative).
The payment will be made as soon as practicable after SNB's
accounting is completed for the year.
Cash Award = (Growth Award% + ROA Award%) x Salary
6.2 Cash Award example (illustrative data from examples above)
Growth Award 9.00%
ROA Award 20.00%
Cash Award 29.00%
29.00% x $135,000 = $39,150
6.3 If the sum of Growth Award and ROA Award percentages is a
negative value, the
cash award for that year will be zero. There will be no negative
balance carried forward.
7. DEFERRED AWARD
7.1 Award: SNB will provide for Mount a deferred award each year in
the form of Participating Units equal to Mount's cash award for
the year.
7.2 Vesting: Mount's rights to the Units will vest beginning at the
end of the year for which
the award is earned and continuing during the next five years
of Mount's employment.
7.2.1 Vesting will be on a daily basis during the five-year period
(1,826 days). Each day of employment after the award year end
will vest 1/1,826, or 0.05476 percent of the Units vested for
that year. (For example, if Mount's employment
terminated 183 days after an award year end, he would be vested
in 183/1,826, or about 10 percent, of the Units granted for
that award year.)
7.3 Termination: If Mount's employment with SNB terminates for any
reason (voluntary or involuntary) other than retirement after
the year 1999, death or disability, vesting will cease at
termination date. Mount will forfeit any Units not vested as
of the termination date.
7.4 Retirement, etc.: If Mount's employment with SNB terminates
due to Mount's retirement after the year 1999, death or
disability, vesting will continue as though
Mount were employed. SNB will then pay the vested Units at
the regular times and according to the regular formula explained
in this Plan. If Mount is not living, SNB
will pay the beneficiary last designated in writing by Mount for
this purpose or, lacking such a beneficiary, SNB will pay Mount's
estate.
7.5 Termination Cause: In case of Mount's termination, the Board will
determine the cause. The Board may revise its determination at
any time.
7.6 Payment: SNB will pay vested Units to Mount under one of three
options to be selected by the Board in its sole discretion:
7.6.1 A lump sum, paid in cash at the end of the termination year
but not sooner than the end of 1999.
7.6.2 A 10-year annuity, to be purchased by SNB at the lump-sum value
at the end of the termination year but not sooner than the end
of 1999.
7.6.3 Ten annual installments beginning at the end of the termination
year but not sooner than the end of 1999. Under this option,
the Units will continue to change in value according to the regular
Unit value formula until the Units are paid.
7.7 Value: The Unit value will be one dollar at time of grant.
The value will be increased or reduced by a factor equal to 10
times SNB's return on assets (ROA) rate each year,
compounded, until the Units are paid.
7.8 Payout Limit: If scheduled Units payments would exceed 50
percent of SNB's net earnings for the year the Board may
reduce the number of Units payable for that year
and defer the balance of vested Units for one year. The Board
may continue such deferrals in successive years to comply with
each year's payment limit. The Units will continue to gain or
lose value until paid.
7.9 Early Out: SNB may accelerate vesting and/or payment of Units
if Mount's Unit account balance is valued at less than $500 OR
if Mount faces severe financial hardship, as determined by the
Board.
7.10 Accelerated Vesting: Mount's rights to Units previously awarded
will become fully vested and immediately payable if, within any
12-month period, both of these events occur: (1) SNB ownership
changes more than 51 percent, AND (2)
Mount's employment terminates.
7.10.1 "Ownership changes" here means the sale, pledge or assignment
of SNB common stock to a party or parties other than the
current owners or members of their immediate families.
Current owners and the calculation of percent
change will be determined in reference to SNB ownership as
of January 15, 1990.
7.10.2 "Employment terminates" here means voluntary or involuntary
termination except for: (1) retirement after 1999, (2) death,
(3) disability or (4) discharge for cause, such as
dishonesty, neglect of duty or otherwise bringing harm or
discredit to SNB.
7.10.3 Units payable under this accelerated vesting provision will
be valued as of the time of accelerated vesting. The 1999
date limitations will not apply to this
accelerated vesting provision.
8. DRAW
8.1 If Mount's total pay (salary + Growth Award + ROA Award) for
a year equals less than 80 percent of Mount's prior two-year
average total pay, Mount may draw the difference as an advance
against his future earnings from SNB.
8.1.1 Advances paid to Mount or repaid to SNB will not be included in
calculations of total pay for purposes of this section.
