Exhibit 10.3
EXECUTIVE SALARY CONTINUATION AGREEMENT
THIS AGREEMENT, made and entered into this 28th day of December, 1988, by
and between Borel Bank & Trust Company, a corporation organized and existing
under the laws of the State of California (hereinafter called "the
Corporation"), and Xxxxxx X. Xxxx (hereinafter called "the Executive").
WITNESSETH:
WHEREAS, the Executive is in the employ of the Corporation, serving as its
Executive Vice President and President
WHEREAS, the experience, knowledge of the affairs of the Corporation, and
reputation and contacts in the industry of the Executive are so valuable that
assurance of the Executive's continued service is essential for the future
growth and profits of the Corporation, and it is in the best interest of the
Corporation to arrange terms of continued employment for the Executive so as to
reasonably assure the Executive's remaining in the Corporation's employment
during the Executive's lifetime or until the age of retirement: and
WHEREAS, it is the desire of the Corporation that the Executive's services
be retained as herein provided; and
WHEREAS, the Executive is willing to continue in the employ of the
Corporation provided the Corporation agrees to pay to the Executive or the
Executive's beneficiaries certain benefits in accordance with the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the services to be performed in the
future, as well as the mutual promises and covenants herein contained, it is
agreed as follows:
ARTICLE 1
1.1. BENEFICIARY. The term "Beneficiary" shall mean the person or persons
whom the Executive shall designate in a valid Beneficiary Designation Notice to
receive the benefits provided hereunder.
A Beneficiary Designation Notice shall be valid only if: (1) it is in the
form attached hereto and made a part hereof; and, (2) it is received by the
named Fiduciary and Plan Administrator prior to the Executive's death.
1.2. CHANGE OF CONTROL. The term change of control shall mean:
(a) any merger or consolidation of the corporation in which the
Corporation is not the surviving corporation ; or
(b) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) of any assets
of the Corporation having an aggregate Fair Market value of fifty percent
(50%) of the total value of the
assets of the Corporation and its consolidated subsidiaries reflected in
the most recent balance sheet of the Corporation.; or
(c) any person ( as such term is used in Sections 13 (d) and 14(d)(2)
of the Securities Exchange Act of 1934) becomes a beneficial owner,
directly or indirectly, of securities of the Corporation representing
twenty-five per cent (25%) of the combined voting power of the
Corporation's then outstanding securities.
1.3. DISABILITY. The term "disability" shall mean the complete and total
inability, due to illness or injury, of the Executive to perform his or her
duties as an Executive Officer of the Corporation and the continued complete and
total inability to perform such duties. Such disability shall be determined by
an independent physician in the event of physical disability or by an
independent psychiatrist in the event of mental disability selected, with the
approval of the Corporation and the Executive.
1.4. NAMED FIDUCIARY AND PLAN ADMINISTRATOR. The Named Fiduciary and Plan
Administrator of this plan shall be the Corporation.
1.5. PLAN YEAR. The term "Plan Year" shall mean the Corporation's fiscal
year.
1.6. 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.
1.7. 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) The Executive's willful breach of duty in the course of
employment, unless waived by the Corporation;
(b) Dishonest or illegal conduct of the Executive; or,
(c) The habitual neglect by the Executive of the Executive's
employment duties, unless waived by the Corporation.
ARTICLE 2
2.1. EMPLOYMENT. The Corporation agrees to employ the Executive in such
capacity as the Corporation may from time to time determine. The Executive shall
continue in the employ of the Corporation in such capacity and with such duties
and compensation as may be determined from time to time by the Board of
Directors of the Corporation.
2.2. FULL EFFORTS. The Executive agrees to devote his or her full time and
attention exclusively to the business and affairs of the Corporation, except
during vacation periods, and to use his or her best efforts to furnish faithful
and satisfactory services to the Corporation.
2.3. FRINGE BENEFIT. The salary continuation benefits provided by this
Agreement are granted by the Corporation as a fringe benefit to the Executive
and are not part of any salary
2
reduction plan or any arrangement deferring a bonus or a salary increase. The
Executive has no option to take any current payment of bonus in lieu of these
salary continuation benefits.
