UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31,June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-10198
The San Francisco Company
(Exact name of Registrant as specified in its charter)
Delaware 94-3071255
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
550 Montgomery Street, San Francisco, California 94111
(Address of principal executive office) (Zip Code)
(415) 781-7810
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
The Registrant had 31,723,78231,728,782 shares of Class A Common Stock
outstanding on May 1,July 17, 1998.
pagePAGE
The San Francisco Company and Subsidiaries
Quarterly Report on Form 10-Q
Table of Contents
Page
Part I - Financial Information
Item 1. Consolidated Statements of Financial Condition
At March 31,June 30, 1998 and December 31, 1997 . . . . . . . . . . . 1
Consolidated Statements of Operations
For the Three and Six Months Ended March 31,June 30, 1998 and 1997.1997 . . 2
Consolidated Statements of Changes in Shareholders'
EquityShareholders'Equity
For the ThreeSix Months Ended March 31,June 30, 1998 and 1997.1997 . . . . . . . 4
Consolidated Statements of Cash Flows
For the Three and Six Months Ended March 31,June 30, 1998 and 1997.1997 . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . 7. 8
Part II - Other Information
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . .13. . . . . . 15
Item 2. Changes in Securities. . . . . . . . . . . . . . . .13. . . . . . 15
Item 3. Defaults Upon Senior Securities. . . . . . . . . . .13. . . . . . 15
Item 4. Submission of Matters to a Vote of Security Holders.13Holders . . . . . 15
Item 5. Other Information. . . . . . . . . . . . . . . . . .13. . . . . . 15
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . .13. . . . . . 15
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . .14
page
Item. 1 - Consolidated Financial Statements. . . . . . 16
PAGE
The San Francisco Company and Subsidiaries
Consolidated Statements of Financial Condition
March 31,June 30, 1998 and December 31, 1997
(Unaudited)
March 31,June 30, December 31,
(Dollars in Thousands Except Per Share Data) 1998 1997
Assets:
Cash and due from banks $ 2,699 $ 2,837$2,031 $2,837
Federal funds sold 20,30539,135 14,150
Cash and cash equivalents 23,00441,166 16,987
Investment securities held-to-maturity, (Market:at cost
(Fair value: 1998 $5,414; $4,830;1997 $6,567) 5,458$5,822) 4,868 5,864
Investment securities available-for-sale,
29,920at fair value 30,429 32,669
Federal Home Loan Bank stock, at par 1,5212,252 1,499
Loans 51,70252,920 51,924
Deferred loan fees (24) (61)
Allowance for loan losses (3,116)(2,850) (3,200)
Loans, net 48,56250,046 48,663
Other real estate owned, 362net 337 410
Premises and equipment, net 7,7927,753 7,791
Interest receivable 534700 720
Other assets 1,9411,877 2,014
Total Assets $119,094$139,428 $116,617
Liabilities and Shareholders' Equity:
Non-interest bearing deposits $ 19,714 $ 19,691$15,467 $19,691
Interest bearing deposits 69,32786,985 66,828
Total deposits 89,041102,452 86,519
Other borrowings 10,00015,000 10,000
Other liabilities and interest payable 2,1893,522 2,528
Total liabilities 101,230120,974 99,047
Shareholders' Equity:
Preferred stockStock (par value $0.01 per share)
Series B - Authorized - 437,500 sharesshares;
Issued and outstanding - 1998 and 1997-15,8691997 - 15,869 111 111
Common stock (par value $0.01 per share)
Class A - Authorized - 100,000,000 sharesshares;
Issued and outstanding-1998outstanding - 1998 - 31,728,782 and
1997-31,723,7821997 -31,723,782 317 317
Additional paid-in capital 78,81478,816 78,814
Retained deficit (61,354)(60,777) (61,656)
Accumulated other comprehensive loss (24)(13) (16)
Total shareholders' equity 17,86418,454 17,570
Total Liabilities and Shareholders' Equity $119,094$139,428 $116,617
See accompanying notes to unaudited consolidated financial statements.
pagePAGE 1
The San Francisco Company and Subsidiaries
Consolidated Statements of Operations
Three and Six Months Ended March 31,June 30, 1998 and 1997
(Unaudited)
March 31,Three Months Six Months
Ended June 30, Ended June 30,
(Dollars in Thousands
Except Per Share Data) 1998 1997 1998 1997
Interest income:
Loans $ 1,211 $1,123$1,252 $1,117 $2,463 $2,240
Investments 826 746819 813 1,645 1,559
Dividends 23 1222 9 45 21
Total interest income 2,060 1,8812,093 1,939 4,153 3,820
Interest expense:
Deposits 653 697646 662 1,299 1,359
Other borrowing s 150borrowings 149 -- 299 --
Total interest expense 803 697795 662 1,598 1,359
Net interest income 1,257 1,184
Provision (adjustment)before
adjustment for loan losses (94)1,298 1,277 2,555 2,461
Adjustment for loan losses (308) -- (402) --
Net interest income after provisionadjustment
for loan losses 1,351 1,1841,606 1,277 2,957 2,461
Non-interest income:
Stock brokerage commissions and
fees 257 354278 275 535 629
Real estate rental income 257 244274 232 531 479
Service charges and fees 146 99157 140 303 239
Gain on sale of other assets, net 25 212 25 234
Loss on sale of securities, net -- 22(6) -- (6)
Other income 37 2242 33 79 55
Total non-interest income 697 741776 886 1,473 1,630
Non-interest expense:
Salaries and related benefits 973 9081,013 926 1,986 1,834
Occupancy expense 292 304289 309 581 615
Professional fees 126 100133 115 259 215
Data processing 111 115103 112 214 226
Corporate insurance premiums 56 61
Equipment34 48 90 109
Property tax expense 39 61
Property taxes -- 4025 -- 65
FDIC insurance premiums 10 399 40 19 79
Other operating expenses 139 154214 355 392 572
Total non-interest expense 1,746 1,7821,795 1,930 3,541 3,715
Income before income taxes 302 143587 233 889 376
Provision for income taxes -- 5 2 5 7
Net Income $ 302 $ 138$582 $231 $884 $369
Income per common share:
Basic: Net income $ 0.01 $ 0.01
Weighted average shares outstanding 31,723,782 28,775,995
Diluted: Net income $ 0.01$0.02 $0.01 $0.03 $0.01
Weighted average shares
outstanding 33,089,892 28,776,78831,727,134 29,357,766 31,725,458 29,068,488
Diluted: Net income $0.02 $0.01 $0.03 $0.01
Weighted average shares
outstanding 33,091,792 29,358,559 33,090,838 29,069,281
See accompanying notes to unaudited consolidated financial statements.
pagePAGE 2
The San Francisco Company and Subsidiaries
Consolidated Statements of Comprehensive IncomeOperations
Three and Six Months Ended March 31,June 30, 1998 and 1997
(Unaudited)
March 31,Three Months Six Months
Ended June 30, Ended June 30,
(Dollars in Thousands
Except Per Share Data) 1998 1997 1998 1997
Net Income $ 302 $ 138$582 $231 $884 $369
Other comprehensive income (loss), net of tax:
Unrealized holding lossesgains (losses) arising
during period, net (8) (227)11 210 3 (17)
Plus: reclassification adjustment for losses
included in net income -- 6 -- 6
Other comprehensive income (loss) (8) (227)11 216 3 (11)
Comprehensive income (loss) $ 294 $ (89)
See accompanying notes to unaudited consolidated financial statements.
page$593 $447 $887 $358
PAGE 3
The San Francisco Company and Subsidiaries
Consolidated Statements of Changes in Shareholders' Equity
ThreeSix Months Ended March 31,June 30, 1998 and 1997
(Unaudited)
Accu-
(Dollars in Thousands) mulated
Other Total
Additional Compre- Retained Compre- Share-
Preferred Common Paid-in hensive Earnings hensive holders'
Stock Stock Capital Income (Deficit) Income Equity
Balances at
January 1, 1997 $111 $288 $77,841 $(67,099) $(77) $11,064
Other comprehensive
income (loss),
net of tax
Unrealized losses
on securities, net -- -- (227) -- (227) (227)
Other comprehensive
income -- -- -- (227) -- -- --
Net income
(three months) -- -- -- 138 138 -- 138
Comprehensive loss (89)
Balances at
March 31, 1997 111 288 77,841 (66,961) (304) 10,975
Net proceeds fromon
sale of stock -- 29 971 -- -- 1,000
Other comprehensive
loss, net of tax
Net unrealized
(losses) gains,
net of
reclassification
adjustments $(11) -- (11) (11)
Other comprehensive
income (11) -- -- --
Net income
(six months) 369 369 -- 369
Comprehensive income $358
Balances at
June 30, 1997 111 317 78,812 (66,730) (88) 12,422
Net proceeds from
the exercise of
stock options -- -- 2 -- -- 2
Other comprehensive
income, net of tax
Unrealized gain
on securities, netNet unrealized
gains (losses) $72 -- -- -- 288 -- 288 28872 72
Other comprehensive
income 28872
Net income (nine(six months) 5,074 5,074 -- -- -- 5,305 5,305 -- 5,3055,074
Comprehensive income 5,593$5,146
Balances at
December 31,199731, 1997 111 317 78,814 (61,656) (16) 17,570
Net proceeds from
the exercise of
stock options -- -- 2 -- -- -- 2
Dividend on
Preferred Stock (5) -- (5)
Other comprehensive
income, net of tax
Unrealized loss
on securities, netNet unrealized
gains (losses) $3 -- -- -- (8) -- (8) (8)3 3
Other comprehensive
income (8)3
Net income (three(six months) 884 884 -- -- -- 302 302 -- 302884
Comprehensive income 294$887
Balances at
March 31,June 30, 1998 $111 $317 $77,814 $(61,354) $(24) $17,864$78,816 $(60,777) $(13) $18,454
See accompanying notes to unaudited consolidated financial statements.
pagePAGE 4
The San Francisco Company and Subsidiaries
Consolidated Statements of Cash Flows
Three and Six Months Ended March 31,June 30, 1998 and 1997
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
(Dollars in Thousands) 1998 1997 1998 1997
Cash Flows from Operating Activities:
Net income $ 302 $138$582 $231 $884 $369
Adjustments to reconcile
net income to net cash
provided by operating activities:
Adjustment for loan losses (94)(308) -- (402) --
Depreciation and amortization expense 124 138127 139 251 277
Loss on sale of investment securities -- 6 -- 6
Net gain on sale of real estate owned (25) (212) (25) (234)
Provision for loss on other
real estate owned and
real estate investment -- (22)
Decrease182 -- 182
(Increase) decrease in interest
receivable and other assets 259 364
(Decrease) increase(102) (217) 157 147
Increase (decrease) in interest
payable and other liabilities (339) 116
(Decrease) increase1,350 (17) 995 99
(Increase) decrease in deferred loan fees -- (1) (37) 6867
Net cash flows provided by
operating activities 215 8021,624 111 1,823 913
Cash Flows from Investing Activities:
Proceeds from maturities of investment
securities held-to-maturity 406 221590 207 996 417
Proceeds from maturities of investment
securities available-for-sale 8,024 1,6044,488 312 12,529 1,926
Proceeds from the sale of investment
securities available-for-sale -- 5,000 -- 5,000
Purchase of investment securities
available-for-sale (5,305) --(5,739) (9,974) (11,045) (9,974)
Net (increase) decrease in loans 222 2,363(1,218) 715 (996) 3,078
Recoveries of loans previously
charged off 10 261
Purchases of premises and equipment (125) (76)42 20 52 281
Proceeds formfrom the sale of
other real estate owned 48 1,38550 2,054 98 3,440
Purchases of premises and equipment (88) (20) (213) (96)
Acquisition and capitalized cost
of real estate owned -- 28 -- 28
Net cash (used in) provided
by investing activities 3,280 5,758(1,875) (1,658) 1,421 4,100
Cash Flows from Financing Activities:
Net increase (decrease) in deposits 2,522 1,17113,411 (1,653) 15,933 (482)
Net increase in other borrowings 5,000 -- 5,000 --
Net proceeds from sale of stock 2 1,000 2 1,000
Net cash provided by (used in)
financing activities 2,522 1,17118,413 (653) 20,935 518
Increase (decrease) in cash and
cash equivalents 6,017 7,73118,162 (2,200) 24,179 5,531
Cash and cash equivalents at
beginning of period 23,004 23,357 16,987 15,626
Cash and cash equivalents at
end of period $ 23,004 $ 23,357$41,166 $21,157 $41,166 $21,157
Supplemental Disclosure of
Cash Flow Information:
Cash paid during the period for:
Interest $ 538 $ 724
Income$913 $719 $1,451 $1,389
Payment of income taxes 12 3
Supplemental Schedule of Noncash
Investing and Financing Activities:
Net transfer of loans to other real estate owned -- --6 2 18 2
See accompanying notes to unaudited consolidated financial statements.
page 5
The San Francisco Company and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
Note 1 - Organization
The San Francisco Company (the "Company") is a Delaware
corporation and a bank holding company registered under the Bank
Holding Company Act of 1956. Bank of San Francisco (the "Bank"),
a state chartered bank, was organized as a California banking
corporation in 1978 and became a wholly owned subsidiary of the
Company through a reorganization in 1982.
Note 2 - Principles of Consolidation and Presentation
The accompanying unaudited consolidated financial statements
of the Company have been prepared in accordance with the
instructions pursuant to Form 10-Q Quarterly Report and Articles 9
and 10 of Regulation S-X, and therefore, do not include all the
information and footnotes necessary to present the consolidated
financial condition, results of operations and cash flows of the
Company in conformity with generally accepted accounting
principles.
The data as of March 31,June 30, 1998, and for the three and six months
ended March 31,June 30, 1998 and 1997 are unaudited, but in the opinion of
management, reflect all accruals and adjustments of a normally
recurring nature necessary for fair presentation of the Company's
financial condition and results of operations. Certain amounts in
the 1997 consolidated financial statements have been reclassified
for comparative purposes. The results of operations for the three
and six months ended March 31,June 30, 1998 are not necessarily indicative
of the results to be expected for the entire year of 1998. This
report should be read in conjunction with the Company's 1997 Annual
Report on Form 10-K.
The accompanying financial statements include the accounts of
the Company, the Bank, and the Bank's wholly owned subsidiary, Bank
of San Francisco Realty Investors (the "BSFRI"). All material
intercompany transactions have been eliminated in consolidation.
Note 3 - Earnings Per Share (the "EPS")
The Company adopted Statement of Financial Accounting
Standards (the "SFAS") no. 128, Earnings"Earnings Per Share." SFAS No. 128
requires dual presentation of basic EPS and diluted EPS on the face
of the income statement and requires disclosure of the calculation of basic
EPS compared to diluted EPS in the footnotes to the financial
statements.
Basic EPS is calculated by dividing net income by the weighted
average number of Class A Common Shares (the "Common Stock"). The
dilutive EPS is calculated giving effect to all potentially
dilutive Common Shares, such as certain page 6
stock options, that were
outstanding during the period.
PAGE 6
The following tables present a reconciliation of the amounts used in
calculating basic and diluted EPS for each of the periods shown.
(dollars in thousands except per-share amounts)
Per-share
1998 Income Shares amount
Three-months ended June 30:
Basic EPS $ 302 31,723,782 $0.01$580 31,727,134 $0.02
Effect of dilutive securities:
Series B Preferred Stock 2 793
Stock Options -- 1,365,3171,363,865
Diluted EPS $ 304 33,089,892 $0.01$582 33,091,792 $0.02
Six-months ended June 30:
Basic EPS $879 31,725,458 $0.03
Effect of dilutive securities:
Series B Preferred Stock 5 793
Stock Options -- 1,364,587
Diluted EPS $884 33,090,838 $0.03
Per-share
1997 Income Shares amount
Three-months ended June 30:
Basic EPS $ 138 28,775,995$229 29,357,766 $0.01
Effect of dilutive securities:
Series B Preferred Stock 2 793
Stock Options -- --
Diluted EPS $ 140 28,776,788$231 29,358,559 $0.01
Six-months ended June 30:
Basic EPS $364 29,068,488 $0.01
Effect of dilutive securities:
Series B Preferred Stock 5 793
Stock Options -- --
Diluted EPS $369 29,069,281 $0.01
Note 4 - Dividend Restrictions
The Company is subject to dividend restrictions under the
Delaware General Corporation Law and regulations and policies of,
and a Written Agreement dated December 14, 1994 (the "Agreement")
with, the Federal Reserve Bank of San Francisco (the "FRB" ). The
Company's Series B Preferred Shares participate equally, share for
share, in cash dividends paid on the Common Shares in addition to
receiving the cash dividends to which they are entitled. SubjectIn order
to regulatory approval, it isbring the present intention ofcash dividends current, the Board of Directors
to pay dividends in arrearsdeclared a cash dividend on the Series B Preferred Stock totaling
$60,000 later this year, and thereafter to pay ongoing
dividends$3.92 per share for stockholders of record on the Series B Preferred Stock pursuant to their terms.July 1, 1998 that was
paid on July 15, 1998.
PAGE 7
Note 5 - Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board (the
"FASB") issued Statement of Financial Accounting Standard (the "SFAS") NumberSFAS No. 130, "Reporting Comprehensive Income" which
provides standards for reporting and displaying comprehensive
income and its components in the financial statements. This
statement is effective with the year-end 1998 financial statements
including interim financial statements. Reclassification of
financial statements for earlier periods is required. The Company
has included comprehensive income in its financial statements as required by SFAS
No. 130.statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosure about
Segments of an Enterprise and Related Information", which requires
that a public company report financial and descriptive information
about its reportable operating segments on the basis that is used
internally for evaluating segment performance and deciding how to
allocate resources to segments. This statement is effective for
year-end 1998 financial statements. The Company is in the process
of determining its format for reporting segment information.
In February 1998, the FASB issued SFAS No. 132, "Accounting
for Pensions and Other Post- Retirement Benefit Plans", which
revises and standardizes the disclosure requirements for pension
and other post retirement benefit plans. The Company does not have
any pension or post retirement benefit plans that require
disclosure in accordance with SFAS No. 132.
In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities", which standardizes
the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, by requiring
that an entity recognize those items as assets or liabilities in
the statement of financial position and measure them at fair value.
This statement is effective for all quarters of fiscal years
beginning after June 15, 1999. As of June 30, 1998, the Company
did not have any derivative instruments or engage in hedging
activities.
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
This document contains forward-looking statements that are
subject to risks and uncertainties, including, but not limited to,
the Company's and
page 7 Bank's ability to implement their respective
long-term business plan, the economy in general and the condition
of stock markets upon which the Company's stock brokerage business
and fee income is dependent, the continued services of the
Company's and Bank's key executives and managers, the real estate
market in California and other factors beyond the Company's and
Bank's control. Such risks, uncertainties and factors, including
those discussed herein, could cause actual results to differ
materially from those indicated. Readers should not place undue
reliance on forward-looking statements, which reflect management's
views only as of the date hereof. The Company and the Bank
undertake no obligation to revise these forward-looking statements
to reflect subsequent events or circumstances. Readers are also
encouraged to review the Company's publicly available filings with
the SEC.Securities and Exchange Commission.
Overview
The Company is a one-bank holding company registered in
Delaware under the Bank Holding Company Act of 1956. The principal
activity of the Company is to serve as the holding company for Bank
of San Francisco, a California chartered bank organized in 1978,
with deposits insured by the Federal Deposit Insurance
Corporation's Bank Insurance Fund. The information set forth in
this report, including unaudited interim financial statements and
related data, relates primarily to the Bank.
PAGE 8
The Company's Common Stock is not listed on any exchange.exchange and
is not actively traded. Van Kasper & Company of San Francisco,
California is the sole market maker in the Company's Common Stock.
On May 1,As of June 30, 1998, Van Kasper & Company quoted athe bid price ofwas approximately $0.60.
The Company recorded net income of $302,000$582,000 for the three
months ended March 31,June 30, 1998 and $884,000 for the six months ended
June 30, 1998, compared to a net income of $138,000$231,000 and $369,000
for the same periodperiods, respectively, in 1997. The increase in the
Company's net income of $164,000$351,000 for the three month period was
primarily from anthe adjustment for loan losses recorded in 1998 of
$308,000 and the reduction in the provision for other real estate
owned (the "OREO") losses in 1998 of $182,000 as compared with
1997. During the second quarter of 1997, the Bank also recognized
a gain on sale of OREO of $200,000 compared to $25,000 recognized
in 1998.
The increase in the Company's net interest income and reductions in non-interest
expenses partially offset by lower brokerage fees inof $515,000 for the
first quartersix months of 1998 compared to the same period in 1997.1997 was
primarily from the adjustment for loan losses of $402,000 and lower
provision for loss on OREO of $182,000, partially offset by
reductions in gain on sale of OREO of $197,000.
At March 31,June 30, 1998, total assets were $119.1$139.4 million, an
increase of $2.5$22.8 million, or 2.1%19.6% from $116.6 million at December
31, 1997. As of March 31,June 30, 1998, total loans were $51.7$52.9 million, an
increase of $1.0 million, or 1.9%, compared to $51.9 million at
December 31, 1997. Total deposits were $89.0$102.5 million at March 31,June 30,
1998, an increase of $2.5$16.0 million, or 2.9%18.5%, compared to $86.5
million at December 31, 1997.
Regulatory Directives
Federal Reserve Board Written Agreement
The Agreement prohibits the Company, without prior approval of
the FRB, from: (a) paying any cash dividends to its shareholders;
(b) directly or indirectly, acquiring or selling any interest in
any entity, line of business, problem or other assets; (c)
executing any new employment, service, or severance contracts, or
renewing or modifying any existing contracts with any executive
officer; (d) engaging in any transactions with the Bank that exceed
an aggregate of $20,000 per month; (e) engaging in any cash
expenditures with any individual or entity that exceed $25,000 per
month; (f) increasing fees paid to any directors for attendance at
board or committee meetings, or paying any bonuses to any executive
officers; (g) incurring any new debt or increasing existing debt;
and (h) repurchasing any outstanding stock of the Company. The
Company is required to submit a progress report to the FRB on a
quarterly basis.
