Document:

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                                                                    EXHIBIT 10.6

              EMPLOYEE SUPPLEMENTAL COMPENSATION BENEFITS AGREEMENT
              -----------------------------------------------------

     This Employee Supplemental Compensation Benefits Agreement (the
"Agreement") is made and entered into effective as of January 1, 1998, by and
between Greater Bay Bancorp, a California banking corporation (the "Employer"),
and Steven C. Smith, an individual residing in the State of California (the
"Employee").

                                 R E C I T A L S
                                 ---------------

     WHEREAS, the Employee is an employee of the Employer, and, since December
16, 1993, has become eligible to participate in the Employee Supplemental
Compensation Benefits Plan represented by this Agreement (the "Plan");

     WHEREAS, the Employer desires to establish a compensation benefits program
as a fringe benefit for certain officers of the Employer in order to attract and
retain individuals with extensive and valuable experience in the banking
industry;

     WHEREAS, the Employee's experience and knowledge of the affairs of the
Employer and the banking industry are extensive and valuable;

     WHEREAS, it is deemed to be in the best interests of the Employer to
provide the Employee with certain benefits, on the terms and conditions set
forth herein, in order to reasonably induce the Employee to remain in the
Employer's employment and to compensate the Employee for valuable services
heretofore rendered to the Employer;

     WHEREAS, it is the intention of the parties that the Employer's obligations
under this Agreement shall be that of an unfunded and unsecured promise to
provide the benefits to the Employee set forth hereinafter and except for the
contributions, if any, to a secular trust to be established by the Employee as
grantor, the Employee and the Employee's beneficiaries shall be unsecured
general creditors with respect to any benefits provided under the terms of this
Agreement; and

     WHEREAS, the Employee and the Employer wish to specify in writing the terms
and conditions upon which this additional compensatory incentive will be
provided to the Employee, or to the Employee's spouse or the Employee's
designated beneficiaries, as the case may be.

     NOW, THEREFORE, in consideration of the services to be performed by the
Employee in the future, as well as the mutual promises and covenants contained
herein, the Employee and the Employer agree as follows:
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                                A G R E E M E N T
                                -----------------

     1.  Terms and Definitions.
         ---------------------

         1.1. Administrator. The Employer shall be the "Administrator" and,
              -------------
solely for the purposes of ERISA, as defined in subparagraph 1.11 below, the
"fiduciary" of this Agreement where a fiduciary is required by ERISA.

         1.2. Applicable Percentage. The term "Applicable Percentage" shall mean
              ---------------------
that percentage listed on Schedule "A" attached hereto which is adjacent to the
number of calendar years which shall have elapsed from the date of the
Employee's commencement of employment with and providing personal services to
the Employer or, if later, the date on which the Employee became eligible to
participate in the Plan represented by this Agreement, and ending on the date
payments are to first begin under the terms of this Agreement. Notwithstanding
the foregoing or the percentages set forth on Schedule "A", but subject to all
other terms and conditions set forth herein, the "Applicable Percentage" shall
be:

              (a) provided payments have not yet begun with respect to the
Employee Benefits specified in Schedule "B", one hundred percent (100%) upon the
termination of the Employee's employment by the Employer if such termination is
in connection with a "Change in Control" as defined in subparagraph 1.4 below. A
termination shall be deemed to be in connection with a Change in Control if,
within two (2) years following the occurrence of a Change in Control: (i) the
Employee's employment with the Employer is terminated by the Employer other than
a Termination for Cause; or (ii) by reason of the Employer's actions any adverse
and material change occurs in the scope of the Employee's position,
responsibilities, duties, salary, benefits or location of employment; or (iii)
the Employer causes an event to occur which reasonably constitutes or results in
a demotion, a significant diminution of responsibilities or authority, or a
constructive termination (by forcing a resignation or otherwise) of the
Employee's employment;

              (b) provided payments have not yet begun with respect to the
Employee Benefits specified in Schedule "B", one hundred percent (100%) upon the
occurrence of (i) the Employee's death prior to the termination of the
Employee's employment by the Employer, or (ii) the Employee's Disability (as
defined in subparagraph 1.6 below) other than a Disability that occurs after the
termination of the Employee's employment by the Employer; and

              (c) notwithstanding subclauses (a) and (b) of this subparagraph
1.2, zero percent (0%) in the event the Employee takes any intentional action
which prevents the Employer from collecting the proceeds of any life insurance
policy which the Employer may happen to own at the time of the Employee's death
and of which the Employer is the designated beneficiary (the "Employer Cost
Recovery Policy"). Furthermore, notwithstanding the foregoing, or anything
contained in this Agreement to the contrary, in the event the Employee takes any
intentional action which prevents the Employer from collecting the proceeds of
any Employer Cost Recovery Policy, then: (1) the Employee, the Employee's
estate, designated beneficiary or Surviving Spouse shall no

                                      -2-
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longer be entitled to receive any of the amounts payable under the terms of this
Agreement, and (2) the Employer shall have the right to recover from Employee's
estate and/or Surviving Spouse all of the amounts paid to the Employee's estate
or Surviving Spouse, as the case may be (with respect to amounts paid prior to
the Employee's death or paid to the Employee's estate or Surviving Spouse) or
from the Employee's designated beneficiary (with respect to amounts paid to the
designated beneficiary) pursuant to the terms of this Agreement prior to and
after Employee's death.

         1.3. Beneficiary. The term "beneficiary" or "designated beneficiary"
              -----------
shall mean the person or persons whom the Employee shall designate in a valid
Beneficiary Designation, a copy of which is attached hereto as Schedule "E," to
receive the benefits provided hereunder. A Beneficiary Designation shall be
valid only if it is in the form attached hereto and made a part hereof and is
completed and signed by the Employee and received by the Administrator prior to
the Employee's death.

         1.4. Change in Control. The term "Change in Control" shall mean the
              -----------------
first to occur of any of the following events with respect to the Employer (with
the term "Employer" being defined for purposes of determining whether a "Change
in Control" has occurred to include any parent bank holding company which owns
100% of the Employer's outstanding voting capital stock):

              (a) Any "person" (as such term is used in sections 13 and 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which
becomes the beneficial owner (as that term is used in section 13(d) of the
Exchange Act), directly or indirectly, of twenty-five percent (25%) or more of
the Employer's capital stock entitled to vote in the election of directors,
other than a group of two or more persons not (i) acting in concert for the
purpose of acquiring, holding or disposing of such stock or (ii) otherwise
required to file any form or report with any governmental agency or regulatory
authority having jurisdiction over the Employer which requires the reporting of
any change in control;

              (b) During any period of not more than two (2) consecutive years,
not including any period prior to the adoption of the Plan represented by this
Agreement, individuals who, at the beginning of such period, constitute the
Board of Directors of the Employer, and any new director (other than a director
designated by a person who has entered into an agreement with the Employer to
effect a transaction described in clause (a), (c), (d) or (e) of this
subparagraph 1.4) whose appointment to the Board of Directors or nomination for
election to the Board of Directors was approved by a vote of at least
three-fourths (3/4ths) of the directors then still in office, either were
directors at the beginning of such period or whose appointment or nomination for
election was previously so approved, cease for any reason to constitute at least
a majority thereof;

              (c) The effective date of any consolidation or merger of the
Employer (after all requisite shareholder, applicable regulatory and other
approvals and consents have been obtained), other than a consolidation or merger
of the Employer in which the holders of the voting capital stock of the Employer
immediately prior to the consolidation or merger hold more than fifty

                                      -3-
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percent (50%) of the voting capital stock of the surviving entity immediately
after the consolidation or merger;

              (d) The shareholders of the Employer approve any plan or proposal
for the liquidation or dissolution of the Employer; or

              (e) The shareholders of the Employer approve the sale or transfer
of substantially all of the Employer's assets to parties that are not within a
"controlled group of corporations" (as that term is defined in section 1563 of
the Code) in which the Employer is a member.

         1.5. The Code. The "Code" shall mean the Internal Revenue Code of 1986,
              --------
as amended (the "Code").

         1.6. Disability/Disabled. The term "Disability" or "Disabled" shall
              -------------------
have the same meaning given such terms in any policy of disability insurance
maintained by the Employer for the benefit of employees including the Employee.
In the absence of such a policy which extends coverage to the Employee in the
event of disability, the terms shall mean bodily injury or disease (mental or
physical) which wholly and continuously prevents the performance of the
Employee's duties to the Employer for at least ninety (90) days.

         1.7. Early Retirement Date. The term "Early Retirement Date" shall mean
              ---------------------
the Retirement, as defined below, of the Employee on a date which occurs prior
to the Employee attaining sixty-two (62) years of age, as defined below, but
after the Employee has attained fifty-nine and one-half (59.5) years of age.