ARTICLE 3
3.1. RETIREMENT. If the Executive shall continue in the employment of the
Corporation at least until attaining the age of Sixty (60), the Executive may
retire from active daily employment as of the first day of the month following
attainment of age Sixty (60), or upon such later date as may be mutually agreed
upon by the Executive and the Corporation. In any event, however, the Executive
may continue to work after the age of Sixty (60).
3.2. PAYMENT. The Corporation agrees that upon such retirement it will pay
to the Executive the annual sum of Sixty Thousand Dollars ($60,000.00), payable
monthly on the first day of each month following such retirement for a period of
one hundred fifty-six (156) months, subject to the conditions and limitations
hereinafter set forth. The Sixty Thousand Dollars ($60,000.00) annual payment
amount may be adjusted as of the first year in which it is to be paid, to
reflect changes in the federally determined cost-of-living index (U.S. Dept. of
Labor BLS CPI) and may be adjusted annually for each payment year thereafter to
reflect further changes in said federally determined cost of living index, using
the date of retirement as a baseline. However, the corporation is not obligated
hereunder to make any such adjustment.
3.3. DEATH AFTER RETIREMENT. The Corporation agrees that if the Executive
shall so retire, but shall die before receiving the full amount of monthly
payments to which he is entitled hereunder, it will continue to make such
monthly payments to the Executive's designated Beneficiary for the remaining
period. If a valid Beneficiary Designation is not in effect, the payments shall
be made to the executive's surviving spouse or, if none, said payments shall be
made to the duly qualified personal representative, executor or administrator of
the Executive's estate.
ARTICLE 4
4.1. DEATH PRIOR TO RETIREMENT. In the event the Executive should die while
actively employed by the Corporation at any time after the date of this
Agreement, but prior to attaining the age of Sixty (60) years, or if the
Executive chooses to work after the age of Sixty (60), but dies before
retirement, the Corporation will pay the annual sum of Sixty Thousand Dollars
($60,000.00) per year to the Executive's designated Beneficiary in equal monthly
installments for a period of one hundred and fifty-six (156) months. If a valid
Beneficiary Designation is not in effect, the payments shall be made to the
Executive's surviving spouse at the time of death, or, if none, said payments
shall be made to the duly qualified personal representative, executor or
administrator of the Executive's estate. The said monthly payments shall begin
the first day of the month following the month of the decease of the Executive.
Provided, however, that anything hereinabove to the contrary notwithstanding, no
death benefit shall be payable hereunder if it is determined that the
Executive's death was caused by suicide on or before December 30, 1990.
4.2. DISABILITY PRIOR TO HIS RETIREMENT. In the event the Executive becomes
disabled while actively employed by the Corporation at any time after the date
of this Agreement, but
3
prior to attaining the age of Sixty (60) years the Executive will be considered
to be one hundred percent (100%) vested in the amount set forth in Schedule A
attached hereto and made a part hereof. Said amount, at the election of the
Executive, shall be paid to the Executive in a lump sum within three (3) months
of the determination of disability, or may be paid in equal monthly installments
over a period not to exceed one hundred and fifty-six (156) months, or such
shorter period as is mutually agreed upon by the Corporation and the Executive.
Said payment shall be in lieu of any other retirement or death benefit under
this Agreement.
If the Executive elects to work beyond the age of Sixty (60) and becomes
disabled prior to retirement, the Executive will be considered to have retired
as defined in Section 3.1 of this Agreement and will be entitled to the benefits
provided by Article 3 of this Agreement.
ARTICLE 5
5.1. TERMINATION OF EMPLOYMENT. The Corporation reserves the right to
terminate employment of the Executive at any time prior to retirement. In the
event that the employment of the Executive shall be terminated prior to the
Executive's attaining the, later of age Sixty (60) or the date of termination,
other than by reason of disability or death, 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 under the following
circumstances:
(1) TERMINATION WITHOUT CAUSE. If the Executive has been employed by the
Corporation for a period of at least three (3) continuous years, and
the Executive's employment is terminated by the' Corporation without
cause, the Executive will be considered to be vested in twenty (20%)
of the amount set forth in Schedule A attached hereto and made a part
hereof, and shall become vested in an additional ten percent (10%) of
said amount for each succeeding year thereafter until he becomes one
hundred (100%) vested. If the Executive's employment is terminated
under the provisions of this Section 5.1, the Corporation will pay the
Executive's vested amount upon such terms and conditions and
commencing at such time as the Corporation shall determine, but in no
event commencing later than age Sixty (60).
