AMENDMENT NO. 1
TO EMPLOYMENT AGREEMENT
THIS AMENDMENT to the Employment Agreement (the "Agreement") entered into as of
March 27, 1996 by and between SJNB Financial Corp. and San Jose National Bank, a
national banking association ("Employer"), and James R. Kenny ("Employee") is
made and entered into effective October 6, 2000.
RECITALS
WHEREAS, Employer and Employee have entered into the Agreement governing the
employment of Employee and now wish to amend the Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the Employer and Employee hereby agree as follows:
1. Paragraph 13(c) shall be amended in its entirety to read as follows:
"Personal Insurance. Employer shall provide during the term of this
Agreement, at Employer's sole cost, a policy or policies of term life
insurance coverage in the amount of Two Hundred Fifty Thousand Dollars
($250,000) and group life, health (including medical, dental and
hospitalization), accident and disability insurance coverage for
Employee and his dependents either through a policy or policies of
standard coverage provided by an insurer or insurers selected by
Employer in its sole discretion. In the event of a termination of
Employee's employment pursuant to paragraph 16(b) or 16(e), or
automatic termination based upon paragraph 16(a)(1), (4), (7), or
(12)(to the extent of Employer's breach), Employer shall continue to
provide for a period of thirty-six (36) months, at Employer's sole
cost, the above-described policy or policies of term life insurance
coverage and group life, health, accident and disability insurance
coverage for Employee and his dependents, to the extent such insurance
coverage is available at a cost to Employer comparable to the cost to
provide such coverage to an active employee. If such insurance
coverage is not available at a comparable cost to Employer, then
Employer shall pay to Employee a lump-sum amount in cash equal to
three times the total annual premiums paid by Employer to provide such
insurance coverage to Employee in the final year of Employee's
employment by Employer."
2. Subparagraph (d) of Paragraph 13 shall be added to read as follows:
"(d) Outplacement Services. In the event of a termination of
Employee's employment pursuant to paragraph 16(b) or 16(e), or
automatic termination based upon paragraph 16(a)(1), (4), (7), or
(12)(to the extent of Employer's breach), Employer shall provide for a
period of thirty-six (36) months, at Employer's sole cost,
outplacement services to the Employee to the extent reasonably
required for the Employee to obtain substantially comparable
employment; provided, however, that such outplacement services shall
not involve an expenditure by Employer in excess of $5,000 per annum;
and provided, further, however, that after the date of his
termination, Employee shall use his best efforts to obtain
substantially comparable employment."
3. The first sentence of subparagraph 16(d) shall be amended in its
entirety to read as follows:
"In the event of termination by Employer pursuant to paragraph 16(b)
or automatic termination based upon paragraph 16(a)(1), (4), (7) or
(12)(to the extent of Employer's breach) of this Agreement, Employee
or his designated beneficiary shall be entitled to receive severance
pay at Employee's rate of salary immediately preceding such
termination equal to (i) twenty-four (24) months' salary, plus (ii)
two (2) times the average annual bonus paid to Employee for the three
(3) years prior to the date of such termination (in addition to
incentive compensation or bonus payments due Employee, if any),
payable in lump sum."
4. The first two paragraphs of Paragraph 16(e) shall be amended in their
entirety to read as follows:
"In the event of a "change in control" as defined herein and within a
period of two (2) years following consummation of such a change in
control (i) Employee's employment is terminated; or (ii) without
Employee's consent there occurs (A) any adverse change in the nature
and scope of Employee's position, responsibilities, duties, salary or
benefits, or (B) any change in Employee's location of employment from
within Santa Clara County, California, or (C) any event which
reasonably constitutes a demotion, significant diminution or
constructive termination (by resignation or otherwise) of Employee's
employment, then Employee shall be entitled to the following (in
addition to any bonus or incentive compensation payments due Employee
or any benefits which Employee is otherwise entitled to hereunder):
(x) Severance pay in an amount equal to (I) three (3) times
Employee's annual salary immediately preceding such change in
control, plus (II) three (3) times the average annual bonus paid
to Employee for the three (3) years prior to the date of such
termination as a result of a change in control, such amount
payable in a lump sum in cash;
(y) An amount equal to the product of (I) a fraction, the
numerator of which is the number of days in the fiscal year in
which the date of termination occurs through such date of
termination, and the denominator of which is 365, and (II) the
targeted amount of the Employee's annual bonus for the year in
which the termination as a result of a change in control occurs
(or, if such target bonus has not been established, Employee's
bonus for the prior year), such amount payable in a lump sum in
cash; and
(z) All unvested and unexercised stock options granted to
Employee pursuant to Employer's stock option plan(s) shall
immediately vest and become exercisable.
