EXECUTIVE SUPPLEMENTAL COMPENSATION AGREEMENT
This Agreement is made and entered into effective as of _______________,
1998 by and between Saratoga National Bank, a national banking association
chartered under the federal laws of the United States of America with its
principal offices located in the City of Saratoga, Santa Clara County,
California (the "Employer"), and Richard L. Mount, an individual residing in the
State of California (the "Executive").
RECITALS
WHEREAS, the Executive has been an employee of the Employer since
_____________, 1982, and is currently serving as its President and Chief
Executive Officer;
WHEREAS, the Employer desires to establish a compensation benefit program
as a fringe benefit for executive officers of the Employer in order to attract
and retain individuals with extensive and valuable experience in the banking
industry;
WHEREAS, the Executive's experience and knowledge of the affairs of the
Employer and the banking industry are extensive and valuable;
WHEREAS, it is deemed to be in the best interests of the Employer to
provide the Executive with certain fringe benefits, on the terms and conditions
set forth herein, in order to reasonably induce the Executive to remain in the
Employer's employment and to compensate the Employee for valuable services
heretofore rendered to the Employer; and
WHEREAS, the Executive and the Employer wish to specify in writing the
terms and conditions upon which this additional compensatory incentive will be
provided to the Executive, or to the Executive's spouse or the Executive's
designated beneficiaries, as the case may be.
NOW, THEREFORE, in consideration of the services to be performed by the
Executive in the future, as well as the mutual promises and covenants contained
herein, the Executive and the Employer agree as follows:
AGREEMENT
1. Terms and Definitions.
1.1. Administrator. The Employer shall be the "Administrator" and, solely
for the purposes of ERISA as defined in subparagraph 1.9 below, the "fiduciary"
of this Agreement where a fiduciary is required by ERISA.
1.2. Applicable Percentage. The term "Applicable Percentage" shall mean
that percentage listed on Schedule "A" attached hereto which is adjacent to the
number of calendar years which shall have elapsed from the date of the
Executive's commencement of service to the Employer. Notwithstanding the
foregoing or the percentages set forth on Schedule "A," but subject to all other
terms and conditions set forth herein, the "Applicable Percentage" shall be: (i)
provided payments have not yet begun hereunder, one hundred percent (100%) upon
the occurrence of a "Change in Control" as defined in subparagraph 1.4 below, or
the Executive's death, or Disability (as defined in subparagraph 1.6
below),which death or Disability occurs prior to the termination of the
Executive's employment by the Employer; and (ii) notwithstanding subclause (i)
of this subparagraph 1.2, zero percent (0%) in the event the Executive takes any
intentional action which prevents the Employer from collecting the proceeds of
any life insurance policy which the Employer may happen to own at the time of
the Executive's death and of which the Employer is the designated beneficiary.
Furthermore, notwithstanding the foregoing, or anything contained in this
Agreement to the contrary, in the event the Executive takes any intentional
action which prevents the Employer from collecting the proceeds of any life
insurance policy which the Employer may happen to own at the time of the
Executive's death and of which the Employer is the designated beneficiary: (1)
the Executive's estate or designated beneficiary shall no longer be entitled to
receive any of the amounts payable under the terms of this Agreement, and (2)
the Employer shall have the right to recover from the Executive's estate all of
the amounts paid to the Executive's estate (with respect to amounts paid prior
to the Executive's death or paid to the Executive's estate) or designated
beneficiary (with respect to amounts paid to the designated beneficiary)
pursuant to the terms of this Agreement prior to and after Executive's death.
1.3. Beneficiary. The term "beneficiary" or "designated beneficiary" shall
mean the person or persons whom the Executive shall designate in a valid
Beneficiary Designation, a copy of which is attached hereto as Schedule "C," to
receive the benefits provided hereunder. A Beneficiary Designation shall be
valid only if it is in the form attached hereto and made a part hereof,
completed and signed by the Executive and received by the Administrator prior to
the Executive's death.
1.4. Change in Control. The term "Change in Control" shall mean the
occurrence of any of the following events with respect to the Employer (with the
term "Employer" being defined for purposes of determining whether a "Change in
Control" has occurred to include any parent bank holding company owning 100% of
the Employer's outstanding common stock): (i) a change in control of a nature
that would be required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or in response to any other form or report to the
regulatory agencies or governmental authorities having jurisdiction over the
Employer or any stock exchange on which the Employer's shares are listed which
requires the reporting of a change in control; (ii) any merger, consolidation or
reorganization of the Employer in which the Employer does not survive; (iii) any
sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one
transaction or a series of transactions) of any assets of the Employer having an
aggregate fair market value of fifty percent (50%)of the total value of the
assets of the Employer, reflected in the most recent balance sheet of the
Employer; (iv) a transaction whereby any "person" (as such term is used in the
Exchange Act) or any individual, corporation, partnership, trust or any other
entity becomes the beneficial owner, directly or indirectly, of securities of
the Employer representing twenty-five percent(25%) or more of the combined
voting power of the Employer's then outstanding securities; or (v) a situation
where, in any one-year period, individuals who at the beginning of such period
constitute the Board of Directors of the Employer cease for any reason to
constitute at least a majority thereof, unless the election, or the nomination
for election by the Employer's shareholders, of each new director is approved by
a vote of at least three-quarters (3/4) of the directors then still in office
who were directors at the beginning of the period.
