EXECUTIVE INDEXED COMPENSATION BENEFITS AGREEMENT
This Agreement is made and entered into effective as of January ___,
1999 by and between Heritage Bank of Commerce, a bank chartered under the laws
of the State of California (the "Employer"), and Brad L. Smith, an individual
residing in the State of California (the "Executive").
R E C I T A L S
WHEREAS, the Executive is an employee of the Employer, serving since
January 1, 1999;
WHEREAS, the Employer desires to establish a compensation benefit
program as a fringe benefit for executive officers of the Employer in order to
attract and retain individuals with extensive and valuable experience in the
banking industry;
WHEREAS, the Executive's experience and knowledge of the affairs of the
Employer and the banking industry are extensive and valuable;
WHEREAS, it is deemed to be in the best interests of the Employer to
provide the Executive with certain fringe benefits, on the terms and conditions
set forth herein, in order to reasonably induce the Executive to remain in the
Employer's employment; and
WHEREAS, the Executive and the Employer wish to specify in writing the
terms and conditions upon which this additional compensatory incentive will be
provided to the Executive, or to the Executive's spouse or the Executive's
designated beneficiaries, as the case may be.
NOW, THEREFORE, in consideration of the services to be performed by the
Executive in the future, as well as the mutual promises and covenants contained
herein, the Executive and the Employer agree as follows:
A G R E E M E N T
10 TERMS AND DEFINITIONS.
1.1. ADMINISTRATOR. The Employer shall be the "Administrator"
and, solely for the purposes of ERISA as defined in subparagraph 1.9 below, the
"fiduciary" of this Agreement where a fiduciary is required by ERISA.
-1-
1.2. APPLICABLE PERCENTAGE. The term "Applicable Percentage"
shall mean that percentage adjacent to a calendar period listed on Schedule "A"
attached hereto, which percentage shall remain in effect until an adjustment
occurs on each succeeding calendar period during the term of employment.
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 an event of termination described
in subparagraph 5.4 pursuant to a "Change in Control" as defined in subparagraph
1.4 below, or the Executive's death, or Disability as defined in subparagraph
1.6 below, which death or Disability occurs prior to the termination of the
Executive's employment by the Employer; and (ii) notwithstanding subclause (i)
of this subparagraph 1.2, zero percent (0%) in the event the Executive takes any
intentional action which prevents the Employer from collecting the proceeds of
any life insurance policy which the Employer may happen to own at the time of
the Executive's death and of which the Employer is the designated beneficiary.
Furthermore, notwithstanding the foregoing, or anything contained in this
Agreement to the contrary, in the event the Executive takes any intentional
action which prevents the Employer from collecting the proceeds of any life
insurance policy which the Employer may happen to own at the time of the
Executive's death and of which the Employer is the designated beneficiary: (1)
the Executive's estate or designated beneficiary shall no longer be entitled to
receive any of the amounts payable under the terms of this Agreement, and (2)
the Employer shall have the right to recover from the Executive's estate all of
the amounts paid to the Executive's estate (with respect to amounts paid prior
to the Executive's death or paid to the Executive's estate) or designated
beneficiary (with respect to amounts paid to the designated beneficiary)
pursuant to the terms of this Agreement prior to and after the Executive's
death.
1.3. BENEFICIARY. The term "beneficiary" or "designated
beneficiary" shall mean the person or persons whom the Executive shall designate
in a valid Beneficiary Designation, a copy of which is attached hereto as
Schedule "C," to receive the benefits provided hereunder. A Beneficiary
Designation shall be valid only if it is in the form attached hereto and made a
part hereof, completed and signed by the Executive and is received by the
Administrator prior to the Executive's death.
1.4. CHANGE IN CONTROL. The term "Change in Control" shall
mean the occurrence of any of the following events with respect to the Employer
(with the term "Employer" being defined for purposes of determining whether a
"Change in Control" has occurred to include any parent bank holding company
organized at the direction of the Employer to own 100% of the Employer's
outstanding common stock): (i) a change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or in response to any other form or report to the regulatory
agencies or governmental authorities
-2-
having jurisdiction over the Employer or any stock exchange on which the
Employer's shares are listed which requires the reporting of a change in
control; (ii) any merger, consolidation or reorganization of the Employer in
which the Employer does not survive; (iii) any sale, lease, exchange, mortgage,
pledge, transfer or other disposition (in one transaction or a series of
transactions) of any assets of the Employer having an aggregate fair market
value of fifty percent (50%) of the total value of the assets of the Employer,
reflected in the most recent balance sheet of the Employer; (iv) a transaction
whereby any "person" (as such term is used in the Exchange Act) or any
individual, corporation, partnership, trust or any other entity becomes the
beneficial owner, directly or indirectly, of securities of the Employer
representing twenty-five percent (25%) or more of the combined voting power of
the Employer's then outstanding securities; or (v) a situation where, in any
one-year period, individuals who at the beginning of such period constitute the
Board of Directors of the Employer cease for any reason to constitute at least a
majority thereof, unless the election, or the nomination for election by the
Employer's shareholders, of each new director is approved by a vote of at least
three-quarters (3/4) of the directors then still in office who were directors at
the beginning of the period. Notwithstanding the foregoing or anything else
contained herein to the contrary, there shall not be a "Change of Control" for
purposes of this Agreement if the event which would otherwise come within the
meaning of the term "Change of Control" involves (i) a reorganization at the
direction of the Employer solely to form a parent bank holding company which
owns 100% of the Employer's common stock following the reorganization, or (ii)
an Employee Stock Ownership Plan sponsored by the Employer or its parent holding
company which is the party that acquires "control" or is the principal
participant in the transaction constituting a "Change in Control," as described
above.
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 mean bodily injury or disease (mental or physical) which wholly and
continuously prevents the performance of duty for at least three months
including, without limitation, the total irrecoverable loss of the sight in both
eyes or the loss by severance of both hands at or above the wrist or of both
feet at or above the ankle or of one hand at or above the wrist and one foot at
or above the ankle.