The Company was also required to submit to the FRB an
acceptable written plan to improve and maintain an adequate capital
position, a comprehensive business plan concerning current and
proposed business activities, and a comprehensive operating budget
for the Bank and the consolidated Company. In addition, the Board
of Directors was required to submit an acceptable written plan
designed to enhance their supervision of the operations and
management of the consolidated organization.
Management was notified by the FRB at its 1997 examination
that the Company was in full compliance with the Agreement, and
management believes the Company continues to be in full compliance.
page 8PAGE 9
Memorandum of Understanding
On May 27, 1997,In June 1998, the Federal Deposit Insurance Corporation (the
"FDIC") and the Department of Financial Institutions (the "DFI")
terminated the Bank's Cease and Desist Orders and in lieu thereof entered into a Memorandum of Understanding (the "MOU") with the Bank. The MOU provides, among other
things,that the Bank: (a) have and retain management acceptable to the
Regional Director of the FDIC (the "Regional Director") and the Commissioner
of the DFI (the "Commissioner"); (b) increase its capital by not less than
$1.0 million by June 30, 1997, (c) maintain a 7% Leverage Capital ratio;
(d) reduce assets classified "Substandard" as of September 30, 1996 to no
more than $12.0 million as of June 30, 1997, $10.0 million as of September
30, 1997, and $8.0 million as of December 31, 1997; (e) develop and
implement written policy recommendations outlined in the Report of
Examination; (f) implement a police which establishes a range for the Bank's
volatile liability dependency ratio, and which ratio shall not be more than
15%; (g) submit a strategic plan covering the period 1997 - 2002; (h) no pay
cash dividends without prior written consent from the Regional Director and
the Commissioner; and (i) report to the Regional Director and the
Commissioner on a quarterly basis the form and manner of any actions taken to
secure compliance with the MOU.
As of March 31, 1998, the Bank has filed all of the required submissions
with the FDIC and DFI in accordance with the MOU, and management believes
that the Bank is full compliance with the requirements of the MOU.Understanding.
Results of Operations
Net Interest Income
The Company's net interest income was $1.3 million infor the
quarterquarters ended March 31,June 30, 1998 and 1997. The Company's net interest
income was $2.6 million for the six months ended June 30, 1998
compared to $1.2$2.5 million for the same period in 1997, or an
increase of 6%4%. The increase was primarily the result of an
increase in total earning assets.
Provision (Adjustment)assets which was partially offset by a
decline in yield on earning assets and an increase in the cost of
funds.
Adjustment for Loan Losses
The Company recorded an adjustmenta reduction to the Allowance for loan lossesLoan
Losses of $94,000$308,000 for the first quarter ofthree months ended June 30, 1998 and
$402,000 for the six months ended June 30, 1998 compared to none
infor the same periodperiods in 1997. The adjustment for loan losses
reflects the amount necessary to reduce the allowance for loan
losses to a level that management believes is adequate based on
many factors that are more fully discussed herein under "Loans -
Allowance for Loan Losses".
Non-Interest Income
Non-interest income was $697,000 at March 31,$776,000 for the three months ended
June 30, 1998 compared to $741,000
at March 31,$886,000 for the same period in 1997.
Non-interest income was $1.5 million for the six months ended June
30, 1998 compared to $1.6 million for the same period in 1997. The
decline in non-interest income of $44,000 was primarily the result of the
reduction in stock option and brokerage
commissiongain on sale of real estate owned income in 1998
compared to 1997.
The net increase of $140,000, or 18%, in real estate rental
income, service charges and fees and other income for the first six
months of 1998 compared to 1997 more than offset the decline in
brokerage commissions and fees by $94,000, or 15%, which was
primarily the result of lower transaction volume. The Bank's
earnings from Brokerage commissions and fees is highly dependent on
the trading prices of the stock underlying the stock options of its
clients and the overall condition of the stock markets in which
they trade.
Non-Interest Expense
The Company's non-interest expenses declined slightly$100,000 to $1.7$1.8
million from $1.8$1.9 million and $200,000 to $3.5 million from $3.7
million for the three month periodand six month periods ended March 31,June 30,
1998 and 1997, respectively.
page 9The Company's occupancy, data processing, corporate insurance,
property tax, FDIC insurance and other operating expenses all
declined, and salaries and related benefits and professional fees
increased. Generally, the operating expenses that declined did so
as a result of continuing cost reduction measures and the overall
improving financial condition of the Company.
PAGE 10
The increase in salaries and related expenses was primarily related
to an increase in business development personnel, and the increase in
professional fees was related primarily to the legal services required
to assist management and the Board of Directors.
Financial Condition
Liquidity and Capital Resources
Liquidity
The Bank's liquid assets, which include cash and short term
investments totaled $23.0$41.2 million, or 19.3%29.5% of total assets, at
March 31,June 30, 1998, an increase of $6.0$24.1 million, from $17.0 million, or
14.6% of total assets, at December 31, 1997. The increase in
liquidity was the result of an increase in core deposits of $2.5$19.3
million and a decreasean increase in investment securities
totaling $3.1other short-term borrowings of $5.0
million. The increase in core deposits was primarily from an
increase in short-term escrow related deposits that are expected to
remain in the Bank less than 90 days. The Bank repaid the $5.0
million borrowing in July 1998.
As of March 31,June 30, 1998, the Bank had pledged securities totaling $11.5$16.3
million pledged to the Federal Home Loan Bank of San Francisco (the
"FHLB") as collateral for other borrowings. As of March 31,June 30, 1998,
the Bank hashad the ability to borrow up to 20% of total assets or $23.8 million from
the FHLB upon the pledge of sufficient collateral.Incollateral. In the future,
long and short term borrowings from the FHLB may be used as an on-goingon-
going source of liquidity and funding. As of March 31,June 30, 1998, the
Bank had other securities totaling $1.6 million pledged as
collateral for public funds, trust, and a lettervarious other purposes.
As of credit
facility with another Bank.
TheJune 30, 1998, the Bank hashad access to the discount
window at the FRB for a total borrowing facility of $1.7$2.0 million
upon the pledge of securities. At March
31,June 30, 1998 and December 31,
1997, no securities were pledged as collateral for the FRB
facility.
Capital
At March 31,June 30, 1998, shareholders' equity was $17.9$18.5 million
compared to $17.6 million at December 31, 1997.
The Company and the Bank are subject to general regulations
issued by the FRB, FDIC, and DFI which require maintenance of a
certain level of capital, and the Bank is under specific capital requirements as a result of
the MOU.capital. As of March 31,June 30, 1998, the Company and the
Bank arewere in compliance with the all minimum capital ratio
requirements including the minimum
Leverage ratio of 7% mandated by the MOU.requirements.
The following table reflects both the Company's and the Bank's
capital ratios with respect to minimum capital requirements in
effect as of March 31,June 30, 1998:
Minimum
Capital
Company Bank Requirement
MOU
Leverage ratio 14.0% 13.8%14.2% 14.1% 4.0% 7.0%
Tier 1 risk-based capital 20.7 20.519.6 19.3 4.0 N/A
Total risk-based capital 22.6 22.421.2 21.0 8.0
N/APAGE 11
Investment Activities
At March 31,June 30, 1998, the Company's investment securities,
including Fed
funds sold,FHLB stock, totaled $54.4$37.5 million, or 48.0%26.9% of total
assets, compared to $54.2$40.0 million, or 46.5%34.3% of total assets, at
December 31, 1997. The decreasenet decline in investment securities resultedwas
primarily from principal amortization onof mortgage relatedbacked securities, and the maturity
andor call of certain agency securities.
The Company's investment portfolio may from time to time
include treasury and agency securities, fixed and adjustable rate
mortgage backed securities, and to a limited extent collateralized
mortgage backed securities. Generally, the Bank's investment
securities held-to-maturity and available-for-sale have maturities
or principal amortization of five years or less.
page 10
At March 31,June 30, 1998, investment securities held-to-maturity
totaled $5.5$4.9 million, compared to $5.9 million at December 31,
1997, and are carried at amortized cost. At March 31,June 30, 1998, the
Company held $29.9$30.4 million in investment securities available-for-sale,available-for-
sale, compared to $32.7 million at December 31, 1997. Investment
securities available-for-sale are accounted for at fair value.
Unrealized gains and losses are recorded as an adjustment to equitya component of
comprehensive income and are not reflected in the current earnings
of the Company. As of March
31,June 30, 1998, the investment securities
available-for-sale havehad an unrealized loss of $24,000$13,000 that was
included as a separate component of shareholder's
equitycomprehensive income to reflect the
current market value of these securities.
Loans
During the first quarterhalf of 1998, total loans decreased slightly,increased $1.0
million, from $51.9 million at December 31, 1997 to $51.7$52.9 million
at March 31,June 30, 1998. The reductionnet increase resulted primarily from
lower outstanding unsecured loans.disbursement of new loan commitments. The composition of the
Bank's loan portfolio at March 31,June 30, 1998 and December 31, 1997 is
summarized as follows:
March 31, June 30,December 31,
(Dollars in Thousands) 1998 1997
Real estate mortgage $ 38,399 $ 37,826$39,355 $37,826
Secured commercial and financial 5,5367,632 4,912
Unsecured 7,1305,663 8,633
Other 637269 553
51,70252,920 51,924
Deferred fees and discounts, net (24) (61)
Allowance for possible loan losses (3,116)(2,850) (3,200)
Total loans, net $ 48,562 $ 48,663$50,046 $48,663
During the first half of 1998, total loan commitments
available increased $10.4 million to $21.1 million as of June 30,
1998 primarily as a result of new secured commercial and financial
loan commitments.
PAGE 12
Classified Assets and Impaired Loans
Classified assets include non-accrual loans, other real estate owned
(the "OREO"),OREO, and
performing loans that exhibit credit quality weaknesses. The table
below outlines the Bank's classified assets at March 31,June 30, 1998 and
December 31, 1997:
March 31,June 30, December 31,
(Dollars in Thousands) 1998 1997
Loans - performing $ 4,672 $ 1,393$4,392 $1,393
Non-accrual loans -- 171
OREO 362337 410
Total classified assets $ 5,034 $ 1,974$4,729 $1,974
On March 31,June 30, 1998, the Bank had one loan totaling $101,000 secured by
cash collateral and in the process of collectionno loans that waswere 90 days past
due and still accruing and there were no loans past due between 31 and 89
days. Classified assets increased by 155%140% to $5.0$4.7 million as of
March 31,June 30, 1998 compared to $2.0 million at December 31, 1997. The
net increase was the result of the downgrade of one loan. The loan
that was downgraded was originated in 1992 as a loan to facilitate
the sale of OREO and the borrower has performed and continues to
perform in accordance with the terms of the loan. As of March 31,June 30,
1998 and December 31, 1997, all OREO properties were classified.
The Company identifies loans with weak credit quality
characteristics for review in accordance with SFAS No. 114
"Accounting by Creditors for Impairment of a Loan" as amended by
SFAS No. 118 "Accounting by Creditors for Impairment of a Loan-IncomeLoan-
Income Recognition and Disclosures" (the "SFAS No.114"No. 114").
page 11 As of
March 31,June 30, 1998 and December 31, 1997, the Company had impaired loans
totaling zero and $171,000, respectively. The impairment was
measured using the collateral value method. Total interest income
recognized on impaired loans during the first quarterhalf of 1998 and 1997
was $4,000 and $31,000.$32,000, respectively.
There can be no assurance that the Bank will not experience
increases in the amount of classified assets or not experience
losses in attempting to collect or otherwise liquidate the non-performingnon-
performing assets which are presently reflected on the Company's
statement of financial condition.
Allowance for Loan Losses
Generally, the Bank charges current earnings with a provision
for estimated losses on loans receivable. The Bank will provide an
adjustment if the total allowance for loan losses exceeds the
amount of estimated loan losses. The provisions or adjustments take into considerationBank recorded an adjustment
for loan losses of $308,000 for the three months ended June 30,
1998 and $402,000 for the six months ended June 30, 1998 compared
to none for the same periods in 1997. The adjustment for loan
losses reflects the amount necessary to reduce the allowance for
loan losses to a level that management believes is adequate based
on many factors including specifically identified problem loans,
the financial condition of the borrowers, the fair value of the
collateral, recourse to guarantors and other factors.
Specific loss allowances are established based on the asset
classification and credit quality. Specific loss allowances are
utilized to ensure that the allowance is allocated based on the
credit quality including the present value of expected cash flows,
the terms and structure of the loan, the financial condition of the
borrower, and the fair value of underlying collateral. As of March 31, 1998, none ofIn
addition, the allowance for loan losses was allocable to impaired loans, as identified in accordance with SFAS
No. 114. In addition, the Bank carries an "unallocated" loan loss allowance
to provideprovides for losses that
may occur in the future in loans that are or are
not presently classified, based on present economic conditions,
trends, and related uncertainties. The following table summarizes
the loan loss experience of the Bank for the quartersix months ended March 31,June
30, 1998:
March 31,PAGE 13
June 30,
(Dollars in Thousands) 1998
Beginning balance of allowance for loan losses at December 31, 1997 $ 3,200$3,200
Charge-offs --
Recoveries 10
Provision (adjustment) (94)52
Adjustment (402)
Ending balance of allowance for loan losses $ 3,116$2,850
For the quartersix months ended March 31,June 30, 1998, the unallocated
portion of the allowance for loan losslosses totaled $1.5$1.3 million
compared to $1.4 million at December 31, 1997. page 12As of June 30,
1998, none of the allowance for loan losses was allocable to
impaired loans, as identified in accordance with SFAS No. 114.
Deposits
The Bank had total deposits of $89.0$102.5 million at March 31,June 30, 1998
compared to $86.5 million at December 31, 1997, an increase of
$2.5$16.0 million or 2.9%18.5%. The increase was attributed to short-term
escrow related customer's deposits of $6.9
millionand Association Bank Service deposits which
were partially offset by a decrease in Stock Option lending related
deposits of approximately $3.1 million and volatile deposits of $900,000.money desk deposits. A summary of deposits at March 31,June
30, 1998 and December 31, 1997 is as follows:
March 31,June 30, December 31,
(Dollars in Thousands) 1998 1997
Demand deposits $ 19,714 $ 19,691$15,467 $19,691
NOW 15,72917,348 15,986
Money market and savings 18,93237,841 16,040
Total deposits with no stated maturity 54,37570,656 51,717
Time deposits:
Less than $100,000 19,65017,725 19,184
$100,000 and greater 15,01614,071 15,618
Total time deposits 34,66631,796 34,802
Total deposits $ 89,041 $ 86,519$102,452 $86,519
The Bank's deposits from private and business banking customers
totaled $34.4$35.1 million, or 38.6%34.3% of total deposits, at March 31,June 30,
1998, compared to $34.7 million, or 40.1% of total deposits, at
December 31, 1997. DepositsThe deposits from Association Bank ServicesService
customers totaled $17.1$19.0 million, or 19.2%18.6% of total deposits at March 31,June
30, 1998, compared to $17.2 million, or 19.9% of total deposits at
December 31, 1997. DepositsThe deposits from Escrow customers totaled
$37.9 million, or 37.0% of total deposits at June 30, 1998,
compared to $15.3 million, or 17.7% of total deposits at December
31, 1997. The deposits related to Stock Option transactions
totaled $2.1 million, or 2% of total deposits at June 30, 1998,
compared to $7.6 million, or 8.8% of total deposits at December 31,
1997.
The deposits acquired through the money desk operations
totaled $10.8$8.3 million, or 12.1%8.1% of total deposits at March
31,June 30, 1998,
compared to $11.7 million, or 13.5% of total deposits at December
31, 1997.
The Bank expects to decrease money desk deposits during the
remainder of the year with the intention of replacing these deposits with
core deposits.
Concentrations of deposits acquired through the money desk operations
have been classified by bank regulators as volatile liabilities associated
with certain risks, including the risks of reduced liquidity if a bank is
unable to retain such deposits and reduced margins if its interest costs are
increased by a bank in order to retain such deposits. As a result of the
MOU, the Bank is required to maintain a volatile liability dependency ratio
of not more than 15%. The Bank's volatile dependency ratio at March 31, 1998
was below the 15.0% requirement.PAGE 14
Other Borrowings
As of March 31,June 30, 1998, the Bank had short-term FHLB borrowings
outstanding totaling $5.0 million and long-term FHLB borrowings
outstanding totaling $10.0 million secured by pledged securities
totaling $11.5$16.3 million. The Bank repaid the short-term borrowing
in July 1998. In the future, long and short term borrowings from
the FHLB may be used as an on-going source of liquidity and
funding.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Because of the nature of its business, the Company and its
subsidiaries, including the Bank, are from time-to-time a party to
legal actions. Based on information available to the Company and
the Bank, and its review of such outstanding claims to date,
management believes the liability relating to such claims, if any,
will not have a material adverse effect on the Company's liquidity,
consolidated financial condition or results of operations.
page 13
Item 2 - Changes in Securities
None
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
None
Item 5 - Other Information
NoneShareholders who expect to present a proposal at the 1999
Annual Meeting of Shareholders which is not included in the
Company's proxy statement should notify the Chief Financial Officer
of the Company at 550 Montgomery Street, San Francisco, California
94111 of the proposal by March 15, 1999. Without such notice,
proxy holders appointed by the Board of Directors of the Company
will be entitled to exercise their discretionary voting authority
when the proposal is raised at the annual meeting, without any
discussion of the proposal in the proxy statement.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
IndemnificationEmployment Agreements dated March 18,effective April 22, 1998 between
each director and executive officer ofand the Company and the Bank.
(b) Report on Form 8-K
None
page 14PAGE 15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
The San Francisco Company
(Registrant)
Date: May 8,July 31, 1998 /s/ James E. Gilleran
James E. Gilleran
Chairman of the Board and
Chief Executive Officer
Date: May 8,July 31, 1998 /s/ Keary L. ColwellL.Colwell
Keary L. Colwell
Chief Financial Officer and
Executive Vice President
page 15
INDEMNIFICATIONPAGE 16
EXHIBITS
James E. Gilleran
EMPLOYMENT AGREEMENT
This Indemnification Agreement ("Agreement"THIS EMPLOYMENT AGREEMENT (the "Agreement") is madeentered
into as of March
18,April ___, 1998, by and between The San Francisco
Company a Delaware corporation (the "Corporation""Company"), Bank of San Francisco (the "Bank")
(collectively, the "Employer"), and ________________, an individual (the "Director"JAMES E. GILLERAN
("Executive").
RECITALSR E C I T A L S:
A. The Director is a member of the Corporation's Board of
Directors and the CorporationEmployer desires that the Director continue to serve
in such capacity. The Director is willing to continue to serve on the
Corporation's Board of Directors if the Director receives the protection
provided by this Agreement.
B. The Corporation maintains directors and officers liability
insurance ("D&O Insurance") and intends to continue to maintain such D&O
Insurance in accordance with the provisions of this Agreement.
C. The Corporation believes that (1) it is increasingly
difficult to attract and keep qualified directors because of potential
liabilities; (2) it is important for a director to have assurance that
indemnification will be available to the fullest extent permitted by law;
and (3) it is in the best interests of the Corporation and its shareholders
for the Corporation to contractually obligate itself to indemnify the
Director and to set forth the details of the indemnification process.
Therefore, in consideration of the premises and the mutual
promises herein contained, the Corporation and the Director agree as
follows:
1. Agreement to Serve. The Director will continueemploy
Executive to serve as a memberChairman of the Board and Chief
Executive Officer of the Company and Chairman of the Board
and Chief Executive Officer of the Bank, and the Boards of
Directors of the Corporation so long asCompany and the Director is duly electedBank have approved the
Employer's employment of Executive.
B. Executive hereby accepts such employment on the
terms and qualifiedconditions set forth in this Agreement.
A G R E E M E N T:
1. Agreement to so serve or untilEmploy. Subject to the Director
resigns or is removedterms
and conditions contained herein, the Employer hereby employs
Executive and Executive hereby accepts employment by the
Employer.
2. Term of Employment. Subject to the
provisions of section 8, below, Executive s employment
shall be for a period of three (3) years from the Corporation's Boarddate of Directors.
2. Indemnification.
(a) The Corporation shall indemnify and hold harmless the
Director to the fullest extent permitted under applicable law (including
without limitation Section 28(k) of the Federal Deposit Insurance Act and
Part 359 of the Rules and regulations of the Federal Deposit Insurance
Commission (the "FDIC Rules")) if the Director was or is a party or
threatened to be made a party to any threatened, pending or completed
action, suit, arbitration (or other alternative dispute resolution
mechanism), or proceeding of any kind, wherever brought, whether civil,
criminal, administrative or investigative and whether formal or informal
(including actions by or in the right of the Corporation and any
preliminary inquiry or claim by any person or authority), by reason of or
associated with the fact that the Director is or was a director, officer,
partner, trustee, employee, consultant or agent of the Corporation or is or
was serving at the Corporation's request, or for the convenience of or
page 1
otherwise to benefit or represent the interests of the Corporation or a
subsidiary of the Corporation, as a director, officer, employee or agent of
another corporation, limited liability company, partnership, joint venture,
trust, employee benefit plan or other enterprise (collectively, an
"Affiliate"), whether or not for profit, or by reason of anything done or
not done by the Director in any such capacity (collectively, "Covered
Matters"). Such indemnification will cover all Expenses (as defined
below), liabilities, judgments (including punitive and exemplary damages),
penalties, fines (including excise taxes relating to employee benefit plans
and civil penalties) and amounts paid or to be paid in settlement which are
incurred by or imposed upon the Director in connection with a Covered
Matter, including all interest assessments on any of the foregoing
(collectively, "Indemnified Amounts"). "Expenses" means all direct or
indirect costs and expenses (including, without limitation, attorneys'
fees, retainers, transcripts, witness fees, expert fees, other professional
fees, court costs and travel costs) incurred by the Director in connection
with a Covered Matter, together with interest thereon commencing 30 days
after incurrence, other than liabilities, judgments, penalties, fines and
settlement amounts.
