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