1.7. EARLY RETIREMENT DATE. The term "Early Retirement Date"
shall mean the Retirement, as defined below, of the Executive on a date which
occurs prior to the Executive attaining sixty-two (62) years of age, but after
the Executive has attained fifty-five (55) years of age.
1.8. EFFECTIVE DATE. The term "Effective Date" shall mean the
date first written above.
-3-
1.9. ERISA. The term "ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as amended.
1.10. EXECUTIVE BENEFITS. The term "Executive Benefits" shall
mean the benefits determined in accordance with Schedule "B", and reduced to the
extent: (i) required under the other provisions of this Agreement, including,
but not limited to, Paragraphs 5, 6 and 7 hereof; (ii) required by reason of the
lawful order of any regulatory agency or body having jurisdiction over the
Employer; or (iii) required in order for the Employer to properly comply with
any and all applicable state and federal laws, including, but not limited to,
income, employment and disability income tax laws (e.g., FICA, FUTA, SDI).
1.11. PLAN YEAR. The term "Plan Year" shall mean the
Employer's fiscal year.
1.12. RETIREMENT. The term "Retirement" or "Retires" shall
refer to the date which the Executive acknowledges in writing to Employer to be
the last day the Executive will provide any significant personal services,
whether as an employee or independent consultant or contractor, to Employer. For
purposes of this Agreement, the phrase "significant personal services" shall
mean more than ten (10) hours of personal services rendered to one or more
individuals or entities in any thirty (30) day period.
1.13. SURVIVING SPOUSE. The term "Surviving Spouse" shall mean
the person, if any, who shall be legally married to the Executive on the date of
the Executive's death.
1.14. TERMINATION FOR CAUSE. The term "Termination for Cause"
shall mean termination of the employment of the Executive by reason of any of
the following:
(a) A termination "for cause" as this term may be
defined in any written employment agreement entered into by and between the
Employer and the Executive;
(b) The willful breach of duty by the Executive in
the course of his employment;
(c) The habitual neglect by the Executive of his
employment responsibilities and duties;
(d) The Executive's deliberate violation of (i) any
state or federal banking or securities laws, or of the Bylaws, rules, policies
or resolutions of the Employer, or (ii)
-4-
of the rules or regulations of the California Commissioner of Financial
Institutions, the Federal Deposit Insurance Corporation or any other regulatory
agency or governmental authority having jurisdiction over the Employer, which
has a material adverse effect upon the Employer;
(e) The determination by a state or federal banking
agency or other governmental authority having jurisdiction over the Employer
that the Executive is not suitable to act in the capacity for which he is
employed by the Employer;
(f) The Executive's conviction of any felony or a
crime involving moral turpitude or a fraudulent or dishonest act; or
(g) The Executive's disclosure without authority of
any secret or confidential information not otherwise publicly available
concerning the Employer or taking any action which the Employer's Board of
Directors determines, in its sole discretion and subject to good faith, fair
dealing and reasonableness, constitutes unfair competition with or inducement of
any customer to breach any contract with the Employer.
20 SCOPE, PURPOSE AND EFFECT.
2.1. CONTRACT OF EMPLOYMENT. Although this Agreement is
intended to provide the Executive with an additional incentive to remain in the
employ of the Employer, this Agreement shall not be deemed to constitute a
contract of employment between the Executive and the Employer nor shall any
provision of this Agreement restrict or expand the right of the Employer to
terminate the Executive's employment. This Agreement shall have no impact or
effect upon any separate written Employment Agreement which the Executive may
have with the Employer, it being the parties' intention and agreement that
unless this Agreement is specifically referenced in said Employment Agreement
(or any modification thereto), this Agreement (and the Employer's obligations
hereunder) shall stand separate and apart and shall have no effect on or be
affected by, the terms and provisions of said Employment Agreement.
2.2. FRINGE BENEFIT. The benefits provided by this Agreement
are granted by the Employer as a fringe benefit to the Executive and are not a
part of any salary reduction plan or any arrangement deferring a bonus or a
salary increase. The Executive has no option to take any current payments or
bonus in lieu of the benefits provided by this Agreement.
30 PAYMENTS UPON EARLY RETIREMENT OR RETIREMENT AND AFTER
RETIREMENT.
3.1. PAYMENTS UPON EARLY RETIREMENT. The Executive shall have
the right to Retire on a date which constitutes an Early Retirement Date as
defined in subparagraph 1.7 above. In the event the Executive elects to Retire
on a date which constitutes an Early Retirement Date, the Executive shall be
entitled to be paid the Applicable Percentage of the
-5-
Executive Benefits, in substantially equal monthly installments on the first day
of each month, beginning with the month following the month in which the Early
Retirement Date occurs or upon such later date as may be mutually agreed upon by
the Executive and the Employer in advance of said Early Retirement Date, payable
(i) for the period designated in Schedule "D" in the case of the balance in the
Benefit Account and (ii) until the Executive=s death in the case of the Index
Benefit defined in Schedule "B".
3.2. PAYMENTS UPON RETIREMENT. If the Executive shall remain
in the continuous employment of the Employer until attaining sixty-two (62)
years of age, the Executive shall be entitled to be paid the Applicable
Percentage of the Executive Benefits, in substantially equal monthly
installments on the first day of each month, beginning with the month following
the month in which the Executive Retires or upon such later date as may be
mutually agreed upon by the Executive and the Employer in advance of said
Retirement date, payable (i) for the period designated in Schedule "D" in the
case of the balance in the Benefit Account and (ii) until the Executive's death
in the case of the Index Benefit defined in Schedule "B". At the Employer's sole
and absolute discretion, the Employer may increase the Executive Benefits as and
when the Employer determines the same to be appropriate.
3.3. PAYMENTS IN THE EVENT OF DEATH AFTER RETIREMENT. The
Employer agrees that if the Executive Retires, but shall die before receiving
all of the Executive Benefits Payments specified in Schedule "B", the Employer
agrees to pay the Applicable Percentage of the Executive Benefits to the
Executive's designated beneficiary in lump sum. If a valid Beneficiary
Designation is not in effect, then the remaining amounts due to the Executive
under the terms of this Agreement shall be paid to the Executive's Surviving
Spouse. If the Executive leaves no Surviving Spouse, the remaining amounts due
to the Executive under the terms of this Agreement shall be paid to the duly
qualified personal representative, executor or administrator of the Executive's
estate.