(2) VOLUNTARY TERMINATION BY THE EXECUTIVE. It is understood by the
Executive that the purpose of this Agreement is to assure the
Executive's continued employment with the Corporation. If the
Executive voluntarily terminates his or her employment with the
Corporation, then the Executive shall be entitled to no benefits under
this Agreement and no amount shall be paid to the Executive under this
Agreement.
(3) TERMINATION FOR CAUSE. If the Executive terminated for cause as
defined herein, then the Executive shall be entitled to no benefits
under this Agreement and no amount shall be paid to the Executive
under this Agreement.
4
(4) TERMINATION UPON CHANGE OF CONTROL.
(a) Anything hereinabove to the contrary notwithstanding, if the
Executive is not fully vested in the amount set forth in Schedule
A, he will become fully vested in said amount in the event of a
transfer in the controlling ownership or sale of the Corporation
or its parent Corporation, and shall be entitled to the full
amount set forth in Schedule A, upon the terms and conditions
hereof, if termination of employment thereafter occurs under this
Section 5.1 as a result of such change of control.
(b) In the event that any payment or benefit received or to be
received by the Executive in connection with a change in control
of the Corporation or the termination of the Executive's
employment (whether payable pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the
corporation, any person whose actions result in a change in
control of the corporation or any person affiliated with the
Corporation or such person (together with the Severance Payment,
the "Total Payments")) would not be deductible (in whole or in
part) as a result of Section 2806 of the Internal Code of 1954,
as amended (the "Code"), the Severance Payment shall be reduced
until no portion of the Total, Payments is not deductible as a
result of section 2806 of the Code, or the Severance Payment is
reduced to zero. For purposes of this limitation (i) 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 the Severance Payment, shall be taken into
account; (ii) no portion of the Total Payments shall be taken
into account which, in the opinion of tax counsel selected by the
Corporation's independent auditors and acceptable to the
Executive, does not constitute a "parachute payment" within the
meaning of section 280G(b)(2) of the Code; (iii) the Severance
Payment shall be reduced only to the extent necessary so that the
Total Payments (other than those referred to in clause (i) or
clause (ii)) in their entirety constitute reasonable compensation
for services actually rendered within the meaning of section
280G(b)(4) of the Code, in the opinion of the tax counsel
referred to in clause (ii); and (iv) the value of any non-cash
benefit o r any deferred payment or benefit included in the Total
Payments shall be determined by the Corporation's independent
auditors in accordance with the principles of sections 280G(d)(3)
and (4) of the Code.
ARTICLE 6
6.1. TERMINATION OF AGREEMENT BY REASON OF CHANGES IN LAW. The Corporation
is entering into this Agreement upon the assumption that certain existing tax
laws will continue in effect in substantially their current form. In the event
of any changes in such federal laws, the Corporation shall have an option to
terminate or modify this Agreement, provided, however, that the Executive shall
be entitled to at least the same amount as he would have been entitled to under
Section 4.2 relating to disability. The payment of said amount shall be made
upon such
5
terms and conditions and at such time as the Corporation -shall determine, but
in no event commencing later than age Sixty (60) or the date of termination.
ARTICLE 7
7.1. NONASSIGNABLE. Neither the Executive, nor the Executive's spouse, nor
any other Beneficiary under this Agreement shall have any power or right to
transfer, assign, anticipate, hypothecate, mortgage, commute, modify, or
otherwise encumber in advance any of the benefits payable hereunder, nor shall
any of said benefits be subject to seizure for the payment of any debts,
judgments, alimony or separate maintenance owned by the Executive or the
Executive's Beneficiary, or any of them, or be transferable by operation of law
in the event of bankruptcy, insolvency, or otherwise.