         1.8. Effective Date. The term "Effective Date" shall mean the date
              --------------
first written above.

         1.9. Employee Benefits. Except as otherwise stated in this Agreement,
              -----------------
the term "Employee Benefits" shall mean the Index Employee Benefits, if any,
described in and determined in accordance with Schedule "B" and the supplemental
benefits described in and determined in accordance with Schedule "C", and
reduced or adjusted to the extent: (i) required under the other provisions of
this Agreement; (ii) required by reason of the lawful order of any regulatory
agency or body having jurisdiction over the Employer; or (iii) required in order
for the Employer to properly comply with any and all applicable state and
federal laws, including, but not limited to, income, employment and disability
income tax laws (e.g., FICA, FUTA, SDI).

                                      -4-
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         1.10. Employer. Except as otherwise set forth in this Agreement, the
               --------
term "Employer" shall mean Greater Bay Bancorp; provided, however, that for
purposes of subparagraph 1.15 (definition of Termination for Cause) and
Paragraph 5 (including its subparagraphs, regarding termination of employment),
the term "Employer" shall mean Greater Bay Bancorp and its subsidiaries and
affiliated entities.

         1.11. ERISA. The term "ERISA" shall mean the Employee Retirement Income
               -----
Security Act of 1974, as amended.

         1.12. Plan Year. The term "Plan Year" shall mean the Employer's fiscal
               ---------
year.

         1.13. Retirement. The term "Retirement" or "Retires" shall refer to the
               ----------
date which the Employee acknowledges in writing to the Employer to be the last
day the Employee will provide any significant personal services, whether as an
employee or independent consultant or contractor, to the Employer or to, for, or
on behalf of, any other business entity conducting, performing or making
available to any person or entity banking or other financial services of any
kind. For purposes of this Agreement, the phrase "significant personal services"
shall mean more than ten (10) hours of personal services rendered to one or more
individuals or entities in any thirty (30) day period for compensation excluding
services, if any, rendered by the Employee after Retirement pursuant to the
terms of a consulting agreement described in Schedule "C", if any.

         1.14. Surviving Spouse. The term "Surviving Spouse" shall mean the
               ----------------
person, if any, who shall be legally married to the Employee on the date of the
Employee's death.

         1.15. Termination for Cause. The term "Termination for Cause" shall
               ---------------------
mean termination of the employment of the Employee by reason of any of the
following:

               (a) The Employee's deliberate violation of (i) any state or
federal banking or securities laws, or of the Bylaws, rules, policies or
resolutions of the Employer, or (ii) of the rules or regulations of the
California Commissioner of Financial Institutions, the Federal Deposit Insurance
Corporation, the Federal Reserve Board of Governors, the Office of the
Comptroller of the Currency or any other regulatory agency or governmental
authority having jurisdiction over the Employer, which has a material adverse
effect upon the Employer; or

               (b) The Employee's conviction of (i) any felony or (ii) a crime
involving moral turpitude or a fraudulent or dishonest act which, in each case,
has a material adverse effect on the Employer.

     2.  Scope, Purpose and Effect.
         -------------------------

         2.1. Contract of Employment. Although this Agreement is intended to
              ----------------------
provide the Employee with an additional incentive to remain in the employ of the
Employer, this Agreement shall not be deemed to constitute a contract of
employment between the Employee and the Employer nor shall any provision of this
Agreement restrict or expand the right of the Employer to terminate

                                      -5-
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the Employee's employment. This Agreement shall have no impact or effect upon
any separate written Employment Agreement which the Employee may have with the
Employer, it being the parties' intention and agreement that unless this
Agreement is specifically referenced in said Employment Agreement (or any
modification thereto), this Agreement (and the Employer's obligations hereunder)
shall stand separate and apart from, and shall have no effect upon, or be
affected by, the terms and provisions of said Employment Agreement.

         2.2. Fringe Benefit. The benefits provided by this Agreement are
              --------------
granted by the Employer as a fringe benefit to the Employee and
are not a part of any salary reduction plan or any arrangement deferring a bonus
or a salary increase. The Employee has no option to take any current payments or
bonus in lieu of the benefits provided by this Agreement.

     3.  Payments Upon Early Retirement or Retirement and After Retirement.
         -----------------------------------------------------------------

         3.1. Payments Upon Early Retirement. The Employee shall have the right
              ------------------------------
to Retire on a date which constitutes an Early Retirement Date as defined in
subparagraph 1.7 above. In the event the Employee elects to Retire on a date
which constitutes an Early Retirement Date, the Employee shall be entitled to be
paid the Applicable Percentage of the Employee Benefits specified in Schedule
"B", payable in substantially equal monthly installments on the first day of
each month, beginning with the month following the month in which the Early
Retirement Date occurs (or on such later date as may be mutually agreed upon by
the Employee and the Employer in advance of such Early Retirement Date) (i) for
the period designated in Schedule "F", in the case of the balance in the Benefit
Account and (ii) until the Employee's death, in the case of the Index Benefit
defined in Schedule "B".

                                      -6-
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                                     EXAMPLE

                         Payments Upon Early Retirement

Assumptions:
-----------

Age at Early Retirement                                              60

Normal Retirement Age                                                62

Projected Benefit Account Value at Age 62                            $100,000

Actual Benefit Account Value at Age 60                               $20,000

Distribution Period Elected for Benefit Account (Schedule F)         10 yrs.

Projected Index Benefit at Age 62                                    $50,000

Projected Index Benefit at Age 60                                    $25,000

Applicable Percentage at Age 60                                      75%

                     First Year Benefit Calculation: Age 60

1) Benefit Account [($20,000 )10) x .75]                             $ 1,500

2) Index Benefit ($25,000 x .75)                                     $18,750
                                                                     -------

        Total First Year Benefit                                     $20,250
                                                                     =======

         3.2. Payments Upon Retirement. If the Employee shall remain in the
              ------------------------
continuous employment of the Employer until attaining sixty-two (62) years of
age, the Employee shall be entitled to be paid the Applicable Percentage of the
Employee Benefits specified in Schedule "B", payable in substantially equal
monthly installments on the first day of each month, beginning with the month
following the month in which the Employee Retires (or on such later date as may
be mutually agreed upon by the Employee and the Employer in advance of said
Retirement date) (i) for the period designated in Schedule "F", in the case of
the balance in the Benefit Account and (ii) until the Employee's death, in the
case of the Index Benefit defined in Schedule "B".

                                      -7-
<PAGE>

         3.3. Payments in the Event of Death After Retirement. The Employer
              -----------------------------------------------
agrees that if the Employee Retires, but shall die before receiving all of the
Employee Benefits, the Employer will make such payments to which the Employee
may be entitled, to the Employee's designated beneficiary in lump sum. If a
valid Beneficiary Designation is not in effect, then the remaining amounts due
to the Employee under the terms of this Agreement shall be paid to the
Employee's Surviving Spouse. If the Employee leaves no Surviving Spouse, the
remaining amounts due to the Employee under the terms of this Agreement shall be
paid to the duly qualified personal representative, executor or administrator of
the Employee's estate.

     4.  Payments in the Event Death or Disability Occurs Prior to Retirement.
         --------------------------------------------------------------------

         4.1. Payments in the Event of Death Prior to Retirement. If the
              --------------------------------------------------
Employee dies while actively employed by the Employer at any time after the
Effective Date of this Agreement, but prior to Retirement, the Employer agrees
to pay the Employee Benefits to which the Employee is then entitled to the
Employee's designated beneficiary in lump sum. If a valid Beneficiary
Designation is not in effect, then the remaining amounts due to the Employee
under the terms of this Agreement shall be paid to the Employee's Surviving
Spouse. If the Employee leaves no Surviving Spouse, the remaining amounts due to
the Employee under the terms of this Agreement shall be paid to the duly
qualified personal representative, executor or administrator of the Employee's
estate.

         4.2. Payments in the Event of Disability Prior to Retirement. In the
              -------------------------------------------------------
event the Employee becomes Disabled at any time after the Effective Date of this
Agreement but prior to Retirement, the Employee shall be entitled to be paid the
Applicable Percentage of the Employee Benefits specified in Schedule "B",
payable in substantially equal monthly installments on the first day of each
month, beginning with the month following the month in which the Employee
becomes Disabled (or on such later date as may be mutually agreed upon by the
Employee and the Employer not less than fifteen (15) days prior to such
commencement date) (i) for the period designated in Schedule "F", in the case of
the balance in the Benefit Account and (ii) until the Employee's death, in the
case of the Index Benefit defined in Schedule "B".