(b) The Director will be so indemnified for all Indemnified
Amounts and the Corporation will defend the Director against claims
(including threatened claims and investigations) which are covered matters,
including claims brought by or on behalf of the Corporation or any
Affiliate, except if it is finally determined by the court of last resort
(or by a lower court if not timely appealed) that the payment is prohibited
by applicable law.
(c) If the Director is entitled under this Agreement to
indemnification for less than all of the amounts incurred by the Director
in connection with a Covered Matter, the Corporation will indemnify the
Director for the indemnifiable amount.
3. Claims for Indemnification. The Director will give the
Corporation written notice of any claim for indemnification under this
Agreement, but failure to do so shall not affect the Director's rights
hereunder. Payment requests will include a schedule setting forth in
reasonable detail the amount requested and will be accompanied (or, if
necessary, followed) by copies of the relevant invoices or other
documentation. The Corporation will pay Indemnified Amounts directly
without requiring the Director to make any prior payment.
4. Determination of Right to Indemnification.
(a) The Director will be presumed to be entitled to
indemnification under
this Agreement and will receive such indemnification,
subject to paragraph 4(b) below, irrespective of whetherend on the Covered Matter
involves allegations of gross negligence or intentional misconduct, alleged
violations of Section 10(b)third anniversary of the
Securities Exchange Actdate hereof (the Third Anniversary ). The term of 1934
(including Rule 10b-5 thereunder), alleged breachthis
Agreement will be extended on the second anniversary hereof
and will roll forward on a month-to-month basis so that
twelve (12) months continuously remain in the Agreement term
unless or until (A) a Change of Control occurs, or (B) any
party to this Agreement notifies the Director's
fiduciary duties (including dutiesother parties that it
does not agree to extend the term of loyalty or care) or any other claim.
(b) The Director shallthis Agreement. Such
written notification must be conclusively presumedprovided to all parties at
least one (1) month in advance of termination date. If
Executive chooses not to extend the term of this Agreement
and gives the applicable one (1) month notice, Executive
will be deemed to have met
any required standard of conduct established by applicable law, unless a
determination is made in the written opinion of independent counsel to the
Corporation, applicable law (including the FDIC Rules) permits
page 2
indemnification in a Covered Matter only as authorized in the specific case
upon a determination that indemnification is proper in the circumstances
because the Director has met the required standard of conduct. In such
event:
(1) The Corporation will immediately give the Director
notice, with a copy of counsel's opinion, that an evaluationvoluntarily terminated and
determination will be made under this paragraph 4(b).
(2) Such evaluation and determination will be made, as
promptly as possible and in good faith, by a majority vote of the members
of the Corporation's Board of Directors who are not parties or threatened
to be made parties to the Covered Matter in question or, if so requested by
the Director, in a written opinion by independent counsel to the
Corporation (who shall not be the same as the counsel referred to above),
or by such other procedure as the Corporation and the Director agree.
(3) The Director will be
entitled to present
information, and to be represented by counsel, in connection with such
evaluation and determination.
(4) The Director will be presumed to have met the
required standard of conduct unless it is conclusively demonstratedonly to the determining firm or body thatbenefits described in Section 9.e.,
below. If Employer chooses not to extend the Director has not metterm of this
Agreement and gives the required
standard of conduct. If the Director is successful (which includes a
settlement without admission of liability) on the merits or otherwise or in
the defense of any claim, issue or matter therein, he shall be conclusively
presumed to have met the required standard of conduct.
(5) The cost of any evaluation and determination under
this paragraph 4(b) (including attorneys' fees and other expenses incurred
by the Director)applicable one (1) month notice,
Executive will be borne by the Corporation.
(6) If the requested indemnification falls within the
scope of the FDIC Rules, the FDIC Rules will also be observed.
(7) The termination of any proceeding by judgment,
order, settlement, arbitration award or conviction, or upon a plea of nolo
contendere or its equivalent shall not affect this presumption or, except
as determined by a judgment or other final adjudication adverse to the
Director, establish a presumption with regard to any factual matter
relevant to determining the Director's rights to indemnification hereunder.
(c) Determination of the Director's entitlement to
indemnification shall be made not later than thirty (30) days after the
Corporation's receipt of his written request for such indemnification. If
page 3
the person or persons so empowered to make a determination pursuant to
paragraph 4 hereof shall have failed to make the requested determination
within thirty (30) days after any judgment, order, settlement, dismissal,
arbitration award, conviction, acceptance of a plea of nolo contendere or
its equivalent, or other disposition or partial disposition of any
proceeding or any other event which could enable the Corporation to
determine the Director's entitlement to indemnification, the requisite
determination that the Director is entitled to indemnification shall be deemed to have been made.
5. Advance of Expenses.
(a) Subject to paragraphs 5(b)terminated without
cause and (c), and notwithstanding
Section 4(b), before final adjudication of a Covered Matter, upon the
Director's request pursuant to paragraph 3 above, the Corporation will
promptly advance Expenses directly; provided, however, if the Director has
already paid any Expenses, the Corporation will promptly reimburse the
Director for all such Expenses.
(b) If, in the opinion of counsel to the Corporation, the
FDIC Rules permit advancement of Expenses with respect to a federal banking
agency proceeding or action only as authorized upon a determination that
the Director has met a standard of conduct established by the FDIC Rules,
the determination will be made in accordance with paragraph 4(b) above to
the extent not inconsistent with FDIC Rules.
(c) The Director will repay any Expenses that are advanced
under this paragraph 5 if so required by the FDIC Rules or if it is
ultimately determined, in a final, nonappealable judgment rendered by the
court of last resort (or by a lower court if not timely appealed), that the
Director is not entitled to be indemnified against such Expenses and
requires repayment.
(d) The Corporation shall use its best efforts to provide
the Director on or before the time of any Change of Control security and
liquidity for the obligations of the Corporation to indemnify and advance
Expenses to the Director pursuant to this Agreement (whether by letter of
credit, the posting of assets as security, or other means).
6. Defense of Claim.
(a) The Corporation, jointly with any other indemnifying
party, will be entitled to assume the defense of any Covered Matter as to
which the Director requests indemnification, provided, however, the
Corporation shall not be entitled to assume the defense if there has been a
Change of Control or the Director is entitled to employ the Director's own
counsel under paragraph 6(c) below, in which case both parties shall be
entitled to participate in the defense.
(b) Counsel selected by the Corporation to defend any
Covered Matter will be subjectonly to the Director's advance written approval.
page 4
(c) The Director may employ the Director's own counselbenefits described
in a
Covered Matter and will be fully reimbursed therefor if (1) the Corporation
approves, in writing, the employment of such counsel or (2) either (A) the
Director has reasonably concluded that there may be a conflict of interest
between the Corporation and the Director or between the Director and other
parties represented by counsel employed by the Corporation to represent the
Director in such action or (B) the Corporation has not employed counsel
reasonably satisfactory to the Director to assume the defense of such
Covered Matter promptly after the Director's request.
(d) Neither the Corporation nor the Director will settle
any Covered Matter without the other's written consent, which will not be
unreasonably withheld.
(e) If the Director is required to testify (in court
proceedings, depositions, informal interviews or otherwise)Section 9.d., consult with
counsel, furnish documents or take any other reasonable action in
connection with a Covered Matter, the Corporation will reimburse the
Director's reasonable expenses in connection therewith and also pay the
Director reasonable compensation for time spent by the Director for which
the Director is otherwise not compensated by the Corporation.
7. Disputes; Enforcement.
(a) If there is a dispute relating to the validity or
enforceability of this Agreement or a denial of indemnification, advance of
Expenses or payment of any other amounts due under this Agreement or the
Corporation's Certificate of Incorporation or Bylaws, the Corporation will
provide such indemnification, advance of Expenses or other payment until a
final, nonappealable judgment that the Director is not entitled to such
indemnification, advance of Expenses or other payment has been rendered by
the court of last resort (or by a lower court if not timely appealed). The
Director will repay such amounts if such final, nonappealable judgment so
requires.
(b) In the event that (i) a determination pursuant to
Section 4(b) hereof is made that the Director is not entitled to
indemnification, (ii) advances of Expenses are not made pursuant to this
Agreement, (iii) payment has not been timely made following a determination
of entitlement to indemnification pursuant to this Agreement, or (iv) the
Director otherwise seeks enforcementbelow. For purposes of this Agreement, the
Directorterm Change of Control shall be entitledmean a sale to a final adjudication in the Court of Chancery of the State
of Delaware of the remedy sought. Alternatively, unless court approval is
required by law for the indemnification sought by the Director, the
Director at his option may seek an award in arbitration to be conducted by
a single arbitrator pursuant to the commercial arbitration rules of the
American Arbitration Association now in effect, which award is to be made
within ninety (90) days following the filing of the demand for arbitration.
The Corporation shall not oppose the Director's right to seek any such
adjudication or arbitration award. In any such proceeding or arbitration
the Director shall be presumed to be entitled to indemnification and
advancement of Expenses under this Agreement and the Corporation shall have
the burden of proof to overcome that presumption. In the event that a
page 5
determination that Director is not entitled to indemnification, in whole or
in part, has been made pursuant to Section 4(b) hereof, the decision in the
judicial proceeding or arbitration provided in this Section 7 shall be made
de novo and the Director shall not be prejudiced by reasonthird party
of a determination that he is not entitled to indemnification. If a
determination that the Director is entitled to indemnification has been
made pursuant to Section 4(b) hereof, or is deemed to have been made
pursuant to Section 4 hereof or otherwise pursuant to the terms of this
Agreement, the Corporation shall be bound by such determinationmajority interest in, the
absence of a misrepresentation of a material fact by the Director in
connection with such determination. The Corporation shall be precluded
from asserting that the procedures and presumptions of this Agreement are
not valid, binding and enforceable. The Corporation shall stipulate in any
such court or arbitration that the Corporation is bound by all the
provisions of this Agreement and is precluded from making any assertion to
the contrary.
(c) The Corporation will reimburse all of the Director's
reasonable expenses (including attorneys' fees) in pursuing an action to
enforce the Director's rights under this Agreement unless a final,
nonappealable judgment against the Director has been rendered in such
action by the court of last resort (or by a lower court if not timely
appealed) or unless the FDIC Rules otherwise require to the same effect as
set forth in Section 5(c). At the Director's request, such expenses will
be advanced by the Corporation to the Director as incurred before final
resolution of such action by the court of last resort; such expenses will
be repaid by the Director if a final, nonappealable judgment in the
Corporation's favor is rendered in such action by the court of last resort
(or by a lower court if not timely appealed) to the same effect as set
forth in Section 5(c).
8. Insurance.
(a) The Corporation hereby covenants and agrees that, as
long as the Director continues to serve as a director of the Corporation
and thereafter as long as the Director may be subject to any possible
Covered Matter, the Corporation, subject to paragraph 8(c) below, shall
maintain in full force and effect D&O Insurance from established and
reputable insurers in amounts not less than, and with coverage comparable
to, those in effect as of the date of this Agreement.
(b) In all D&O Insurance policies, the Director shall be
named as an insured in such a manner as to provide the Director the same
rights and benefits as are accorded the most favorably insured of the
Company's directors.
(c) The Corporation will not be required to maintain D&O
Insurance if the Board of Directors of the Corporation determines, after
diligent inquiry, that (1) such insurance is not available; (2) the
premiums for available insurance are disproportionate to the amount of
coverage and to the premiums paid by other corporations similarly situated;
or (3) the coverage provided by such insurance is so limited by exclusions
that it provides an insufficient benefit. The Board of Directors of the
Corporation will, from time to time, in good faith review any decision not
to maintain D&O Insurance and will purchase such insurance at any time that
the conditions of this paragraph 8(c) cease to apply.
page 6
(d) The parties will cooperate to obtain advances of
Expenses, indemnification payments and consents from D&O Insurance carriers
in any Covered Matter to the full extent of applicable D&O Insurance. The
existence of D&O Insurance coverage will not diminish or limit the
Corporation's obligation to make indemnification payments to the Director.
Amounts paid directly to the Director with respect to a Covered Matter by
the Corporation's D&O Insurance carriers will be credited to the amounts
payable by the Corporation to the Director under this Agreement.
(e) Payments under any D&O Insurance policies shall be
subject to the FDIC Rules.
9. Limitations of Actions; Limitation of Indemnity.
(a) No action will be brought by or on behalf of the
Corporation against the Director or the Director's heirs or personal
representatives relating to the Director's service as a director, after the
expiration of one year from the date the Director ceases (for any reason)
to serve as a director of the Corporation, and any claim or cause of action
of the Corporation will be extinguished and deemed released unless asserted
by the filing of a legal action before the expiration of such period.
(b) Notwithstanding the provisions hereof, the Corporation
shall not be obligated pursuant to the terms of this Agreement:
(1) Claims Initiated by the Director. To indemnify or
advance expenses to the Director with respect to proceedings or claims
initiated or brought voluntarily by the Director and not by way of defense,
except with respect to proceedings brought to establish or enforce a right
to indemnification under this Agreement or any other statute or law or
otherwise as required under Section 145 of the Delaware General Corporation
Law, but such indemnification or advancement of expenses may be provided by
the Corporation in specific cases if the Board of Directors has approved
the initiation or bringing of such suit;
(2) Lack of Good Faith. To indemnify the Director for
any expenses incurred by the Director with respect to any proceeding
instituted by the Director to enforce or interpret this Agreement, if a
court of competent jurisdiction determines that each of the material
assertions made by the Director in such proceeding was not made in good
faith or was frivolous;
(3) Insured Claims. To indemnify the Director for
expenses or liabilities of any type whatsoever (including, but not limited
to, judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) which have been paid directly to the Director by an insurance
carrier under D&O Insurance maintained by the Corporation; or
page 7
(4) FDIC Rules. To make any indemnification payment
contrary to the FDIC Rules.
(5) Short Swing Profits. To indemnify the Director
for expenses or liabilities incurred by the Director under Section 16 of
the Securities and Exchange Act of 1934.
10. Rights Not Exclusive; Benefit of Amendments to Law. The
indemnification provided to the Director under this Agreement will be in
addition to any indemnification provided to the Director by any law,
agreement, Board resolution, provision of the Certificate of Incorporation
or Bylaws of the Corporation or otherwise (including, but not limited to,
under that certain Indemnification Agreement (the "Bank Agreement") made as
of March 18, 1998, between The Bank of San Francisco, a California
corporation (the "Bank") and the Director). If applicable laws, rules or
regulations are amended after the date of this Agreement to permit
indemnification of a type or to an extent beyond or greater than that
provided by this Agreement, the Director shall be entitled to
indemnification hereunder of such further types or to such further extent
as is then permitted; provided, however, that no such amendment shall in
any way restrict or limit the rights of the Director hereunder and the term
"applicable law" shall refer only to the same as amended to the extent such
amendment permits the Corporation to provide such greater indemnification.
The Corporation and the Director agree that the Director may pursue his
remedies under both this Agreement and the Bank Agreement, under only this
Agreement, or under only the Bank Agreement, and that the manner in which
the Director chooses to pursue (or not to pursue) his remedies under this
Agreement and/or under the Bank Agreement shall not in any way restrict or
limit the rights of the Director under this Agreement.
11. Change in Control. "Change in Control" shall mean the
occurrence of any of the following after January 1, 1998:
(a) Both (1) any "person" (as defined below) is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Corporation representing at
least 15% of the total voting power represented by the Corporation's then
outstanding voting securities; and (2) the beneficial ownership by such
person of securities representing such percentage has not been approved by
a majority of the "continuing directors" (as defined below); or
(b) Any "person" (as defined below) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Corporation representing at
least 50% of the total voting power represented by the Corporation's then
outstanding voting securities; or
(c) A change in the composition of the Board occurs, as a
result of which fewer than two-thirds of the incumbent directors are
directors who either (1) had been directors of the Corporation on January
1, 1998 (the "Original Directors") or (2) were elected, or nominated for
election, to the Board with the affirmative votes of at least a majority in
the aggregate of the Original Directors who were still in office at the
time of the election or nomination and directors whose election or
nomination was previously so approved (the "continuing directors"); or
page 8
(d) The stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation, if such merger
or consolidation would result in the voting securities of the Corporation
outstanding immediately prior thereto representing (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) 50% or less of the total voting power represented by the voting
securities of the Corporation or such surviving entity outstanding
immediately after such merger or consolidation; or
(e) The stockholders of the Corporation approve (1) a plan
of complete liquidation of the Corporation or (2) an agreement for the sale
or disposition by the Corporation of all or substantially all of the
Corporation's assets.
For purposes of Subsection (a) above, the term "person" shall have the
same meaning as when used in sections 13(d) and 14(d) of the Exchange Act,
but shall exclude (x) a trustee or other fiduciary holding securities under
an employee benefit plan of the Corporation or of a parent or subsidiary of
the Corporation or (y) a corporation owned directly or indirectly by the
stockholders of the Corporation in substantially the same proportions as
their ownership of the common stock of the Corporation.
Any other provisions of this Section 11 notwithstanding, the term
"Change in Control" shall not include (1) a transaction, if undertaken at
the election of the Corporation, the result of which is to sell all or substantially all of the
assets of, the CorporationCompany or the Bank, but the term Change of
Control shall not include (A) a transfer of shares to another corporation
(the "surviving corporation");any
voting trust or similar custodial arrangement, or (B) a
transaction in which Executive participates as a principal
or with any direct or indirect equity interest, whether
contingent or otherwise.
PAGE 1
3. Position and Duties/Authority of Executive.
During the term of this Agreement, Executive shall hold the
positions of Chairman of the Board and Chief Executive
Officer of the Company and Chairman of the Board and Chief
Executive Officer of the Bank. Executive shall perform such
additional duties and responsibilities, consistent with the
foregoing positions as may be assigned to Executive from
time to time by the respective Boards of Directors of the
Employer acting with reasonable discretion and in accord
with the scope of this Agreement.
4. Place of Employment. Executive's principal
place of employment shall be 550 Montgomery Street, San
Francisco, California. While discharging his duties and
responsibilities hereunder, Executive may be required to
travel from time to time and, as a result, be temporarily
absent from his place of employment.
5. Devotion of Time to Business. Except as
provided below, Executive shall devote his best efforts and
ability, and attention to the business and affairs of the
Employer and to performing the duties and responsibilities
set forth herein on behalf of the Employer. Notwithstanding
any language herein to the contrary, Executive shall be
entitled to devote time to charitable, political and civic
activities and speaking engagements, and Executive shall be
permitted to serve on the boards of directors of other
companies which do not directly compete with the Employer
provided such activities do not have a material, adverse
effect on Executive's performance hereunder.
6. Confidential Information/Trade Secrets.
a. In performing his duties under this
Agreement, Executive will have access to and become
acquainted with information concerning the Employer's
operations, including financial, personnel, marketing, and
other information and customer lists that are owned by the
surviving corporationEmployer and regularly used in the Employer's business, and
such information is ownedconfidential and constitutes trade
secrets of the Employer.
b. Executive will not misuse, misappropriate, or
disclose any such trade secrets, directly or indirectly, to
any other person, or use them in any way, except as required
in the course of his employment hereunder.
c. The unauthorized use or disclosure of any of
the Employer's confidential information/trade secrets
(including without limitation information concerning current
or future proposed work, services, or products, the fact
that any such work, services, or products are planned, under
consideration, or in use, and any descriptions thereof)
constitute unfair competition.
PAGE 2
d. Any violation by Executive of any of the
provisions of this paragraph would result in irreparable
injury to the Employer, and the Employer shall be entitled
to injunctive relief to prevent or terminate such violation.
e. This paragraph shall not apply to any
information that becomes generally known to or available for
use by the stockholderspublic other than as a result of Executive's
acts.
f. The covenants set forth in this paragraph
shall survive termination of this Agreement for a period of
one year; provided, however, that with respect to the
Employer's customer lists and relationships, such period
shall be two years.
7. Compensation to Executive.
a. Salary and Benefits. Subject to the terms
and conditions contained herein, throughout the term of this
Agreement, Executive shall be entitled to receive the
following salary and benefits from the Employer:
i) Annual Base Salary. The Employer shall
pay to Executive as compensation for his services an
Annual Base Salary of Three Hundred Thousand Dollars
($300,000) in such intervals as other salaried
executives of the Corporation
immediately following such transactionEmployer are presently paid (but in
substantiallyno case less frequently than monthly). The Annual Base
Salary shall be paid subject to all federal, state and
local rules for payment, deduction and withholding of
taxes. The Annual Base Salary shall be reassessed
annually by the same
proportions asBoards of Directors of Company and the
Bank at which time the Boards may, in their ownershipsole
discretion, vote to increase the Annual Base Salary.
ii) Annual Performance Bonus. For each
calendar year, Executive and the Boards of Directors of
the Corporation's common stock
immediately precedingCompany and the Bank shall establish reasonable
goals for such transaction;year performance against which will
result in a bonus payable to Executive from 0% to 100%
of his Annual Base Salary in cash. With respect to the
Bank, such goals shall be based upon positive
performance criteria as measured by achievement of
annually-set objectives.
iii) Special Incentive. The Employer shall
pay to Executive a one-time bonus of $150,000 at such
time subsequent to a regulatory examination that the
boards of directors of the Company and the Bank
determine, respectively, that the condition of the
Company and the condition of the Bank (as measured by
its capital, assets, management, earnings and
liquidity) are satisfactory. Such determination is not
to be negatively influenced by any ownership interests.
iv) Completion Incentive. On the Third
Anniversary, provided that Executive is then employed
pursuant to this Agreement (whether or not such
employment terminates on the Third Anniversary), the
PAGE 3
Employer shall pay Executive a Completion Incentive
in the amount of one (1) year of the then Annual Base
Salary, provided further, however, that (A) such
Incentive payment shall be subject to applicable
statutory or regulatory restrictions, and (B) no such
Incentive payment shall be made unless the surviving corporation expressly assumesBank and
Company maintain a CAMEL 2 or satisfactory or better
(or equivalent) regulatory rating. If, upon payment of
the Completion Incentive, it appears that Executive s
employment with Employer will continue for an
additional period of years, the parties will negotiate
in good faith the terms of an additional retention
bonus.
b. Retirement Plan. The Employer shall provide
Executive with retirement benefits, including any Section
401(k) Plan, under which the Employer provides retirement or
similar benefits to the other Company or Bank employees.