1.5. The Code. The "Code" shall mean the Internal Revenue Code of 1986, as
amended (the "Code").
1.6. Disability/Disabled. The term "Disability" or "Disabled" shall have
the same meaning given such terms in any policy of disability insurance
maintained by the Employer for the benefit of employees including the Executive.
In the absence of such a policy which extends coverage to the Executive in the
event of disability, the terms shall mean bodily injury or disease (mental or
physical) which wholly and continuously prevents the performance of duty for at
least three months.
1.7. Early Retirement Date. The term "Early Retirement Date" shall mean the
Retirement, as defined below, of the Executive on a date which occurs prior to
the Executive attaining sixty-two(62) years of age, but after the Executive has
attained fifty-five (55) years of age.
1.8. Effective Date. The term "Effective Date" shall mean the date first
written above.
1.9. ERISA. The term "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
1.10. Executive Benefits. The term "Executive Benefits" shall mean the
benefits determined in accordance with Schedule "B", and reduced or adjusted to
the extent: (i) required under the other provisions of this Agreement,
including, but not limited to, Paragraphs 5, 6 and 7 hereof; (ii) required by
reason of the lawful order of any regulatory agency or body having jurisdiction
over the Employer; or (iii) required in order for the Employer to properly
comply with any and all applicable state and federal laws, including, but not
limited to, income, employment and disability income tax laws (e.g., FICA, FUTA,
SDI).
1.11. Plan Year. The term "Plan Year" shall mean the Employer's fiscal
year.
1.12. Retirement. The term "Retirement" or "Retires" shall refer to the
date which the Executive acknowledges in writing to Employer to be the last day
the Executive will provide any significant personal services, whether as an
employee or independent consultant or contractor, to Employer. For purposes of
this Agreement, the phrase "significant personal services" shall mean more than
ten (10) hours of personal services rendered to one or more individuals or
entities in any thirty (30) day period.
1.13. Surviving Spouse. The term "Surviving Spouse" shall mean the person,
if any, who shall be legally married to the Executive on the date of the
Executive's death.
1.14. Termination for Cause. The term "Termination for Cause" shall mean
termination of the employment of the Executive by reason of any of the following
determined in good faith by the Employer's Board of Directors:
(a) The willful, intentional and material breach or the habitual and
continued neglect by the Executive of his or her employment
responsibilities and duties;
(b) The continuous mental or physical incapacity of the Executive,
subject to disability rights under this Agreement;
(c) The Executive's willful and intentional violation of any federal
banking or securities laws, or of the Bylaws, rules, policies or
resolutions of Employer, or the rules or regulations of the Board
of Governors of the Federal Reserve System, Federal Deposit
Insurance Corporation, Office of the Comptroller of the Currency,
or other regulatory agency or governmental authority having
jurisdiction over the Employer, which has a material adverse
effect upon the Employer;
(d) The written determination by a state or federal banking agency or
governmental authority having jurisdiction over the Employer that
Executive is not suitable to act in the capacity for which he or
she is employed by Employer;
(e) The Executive's conviction of (i) any felony or (ii) a crime
involving moral turpitude, or the Executive's willful and
intentional commission of a fraudulent or dishonest act; or
(f) The Executive's willful and intentional disclosure, without
authority, of any secret or confidential information concerning
Employer or taking any action which the Employer's Board of
Directors determines, in its sole discretion and subject to good
faith, fair dealing and reasonableness, constitutes unfair
competition with or induces any customer to breach any contract
with the Employer.
2. Scope, Purpose and Effect.
2.1. Contract of Employment. Although this Agreement is intended to provide
the Executive with an additional incentive to remain in the employ of the
Employer, this Agreement shall not be deemed to constitute a contract of
employment between the Executive and the Employer nor shall any provision of
this Agreement restrict or expand the right of the Employer to terminate the
Executive's employment. This Agreement shall have no impact or effect upon any
separate written Employment Agreement which the Executive may have with the
Employer, it being the parties' intention and agreement that unless this
Agreement is specifically referenced in said Employment Agreement (or any
modification thereto), this Agreement (and the Employer's obligations hereunder)
shall stand separate and apart and shall have no effect on or be affected by,
the terms and provisions of said Employment Agreement.
2.2. Fringe Benefit. The benefits provided by this Agreement are granted by
the Employer as a fringe benefit to the Executive and are not a part of any
salary reduction plan or any arrangement deferring a bonus or a salary increase.
The Executive has no option to take any current payments or bonus in lieu of the
benefits provided by this Agreement.