40 PAYMENTS IN THE EVENT DEATH OR DISABILITY OCCURS PRIOR TO
RETIREMENT.
4.1. PAYMENTS IN THE EVENT OF DEATH PRIOR TO RETIREMENT. If
the Executive dies at any time after the Effective Date of this Agreement, but
prior to Retirement, the Employer agrees to pay the Applicable Percentage of the
Executive Benefits to the Executive's designated beneficiary in lump sum. If a
valid Beneficiary Designation is not in effect, then the remaining amounts due
to the Executive under the terms of this Agreement shall be paid to the
Executive's Surviving Spouse. If the Executive leaves no Surviving Spouse, the
remaining amounts due to the Executive under the terms of this Agreement shall
be paid to the duly qualified personal representative, executor or administrator
of the Executive's estate.
4.2. PAYMENTS IN THE EVENT OF DISABILITY PRIOR TO RETIREMENT.
In the event the Executive becomes Disabled at any time after the Effective Date
of this Agreement but prior to Retirement, the Executive shall be entitled to be
paid the Applicable Percentage of the
-6-
Executive Benefits, in substantially equal monthly installments on the first day
of each month, beginning with the month following the month in which the
Executive becomes Disabled, payable (i) for the period designated in Schedule
"D" in the case of the balance in the Benefit Account and (ii) until the
Executive=s death in the case of the Index Benefit defined in Schedule "B".
50 PAYMENTS IN THE EVENT EMPLOYMENT IS TERMINATED PRIOR TO
RETIREMENT. As indicated in subparagraph 2.1 above, the Employer reserves the
right to terminate the Executive's employment, with or without cause but subject
to any written employment agreement which may then exist, at any time prior to
the Executive's Retirement. In the event that the employment of the Executive
shall be terminated, other than by reason of death, Disability or Retirement,
prior to the Executive's attaining sixty-two (62) years of age, then this
Agreement shall terminate upon the date of such termination of employment;
provided, however, that the Executive shall be entitled to the following
benefits as may be applicable depending upon the circumstances surrounding the
Executive's termination:
5.1. TERMINATION WITHOUT CAUSE. If the Executive's employment
is terminated by the Employer without cause, and such termination is not subject
to the provisions of subparagraph 5.4 below, the Executive shall be entitled to
be paid the Applicable Percentage of the Executive Benefits, in substantially
equal monthly installments on the first day of each month, beginning with the
month following the month in which the Executive attains fifty-five (55) years
of age or any month thereafter, as requested in writing by the Executive and
delivered to the Employer or its successor thirty (30) days prior to the
commencement of installment payments; provided, however, that in the event the
Executive does not request a commencement date as specified, such installments
shall be paid on the first day of each month, beginning with the month following
the month in which the Executive attains sixty-two (62) years of age. The
installments shall be payable (i) for the period designated in Schedule "D" in
the case of the balance in the Benefit Account and (ii) until the Executive's
death in the case of the Index Benefit defined in Schedule "B".
5.2. VOLUNTARY TERMINATION BY THE EXECUTIVE. If the
Executive's employment is terminated by voluntary resignation, and such
resignation is not subject to the provisions of subparagraph 5.4 below, the
Executive shall be entitled to be paid the Applicable Percentage of the
Executive Benefits, in substantially equal monthly installments on the first day
of each month, beginning with the month following the month in which the
Executive attains fifty-five (55) years of age or any month thereafter, as
requested in writing by the Executive and delivered to the Employer or its
successor thirty (30) days prior to the commencement of installment payments;
provided, however, that in the event the Executive does not request a
commencement date as specified, such installments shall be paid on the first day
of each month, beginning with the month following the month in which the
Executive attains sixty-two (62) years of age. The installments shall be payable
(i) for the period designated in Schedule "D" in
-7-
the case of the balance in the Benefit Account and (ii) until the Executive's
death in the case of the Index Benefit defined in Schedule "B".
5.3. TERMINATION FOR CAUSE. The Executive agrees that if the
Executive's employment with the Employer is terminated "for cause," as defined
in subparagraph 1.14 of this Agreement, the Executive shall forfeit any and all
rights and benefits the Executive may have under the terms of this Agreement and
shall have no right to be paid any of the amounts which would otherwise be due
or paid to the Executive by the Employer pursuant to the terms of this
Agreement.
5.4. TERMINATION BY THE EMPLOYER ON ACCOUNT OF OR AFTER A
CHANGE IN CONTROL. In the event: (i) the Executive's employment with the
Employer is terminated by the Employer in conjunction with, or by reason of, a
"Change in Control" (as defined in subparagraph 1.4 above); or (ii) by reason of
the Employer's actions any adverse and material change occurs in the scope of
the Executive's position, responsibilities, duties, salary, benefits, or
location of employment after a "Change in Control" occurs; or (iii) the Employer
causes an event to occur which reasonably constitutes or results in a demotion,
a significant diminution of responsibilities or authority, or a constructive
termination (by forcing a resignation or otherwise) of the Executive's
employment after a "Change in Control" occurs, then the Executive shall be
entitled to be paid the Applicable Percentage of the Executive Benefits, as
defined above, in substantially equal monthly installments on the first day of
each month, beginning with the month following the month in which the Executive
attains fifty-five (55) years of age or any month thereafter, as requested in
writing by the Executive and delivered to the Employer or its successor thirty
(30) days prior to the commencement of installment payments; provided, however,
that in the event the Executive does not request a commencement date as
specified, such installments shall be paid on the first day of each month,
beginning with the month following the month in which the Executive attains
sixty-two (62) years of age. The installments shall be payable (i) for the
period designated in Schedule "D" in the case of the balance in the Benefit
Account and (ii) until the Executive's death in the case of the Index Benefit
defined in Schedule "B".