The Company currently sponsors The San Francisco Company
401(k) Plan.
c. Benefits. The Employer shall, during the
term of this Agreement;Agreement, make available to Executive the
following:
i) insurance coverage and benefits
according to its existing health plans;
ii) group term life insurance or (2)other term
life insurance in an acquisitionamount equal to four (4) times
Executive s Annual Base Salary, accidental death and
dismemberment insurance, and long-term group disability
insurance, and
iii) vacation of votingfour weeks per year.
d. Expense Account. The Employer will require
Executive to incur travel, lodging, meal, entertainment, and
similar expenses. The Employer shall advance or promptly
reimburse Executive for all expenses reasonably incurred by
Executive in the performance of his duties for which
Executive furnishes the Employer with adequate records and
other rights on outstanding sharesdocumentary evidence as required by a voting
trustee who is approved (andapplicable federal
and state laws and regulations.
e. Stock Options.
i) The Board of Directors of the agreementCompany
has adopted an Executive Stock Option Plan (the "Stock
Plan") under which he actsExecutive has received anti-dilutive
options to purchase shares of the Company's Class A
Common Stock and for which there is approved)a separate Stock
Option Agreement. These options are all vested and are
exercisable for a period of ten (10) years from the
date of grant.
PAGE 4
ii) Additional options (the "anti-dilution
options") shall be granted to Executive from time to
time at the then current fair market value and in such
amounts as to assure that Executive's anti-dilutive
options and shares previously issued to Executive upon
the exercise of such options will comprise not less
than five percent (5%) of the fully diluted number of
shares of all classes of the Company's Common Stock
(i.e., the sum of the number of shares of all classes
of Common Stock issued and outstanding, plus the number
of shares of all classes of Common Stock subject to
options, warrants, conversion rights and all other
outstanding rights to purchase any class of shares of
Common Stock). Such additional options shall be
granted at the fair market value at the date of grant
and shall be calculated pursuant to the methodology
adopted by the continuing directors,Board of Directors of the Company at its
February 11, 1998, meeting. Vested options granted on
account of options, warrants, conversion rights or
other rights to purchase Common Stock shall not be
exercisable unless and until Common Stock is issued
upon the exercise of such rights. The Company shall
have no obligation to grant Executive any antidilution
options with respect to any dilutive events occurring
after the completion of the next public offering by the
Company of its Common Stock.
iii) In addition to the anti-dilutive options
referred to in sections 7e i) and ii), above, the
Company s Board of Directors may, in its sole
discretion, award Executive additional options under
the Stock Plan not subject to anti-dilutive treatment.
f. Other Benefits. The Employer shall provide
Executive with such other pension, health and welfare
benefits as it may from time to time offer to other senior
executives in the ordinary course of its business, or as may
be reasonably required or necessary for him to perform his
duties.
8. Termination.
a. Termination by the Employer for Cause. The
Employer may terminate Executive's employment at any time
for "cause." For the purpose of the Employer's termination
of this Agreement, the term "cause" shall include any of the
following:
i) Adjudication of Executive's guilt in
connection with the commission of a felony or a
misdemeanor involving moral turpitude (excluding
traffic violations);
ii) Good faith finding by the Employer's
Boards of Directors of Executive's theft, conversion,
misappropriation, or embezzlement of any assets of the
Employer;
iii) Executive's (A) habitual neglect of his
duties, (B) failure to obey the lawful direction of the
Boards of Directors of the Employer that do not
contravene regulations or regulatory policies,
guidelines, agreements or orders, or (C) conduct that
has a direct, substantial and adverse effect on the
Employer's reputation, in each case, after written
notice and adequate opportunity to cure any such
asserted neglect, failure or conduct; or
PAGE 5
iv) Good faith finding by the Employer's
Boards of Directors that Executive's performance of his
duties resulted in a material deterioration in the
condition of the Company or the Bank, provided that
such deterioration is not the result of conditions
either existing on the date of Executive's employment
or external to the Company and the Bank and beyond
Executive's control.
b. Termination without Cause.
The Employer may terminate Executive's
employment without "cause" at any time subject only to the
provisions of this Agreement. A without cause termination
may include, but is not limited to, a termination upon a
Change of Control.
c. Termination for Death. Executive's
employment shall terminate upon Executive's death.
d. Termination for Disability. The Employer
may, to the extent permitted by law, terminate Executive's
employment upon the disability of Executive. As used
herein, the term "disability" shall mean sickness or
physical or mental disability that renders Executive unable
to perform a substantial portion of his duties under this
Agreement for an aggregate period of more than ninety (90)
days in any subsequenttwelve (12) month period.
e. Notice of Termination. If the Employer
desires to terminate Executive's employment under this
Agreement, whether or not for cause, the Employer shall
deliver a notice of termination in writing to Executive (the
"Notice of Termination"). The Notice of Termination shall
specify whether the termination is (A) for cause (in which
case the conduct of Executive or the Employer giving rise to
the termination shall be specified), (B) for death, (C) for
disability or (D) without cause. The Notice of Termination
shall specify an effective date of termination (the
"Termination Date") on or after the date notice is given.
9. Effect of Termination. Upon the termination of
this Agreement by either party, the parties shall comply
with the following obligations and duties:
a. Termination for Cause. If the Employer
terminates Executive's employment for cause:
i) Annual Base Salary. The Employer shall
on the Termination Date pay Executive Executive's
Annual Base Salary through the Termination Date.
PAGE 6
ii) Reimbursement Expenses. The Employer
shall, on the Termination Date, pay Executive all
reimbursable expenses for which expense reports have
been provided to the Employer in accordance with the
Employer's policy.
iii) Annual Performance Bonus. Executive is
not entitled to be paid any bonus for any months served
during the current Bonus Plan Year. Executive is not
eligible to receive any bonus payment if terminated for
cause.
iv) Vesting of Stock Options. All of the
stock options granted to Executive which have vested
shall be exercisable in accordance with paragraph 7.e,
the Stock Plan, and Stock Option Agreement.
b. Termination for Death. If Executive's
employment is terminated as a result of Executive's death:
i) Annual Base Salary. The Employer's
obligation to pay Executive's salary shall terminate
upon his death.
ii) Reimbursable Expenses. The Employer
shall, within thirty (30) days following the date of
Executive's death, pay Executive's estate all
reimbursable expenses for which expense reports have
been provided to the Employer in accordance with the
Employer's policy.
iii) Annual Performance Bonus. The Employer
shall, within thirty (30) days following the date of
death, pay Executive's estate Executive's Annual
Performance Bonus at a rate of fifty percent (50%) of
Bonus Plan prorated by the number of full months served
during the current Bonus Plan year.
iv) Vesting of Stock Options. All of the
stock options granted to Executive which are vested
shall be exercisable by Executive's estate in
accordance with paragraph 7.e, the Stock Plan, and the
Stock Option Agreement.
c. Termination for Disability.
i) Annual Base Salary. The Employer shall
pay Executive Executive's Annual Base Salary through
Termination Date.
ii) Reimbursable Expenses. The Employer
shall, within thirty (30) days following the
Termination Day, pay Executive all reimbursable
expenses for which expense reports have been provided
to the Employer in accordance with the Employer's
policy.
iii) Annual Performance Bonus. The Employer
shall, within thirty (30) days following the
Termination Date, pay Executive Executive's Annual
Performance Bonus at a rate of fifty percent (50%) of
Bonus Plan prorated by the number of full months served
during the current Bonus Plan year.
PAGE 7
iv) Vesting of Stock Options. All of the
stock options granted to Executive which are vested
shall be exercisable in accordance with paragraph 7.e,
the Stock Plan, and the Stock Option Agreement.
d. Termination without Cause. If the Employer
terminates Executive's employment without cause:
i) Annual Base Salary and Separation Pay.
The Employer shall, on the Termination Date, pay
Executive his Annual Base Salary through the
Termination Date. In addition, the Employer shall, on
the Termination Date, pay Executive an additional one
(1) year of the then current Annual Base Salary, as
separation pay.
ii) In addition to the one (1) year
separaton pay described in section d.(i) above, in the
event of a termination without cause before the Third
Anniversary, and following a Change of Control,
effected byEmployer shall pay Executive an additional one (1) year
of the voting trusteethen current Annual Base Salary. In the event
of a termination without cause before the Third
Anniversary but not following a Change of Control,
Employer shall pay Executive a prorated portion of his
then Annual Base Salary, such amount prorated based on
the number of years of the initial three year term of
employment which Executive has served (Prorated
Separation Pay), provided that if such termination
occurs during the first year, Employer shall pay
Executive one-third of the then Annual Base Salary.
For example, (A) if Executive is terminated without
cause within or his successor.
12. Subrogation. Upon paymentupon one year of any Indemnified Amountemployment under this
Agreement, the Corporation will be subrogatedin addition to the extent of such
payment to allone (1) year separation
pay described in section d.(i), above, Employer shall
pay Executive one-third of the Director's rightsthen current Annual Base
Salary and (B) if Executive is terminated without cause
after 18 months of recovery thereforemployment under this Agreement, in
addition to the one (1) year separation pay described
in section d.(i) above, Employer shall pay Executive
one-half of the then current Annual Base Salary. If
Executive is terminated without cause after the Third
Anniversary, he is not entitled to any payment under
this section d.(ii) but shall only be entitled to the
payment under section d.(i).
iii) Reimbursable Expenses. The Employer
shall, within thirty (3) days following the Termination
Date, pay Executive all reimbursable expenses for which
expense reports have been provided to the Employer in
accordance with the Employer's policy.
iv) Annual Performance Bonus. The Employer
shall, within thirty (30) days following the
Termination Date, pay Executive Executive's Annual
Performance Bonus at a rate of one hundred percent
(100%) of Bonus Plan prorated by the number of full
months served during the current Bonus Plan year.
PAGE 8
v) Vesting of Stock Options. All of the
stock options granted to Executive shall be exercisable
in accordance with paragraph 7.e, the Stock Option
Agreement, and the Director will takeStock Plan.
e. Voluntary Termination by Executive. If
Executive terminates this Agreement voluntarily:
i) Annual Base Salary. The Employer shall,
within three (3) days following the Termination Date,
pay Executive Executive's Annual Base Salary through
the Termination Date.
ii) Reimbursable Expenses. The Employer
shall, within thirty (30) days following the
Termination Date, pay Executive all reimbursable
expenses for which expense reports have been provided
to the Employer in accordance with the Employer's
policy.
iii) Vesting of Stock Options. All of the
stock options granted to Executive which have vested
shall be exercisable in accordance with paragraph 7.e,
the Stock Plan, and the Stock Option Agreement.
10. Indemnification of Executive.
a. Pre-Execution Actions and Events.
Notwithstanding any other provision to the contrary
contained in this Agreement in addition to any rights
Executive has under any individual indemnification
agreements, the Employer shall indemnify, defend at its
expense, and hold Executive entirely harmless against and
from any claim, demand, cause of action, judgment, loss,
liability, damage, cost or expense whatsoever, including
without limitation reasonable attorneys' fees, which
Executive may suffer, sustain, incur or otherwise become
subject to either directly or indirectly as a result of any
claim, controversy, dispute, legal action or proceeding
whatsoever arising from actions requestedtaken by the Corporation (at
noEmployer or
events relating to the business of the Bank or the Company
occurring prior to the execution of this Agreement.
b. Post-Execution Actions and Events.
Notwithstanding any other provision to the contrary
contained in this Agreement, but subject to an individual
indemnification agreement already approved by the Board of
Directors on February 11, 1998, the Employer shall
indemnify, defend at its expense, and hold Executive
entirely harmless against and from any claim, demand, cause
of action, judgment, loss, liability, damage, cost or
penaltyexpense whatsoever, including without limitation reasonable
attorneys' fees, which Executive may suffer, sustain, incur
or otherwise become subject to either directly or indirectly
as a result of any claim, controversy, dispute, legal action
or proceeding whatsoever arising from actions taken by the
Employer or events relating to the Director)business of the Bank or
the Company occurring subsequent to secure the Corporation's rightsexecution of this
Agreement, other than any such claim, demand, cause of
action, judgment, loss, liability, damage, cost or expense
whatsoever which is directly and substantially due to
Executive's misconduct or gross negligence. Notwithstanding
the foregoing, in any administrative proceeding or civil
action initiated by any federal banking agency, the Bank or
the Company may only reimburse, indemnify or hold harmless
Executive if the Bank is in compliance with any applicable
statute, rule, regulation or policy of the Federal Deposit
Insurance Corporation, Federal Reserve Board, or the
California Department of Financial Institutions regarding
permissible indemnification payments.
PAGE 9
c. Payment of expenses. In the event the
Employer is obligated hereunder to defend and indemnify
Executive and in the event Executive is required to retain
independent legal counsel, other experts or professionals or
should incur any cost himself in connection with Paragraph
10.b. above, the Employer shall promptly pay such expenses
as incurred.
d. Survival of Indemnification. The obligations
of the Employer under this paragraph 11 including executing documents.
13. Continuation10 to indemnify
Executive shall survive the expiration or termination of
Indemnity. Allthis Agreement.
11. Insurance. The Employer agrees to make reasonable
efforts to maintain director's and officer's liability
insurance in an amount of not less than $5,000,000 for each
occurrence for the Corporation's
obligations underbenefit of Executive.
12. General provisions.
a. Binding on Successors. Subject to any
restrictions stated in any other provision of this
Agreement, will continue as long as the Director is
subject to any actual or possible Covered Matter, notwithstanding the
Director's termination of service as a director, and in any event for at
least five (5) years subsequent to the date when the Director ceases to be
a director of the Corporation. The right to indemnification conferred
hereinthis Agreement shall be presumed to have been relied upon by the Director in
serving or continuing to serve as a director of the Corporation or in any
capacity with any Affiliatebinding on and shall be enforceable as a contract right.
page 9
14. Amendments. Neither the Corporation's Certificate of
Incorporation nor its Bylaws will be changed to increase liability of
directors or to limit the Director's indemnification. Any repeal or
modification of the Corporation's Certificate of Incorporation or Bylaws or
any repeal or modification of the relevant provisions of any applicable
law, rules or regulations will not in any way diminish any of the
Director's rights or the Corporation's obligations under this Agreement.
This Agreement cannot be amended except with the written consent of the
Corporation and the Director.
15. Governing Law. This Agreement will be governed by Delaware
law without regard to such state's conflicts of laws principles.
16. Successors.
(a) This Agreement will be binding upon and
inure to the benefit of the parties and their respective
heirs, legal representativessuccessors and assigns.
(b)b. Partial Invalidity/Severability. Should any
of the provisions of this Agreement be held to be invalid or
unenforceable, such invalidity or unenforceability shall not
affect the validity or enforceability of any other provision
of this Agreement.
c. Entire Agreement. This Agreement contains
the entire agreement between the parties with respect to the
subject matter of this Agreement and supersedes all prior
oral or written understandings and agreements, excluding the
Stock Option Plan, the Stock Option Agreement and any
individual indemnification agreement.
d. Amendments; Waivers. No provision of this
Agreement may be changed, waived, modified, discharged or
terminated, except by a written instrument executed by the
parties hereto.
e. Notices. Any notice to be given under this
Agreement shall be in writing and shall be deemed effective
only when hand-delivered or when delivered by overnight
courier, or three (3) days after the date postmarked if sent
by certified or registered mail, postage prepaid, return
receipt requested, addressed as follows:
PAGE 10
If to the Employer:
The Corporation will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise)San Francisco Company &
Bank of San Francisco
550 Montgomery Street
San Francisco, California 94111
Attn: Boards of Directors
If to all
or substantiallyExecutive:
James E. Gilleran
3880 Sacramento Street
San Francisco, California 94118
f. Attorney's Fees and Costs. The Employer
shall bear all of the businesscosts and expenses, including
attorney's fees, incurred by both parties in the negotiation
and drafting of this Agreement. In the event of a dispute
regarding this Agreement, the prevailing party in any
arbitration or assetslitigation shall be entitled to its
reasonable legal fees and costs.
g. Governing Law. This Agreement shall be
construed and enforced in accordance with the laws of the
CorporationState of California.
h. Title and Headings. Title and headings to
assume
allparagraphs, subparagraphs and sub-subparagraphs of this
Agreement are for the purpose of reference only and shall
not affect the interpretation of this Agreement.
i. Regulatory Approval. This Agreement is
subject to and shall not become effective until any required
approval or non-disapproval of the Corporation's obligationsFederal Reserve Bank.
j. Resolution of disputes. With the exception of
an action for equitable relief arising from a breach of any
provisions of Paragraph 6 a-f, above, any controversy between
Executive and Employer or between Executive and any employee
of Employer arising out of or related to Executive s
employment with Employer, including, but not limited to claims
of race, age, gender, religious, or national origin
discrimination under federal, state or local laws and those
involving the construction or application of any of the terms,
provisions or conditions of this Agreement, shall be settled
by arbitration in accordance with the dispute resolution rules
of the Judicial Arbitration & Mediation Service ( JAMS ), and
judgment on the award rendered by the arbitrator(s) may be
rendered by any court having jurisdiction thereof. Employer
and Executive shall share the costs of the arbitrator equally
but shall each bear their own costs and legal fees associated
with the arbitration. The location of the arbitration shall
be in San Francisco, California.
PAGE 11
In the event of a breach of any of the provisions
in Paragraph 6 of this Agreement, Executive or Employer
shall be entitled to institute proceedings in any court of
competent jurisdiction to obtain equitable relief,
including, but not limited to, specific performance or an
injunction against performance of any acts.
PAGE 12
k. Conflicts. The Employer and Executive are
aware of the Conflict of Interest provisions of Section
87400 et. seq. of the Government Code. To his knowledge,
Executive has not in the past participated in any proceeding
related to the Employer which is still outstanding within
the meaning of Section 87401(b) of the Government Code. The
Employer's Boards of Directors and Executive will not in the
future take any action that would violate Section 87400 et.
seq. of the Government Code.
IN WITNESS WHEREOF, the undersigned have hereunto
caused this Agreement to be executed as of the day and year
first above written.
THE SAN FRANCISCO COMPANY
By: _____________________________
BANK OF SAN FRANCISCO
By: _____________________________
EXECUTIVE:
_________________________________
James E. Gilleran
PAGE 13
Joanne Haakinson
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered
into as of April ___, 1998, by and between The San Francisco
Company (the "Company"), Bank of San Francisco (the "Bank")
(collectively, the "Employer"), and JOANNE HAAKINSON
("Executive").
R E C I T A L S:
A. The Employer desires to continue to employ
Executive to serve as Corporate Secretary for the Company
and Corporate Secretary, Executive Vice President and Chief
Administrative Officer for the Bank, and the Boards of
Directors of the Company and the Bank have approved the
Employer's employment of Executive.
B. Executive hereby accepts such employment on the
terms and conditions set forth in this Agreement.
Such assumptionA G R E E M E N T:
1. Agreement to Employ. Subject to the terms
and conditions contained herein, the Employer hereby employs
Executive and Executive hereby accepts employment by the
Employer.
2. Term of Employment. Subject to the
provisions of section 8, below, Executive s employment
shall be for a period of three (3) years from the date of
this Agreement and will not releaseend on the Corporation from its obligations under this Agreement.
17. Severability.third anniversary of the
date hereof (the Third Anniversary ). The provisionsterm of this
Agreement will be deemed severable,extended on the second anniversary hereof
and ifwill roll forward on a month-to-month basis so that
twelve (12) months continuously remain in the Agreement term
unless or until (A) a Change of Control occurs, or (B) any
partparty to this Agreement notifies the other parties that it
does not agree to extend the term of any provision is held illegal, void or
invalid under applicable law, such provision maythis Agreement. Such
written notification must be changedprovided to all parties at
least one (1) month in advance of termination date. If
Executive chooses not to extend the extent
reasonably necessary to make the provision, as so changed, legal, valid and
binding. If any provisionterm of this Agreement
is held illegal, void or
invalidand gives the applicable one (1) month notice, Executive
will be deemed to have voluntarily terminated and will be
entitled only to the benefits described in its entirety,Section 9.e.,
below. If Employer chooses not to extend the remaining provisionsterm of this
Agreement will
not in any way be affected or impaired but will remain binding in
accordance with their terms.
18. Notices. All notices given under this Agreement will be in
writing and delivered either personally, by registered or certified mail
(return receipt requested, postage prepaid), by recognized overnight
courier or by telecopy (if promptly followed by a copy delivered
personally, by registered or certified mail or overnight courier), as
follows:
If togives the Director: _______________________
_______________________
_______________________
page 10
If to the Corporation: The San Francisco Company
550 Montgomery Street
San Francisco CA 94111
Attn.: Chiefapplicable one (1) month notice,
Executive Officer
or to such other address as either party furnishes to the other in writing.
19. Counterparts. This Agreement may be signed in counterparts.
IN WITNESS WHEREOF, the parties have executed this Agreement on
the date first written above.