Notwithstanding anything in this Agreement to the contrary, and in
particular this Section 16(e) hereof, if any payment made under this
Agreement is a "golden parachute payment" as defined in Section 28(k)
of the Federal Deposit Insurance Act (12 U.S.C. section 1828(k)) and
Part 359 of the Rules and Regulations of the Federal Deposit Insurance
Corporation (collectively, the "FDIC Rules") or is otherwise
prohibited, restricted or subject to the prior approval of the Board
of Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, Office of the Comptroller of the Currency, or any other
regulatory agency or governmental authority having jurisdiction over
the Employer, no payment shall be made hereunder without complying
with said FDIC Rules."
5. A new Paragraph 27 shall be added to read as follows:
"27. Certain Additional Payments by Employer.
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(a) In the event it shall be determined that any payment or
distribution by Employer to or for the benefit of Employee
(whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments
required under this Section 27) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code") or
any interest or penalties are incurred by Employee with
respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then Employee
shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by
Employee of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, Employee retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.
(b) Subject to the provisions of Section 27(c), all
determinations required to be made under this Section 27,
including whether and when a Gross-Up Payment is required
and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be
made by KPMG LLP, or such other certified public accounting
firm reasonably acceptable to Employer as may be designated
by Employee (the "Accounting Firm") which shall provide
detailed supporting calculations both to Employer and
Employee within 15 business days of the receipt of notice
from Employee that there has been a Payment, or such earlier
time as is requested by Employer. All fees and expenses of
the Accounting Firm shall be borne solely by Employer. Any
Gross-Up Payment, as determined pursuant to this Section 27,
shall be paid by Employer to Employee within five days of
the later of (i) the due date for the payment of any Excise
Tax, and (ii) the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm
shall be binding upon Employer and Employee. As a result of
the uncertainty in the application of Section 4999 of the
Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by Employer should
have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event
that Employer exhausts its remedies pursuant to Section
27(c) and Employee thereafter is required to make a payment
of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by Employer to or for
the benefit of Employee.
(c) Employee shall notify Employer in writing of any claim
by the Internal Revenue Service ("IRS") that, if successful,
would require the payment by Employer of the Gross-Up
Payment. Such notification shall be given as soon as
practicable but no later than ten business days after
Employee is informed in writing of such claim and shall
apprise Employer of the nature of such claim and the date on
which such claim is requested to be paid. Employee shall not
pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to Employer
(or such shorter period ending on the date that any payment
of taxes with respect to such claim is due). If Employer
notifies Employee in writing prior to the expiration of such
period that it desires to contest such claim, Employee
shall: (i) give Employer any information reasonably
requested by Employer relating to such claim, (ii) take such
action in connection with contesting such claim as Employer
shall reasonably request in writing from time to time,
including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by Employer, (iii) cooperate with
Employer in good faith in order effectively to contest such
claim, and (iv) permit Employer to participate in any
proceedings relating to such claim; provided, however, that
Employer shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold
Employee harmless, on an after-tax basis, for any Excise Tax
or income tax (including interest and penalties with respect
thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 27(c), Employer shall
control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forgo any and
all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such
claim and may, at its sole option, either direct Employee to
pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and Employee agrees to
prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction
and in one or more appellate courts, as Employer shall
determine; provided, however, that if Employer directs
Employee to pay such claim and sue for a refund, Employer
shall advance the amount of such payment to Employee, on an
interest-free basis and shall indemnify and hold Employee
harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable
year of Employee with respect to which such contested amount
is claimed to be due is limited solely to such contested
amount. Furthermore, Employer's control of the contest shall
be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and Employee shall be
entitled to settle or contest, as the case may be, any other
issue raised by the IRS or any other taxing authority.
(d) If, after the receipt by Employee of an amount advanced
by Employer pursuant to Section 27(c), Employee becomes
entitled to receive any refund with respect to such claim,
Employee shall (subject to Employer's complying with the
requirements of Section 27(c)) promptly pay to Employer the
amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after
the receipt by Employee of an amount advanced by Employer
pursuant to Section 27(c), a determination is made that
Employee shall not be entitled to any refund with respect to
such claim and Employer does not notify Employee in writing
of its intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be
repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to
be paid."
6. Except as set forth herein, the Agreement shall remain in full force
and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date set
forth above.
EMPLOYER EMPLOYEE
SAN JOSE NATIONAL BANK
By s/Robert A. Archer By s/James R. Kenny
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James R. Kenny