     5.  Payments in the Event Employment Is Terminated Prior to Retirement. As
         ------------------------------------------------------------------
indicated in subparagraph 2.1 above, the Employer reserves the right to
terminate the Employee's employment, with or without cause but subject to any
written employment agreement which may then exist, at any time prior to the
Employee's Retirement. In the event that the employment of the Employee shall be
terminated, other than by reason of death, Disability or Retirement, prior to
the Employee's attaining sixty-two (62) years of age, then this Agreement shall
terminate on the date of such termination of employment; provided, however, that
the Employee shall be entitled to the following benefits as may be applicable
depending upon the circumstances surrounding the Employee's termination:

         5.1. Termination Without Cause. If the Employee's employment is
              -------------------------
terminated by the Employer without cause, and such termination is not subject to
the provisions of subparagraph 5.4 below, the Employee shall be entitled to be
paid the Applicable Percentage of the Employee

                                      -8-
<PAGE>

Benefits specified in Schedule "B", payable in substantially equal monthly
installments on the first day of each month, beginning with the month following
the month in which the Employee attains sixty-two (62) years of age (or on such
later date as may be mutually agreed upon by the Employee and the Employer not
less than fifteen (15) days prior to such commencement date) (i) for the period
designated in Schedule "F", in the case of the balance in the Benefit Account
and (ii) until the Employee's death, in the case of the Index Benefit defined in
Schedule "B".

         5.2. Voluntary Termination by the Employee. If the Employee's
              -------------------------------------
employment is terminated by voluntary resignation, and such resignation is not
subject to the provisions of subparagraph 5.4 below, the Employee shall be
entitled to be paid the following benefits:

              (a) If the Applicable Percentage at the date of termination is one
hundred percent (100%), the Employee shall be paid (i) the Employee Benefits
specified in Schedule "B", payable in substantially equal monthly installments
on the first day of each month, beginning with the month following the month in
which the Employee attains sixty-two (62) years of age (or on such later date as
may be mutually agreed upon by the Employee and the Employer not less than
fifteen (15) days prior to such commencement date) (A) for the period designated
in Schedule "F", in the case of the balance in the Benefit Account and (B) until
the Employee's death, in the case of the Index Benefit defined in Schedule "B.

              (b) If the Applicable Percentage at the date of termination is
less than one hundred percent (100%), the Employee shall be paid the Applicable
Percentage of the Employee Benefits specified in Schedule "B", based on a ten
(10) year (120 month) payout of the Benefit Account balance at termination
notwithstanding the Employee's election of a different payout period under
Schedule "F", but not more than sixty percent (60%) of the Employee's base
salary (i.e., exclusive of any bonuses, incentive payments or other employee
benefits to which the Employee would otherwise be entitled) at the date of
termination. Such benefit shall be payable in substantially equal monthly
installments on the first day of each month, beginning with the month following
the month in which the Employee attains sixty-two (62) years of age (or on such
later date as may be mutually agreed upon by the Employee and the Employer not
less than fifteen (15) days prior to such commencement date) (A) for the period
of one hundred twenty (120) months, in the case of the balance in the Benefit
Account and (B) until the Employee's death, in the case of the Index Benefit
defined in Schedule "B" (subject to reduction upon application of the sixty
(60%) limitation described above).

         5.3. Termination for Cause. If the Employee suffers a "Termination for
              ---------------------
Cause", as defined in subparagraph 1.15 of this Agreement, the Employee shall
forfeit any and all rights and benefits the Employee may have under the terms of
this Agreement and shall have no right to be paid any of the amounts which would
otherwise be due or paid to the Employee by the Employer pursuant to the terms
of this Agreement.

         5.4. Termination by the Employer on Account of or After a Change in
              --------------------------------------------------------------
Control. In the event the Employee's employment with the Employer is terminated
-------
by the Employer

                                      -9-
<PAGE>

"in connection with a Change in Control" as described in subparagraph 1.2(a) and
as defined in subparagraph 1.4 above, the Employee shall be entitled to be paid
the Applicable Percentage of the Employee Benefits specified in Schedule "B", in
substantially equal monthly installments on the first day of each month,
beginning with the month following the month in which the Employee attains
fifty-nine and one-half (59.5) years of age or any month thereafter, as
requested in writing by the Employee and delivered to the Employer or its
successor thirty (30) days prior to the commencement of installment payments;
provided, however, that in the event the Employee does not request a
commencement date as specified, such installments shall be paid on the first day
of each month, beginning with the month following the month in which the
Employee attains sixty-two (62) years of age. The installments shall be payable
(i) for the period designated in Schedule "F" in the case of the balance in the
Benefit Account and (ii) until the Employee's death in the case of the Index
Benefit defined in Schedule "B".

         5.5. Payments in the Event of Death Following Termination. If the
              ----------------------------------------------------
Employee shall die prior to receiving all of the applicable benefits described
in this Paragraph 5 to which the Employee is entitled, then the Employer will
make such payments to the Employee's designated beneficiary. If a valid
Beneficiary Designation is not in effect, then the remaining amounts due to the
Employee shall be paid to the Employee's Surviving Spouse. If the Employee
leaves no Surviving Spouse, the remaining amounts due to the Employee shall be
paid to the duly qualified personal representative, executor or administrator of
the Employee's estate.

     6. Section 280G Benefits Adjustment. If all or any portion of the amounts
        --------------------------------
payable to the Employee under this Agreement, either alone or together with
other payments which the Employee has the right to receive from the Employer,
constitute "excess parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"), that are subject to the
excise tax imposed by Section 4999 of the Code (or similar tax and/or
assessment), the Employer (and its successor) shall increase the amounts payable
under this Agreement to the extent necessary to afford the Employee
substantially the same economic benefit under this Agreement as the Employee
would have received had no such excise tax been imposed on the payments due the
Employee under this Agreement. The determination of the amount of any such
excise taxes shall be made initially by the independent accounting firm employed
by the Employer immediately prior to the occurrence of the event constituting a
Change in Control.

                                      -10-
<PAGE>

     If, at a later date, it is determined (pursuant to final regulations or
published rulings of the Internal Revenue Service, final judgment of a court of
competent jurisdiction, or otherwise) that the amount of excise taxes payable to
the Employee is greater than the amount initially so determined, then the
Employer (or its successor) shall pay to the Employee an amount equal to the sum
of (i) such additional excise taxes, and (ii) any interest, fines and penalties
resulting from such underpayment, plus (iii) an amount necessary to reimburse
the Employee substantially for any income, excise or other taxes payable by the
Employee with respect to the amounts specified in (i) and (ii) above, and the
reimbursement provided by this clause (iii).

     7. Right To Determine Funding Methods. The Employer reserves the right to
        ----------------------------------
determine, in its sole and absolute discretion, whether, to what extent and by
what method, if any, to provide for the payment of the amounts which may be
payable to the Employee, the Employee's spouse or the Employee's beneficiaries
under the terms of this Agreement. In the event that the Employer elects to fund
this Agreement, in whole or in part, through the use of life insurance or
annuities, or both, the Employer shall determine the ownership and beneficial
interests of any such policy of life insurance or annuity. The Employer further
reserves the right, in its sole and absolute discretion, to terminate any such
policy, and any other device used to fund its obligations under this Agreement,
at any time, in whole or in part. Consistent with Paragraph 9 below, neither the
Employee, the Employee's spouse nor the Employee's beneficiaries shall have any
right, title or interest in or to any funding source or amount utilized by the
Employer pursuant to this Agreement, and any such funding source or amount shall
not constitute security for the performance of the Employer's obligations
pursuant to this Agreement. In connection with the foregoing, the Employee
agrees to execute such documents and undergo such medical examinations or tests
which the Employer may request and which may be reasonably necessary to
facilitate any funding for this Agreement including, without limitation, the
Employer's acquisition of any policy of insurance or annuity. Furthermore, a
refusal by the Employee to consent to, participate in and undergo any such
medical examinations or tests shall result in the immediate termination of this
Agreement and the immediate forfeiture by the Employee, the Employee's spouse
and the Employee's beneficiaries of any and all rights to payment hereunder.

     8. Claims Procedure. The Employer shall, but only to the extent necessary
        ----------------
to comply with ERISA, be designated as the named fiduciary under this Agreement
and shall have authority to control and manage the operation and administration
of this Agreement. Consistent therewith, the Employer shall make all
determinations as to the rights to benefits under this Agreement. Any decision
by the Employer denying a claim by the Employee, the Employee's spouse, or the
Employee's beneficiary for benefits under this Agreement shall be stated in
writing and delivered or mailed, via registered or certified mail, to the
Employee, the Employee's spouse or the Employee's beneficiary, as the case may
be. Such decision shall set forth the specific reasons for the denial of a
claim. In addition, the Employer shall provide the Employee, the Employee's
spouse or the Employee's beneficiary with a reasonable opportunity for a full
and fair review of the decision denying such claim.

                                      -11-
<PAGE>

     9.  Status Under Secular Trust and as an Unsecured General Creditor.
         ---------------------------------------------------------------

         (a) The Employee has established a secular trust, identified as the
Steven C. Smith Secular Trust, a copy of which is attached hereto as Schedule
"G" (the "Trust"). The Employer shall make contributions to the Trust as
specified in Schedule "C" of this Agreement. The contributions shall be
deposited into an account which constitutes the Trust Fund as defined in the
Trust. Notwithstanding anything contained herein to the contrary, the Trust Fund
shall not be subject to the claims of the Employer's general creditors except as
may be expressly stated in the Trust. In the event of a conflict between the
provisions of the Trust and this Agreement, the provisions of the Trust shall
control.