3. Payments Upon Early Retirement or Retirement and After Retirement.
3.1. Payments Upon Early Retirement. The Executive shall have the right to
Retire on a date which constitutes an Early Retirement Date as defined in
subparagraph 1.7 above. In the event the Executive elects to Retire on a date
which constitutes an Early Retirement Date, the Executive shall be entitled to
be paid the Applicable Percentage of the Executive Benefits, in substantially
equal monthly installments on the first day of each month, beginning with the
month following the month in which the Early Retirement Date occurs or upon such
later date as may be mutually agreed upon by the Executive and the Employer in
advance of said Early Retirement Date, payable (i) for the period designated in
Schedule "D" in the case of the balance in the Benefit Account and (ii) until
the Executive's death in the case of the Index Benefit defined in Schedule "B".
3.2. Payments Upon Retirement. If the Executive remains in the employment
of the Employer until attaining sixty-two (62)years of age, the Executive shall
be entitled to be paid the Applicable Percentage of the Executive Benefits, in
substantially equal monthly installments on the first day of each month,
beginning with the month following the month in which the Executive Retires or
upon such later date as may be mutually agreed upon by the Executive and the
Employer in advance of said Retirement date, payable (i) for the period
designated in Schedule "D" in the case of the balance in the Benefit Account and
(ii) until the Executive's death in the case of the Index Benefit defined in
Schedule "B". At the Employer's sole and absolute discretion, the Employer may
increase the Executive Benefits as and when the Employer determines the same to
be appropriate.
3.3. Payments in the Event of Death After Retirement. The Employer agrees
that if the Executive Retires, but shall die before receiving all of the
Executive Benefits Payments specified in Schedule "B", the Employer agrees to
pay the Applicable Percentage of the Executive Benefits to the Executive's
designated beneficiary in lump sum. If a valid Beneficiary Designation is not in
effect, then the remaining amounts due to the Executive under the terms of this
Agreement shall be paid to the Executive's Surviving Spouse. If the Executive
leaves no Surviving Spouse, the remaining amounts due to the Executive under the
terms of this Agreement shall be paid to the duly qualified personal
representative, executor or administrator of the Executive's estate.
4. Payments in the Event Death or Disability Occurs Prior to Retirement.
4.1. Payments in the Event of Death Prior to Retirement. If the Executive
dies at any time after the Effective Date of this Agreement, but prior to
Retirement, the Employer agrees to pay the Applicable Percentage of the
Executive Benefits to the Executive's designated beneficiary in lump sum. If a
valid Beneficiary Designation is not in effect, then the remaining amounts due
to the Executive under the terms of this Agreement shall be paid to the
Executive's Surviving Spouse. If the Executive leaves no Surviving Spouse, the
remaining amounts due to the Executive under the terms of this Agreement shall
be paid to the duly qualified personal representative, executor or administrator
of the Executive's estate.
4.2. Payments in the Event of Disability Prior to Retirement. In the event
the Executive becomes Disabled at any time after the Effective Date of this
Agreement but prior to Retirement, the Executive shall be entitled to be paid
the Applicable Percentage of the Executive Benefits, in substantially equal
monthly installments on the first day of each month, beginning with the month
following the month in which the Executive becomes Disabled, payable (i) for the
period designated in Schedule "D" in the case of the balance in the Benefit
Account and (ii) until the Executive's death in the case of the Index Benefit
defined in Schedule "B".
5. Payments in the Event Employment Is Terminated Prior to Retirement. As
indicated in subparagraph 2.1 above, the Employer reserves the right to
terminate the Executive's employment, with or without cause but subject to any
written employment agreement which may then exist, at any time prior to the
Executive's Retirement. In the event that the employment of the Executive shall
be terminated, other than by reason of death, Disability or Retirement, prior to
the Executive's attaining sixty-two(62) years of age, then this Agreement shall
terminate upon the date of such termination of employment; provided, however,
that the Executive shall be entitled to the following benefits as may be
applicable depending upon the circumstances surrounding the Executive's
termination:
5.1. Termination Without Cause. If the Executive's employment is terminated
by the Employer without cause, and such termination is not subject to the
provisions of subparagraph 5.4 below, the Executive shall be entitled to be paid
the Applicable Percentage of the Executive Benefits, in substantially equal
monthly installments on the first day of each month, beginning with the month
following the month in which the Executive attains fifty-five (55) years of age
or any month thereafter, as requested in writing by the Executive and delivered
to the Employer or its successor thirty (30) days prior to the commencement of
installment payments; provided, however, that in the event the Executive does
not request a commencement date as specified, such installments shall be paid on
the first day of each month, beginning with the month following the month in
which the Executive attains sixty-two (62) years of age. The installments shall
be payable (i) for the period designated in Schedule "D" in the case of the
balance in the Benefit Account and (ii) until the Executive's death in the case
of the Index Benefit defined in Schedule "B".
5.2. Voluntary Termination by the Executive. If the Executive's employment
is terminated by voluntary resignation and such resignation is not subject to
the provisions of subparagraph 5.4 below, the Executive shall be entitled to be
paid the Applicable Percentage of the Executive Benefits, in substantially equal
monthly installments on the first day of each month, beginning with the month
following the month in which the Executive attains fifty-five (55) years of age
or any month thereafter, as requested in writing by the Executive and delivered
to the Employer or its successor thirty (30) days prior to the commencement of
installment payments; provided, however, that in the event the Executive does
not request a commencement date as specified, such installments shall be paid on
the first day of each month, beginning with the month following the month in
which the Executive attains sixty-two (62) years of age. The installments shall
be payable (i) for the period designated in Schedule "D" in the case ofthe
balance in the Benefit Account and (ii) until the Executive's death in thecase
of the Index Benefit defined in Schedule "B".
