Exhibit 10.39

FIRST NATIONAL BANK OF NORTHERN CALIFORNIA

SPLIT DOLLAR LIFE INSURANCE AGREEMENT

          THIS SUPPLEMENTAL LIFE INSURANCE AGREEMENT (the “Agreement”) is
adopted this 1st day of January, 2008, by and between FIRST NATIONAL BANK OF
NORTHERN CALIFORNIA, a bank located in South San Francisco, California (the
“Bank”), and DAVID A. CURTIS (the “Executive”).

          The purpose of this Agreement is to retain and reward the Executive,
by dividing the death proceeds of certain life insurance policies which are
owned by the Bank on the life of the Executive with the designated beneficiary
of the Executive. The Bank will pay the life insurance premiums from its general
assets.

          Death proceeds payable under this Agreement shall be paid solely by
the Insurer from the proceeds of any Policy(ies) on the life of the Insured. In
no event shall the Bank be obligated to pay a death benefit under this Agreement
from its general funds. Should an Insurer refuse or be unable to pay death
proceeds endorsed to Insured under the express terms of this Agreement, or
should the Bank cancel the Policy(ies) for any reason, Executive’s
Beneficiary(ies) shall not be entitled to a death benefit.

Article 1
Definitions

 

 

 

Whenever used in this Agreement, the following terms shall have the meanings
specified:

 

 

1.1

“Bank’s Interest” means the benefit set forth in Section 2.1.

 

 

1.2

“Beneficiary” means each designated person, or the estate of the deceased
Executive, entitled to benefits, if any, upon the death of the Executive.

 

 

1.3

“Beneficiary Designation Form” means the form established from time to time by
the Plan Administrator that the Executive completes, signs and returns to the
Plan Administrator to designate one or more Beneficiaries.

 

 

1.4

“Board” means the Board of Directors of the Bank as from time to time
constituted.

 

 

1.5

“Effective Date” shall mean January 1, 2008.

 

 

1.6

“Executive’s Interest” means the benefit set forth in Section 2.2.

 

 

1.7

“Insurer” means the insurance company issuing the Policy on the life of the
Executive.

 

 

1.8

“Net Death Proceeds” means the total death proceeds of the Policy minus the
greater of

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(i) the cash surrender value or (ii) the aggregate premiums paid by the Bank.

 

 

1.9

“Normal Retirement Age” means the Executive attaining age 65.

 

 

1.10

“Policy” or “Policies” means the individual insurance policy or policies adopted
by the Bank for purposes of insuring the Executive’s life under this Agreement.

 

 

1.11

“Separation from Service” shall mean that the Executive’s service, as an
employee and independent contractor, to the Bank and any member of a controlled
group as defined in Section 414 of the Code to which the Bank belongs, has
terminated for any reason, other than by reason of a leave of absence approved
by the Bank or the death of the Executive.

Article 2
Policy Ownership/Interests/Insurer/Assignment

 

 

2.1

Bank’s Interest. The Bank shall own the Policies and shall have the right to
exercise all incidents of ownership, including the right to terminate the
Policy(ies) without the consent of the Executive. The Bank shall be the
beneficiary of the remaining death proceeds of the Policies after the
Executive’s Interest is determined according to Section 2.2 below.

 

 

2.2

Executive’s Interest. Upon Executive’s death prior to a Separation from Service,
the Executive, or the Executive’s assignee, shall have the right to designate
the Beneficiary of One Million Eight Hundred Thirty-Seven Thousand Nine Hundred
and Eleven Dollars ($1,837,911), not to exceed the Net Death Proceeds of the
Policy. The Executive shall also have the right to elect and change settlement
options with respect to the Executive’s Interest by providing written notice to
the Bank and the Insurer, provided such change to settlement options is not in
conflict with Section 409A of the Internal Revenue Code of 1986, as amended (the
“Code”). Executive shall not have an interest in the Policy upon a Separation
from Service.

 

 

2.3

Offer to Purchase. If the Bank discontinues a Policy during the course of this
Agreement, the Bank shall give the Executive at least thirty (30) days to
purchase such Policy. The purchase price shall be the fair market value of the
Policy, as determined under Treasury Reg. §1.61-22(g)(2) or any subsequent
applicable authority. Such notification shall be in writing.