         (b) Except as provided in subparagraph 9(a) above: (i) neither the
Employee, the Employee's spouse or the Employee's designated beneficiaries shall
have any legal or equitable rights, interests or claims in or to any specific
property or assets of the Employer as a result of this Agreement; (ii) none of
the Employer's assets shall be held in or under any trust for the benefit of the
Employee, the Employee's spouse or the Employee's designated beneficiaries or
held in any way as security for the fulfillment of the obligations of the
Employer under this Agreement; (iii) all of the Employer's assets shall be and
remain the general unpledged and unrestricted assets of the Employer; (iv) the
Employer's obligation under this Agreement shall be that of an unfunded and
unsecured promise by the Employer to pay money in the future; and (v) the
Employee, the Employee's spouse and the Employee's designated beneficiaries
shall be unsecured general creditors with respect to any benefits which may be
payable under the terms of this Agreement.

         (c) Notwithstanding subparagraphs 9(b)(i) through 9(b)(v) above, the
Employer and the Employee acknowledge and agree that, in the event of a Change
in Control and at the written request of the Employee, the Employer shall
establish, not later than the effective date of the Change in Control, a Rabbi
Trust or multiple Rabbi Trusts upon such terms and conditions as the Employer in
its sole discretion deems appropriate and in compliance with applicable
provisions of the Code in order to permit the Employer to make contributions
and/or transfer assets to the Rabbi Trust or Rabbi Trusts to discharge its
obligations pursuant to this Agreement. The principal of the Rabbi Trust or
Rabbi Trusts and any earnings thereon shall be held separate and apart from
other funds of the Employer to be used exclusively for discharge of the
Employer's obligations pursuant to this Agreement and shall continue to be
subject to the claims of the Employer's general creditors until paid to the
Employee or its beneficiaries in such manner and at such times as specified in
this Agreement.

     10. Discretion of Board to Accelerate Payout. Notwithstanding any of the
         ----------------------------------------
other provisions of this Agreement, the Board of Directors of the Employer may,
if determined in its sole and absolute discretion to be appropriate, accelerate
the payment of the amounts due under the terms of this Agreement, provided that
Employee (or the Employee's spouse or designated beneficiaries): (i) consents to
the revised payout terms determined appropriate by the Employer's Board of
Directors; and (ii) does not negotiate or in anyway influence the terms of
proposed altered/accelerated payout (said decision to be made solely by the
Employer's Board of Directors

                                      -12-
<PAGE>

and offered to the Employee [or Employee's spouse or designated beneficiaries]
on a "take it or leave it basis").

     11. Miscellaneous.
         -------------

         11.1. Opportunity To Consult With Independent Advisors. The Employee
               ------------------------------------------------
acknowledges that the Employee has been afforded the opportunity to consult with
independent advisors of his or her choosing including, without limitation,
accountants or tax advisors and counsel regarding both the benefits granted to
the Employee under the terms of this Agreement and the (i) terms and conditions
which may affect the Employee's right to these benefits and (ii) personal tax
effects of such benefits including, without limitation, the effects of any
federal or state taxes, Section 280G of the Code, and any other taxes, costs,
expenses or liabilities whatsoever related to such benefits, which in any of the
foregoing instances the Employee acknowledges and agrees shall be the sole
responsibility of the Employee notwithstanding any other term or provision of
this Agreement. The Employee further acknowledges and agrees that the Employer
shall have no liability whatsoever related to any such personal tax effects or
other personal costs, expenses, or liabilities applicable to the Employee and
further specifically waives any right for the Employee and his or her heirs,
beneficiaries, legal representatives, agents, successors, and assigns to claim
or assert liability on the part of the Employer related to the matters described
above in this subparagraph 11.1. The Employee further acknowledges and agrees
that the Employee has read, understands and consents to all of the terms and
conditions of this Agreement, and that the Employee enters into this Agreement
with a full understanding of its terms and conditions.

         11.2. Arbitration of Disputes. All claims, disputes and other matters
               -----------------------
in question arising out of or relating to this Agreement or the breach or
interpretation thereof, other than those matters which are to be determined by
the Employer in its sole and absolute discretion, shall be resolved by binding
arbitration before a representative member, selected by the mutual agreement of
the parties, of the Judicial Arbitration and Mediation Services, Inc. ("JAMS"),
in San Francisco, California. In the event JAMS is unable or unwilling to
conduct the arbitration provided for under the terms of this Paragraph, or has
discontinued its business, the parties agree that a representative member,
selected by the mutual agreement of the parties, of the American Arbitration
Association ("AAA"), in San Francisco, California, shall conduct the binding
arbitration referred to in this Paragraph. Notice of the demand for arbitration
shall be filed in writing with the other party to this Agreement and with JAMS
(or AAA, if necessary). In no event shall the demand for arbitration be made
after the date when institution of legal or equitable proceedings based on such
claim, dispute or other matter in question would be barred by the applicable
statute of limitations. The arbitration shall be subject to such rules of
procedure used or established by JAMS, or if there are none, the rules of
procedure used or established by AAA. Any award rendered by JAMS or AAA shall be
final and binding upon the parties, and as applicable, their respective heirs,
beneficiaries, legal representatives, agents, successors and assigns, and may be
entered in any court having jurisdiction thereof. The obligation of the parties
to arbitrate pursuant to this clause shall be specifically enforceable in
accordance with, and shall be conducted consistently with, the provisions of
Title 9 of Part 3 of the California Code of Civil Procedure. Any arbitration
hereunder shall be conducted in San Jose, California, unless otherwise agreed to
by the parties.

                                      -13-
<PAGE>

         11.3. Attorneys' Fees. In the event of any arbitration or litigation
               ---------------
concerning any controversy, claim or dispute between the parties hereto, arising
out of or relating to this Agreement or the breach hereof, or the interpretation
hereof, the prevailing party shall be entitled to recover from the
non-prevailing party reasonable expenses, attorneys' fees and costs incurred in
connection therewith or in the enforcement or collection of any judgment or
award rendered therein. The "prevailing party" means the party determined by the
arbitrator(s) or court, as the case may be, to have most nearly prevailed, even
if such party did not prevail in all matters, not necessarily the one in whose
favor a judgment is rendered.

         11.4. Notice. Any notice required or permitted of either the Employee
               ------
or the Employer under this Agreement shall be deemed to have been duly given, if
by personal delivery, upon the date received by the party or its authorized
representative; if by facsimile, upon transmission to a telephone number
previously provided by the party to whom the facsimile is transmitted as
reflected in the records of the party transmitting the facsimile and upon
reasonable confirmation of such transmission; and if by mail, on the third day
after mailing via U.S. first class mail, registered or certified, postage
prepaid and return receipt requested, and addressed to the party at the address
given below for the receipt of notices, or such changed address as may be
requested in writing by a party.

               If to the Employer:   Greater Bay Bancorp
                                     2860 West Bayshore Road
                                     Palo Alto, California 94303
                                     Attention: Human Resources

               If to the Employee:   Steven C. Smith
                                     [omitted]

                                      -14-
<PAGE>

         11.5. Assignment. Neither the Employee, the Employee's spouse, nor any
               ----------
other beneficiary under this Agreement shall have any power or right to
transfer, assign, anticipate, hypothecate, modify or otherwise encumber any part
or all of the amounts payable hereunder, nor, prior to payment in accordance
with the terms of this Agreement, shall any portion of such amounts be: (i)
subject to seizure by any creditor of any such beneficiary, by a proceeding at
law or in equity, for the payment of any debts, judgments, alimony or separate
maintenance obligations which may be owed by the Employee, the Employee's
spouse, or any designated beneficiary; or (ii) transferable by operation of law
in the event of bankruptcy, insolvency or otherwise. Any such attempted
assignment or transfer shall be void and unenforceable without the prior written
consent of the Employer. The Employer's consent, if any, to one or more
assignments or transfers shall not obligate the Employer to consent to or be
construed as the Employer's consent to any other or subsequent assignment or
transfer.

         11.6. Binding Effect/Merger or Reorganization. This Agreement shall be
               ---------------------------------------
binding upon and inure to the benefit of the Employee and the Employer and, as
applicable, their respective heirs, beneficiaries, legal representatives,
agents, successors and assigns. Accordingly, the Employer shall not merge or
consolidate into or with another corporation, or reorganize or sell
substantially all of its assets to another corporation, firm or person, unless
and until such succeeding or continuing corporation, firm or person agrees to
assume and discharge the obligations of the Employer under this Agreement. Upon
the occurrence of such event, the term "Employer" as used in this Agreement
shall be deemed to refer to such surviving or successor firm, person, entity or
corporation.