5.3. Termination for Cause. The Executive agrees that if the Executive's
employment with the Employer is terminated "for cause" (as defined in
subparagraph 1.14 of this Agreement) and pursuant to subparagraph 1.14(c), (d)
or (e), the Executive shall forfeit any and all rights and benefits the
Executive may have under the terms of this Agreement and shall have no right to
be paid any of the amounts which would otherwise be due or paid to the Executive
by the Employer pursuant to the terms of this Agreement. In the event that the
Executive's employment with the Employer is terminated "for cause" pursuant to
subparagraph 1.14(a), (b) or (f), the Executive shall be entitled to be paid the
Applicable Percentage of the Executive Benefits, in substantially equal monthly
installments on the first day of each month, beginning with the month following
the month in which the Executive attains fifty-five (55) years of age or any
month thereafter, as requested in writing by the Executive and delivered to the
Employer or its successor thirty (30) days prior to the commencement of
installment payments; provided, however, that in the event the Executive does
not request a commencement date as specified, such installments shall be paid on
the first day of each month, beginning with the month following the month in
which the Executive attains sixty-two (62) years of age. The installments shall
be payable (i) for the period designated in Schedule "D" in the case of the
balance in the Benefit Account and (ii) until the Executive's death in the case
of the Index Benefit defined in Schedule "B".
5.4. Termination by the Employer on Account of or After a Change in
Control. In the event: (i) the Executive's employment with the Employer is
terminated by the Employer in conjunction with, or by reason of, a "Change in
Control" (as defined in subparagraph 1.4 above); or (ii) by reason of the
Employer's actions and without the Executive's prior written consent, any change
occurs in the scope of the Executive's position, responsibilities, duties,
salary, benefits, or location of employment (which in the event of relocation of
more than thirty (30) miles from the location of the Executive's office prior to
a Change in Control shall constitute such a change in location) after a Change
in Control occurs; or (iii) the Employer causes an event to occur which
reasonably constitutes or results in a demotion, a significant diminution of
responsibilities or authority, or a constructive termination (by forcing a
resignation or otherwise) of the Executive's employment after a Change in
Control occurs; or (iv) the Executive's employment with the Employer is
terminated within twelve (12) months after a Change in Control occurs and the
Executive notified the Employer of his intention to terminate in a writing
delivered to the Employer within six (6)months after the occurrence of a Change
in Control, then the Executive shall be entitled to be paid the Applicable
Percentage of the Executive Benefits, as defined above, in substantially equal
monthly installments on the first day of each month, beginning with the month
following the month in which the Executive attains fifty-five (55) years of age
or any month thereafter, as requested in writing by the Executive and delivered
to the Employer or its successor thirty (30) days prior to the commencement of
installment payments; provided, however, that in the event the Executive does
not request a commencement date as specified, such installments shall be paid on
the first day of each month, beginning with the month following the month in
which the Executive attains sixty-two (62) years of age. The installments shall
be payable (i) for the period designated in Schedule "D" in the case of the
balance in the Benefit Account and (ii) until the Executive's death in the case
of the Index Benefit defined in Schedule "B".
5.5. Payments in the Event of Death Following Termination. If the Executive
dies prior to receiving all of the Executive Benefits described in this
Paragraph 5 to which the Executive is entitled, then the Employer will make such
payments to the Executive's designated beneficiary in lump sum. If a valid
Beneficiary Designation is not in effect, then the remaining amounts due to the
Executive under the terms of this Agreement shall be paid to the Executive's
Surviving Spouse. If the Executive leaves no Surviving Spouse, the remaining
amounts due to the Executive under the terms of this Agreement shall be paid to
the duly qualified personal representative, executor or administrator of the
Executive's estate.
6. Section 280G Adjustment. If all or any portion of the amounts payable to
the Employee under this Agreement, either alone or together with other payments
which the Employee has the right to receive from the Employer, constitute
"excess parachute payments" within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended(the "Code"), that are subject to the excise tax
imposed by Section 4999 of the Code (or similar tax and/or assessment), the
Employee shall be responsible for the payment of such excise tax and the
Employer (and its successor) shall be responsible for any loss of deductibility
related thereto. If, at a later date, it is determined (pursuant to final
regulations or published rulings of the Internal Revenue Service, final judgment
of a court of competent jurisdiction, or otherwise) that the amount of excise
taxes payable by the Employee is greater than the amount initially so
determined, then the Employee shall pay an amount equal to the sum of such
additional excise taxes and any interest, fines and penalties resulting from
such under payment. The determination of the amount of any such excise taxes
shall be made by the independent accounting firm employed by the Employer
immediately prior to the change in control, subject to the mutual agreement of
the Employer and Employee.