 

 

2.4

Insurer. The Insurer shall be bound only by the terms of the Policy. Any
payments the Insurer makes or actions it takes in accordance with the Policy
shall fully discharge it from all claims, suits and demands of all entities or
persons. The Insurer shall not be bound by or be deemed to have notice of the
provisions of this Agreement.

 

 

2.5

Assignment. The Executive may assign without consideration all of the
Executive’s interests in the Policy and in this Agreement to any person, entity
or trust. In the event the Executive transfers all of the Executive’s interest
in the Policy, then all of the Executive’s interest in the Policy and in the
Agreement shall be vested in the Executive’s transferee, who shall be
substituted as a party hereunder and the Executive shall have no further
interest in the Policy or in this Agreement.

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Article 3
Premiums and Imputed Income

 

 

3.1

Premium Payment. The Bank shall pay all premiums due on all Policies.

 

 

3.2

Economic Benefit. The Bank shall determine the economic benefit attributable to
the Executive based on the life insurance premium factor for the Executive’s age
multiplied by the aggregate death benefit payable to the Beneficiary. The “life
insurance premium factor” is the minimum factor applicable under guidance
published pursuant to Treasury Reg. § 1.61-22(d)(3)(ii) or any subsequent
authority.

 

 

3.3

Imputed Income. The Bank shall impute the economic benefit to the Executive on
an annual basis, by adding the economic benefit to the Executive’s W-2, or if
applicable, Form 1099.

Article 4
General Limitations

 

 

4.1

Termination for Cause. Notwithstanding any provision of this Agreement to the
contrary, the Executive shall forfeit any right to a benefit under this
Agreement if the Bank terminates the Executive’s employment for cause.
Termination of the Executive’s employment for “Cause” shall mean termination
because of personal dishonesty, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful
violation of any law, rule or regulation (other than traffic violations or
similar offenses) or final cease-and-desist order or material breach of any
provision of the Agreement. For purposes of this paragraph, no act or failure to
act on the Executive’s part shall be considered “willful” unless done, or
omitted to be done, by the Executive not in good faith and without reasonable
belief that the Executive’s action or omission was in the best interest of the
Bank.

 

 

4.2

Removal. Notwithstanding any provision of this Agreement to the contrary, the
Executive’s rights in the Agreement shall terminate if the Executive is subject
to a final removal or prohibition order issued by an appropriate federal banking
agency pursuant to Section 8(e) of the Federal Deposit Insurance Act (“FDIA”).

 

 

4.3

Suicide or Misstatement. No benefits shall be payable if the Executive commits
suicide within two years after the date of this Agreement, or if the insurance
company denies coverage (i) for material misstatements of fact made by the
Executive on any application for life insurance purchased by the Bank, or (ii)
for any other reason; provided, however that the Bank shall evaluate the reason
for the denial, and upon advice of legal counsel and in its sole discretion,
consider judicially challenging any denial.

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Article 5
Beneficiaries

 

 

5.1

Beneficiary. The Executive shall have the right, at any time, to designate a
Beneficiary(ies) to receive any benefits payable under the Agreement upon the
death of the Executive. The Beneficiary designated under this Agreement may be
the same as or different from the beneficiary designation under any other
Agreement of the Bank in which the Executive participates.

 

 

5.2

Beneficiary Designation; Change. The Executive shall designate a Beneficiary by
completing and signing the Beneficiary Designation Form, and delivering it to
the Bank or its designated agent. The Executive’s beneficiary designation shall
be deemed automatically revoked if the Beneficiary predeceases the Executive or
if the Executive names a spouse as Beneficiary and the marriage is subsequently
dissolved. The Executive shall have the right to change a Beneficiary by
completing, signing and otherwise complying with the terms of the Beneficiary
Designation Form and the Bank’s rules and procedures, as in effect from time to
time. Upon the acceptance by the Bank of a new Beneficiary Designation Form, all
Beneficiary designations previously filed shall be cancelled. The Bank shall be
entitled to rely on the last Beneficiary Designation Form filed by the Executive
and accepted by the Bank prior to the Executive’s death.

 

 

5.3

Acknowledgment. No designation or change in designation of a Beneficiary shall
be effective until received, accepted and acknowledged in writing by the Bank or
its designated agent.