THE SAN FRANCISCO COMPANY
______________________________
By: __________________________
Its:___________________________
DIRECTOR
______________________________
page 11
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of March
18, 1998, between The San Francisco Company, a Delaware corporation (the
"Corporation"), and ________________, an individual (the "Officer").
RECITALS
A. The Officer is a member of the Corporation's Executive
Management Committee and the Corporation desires that the Officer continue
to serve in such capacity. The Officer is willing to continue to serve on
the Corporation's Executive Management Committee if the Officer receives
the protection provided by this Agreement.
B. The Corporation maintains directors and officers liability
insurance ("D&O Insurance") and intends to continue to maintain such D&O
Insurance in accordance with the provisions of this Agreement.
C. The Corporation believes that (1) it is increasingly
difficult to attract and keep qualified senior officers because of
potential liabilities; (2) it is important for a senior officer to have
assurance that indemnification will be available to the fullest extent
permitted by law; and (3) it is in the best interests of the Corporation
and its shareholders for the Corporation to contractually obligate itself
to indemnify the Officer and to set forth the details of the
indemnification process.
Therefore, in consideration of the premises and the mutual
promises herein contained, the Corporation and the Officer agree as
follows:
1. Agreement to Serve. The Officer will continue to serve as a
member of the Executive Management Committee of the Corporation at the
pleasure of the Corporation's Board of Directors.
2. Indemnification.
(a) The Corporation shall indemnify and hold harmless the
Officer to the fullest extent permitted under applicable law (including
without limitation Section 28(k) of the Federal Deposit Insurance Act and
Part 359 of the Rules and regulations of the Federal Deposit Insurance
Commission (the "FDIC Rules")) if the Officer was or is a party or
threatened to be made a party to any threatened, pending or completed
action, suit, arbitration (or other alternative dispute resolution
mechanism), or proceeding of any kind, wherever brought, whether civil,
criminal, administrative or investigative and whether formal or informal
(including actions by or in the right of the Corporation and any
preliminary inquiry or claim by any person or authority), by reason of or
associated with the fact that the Officer is or was a director, officer,
partner, trustee, employee, consultant or agent of the Corporation or is or
was serving at the Corporation's request, or for the convenience of or
otherwise to benefit or represent the interests of the Corporation or a
subsidiary of the Corporation, as a director, officer, employee or agent of
another corporation, limited liability company, partnership, joint venture,
trust, employee benefit plan or other enterprise (collectively, an
"Affiliate"), whether or not for profit, or by reason of anything done or
not done by the Officer in any such capacity (collectively, "Covered
Matters").
page 1
Such indemnification will cover all Expenses (as defined
below), liabilities, judgments (including punitive and exemplary damages),
penalties, fines (including excise taxes relating to employee benefit plans
and civil penalties) and amounts paid or to be paid in settlement which are
incurred by or imposed upon the Officer in connection with a Covered
Matter, including all interest assessments on any of the foregoing
(collectively, "Indemnified Amounts"). "Expenses" means all direct or
indirect costs and expenses (including, without limitation, attorneys'
fees, retainers, transcripts, witness fees, expert fees, other professional
fees, court costs and travel costs) incurred by the Officer in connection
with a Covered Matter, together with interest thereon commencing 30 days
after incurrence, other than liabilities, judgments, penalties, fines and
settlement amounts.
(b) The Officer will be so indemnified for all Indemnified
Amounts and the Corporation will defend the Officer against claims
(including threatened claims and investigations) which are covered matters,
including claims brought by or on behalf of the Corporation or any
Affiliate, except if it is finally determined by the court of last resort
(or by a lower court if not timely appealed) that the payment is prohibited
by applicable law.
(c) If the Officer is entitled under this Agreement to
indemnification for less than all of the amounts incurred by the Officer in
connection with a Covered Matter, the Corporation will indemnify the
Officer for the indemnifiable amount.
3. Claims for Indemnification. The Officer will give the
Corporation written notice of any claim for indemnification under this
Agreement, but failure to do so shall not affect the Officer's rights
hereunder. Payment requests will include a schedule setting forth in
reasonable detail the amount requested and will be accompanied (or, if
necessary, followed) by copies of the relevant invoices or other
documentation. The Corporation will pay Indemnified Amounts directly
without requiring the Officer to make any prior payment.
4. Determination of Right to Indemnification.
(a) The Officer will be presumed to be entitled to
indemnification under this Agreement and will receive such indemnification,
subject to paragraph 4(b) below, irrespective of whether the Covered Matter
involves allegations of gross negligence or intentional misconduct, alleged
violations of Section 10(b) of the Securities Exchange Act of 1934
(including Rule 10b-5 thereunder), alleged breach of the Officer's
fiduciary duties (including duties of loyalty or care) or any other claim.
(b) The Officer shall be conclusively presumed to have met
any required standard of conduct established by applicable law, unless a
determination is made in the written opinion of independent counsel to the
Corporation, applicable law (including the FDIC Rules) permits
indemnification in a Covered Matter only as authorized in the specific case
upon a determination that indemnification is proper in the circumstances
because the Officer has met the required standard of conduct. In such
event:
(1) The Corporation will immediately give the Officer
notice, with a copy of counsel's opinion, that an evaluation and
determination will be made under this paragraph 4(b).
(2) Such evaluation and determination will be made, as
promptly as possible and in good faith, by a majority vote of the members
of the Corporation's Board of Directors who are not parties or threatened
to be made parties to the Covered Matter in question or, if so requested by
the Officer, in a written opinion by independent counsel to the Corporation
(who shall not be the same as the counsel referred to above), or by such
other procedure as the Corporation and the Officer agree.
page 2
(3) The Officer will be entitled to present
information, and to be represented by counsel, in connection with such
evaluation and determination.
(4) The Officer will be presumed to have met the
required standard of conduct unless it is conclusively demonstrated to the
determining firm or body that the Officer has not met the required standard
of conduct. If the Officer is successful (which includes a settlement
without admission of liability) on the merits or otherwise or in the
defense of any claim, issue or matter therein, he shall be conclusively
presumed to have met the required standard of conduct.
(5) The cost of any evaluation and determination under
this paragraph 4(b) (including attorneys' fees and other expenses incurred
by the Officer) will be borne by the Corporation.
(6) If the requested indemnification falls within the
scope of the FDIC Rules, the FDIC Rules will also be observed.
(7) The termination of any proceeding by judgment,
order, settlement, arbitration award or conviction, or upon a plea of nolo
contendere or its equivalent shall not affect this presumption or, except
as determined by a judgment or other final adjudication adverse to the
Officer, establish a presumption with regard to any factual matter relevant
to determining the Officer's rights to indemnification hereunder.
(c) Determination of the Officer's entitlement to
indemnification shall be made not later than thirty (30) days after the
Corporation's receipt of his written request for such indemnification. If
the person or persons so empowered to make a determination pursuant to
paragraph 4 hereof shall have failed to make the requested determination
within thirty (30) days after any judgment, order, settlement, dismissal,
arbitration award, conviction, acceptance of a plea of nolo contendere or
its equivalent, or other disposition or partial disposition of any
proceeding or any other event which could enable the Corporation to
determine the Officer's entitlement to indemnification, the requisite
determination that the Officer is entitled to indemnification shall be deemed to have been made.
5. Advance of Expenses.
(a) Subject to paragraphs 5(b)terminated without
cause and (c), and notwithstanding
Section 4(b), before final adjudication of a Covered Matter, upon the
Officer's request pursuant to paragraph 3 above, the Corporation will
promptly advance Expenses directly; provided, however, if the Officer has
already paid any Expenses, the Corporation will promptly reimburse the
Officer for all such Expenses.
page 3
(b) If, in the opinion of counsel to the Corporation, the
FDIC Rules permit advancement of Expenses with respect to a federal banking
agency proceeding or action only as authorized upon a determination that
the Officer has met a standard of conduct established by the FDIC Rules,
the determination will be made in accordance with paragraph 4(b) above to
the extent not inconsistent with FDIC Rules.
(c) The Officer will repay any Expenses that are advanced
under this paragraph 5 if so required by the FDIC Rules or if it is
ultimately determined, in a final, nonappealable judgment rendered by the
court of last resort (or by a lower court if not timely appealed), that the
Officer is not entitled to be indemnified against such Expenses and
requires repayment.
(d) The Corporation shall use its best efforts to provide
the Officer on or before the time of any Change of Control security and
liquidity for the obligations of the Corporation to indemnify and advance
Expenses to the Officer pursuant to this Agreement (whether by letter of
credit, the posting of assets as security, or other means).
6. Defense of Claim.
(a) The Corporation, jointly with any other indemnifying
party, will be entitled to assume the defense of any Covered Matter as to
which the Officer requests indemnification, provided, however, the
Corporation shall not be entitled to assume the defense if there has been a
Change of Control or the Officer is entitled to employ the Officer's own
counsel under paragraph 6(c) below, in which case both parties shall be
entitled to participate in the defense.
(b) Counsel selected by the Corporation to defend any
Covered Matter will be subjectonly to the Officer's advance written approval.
(c) The Officer may employ the Officer's own counselbenefits described
in a
Covered Matter and will be fully reimbursed therefor if (1) the Corporation
approves, in writing, the employment of such counsel or (2) either (A) the
Officer has reasonably concluded that there may be a conflict of interest
between the Corporation and the Officer or between the Officer and other
parties represented by counsel employed by the Corporation to represent the
Officer in such action or (B) the Corporation has not employed counsel
reasonably satisfactory to the Officer to assume the defense of such
Covered Matter promptly after the Officer's request.
(d) Neither the Corporation nor the Officer will settle any
Covered Matter without the other's written consent, which will not be
unreasonably withheld.
(e) If the Officer is required to testify (in court
proceedings, depositions, informal interviews or otherwise)Section 9.d., consult with
counsel, furnish documents or take any other reasonable action in
connection with a Covered Matter, the Corporation will reimburse the
Officer's reasonable expenses in connection therewith and also pay the
Officer reasonable compensation for time spent by the Officer for which the
Officer is otherwise not compensated by the Corporation.
page 4
7. Disputes; Enforcement.
(a) If there is a dispute relating to the validity or
enforceability of this Agreement or a denial of indemnification, advance of
Expenses or payment of any other amounts due under this Agreement or the
Corporation's Certificate of Incorporation or Bylaws, the Corporation will
provide such indemnification, advance of Expenses or other payment until a
final, nonappealable judgment that the Officer is not entitled to such
indemnification, advance of Expenses or other payment has been rendered by
the court of last resort (or by a lower court if not timely appealed). The
Officer will repay such amounts if such final, nonappealable judgment so
requires.
(b) In the event that (i) a determination pursuant to
Section 4(b) hereof is made that the Officer is not entitled to
indemnification, (ii) advances of Expenses are not made pursuant to this
Agreement, (iii) payment has not been timely made following a determination
of entitlement to indemnification pursuant to this Agreement, or (iv) the
Officer otherwise seeks enforcementbelow. For purposes of this Agreement, the
Officerterm Change of Control shall be
entitledmean a sale to a final adjudication in the Court of Chancery of the State of
Delaware of the remedy sought. Alternatively, unless court approval is
required by law for the indemnification sought by the Officer, the Officer
at his option may seek an award in arbitration to be conducted by a single
arbitrator pursuant to the commercial arbitration rules of the American
Arbitration Association now in effect, which award is to be made within
ninety (90) days following the filing of the demand for arbitration. The
Corporation shall not oppose the Officer's right to seek any such
adjudication or arbitration award. In any such proceeding or arbitration
the Officer shall be presumed to be entitled to indemnification and
advancement of Expenses under this Agreement and the Corporation shall have
the burden of proof to overcome that presumption. In the event that a
determination that Officer is not entitled to indemnification, in whole or
in part, has been made pursuant to Section 4(b) hereof, the decision in the
judicial proceeding or arbitration provided in this Section 7 shall be made
de novo and the Officer shall not be prejudiced by reasonthird party
of a determination that he is not entitled to indemnification. If a
determination that the Officer is entitled to indemnification has been made
pursuant to Section 4(b) hereof, or is deemed to have been made pursuant to
Section 4 hereof or otherwise pursuant to the terms of this Agreement, the
Corporation shall be bound by such determinationmajority interest in, the absence of a
misrepresentation of a material fact by the Officer in connection with such
determination. The Corporation shall be precluded from asserting that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable. The Corporation shall stipulate in any such court or
arbitration that the Corporation is bound by all the provisions of this
Agreement and is precluded from making any assertion to the contrary.
(c) The Corporation will reimburse all of the Officer's
reasonable expenses (including attorneys' fees) in pursuing an action to
enforce the Officer's rights under this Agreement unless a final,
nonappealable judgment against the Officer has been rendered in such action
by the court of last resort (or by a lower court if not timely appealed) or
unless the FDIC Rules otherwise require to the same effect as set forth in
Section 5(c). At the Officer's request, such expenses will be advanced by
the Corporation to the Officer as incurred before final resolution of such
action by the court of last resort; such expenses will be repaid by the
Officer if a final, nonappealable judgment in the Corporation's favor is
rendered in such action by the court of last resort (or by a lower court if
not timely appealed) to the same effect as set forth in Section 5(c).
page 5
8. Insurance.
(a) The Corporation hereby covenants and agrees that, as
long as the Officer continues to serve as an officer of the Corporation and
thereafter as long as the Officer may be subject to any possible Covered
Matter, the Corporation, subject to paragraph 8(c) below, shall maintain in
full force and effect D&O Insurance from established and reputable insurers
in amounts not less than, and with coverage comparable to, those in effect
as of the date of this Agreement.
(b) In all D&O Insurance policies, the Officer shall be
named as an insured in such a manner as to provide the Officer the same
rights and benefits as are accorded the most favorably insured of the
Company's directors or officers.
(c) The Corporation will not be required to maintain D&O
Insurance if the Board of Directors of the Corporation determines, after
diligent inquiry, that (1) such insurance is not available; (2) the
premiums for available insurance are disproportionate to the amount of
coverage and to the premiums paid by other corporations similarly situated;
or (3) the coverage provided by such insurance is so limited by exclusions
that it provides an insufficient benefit. The Board of Directors of the
Corporation will, from time to time, in good faith review any decision not
to maintain D&O Insurance and will purchase such insurance at any time that
the conditions of this paragraph 8(c) cease to apply.
(d) The parties will cooperate to obtain advances of
Expenses, indemnification payments and consents from D&O Insurance carriers
in any Covered Matter to the full extent of applicable D&O Insurance. The
existence of D&O Insurance coverage will not diminish or limit the
Corporation's obligation to make indemnification payments to the Officer.
Amounts paid directly to the Officer with respect to a Covered Matter by
the Corporation's D&O Insurance carriers will be credited to the amounts
payable by the Corporation to the Officer under this Agreement.
(e) Payments under any D&O Insurance policies shall be
subject to the FDIC Rules.
9. Limitations of Actions; Limitation of Indemnity.
(a) No action will be brought by or on behalf of the
Corporation against the Officer or the Officer's heirs or personal
representatives relating to the Officer's service as an officer, after the
expiration of one year from the date the Officer ceases (for any reason) to
serve as an officer of the Corporation, and any claim or cause of action of
the Corporation will be extinguished and deemed released unless asserted by
the filing of a legal action before the expiration of such period.
(b) Notwithstanding the provisions hereof, the Corporation
shall not be obligated pursuant to the terms of this Agreement:
(1) Claims Initiated by the Officer. To indemnify or
advance expenses to the Officer with respect to proceedings or claims
initiated or brought voluntarily by the Officer and not by way of defense,
except with respect to proceedings brought to establish or enforce a right
to indemnification under this Agreement or any other statute or law or
otherwise as required under Section 145 of the Delaware General Corporation
Law, but such indemnification or advancement of expenses may be provided by
the Corporation in specific cases if the Board of Directors has approved
the initiation or bringing of such suit;
page 6
(2) Lack of Good Faith. To indemnify the Officer for
any expenses incurred by the Officer with respect to any proceeding
instituted by the Officer to enforce or interpret this Agreement, if a
court of competent jurisdiction determines that each of the material
assertions made by the Officer in such proceeding was not made in good
faith or was frivolous;
(3) Insured Claims. To indemnify the Officer for
expenses or liabilities of any type whatsoever (including, but not limited
to, judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) which have been paid directly to the Officer by an insurance
carrier under D&O Insurance maintained by the Corporation; or
(4) FDIC Rules. To make any indemnification payment
contrary to the FDIC Rules.
(5) Short Swing Profits. To indemnify the Officer for
expenses or liabilities incurred by the Officer under Section 16 of the
Securities and Exchange Act of 1934.
10. Rights Not Exclusive; Benefit of Amendments to Law. The
indemnification provided to the Officer under this Agreement will be in
addition to any indemnification provided to the Officer by any law,
agreement, Board resolution, provision of the Certificate of Incorporation
or Bylaws of the Corporation or otherwise (including, but not limited to,
under that certain Indemnification Agreement (the "Bank Agreement") made as
of _________, 1998, between The Bank of San Francisco, a California
corporation (the "Bank") and the Officer). If applicable laws, rules or
regulations are amended after the date of this Agreement to permit
indemnification of a type or to an extent beyond or greater than that
provided by this Agreement, the Officer shall be entitled to
indemnification hereunder of such further types or to such further extent
as is then permitted; provided, however, that no such amendment shall in
any way restrict or limit the rights of the Officer hereunder and the term
"applicable law" shall refer only to the same as amended to the extent such
amendment permits the Corporation to provide such greater indemnification.
The Corporation and the Officer agree that the Officer may pursue his
remedies under both this Agreement and the Bank Agreement, under only this
Agreement, or under only the Bank Agreement, and that the manner in which
the Officer chooses to pursue (or not to pursue) his remedies under this
Agreement and/or under the Bank Agreement shall not in any way restrict or
limit the rights of the Officer under this Agreement.
11. Change in Control. "Change in Control" shall mean the
occurrence of any of the following after January 1, 1998:
(a) Both (1) any "person" (as defined below) is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Corporation representing at
least 15% of the total voting power represented by the Corporation's then
outstanding voting securities; and (2) the beneficial ownership by such
person of securities representing such percentage has not been approved by
a majority of the "continuing directors" (as defined below); or
page 7
(b) Any "person" (as defined below) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Corporation representing at
least 50% of the total voting power represented by the Corporation's then
outstanding voting securities; or
(c) A change in the composition of the Board occurs, as a
result of which fewer than two-thirds of the incumbent directors are
directors who either (1) had been directors of the Corporation on January
1, 1998 (the "Original Directors") or (2) were elected, or nominated for
election, to the Board with the affirmative votes of at least a majority in
the aggregate of the Original Directors who were still in office at the
time of the election or nomination and directors whose election or
nomination was previously so approved (the "continuing directors"); or
(d) The stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation, if such merger
or consolidation would result in the voting securities of the Corporation
outstanding immediately prior thereto representing (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) 50% or less of the total voting power represented by the voting
securities of the Corporation or such surviving entity outstanding
immediately after such merger or consolidation; or
(e) The stockholders of the Corporation approve (1) a plan
of complete liquidation of the Corporation or (2) an agreement for the sale
or disposition by the Corporation of all or substantially all of the
Corporation's assets.
For purposes of Subsection (a) above, the term "person" shall have the
same meaning as when used in sections 13(d) and 14(d) of the Exchange Act,
but shall exclude (x) a trustee or other fiduciary holding securities under
an employee benefit plan of the Corporation or of a parent or subsidiary of
the Corporation or (y) a corporation owned directly or indirectly by the
stockholders of the Corporation in substantially the same proportions as
their ownership of the common stock of the Corporation.
Any other provisions of this Section 11 notwithstanding, the term
"Change in Control" shall not include (1) a transaction, if undertaken at
the election of the Corporation, the result of which is to sell all or substantially all of the
assets of, the CorporationCompany or the Bank, but the term Change of
Control shall not include (A) a transfer of shares to another corporation
(the "surviving corporation");any
voting trust or similar custodial arrangement, or (B) a
transaction in which Executive participates as a principal
or with any direct or indirect equity interest, whether
contingent or otherwise.
PAGE 1
3. Position and Duties/Authority of Executive.
During the term of this Agreement, Executive shall hold the
positions of Corporate Secretary for the Company and
Corporate Secretary, Executive Vice President and Chief
Administrative Officer for the Bank. Executive shall
perform such additional duties and responsibilities,
consistent with the foregoing positions as may be assigned
to Executive from time to time by the respective Boards of
Directors of the Employer acting with reasonable discretion
and in accord with the scope of this Agreement.
4. Place of Employment. Executive's principal
place of employment shall be 550 Montgomery Street, San
Francisco, California. While discharging her duties and
responsibilities hereunder, Executive may be required to
travel from time to time and, as a result, be temporarily
absent from her place of employment.
5. Devotion of Time to Business. Except as
provided below, Executive shall devote her best efforts and
ability, and attention to the business and affairs of the
Employer and to performing the duties and responsibilities
set forth herein on behalf of the Employer. Notwithstanding
any language herein to the contrary, Executive shall be
entitled to devote time to charitable, political and civic
activities and speaking engagements, and Executive shall be
permitted to serve on the boards of directors of other
companies which do not directly compete with the Employer
provided such activities do not have a material, adverse
effect on Executive's performance hereunder.
6. Confidential Information/Trade Secrets.
a. In performing her duties under this
Agreement, Executive will have access to and become
acquainted with information concerning the Employer's
operations, including financial, personnel, marketing, and
other information and customer lists that are owned by the
surviving corporationEmployer and regularly used in the Employer's business, and
such information is ownedconfidential and constitutes trade
secrets of the Employer.
b. Executive will not misuse, misappropriate, or
disclose any such trade secrets, directly or indirectly, to
any other person, or use them in any way, except as required
in the course of her employment hereunder.
c. The unauthorized use or disclosure of any of
the Employer's confidential information/trade secrets
(including without limitation information concerning current
or future proposed work, services, or products, the fact
that any such work, services, or products are planned, under
consideration, or in use, and any descriptions thereof)
constitute unfair competition.