         11.7. Non-waiver. The failure of either party to enforce at any time or
               ----------
for any period of time any one or more of the terms or conditions of this
Agreement shall not be a waiver of such term(s) or condition(s) or of that
party's right thereafter to enforce each and every term and condition of this
Agreement.

         11.8. Partial Invalidity. If any term, provision, covenant, or
               ------------------
condition of this Agreement is determined by an arbitrator or a court, as the
case may be, to be invalid, void, or unenforceable, such determination shall not
render any other term, provision, covenant or condition invalid, void or
unenforceable, and the Agreement shall remain in full force and effect
notwithstanding such partial invalidity.

         11.9. Entire Agreement. This Agreement, including the schedules and
               ----------------
exhibits attached hereto and incorporated herein by this reference, contains all
of the covenants and agreement, and supersedes any and all other agreements,
either oral or in writing, between the parties with respect to the subject
matter of this Agreement. Each party to this Agreement acknowledges that no
other representations, inducements, promises, or agreements, oral or otherwise,
have been made by any party, or anyone acting on behalf of any party, which are
not set forth herein, and that no other agreement, statement, or promise not
contained in this Agreement shall be valid or binding on either party.

         11.10. Modifications. Any modification of this Agreement shall be
                -------------
effective only if it is in writing and signed by each party or such party's
authorized representative.

                                      -15-
<PAGE>

         11.11. Paragraph Headings. The paragraph headings used in this
                ------------------
Agreement are included solely for the convenience of the parties and shall not
affect or be used in connection with the interpretation of this Agreement.

         11.12. No Strict Construction. The language used in this Agreement
                ----------------------
shall be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be applied against any
person.

         11.13. Governing Law. The laws of the State of California, other than
                -------------
those laws denominated choice of law rules, and, where applicable, the rules and
regulations of the California Commissioner of Financial Institutions, the
Federal Deposit Insurance Corporation, the Federal Reserve Board of Governors
and the Office of the Comptroller of the Currency, shall govern the validity,
interpretation, construction and effect of this Agreement.

         11.14. Waiver of Prior Plan Benefit. To the extent that the Employee is
                ----------------------------
a participant in any other supplemental benefit plan provided by the Employer
which affords the Employee benefits in the event of the Employee's retirement or
death or a change in control of the Employer, it is an express condition
precedent to the effectiveness of this Agreement that the Employee execute and
deliver the Waiver of Prior Plan Benefit attached as Schedule "D" to this
Agreement.

     IN WITNESS WHEREOF, the Employer and the Employee have executed this
Agreement on the date first above-written in the City of Palo Alto, Santa Clara
County, California.

THE EMPLOYER                                THE EMPLOYEE

Greater Bay Bancorp

By:  /s/ David L. Kalkbrenner               /s/ Steven C. Smith
     ------------------------               -------------------
     David L. Kalkbrenner                   Steven C. Smith
     President

                                      -16-
<PAGE>

                                   SCHEDULE A

                                                 Applicable
                  Calendar Year                  Percentage

                     12/31/97                         70%
                     12/31/98                         85%
                     12/31/99                        100%
<PAGE>

                                   SCHEDULE B
                                   ----------

                             INDEX EMPLOYEE BENEFITS
                             -----------------------

1.   Index Employee Benefits Determination. The Index Employee Benefits consist
     -------------------------------------
of (i) accruals to the Employee's Benefit Account (as described in subparagraph
(a) below) during the Employee's employment by the Employer and (ii) the Index
Benefit (as described in subparagraph (b) below) after the Employee's employment
by the Employer terminates. The Index Employee Benefits shall be determined
based upon the following:

     a. Benefit Account: A Benefit Account shall be established as a liability
        ---------------
reserve account on the books of the Employer for the benefit of the Employee.
Prior to the date on which the Employee becomes eligible to receive payments
under the Plan, such Benefit Account shall be increased (or decreased) each Plan
Year by an amount equal to the annual earnings (or loss) for that Plan Year
determined by the Index (described in subparagraph c below), less the
Opportunity Cost (described in subparagraph d below) for that Plan Year.

     b. Index Benefit: After the date on which the Employee becomes eligible to
        -------------
receive payments under the Plan, the Index Benefit for the Employee for any Plan
Year shall be determined by subtracting the Opportunity Cost for that Plan Year
from the annual earnings (if any) for that Plan year determined by the Index.

     c. Index: The Index for any Plan Year shall be the aggregate annual
        -----
after-tax income from the life insurance contracts described hereinafter as
defined by FASB Technical Bulletin 85-4. This Index shall be applied as if such
insurance contracts were purchased on the Effective Date.

                  Insurance Company:                  [omitted]
                  -----------------
                  Policy Number:                      [omitted]
                  -------------
                  Premiums Paid:                      $505,000
                   ------------

                  Insurance Company:                  [omitted]
                  -----------------
                  Policy Number:                      [omitted]
                  -------------
                  Premiums Paid:                      $505,000
                  -------------

If such contracts of life insurance are actually purchased by the Employer, then
the actual policies as of the dates purchased shall be used in calculations to
determine the Index and Opportunity Cost. If such contracts of life insurance
are not purchased or are subsequently surrendered or lapsed, then the Employer
shall receive and use annual policy illustrations that assume the above
described policies were purchased from the above named insurance company(ies) on
the Effective Date to calculate the amount of the Index and Opportunity Cost.
<PAGE>

     d. Opportunity Cost: The Opportunity Cost for any Plan Year shall be
        ----------------
calculated by multiplying (a) the sum of (i) the total amount of premiums set
forth in the insurance policies described above, (ii) the amount of any Index
Benefits (described at subparagraph b above), and (iii) the amount of all
previous years after-tax Opportunity Costs; by (b) the average annualized
after-tax cost of funds calculated using a one-year U.S. Treasury Bill as
published in the Wall Street Journal. The applicable tax rate used to calculate
                 -------------------
the Opportunity Cost shall be the Employer's marginal tax rate until the
Employee's Retirement, or other termination of service (including a Change in
Control). Thereafter, the Opportunity Cost shall be calculated with the
assumption of a marginal forty-two percent (42%) corporate tax rate each year
regardless of whether the actual marginal tax rate of the Employer is higher or
lower.

2. Employee Benefits Payments. The Employee shall be entitled to payment of the
   --------------------------
Index Employee Benefits on the terms as specified in the Agreement.

                                     EXAMPLE

INDEX EMPLOYEE BENEFITS

<TABLE>
<CAPTION>
[n]              [A]                               [B]              [C]              [D]
End of Year      Cash  Surrender Value of    Index            Opportunity Cost       Annual
-----------      ------------------------    -----            ----------------       ------
                 Life Insurance Policy       [Annual          A/0/ = premium         Benefit
                 ---------------------       Policy           A/0/+C/n-1/x.05x       -------
                                             Income]          (1-42%)                B-C
                                             A/n/-A/n-1/
<S>              <C>                         <C>              <C>                    <C>

0                $1,000,000                  --               --                     --

      1          $1,050,000                  $50,000          $29,000                $21,000

      2          $1,102,500                  $52,500          $29,841                $22,659

      3          $1,157,625                  $55,125          $30,706                $24,419

      .
      .
      .
</TABLE>

Assumptions:      Initial Insurance = $1,000,000
                  Effective Tax Rate = 42%
                  One Year US Treasury Yield = 5%
<PAGE>

                                   SCHEDULE C

                              SUPPLEMENTAL BENEFITS

     In addition to the Employee Benefits specified elsewhere in this Agreement,
the Employee shall be entitled to receive the following supplemental benefits
(the "Supplemental Benefits"):

     Secular Trust Defined Benefit. Provided that the Employee has not exercised
the Employee's withdrawal rights under the Trust, the Employer shall make
contributions to the Trust, pursuant to paragraph 9 of the Agreement, on a
pre-tax basis in the amounts shown in column (B) of the following table. Such
contributions shall be made from time to time in the discretion of the Employer
provided that the total amount shown in column (B) below has been contributed to
the Trust by the end of the Plan Year shown in column (A) below.

                     (A)           (B)

                     1998          $98,039

                     1999          $32,277

                     2000          $36,556

                     2001          $41,217

                     2002          $46,290

                     2003          $51,808

                     2004          $57,805

                     2005          $64,320

                     2006          $71,393

                     2007          $79,068

                     2008          $87,390

                     2009          $96,411

                     2010          $106,185

                     2011          $116,768

                     2012          $128,223

                     2013          $140,617
<PAGE>

     The aggregate amount of the foregoing contributions shall be subject to
adjustment, from time to time, to ensure that the Trust is adequately funded to
afford the Employee with a projected defined benefit equal to the Applicable
Percentage of Fifty Seven Thousand Two Hundred Forty Dollars ($57,240) per annum
for twenty (20) years commencing the year in which the Employee attains age
sixty-two (62). In the event that the contributions made by the Employer to the
Trust as provided above are determined to be insufficient to fund the foregoing
Supplemental Benefits, the Employer shall make such further contributions to the
Trust as may be necessary to fund fully such Supplemental Benefits. Such
determination and adjusting contributions, if required, may be made from time to
time at the discretion of the Employer, but in all events not later than the
date on which the Employee Retires or otherwise becomes eligible to begin
receiving the Employee Benefits specified in Schedule "B". Provided that the
foregoing final adjusting contribution, if required, has been made, the Employer
shall have no obligation to make further contributions to the Trust once the
Employee Retires or otherwise becomes eligible to begin receiving the Employee
Benefits specified in Schedule "B".