 

 

5.4

No Beneficiary Designation. If the Executive dies without a valid designation of
beneficiary, or if all designated Beneficiaries predecease the Executive, then
the Executive’s surviving spouse shall be the designated Beneficiary. If the
Executive has no surviving spouse, the benefits shall be made payable to the
personal representative of the Executive’s estate.

 

 

5.5

Facility of Payment. If the Bank determines in its discretion that a benefit is
to be paid to a minor, to a person declared incompetent, or to a person
incapable of handling the disposition of that person’s property, the Bank may
direct payment of such benefit to the guardian, legal representative or person
having the care or custody of such minor, incompetent person or incapable
person. The Bank may require proof of incompetence, minority or guardianship as
it may deem appropriate prior to distribution of the benefit. Any payment of a
benefit shall be a payment for the account of the Executive and the Executive’s
Beneficiary, as the case may be, and shall be a complete discharge of any
liability under the Agreement for such payment amount.

Article 6
Claims And Review Procedure

 

 

 

6.1

Claims Procedure. The Executive or Beneficiary (“claimant”) who has not received
benefits under the Agreement that he or she believes should be paid shall make a
claim for such benefits as follows:

 

 

 

 

6.1.1

Initiation – Written Claim. The claimant initiates a claim by submitting to the
Bank a written claim for the benefits.

 

 

 

 

6.1.2

Timing of Bank Response. The Bank shall respond to such claimant within 90 days
after receiving the claim. If the Bank determines that special circumstances
require additional time for processing the claim, the Bank can extend the
response period by an additional 90 days by notifying the claimant in writing,
prior to the end of the initial 90-day period, that an additional period is
required. The notice of extension must set forth the special circumstances and
the date by which the Bank expects to render its decision.

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6.1.3

Notice of Decision. If the Bank denies part or all of the claim, the Bank shall
notify the claimant in writing of such denial. The Bank shall write the
notification in a manner calculated to be understood by the claimant. The
notification shall set forth:

 

 

 

 

 

 

(a)

The specific reasons for the denial;

 

 

 

 

 

 

(b)

A reference to the specific provisions of the Agreement on which the denial is
based;

 

 

 

 

 

 

(c)

A description of any additional information or material necessary for the
claimant to perfect the claim and an explanation of why it is needed;

 

 

 

 

 

 

(d)

An explanation of the Agreement’s review procedures and the time limits
applicable to such procedures; and

 

 

 

 

 

 

(e)

A statement of the claimant’s right to bring a civil action under ERISA Section
502(a) following an adverse benefit determination on review.

 

 

 

 

 

 

 

 

6.2

Review Procedure. If the Bank denies part or all of the claim, the claimant
shall have the opportunity for a full and fair review by the Bank of the denial,
as follows:

 

 

 

 

 

6.2.1

Initiation – Written Request. To initiate the review, the claimant, within 60
days after receiving the Bank’s notice of denial, must file with the Bank a
written request for review.

 

 

 

 

 

6.2.2

Additional Submissions – Information Access. The claimant shall then have the
opportunity to submit written comments, documents, records and other information
relating to the claim. The Bank shall also provide the claimant, upon request
and free of charge, reasonable access to, and copies of, all documents, records
and other information relevant (as defined in applicable ERISA regulations) to
the claimant’s claim for benefits.

 

 

 

 

 

6.2.3

Considerations on Review. In considering the review, the Bank shall take into
account all materials and information the claimant submits relating to the
claim, without regard to whether such information was submitted or considered in
the initial benefit determination.

 

 

 

 

 

6.2.4

Timing of Bank’s Response. The Bank shall respond in writing to such claimant
within 60 days after receiving the request for review. If the Bank determines
that special circumstances require additional time for processing the claim, the
Bank can extend the response period by an additional 60 days by notifying the
claimant in writing, prior to the end of the initial 60-day period, that an
additional period is required. The notice of extension must set forth the
special circumstances and the date by which the Bank expects to render its
decision.

 

 

 

 

 

6.2.5

Notice of Decision. The Bank shall notify the claimant in writing of its
decision on review. The Bank shall write the notification in a manner calculated
to be understood by the claimant. The notification shall set forth:

 

 

 

 

 

 

(a)

The specific reasons for the denial;

 

 

 

 

 

 

(b)

A reference to the specific provisions of the Agreement on which the denial is
based;

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(c)

A statement that the claimant is entitled to receive, upon request and free of
charge, reasonable access to, and copies of, all documents, records and other
information relevant (as defined in applicable ERISA regulations) to the
claimant’s claim for benefits; and

 

 

 

 

 

 

(d)

A statement of the claimant’s right to bring a civil action under ERISA Section
502(a).