8.1.2 SNB may deduct the amount of any outstanding advances from Mount's
earnings in excess of 80 percent of his prior two-year average
total pay. "Earnings" here includes salary, Growth Awards, ROA
Awards and Deferred Awards.
8.2 Mount may not draw an advance under the terms of this section
upon or in anticipation of the termination of his employment for
any reason (voluntary or involuntary).
9. CALCULATION NOTES
9.1 Data for other Bay Area banks is available in the Grant Thornton
Bankers' Index. The Index shows change in assets percentages
and ROA percentages for each Bay Area bank in the same asset
group. SNB will array each of those percentages from high to
low for all banks in the group, excluding SNB. The median
percentage (the middle value) will be used for comparison. Note
that the median and not the average is to be used for comparison.
(The median is more reliable than the average, which can be
distorted by extreme values in the array.)
9.2 When calculating incentive awards, SNB will compare its year-end
data to the year-end data for other banks in the same size
category.
9.3 SNB assets and net income for the award year will be calculated
before allowance for awards being calculated under this Plan for
the award year. (This is to avoid circular calculations.)
9.4 At the discretion of the Board of Directors, SNB may calculate
separate awards, on a pro rata basis, before and after a major
change in SNB's condition. A major change
might include acquisition of another bank, a large infusion of
capital, sale of branches,
sale or abandonment of a large part of SNB's business, or other
such change that the Board regards as major. SNB's asset growth
and ROA would then be calculated and compared to other banks
for the separate periods before and after the change. Any such
pro rata calculation of award values will not accelerate award
payment to before year end.
9.5 With adoption of this Plan, the Board of Directors also terminates
the prior CEO Compensation Plan. All deferred Units granted under
the prior plan will be valued under the prior plan up to the
effective date of this Plan. After that date, the old Units
will convert to the new Unit value formula of this Plan
10. LIMITATIONS AND RIGHTS
10.1 Nothing in this Plan may be construed to: (1) give any person any
right to be issued any award or payment other than under terms of
this Plan, (2) limit in any way the right of SNB to terminate
Mount's employment at any time or (3) be evidence of any
agreement or understanding, express or implied, that SNB
will employ Mount in any particular position or at any
particular rate of compensation or for any particular time,
except as specifically set forth in the Plan.
10.2 SNB may amend, alter, modify or terminate this Plan at any time
upon written notice to Mount.
10.2.1 Any such action shall not affect the rights of Mount with
respect to any award properly credited under this Plan
prior to the effective date of such action.
10.2.2 If this Plan is changed or terminated, SNB will prorate
cash and deferred awards for the portion of the year
worked before the change or termination.
10.3 This Plan will be in effect from January 1, 1995 until changed
or terminated.
* * * * *
Plan approved by the Board of Directors by resolution dated ________________
For the Board_______________________________________ Date____________________
Saratoga National Bank
12000 S. Saratoga-Sunnyvale Road, Saratoga, California 95070
Plan received and read by Richard L. Mount, Chief Executive Officer:
Signature__________________________________________ Date___________________
Address_____________________________________________________________________
Saratoga National Bank
CHIEF EXECUTIVE OFFICER
INCENTIVE COMPENSATION PLAN
July 8, 1995
1. AGREEMENT
1.1 This Chief Executive Officer Incentive Compensation Plan (the Plan)
states the understanding between Richard L. Mount (Mount) and Saratoga
National Bank regarding incentive compensation of Mount as Chief
Executive Officer of Saratoga National Bank ("SNB"). This Plan
supersedes the prior Chief Executive Officer Compensation Plan.
Any employment agreement, management continuity agreement,
or other agreement that may exist between Mount and SNB is separate
from and shall not affect or be affected by this Plan.
2. SALARY
2.1 SNB will pay Mount a base salary at a rate approved by resolution of
the Board of Directors (the Board). That base salary amount earned
during the year will be used in calculating awards under this Plan.
This Plan does not establish a salary in addition to
any salary established by any other agreement between SNB and Mount.
2.2 Any Director fees or other amounts that SNB may pay Mount that are
not base salary will not be included as part of salary for the
purpose of this Plan.
3. INCENTIVE AWARDS
3.1 Mount will be eligible each year for a cash award and a deferred
award. The cash award will combine a growth award and a ROA award.
4. GROWTH AWARD
4.1 The Growth Award will equal one and one-half times the percentage
point difference (positive or negative) of SNB's percentage change
in assets for the year, minus the median percentage change in assets
among California banks located in a metropolitan
service area in the same asset group (currently $75-$150 million.)