PAGE 2
d. Any violation by Executive of any of the
provisions of this paragraph would result in irreparable
injury to the Employer, and the Employer shall be entitled
to injunctive relief to prevent or terminate such violation.
e. This paragraph shall not apply to any
information that becomes generally known to or available for
use by the stockholderspublic other than as a result of Executive's
acts.
f. The covenants set forth in this paragraph
shall survive termination of this Agreement for a period of
one year; provided, however, that with respect to the
Employer's customer lists and relationships, such period
shall be two years.
7. Compensation to Executive.
a. Salary and Benefits. Subject to the terms
and conditions contained herein, throughout the term of this
Agreement, Executive shall be entitled to receive the
following salary and benefits from the Employer:
i) Annual Base Salary. The Employer shall
pay to Executive as compensation for her services an
Annual Base Salary of One Hundred and Twenty Thousand
Dollars ($120,000) in such intervals as other salaried
executives of the Corporation
immediately following such transactionEmployer are presently paid (but in
substantiallyno case less frequently than monthly). The Annual Base
Salary shall be paid subject to all federal, state and
local rules for payment, deduction and withholding of
taxes. The Annual Base Salary shall be reassessed
annually by the same
proportions asBoards of Directors of Company and the
Bank at which time the Boards may, in their ownershipsole
discretion, vote to increase the Annual Base Salary.
ii) Annual Performance Bonus. For each
calendar year, Executive and the Boards of Directors of
the Corporation's common stock
immediately precedingCompany and the Bank shall establish reasonable
goals for such transaction; andyear performance against which will
result in a bonus payable to Executive from 0% to 50%
of her Annual Base Salary in cash. With respect to the
Bank, such goals shall be based upon positive
performance criteria as measured by achievement of
annually-set objectives.
iii) Completion Incentive. On the Third
Anniversary, provided that Executive is then employed
pursuant to this Agreement (whether or not such
employment terminates on the Third Anniversary), the
Employer shall pay Executive a Completion Incentive
in the amount of one (1) year of the then Annual Base
Salary, provided further, however, that (A) such
Incentive payment shall be subject to applicable
statutory or regulatory restrictions, and (B) no such
Incentive payment shall be made unless the surviving corporation expressly assumesBank and
Company maintain a CAMEL 2 or satisfactory or better
(or equivalent) regulatory rating. If, upon payment of
the Completion Incentive, it appears that Executive s
employment with Employer will continue for an
additional period of years, the parties will negotiate
in good faith the terms of an additional retention
bonus.
PAGE 3
b. Retirement Plan. The Employer shall provide
Executive with retirement benefits, including any Section
401(k) Plan, under which the Employer provides retirement or
similar benefits to the other Company or Bank employees.
The Company currently sponsors The San Francisco Company
401(k) Plan.
c. Benefits. The Employer shall, during the
term of this Agreement;Agreement, make available to Executive the
following:
i) insurance coverage and benefits
according to its existing health plans;
ii) group term life insurance or other term
life insurance in an amount equal to two (2) an
acquisitiontimes
Executive s Annual Base Salary, accidental death and
dismemberment insurance, and long-term group disability
insurance, and
iii) vacation of votingfour weeks per year.
d. Expense Account. The Employer will require
Executive to incur travel, lodging, meal, entertainment, and
similar expenses. The Employer shall advance or promptly
reimburse Executive for all expenses reasonably incurred by
Executive in the performance of her duties for which
Executive furnishes the Employer with adequate records and
other rights on outstanding sharesdocumentary evidence as required by a voting
trustee who is approved (andapplicable federal
and state laws and regulations.
e. Stock Options. The Board of Directors of the
agreementCompany has adopted an Executive Stock Option Plan (the
"Stock Plan") under which he acts is approved)Executive has received and may in
the future receive option grants as a senior manager
pursuant to the direction of the Board of Directors.
f. Other Benefits. The Employer shall provide
Executive with such other pension, health and welfare
benefits as it may from time to time offer to other senior
executives in the ordinary course of its business, or as may
be reasonably required or necessary for her to perform her
duties.
8. Termination.
a. Termination by the continuing directors,Employer for Cause. The
Employer may terminate Executive's employment at any time
for "cause." For the purpose of the Employer's termination
of this Agreement, the term "cause" shall include any of the
following:
PAGE 4
i) Adjudication of Executive's guilt in
connection with the commission of a felony or a
misdemeanor involving moral turpitude (excluding
traffic violations);
ii) Good faith finding by the Employer's
Boards of Directors of Executive's theft, conversion,
misappropriation, or embezzlement of any assets of the
Employer;
iii) Executive's (A) habitual neglect of her
duties, (B) failure to obey the lawful direction of the
Boards of Directors of the Employer that do not
contravene regulations or regulatory policies,
guidelines, agreements or orders, or (C) conduct that
has a direct, substantial and adverse effect on the
Employer's reputation, in each case, after written
notice and adequate opportunity to cure any such
asserted neglect, failure or conduct; or
iv) Good faith finding by the Employer's
Boards of Directors that Executive's performance of her
duties resulted in a material deterioration in the
condition of the Company or the Bank, provided that
such deterioration is not the result of conditions
either existing on the date of Executive's employment
or external to the Company and the Bank and beyond
Executive's control.
b. Termination without Cause.
The Employer may terminate Executive's
employment without "cause" at any time subject only to the
provisions of this Agreement. A without cause termination
may include, but is not limited to, a termination upon a
Change of Control.
c. Termination for Death. Executive's
employment shall terminate upon Executive's death.
d. Termination for Disability. The Employer
may, to the extent permitted by law, terminate Executive's
employment upon the disability of Executive. As used
herein, the term "disability" shall mean sickness or
physical or mental disability that renders Executive unable
to perform a substantial portion of her duties under this
Agreement for an aggregate period of more than ninety (90)
days in any subsequenttwelve (12) month period except in the case of a
pregnancy-related disability. If Executive is prevented
from properly performing her duties by reason of a
pregnancy-related disability for a period of more than one
hundred and twenty (120) days in the aggregate in any twelve
(12) month period, then to the extent permitted by law, her
employment shall terminate.
e. Notice of Termination. If the Employer
desires to terminate Executive's employment under this
Agreement, whether or not for cause, the Employer shall
deliver a notice of termination in writing to Executive (the
"Notice of Termination"). The Notice of Termination shall
specify whether the termination is (A) for cause (in which
case the conduct of Executive or the Employer giving rise to
the termination shall be specified), (B) for death, (C) for
disability or (D) without cause. The Notice of Termination
shall specify an effective date of termination (the
"Termination Date") on or after the date notice is given.
PAGE 5
9. Effect of Termination. Upon the termination of
this Agreement by either party, the parties shall comply
with the following obligations and duties:
a. Termination for Cause. If the Employer
terminates Executive's employment for cause:
i) Annual Base Salary. The Employer shall
on the Termination Date pay Executive Executive's
Annual Base Salary through the Termination Date.
ii) Reimbursement Expenses. The Employer
shall, on the Termination Date, pay Executive all
reimbursable expenses for which expense reports have
been provided to the Employer in accordance with the
Employer's policy.
iii) Annual Performance Bonus. Executive is
not entitled to be paid any bonus for any months served
during the current Bonus Plan Year. Executive is not
eligible to receive any bonus payment if terminated for
cause.
iv) Vesting of Stock Options. All of the
stock options granted to Executive which have vested
shall be exercisable in accordance with paragraph 7.e,
the Stock Plan, and Stock Option Agreement.
b. Termination for Death. If Executive's
employment is terminated as a result of Executive's death:
i) Annual Base Salary. The Employer's
obligation to pay Executive's salary shall terminate
upon her death.
ii) Prorated Death Benefit. Employer shall
pay Executive a prorated portion of her then Annual
Base Salary, such amount prorated based on the number
of years of the initial three year term of employment
which Executive has served as of the time of death,
provided that if her death occurs during the first
year, Employer shall pay Executive one-third of the
then Annual Base Salary. For example, (A) if Executive
dies within or upon one year of employment under this
Agreement, Employer shall pay Executive one-third of
the then current Annual Base Salary and (B) if
Executive dies after 18 months of employment under this
Agreement, Employer shall pay Executive one-half of the
then current Annual Base Salary. If Executive dies
after the Third Anniversary, she is not entitled to any
payment under this section b.(ii).
PAGE 6
iii) Reimbursable Expenses. The Employer
shall, within thirty (30) days following the date of
Executive's death, pay Executive's estate all
reimbursable expenses for which expense reports have
been provided to the Employer in accordance with the
Employer's policy.
iv) Annual Performance Bonus. The Employer
shall, within thirty (30) days following the date of
death, pay Executive's estate Executive's Annual
Performance Bonus at a rate of fifty percent (50%) of
Bonus Plan prorated by the number of full months served
during the current Bonus Plan year.
v) Vesting of Stock Options. All of the
stock options granted to Executive which are vested
shall be exercisable by Executive's estate in
accordance with paragraph 7.e, the Stock Plan, and the
Stock Option Agreement.
c. Termination for Disability.
i) Annual Base Salary. The Employer shall
pay Executive Executive's Annual Base Salary through
Termination Date.
ii) Reimbursable Expenses. The Employer
shall, within thirty (30) days following the
Termination Day, pay Executive all reimbursable
expenses for which expense reports have been provided
to the Employer in accordance with the Employer's
policy.
iii) Annual Performance Bonus. The Employer
shall, within thirty (30) days following the
Termination Date, pay Executive Executive's Annual
Performance Bonus at a rate of fifty percent (50%) of
Bonus Plan prorated by the number of full months served
during the current Bonus Plan year.
iv) Vesting of Stock Options. All of the
stock options granted to Executive which are vested
shall be exercisable in accordance with paragraph 7.e,
the Stock Plan, and the Stock Option Agreement.
d. Termination without Cause. If the Employer
terminates Executive's employment without cause:
i) Annual Base Salary and Separation Pay.
The Employer shall, on the Termination Date, pay
Executive her Annual Base Salary through the
Termination Date. In addition, the Employer shall, on
the Termination Date, pay Executive an additional one
(1) year of the then current Annual Base Salary, as
separation pay.
PAGE 7
ii) In addition to the one (1) year
separaton pay described in section d.(i) above, in the
event of a termination without cause before the Third
Anniversary, and following a Change of Control,
effected byEmployer shall pay Executive an additional one (1) year
of the voting trusteethen current Annual Base Salary. In the event
of a termination without cause before the Third
Anniversary but not following a Change of Control,
Employer shall pay Executive a prorated portion of her
then Annual Base Salary, such amount prorated based on
the number of years of the initial three year term of
employment which Executive has served (Prorated
Separation Pay), provided that if such termination
occurs during the first year, Employer shall pay
Executive one-third of the then Annual Base Salary.
For example, (A) if Executive is terminated without
cause within or his successor.
page 8
12. Subrogation. Upon paymentupon one year of any Indemnified Amountemployment under this
Agreement, the Corporation will be subrogatedin addition to the extent of such
payment to allone (1) year separation
pay described in section d.(i), above, Employer shall
pay Executive one-third of the Officer's rightsthen current Annual Base
Salary and (B) if Executive is terminated without cause
after 18 months of recovery thereforemployment under this Agreement, in
addition to the one (1) year separation pay described
in section d.(i) above, Employer shall pay Executive
one-half of the then current Annual Base Salary. If
Executive is terminated without cause after the Third
Anniversary, she is not entitled to any payment under
this section d.(ii) but shall only be entitled to the
payment under section d.(i).
iii) Reimbursable Expenses. The Employer
shall, within thirty (3) days following the Termination
Date, pay Executive all reimbursable expenses for which
expense reports have been provided to the Employer in
accordance with the Employer's policy.
iv) Annual Performance Bonus. The Employer
shall, within thirty (30) days following the
Termination Date, pay Executive Executive's Annual
Performance Bonus at a rate of one hundred percent
(100%) of Bonus Plan prorated by the number of full
months served during the current Bonus Plan year.
v) Vesting of Stock Options. All of the
stock options granted to Executive shall be exercisable
in accordance with paragraph 7.e, the Stock Option
Agreement, and the Officer
will takeStock Plan.
e. Voluntary Termination by Executive. If
Executive terminates this Agreement voluntarily:
i) Annual Base Salary. The Employer shall,
within three (3) days following the Termination Date,
pay Executive Executive's Annual Base Salary through
the Termination Date.
ii) Reimbursable Expenses. The Employer
shall, within thirty (30) days following the
Termination Date, pay Executive all reimbursable
expenses for which expense reports have been provided
to the Employer in accordance with the Employer's
policy.
PAGE 8
iii) Vesting of Stock Options. All of the
stock options granted to Executive which have vested
shall be exercisable in accordance with paragraph 7.e,
the Stock Plan, and the Stock Option Agreement.
10. Indemnification of Executive.
a. Pre-Execution Actions and Events.
Notwithstanding any other provision to the contrary
contained in this Agreement in addition to any rights
Executive has under any individual indemnification
agreements, the Employer shall indemnify, defend at its
expense, and hold Executive entirely harmless against and
from any claim, demand, cause of action, judgment, loss,
liability, damage, cost or expense whatsoever, including
without limitation reasonable attorneys' fees, which
Executive may suffer, sustain, incur or otherwise become
subject to either directly or indirectly as a result of any
claim, controversy, dispute, legal action or proceeding
whatsoever arising from actions requestedtaken by the Corporation (at noEmployer or
events relating to the business of the Bank or the Company
occurring prior to the execution of this Agreement.
b. Post-Execution Actions and Events.
Notwithstanding any other provision to the contrary
contained in this Agreement, but subject to an individual
indemnification agreement already approved by the Board of
Directors on February 11, 1998, the Employer shall
indemnify, defend at its expense, and hold Executive
entirely harmless against and from any claim, demand, cause
of action, judgment, loss, liability, damage, cost or
penaltyexpense whatsoever, including without limitation reasonable
attorneys' fees, which Executive may suffer, sustain, incur
or otherwise become subject to either directly or indirectly
as a result of any claim, controversy, dispute, legal action
or proceeding whatsoever arising from actions taken by the
Employer or events relating to the Officer)business of the Bank or
the Company occurring subsequent to secure the Corporation's rightsexecution of this
Agreement, other than any such claim, demand, cause of
action, judgment, loss, liability, damage, cost or expense
whatsoever which is directly and substantially due to
Executive's misconduct or gross negligence. Notwithstanding
the foregoing, in any administrative proceeding or civil
action initiated by any federal banking agency, the Bank or
the Company may only reimburse, indemnify or hold harmless
Executive if the Bank is in compliance with any applicable
statute, rule, regulation or policy of the Federal Deposit
Insurance Corporation, Federal Reserve Board, or the
California Department of Financial Institutions regarding
permissible indemnification payments.
c. Payment of expenses. In the event the
Employer is obligated hereunder to defend and indemnify
Executive and in the event Executive is required to retain
independent legal counsel, other experts or professionals or
should incur any cost herself in connection with Paragraph
10.b. above, the Employer shall promptly pay such expenses
as incurred.
PAGE 9
d. Survival of Indemnification. The obligations
of the Employer under this paragraph 11 including executing documents.
13. Continuation10 to indemnify
Executive shall survive the expiration or termination of
Indemnity. Allthis Agreement.
11. Insurance. The Employer agrees to make reasonable
efforts to maintain director's and officer's liability
insurance in an amount of not less than $5,000,000 for each
occurrence for the Corporation's
obligations underbenefit of Executive.
12. General provisions.
a. Binding on Successors. Subject to any
restrictions stated in any other provision of this
Agreement, will continue as long as the Officer is
subject to any actual or possible Covered Matter, notwithstanding the
Officer's termination of service as an officer, and in any event for at
least five (5) years subsequent to the date when the Officer ceases to be
an officer of the Corporation. The right to indemnification conferred
hereinthis Agreement shall be presumed to have been relied upon by the Officer in serving
or continuing to serve as an officer of the Corporation or in any capacity
with any Affiliatebinding on and shall be enforceable as a contract right.
14. Amendments. Neither the Corporation's Certificate of
Incorporation nor its Bylaws will be changed to increase liability of
officers or to limit the Officer's indemnification. Any repeal or
modification of the Corporation's Certificate of Incorporation or Bylaws or
any repeal or modification of the relevant provisions of any applicable
law, rules or regulations will not in any way diminish any of the Officer's
rights or the Corporation's obligations under this Agreement. This
Agreement cannot be amended except with the written consent of the
Corporation and the Officer.
15. Governing Law. This Agreement will be governed by Delaware
law without regard to such state's conflicts of laws principles.
16. Successors.
(a) This Agreement will be binding upon and
inure to the benefit of the parties and their respective
heirs, legal representativessuccessors and assigns.
(b)b. Partial Invalidity/Severability. Should any
of the provisions of this Agreement be held to be invalid or
unenforceable, such invalidity or unenforceability shall not
affect the validity or enforceability of any other provision
of this Agreement.
c. Entire Agreement. This Agreement contains
the entire agreement between the parties with respect to the
subject matter of this Agreement and supersedes all prior
oral or written understandings and agreements, excluding the
Stock Option Plan, the Stock Option Agreement and any
individual indemnification agreement.
d. Amendments; Waivers. No provision of this
Agreement may be changed, waived, modified, discharged or
terminated, except by a written instrument executed by the
parties hereto.
e. Notices. Any notice to be given under this
Agreement shall be in writing and shall be deemed effective
only when hand-delivered or when delivered by overnight
courier, or three (3) days after the date postmarked if sent
by certified or registered mail, postage prepaid, return
receipt requested, addressed as follows:
If to the Employer:
The CorporationSan Francisco Company &
Bank of San Francisco
550 Montgomery Street
San Francisco, California 94111
Attn: Boards of Directors
If to Executive:
Joanne Haakinson
41 Winfield Street
San Francisco, CA 94110
PAGE 10
f. Attorney's Fees and Costs. The Employer
shall bear all of the costs and expenses, including
attorney's fees, incurred by both parties in the negotiation
and drafting of this Agreement. In the event of a dispute
regarding this Agreement, the prevailing party in any
arbitration or litigation shall be entitled to its
reasonable legal fees and costs.
g. Governing Law. This Agreement shall be
construed and enforced in accordance with the laws of the
State of California.
h. Title and Headings. Title and headings to
paragraphs, subparagraphs and sub-subparagraphs of this
Agreement are for the purpose of reference only and shall
not affect the interpretation of this Agreement.
i. Regulatory Approval. This Agreement is
subject to and shall not become effective until any required
approval or non-disapproval of the Federal Reserve Bank.
j. Resolution of disputes. With the exception of
an action for equitable relief arising from a breach of any
provisions of Paragraph 6 a-f, above, any controversy between
Executive and Employer or between Executive and any employee
of Employer arising out of or related to Executive s
employment with Employer, including, but not limited to claims
of race, age, gender, religious, or national origin
discrimination under federal, state or local laws and those
involving the construction or application of any of the terms,
provisions or conditions of this Agreement, shall be settled
by arbitration in accordance with the dispute resolution rules
of the Judicial Arbitration & Mediation Service ( JAMS ), and
judgment on the award rendered by the arbitrator(s) may be
rendered by any court having jurisdiction thereof. Employer
and Executive shall share the costs of the arbitrator equally
but shall each bear their own costs and legal fees associated
with the arbitration. The location of the arbitration shall
be in San Francisco, California.
In the event of a breach of any of the provisions
in Paragraph 6 of this Agreement, Executive or Employer
shall be entitled to institute proceedings in any court of
competent jurisdiction to obtain equitable relief,
including, but not limited to, specific performance or an
injunction against performance of any acts.
IN WITNESS WHEREOF, the undersigned have hereunto
caused this Agreement to be executed as of the day and year
first above written.
THE SAN FRANCISCO COMPANY
By: _____________________________
PAGE 11
BANK OF SAN FRANCISCO
By: _____________________________
EXECUTIVE:
_________________________________
Joanne Haakinson
PAGE 12
John F. McGrath
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered
into as of April ___, 1998, by and between The San Francisco
Company (the "Company"), Bank of San Francisco (the "Bank")
(collectively, the "Employer"), and JOHN F. MCGRATH
("Executive").
R E C I T A L S:
A. The Employer desires to continue to employ
Executive to serve as President, Chief Operating Officer,
Chief Credit Officer and Director of the Company and the
Bank, and the Boards of Directors of the Company and the
Bank have approved the Employer's employment of Executive.
B. Executive hereby accepts such employment on the
terms and conditions set forth in this Agreement.
A G R E E M E N T:
1. Agreement to Employ. Subject to the terms
and conditions contained herein, the Employer hereby employs
Executive and Executive hereby accepts employment by the
Employer.
2. Term of Employment. Subject to the
provisions of section 8, below, Executive s employment
shall be for a period of three (3) years from the date of
this Agreement and will requireend on the third anniversary of the
date hereof (the Third Anniversary ). The term of this
Agreement will be extended on the second anniversary hereof
and will roll forward on a month-to-month basis so that
twelve (12) months continuously remain in the Agreement term
unless or until (A) a Change of Control occurs, or (B) any
successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise)party to this Agreement notifies the other parties that it
does not agree to extend the term of this Agreement. Such
written notification must be provided to all parties at
least one (1) month in advance of termination date. If
Executive chooses not to extend the term of this Agreement
and gives the applicable one (1) month notice, Executive
will be deemed to have voluntarily terminated and will be
entitled only to the benefits described in Section 9.e.,
below. If Employer chooses not to extend the term of this
Agreement and gives the applicable one (1) month notice,
Executive will be deemed to have been terminated without
cause and will be entitled only to the benefits described
in Section 9.d., below. For purposes of this Agreement, the
term Change of Control shall mean a sale to a third party
of a majority interest in, or substantially all of the
business or assets of, the Company or the Bank, but the term Change of
Control shall not include (A) a transfer of shares to any
voting trust or similar custodial arrangement, or (B) a
transaction in which Executive participates as a principal
or with any direct or indirect equity interest, whether
contingent or otherwise.