     Notwithstanding anything herein or in the Agreement to the contrary, the
obligation of the Employer to make the contributions to the Trust as specified
above shall terminate automatically upon the forfeiture or other termination of
the Employee's right to receive the Employee Benefits specified in Schedule "B",
as provided in this Agreement.

                                      -2-
<PAGE>

                                   SCHEDULE D
                                   ----------

                          WAIVER OF PRIOR PLAN BENEFITS
                          -----------------------------

     In consideration for the Employee Benefits made available to the Employee
by this Employee Supplemental Compensation Benefits Agreement (the "Agreement"),
the Employee acknowledges and agrees as follows:

         (a) The Employee is a party to that certain ___________________________
Agreement made with the Employer or its predecessor dated ____________, 19__
(the "Prior Plan Agreement");

         (b) This Agreement and the Employee Benefits hereunder are provided as
a substitute for the Prior Plan Agreement and the benefits provided thereunder;

         (c) The Prior Plan Agreement and the benefits thereunder are hereby
terminated effective as of the date of this Agreement;

         (d) The Employee hereby waives and relinquishes for himself or herself,
and his or her heirs, beneficiaries, legal representatives, agents, successors
and assigns, any and all right, entitlement and interest that the Employee has
or may have pursuant to the Prior Plan Agreement and the benefits thereunder;

         (e) The Employee accepts the Employee Benefits afforded by this
Agreement in full and complete substitution for the benefits otherwise provided
by the Prior Plan Agreement; and

         (f) Without limiting the scope and effect of subparagraph 11.1 of the
Agreement, the Employee (i) has had an opportunity to consult with advisors of
the Employee's own choice in determining to enter into this Agreement and this
Waiver, (ii) understands that the effect of this Waiver is to terminate, waive
and relinquish forever all rights, entitlements and interests that the Employee
has or may have under the Prior Plan Agreement and the benefits thereunder as a
condition to receiving the Employee Benefits under this Agreement; and (iii) the
Employee is entering into this Agreement and this Waiver voluntarily and with
full appreciation of the effect of doing so.

Dated:                              , 1998
        ----------------------------            --------------------------------
                                                Steven C. Smith

I consent to and agree to be bound by the foregoing Waiver:

-----------------------------------------------------
Lourdes Smith, Spouse of Steven C. Smith
<PAGE>

                                  SCHEDULE E
                                  ----------

                            BENEFICIARY DESIGNATION
                            -----------------------

     To the Administrator of the Greater Bay Bancorp Employee Supplemental
Compensation Benefits Agreement:

     Pursuant to the Provisions of my Employee Supplemental Compensation
Benefits  Agreement with Greater Bay Bancorp,  permitting  the  designation of a
beneficiary or beneficiaries by a participant,  I hereby designate the following
persons and entities as primary and secondary beneficiaries of any benefit under
said Agreement payable by reason of my death:

Primary Beneficiary:
-------------------

---------------------------    --------------------------   --------------------
Name                           Address                      Relationship

Secondary (Contingent) Beneficiary:
----------------------------------

---------------------------    --------------------------   --------------------
Name                           Address                      Relationship

THE RIGHT TO REVOKE OR CHANGE ANY BENEFICIARY DESIGNATION IS HEREBY RESERVED.
ALL PRIOR DESIGNATIONS, IF ANY, OF PRIMARY BENEFICIARIES AND SECONDARY
BENEFICIARIES ARE HEREBY REVOKED.

     The Administrator shall pay all sums payable under the Agreement by reason
of my death to the Primary Beneficiary, if he or she survives me, and if no
Primary Beneficiary shall survive me, then to the Secondary Beneficiary, and if
no named beneficiary survives me, then the Administrator shall pay all amounts
in accordance with the terms of my Employee Supplemental Compensation Benefits
Agreement. In the event that a named beneficiary survives me and dies prior to
receiving the entire benefit payable under said Agreement, then and in that
event, the remaining unpaid benefit payable according to the terms of my
Employee Supplemental Compensation Benefits Agreement shall be payable to the
personal representatives of the estate of said beneficiary who survived me but
died prior to receiving the total benefit provided by my Employee Supplemental
Compensation Benefits Agreement.

Dated:                             , 1998
       ----------------------------          ----------------------------------
                                             Steven C. Smith
<PAGE>

CONSENT OF THE EMPLOYEE'S SPOUSE
TO THE ABOVE BENEFICIARY DESIGNATION:
------------------------------------

     I, Lourdes Smith, being the spouse of Steven C. Smith, after being afforded
the opportunity to consult with independent counsel of my choosing, do hereby
acknowledge that I have read, agree and consent to the foregoing Beneficiary
Designation which relates to the Employee Supplemental Compensation Benefits
Agreement entered into by my spouse effective as of January 1, 1998. I
understand that the above Beneficiary Designation may affect certain rights
which I may have in the benefits provided for under the terms of the Employee
Supplemental Compensation Benefits Agreement and in which I may have a marital
property interest.

Dated:                            , 1998
      ----------------------------

----------------------------------------
             Lourdes Smith
<PAGE>

                                   SCHEDULE F
                                   ----------

                              DISTRIBUTION ELECTION
                              ---------------------

Pursuant to the Provisions of my Employee Supplemental Compensation Benefits
Agreement with Greater Bay Bancorp, I hereby elect to have any distribution of
the balance in my Benefit Account paid to me in installments as designated
below:

____     sixty (60) monthly installments with the amount of each installment
         determined as of each installment date by dividing the entire amount in
         my Benefit Account by the number of installments then remaining to be
         paid, with the final installment to be the entire remaining balance in
         the Benefit Account.

____     one hundred twenty (120) monthly installments with the amount of each
         installment determined as of each installment date by dividing the
         entire amount in my Benefit Account by the number of installments then
         remaining to be paid, with the final installment to be the entire
         remaining balance in the Benefit Account.

____     one hundred eighty (180) monthly installments with the amount of each
         installment determined as of each installment date by dividing the
         entire amount in my Benefit Account by the number of installments then
         remaining to be paid, with the final installment to be the entire
         remaining balance in the Benefit Account.

Dated:                            , 1998
      ----------------------------

Signed:
       ---------------------------------
       Steven C. Smith
<PAGE>

                                   SCHEDULE G
                                   ----------

                                  SECULAR TRUST
                                  -------------

[to be finalized]<PAGE>

                                                                 Exhibit 10.15.1

                               November 4, 1999

Greater Bay Bancorp
2860 W. Bayshore Road
Palo Alto, CA 94303
Attention: Kamran Husain

Dear Mr. Husain:

     This letter is to confirm that Wells Fargo Bank, National Association
("Bank"), subject to all terms and conditions contained herein, has agreed to
make available to Greater Bay Bancorp ("Borrower") a revolving line of credit
under which Bank will make advances to Borrower from time to time up to and
including November 2, 2000 not to exceed the maximum principal amount of
$25,000,000.00 (the "Line of Credit"). The proceeds of the Line of Credit shall
be used for short term operational cash flow requirements of Borrower and its
subsidiaries. Each existing or hereafter acquired subsidiary of Borrower which
is a bank is hereinafter referred to a "Bank Subsidiary").

I.   CREDIT TERMS:

     1.  LINE OF CREDIT:

     (a) Line of Credit Note.  Borrower's obligation to repay advances under the
         -------------------
Line of Credit shall be evidenced by a promissory note substantially in the form
of Exhibit A attached hereto ("Line of Credit Note"), all terms of which are
incorporated herein by this reference.

     (b) Borrowing and Repayment.  Borrower may from time to time during the
         -----------------------
term of the Line of Credit borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions contained herein or in the Line of Credit Note; provided however,
that (i) the total outstanding borrowings under the Line of Credit shall not at
any time exceed the maximum principal amount available thereunder, as set forth
above, and that (ii) Borrower shall maintain a zero balance on the Line of
Credit during the 30 consecutive day period immediately following any period of
180 consecutive days during which the outstanding principal balance of the Line
of Credit exceeded zero.
<PAGE>

Greater Bay Bancorp
November 4, 1999
Page 2

II.  INTEREST/FEES:

     1.  Interest.  The outstanding principal balance of the Line of Credit
         --------
shall bear interest at the rate of interest set forth in the Line of Credit
Note.