7. Right To Determine Funding Methods. The Employer reserves the right to
determine, in its sole and absolute discretion, whether, to what extent and by
what method, if any, to provide for the payment of the amounts which may be
payable to the Executive, the Executive's spouse or the Executive's
beneficiaries under the terms of this Agreement. In the event that the Employer
elects to fund this Agreement, in whole or in part, through the use of life
insurance or annuities, or both, the Employer shall determine the ownership and
beneficial interests of any such policy of life insurance or annuity. The
Employer further reserves the right, in its sole and absolute discretion, to
terminate any such policy, and any other device used to fund its obligations
under this Agreement, at any time, in whole or in part. Consistent with
Paragraph 9 below, neither the Executive, the Executive's spouse nor the
Executive's beneficiaries shall have any right, title or interest in or to any
funding source or amount utilized by the Employer pursuant to this Agreement,
and any such funding source or amount shall not constitute security for the
performance of the Employer's obligations pursuant to this Agreement. In
connection with the foregoing, the Executive agrees to execute such documents
and undergo such medical examinations or tests which the Employer may request
and which may be reasonably necessary to facilitate any funding for this
Agreement including, without limitation, the Employer's acquisition of any
policy of insurance or annuity. Furthermore, a refusal by the Executive to
consent to, participate in and undergo any such medical examinations or tests
shall result in the immediate termination of this Agreement and the immediate
forfeiture by the Executive, the Executive's spouse and the Executive's
beneficiaries of any and all rights to payment hereunder.
8. Claims Procedure. The Employer shall, but only to the extent necessary
to comply with ERISA, be designated as the named fiduciary under this Agreement
and shall have authority to control and manage the operation and administration
of this Agreement. Consistent therewith, the Employer shall make all
determinations as to the rights to benefits under this Agreement. Any decision
by the Employer denying a claim by the Executive, the Executive's spouse, or the
Executive's beneficiary for benefits under this Agreement shall be stated in
writing and delivered or mailed, via registered or certified mail, to the
Executive, the Executive's spouse or the Executive's beneficiary, as the case
may be. Such decision shall set forth the specific reasons for the denial of a
claim. In addition, the Employer shall provide the Executive, the Executive's
spouse or the Executive's beneficiary with a reasonable opportunity for a full
and fair review of the decision denying such claim.
9. Status as an Unsecured General Creditor. Notwithstanding anything
contained herein to the contrary: (i) neither the Executive, the Executive's
spouse or the Executive's designated beneficiaries shall have any legal or
equitable rights, interests or claims in or to any specific property or assets
of the Employer as a result of this Agreement; (ii) none of the Employer's
assets shall be held in or under any trust for the benefit of the Executive, the
Executive's spouse or the Executive's designated beneficiaries or held in any
way as security for the fulfillment of the obligations of the Employer under
this Agreement; (iii) all of the Employer's assets shall be and remain the
general unpledged and unrestricted assets of the Employer; (iv) the Employer's
obligation under this Agreement shall be that of an unfunded and unsecured
promise by the Employer to pay money in the future; and (v) the Executive, the
Executive's spouse and the Executive's designated beneficiaries shall be
unsecured general creditors with respect to any benefits which may be payable
under the terms of this Agreement. Notwithstanding subparagraphs (i) through (v)
above, the Employer and the Executive acknowledge and agree that, in the event
of a Change in Control, upon request of the Executive, or in the Employer's
discretion if the Executive does not so request and the Employer nonetheless
deems it appropriate, the Employer shall establish, not later than the effective
date of the Change in Control, a Rabbi Trust or multiple Rabbi Trusts (the
"Trust" or "Trusts") upon such terms and conditions as the Employer, in its sole
discretion, deems appropriate and in compliance with applicable provisions of
the Code, in order to permit the Employer to make contributions and/or transfer
assets to the Trust or Trusts to discharge its obligations pursuant to this
Agreement. The principal of the Trust or Trusts and any earnings thereon shall
be held separate and apart from other funds of the Employer to be used
exclusively for discharge of the Employer's obligations pursuant to this
Agreement and shall continue to be subject to the claims of the Employer's
general creditors until paid to the Executive or its beneficiaries in such
manner and at such times as specified in this Agreement.
10. Discretion of Board to Accelerate Payout. Notwithstanding any of the
other provisions of this Agreement, the Board of Directors of the Employer may,
if determined in its sole and absolute discretion to be appropriate, accelerate
the payment of the amounts due under the terms of this Agreement, provided that
Executive (or Executive's spouse or designated beneficiaries): (i) consents to
the revised payout terms determined appropriate by the Employer's Board of
Directors; and (ii) does not negotiate or in anyway influence the terms of
proposed altered/accelerated payout (said decision to be made solely by the
Employer's Board of Directors and offered to the Executive [or Executive's
spouse or designated beneficiaries] on a "take it or leave it basis").
