SCRIPPS BANK
AMENDED AND RESTATED LONG-TERM INCENTIVE COMPENSATION
PLAN FOR PRESIDENT & CHIEF EXECUTIVE OFFICER
BACKGROUND
Ronald J. Carlson currently has the following compensation arrangement with
Scripps Bank:
A. Based on his 11/97 employment agreement, as amended and restated as of
March __, 2000, Ronald J. Carlson currently has:
- An annual base salary of $230,000 and is eligible to receive
annual salary increases.
- Receives both the standard employee benefit package (E.G.,
401(k), ESOP, health benefits) and additional executive
perquisites (E.G., car allowance).
B. Has an amended and restated supplemental retirement plan which will
provide to him a $50,000 annuity (paid monthly) commencing upon his
planned retirement on October 1, 2002.
C. Has an additional $25,000 amended and restated supplemental retirement
agreement with spousal survivor benefit.
D. Has an amended and restated unfunded deferred compensation agreement
that provides him an annual $20,000 benefit which can be adjusted from
time to time. This arrangement was approved August 1992.
E. Is eligible for the annual Stakeholders Bonus. In 1998, he received
$22,304.
F. Has received additional discretionary awards, the last one in the
amount of $9,000 for fiscal year 1998.
G. Receives periodic grants of stock options.
OBJECTIVES
A. Scripps Bank desires to amend and restate the long-term compensation
plan for Ronald J. Carlson dated as of October 20, 1999 as set forth in
this Amended and Restated Long Term Compensation Plan (the "Amended
Plan"). The Amended Plan is intended to focus his attention on
achieving the strategic plan that the Bank developed and approved this
year.
B. The Amended Plan is independent of any other pay or incentives
currently available to Ronald J. Carlson.
C. The Amended Plan should be a performance based plan whereby Ronald J.
Carlson's performance at the expected date of his retirement (October
2002), can be measured on both a quantitative and qualitative basis by
the Board of Directors.
D. Ronald J. Carlson would not be eligible for any award under the Amended
Plan unless he achieves minimum targets as set forth herein.
E. The earliest Ronald J. Carlson can receive any awards under the Amended
Plan would be upon his retirement from the Bank.
F. The Amended Plan should have a deferral provision, so that Ronald J.
Carlson could elect either a lump sum payment of any earned awards or
stretch out the receipt of such payment over a number of years.
AMENDED PLAN DESIGN
A. ELIGIBILITY:
This Amended Plan is solely designed for Mr. Ronald J. Carlson in his
capacity as President and Chief Executive Officer of Scripps Bank.
Ronald J. Carlson will be eligible for the incentive compensation
awards detailed in this Amended Plan as long as:
1. Ronald J. Carlson is employed as the President and Chief
Executive Officer of Scripps Bank through October 1, 2002 and
meets all conditions stated in his Amended Employment
Agreement.
2. Ronald J. Carlson achieves the minimum performance
requirements as described in this Amended Plan.
3. Ronald J. Carlson has made all elections as required under
this Amended Plan.
B. AMENDED PLAN PERIOD:
This Amended Plan is effective with the approval of the Scripps Bank
Board of Directors and will remain in place through October 1, 2002.
The Amended Plan period may be modified should Scripps Bank and Ronald
J. Carlson agree to modify the Term of the Amended Employment
Agreement, as defined therein.
C. PERFORMANCE GOALS:
1. Performance goals will be based upon the July 1999 Scripps
Bank Strategic Plan adopted by the Scripps Bank Board of
Directors.
2. Under this Amended Plan, there will be FOUR GOALS which will
be evaluated by the Board of Directors at the end of the
Amended Plan period to determine if Ronald J. Carlson is
eligible for any incentive compensation awards.
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3. The four goals are:
GOAL #1: To obtain a return on ending equity of 16.0%
by the end of 2001.
GOAL #2: To grow assets to $800,000,000 by the end of
2001.
GOAL #3: Meet or exceed quality trigger from
Stakeholders Plan model - net loan losses
and classified loans as a percentage of Plan
loans.
GOAL #4: To achieve five non-financial "Big Picture
Goals" as stated on Page 2 of the Strategic
Plan. In summary, these are:
(a) To be viewed as the premier
relationship bank in San Diego
County.
(b) To hire and retain the highest
level of financial service
professionals.
(c) To attract and retain profitable
customer relationships.
(d) To assure that the Bank electronic
banking services are enhanced to be
superior to other community banks
of similar size and potential.
(e) To have established a plan for
orderly management successors.
D. MEASUREMENT DOCUMENTATION:
GOAL #1: A report from the Chief Financial Officer of Scripps
Bank and the Bank's independent auditor.
GOAL #2: A report from the Chief Financial Office of Scripps
Bank and the Bank's independent auditor.