PAGE 1
3. Position and Duties/Authority of Executive.
During the term of this Agreement, Executive shall hold the
positions of President, Chief Operating Officer, Chief
Credit Officer and Director of the Company and the Bank.
Executive shall perform such additional duties and
responsibilities, consistent with the foregoing positions as
may be assigned to Executive from time to time by the
respective Boards of Directors of the Employer acting with
reasonable discretion and in accord with the scope of this
Agreement.
4. Place of Employment. Executive's principal
place of employment shall be 550 Montgomery Street, San
Francisco, California. While discharging his duties and
responsibilities hereunder, Executive may be required to
travel from time to time and, as a result, be temporarily
absent from his place of employment.
5. Devotion of Time to Business. Except as
provided below, Executive shall devote his best efforts and
ability, and attention to the business and affairs of the
Employer and to performing the duties and responsibilities
set forth herein on behalf of the Employer. Notwithstanding
any language herein to the contrary, Executive shall be
entitled to devote time to charitable, political and civic
activities and speaking engagements, and Executive shall be
permitted to serve on the boards of directors of other
companies which do not directly compete with the Employer
provided such activities do not have a material, adverse
effect on Executive's performance hereunder.
6. Confidential Information/Trade Secrets.
a. In performing his duties under this
Agreement, Executive will have access to and become
acquainted with information concerning the Employer's
operations, including financial, personnel, marketing, and
other information and customer lists that are owned by the
Employer and regularly used in the Employer's business, and
such information is confidential and constitutes trade
secrets of the Employer.
b. Executive will not misuse, misappropriate, or
disclose any such trade secrets, directly or indirectly, to
any other person, or use them in any way, except as required
in the course of his employment hereunder.
c. The unauthorized use or disclosure of any of
the Employer's confidential information/trade secrets
(including without limitation information concerning current
or future proposed work, services, or products, the fact
that any such work, services, or products are planned, under
consideration, or in use, and any descriptions thereof)
constitute unfair competition.
PAGE 2
d. Any violation by Executive of any of the
provisions of this paragraph would result in irreparable
injury to the Employer, and the Employer shall be entitled
to injunctive relief to prevent or terminate such violation.
e. This paragraph shall not apply to any
information that becomes generally known to or available for
use by the public other than as a result of Executive's
acts.
f. The covenants set forth in this paragraph
shall survive termination of this Agreement for a period of
one year; provided, however, that with respect to the
Employer's customer lists and relationships, such period
shall be two years.
7. Compensation to Executive.
a. Salary and Benefits. Subject to the terms
and conditions contained herein, throughout the term of this
Agreement, Executive shall be entitled to receive the
following salary and benefits from the Employer:
i) Annual Base Salary. The Employer shall
pay to Executive as compensation for his services an
Annual Base Salary of One Hundred and Seventy Thousand
Dollars ($170,000) in such intervals as other salaried
executives of the Employer are presently paid (but in
no case less frequently than monthly). The Annual Base
Salary shall be paid subject to all federal, state and
local rules for payment, deduction and withholding of
taxes. The Annual Base Salary shall be reassessed
annually by the Boards of Directors of Company and the
Bank at which time the Boards may, in their sole
discretion, vote to increase the Annual Base Salary.
ii) Annual Performance Bonus. For each
calendar year, Executive and the Boards of Directors of
the Company and the Bank shall establish reasonable
goals for such year performance against which will
result in a bonus payable to Executive from 0% to 100%
of his Annual Base Salary in cash. With respect to the
Bank, such goals shall be based upon positive
performance criteria as measured by achievement of
annually-set objectives.
iii) Completion Incentive. On the Third
Anniversary, provided that Executive is then employed
pursuant to this Agreement (whether or not such
employment terminates on the Third Anniversary), the
Employer shall pay Executive a Completion Incentive
in the amount of one (1) year of the then Annual Base
Salary, provided further, however, that (A) such
Incentive payment shall be subject to applicable
statutory or regulatory restrictions, and (B) no such
Incentive payment shall be made unless the Bank and
Company maintain a CAMEL 2 or satisfactory or better
(or equivalent) regulatory rating. If, upon payment of
the Completion Incentive, it appears that Executive s
employment with Employer will continue for an
additional period of years, the parties will negotiate
in good faith the terms of an additional retention
bonus.
PAGE 3
b. Retirement Plan. The Employer shall provide
Executive with retirement benefits, including any Section
401(k) Plan, under which the Employer provides retirement or
similar benefits to the other Company or Bank employees.
The Company currently sponsors The San Francisco Company
401(k) Plan.
c. Benefits. The Employer shall, during the
term of this Agreement, make available to Executive the
following:
i) insurance coverage and benefits
according to its existing health plans;
ii) group term life insurance or other term
life insurance in an amount equal to four (4) times
Executive s Annual Base Salary, accidental death and
dismemberment insurance, and long-term group disability
insurance, and
iii) vacation of four weeks per year.
d. Expense Account. The Employer will require
Executive to incur travel, lodging, meal, entertainment, and
similar expenses. The Employer shall advance or promptly
reimburse Executive for all expenses reasonably incurred by
Executive in the performance of his duties for which
Executive furnishes the Employer with adequate records and
other documentary evidence as required by applicable federal
and state laws and regulations.
e. Stock Options.
i) The Board of Directors of the Company
has adopted an Executive Stock Option Plan (the "Stock
Plan") under which Executive has received anti-dilutive
options to purchase shares of the Company's Class A
Common Stock and for which there is a separate Stock
Option Agreement. Two-thirds of these options have
vested and one-third of these options is scheduled to
vest on November 27, 1998.
ii) Additional options (the "anti-dilution
options") shall be granted to Executive from time to
time at the then current fair market value and in such
amounts as to assure that Executive's anti-dilutive
options and shares previously issued to Executive upon
the exercise of such options will comprise not less
than one percent (1%) of the fully diluted number of
shares of all classes of the Company's Common Stock
(i.e., the sum of the number of shares of all classes
of Common Stock issued and outstanding, plus the number
of shares of all classes of Common Stock subject to
options, warrants, conversion rights and all other
outstanding rights to purchase any class of shares of
Common Stock). Such additional options shall be
granted at the fair market value at the date of grant
and shall be calculated pursuant to the methodology
adopted by the Board of Directors of the Company at its
February 11, 1998, meeting. Vested options granted on
account of options, warrants, conversion rights or
other rights to purchase Common Stock shall not be
exercisable unless and until Common Stock is issued
upon the exercise of such rights. The Company shall
have no obligation to grant Executive any antidilution
options with respect to any dilutive events occurring
after the completion of the next public offering by the
Company of its Common Stock.
PAGE 4
iii) In addition to the anti-dilutive options
referred to in sections 7e i) and ii), above, the
Company s Board of Directors may, in its sole
discretion, award Executive additional options under
the Stock Plan not subject to anti-dilutive treatment.
f. Other Benefits. The Employer shall provide
Executive with such other pension, health and welfare
benefits as it may from time to time offer to other senior
executives in the ordinary course of its business, or as may
be reasonably required or necessary for him to perform his
duties.
8. Termination.
a. Termination by the Employer for Cause. The
Employer may terminate Executive's employment at any time
for "cause." For the purpose of the Employer's termination
of this Agreement, the term "cause" shall include any of the
following:
i) Adjudication of Executive's guilt in
connection with the commission of a felony or a
misdemeanor involving moral turpitude (excluding
traffic violations);
ii) Good faith finding by the Employer's
Boards of Directors of Executive's theft, conversion,
misappropriation, or embezzlement of any assets of the
Employer;
iii) Executive's (A) habitual neglect of his
duties, (B) failure to obey the lawful direction of the
Boards of Directors of the Employer that do not
contravene regulations or regulatory policies,
guidelines, agreements or orders, or (C) conduct that
has a direct, substantial and adverse effect on the
Employer's reputation, in each case, after written
notice and adequate opportunity to cure any such
asserted neglect, failure or conduct; or
iv) Good faith finding by the Employer's
Boards of Directors that Executive's performance of his
duties resulted in a material deterioration in the
condition of the Company or the Bank, provided that
such deterioration is not the result of conditions
either existing on the date of Executive's employment
or external to the Company and the Bank and beyond
Executive's control.
PAGE 5
b. Termination without Cause.
The Employer may terminate Executive's
employment without "cause" at any time subject only to the
provisions of this Agreement. A without cause termination
may include, but is not limited to, a termination upon a
Change of Control.
c. Termination for Death. Executive's
employment shall terminate upon Executive's death.
d. Termination for Disability. The Employer
may, to the extent permitted by law, terminate Executive's
employment upon the disability of Executive. As used
herein, the term "disability" shall mean sickness or
physical or mental disability that renders Executive unable
to perform a substantial portion of his duties under this
Agreement for an aggregate period of more than ninety (90)
days in any twelve (12) month period.
e. Notice of Termination. If the Employer
desires to terminate Executive's employment under this
Agreement, whether or not for cause, the Employer shall
deliver a notice of termination in writing to Executive (the
"Notice of Termination"). The Notice of Termination shall
specify whether the termination is (A) for cause (in which
case the conduct of Executive or the Employer giving rise to
the termination shall be specified), (B) for death, (C) for
disability or (D) without cause. The Notice of Termination
shall specify an effective date of termination (the
"Termination Date") on or after the date notice is given.
9. Effect of Termination. Upon the termination of
this Agreement by either party, the parties shall comply
with the following obligations and duties:
a. Termination for Cause. If the Employer
terminates Executive's employment for cause:
i) Annual Base Salary. The Employer shall
on the Termination Date pay Executive Executive's
Annual Base Salary through the Termination Date.
ii) Reimbursement Expenses. The Employer
shall, on the Termination Date, pay Executive all
reimbursable expenses for which expense reports have
been provided to the Employer in accordance with the
Employer's policy.
PAGE 6
iii) Annual Performance Bonus. Executive is
not entitled to be paid any bonus for any months served
during the current Bonus Plan Year. Executive is not
eligible to receive any bonus payment if terminated for
cause.
iv) Vesting of Stock Options. All of the
stock options granted to Executive which have vested
shall be exercisable in accordance with paragraph 7.e,
the Stock Plan, and Stock Option Agreement.
b. Termination for Death. If Executive's
employment is terminated as a result of Executive's death:
i) Annual Base Salary. The Employer's
obligation to pay Executive's salary shall terminate
upon his death.
ii) Reimbursable Expenses. The Employer
shall, within thirty (30) days following the date of
Executive's death, pay Executive's estate all
reimbursable expenses for which expense reports have
been provided to the Employer in accordance with the
Employer's policy.
iii) Annual Performance Bonus. The Employer
shall, within thirty (30) days following the date of
death, pay Executive's estate Executive's Annual
Performance Bonus at a rate of fifty percent (50%) of
Bonus Plan prorated by the number of full months served
during the current Bonus Plan year.
iv) Vesting of Stock Options. All of the
stock options granted to Executive which are vested
shall be exercisable by Executive's estate in
accordance with paragraph 7.e, the Stock Plan, and the
Stock Option Agreement.
c. Termination for Disability.
i) Annual Base Salary. The Employer shall
pay Executive Executive's Annual Base Salary through
Termination Date.
ii) Reimbursable Expenses. The Employer
shall, within thirty (30) days following the
Termination Day, pay Executive all reimbursable
expenses for which expense reports have been provided
to the Employer in accordance with the Employer's
policy.
iii) Annual Performance Bonus. The Employer
shall, within thirty (30) days following the
Termination Date, pay Executive Executive's Annual
Performance Bonus at a rate of fifty percent (50%) of
Bonus Plan prorated by the number of full months served
during the current Bonus Plan year.
PAGE 7
iv) Vesting of Stock Options. All of the
stock options granted to Executive which are vested
shall be exercisable in accordance with paragraph 7.e,
the Stock Plan, and the Stock Option Agreement.
d. Termination without Cause. If the Employer
terminates Executive's employment without cause:
i) Annual Base Salary and Separation Pay.
The Employer shall, on the Termination Date, pay
Executive his Annual Base Salary through the
Termination Date. In addition, the Employer shall, on
the Termination Date, pay Executive an additional one
(1) year of the then current Annual Base Salary, as
separation pay.
ii) In addition to the one (1) year
separaton pay described in section d.(i) above, in the
event of a termination without cause before the Third
Anniversary, and following a Change of Control,
Employer shall pay Executive an additional one (1) year
of the then current Annual Base Salary. In the event
of a termination without cause before the Third
Anniversary but not following a Change of Control,
Employer shall pay Executive a prorated portion of his
then Annual Base Salary, such amount prorated based on
the number of years of the initial three year term of
employment which Executive has served (Prorated
Separation Pay), provided that if such termination
occurs during the first year, Employer shall pay
Executive one-third of the then Annual Base Salary.
For example, (A) if Executive is terminated without
cause within or upon one year of employment under this
Agreement, in addition to the one (1) year separation
pay described in section d.(i), above, Employer shall
pay Executive one-third of the then current Annual Base
Salary and (B) if Executive is terminated without cause
after 18 months of employment under this Agreement, in
addition to the one (1) year separation pay described
in section d.(i) above, Employer shall pay Executive
one-half of the then current Annual Base Salary. If
Executive is terminated without cause after the Third
Anniversary, he is not entitled to any payment under
this section d.(ii) but shall only be entitled to the
payment under section d.(i).
iii) Reimbursable Expenses. The Employer
shall, within thirty (3) days following the Termination
Date, pay Executive all reimbursable expenses for which
expense reports have been provided to the Employer in
accordance with the Employer's policy.
iv) Annual Performance Bonus. The Employer
shall, within thirty (30) days following the
Termination Date, pay Executive Executive's Annual
Performance Bonus at a rate of one hundred percent
(100%) of Bonus Plan prorated by the number of full
months served during the current Bonus Plan year.
PAGE 8
v) Vesting of Stock Options. All of the
stock options granted to Executive shall be exercisable
in accordance with paragraph 7.e, the Stock Option
Agreement, and the Stock Plan.
e. Voluntary Termination by Executive. If
Executive terminates this Agreement voluntarily:
i) Annual Base Salary. The Employer shall,
within three (3) days following the Termination Date,
pay Executive Executive's Annual Base Salary through
the Termination Date.
ii) Reimbursable Expenses. The Employer
shall, within thirty (30) days following the
Termination Date, pay Executive all reimbursable
expenses for which expense reports have been provided
to the Employer in accordance with the Employer's
policy.
iii) Vesting of Stock Options. All of the
stock options granted to Executive which have vested
shall be exercisable in accordance with paragraph 7.e,
the Stock Plan, and the Stock Option Agreement.
10. Indemnification of Executive.
a. Pre-Execution Actions and Events.
Notwithstanding any other provision to the contrary
contained in this Agreement in addition to any rights
Executive has under any individual indemnification
agreements, the Employer shall indemnify, defend at its
expense, and hold Executive entirely harmless against and
from any claim, demand, cause of action, judgment, loss,
liability, damage, cost or expense whatsoever, including
without limitation reasonable attorneys' fees, which
Executive may suffer, sustain, incur or otherwise become
subject to either directly or indirectly as a result of any
claim, controversy, dispute, legal action or proceeding
whatsoever arising from actions taken by the Employer or
events relating to the business of the Bank or the Company
occurring prior to the execution of this Agreement.
b. Post-Execution Actions and Events.
Notwithstanding any other provision to the contrary
contained in this Agreement, but subject to an individual
indemnification agreement already approved by the Board of
Directors on February 11, 1998, the Employer shall
indemnify, defend at its expense, and hold Executive
entirely harmless against and from any claim, demand, cause
of action, judgment, loss, liability, damage, cost or
expense whatsoever, including without limitation reasonable
attorneys' fees, which Executive may suffer, sustain, incur
or otherwise become subject to either directly or indirectly
as a result of any claim, controversy, dispute, legal action
or proceeding whatsoever arising from actions taken by the
Employer or events relating to the business of the Bank or
the Company occurring subsequent to the execution of this
Agreement, other than any such claim, demand, cause of
action, judgment, loss, liability, damage, cost or expense
whatsoever which is directly and substantially due to
Executive's misconduct or gross negligence. Notwithstanding
the foregoing, in any administrative proceeding or civil
action initiated by any federal banking agency, the Bank or
the Company may only reimburse, indemnify or hold harmless
Executive if the Bank is in compliance with any applicable
statute, rule, regulation or policy of the Federal Deposit
Insurance Corporation, Federal Reserve Board, or the
California Department of Financial Institutions regarding
permissible indemnification payments.
PAGE 9
c. Payment of expenses. In the event the
Employer is obligated hereunder to assumedefend and indemnify
Executive and in the event Executive is required to retain
independent legal counsel, other experts or professionals or
should incur any cost himself in connection with Paragraph
10.b. above, the Employer shall promptly pay such expenses
as incurred.
d. Survival of Indemnification. The obligations
of the Employer under this paragraph 10 to indemnify
Executive shall survive the expiration or termination of
this Agreement.
11. Insurance. The Employer agrees to make reasonable
efforts to maintain director's and officer's liability
insurance in an amount of not less than $5,000,000 for each
occurrence for the benefit of Executive.
12. General provisions.
a. Binding on Successors. Subject to any
restrictions stated in any other provision of this
Agreement, this Agreement shall be binding on and shall
inure to the benefit of the parties and their respective
successors and assigns.
b. Partial Invalidity/Severability. Should any
of the provisions of this Agreement be held to be invalid or
unenforceable, such invalidity or unenforceability shall not
affect the validity or enforceability of any other provision
of this Agreement.
c. Entire Agreement. This Agreement contains
the entire agreement between the parties with respect to the
subject matter of this Agreement and supersedes all prior
oral or written understandings and agreements, excluding the
Stock Option Plan, the Stock Option Agreement and any
individual indemnification agreement.
d. Amendments; Waivers. No provision of this
Agreement may be changed, waived, modified, discharged or
terminated, except by a written instrument executed by the
parties hereto.
e. Notices. Any notice to be given under this
Agreement shall be in writing and shall be deemed effective
only when hand-delivered or when delivered by overnight
courier, or three (3) days after the date postmarked if sent
by certified or registered mail, postage prepaid, return
receipt requested, addressed as follows:
PAGE 10
If to the Employer:
The San Francisco Company &
Bank of San Francisco
550 Montgomery Street
San Francisco, California 94111
Attn: Boards of Directors
If to Executive:
John F. McGrath
470 Crocker Road
Sacramento, CA 95864
f. Attorney's Fees and Costs. The Employer
shall bear all of the Corporation's obligations undercosts and expenses, including
attorney's fees, incurred by both parties in the negotiation
and drafting of this Agreement. Such assumption
willIn the event of a dispute
regarding this Agreement, the prevailing party in any
arbitration or litigation shall be entitled to its
reasonable legal fees and costs.
g. Governing Law. This Agreement shall be
construed and enforced in accordance with the laws of the
State of California.
h. Title and Headings. Title and headings to
paragraphs, subparagraphs and sub-subparagraphs of this
Agreement are for the purpose of reference only and shall
not releaseaffect the Corporation from its obligations underinterpretation of this Agreement.
17. Severability.i. Regulatory Approval. This Agreement is
subject to and shall not become effective until any required
approval or non-disapproval of the Federal Reserve Bank.
j. Resolution of disputes. With the exception of
an action for equitable relief arising from a breach of any
provisions of Paragraph 6 a-f, above, any controversy between
Executive and Employer or between Executive and any employee
of Employer arising out of or related to Executive s
employment with Employer, including, but not limited to claims
of race, age, gender, religious, or national origin
discrimination under federal, state or local laws and those
involving the construction or application of any of the terms,
provisions or conditions of this Agreement, shall be settled
by arbitration in accordance with the dispute resolution rules
of the Judicial Arbitration & Mediation Service ( JAMS ), and
judgment on the award rendered by the arbitrator(s) may be
rendered by any court having jurisdiction thereof. Employer
and Executive shall share the costs of the arbitrator equally
but shall each bear their own costs and legal fees associated
with the arbitration. The location of the arbitration shall
be in San Francisco, California.
PAGE 11
In the event of a breach of any of the provisions
in Paragraph 6 of this Agreement, Executive or Employer
shall be entitled to institute proceedings in any court of
competent jurisdiction to obtain equitable relief,
including, but not limited to, specific performance or an
injunction against performance of any acts.
IN WITNESS WHEREOF, the undersigned have hereunto
caused this Agreement to be executed as of the day and year
first above written.
THE SAN FRANCISCO COMPANY
By: _____________________________
BANK OF SAN FRANCISCO
By: _____________________________
EXECUTIVE:
_________________________________
John F. McGrath
PAGE 12
Keary Colwell
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered
into as of April ___, 1998, by and between The San Francisco
Company (the "Company"), Bank of San Francisco (the "Bank")
(collectively, the "Employer"), and Keary Colwell
("Executive").
R E C I T A L S:
A. The Employer desires to continue to employ
Executive to serve as Executive Vice President and Chief
Financial Officer for the Company and the Bank, and the
Boards of Directors of the Company and the Bank have
approved the Employer's employment of Executive.
B. Executive hereby accepts such employment on the
terms and conditions set forth in this Agreement.
A G R E E M E N T:
1. Agreement to Employ. Subject to the terms
and conditions contained herein, the Employer hereby employs
Executive and Executive hereby accepts employment by the
Employer.
