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 19__;
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 1.10 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 term sand
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 1.7 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
Surrogate's death and of which the Bank is the designated beneficiary.
Furthermore, notwithstanding the foregoing, or anything contained in this
Agreement to the contrary, in the event the Director takes any intentional
action which prevents the Bank from collecting the proceeds of any life
insurance policy which the Bank may happen to own at the time of the Surrogate's
death and of which the Bank is the designated beneficiary: (1) the Director's
estate or designated beneficiary shall no longer be entitled to receive 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 Surrogate'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 Surrogate's death.
1.3. Beneficiary. The term "beneficiary" or "designated beneficiary "shall
mean the person or persons whom the Director shall designate in a valid
Beneficiary Designation, a copy of which is attached hereto as Schedule "C," to
receive 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 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. 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).
1.7. 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.
1.8. 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. Removal for Cause. The term "Removal for Cause" shall mean
termination of the employment 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.
1.13. 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.
1.14. Surrogate. The term "Surrogate" shall mean the individuals elected as
a substitute insured for the Director for purposes related to any insurance
policy applicable to this Agreement.
1.15. 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.
2. Scope, Purpose and Effect.
2.1. Contract of Employment. Although this Agreement is intended to provide
the Director with an additional incentive to continue to serve as a member of
the Board of Directors of the Bank, this Agreement shall not be deemed to
constitute a contract of employment between the Director and the Bank nor shall
any provision of this Agreement restrict the right of the Bank to remove or
cause the removal of the Director including, without limitation, by (i)refusal
to nominate the Director for election for any successive term of office as a
member of the Board of Directors of the Bank, or (ii) complying with an order or
other directive from a court of competent jurisdiction or any regulatory
authority having jurisdiction over the Bank which requires the Bank to take
action to remove the Director.
2.2. Fringe Benefit. The benefits provided by this Agreement are granted by
the Bank as a fringe benefit to the Director and are not a part of any salary
reduction plan or any arrangement deferring a bonus or a salary increase. The
Director has no option to take any current payments or bonus in lieu of the
benefits provided by this Agreement.
3. 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 1.8 above.
(a) In the event the Director elects to Retire on a date which
constitutes an Early Retirement Date, and provided that the
Surrogate is alive at the date the Director Retires, 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, payable (i)
for the period designated in Schedule "D" in the case of the
balance in the Benefit Account and (ii) until the first to occur
of the Director's death or the Surrogate's death in the case of
the Index Benefit defined in Schedule "B".
(b) In the event the Director elects to Retire on a date which
constitutes an Early Retirement Date, and provided that the
Surrogate has predeceased the Director at the date the Director
Retires, the Director shall been titled to the payments specified
in subparagraph 3.3 below.
3.2. Payments Upon Retirement.
(a) If the Director remains a member of the Board of Directors of the
Bank until attaining sixty-two (62) years of age, and provided
that the Surrogate is alive at the date the Director Retires, 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 first to occur of the
Director's death or the Surrogate'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.
(b) If the Director remains a member of the Board of Directors of the
Bank until attaining sixty-two (62) years of age, and provided
that the Surrogate has predeceased the Director at the date the
Director Retires, the Director shall be entitled to the payments
specified in subparagraph 3.3 below.
3.3. Payments in the Event of Surrogate's Death Before Retirement.
Notwithstanding subparagraph 3.1(a) and subparagraph 3.2(a), if the Surrogate
dies before the Director Retires, then upon the Director's Retirement, the
Director Benefits to which the Director would otherwise be entitled shall be
adjusted such that the portion of such Director Benefits which is derived by
reference to an insurance policy, if any, underwritten using a surrogate
insured(a "Surrogate Policy") shall be paid as follows: the Bank shall pay to
the Director the Applicable Percentage of (i) that portion of the balance, if
any, in the Benefit Account as of the date of the Surrogate's death which is
derived by reference to a Surrogate Policy, if any, payable 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 on such later date
as may be mutually agreed upon by the Director and the Bank in advance of said
Retirement date) for the period designated in Schedule "D". Upon the death of
the Director before receiving all of the Director Benefits to which the Director
is entitled, the Bank shall pay to the Director's designated beneficiary(ies)the
Applicable Percentage of the balance, if any, of the Benefit Account which is
derived by reference to a Surrogate Policy, if any, in lump sum. The remaining
Director Benefits to which the Director is entitled which are derived without
reference to any Surrogate Policy shall continue to be paid as specified in the
applicable provisions of this Agreement.