     2.  Computation and Payment.  Interest shall be computed on the basis of a
         -----------------------
360-day year, actual days elapsed.  Interest shall be payable at the times and
place set forth in the Line of Credit Note.

     3.  Commitment Fee.  Borrower shall pay to Bank a non-refundable commitment
         --------------
fee for the Line of Credit equal to $5,000.00, which fee shall be due and
payable in full on the date of Borrower's execution of this letter.

     4.  Collection of Payments.  Borrower authorizes Bank to collect all
         ----------------------
interest and fees due under the Line of Credit by charging Borrower's demand
deposit account number 4000-583708 ___ with Bank, or any other demand deposit
account maintained by Borrower with Bank, for the full amount thereof.  Should
there be insufficient funds in any such demand deposit account to pay all such
sums when due, the full amount of such deficiency shall be immediately due and
payable by Borrower.

III.  REPRESENTATIONS AND WARRANTIES:

     Borrower makes the following representations and warranties to Bank, which
representations and warranties shall survive the execution of this letter and
shall continue in full force and effect until the full and final payment, and
satisfaction and discharge, of all obligations of Borrower to Bank subject to
this letter.

     1.  Legal Status.  Borrower is a corporation, duly organized and existing
         ------------
and in good standing under the laws of California and is qualified or licensed
to do business in all jurisdictions in which such qualification or licensing is
required or in which the failure to so qualify or to be so licensed could have a
material adverse effect on Borrower.

     2.  Authorization and Validity.  This letter, the Line of Credit Note, and
         --------------------------
each other document, contract or instrument deemed necessary by Bank to evidence
any extension of credit to Borrower pursuant to the terms and conditions hereof,
or now or at any time hereafter required by or delivered to Bank in connection
with this letter (collectively, the "Loan Documents") have been duly authorized,
and upon their execution and delivery in accordance with the provisions hereof
will constitute legal, valid and binding agreements and obligations of Borrower
or the
<PAGE>

Greater Bay Bancorp
November 4, 1999
Page 3

party which executes the same, enforceable in accordance with their respective
terms.

     3.  No Violation.  The execution, delivery and performance by Borrower of
         ------------
each of the Loan Documents do not violate any provision of any law or
regulation, or contravene any provision of the Articles of Incorporation or by-
laws of Borrower, or result in a breach of or constitute a default under any
contract, obligation, indenture or other instrument to which Borrower is a party
or by which Borrower may be bound.

     4.  Litigation.  There are no pending, or to the best of Borrower's
         ----------
knowledge threatened, actions, claims, investigations, suits or proceedings by
or before any governmental authority, arbitrator, court or administrative agency
which could have a material adverse effect on the financial condition or
operation of Borrower other than those disclosed by Borrower to Bank in writing
prior to the date hereof.

     5.  Correctness of Financial Statement.  The financial statement of
         ----------------------------------
Borrower dated June 30, 1999, a true copy of which has been delivered by
Borrower to Bank prior to the date hereof, (a) is complete and correct and
presents fairly the consolidated financial condition of Borrower, (b) discloses
all liabilities of Borrower that are required to be reflected or reserved
against under generally accepted accounting principles, whether liquidated or
unliquidated, fixed or contingent, and (c) has been prepared in accordance with
generally accepted accounting principles consistently applied.  Since the date
of such financial statement there has been no material adverse change in the
consolidated financial condition of Borrower, nor has Borrower or any Bank
Subsidiary mortgaged, pledged, granted a security interest in or otherwise
encumbered any of its assets or properties except in favor of Bank or as
otherwise permitted by Bank in writing.

     6.  Income Tax Returns.  Borrower has no knowledge of any pending
         ------------------
assessments or adjustments of its income tax payable with respect to any year.
<PAGE>

Greater Bay Bancorp
November 4, 1999
Page 4

     7.  No Subordination.  There is no agreement, indenture, contract or
         ----------------
instrument to which Borrower is a party or by which Borrower may be bound that
requires the subordination in right of payment of any of Borrower's obligations
subject to this letter to any other obligation of Borrower.

     8.  Permits, Franchises.  Borrower possesses, and will hereafter possess,
         -------------------
all permits, consents, approvals, franchises and licenses required and all
rights to trademarks, trade names, patents and fictitious names, if any,
necessary to enable it to conduct the business in which it is now engaged in
compliance with applicable law.

     9.  ERISA.  Borrower is in compliance in all material respects with all
         -----
applicable provisions of the Employee Retirement Income Security Act of 1974, as
amended or recodified from time to time ("ERISA"); Borrower has not violated any
provision of any defined employee pension benefit plan (as defined in ERISA)
maintained or contributed to by Borrower (each, a "Plan"); no Reportable Event,
as defined in ERISA, has occurred and is continuing with respect to any Plan
initiated by Borrower; Borrower has met its minimum funding requirements under
ERISA with respect to each Plan; and each Plan will be able to fulfill its
benefit obligations as they come due in accordance with the Plan documents and
under generally accepted accounting principles.

     10.  Other Obligations.  Borrower is not in default on any obligation for
          -----------------
borrowed money, any material purchase money obligation or any other material
lease, commitment, contract, instrument or obligation.

     11.  Environmental Matters.  Except as disclosed by Borrower to Bank in
          ---------------------
writing prior to the date hereof, Borrower is in compliance in all material
respects with all applicable federal or state environmental, hazardous waste,
health and safety statutes, and any rules or regulations adopted pursuant
thereto, which govern or affect any of Borrower's operations and/or properties,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act
of 1976, and the Federal Toxic Substances Control Act, as any of the same may be
amended, modified or supplemented from time to time.  None of the operations of
Borrower is the subject of any federal or state investigation evaluating whether
any remedial action involving a material expenditure is needed to respond to a
release of any toxic or hazardous waste or substance into the environment.
Borrower has no material contingent liability in connection with any release of
any toxic or hazardous waste or substance into the environment.
<PAGE>

Greater Bay Bancorp
November 4, 1999
Page 5

IV.   CONDITIONS:

     1.  Conditions of Initial Extension of Credit.  The obligation of Bank to
         -----------------------------------------
extend any credit contemplated by this letter is subject to fulfillment to
Bank's satisfaction of all of the following conditions:

     (a) Documentation.  Bank shall have received each of the Loan Documents,
         -------------
duly executed and in form and substance satisfactory to Bank.

     (b) Financial Condition.  There shall have been no material adverse change,
         -------------------
as determined by Bank, in the financial condition or business of Borrower, nor
any material decline, as determined by Bank, in the market value of a
substantial or material portion of the assets of Borrower.

     2.  Conditions of Each Extension of Credit.  The obligation of Bank to make
         --------------------------------------
each extension of credit requested by Borrower hereunder shall be subject to the
fulfillment to Bank's satisfaction of each of the following conditions:

     (a) Compliance.  The representations and warranties contained herein and in
         ----------
each of the other Loan Documents shall be true on and as of the date of the
signing of this letter and on the date of each extension of credit by Bank
pursuant hereto, with the same effect as though such representations and
warranties had been made on and as of each such date, and on each such date, no
default hereunder, and no condition, event or act which with the giving of
notice or the passage of time or both would constitute such a default, shall
have occurred and be continuing or shall exist.

     (b) Documentation.  Bank shall have received all additional documents which
         -------------
may be required in connection with such extension of credit.
<PAGE>

Greater Bay Bancorp
November 4, 1999
Page 6

V.  COVENANTS:

     Borrower covenants that so long as Bank remains committed to extend credit
to Borrower pursuant hereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents
remain outstanding, and until payment in full of all obligations of Borrower
subject hereto, Borrower shall, unless Bank otherwise consents in writing:

     1.  Punctual Payment.  Punctually pay all principal, interest, fees or
         ----------------
other liabilities due under any of the Loan Documents at the times and place and
in the manner specified therein , and immediately upon demand by Bank, the
amount by which the outstanding principal balance of the Line of Credit at any
time exceeds any limitation on borrowings applicable thereto.

     2.  Accounting Records.  Maintain adequate books and records in accordance
         ------------------
with generally accepted accounting principles consistently applied, and permit
any representative of Bank, at any reasonable time, to inspect, audit and
examine such books and records, to make copies of the same, and inspect the
properties of Borrower.

     3.  Financial Statements. Provide to Bank all of the following, in form and
         --------------------
detail satisfactory to Bank:

     (a) not later than 95 days after and as of the end of each fiscal year, an
     audited consolidated financial statement of Borrower, prepared by
     independent certified public accountants acceptable to Bank, to include
     balance sheet, income statement, statement of cash flows, together with an
     unqualified opinion;

     (b) not later than 50 days after and as of the end of each fiscal quarter,
     a consolidated financial statement of Borrower, prepared by Borrower, to
     include balance sheet, income statement and statement of cash flows;

     (c)  promptly upon the occurrence thereof, notify Bank of any formal
     enforcement action taken or, to the knowledge of Borrower, proposed to be
     taken against Borrower and/or any of its subsidiaries; and

     (d) from time to time such other information as Bank may reasonably
     request.