Article 7
Amendments And Termination

 

 

 

                      This Agreement may be amended or terminated only by a
written agreement signed by the Company and the Executive. In the event that the
Bank decides to maintain the Policy after termination of the Agreement, the Bank
shall be the direct beneficiary of the entire death proceeds of the Policy.

Article 8
Administration

 

 

8.1

Plan Administrator Duties. This Agreement shall be administered by a Plan
Administrator which shall consist of the Board, or such committee or persons as
the Board may choose. The Plan Administrator shall also have the discretion and
authority to (i) make, amend, interpret and enforce all appropriate rules and
regulations for the administration of this Agreement and (ii) decide or resolve
any and all ques­tions including interpretations of this Agreement, as may arise
in connection with this Agreement, provided that such amendments and
interpretations are made at all times in compliance with Section 409A of the
Code.

 

 

8.2

Agents. In the administration of this Agreement, the Plan Administrator may
employ agents and delegate to them such administrative duties as it sees fit,
(including acting through a duly appointed representative), and may from time to
time consult with counsel who may be counsel to the Bank.

 

 

8.3

Binding Effect of Decisions. The decision or action of the Plan Administrator
with respect to any question arising out of or in connection with the
administration, interpretation and application of this Agreement and the rules
and regulations promulgated hereunder shall be final and conclusive and binding
upon all persons having any interest in this Agreement, provided that such
decisions or actions are in compliance with Section 409A of the Code.

 

 

8.4

Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless the
members of the Plan Administrator against any and all claims, losses, damages,
expenses or liabilities arising from any action or failure to act with respect
to this Agreement, except in the case of willful misconduct by the Plan
Administrator or any of its members.

 

 

8.5

Information. To enable the Plan Administrator to perform its functions, the Bank
shall supply full and timely information to the Plan Administrator on all
matters relating to the Base Salary of the Executive, the date and circumstances
of the retirement, Disability, death or Separation from Service of the
Executive, and such other pertinent information as the Plan Administrator may
reasonably require.

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Article 9
Miscellaneous

 

 

9.1

Binding Effect. This Agreement shall bind the Executive and the Bank, their
beneficiaries, survivors, executors, administrators and transferees and any
Beneficiary.

 

 

9.2

No Guarantee of Employment. This Agreement is not an employment policy or
contract. It does not give the Executive the right to remain an Executive of the
Bank, nor does it interfere with the Bank’s right to discharge the Executive. It
also does not require the Executive to remain an Executive nor interfere with
the Executive’s right to terminate employment at any time.

 

 

9.3

Applicable Law. The Agreement and all rights hereunder shall be governed by and
construed according to the laws of the State of California, except to the extent
preempted by the laws of the United States of America.

 

 

9.4

Reorganization. The Bank shall not merge or consolidate into or with another
company, or reorganize, or sell substantially all of its assets to another
company, firm or person unless such succeeding or continuing company, firm or
person agrees to assume and discharge the obligations of the Bank under this
Agreement. Upon the occurrence of such event, the term “Bank” as used in this
Agreement shall be deemed to refer to the successor or survivor company.

 

 

9.5

Notice. Any notice or filing required or permitted to be given to the Bank under
this Agreement shall be sufficient if in writing and hand-delivered, or sent by
registered or certified mail, to the address below:

 

First National Bank of Northern California

 

975 El Camino Real

 

South San Francisco, CA 94080

 

 

 

 

Such notice shall be deemed given as of the date of delivery or, if delivery is
made by mail, as of the date shown on the postmark or the receipt for
registration or certification.

 

 

 

          Any notice or filing required or permitted to be given to the
Executive under this Agreement shall be sufficient if in writing and
hand-delivered, or sent by mail, to the last known address of the Executive.

 

 

9.6

Entire Agreement. This Agreement, along with the Executive’s Beneficiary
Designation Form, constitutes the entire agreement between the Bank and the
Executive as to the subject matter hereof. No rights are granted to the
Executive under this Agreement other than those specifically set forth herein.

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          IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date indicated above.