11. Miscellaneous.
11.1. Opportunity To Consult With Independent Advisors. The Executive
acknowledges that he has been afforded the opportunity to consult with
independent advisors of his choosing including, without limitation, accountants
or tax advisors and counsel regarding both the benefits granted to him under the
terms of this Agreement and the (i) terms and conditions which may affect the
Executive's right to these benefits and (ii) personal tax effects of such
benefits including, without limitation, the effects of any federal or state
taxes, Section 280G of the Code, and any other taxes, costs, expenses or
liabilities whatsoever related to such benefits, which in any of the foregoing
instances the Executive acknowledges and agrees shall be the sole responsibility
of the Executive notwithstanding any other term or provision of this Agreement.
The Executive further acknowledges and agrees that the Employer shall have no
liability whatsoever related to any such personal tax effects or other personal
costs, expenses, or liabilities applicable to the Executive and further
specifically waives any right for the Executive, himself, and his heirs,
beneficiaries, legal representatives, agents, successors, and assigns to claim
or assert liability on the part of the Employer related to the matters described
above in this subparagraph 11.1. The Executive further acknowledges and agrees
that he has read, understands and consents to all of the terms and conditions of
this Agreement, and that he enters into this Agreement with a full understanding
of its terms and conditions.
11.2. Arbitration of Disputes. All claims, disputes and other matters in
question arising out of or relating to this Agreement or the breach or
interpretation thereof, other than those matters which are to be determined by
the Employer in its sole and absolute discretion, shall be resolved by binding
arbitration before a representative member, selected by the mutual agreement of
the parties, of the Judicial Arbitration and Mediation Services, Inc. ("JAMS"),
located in San Francisco, California. In the event JAMS is unable or unwilling
to conduct the arbitration provided for under the terms of this Paragraph, or
has discontinued its business, the parties agree that a representative member,
selected by the mutual agreement of the parties, of the American Arbitration
Association ("AAA"), located in San Francisco, California, shall conduct the
binding arbitration referred to in this Paragraph. Notice of the demand for
arbitration shall be filed in writing with the other party to this Agreement and
with JAMS (or AAA, if necessary). In no event shall the demand for arbitration
be made after the date when institution of legal or equitable proceedings based
on such claim, dispute or other matter in question would be barred by the
applicable statute of limitations. The arbitration shall be subject to such
rules of procedure used or established by JAMS, or if there are none, the rules
of procedure used or established by AAA. Any award rendered by JAMS or AAA shall
be final and binding upon the parties, and as applicable, their respective
heirs, beneficiaries, legal representatives, agents, successors and assigns, and
may be entered in any court having jurisdiction thereof. The obligation of the
parties to arbitrate pursuant to this clause shall be specifically enforceable
in accordance with, and shall be conducted consistently with, the provisions of
Title 9 of Part 3 of the California Code of Civil Procedure. Any arbitration
hereunder shall be conducted in Saratoga, California, unless otherwise agreed to
by the parties.
11.3. Attorneys' Fees. In the event of any arbitration or litigation
concerning any controversy, claim or dispute between the parties hereto, arising
out of or relating to this Agreement or the breach hereof, or the interpretation
hereof, the prevailing party shall be entitled to recover from the
non-prevailing party reasonable expenses, attorneys' fees and costs incurred in
connection therewith or in the enforcement or collection of any judgment or
award rendered therein. The "prevailing party" means the party determined by the
arbitrator(s) or court, as the case may be, to have most nearly prevailed, even
if such party did not prevail in all matters, not necessarily the one in whose
favor a judgment is rendered.
11.4. Notice. Any notice required or permitted of either the Executive or
the Employer under this Agreement shall be deemed to have been duly given, if by
personal delivery, upon the date received by the party or its authorized
representative; if by facsimile, upon transmission to a telephone number
previously provided by the party to whom the facsimile is transmitted as
reflected in the records of the party transmitting the facsimile and upon
reasonable confirmation of such transmission; and if by mail, on the third day
after mailing via U.S. first class mail, registered or certified, postage
prepaid and return receipt requested, and addressed to the party at the address
given below for the receipt of notices, or such changed address as may be
requested in writing by a party.
If to the Employer: Saratoga National Bank
12000 Saratoga-Sunnyvale Rd.
Saratoga, California 95070
Attn: Chairman of the Board
If to the Executive: Richard L. Mount
------------------------------
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11.5. Assignment. Neither the Executive, the Executive's spouse, nor any
other beneficiary under this Agreement shall have any power or right to
transfer, assign, anticipate, hypothecate, modify or otherwise encumber any part
or all of the amounts payable hereunder, nor, prior to payment in accordance
with the terms of this Agreement, shall any portion of such amounts be: (i)
subject to seizure by any creditor of any such beneficiary, by a proceeding at
law or in equity, for the payment of any debts, judgments, alimony or separate
maintenance obligations which may be owed by the Executive, the Executive's
spouse, or any designated beneficiary; or (ii) transferable by operation of law
in the event of bankruptcy, insolvency or otherwise. Any such attempted
assignment or transfer shall be void and unenforceable without the prior written
consent of the Employer. The Employer's consent, if any, to one or more
assignments or transfers shall not obligate the Employer to consent to or be
construed as the Employer's consent to any other or subsequent assignment or
transfer.