5.5. PAYMENTS IN THE EVENT OF DEATH FOLLOWING TERMINATION. If
the Executive dies prior to receiving all of the Executive Benefits described in
this Paragraph 5 to which the Executive is entitled, then the Employer will make
such payments to the Executive's designated beneficiary in lump sum. If a valid
Beneficiary Designation is not in effect, then the remaining amounts due to the
Executive under the terms of this Agreement shall be paid to the Executive's
Surviving Spouse. If the Executive leaves no Surviving Spouse, the remaining
-8-
amounts due to the Executive under the terms of this Agreement shall be paid to
the duly qualified personal representative, executor or administrator of the
Executive's estate.
60 SECTION 280G BENEFITS REDUCTION. The Executive 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 Executive agrees that, notwithstanding anything
contained herein to the contrary, in the event that any payment or benefit
received or to be received by the Executive, whether payable pursuant to the
terms of this Agreement or any other plan, arrangement or agreement with the
Employer (together with the Executive 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 Executive shall have effectively waived in writing prior
to the date of payment of any future Executive 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 Employer
and acceptable to the Executive, 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
Executive pursuant to the terms of this Agreement and any other plan,
arrangement or agreement with the Employer in the order determined by mutual
agreement of the Employer and the Executive;
(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 Employer and acceptable to the Executive
in accordance with the principles of Section 280G of the Code.
70 RIGHT TO DETERMINE FUNDING METHODS. The Employer reserves the
right to determine, in its sole and absolute discretion, whether, to what extent
and by what method, if any, to provide for the payment of the amounts which may
be payable to the Executive, the
-9-
Executive's spouse or the Executive's beneficiaries under the terms of this
Agreement. In the event that the Employer elects to fund this Agreement, in
whole or in part, through the use of life insurance or annuities, or both, the
Employer shall determine the ownership and beneficial interests of any such
policy of life insurance or annuity. The Employer further reserves the right, in
its sole and absolute discretion, to terminate any such policy, and any other
device used to fund its obligations under this Agreement, at any time, in whole
or in part. Consistent with Paragraph 9 below, neither the Executive, the
Executive's spouse nor the Executive's beneficiaries shall have any right, title
or interest in or to any funding source or amount utilized by the Employer
pursuant to this Agreement, and any such funding source or amount shall not
constitute security for the performance of the Employer's obligations pursuant
to this Agreement. In connection with the foregoing, the Executive agrees to
execute such documents and undergo such medical examinations or tests which the
Employer may request and which may be reasonably necessary to facilitate any
funding for this Agreement including, without limitation, the Employer's
acquisition of any policy of insurance or annuity. Furthermore, a refusal by the
Executive to consent to, participate in and undergo any such medical
examinations or tests shall result in the immediate termination of this
Agreement and the immediate forfeiture by the Executive, the Executive's spouse
and the Executive's beneficiaries of any and all rights to payment hereunder.
80 CLAIMS PROCEDURE. The Employer shall, but only to the extent
necessary to comply with ERISA, be designated as the named fiduciary under this
Agreement and shall have authority to control and manage the operation and
administration of this Agreement. Consistent therewith, the Employer shall make
all determinations as to the rights to benefits under this Agreement. Any
decision by the Employer denying a claim by the Executive, the Executive's
spouse, or the Executive's beneficiary for benefits under this Agreement shall
be stated in writing and delivered or mailed, via registered or certified mail,
to the Executive, the Executive's spouse or the Executive's beneficiary, as the
case may be. Such decision shall set forth the specific reasons for the denial
of a claim. In addition, the Employer shall provide the Executive, the
Executive's spouse or the Executive's beneficiary with a reasonable opportunity
for a full and fair review of the decision denying such claim.
-10-
90 STATUS AS AN UNSECURED GENERAL CREDITOR. Notwithstanding
anything contained herein to the contrary: (i) neither the Executive, the
Executive's spouse or the Executive's designated beneficiaries shall have any
legal or equitable rights, interests or claims in or to any specific property or
assets of the Employer as a result of this Agreement; (ii) none of the
Employer's assets shall be held in or under any trust for the benefit of the
Executive, the Executive's spouse or the Executive's designated beneficiaries or
held in any way as security for the fulfillment of the obligations of the
Employer under this Agreement; (iii) all of the Employer's assets shall be and
remain the general unpledged and unrestricted assets of the Employer; (iv) the
Employer's obligation under this Agreement shall be that of an unfunded and
unsecured promise by the Employer to pay money in the future; and (v) the
Executive, the Executive's spouse and the Executive's designated beneficiaries
shall be unsecured general creditors with respect to any benefits which may be
payable under the terms of this Agreement.
Notwithstanding subparagraphs (i) through (v) above, the
Employer and the Executive acknowledge and agree that upon request of the
Executive at any time during the term of this Agreement, a Rabbi Trust (the
"Trust") shall be established upon such terms and conditions as may be mutually
agreeable between the Employer and the Executive in order to permit the Employer
to make contributions and/or transfer assets to the Trust to discharge its
obligations pursuant to this Agreement. The principal of the Trust and any
earnings thereon shall be held separate and apart from other funds of the
Employer to be used exclusively for discharge of the Employer's obligations
pursuant to this Agreement and shall continue to be subject to the claims of the
Employer's general creditors until paid to the Executive or its beneficiaries in
such manner and at such times as specified in this Agreement.
100 DISCRETION OF BOARD TO ACCELERATE PAYOUT. Notwithstanding any of
the other provisions of this Agreement, the Board of Directors of the Employer
may, if determined in its sole and absolute discretion to be appropriate,
accelerate the payment of the amounts due under the terms of this Agreement,
provided that Executive (or Executive's spouse or designated beneficiaries): (i)
consents to the revised payout terms determined appropriate by the Employer's
Board of Directors; and (ii) does not negotiate or in anyway influence the terms
of proposed altered/accelerated payout (said decision to be made solely by the
Employer's Board of Directors and offered to the Executive [or Executive's
spouse or designated beneficiaries] on a "take it or leave it basis").