2. Term of Employment. Subject to the
provisions of section 8, below, Executive s employment
shall be for a period of three (3) years from the date of
this Agreement and will end on the third anniversary of the
date hereof (the Third Anniversary ). The term of this
Agreement will be deemed severable,extended on the second anniversary hereof
and ifwill roll forward on a month-to-month basis so that
twelve (12) months continuously remain in the Agreement term
unless or until (A) a Change of Control occurs, or (B) any
partparty to this Agreement notifies the other parties that it
does not agree to extend the term of any provision is held illegal, void or
invalid under applicable law, such provision maythis Agreement. Such
written notification must be changedprovided to all parties at
least one (1) month in advance of termination date. If
Executive chooses not to extend the extent
reasonably necessary to make the provision, as so changed, legal, valid and
binding. If any provisionterm of this Agreement
is held illegal, void or
invalidand gives the applicable one (1) month notice, Executive
will be deemed to have voluntarily terminated and will be
entitled only to the benefits described in its entirety,Section 9.e.,
below. If Employer chooses not to extend the remaining provisionsterm of this
Agreement and gives the applicable one (1) month notice,
Executive will notbe deemed to have been terminated without
cause and will be entitled only to the benefits described
in any way be affected or impaired but will remain binding in
accordance with their terms.
18. Notices. All notices given underSection 9.d., below. For purposes of this Agreement, willthe
term Change of Control shall mean a sale to a third party
of a majority interest in, or substantially all of the
assets of, the Company or the Bank, but the term Change of
Control shall not include (A) a transfer of shares to any
voting trust or similar custodial arrangement, or (B) a
transaction in which Executive participates as a principal
or with any direct or indirect equity interest, whether
contingent or otherwise.
PAGE 1
3. Position and Duties/Authority of Executive.
During the term of this Agreement, Executive shall hold the
positions of Executive Vice President and Chief Financial
Officer for the Company and the Bank. Executive shall
perform such additional duties and responsibilities,
consistent with the foregoing positions as may be assigned
to Executive from time to time by the respective Boards of
Directors of the Employer acting with reasonable discretion
and in writing and delivered either personally, by registered or certified mail
(return receipt requested, postage prepaid), by recognized overnight
courier or by telecopy (if promptly followed by a copy delivered
personally, by registered or certified mail or overnight courier), as
follows:
page 9
If toaccord with the Officer: _______________________
_______________________
_______________________
If to the Corporation: The San Francisco Companyscope of this Agreement.
4. Place of Employment. Executive's principal
place of employment shall be 550 Montgomery Street, San
Francisco, CA 94111
Attn.: ChiefCalifornia. While discharging her duties and
responsibilities hereunder, Executive Officermay be required to
travel from time to time and, as a result, be temporarily
absent from her place of employment.
5. Devotion of Time to Business. Except as
provided below, Executive shall devote her best efforts and
ability, and attention to the business and affairs of the
Employer and to performing the duties and responsibilities
set forth herein on behalf of the Employer. Notwithstanding
any language herein to the contrary, Executive shall be
entitled to devote time to charitable, political and civic
activities and speaking engagements, and Executive shall be
permitted to serve on the boards of directors of other
companies which do not directly compete with the Employer
provided such activities do not have a material, adverse
effect on Executive's performance hereunder.
6. Confidential Information/Trade Secrets.
a. In performing her duties under this
Agreement, Executive will have access to and become
acquainted with information concerning the Employer's
operations, including financial, personnel, marketing, and
other information and customer lists that are owned by the
Employer and regularly used in the Employer's business, and
such information is confidential and constitutes trade
secrets of the Employer.
b. Executive will not misuse, misappropriate, or
disclose any such trade secrets, directly or indirectly, to
any other person, or use them in any way, except as required
in the course of her employment hereunder.
c. The unauthorized use or disclosure of any of
the Employer's confidential information/trade secrets
(including without limitation information concerning current
or future proposed work, services, or products, the fact
that any such work, services, or products are planned, under
consideration, or in use, and any descriptions thereof)
constitute unfair competition.
d. Any violation by Executive of any of the
provisions of this paragraph would result in irreparable
injury to the Employer, and the Employer shall be entitled
to injunctive relief to prevent or terminate such violation.
PAGE 2
e. This paragraph shall not apply to any
information that becomes generally known to or available for
use by the public other addressthan as either party furnishesa result of Executive's
acts.
f. The covenants set forth in this paragraph
shall survive termination of this Agreement for a period of
one year; provided, however, that with respect to the
Employer's customer lists and relationships, such period
shall be two years.
7. Compensation to Executive.
a. Salary and Benefits. Subject to the terms
and conditions contained herein, throughout the term of this
Agreement, Executive shall be entitled to receive the
following salary and benefits from the Employer:
i) Annual Base Salary. The Employer shall
pay to Executive as compensation for her services an
Annual Base Salary of One Hundred and Twenty Thousand
Dollars ($120,000) in such intervals as other salaried
executives of the Employer are presently paid (but in
no case less frequently than monthly). The Annual Base
Salary shall be paid subject to all federal, state and
local rules for payment, deduction and withholding of
taxes. The Annual Base Salary shall be reassessed
annually by the Boards of Directors of Company and the
Bank at which time the Boards may, in their sole
discretion, vote to increase the Annual Base Salary.
ii) Annual Performance Bonus. For each
calendar year, Executive and the Boards of Directors of
the Company and the Bank shall establish reasonable
goals for such year performance against which will
result in a bonus payable to Executive from 0% to 50%
of her Annual Base Salary in cash. With respect to the
Bank, such goals shall be based upon positive
performance criteria as measured by achievement of
annually-set objectives.
iii) Completion Incentive. On the Third
Anniversary, provided that Executive is then employed
pursuant to this Agreement (whether or not such
employment terminates on the Third Anniversary), the
Employer shall pay Executive a Completion Incentive
in the amount of one (1) year of the then Annual Base
Salary, provided further, however, that (A) such
Incentive payment shall be subject to applicable
statutory or regulatory restrictions, and (B) no such
Incentive payment shall be made unless the Bank and
Company maintain a CAMEL 2 or satisfactory or better
(or equivalent) regulatory rating. If, upon payment of
the Completion Incentive, it appears that Executive s
employment with Employer will continue for an
additional period of years, the parties will negotiate
in good faith the terms of an additional retention
bonus.
PAGE 3
b. Retirement Plan. The Employer shall provide
Executive with retirement benefits, including any Section
401(k) Plan, under which the Employer provides retirement or
similar benefits to the other Company or Bank employees.
The Company currently sponsors The San Francisco Company
401(k) Plan.
c. Benefits. The Employer shall, during the
term of this Agreement, make available to Executive the
following:
i) insurance coverage and benefits
according to its existing health plans;
ii) group term life insurance or other term
life insurance in writing.
19. Counterparts.an amount equal to two (2) times
Executive s Annual Base Salary, accidental death and
dismemberment insurance, and long-term group disability
insurance, and
iii) vacation of four weeks per year.
d. Expense Account. The Employer will require
Executive to incur travel, lodging, meal, entertainment, and
similar expenses. The Employer shall advance or promptly
reimburse Executive for all expenses reasonably incurred by
Executive in the performance of her duties for which
Executive furnishes the Employer with adequate records and
other documentary evidence as required by applicable federal
and state laws and regulations.
e. Stock Options. The Board of Directors of the
Company has adopted an Executive Stock Option Plan (the
"Stock Plan") under which Executive has received and may in
the future receive option grants as a senior manager
pursuant to the direction of the Board of Directors.
f. Other Benefits. The Employer shall provide
Executive with such other pension, health and welfare
benefits as it may from time to time offer to other senior
executives in the ordinary course of its business, or as may
be reasonably required or necessary for her to perform her
duties.
8. Termination.
a. Termination by the Employer for Cause. The
Employer may terminate Executive's employment at any time
for "cause." For the purpose of the Employer's termination
of this Agreement, the term "cause" shall include any of the
following:
i) Adjudication of Executive's guilt in
connection with the commission of a felony or a
misdemeanor involving moral turpitude (excluding
traffic violations);
PAGE 4
ii) Good faith finding by the Employer's
Boards of Directors of Executive's theft, conversion,
misappropriation, or embezzlement of any assets of the
Employer;
iii) Executive's (A) habitual neglect of her
duties, (B) failure to obey the lawful direction of the
Boards of Directors of the Employer that do not
contravene regulations or regulatory policies,
guidelines, agreements or orders, or (C) conduct that
has a direct, substantial and adverse effect on the
Employer's reputation, in each case, after written
notice and adequate opportunity to cure any such
asserted neglect, failure or conduct; or
iv) Good faith finding by the Employer's
Boards of Directors that Executive's performance of her
duties resulted in a material deterioration in the
condition of the Company or the Bank, provided that
such deterioration is not the result of conditions
either existing on the date of Executive's employment
or external to the Company and the Bank and beyond
Executive's control.
b. Termination without Cause.
The Employer may terminate Executive's
employment without "cause" at any time subject only to the
provisions of this Agreement. A without cause termination
may include, but is not limited to, a termination upon a
Change of Control.
c. Termination for Death. Executive's
employment shall terminate upon Executive's death.
d. Termination for Disability. The Employer
may, to the extent permitted by law, terminate Executive's
employment upon the disability of Executive. As used
herein, the term "disability" shall mean sickness or
physical or mental disability that renders Executive unable
to perform a substantial portion of her duties under this
Agreement for an aggregate period of more than ninety (90)
days in any twelve (12) month period except in the case of a
pregnancy-related disability. If Executive is prevented
from properly performing her duties by reason of a
pregnancy-related disability for a period of more than one
hundred and twenty (120) days in the aggregate in any twelve
(12) month period, then to the extent permitted by law, her
employment shall terminate.
e. Notice of Termination. If the Employer
desires to terminate Executive's employment under this
Agreement, whether or not for cause, the Employer shall
deliver a notice of termination in writing to Executive (the
"Notice of Termination"). The Notice of Termination shall
specify whether the termination is (A) for cause (in which
case the conduct of Executive or the Employer giving rise to
the termination shall be specified), (B) for death, (C) for
disability or (D) without cause. The Notice of Termination
shall specify an effective date of termination (the
"Termination Date") on or after the date notice is given.
PAGE 5
9. Effect of Termination. Upon the termination of
this Agreement by either party, the parties shall comply
with the following obligations and duties:
a. Termination for Cause. If the Employer
terminates Executive's employment for cause:
i) Annual Base Salary. The Employer shall
on the Termination Date pay Executive Executive's
Annual Base Salary through the Termination Date.
ii) Reimbursement Expenses. The Employer
shall, on the Termination Date, pay Executive all
reimbursable expenses for which expense reports have
been provided to the Employer in accordance with the
Employer's policy.
iii) Annual Performance Bonus. Executive is
not entitled to be paid any bonus for any months served
during the current Bonus Plan Year. Executive is not
eligible to receive any bonus payment if terminated for
cause.
iv) Vesting of Stock Options. All of the
stock options granted to Executive which have vested
shall be exercisable in accordance with paragraph 7.e,
the Stock Plan, and Stock Option Agreement.
b. Termination for Death. If Executive's
employment is terminated as a result of Executive's death:
i) Annual Base Salary. The Employer's
obligation to pay Executive's salary shall terminate
upon her death.
ii) Prorated Death Benefit. Employer shall
pay Executive a prorated portion of her then Annual
Base Salary, such amount prorated based on the number
of years of the initial three year term of employment
which Executive has served as of the time of death,
provided that if her death occurs during the first
year, Employer shall pay Executive one-third of the
then Annual Base Salary. For example, (A) if Executive
dies within or upon one year of employment under this
Agreement, Employer shall pay Executive one-third of
the then current Annual Base Salary and (B) if
Executive dies after 18 months of employment under this
Agreement, Employer shall pay Executive one-half of the
then current Annual Base Salary. If Executive dies
after the Third Anniversary, she is not entitled to any
payment under this section b.(ii).
PAGE 6
iii) Reimbursable Expenses. The Employer
shall, within thirty (30) days following the date of
Executive's death, pay Executive's estate all
reimbursable expenses for which expense reports have
been provided to the Employer in accordance with the
Employer's policy.
iv) Annual Performance Bonus. The Employer
shall, within thirty (30) days following the date of
death, pay Executive's estate Executive's Annual
Performance Bonus at a rate of fifty percent (50%) of
Bonus Plan prorated by the number of full months served
during the current Bonus Plan year.
v) Vesting of Stock Options. All of the
stock options granted to Executive which are vested
shall be exercisable by Executive's estate in
accordance with paragraph 7.e, the Stock Plan, and the
Stock Option Agreement.
c. Termination for Disability.
i) Annual Base Salary. The Employer shall
pay Executive Executive's Annual Base Salary through
Termination Date.
ii) Reimbursable Expenses. The Employer
shall, within thirty (30) days following the
Termination Day, pay Executive all reimbursable
expenses for which expense reports have been provided
to the Employer in accordance with the Employer's
policy.
iii) Annual Performance Bonus. The Employer
shall, within thirty (30) days following the
Termination Date, pay Executive Executive's Annual
Performance Bonus at a rate of fifty percent (50%) of
Bonus Plan prorated by the number of full months served
during the current Bonus Plan year.
iv) Vesting of Stock Options. All of the
stock options granted to Executive which are vested
shall be exercisable in accordance with paragraph 7.e,
the Stock Plan, and the Stock Option Agreement.
d. Termination without Cause. If the Employer
terminates Executive's employment without cause:
i) Annual Base Salary and Separation Pay.
The Employer shall, on the Termination Date, pay
Executive her Annual Base Salary through the
Termination Date. In addition, the Employer shall, on
the Termination Date, pay Executive an additional one
(1) year of the then current Annual Base Salary, as
separation pay.
PAGE 7
ii) In addition to the one (1) year
separaton pay described in section d.(i) above, in the
event of a termination without cause before the Third
Anniversary, and following a Change of Control,
Employer shall pay Executive an additional one (1) year
of the then current Annual Base Salary. In the event
of a termination without cause before the Third
Anniversary but not following a Change of Control,
Employer shall pay Executive a prorated portion of her
then Annual Base Salary, such amount prorated based on
the number of years of the initial three year term of
employment which Executive has served (Prorated
Separation Pay), provided that if such termination
occurs during the first year, Employer shall pay
Executive one-third of the then Annual Base Salary.
For example, (A) if Executive is terminated without
cause within or upon one year of employment under this
Agreement, in addition to the one (1) year separation
pay described in section d.(i), above, Employer shall
pay Executive one-third of the then current Annual Base
Salary and (B) if Executive is terminated without cause
after 18 months of employment under this Agreement, in
addition to the one (1) year separation pay described
in section d.(i) above, Employer shall pay Executive
one-half of the then current Annual Base Salary. If
Executive is terminated without cause after the Third
Anniversary, she is not entitled to any payment under
this section d.(ii) but shall only be entitled to the
payment under section d.(i).
iii) Reimbursable Expenses. The Employer
shall, within thirty (3) days following the Termination
Date, pay Executive all reimbursable expenses for which
expense reports have been provided to the Employer in
accordance with the Employer's policy.
iv) Annual Performance Bonus. The Employer
shall, within thirty (30) days following the
Termination Date, pay Executive Executive's Annual
Performance Bonus at a rate of one hundred percent
(100%) of Bonus Plan prorated by the number of full
months served during the current Bonus Plan year.
v) Vesting of Stock Options. All of the
stock options granted to Executive shall be exercisable
in accordance with paragraph 7.e, the Stock Option
Agreement, and the Stock Plan.
e. Voluntary Termination by Executive. If
Executive terminates this Agreement voluntarily:
i) Annual Base Salary. The Employer shall,
within three (3) days following the Termination Date,
pay Executive Executive's Annual Base Salary through
the Termination Date.
ii) Reimbursable Expenses. The Employer
shall, within thirty (30) days following the
Termination Date, pay Executive all reimbursable
expenses for which expense reports have been provided
to the Employer in accordance with the Employer's
policy.
iii) Vesting of Stock Options. All of the
stock options granted to Executive which have vested
shall be exercisable in accordance with paragraph 7.e,
the Stock Plan, and the Stock Option Agreement.
PAGE 8
10. Indemnification of Executive.
a. Pre-Execution Actions and Events.
Notwithstanding any other provision to the contrary
contained in this Agreement in addition to any rights
Executive has under any individual indemnification
agreements, the Employer shall indemnify, defend at its
expense, and hold Executive entirely harmless against and
from any claim, demand, cause of action, judgment, loss,
liability, damage, cost or expense whatsoever, including
without limitation reasonable attorneys' fees, which
Executive may suffer, sustain, incur or otherwise become
subject to either directly or indirectly as a result of any
claim, controversy, dispute, legal action or proceeding
whatsoever arising from actions taken by the Employer or
events relating to the business of the Bank or the Company
occurring prior to the execution of this Agreement.
b. Post-Execution Actions and Events.
Notwithstanding any other provision to the contrary
contained in this Agreement, but subject to an individual
indemnification agreement already approved by the Board of
Directors on February 11, 1998, the Employer shall
indemnify, defend at its expense, and hold Executive
entirely harmless against and from any claim, demand, cause
of action, judgment, loss, liability, damage, cost or
expense whatsoever, including without limitation reasonable
attorneys' fees, which Executive may suffer, sustain, incur
or otherwise become subject to either directly or indirectly
as a result of any claim, controversy, dispute, legal action
or proceeding whatsoever arising from actions taken by the
Employer or events relating to the business of the Bank or
the Company occurring subsequent to the execution of this
Agreement, other than any such claim, demand, cause of
action, judgment, loss, liability, damage, cost or expense
whatsoever which is directly and substantially due to
Executive's misconduct or gross negligence. Notwithstanding
the foregoing, in any administrative proceeding or civil
action initiated by any federal banking agency, the Bank or
the Company may only reimburse, indemnify or hold harmless
Executive if the Bank is in compliance with any applicable
statute, rule, regulation or policy of the Federal Deposit
Insurance Corporation, Federal Reserve Board, or the
California Department of Financial Institutions regarding
permissible indemnification payments.
c. Payment of expenses. In the event the
Employer is obligated hereunder to defend and indemnify
Executive and in the event Executive is required to retain
independent legal counsel, other experts or professionals or
should incur any cost herself in connection with Paragraph
10.b. above, the Employer shall promptly pay such expenses
as incurred.
d. Survival of Indemnification. The obligations
of the Employer under this paragraph 10 to indemnify
Executive shall survive the expiration or termination of
this Agreement.
11. Insurance. The Employer agrees to make reasonable
efforts to maintain director's and officer's liability
insurance in an amount of not less than $5,000,000 for each
occurrence for the benefit of Executive.
PAGE 9
12. General provisions.
a. Binding on Successors. Subject to any
restrictions stated in any other provision of this
Agreement, this Agreement shall be binding on and shall
inure to the benefit of the parties and their respective
successors and assigns.
b. Partial Invalidity/Severability. Should any
of the provisions of this Agreement be held to be invalid or
unenforceable, such invalidity or unenforceability shall not
affect the validity or enforceability of any other provision
of this Agreement.
c. Entire Agreement. This Agreement contains
the entire agreement between the parties with respect to the
subject matter of this Agreement and supersedes all prior
oral or written understandings and agreements, excluding the
Stock Option Plan, the Stock Option Agreement and any
individual indemnification agreement.
d. Amendments; Waivers. No provision of this
Agreement may be signedchanged, waived, modified, discharged or
terminated, except by a written instrument executed by the
parties hereto.
e. Notices. Any notice to be given under this
Agreement shall be in counterparts.writing and shall be deemed effective
only when hand-delivered or when delivered by overnight
courier, or three (3) days after the date postmarked if sent
by certified or registered mail, postage prepaid, return
receipt requested, addressed as follows:
If to the Employer:
The San Francisco Company &
Bank of San Francisco
550 Montgomery Street
San Francisco, California 94111
Attn: Boards of Directors
If to Executive:
Keary Colwell
6700 Exeter Drive
Oakland, CA 94611
f. Attorney's Fees and Costs. The Employer
shall bear all of the costs and expenses, including
attorney's fees, incurred by both parties in the negotiation
and drafting of this Agreement. In the event of a dispute
regarding this Agreement, the prevailing party in any
arbitration or litigation shall be entitled to its
reasonable legal fees and costs.
PAGE 10
g. Governing Law. This Agreement shall be
construed and enforced in accordance with the laws of the
State of California.
h. Title and Headings. Title and headings to
paragraphs, subparagraphs and sub-subparagraphs of this
Agreement are for the purpose of reference only and shall
not affect the interpretation of this Agreement.
i. Regulatory Approval. This Agreement is
subject to and shall not become effective until any required
approval or non-disapproval of the Federal Reserve Bank.
j. Resolution of disputes. With the exception of
an action for equitable relief arising from a breach of any
provisions of Paragraph 6 a-f, above, any controversy between
Executive and Employer or between Executive and any employee
of Employer arising out of or related to Executive s
employment with Employer, including, but not limited to claims
of race, age, gender, religious, or national origin
discrimination under federal, state or local laws and those
involving the construction or application of any of the terms,
provisions or conditions of this Agreement, shall be settled
by arbitration in accordance with the dispute resolution rules
of the Judicial Arbitration & Mediation Service ( JAMS ), and
judgment on the award rendered by the arbitrator(s) may be
rendered by any court having jurisdiction thereof. Employer
and Executive shall share the costs of the arbitrator equally
but shall each bear their own costs and legal fees associated
with the arbitration. The location of the arbitration shall
be in San Francisco, California.
In the event of a breach of any of the provisions
in Paragraph 6 of this Agreement, Executive or Employer
shall be entitled to institute proceedings in any court of
competent jurisdiction to obtain equitable relief,
including, but not limited to, specific performance or an
injunction against performance of any acts.
IN WITNESS WHEREOF, the partiesundersigned have executedhereunto
caused this Agreement onto be executed as of the dateday and year
first written above.above written.
THE SAN FRANCISCO COMPANY
______________________________
By: __________________________
Its:___________________________
OFFICER
______________________________
page 10_____________________________
BANK OF SAN FRANCISCO
By: _____________________________
PAGE 11
EXECUTIVE:
_________________________________
Keary Colwell
PAGE 12