Growth Award = 1.5 x (SNB Assets Change% - Group Median Assets Change%)
4.2 Growth Award example (illustrative data, not actual):
SNB Assets 12/31/94 $ 80,000,000
SNB Assets 12/31/95 $ 91,200,000
SNB Assets Change 14.00%
Comparison Group Median Change 8.00%
Assets Change Difference 6.00%
Growth Award (1.5 x Assets Chng Diff) 9.00%
4.3 The percentage change in assets will be calculated from
the end of the prior year to the end of the incentive period.
5. ROA AWARD
5.1 The ROA Award will equal 50 times the percentage point difference
(positive or negative) of SNB's ROA percentage for the year,
minus the median ROA percentage among California banks located in
a metropolitan service area in the same asset group
(currently $75 - $150 million.)
ROA Award = 50 x (SNB ROA% - Group Median ROA%)
5.2 ROA Award example (illustrative data, not actual):
SNB ROA 1995 1.20%
Comparison Group Median 0.80%
ROA Difference 0.40%
ROA Award (50 x ROA Diff) 20.00%
5.3 ROA will be calculated as net income for the year, divided by
average assets for the year.
6. CASH AWARD
6.1 The Cash Award will equal Mount's base salary for the year
multiplied by the Growth Award percentage (positive or negative)
added to the ROA Award percentage (positive or negative). The
payment will be made as soon as practicable after SNB's accounting
is completed for the year.
Cash Award = (Growth Award% + ROA Award%) x Salary
6.2 Cash Award example (illustrative data from examples above)
Growth Award 9.00%
ROA Award 20.00%
Cash Award 29.00%
29.00% x $135,000 = $39,150
6.3 If the sum of Growth Award and ROA Award percentages is a negative
value, the
cash award for that year will be zero. There will be no negative
balance carried forward.
7. DEFERRED AWARD
7.1 Award: SNB will provide for Mount a deferred award each year in
the form of Participating Units equal to Mount's cash award for
the year.
7.2 Vesting: Mount's rights to the Units will vest beginning at the
end of the year for which the award is earned and continuing
during the next five years of Mount's employment.
7.2.1 Vesting will be on a daily basis during the five-year period
(1,826 days). Each day of employment after the award year end
will vest 1/1,826, or 0.05476 percent of the Units vested for
that year. (For example, if Mount's employment
terminated 183 days after an award year end, he would be
vested in 183/1,826, or about 10 percent, of the Units granted
for that award year.)
7.3 Termination: If Mount's employment with SNB terminates for any
reason (voluntary or involuntary) other than retirement after
the year 1999, death or disability, vesting
will cease at termination date. Mount will forfeit any Units
not vested as of the termination date.
7.4 Retirement, etc.: If Mount's employment with SNB terminates due
to Mount's retirement after the year 1999, death or disability,
vesting will continue as though
Mount were employed. SNB will then pay the vested Units at the
regular times and
according to the regular formula explained in this Plan. If Mount
is not living, SNB
will pay the beneficiary last designated in writing by Mount for
this purpose or, lacking
such a beneficiary, SNB will pay Mount's estate.
7.5 Termination Cause: In case of Mount's termination, the Board will
determine the cause.
The Board may revise its determination at any time.
7.6 Payment: SNB will pay vested Units to Mount under one of three
options to be selected
by the Board in its sole discretion:
7.6.1 A lump sum, paid in cash at the end of the termination year but
not sooner than the end of 1999.
7.6.2 A 10-year annuity, to be purchased by SNB at the lump-sum value
at the end of the termination year but not sooner than the end
of 1999.
7.6.3 Ten annual installments beginning at the end of the termination
year but not
sooner than the end of 1999. Under this option, the Units will
continue to
change in value according to the regular Unit value formula until
the Units are paid.
7.7 Value: The Unit value will be one dollar at time of grant. The
value will be increased
or reduced by a factor equal to 10 times SNB's return on assets
(ROA) rate each year, compounded, until the Units are paid.
7.8 Payout Limit: If scheduled Units payments would exceed 50 percent
of SNB's net
earnings for the year the Board may reduce the number of Units
payable for that year
and defer the balance of vested Units for one year. The Board may
continue such
deferrals in successive years to comply with each year's payment
limit. The Units will
continue to gain or lose value until paid.