GOAL #3: A detailed report from the President and Chief
Executive Officer describing the accomplishments made
to achieving the four Big Picture Goals. The report
should reference the specific strategies to be
accomplished in the Strategic Plan.
GOAL #4: A detailed report from the Chairman of the Board
taking up each factor and providing an objective
appraisal for review by the Board.
E. COMPENSATION:
1. The basis for determining Ronald J. Carlson's incentive
compensation award will be:
(a) Ronald J. Carlson's annual base salary as of
10/1/2002.
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(b) How well Ronald J. Carlson has achieved each of the
three goals.
(c) An award amount calculated from a percentage of
Ronald J. Carlson's annual base salary.
2. The award schedule described below is predicated on Ronald J.
Carlson earning 100% of his final base salary for achieving
100% of all three goals.
Note that more emphasis is placed upon achieving the first two
goals (which are measured quantifiably) than Goal #3 (a
qualitative and more subjective measurement).
3. The award schedule is as follows:
PERCENT OF GOAL ACHIEVED
90% 100% 110+%
GOAL PERCENT OF BASE SALARY AWARDED
----
#1 20% 40% 60%
#2 20% 40% 60%
#3 0% 20% 20%
4. In the above schedule, Goal #3 is measured as either a
pass/fail, as determined by the Board of Directors after
reviewing the documentation indicated.
5. The schedule extends to 110% with a specific award, however,
it shall remain within the discretion of the Board upon
retirement to increase the award for performance found to be
superior.
6. In the example below, upon his retirement date on October 1,
2002, let us assume that:
(a) Ronald J. Carlson's annual salary is $250,000
(b) Ronald J. Carlson's performance to each of the three
goals was:
GOAL #1: 105% of goal achieved.
GOAL #2: 115% of goal achieved.
GOAL #3: Met the goal.
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(c) Calculation of Ronald J. Carlson's award:
GOAL #1: $250,000 x 40% = $100,000
GOAL #2: $250,000 x 60% = $150,000
GOAL #3: $250,000 x 25% = $ 50,000
TOTAL AWARD: = $300,000
F. METHOD OF PAYMENT:
1. Ronald J. Carlson should be provided the opportunity to elect
payment of his award among the following options:
(a) A cash award upon his retirement date on October 1,
2002. This would be a lump sum payment subject to
taxation similar to any other bonus payment.
(b) An award of Scripps Bank Stock equivalent to the cash
award. This, too, would be subject to applicable tax
rules at the time of issuance.
(c) An election to defer payments (via a non-qualified
deferred compensation arrangement) for a period of up
to five years. Bank can elect to purchase an annuity
to fulfill this method of payment. This will require
that Ronald J. Carlson make an election in the year
prior to his retirement as to whether he wishes to
defer and, if so, in what manner.
For example, the Amended Plan could be structured so
that his options are:
1. No deferral resulting in a lump sum payment
and applicable taxation.
2. Deferral for up to five years, at which time
he would receive his award and applicable
taxes would then be taken.
3. Equal payout installments over X years (not
to exceed five).
If Ronald J. Carlson elects either #2 or #3, the Bank
could apply an interest rate to the undistributed
funds.
(d) If the Bank adopts the deferral provision, a formal
plan document adhering to current legal requirements
should be prepared as an additional to the incentive
compensation plan.
G. MISCELLANEOUS PROVISIONS:
1. This Amended Plan can be modified, amended, rescinded, or
terminated at any time at the sole and absolute discretion of
the Board of Directors. There are no
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representations, inducements, promises or agreements, oral
or otherwise, that are made by anyone acting on behalf of
the Bank, which are not embodied herein, and that no
agreement, statement or promise not contained or referenced
in this Amended Plan shall be valid or binding.
2. If any legal action, including an action for declaratory
relief, is brought to enforce or interpret the provisions of
this Amended Plan, the prevailing party shall be entitled to
recover reasonable attorneys' fees and costs from the other
party. These fees, which may be set by the court in the same
action or in a separate action brought for that purpose, are
in addition to any relief to which the prevailing party may be
entitled. This provision applies to the entire Amended Plan.
3. In the event of a transfer or sale of the assets of Scripps
Bank or a merger or consolidation of Scripps Bank into or with
any other corporation or entity, each of the Performance Goals
set forth in Section C of this Amended Plan shall be deemed
met at the 100% level as of the date of any such transfer or
sale of assets, merger or consolidation; therefore entitling
Ronald J. Carlson to receive no later than October 1, 2002,
the compensation award set forth in Section E of this Amended
Plan.
By: By:
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William E. Nelson Ronald J. Carlson
Chairman of the Board President and Chief
Executive Officer
Date: Date:
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