ARTICLE 8
8.1. CLAIMS PROCEDURE. The Corporation shall make all determinations as to
rights to benefits under this Agreement. Any decision by the Corporation denying
a claim by the Executive or the Executive's Beneficiary for benefits under this
Agreement shall be stated in writing and delivered or mailed to the Executive or
such Beneficiary. Such decision shall set forth the specific reasons for the
denial, written to the best of the Corporation's ability, in a manner calculated
to be understood without legal or actuarial counsel. In addition, the
Corporation shall, provide a reasonable opportunity to the Executive or such
Beneficiary for full and fair review of the decision denying such claim.
ARTICLE 9
9.1. UNSECURED GENERAL CREDITOR. The Executive and the Executive's
Beneficiary shall have no legal or equitable rights, interests, or claims in or
to any property or assets of the Corporation. No assets of the Corporation shall
be held under any trust for the benefit of the Executive or his Beneficiaries,
or held in any way as security for the fulfillment of the obligations of the
Corporation under this Plan. All of the Corporation's assets shall be, and
remain, the general, unpledged, unrestricted assets of the Corporation. The
Corporation's obligation under this Plan shall be that of an unfunded and
unsecured promise by the Corporation to pay money in the future. Executives and
their Beneficiaries shall be unsecured general creditors with respect to any
benefits hereunder.
ARTICLE 10
10.1. REORGANIZATION. The Corporation 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 Corporation under this Agreement. Upon the occurrence of such
event, the term "Corporation," as used in this Agreement, shall be deemed to
refer to such successor or survivor corporation.
6
ARTICLE 11
11.1. BENEFITS AND BURDENS. This Agreement shall be binding upon, and inure
to the benefit of the Executive and the Executive's personal representatives,
and the corporation and any successor organization which shall succeed to
substantially all of its assets and business.
ARTICLE 12
12.1. NOT A CONTRACT OF EMPLOYMENT. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Corporation to discharge the
Executive, or restrict the right of the Executive to terminate his employment.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
duly executed .by its proper officer, and the Executive has hereunto set his
hand at San Mateo, California, the day and year first above written.
BOREL BANK & TRUST COMPANY
By: /s/ XXXXXX X. XXXX
--------------------------------------
Its: President
EXECUTIVE
/s/ XXXXXX X. XXXX
--------------------------------------
7
XXXXXX X. XXXX
SCHEDULE A
PLAN YEAR AMOUNT IN WHICH VESTING OCCURS
--------- ------------------------------
1 19,800
2 41,674
3 65,838
4 92,532
5 122,022
6 154,599
7 190,588
8 230,345
9 274,266
10 322,785
11 376,385
12 435,598
8
DESIGNATION OF BENEFICIARY
Pursuant to the terms of a Salary Continuation Agreement, dated 28 December
1988, between myself and the Borel Bank & Trust Company, I hereby designate the
following beneficiary(ies) to receive any payments which may be due under such
Agreement after my death:
Primary
Beneficiary XXXXXXX XXXX
--------------------------------------------------------------------
Secondary
Beneficiary(ies) XXXXXXX XXXX, XXXXX XXXX, MAL XXXXXXX XXXX IN EQUAL SHARES
---------------------------------------------------------------
The Primary Beneficiary named above shall be designated beneficiary
referred to in Articles 1.1, 3.3 and 4.1 of said Agreement if he or she is
living at the time a death benefit payment thereunder becomes due and payable,
and the Secondary Beneficiary named above shall be designated beneficiary
referred to in Articles 1.1, 3.3 and 4.1 of said Agreement only if he or she is
living at the time a death benefit payment becomes payable and the Primary
Beneficiary is not then living.
This designation hereby revokes any prior designation which may have been
in effect.
Date: 28 DECEMBER 1988
-----------------------------------
/s/ ILLEGIBLE /s/ XXXXXX X. XXXX
------------------------------- ---------------------------------------
Witness Executive
Acknowledged By: /s/ XXXXXX X. XXXX
---------------------------------------
9