7.9 Early Out: SNB may accelerate vesting and/or payment of Units if
Mount's Unit
account balance is valued at less than $500 OR if Mount faces
severe financial
hardship, as determined by the Board.
7.10 Accelerated Vesting: Mount's rights to Units previously awarded
will become
fully vested and immediately payable if, within any 12-month
period, both of
these events occur: (1) SNB ownership changes more than 51
percent, AND (2)
Mount's employment terminates.
7.10.1 "Ownership changes" here means the sale, pledge or assignment
of SNB
common stock to a party or parties other than the current
owners or members
of their immediate families. Current owners and the calculation
of percent
change will be determined in reference to SNB ownership as of
January 1, 1995.
7.10.2 "Employment terminates" here means voluntary or involuntary
termination
except for: (1) retirement after 1999, (2) death,
(3) disability or (4) discharge
for cause, such as dishonesty, neglect of duty or otherwise
bringing harm or discredit to SNB.
7.10.3 Units payable under this accelerated vesting provision will
be valued as of the
time of accelerated vesting. The 1999 date limitations will not
apply to this accelerated vesting provision.
8. DRAW
8.1 If Mount's total pay (salary + Growth Award + ROA Award) for a year
equals less than 80 percent of Mount's prior two-year average total
pay, Mount may draw the difference as an advance against his future
earnings from SNB.
8.1.1 Advances paid to Mount or repaid to SNB will not be included in
calculations of total pay for purposes of this section.
8.1.2 SNB may deduct the amount of any outstanding advances from Mount's
earnings in excess of 80 percent of his prior two-year average
total pay.
"Earnings" here includes salary, Growth Awards, ROA Awards and
Deferred Awards.
8.2 Mount may not draw an advance under the terms of this section upon
or in anticipation of the termination of his employment for any
reason (voluntary or involuntary).
9. CALCULATION NOTES
9.1 For purposes of determining the Growth Award and the ROA Award,
SNB will array
each of the percentages from high to low for all banks in the
comparison group,
excluding SNB. The median percentage (the middle value) will be
used for comparison.
Note that the median and not the average is to be used for
comparison. (The median is
more reliable than the average, which can be distorted by extreme
values in the array.)
9.2 When calculating incentive awards, SNB will compare its year-end
data to the year-end
data for other banks in the same size category.
9.3 SNB assets and net income for the award year will be calculated
before allowance for
awards being calculated under this Plan for the award year. (This
is to avoid circular
calculations.)
9.4 At the discretion of the Board of Directors, SNB may calculate
separate awards, on a
pro rata basis, before and after a major change in SNB's condition.
A major change
might include acquisition of another bank, a large infusion of
capital, sale of branches,
sale or abandonment of a large part of SNB's business, or other
such change that the
Board regards as major. SNB's asset growth and ROA would then be
calculated and
compared to other banks for the separate periods before and after
the change. Any such
pro rata calculation of award values will not accelerate award
payment to before year
end.
9.5 With adoption of this Plan, the Board of Directors also terminates
the prior CEO
Compensation Plan. All deferred Units granted under the prior plan
will be valued
under the prior plan up to the effective date of this Plan. After
that date, the old Units
will convert to the new Unit value formula of this Plan
10. LIMITATIONS AND RIGHTS
10.1 Nothing in this Plan may be construed to: (1) give any person any
right to be
issued any award or payment other than under terms of this Plan,
(2) limit in
any way the right of SNB to terminate Mount's employment at any
time or (3)
be evidence of any agreement or understanding, express or implied,
that SNB
will employ Mount in any particular position or at any particular
rate of
compensation or for any particular time, except as specifically
set forth in the
Plan.
10.2 SNB may amend, alter, modify or terminate this Plan at any time
upon written
notice to Mount.
10.2.1 Any such action shall not affect the rights of Mount with
respect to any award
properly credited under this Plan prior to the effective date]
of such action.
10.2.2 If this Plan is changed or terminated, SNB will prorate cash
and deferred
awards for the portion of the year worked before the change or
termination.
10.3 This Plan will be in effect from January 1, 1995 until changed or
terminated.
* * * * *
Plan approved by the Board of Directors by resolution dated __________________
For the Board_______________________________________ Date____________________
Saratoga National Bank
12000 S. Saratoga-Sunnyvale Road, Saratoga, California 95070
Plan received and read by Richard L. Mount, Chief Executive Officer:
Signature__________________________________________ Date_____________________
Address______________________________________________________________________