110 MISCELLANEOUS.
11.1. OPPORTUNITY TO CONSULT WITH INDEPENDENT ADVISORS. The
Executive acknowledges that he has been afforded the opportunity to consult with
independent advisors of his choosing including, without limitation, accountants
or tax advisors and counsel regarding both the benefits granted to him under the
terms of this Agreement and the (i) terms and conditions which may affect the
Executive's right to these benefits and (ii) personal tax effects of such
benefits including, without limitation, the effects of any federal or state
taxes,
-11-
Section 280G of the Code, and any other taxes, costs, expenses or liabilities
whatsoever related to such benefits, which in any of the foregoing instances the
Executive acknowledges and agrees shall be the sole responsibility of the
Executive notwithstanding any other term or provision of this Agreement. The
Executive further acknowledges and agrees that the Employer shall have no
liability whatsoever related to any such personal tax effects or other personal
costs, expenses, or liabilities applicable to the Executive and further
specifically waives any right for the Executive, himself, and his heirs,
beneficiaries, legal representatives, agents, successors, and assigns to claim
or assert liability on the part of the Employer related to the matters described
above in this subparagraph 11.1. The Executive further acknowledges and agrees
that he has read, understands and consents to all of the terms and conditions of
this Agreement, and that he enters into this Agreement with a full understanding
of its terms and conditions.
11.2. ARBITRATION OF DISPUTES. All claims, disputes and other
matters in question arising out of or relating to this Agreement or the breach
or interpretation thereof, other than those matters which are to be determined
by the Employer in its sole and absolute discretion, shall be resolved by
binding arbitration before a representative member, selected by the mutual
agreement of the parties, of the Judicial Arbitration and Mediation Services,
Inc. ("JAMS"), located in San Francisco, California. In the event JAMS is unable
or unwilling to conduct the arbitration provided for under the terms of this
Paragraph, or has discontinued its business, the parties agree that a
representative member, selected by the mutual agreement of the parties, of the
American Arbitration Association ("AAA"), located in San Francisco, California,
shall conduct the binding arbitration referred to in this Paragraph. Notice of
the demand for arbitration shall be filed in writing with the other party to
this Agreement and with JAMS (or AAA, if necessary). In no event shall the
demand for arbitration be made after the date when institution of legal or
equitable proceedings based on such claim, dispute or other matter in question
would be barred by the applicable statute of limitations. The arbitration shall
be subject to such rules of procedure used or established by JAMS, or if there
are none, the rules of procedure used or established by AAA. Any award rendered
by JAMS or AAA shall be final and binding upon the parties, and as applicable,
their respective heirs, beneficiaries, legal representatives, agents, successors
and assigns, and may be entered in any court having jurisdiction thereof. The
obligation of the parties to arbitrate pursuant to this clause shall be
specifically enforceable in accordance with, and shall be conducted consistently
with, the provisions of Title 9 of Part 3 of the California Code of Civil
Procedure. Any arbitration hereunder shall be conducted in San Jose, 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
-12-
case may be, to have most nearly prevailed, even if such party did not prevail
in all matters, not necessarily the one in whose favor a judgment is rendered.
11.4. NOTICE. Any notice required or permitted of either the
Executive or the Employer under this Agreement shall be deemed to have been duly
given, if by personal delivery, upon the date received by the party or its
authorized representative; if by facsimile, upon transmission to a telephone
number previously provided by the party to whom the facsimile is transmitted as
reflected in the records of the party transmitting the facsimile and upon
reasonable confirmation of such transmission; and if by mail, on the third day
after mailing via U.S. first class mail, registered or certified, postage
prepaid and return receipt requested, and addressed to the party at the address
given below for the receipt of notices, or such changed address as may be
requested in writing by a party.
If to the Employer: Heritage Bank of Commerce
150 Almaden Boulevard
San Jose, California 95113
Attn: President
If to the Executive: Brad L. Smith
1707 Vista Del Sur
Gilroy, California 95020
11.5. ASSIGNMENT. Neither the Executive, the Executive's
spouse, nor any other beneficiary under this Agreement shall have any power or
right to transfer, assign, anticipate, hypothecate, modify or otherwise encumber
any part or all of the amounts payable hereunder, nor, prior to payment in
accordance with the terms of this Agreement, shall any portion of such amounts
be: (i) subject to seizure by any creditor of any such beneficiary, by a
proceeding at law or in equity, for the payment of any debts, judgments, alimony
or separate maintenance obligations which may be owed by the Executive, the
Executive's spouse, or any designated beneficiary; or (ii) transferable by
operation of law in the event of bankruptcy, insolvency or otherwise. Any such
attempted assignment or transfer shall be void and unenforceable without the
prior written consent of the Employer. The Employer's consent, if any, to one or
more assignments or transfers shall not obligate the Employer to consent to or
be construed as the Employer's consent to any other or subsequent assignment or
transfer.
11.6. BINDING EFFECT/MERGER OR REORGANIZATION. This Agreement
shall be binding upon and inure to the benefit of the Executive and the Employer
and, as applicable, their
-13-
respective heirs, beneficiaries, legal representatives, agents, successors and
assigns. Accordingly, the Employer shall not merge or consolidate into or with
another corporation, or reorganize or sell substantially all of its assets to
another corporation, firm or person, unless and until such succeeding or
continuing corporation, firm or person agrees to assume and discharge the
obligations of the Employer under this Agreement. Upon the occurrence of such
event, the term "Employer" as used in this Agreement shall be deemed to refer to
such surviving or successor firm, person, entity or corporation.
11.7. NONWAIVER. The failure of either party to enforce at any
time or for any period of time any one or more of the terms or conditions of
this Agreement shall not be a waiver of such term(s) or condition(s) or of that
party's right thereafter to enforce each and every term and condition of this
Agreement.
11.8. PARTIAL INVALIDITY. If any term, provision, covenant, or
condition of this Agreement is determined by an arbitrator or a court, as the
case may be, to be invalid, void, or unenforceable, such determination shall not
render any other term, provision, covenant or condition invalid, void or
unenforceable, and the Agreement shall remain in full force and effect
notwithstanding such partial invalidity.