11.6. Binding Effect/Merger or Reorganization. This Agreement shall be
binding upon and inure to the benefit of the Executive and the Employer and, as
applicable, their respective heirs, beneficiaries, legal representatives,
agents, successors and assigns. Accordingly, the Employer shall not merge or
consolidate into or with another corporation, or reorganize or sell
substantially all of its assets to another corporation, firm or person, unless
and until such succeeding or continuing corporation, firm or person agrees to
assume and discharge the obligations of the Employer under this Agreement. Upon
the occurrence of such event, the term "Employer" as used in this Agreement
shall be deemed to refer to such surviving or successor firm, person, entity or
corporation.
11.7. Nonwaiver. The failure of either party to enforce at any time or for
any period of time any one or more of the terms or conditions of this Agreement
shall not be a waiver of such term(s) or condition(s) or of that party's right
thereafter to enforce each and every term and condition of this Agreement.
11.8. Partial Invalidity. If any term, provision, covenant, or condition of
this Agreement is determined by an arbitrator or a court, as the case may be, to
be invalid, void, or unenforceable, such determination shall not render any
other term, provision, covenant or condition invalid, void or unenforceable, and
the Agreement shall remain in full force and effect notwithstanding such partial
invalidity.
11.9. Entire Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties with respect to the
subject matter of this Agreement and contains all of the covenants and
agreements between the parties with respect thereto. Each party to this
Agreement acknowledges that no other representations, inducements, promises, or
agreements, oral or otherwise, have been made by any party, or anyone acting on
behalf of any party, which are not set forth herein, and that no other
agreement, statement, or promise not contained in this Agreement shall be valid
or binding on either party.
11.10. Modifications. Any modification of this Agreement shall be effective
only if it is in writing and signed by each party or such party's authorized
representative.
11.11. Paragraph Headings. The paragraph headings used in this Agreement
are included solely for the convenience of the parties and shall not affect or
be used in connection with the interpretation of this Agreement.
11.12. No Strict Construction. The language used in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any person.
11.13. Governing Law. The laws of the State of California, other than those
laws denominated choice of law rules, and, where applicable, the rules and
regulations of the Board of Governors of the Federal Reserve System, Federal
Deposit Insurance Corporation, Office of the Comptroller of the Currency, or
other regulatory agency or governmental authority having jurisdiction over
Employer, shall govern the validity, interpretation, construction and effect of
this Agreement.
IN WITNESS WHEREOF, the Employer and the Executive have executed this
Agreement on the date first above-written in the City of Saratoga, Santa Clara
County, California.
THE EMPLOYER THE EXECUTIVE
SARATOGA NATIONAL BANK
By:______________________________ _____________________________
V. Ronald Mancuso Richard L. Mount
Compensation Committee Chairman
SCHEDULE A
CALENDAR YEAR APPLICABLE PERCENTAGE
__________, 1982 to December 31, 1998. . . . 80.00%
December 31, 1999. . . . . . . . . . . . . . 90.00%
December 31, 2000. . . . . . . . . . . . . .100.00%
SCHEDULE B
EXECUTIVE BENEFITS
1. Executive Benefits Determination.
The Executive Benefits shall be determined based upon the following:
a. Benefit Account:
A Benefit Account shall be established as a liability reserve account
on the books of the Employer for the benefit of the Executive. Prior
to the date on which the Executive becomes eligible to receive
payments under the Agreement, such Benefit Account shall be increased
(or decreased) each Plan Year (including the Plan Year in which the
Executive ceases to be employed by the Employer) by an amount equal to
the annual earnings or loss for that Plan Year determined by the Index
(described in subparagraph c below), less the Opportunity Cost
(described in subparagraph d below) for that Plan Year.
b. Index Benefit:
After the date on which the Executive becomes eligible to receive
payments under the Agreement, the Index Benefit for the Executive for
any Plan Year shall be determined by subtracting the Opportunity Cost
for that Plan Year from the earnings, if any, established by the
Index.
c. Index:
The Index for any Plan Year shall be the aggregate annual after-tax
income from the life insurance contracts described hereinafter as
defined by FASB Technical Bulletin 85-4. This Index shall be applied
as if such insurance contracts were purchased on the Effective Date.
Insurance Company(ies)/Policy Number(s):
Canada Life Assurance/US2651090
Southland Life Insurance/0600080553
Transamerica Life/50335062
If such contracts of life insurance are actually purchased by the
Employer, then the actual policies as of the dates purchased shall be
used in calculations to determine the Index and Opportunity Cost. If
such contracts of life insurance are not purchased or are subsequently
surrendered or lapsed, then the Employer shall receive and use annual
policy illustrations that assume the above described policies were
purchased from the above named insurance company(ies) on the Effective
Date to calculate the amount of the Index and Opportunity Cost.
d. Opportunity Cost:
The Opportunity Cost for any Plan Year shall be calculated by
multiplying (a) the sum of (i) the total amount of premiums set forth
in the insurance policies described above, (ii) the amount of any
Index Benefits (described at subparagraph b above), and (iii) the
amount of all previous years after-tax Opportunity Costs; by (b) the
average annualized after-tax cost of funds calculated using a one-year
U.S. Treasury Bill as published in the Wall Street Journal. The
applicable tax rate used to calculate the Opportunity Cost shall be
the Employer's marginal tax rate until the Executive's Retirement, or
other termination of service (including a Change in Control).