 

 

 

DAVID A. CURTIS:

FIRST NATIONAL BANK OF NORTHERN CALIFORNIA

     

/s/ David A. Curtis

By:

/s/ Thomas C. McGraw

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Executive

Title:

Chief Executive Officer

 

Date:

March 3, 2008

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x

New Designation

 

 

o

Change in Designation

I, David A. Curtis, designate the following as Beneficiary under the Agreement:

 

 

Primary:
Esther D. Curtis

100%

   

Contingent:

 

___________________________________________________________________________

_______%

 

 

___________________________________________________________________________

_______%

 

 

Notes:

 

 

 

 

•

Please PRINT CLEARLY or TYPE the names of the beneficiaries.

 

 

 

 

•

To name a trust as Beneficiary, please provide the name of the trustee(s) and
the exact name and date of the trust agreement.

 

 

 

 

•

To name your estate as Beneficiary, please write “Estate of [your name]”.

 

 

 

 

•

Be aware that none of the contingent beneficiaries will receive anything unless
ALL of the primary beneficiaries predecease you.

I understand that I may change these beneficiary designations by delivering a
new written designation to the Plan Administrator, which shall be effective only
upon receipt and acknowledgment by the Plan Administrator prior to my death. I
further understand that the designations will be automatically revoked if the
Beneficiary predeceases me, or, if I have named my spouse as Beneficiary and our
marriage is subsequently dissolved.

 

 

 

 

Name:

David A. Curtis

 

 

 

 

 

 

Signature:

/s/ David A. Curtis

Date:

March 3, 2008

 

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SPOUSAL CONSENT (Required if Spouse not named beneficiary):

 

I consent to the beneficiary designation above, and acknowledge that if I am
named Beneficiary and our marriage is subsequently dissolved, the designation
will be automatically revoked.

 

 

 

 

Spouse Name:

_______________________________

 

 

 

 

 

 

Signature:

__________________________________________

Date:

_______

Received by the Plan Administrator this 3rd day of March, 2008

 

 

By:

Thomas C. Mc Graw

 

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Title:

Chief Executive Officer

 

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Insurer: Beneficial Life Insurance Company

POLICY ENDORSEMENT

Owner: First National Bank of Northern California
Insured: David A. Curtis
Policy number: BL2184740

          Pursuant to the terms of the First National Bank of Northern
California SPLIT DOLLAR LIFE INSURANCE AGREEMENT dated January 1, 2008, the
undersigned Owner requests that the above-referenced policy issued by the
Insurer provide for the following beneficiary designation and limited contract
ownership rights to the Insured:

          1. Upon the death of the Insured, Insurer shall pay proceeds in one
sum to the Owner, its successors or assigns, to the extent of its interest in
the policy. It is hereby provided that the Insurer may rely solely upon a
statement from the Owner as to the amount of proceeds it is entitled to receive
under this paragraph.

          2. Any proceeds at the death of the Insured in excess of the amount
paid under the provisions of the preceding paragraph shall be paid in one sum
to:

Esther D. Curtis, wife

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PRIMARY BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER

 

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CONTINGENT BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER

The exclusive right to change the beneficiary for the proceeds payable under
this paragraph, to elect any optional method of settlement for the proceeds paid
under this paragraph which are available under the terms of the policy and to
assign all rights and interests granted under this paragraph are hereby granted
to the Insured. The sole signature of the Insured shall be sufficient to
exercise said rights. The Owner retains all contract rights not granted to the
Insured under this paragraph.

          3. It is agreed by the undersigned that this designation and limited
assignment of rights shall be subject in all respects to the contractual terms
of the policy.

          4. Any payment directed by the Owner under this endorsement shall be a
full discharge of the Insurer, and such discharge shall be binding on all
parties claiming any interest under the policy.

The undersigned for the Owner is signing in a representative capacity and
warrants that he or she has the authority to bind the entity on whose behalf
this document is being executed.

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Signed at 975 El Camino Real, South San Francisco, CA this 3rd day of March,
2008.

 

 

 

INSURED:

 

OWNER:

 

 

 

 

 

First National Bank of Northern California

 

 

 

/s/ David A. Curtis

 

/s/ Thomas C. McGraw

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David A. Curtis

 

Thomas C. McGraw, CEO

 

 

 

 

 

March 3, 2008

 

 

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Date

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