11.9. ENTIRE AGREEMENT. This Agreement supersedes any and all
other agreements, either oral or in writing, between the parties with respect to
the subject matter of this Agreement and contains all of the covenants and
agreements between the parties with respect thereto. Each party to this
Agreement acknowledges that no other representations, inducements, promises, or
agreements, oral or otherwise, have been made by any party, or anyone acting on
behalf of any party, which are not set forth herein, and that no other
agreement, statement, or promise not contained in this Agreement shall be valid
or binding on either party.
11.10. MODIFICATIONS. Any modification of this Agreement shall
be effective only if it is in writing and signed by each party or such party's
authorized representative.
11.11. PARAGRAPH HEADINGS. The paragraph headings used in this
Agreement are included solely for the convenience of the parties and shall not
affect or be used in connection with the interpretation of this Agreement.
11.12. NO STRICT CONSTRUCTION. The language used in this
Agreement shall be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction will be applied
against any person.
11.13. GOVERNING LAW. The laws of the State of California,
other than those laws denominated choice of law rules, and, where applicable,
the rules and regulations of
-14-
the California Commissioner of Financial Institutions and the Federal Deposit
Insurance Corporation, shall govern the validity, interpretation, construction
and effect of this Agreement.
-15-
IN WITNESS WHEREOF, the Employer and the Executive have executed this
Agreement on the date first above-written in the City of San Jose, Santa Clara
County, California.
THE EMPLOYER THE EXECUTIVE
Heritage Bank of Commerce
By:
------------------------------- ----------------------------------------
John E. Rossell Brad L. Smith
President and Chief
Executive Officer
-16-
SCHEDULE A
CALENDAR PERIOD APPLICABLE PERCENTAGE
--------------- ---------------------
January 1, 1999 to December 31, 2001............. 0.00%
January 1, 2002 to December 31, 2002............. 36.00%
January 1, 2003 to December 31, 2003............. 48.00%
January 1, 2004 to December 31, 2004............. 60.00%
January 1, 2005 to December 31, 2005............. 72.00%
January 1, 2006 to December 31, 2006............. 84.00%
January 1, 2007 and Thereafter................... 100.00%
See subparagraph 1.2 of the Agreement for a definition and discussion of the
Applicable Percentage.
SCHEDULE B
EXECUTIVE BENEFITS
1. Executive Benefits Determination.
The Executive Benefits shall be determined based upon the following:
a. Benefit Account:
A Benefit Account shall be established as a liability reserve
account on the books of the Employer for the benefit of the
Executive. Prior to the date on which the Executive becomes
eligible to receive payments under the Agreement, such Benefit
Account shall be increased (or decreased) each Plan Year
(including the Plan Year in which the Executive ceases to be
employed by the Employer) by an amount equal to the annual
earnings or loss for that Plan Year determined by the Index
(described in subparagraph c below), less the Opportunity Cost
(described in subparagraph d below) for that Plan Year.
b. Index Benefit:
After the date on which the Executive becomes eligible to
receive payments under the Agreement, the Index Benefit for the
Executive for any Plan Year shall be determined by subtracting
the Opportunity Cost for that Plan Year from the earnings, if
any, established by the Index.
c. Index:
The Index for any Plan Year shall be the aggregate annual
after-tax income from the life insurance contracts described
hereinafter as defined by FASB Technical Bulletin 85-4. This
Index shall be applied as if such insurance contracts were
purchased on the Effective Date.
Insurance Company: Canada Life Assurance Company\US2669025
Security Life of Denver\001078311
Southland Life Insurance\0600081375
If such contracts of life insurance are actually purchased by
the Employer, then the actual policies as of the dates purchased
shall be used in calculations to determine the Index and
Opportunity Cost. If such contracts of life insurance are not
purchased or are subsequently surrendered or lapsed, then the
Employer shall
-1-
receive and use annual policy illustrations that assume the
above described policies were purchased from the above named
insurance company(ies) on the Effective Date to calculate the
amount of the Index and Opportunity Cost.
d. Opportunity Cost:
The Opportunity Cost for any Plan Year shall be calculated by
multiplying (a) the sum of (i) the total amount of premiums set
forth in the insurance policies described above, (ii) the amount
of any Index Benefits (described at subparagraph b above), and
(iii) the amount of all previous years after-tax Opportunity
Costs; by (b) the average annualized after-tax cost of funds
calculated using a one-year U.S. Treasury Bill as published in
the Wall Street Journal. The applicable tax rate used to
calculate the Opportunity Cost shall be the Employer's marginal
tax rate until the Executive's Retirement, or other termination
of service (including a Change in Control). Thereafter, the
Opportunity Cost shall be calculated with the assumption of a
marginal forty-two percent (42%) corporate tax rate each year
regardless of whether the actual marginal tax rate of the
Employer is higher or lower.
- -----------------------------------------------------------------------------------------------
EXAMPLE
INDEX BENEFITS
- -----------------------------------------------------------------------------------------------
[n] [A] [B] [C] [D]
INDEX
[Annual OPPORTUNITY COST
CASH SURRENDER Policy A0 = premium ANNUAL CUMULATIVE
END OF VALUE OF LIFE Income] A0+Cn-1x.05x BENEFIT BENEFIT
YEAR INSURANCE POLICY An-An-1 (1-42%) B-C D+Dn-1
- -----------------------------------------------------------------------------------------------
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
-2-
Effective Tax Rate = 42%
One Year US Treasury Yield = 5%
2. Executive Benefits Payments.
The Executive shall be entitled to payment of the Applicable Percentage
of (i) the balance in the Benefit Account in installments upon the terms
as specified in the Agreement, and (ii) the Index Benefit for each Plan
Year payable in installments until the Executive's death.