3.4. Payments in the Event of Death After Retirement.
(a) If the Director Retires, but shall die before receiving all of
the Director Benefits, and provided that the Surrogate is alive
at the date of the Director's death, the Bank will pay to the
Director's designated beneficiary(ies) the Applicable Percentage
of the balance, if any, of the Benefit Account, in lump sum, and
up to twenty (20) annual Index Benefit installment payments in
the amounts that otherwise would have been paid to the Director
if still alive and which are derived by reference to a Surrogate
Policy, if any, minus the number of annual Index Benefit
installment payments made to the Director prior to the Director's
death. Upon the death of the Surrogate, such installment payments
shall cease whether or not any unpaid portion of the twenty (20)
installment payments shall remain unpaid.
(b) If the Director Retires, but the Surrogate shall predecease the
Director, the Director shall be entitled to receive the payments
specified in subparagraph 3.3 above.
(c) 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.
(a) If the Director dies at any time after the Effective Date of this
Agreement but prior to Retirement, and provided that the
Surrogate is alive at the date of the Director's death, the Bank
agrees to pay to the Director's designated beneficiary(ies) the
Applicable Percentage of the balance, if any, in the Benefit
Account, in lump sum, and up to twenty (20) annual Index Benefit
installment payments in the amounts that otherwise would have
been paid to the Director if still alive and which are derived by
reference to a Surrogate Policy, if any. Upon the death of the
Surrogate, such installment payments shall cease whether or not
any unpaid portion of the twenty (20)installment payments shall
remain unpaid.
(b) If the Director dies at any time after the Effective Date of this
Agreement but prior to Retirement, and provided that the
Surrogate has predeceased the Director, the Bank agrees to pay to
the Director's designated beneficiary(ies) the Applicable
Percentage of the balance, if any, of the Benefit Account in lump
sum.
(c) 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 paid the Applicable
Percentage of the Director Benefits which the Director may be entitled to
receive, 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 first to occur of
the Director's death or the Surrogate'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, 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 first to occur of the Director's death
or the Surrogate'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 first to occur of the Director's death or the
Surrogate'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 1.12 of this
Agreement) and pursuant to subparagraph 1.12 (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 1.12(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 first
to occur of the Director's death or the Surrogate'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 first to occur of the Director's death or the
Surrogate'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 here
into 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 280G or such other
applicable provisions of the Code. For purposes of this limitation:
(a) No portion of the Total Payments, the receipt or enjoyment of
which the Director shall have effectively waived in writing prior
to the date of payment of any future Director Benefits payments,
shall be taken into account;
(b) No portion of the Total Payments shall be taken into account,
which in the opinion of the tax counsel selected by the 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 may be 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 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
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 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 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 maybe
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 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 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:____________________________ _____________________________
Richard L. Mount __________________
President and Chief Executive Officer
SCHEDULE A
CALENDAR YEAR APPLICABLE PERCENTAGE
__________, 1981 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:
A 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] [B] [C] [D]
End of Cash Surrender Index Opportunity Annual Cumulative
Year Value of Life [Annual Cost Benefit Benefit
Insurance Policy 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. Director Benefits Payments.
The Director shall be entitled to payment of the Applicable Percentage
of(i) the balance in the Benefit Account in installments, and (ii) the Index
Benefit for each Plan Year payable in installments, upon the terms as specified
in the Agreement 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 no
Primary Beneficiary shall survive me, then to the Secondary Beneficiary, and if
no named beneficiary survives me, then the Administrator shall pay all amounts
in accordance with the terms of my Director Supplemental Compensation Agreement.
In the event that a named beneficiary survives me and dies prior to receiving
the entire benefit payable under said Agreement, then and in that event, the
remaining unpaid benefit payable according to the terms of my Director
Supplemental Compensation Agreement shall be payable to the personal
representatives of the estate of said beneficiary who survived me but died prior
to receiving the total benefit provided by my Director Supplemental Compensation
Agreement.
Dated: ___________, 1998 __________________________
__________________
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:_______________________
__________________