Thereafter, the Opportunity Cost shall be calculated with the
assumption of a marginal forty-two percent (42%) corporate tax rate
each year regardless of whether the actual marginal tax rate of the
Employer is higher or lower.
EXAMPLE INDEX BENEFITS
[n] [A] [B] [C] [D]
End of Cash Surrender Index Opportunity Annual Cumulative
Year Value of Life [Annual Cost Benefit Benefit
Policy A0=premium B-C D+Dn-1
Income A0+Cn-1x.05x
An-An-1 (1-42%)
0 $1,000,000 -- -- -- --
1 $1,050,000 $50,000 $29,000 $21,000 $21,000
2 $1,102,500 $52,500 $29,841 $22,659 $43,659
3 $1,157,625 $55,125 $30,706 $24,419 $68,078
.
.
.
Assumptions: Initial Insurance = $1,000,000
Effective Tax Rate = 42%
One Year US Treasury Yield = 5%
2. Executive Benefits Payments.
The Executive shall be entitled to payment of the Applicable Percentage of
(i) the balance in the Benefit Account in installments upon the terms as
specified in the Agreement, and (ii) the Index Benefit for each Plan Year
payable in installments until the Executive's death.
SCHEDULE C
BENEFICIARY DESIGNATION
To the Administrator of the Saratoga National Bank Executive Supplemental
Compensation Agreement: Pursuant to the Provisions of my Executive Supplemental
Compensation Agreement with Saratoga National Bank, permitting the designation
of a beneficiary or beneficiaries by a participant, I hereby designate the
following persons and entities as primary and secondary beneficiaries of any
benefit under said Agreement payable by reason of my death:
Primary Beneficiary:
______________________ ____________________ ___________________________
Name Address Relationship
Secondary (Contingent) Beneficiary:
______________________ _____________________ ___________________________
Name Address Relationship
THE RIGHT TO REVOKE OR CHANGE ANY BENEFICIARY DESIGNATION IS HEREBY RESERVED.
ALL PRIOR DESIGNATIONS, IF ANY, OF PRIMARY BENEFICIARIES AND SECONDARY
BENEFICIARIES ARE HEREBY REVOKED.
The Administrator shall pay all sums payable under the Agreement by reason
of my death to the Primary Beneficiary, if he or she survives me, and if no
Primary Beneficiary shall survive me, then to the Secondary Beneficiary, and if
no named beneficiary survives me, then the Administrator shall pay all amounts
in accordance with the terms of my Executive Supplemental Compensation
Agreement. In the event that a named beneficiary survives me and dies prior to
receiving the entire benefit payable under said Agreement, then and in that
event, the remaining unpaid benefit payable according to the terms of my
Executive Supplemental Compensation Agreement shall be payable to the personal
representatives of the estate of said beneficiary who survived me but died prior
to receiving the total benefit provided by my Executive Supplemental
Compensation Agreement.
Dated: ___________, 1998 __________________________
Richard L. Mount
CONSENT OF THE EXECUTIVE'S SPOUSE TO THE ABOVE BENEFICIARY DESIGNATION:
I, Patricia A. Mount, being the spouse of Richard L. Mount, after being
afforded the opportunity to consult with independent counsel of my choosing, do
hereby acknowledge that I have read, agree and consent to the foregoing
Beneficiary Designation which relates to the Executive Supplemental Compensation
Agreement entered into by my spouse effective as of ___________, 1998. I
understand that the above Beneficiary Designation may affect certain rights
which I may have in the benefits provided for under the terms of the Executive
Supplemental Compensation Agreement and in which I may have a marital property
interest.
Dated: ___________, 1998 ______________________________
Patricia A. Mount
SCHEDULE D
DISTRIBUTION ELECTION
Pursuant to the Provisions of my Executive Supplemental Compensation Agreement
with Saratoga National Bank, I hereby elect to have any distribution of the
balance in my Benefit Account paid to me in installments as designated below:
thirty-six (36) monthly installments with the amount of each
installment determined as of each installment date by dividing
the entire amount in my Benefit Account by the number of
installments then remaining to be paid, with the final
installment to be the entire remaining balance in the Benefit
Account.
sixty (60) monthly installments with the amount of each
installment determined as of each installment date by dividing
the entire amount in my Benefit Account by the number of
installments then remaining to be paid, with the final
installment to be the entire remaining balance in the Benefit
Account.
one hundred twenty (120) monthly installments with the amount of
each installment determined as of each installment date by
dividing the entire amount in my Benefit Account by the number of
installments then remaining to be paid, with the final
installment to be the entire remaining balance in the Benefit
Account.
one hundred eighty (180) monthly installments with the amount of
each installment determined as of each installment date by
dividing the entire amount in my Benefit Account by the number of
installments then remaining to be paid, with the final
installment to be the entire remaining balance in the Benefit
Account.
Dated: ____________, 1998
Signed: _______________________
Richard L. Mount