-3-
SCHEDULE C
BENEFICIARY DESIGNATION
To the Administrator of the Heritage Bank of Commerce Executive Indexed
Compensation Benefits Agreement:
Pursuant to the Provisions of my Executive Indexed Compensation Benefits
Agreement with Heritage Bank of Commerce, permitting the designation of a
beneficiary or beneficiaries by a participant, I hereby designate the following
persons and entities as primary and secondary beneficiaries of any benefit under
said Agreement payable by reason of my death:
PRIMARY BENEFICIARY:
- ---------------------- -------------------- -----------------------------
Name Address Relationship
SECONDARY (CONTINGENT) BENEFICIARY:
- ---------------------- -------------------- -----------------------------
Name Address Relationship
THE RIGHT TO REVOKE OR CHANGE ANY BENEFICIARY DESIGNATION IS HEREBY RESERVED.
ALL PRIOR DESIGNATIONS, IF ANY, OF PRIMARY BENEFICIARIES AND SECONDARY
BENEFICIARIES ARE HEREBY REVOKED.
The Administrator shall pay all sums payable under the Agreement by
reason of my death to the Primary Beneficiary, if he or she survives me, and if
no Primary Beneficiary shall survive me, then to the Secondary Beneficiary, and
if no named beneficiary survives me, then the Administrator shall pay all
amounts in accordance with the terms of my Executive Indexed Compensation
Benefits 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
-1-
remaining unpaid benefit payable according to the terms of my Executive Indexed
Compensation Benefits Agreement shall be payable to the personal representatives
of the estate of said beneficiary who survived me but died prior to receiving
the total benefit provided by my Executive Indexed Compensation Benefits
Agreement.
Dated: ____________, 1999 ---------------------------------------
Brad L. Smith
CONSENT OF THE EXECUTIVE'S SPOUSE
TO THE ABOVE BENEFICIARY DESIGNATION:
I, Kathleen M. Smith, being the spouse of Brad L. Smith, after being
afforded the opportunity to consult with independent counsel of my choosing, do
hereby acknowledge that I have read, agree and consent to the foregoing
Beneficiary Designation which relates to the Executive Indexed Compensation
Benefits Agreement entered into by my spouse effective as of ____________, 1999.
I understand that the above Beneficiary Designation may affect certain rights
which I may have in the benefits provided for under the terms of the Executive
Indexed Compensation Benefits Agreement and in which I may have a marital
property interest.
Dated: ____________, 1999
- ------------------------------
Kathleen M. Smith
-2-
SCHEDULE D
DISTRIBUTION ELECTION
Pursuant to the Provisions of my Executive Indexed Compensation Benefits
Agreement with Heritage Bank of Commerce, 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: _____________, 1999
Signed:
--------------------------------
Brad L. Smith
LIFE INSURANCE
ENDORSEMENT METHOD SPLIT DOLLAR PLAN
AGREEMENT
Insurer/Policy Number: Insurance Company: Canada Life Assurance
Company\US2669025
Insurance Company: Security Life of Denver\001078311
Insurance Company: Southland Life Insurance\0600081375
Bank: Heritage Bank of Commerce
Insured: Brad L. Smith
Relationship of Insured to Bank: Executive Officer
Date: _____________, 1999
The respective rights and duties of the Bank and the Insured in the above
policy(ies) (the "Policy") shall be as follows:
I. DEFINITIONS
Refer to the Policy provisions for the definition of all terms in this
Agreement.
II. POLICY TITLE AND OWNERSHIP
Title and ownership shall reside in the Bank for its use and for the use
of the Insured all in accordance with this Agreement. The Bank alone
may, to the extent of its interest, exercise the right to borrow or
withdraw the Policy cash values. Where the Bank and the Insured (or
beneficiary[ies] or assignee[s], with the consent of the Insured)
mutually agree to exercise the right to increase the coverage under the
subject split dollar Policy, then, in such event, the rights, duties and
benefits of the parties to such increased coverage shall continue to be
subject to the terms of this Agreement.
III. BENEFICIARY DESIGNATION RIGHTS
The Insured (or beneficiary[ies] or assignee[s]) shall have the right
and power to designate a beneficiary or beneficiaries to receive his
share of the proceeds payable upon the death of the Insured, and to
elect and change a payment option for such beneficiary, subject to any
right or interest the Bank may have in such proceeds, as provided in
this Agreement.
IV. PREMIUM PAYMENT METHOD
The Bank shall pay an amount equal to the planned premiums and any other
premium payments that might become necessary to maintain the Policy in
force.
V. TAXABLE BENEFIT
Annually the Insured will receive a taxable benefit equal to the assumed
cost of insurance as required by the Internal Revenue Service. The Bank
(or its administrator) will report to the Insured the amount of imputed
income received each year on Form W-2 or its equivalent.
VI. DIVISION OF DEATH PROCEEDS
Subject to Paragraph VII herein, the division of the death proceeds of
the Policy is as follows:
1. The Insured's beneficiary(ies), designated in accordance with
Paragraph III, shall be entitled to an amount equal to eighty
percent (80%) of the net at risk insurance portion of the
proceeds. The net at risk insurance portion is the total
proceeds less the cash value of the Policy.
2. The Bank shall be entitled to the remainder of such proceeds.
3. The Bank and the Insured (or beneficiary[ies] or assignee[s])
shall share in any interest due on the death proceeds on a pro
rata basis in the ratio that the proceeds due the Bank and the
Insured, respectively, bears to the total proceeds, excluding
any such interest.
VII. DIVISION OF CASH SURRENDER VALUE
The Bank shall at all times be entitled to an amount equal to the
Policy's cash value, as that term is defined in the Policy, less any
Policy loans and unpaid interest or cash withdrawals previously incurred
by the Bank and any applicable Policy surrender charges. Such cash value
shall be determined as of the date of surrender of the Policy or death
of the Insured as the case may be.
VIII. PREMIUM WAIVER
If the Policy contains a premium waiver provision, any such waived
amounts shall be considered for all purposes of this Agreement as having
been paid by the Bank.
-2-
IX. RIGHTS OF PARTIES WHERE POLICY ENDOWMENT OR ANNUITY ELECTION EXISTS
In the event the Policy involves an endowment or annuity element, the
Bank's right and interest in any endowment proceeds or annuity benefits
shall be determined under the provisions of this Agreement by regarding
such endowment proceeds or the commuted value of such annuity benefits
as the Policy's cash value. Such endowment proceeds or annuity benefits
shall be treated like death proceeds for the purposes of division under
this Agreement.
X. TERMINATION OF AGREEMENT
This Agreement shall terminate at the option of the Bank following
thirty (30) days written notice to the Insured upon the happening of any
one of the following:
1. The Insured's right to receive benefits under that certain
Executive Indexed Compensation Benefits Agreement effective as
of ____________, 1999 shall terminate for any reason other than
the Insured's death, or
2. The Insured shall be discharged from service with the Bank for
cause. The term "for cause" shall mean:
a. A termination "for cause" as this term may be defined in
any written employment agreement entered into by and between
the Bank and the Insured;
b. The willful breach of duty by the Insured in the course
of his employment;
c. The habitual neglect by the Insured of his employment
responsibilities and duties;
d. The Insured's deliberate violation of (i) any state or
federal banking or securities laws, or of the Bylaws, rules,
policies or resolutions of the Bank, or (ii) of the rules or
regulations of the California Commissioner of Financial
Institutions, the Federal Deposit Insurance Corporation or any
other regulatory agency or governmental authority having
jurisdiction over the Bank, which has a material adverse effect
upon the Bank;
e. The determination by a state or federal banking agency
or other governmental authority having jurisdiction over the
Bank that the Insured is not suitable to act in the capacity for
which he is employed by the Bank;
-3-
f. The Insured's conviction of any felony or a crime
involving moral turpitude or a fraudulent or dishonest act; or
g. The Insured's disclosure without authority of any secret
or confidential information not otherwise publicly available
concerning the 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 inducement of any customer to breach any
contract with the Bank.
Upon such termination, the Insured (or beneficiary[ies] or assignee[s])
shall have a ninety (90) day option to receive from the Bank an absolute
assignment of the Policy in consideration of a cash payment to the Bank,
whereupon this Agreement shall terminate. Such cash payment shall be the
greater of:
1. The Bank's share of the cash value of the Policy on the date of
such assignment, as defined in this Agreement.
2. The amount of the premiums which have been paid by the Bank
prior to the date of such assignment.
Should the Insured (or beneficiary[ies] or assignee[s]) fail to exercise
this option within the prescribed ninety (90) day period, the Insured
(or beneficiary[ies] or assignee[s]) agrees that all of his or her
rights, interest and claims in the Policy shall terminate as of the date
of the termination of this Agreement.
Except as provided above, this Agreement shall terminate upon
distribution of the death benefit proceeds in accordance with Paragraph
VI above.
XI. INSURED'S OR ASSIGNEE'S ASSIGNMENT RIGHTS
The Insured may not, without the prior written consent of the Bank,
assign to any individual, trust or other organization, any right, title
or interest in the Policy nor any rights, options, privileges or duties
created under this Agreement.
XII. AGREEMENT BINDING UPON THE PARTIES
This Agreement shall be binding upon the Insured and the Bank, and their
respective heirs, successors, personal representatives and assigns, as
applicable.
XIII. NAMED FIDUCIARY AND PLAN ADMINISTRATOR
-4-
The Bank is hereby designated the "Named Fiduciary" until resignation or
removal by its Board of Directors. As Named Fiduciary, the Bank shall be
responsible for the management, control, and administration of this
Agreement as established herein. The Named Fiduciary may allocate to
others certain aspects of the management and operations responsibilities
of this Agreement, including the employment of advisors and the
delegation of any ministerial duties to qualified individuals.
XIV. FUNDING POLICY
The funding Policy for this Agreement shall be to maintain the Policy in
force by paying, when due, all premiums required.
XV. CLAIM PROCEDURES
Claim forms or claim information as to the subject Policy can be
obtained by contacting The Benefit Marketing Group, Inc. (770-952-1529).
When the Named Fiduciary has a claim which may be covered under the
provisions described in the Policy, it should contact the office named
above, and they will either complete a claim form and forward it to an
authorized representative of the Insurer or advise the Named Fiduciary
what further requirements are necessary. The Insurer will evaluate and
make a decision as to payment. If the claim is payable, a benefit check
will be issued to the Named Fiduciary.
In the event that a claim is not eligible under the Policy, the Insurer
will notify the Named Fiduciary of the denial pursuant to the
requirements under the terms of the Policy. If the Named Fiduciary is
dissatisfied with the denial of the claim and wishes to contest such
claim denial, it should contact the office named above and they will
assist in making inquiry to the Insurer. All objections to the Insurer's
actions should be in writing and submitted to the office named above for
transmittal to the Insurer.
XVI. GENDER
Whenever in this Agreement words are used in the masculine or neuter
gender, they shall be read and construed as in the masculine, feminine
or neuter gender, whenever they should so apply.
XVII. INSURANCE COMPANY NOT A PARTY TO THIS AGREEMENT
The Insurer shall not be deemed a party to this Agreement, but will
respect the rights of the parties as set forth herein upon receiving an
executed copy of this Agreement. Payment or other performance in
accordance with the Policy provisions shall fully discharge the Insurer
from any and all liability.
-5-
IN WITNESS WHEREOF, the Insured and a duly authorized Bank officer have signed
this Agreement as of the above written date.
HERITAGE BANK OF COMMERCE INSURED
- --------------------------------- ----------------------------------------
John E. Rossell Brad L. Smith
President and Chief Executive Officer
-6-
BENEFICIARY DESIGNATION FORM
PRIMARY DESIGNATION:
NAME RELATIONSHIP
---- ------------
- ----------------------------- ---------------------------------------
- ----------------------------- ---------------------------------------
- ----------------------------- ---------------------------------------
CONTINGENT DESIGNATION:
- ----------------------------- ---------------------------------------
- ----------------------------- ---------------------------------------
- ----------------------------- ---------------------------------------
_____________________________ ______________, 19__
Brad L. Smith