     4.  Compliance.  Preserve and maintain all licenses, permits, governmental
         ----------
approvals, rights, privileges and franchises necessary for the conduct of its
business; and comply
<PAGE>

Greater Bay Bancorp
November 4, 1999
Page 7

with the provisions of all documents pursuant to which Borrower is organized
and/or which govern Borrower's continued existence and with the requirements of
all laws, rules, regulations and orders of a governmental agency applicable to
Borrower and/or its business, except any of the foregoing which, if not
preserved, maintained or complied with, would not have a material adverse effect
on Borrower.

     5.  Insurance.  Maintain and keep in force insurance of the types and in
         ---------
amounts customarily carried in lines of business similar to that of Borrower,
including but not limited to fire, extended coverage, public liability, property
damage and workers' compensation, with all such insurance carried with companies
and in amounts satisfactory to Bank, and deliver to Bank from time to time at
Bank's request schedules setting forth all insurance then in effect.

     6.  Facilities.  Keep all properties useful or necessary to Borrower's
         ----------
business in good repair and condition, and from time to time make necessary
repairs, renewals and replacements thereto so that such properties shall be
fully and efficiently preserved and maintained.

     7.  Taxes and Other Liabilities.  Pay and discharge when due any and all
         ---------------------------
indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation federal and state income taxes and state and local
property taxes and assessments, except (a) such as Borrower may in good faith
contest or as to which a bona fide dispute may arise, and (b) for which Borrower
has made provision, to Bank's satisfaction, for eventual payment thereof in the
event that Borrower is obligated to make such payment.

     8.  Litigation.  Promptly give notice in writing to Bank of any litigation
         ----------
pending or threatened against Borrower with a claim in excess of $1,000,000.00.

     9.  Financial Condition.  Maintain Borrower's financial condition (or, with
         -------------------
respect to paragraph (c) below, cause all of Borrower's subsidiaries or Bank
Subsidiaries (as applicable) to maintain their combined financial condition) as
follows using generally accepted accounting principles consistently applied and
used consistently with prior practices (except to the extent modified by the
definitions herein), with compliance determined commencing with Borrower's
financial statements for the period ending September 30, 1999:
<PAGE>

Greater Bay Bancorp
November 4, 1999
Page 8

     (a) Double Leverage Ratio not at any time greater than 1.50 to 1.0
determined as of the end of each fiscal quarter, with "Double Leverage Ratio"
                                                       ----------------------
defined as the ratio of (i) Borrower's equity investment in all its
subsidiaries, to (ii) Borrower's equity.

     (b) Maintain on a consolidated basis (and cause each Bank Subsidiary to
maintain) a capital ratio sufficient to be rated "well capitalized" by the
Federal Reserve Board, Federal Deposit Insurance Corporation and each other
federal or state regulatory entity or agency which has jurisdiction over
Borrower or any Bank Subsidiary and maintains such a rating system; provided,
                                                                    ---------
however, that in the event Borrower acquires a Bank Subsidiary after the date of
-------
this Agreement which is not "well capitalized" at the time of such acquisition,
Borrower shall cause such Bank Subsidiary to become "well capitalized" within
six (6) months following such acquisition.

     (c) Maintain consolidated net income after taxes not less than $1.00,
determined as of each fiscal quarter end on a rolling four (4) quarter basis.
Consolidated herein refers to Borrower and all of its subsidiaries.

     10.  Other Indebtedness.  Not create, incur, assume or permit to exist any
          ------------------
indebtedness or liabilities resulting from borrowings, loans or advances,
whether secured or unsecured, matured or unmatured, liquidated or unliquidated,
joint or several, except (a) the liabilities of Borrower to Bank, (b) any other
liabilities of Borrower and any subsidiaries existing as of, and disclosed to
Bank prior to, the date hereof, (c) unsecured and uncommitted operating lines of
credit, such as daylight overdraft facilities and Fed Funds lines and the like,
(d) other unsecured loans and lines of credit in an aggregate amount not to
exceed, on a consolidated basis, 50% of Borrower's consolidated equity preceding
the incurring of such indebtedness, and (e) additional unsecured liabilities
which are subordinated to the obligations of Borrower to Bank pursuant to
agreements in form and content acceptable to Bank; provided that the
indebtedness described in clauses (b), (c) and (d) shall not be prior or senior
in right of payment to the obligations of Borrower to Bank.

     11.  Merger, Consolidation, Transfer of Assets.  Not merge into or
          -----------------------------------------
consolidate with any other entity unless Borrower is the surviving entity; nor
make any substantial change in the nature of Borrower's business as conducted as
of the date hereof; nor sell, lease, transfer or otherwise dispose of all or a
substantial or material portion of Borrower's assets except in the ordinary
course of its business.
<PAGE>

Greater Bay Bancorp
November 4, 1999
Page 9

     12.  Loans, Advances, Investments.  Not make any loans or advances to or
          ----------------------------
investments in any person or entity, except (a) any of the foregoing existing as
of, and disclosed to Bank prior to, the date hereof, (b) loans and advances to
Borrower's subsidiaries, provided that at no time shall the outstanding
principal balance of such loans and advances to any Bank Subsidiaries exceed 50%
of the equity of such subsidiary, (c) loans and advances in the ordinary course
of Borrower's business, (d) additional investments in new subsidiaries, and (e)
investments (other than in subsidiaries) in the ordinary course of business.

     13.  Distributions.  Upon and during the continuance of an Event of Default
          -------------
(as defined in Section VI below), not to declare or pay any distributions to its
shareholders either in cash or any other property (other than dividends in the
form of stock), nor redeem, retire, repurchase or otherwise acquire any
ownership interest in Borrower.

     14.  Year 2000 Compliance.  Perform all acts reasonably necessary to ensure
          --------------------
that (a) Borrower and any business in which Borrower holds a substantial
interest, and (b) all customers, suppliers and vendors that are material to
Borrower's business, become Year 2000 Compliant in a timely manner.  Such acts
shall include, without limitation, performing a comprehensive review and
assessment of all of Borrower's systems and adopting a detailed plan, with
itemized budget, for the remediation, monitoring and testing of such systems.
As used herein, "Year 2000 Compliant" shall mean, in regard to any entity, that
all software, hardware, firmware, equipment, goods or systems utilized by or
material to the business operations or financial condition of such entity, will
properly perform date sensitive functions before, during and after the year
2000.  Borrower shall, immediately upon request, provide to Bank such
certifications or other evidence of Borrower's compliance with the terms hereof
as Bank may from time to time require.
<PAGE>

Greater Bay Bancorp
November 4, 1999
Page 10

VI.  DEFAULT, REMEDIES:

     1.  Default, Remedies.  Upon the violation of any term or condition of any
         -----------------
of the Loan Documents, or upon the occurrence of any default or defined event of
default under any of the Loan Documents (each, an "Event of Default"): (a) all
indebtedness of Borrower under each of the Loan Documents, any term thereof to
the contrary notwithstanding, shall at Bank's option and without notice become
immediately due and payable without presentment, demand, protest or notice of
dishonor, all of which are expressly waived by Borrower; (b) the obligation, if
any, of Bank to extend any further credit under any of the Loan Documents shall
immediately cease and terminate; and (c) Bank shall have all rights, powers and
remedies available under each of the Loan Documents, or accorded by law,
including without limitation the right to resort to any or all security for any
credit extended by Bank to Borrower under any of the Loan Documents and to
exercise any or all of the rights of a beneficiary or secured party pursuant to
the applicable law.  All rights, powers and remedies of Bank may be exercised at
any time by Bank and from time to time after the occurrence of any such Event of
Default, are cumulative and not exclusive, and shall be in addition to any other
rights, powers or remedies provided by law or equity.

     2.  No Waiver.  No delay, failure or discontinuance of Bank in exercising
         ---------
any right, power or remedy under any of the Loan Documents shall affect or
operate as a waiver of such right, power or remedy; nor shall any single or
partial exercise of any such right, power or remedy preclude, waive or otherwise
affect any other or further exercise thereof or the exercise of any other right,
power or remedy.  Any waiver, permit, consent or approval of any kind by Bank of
any breach of or default under any of the Loan Documents must be in writing and
shall be effective only to the extent set forth in such writing.
<PAGE>

Greater Bay Bancorp
November 4, 1999
Page 11

VII.  MISCELLANEOUS:

     1.  Notices.  All notices, requests and demands which any party is required
         -------
or may desire to give to any other party under any provision of this letter must
be in writing delivered to each party at its address first set forth above, or
to such other address as any party may designate by written notice to all other
parties.  Each such notice, request and demand shall be deemed given or made as
follows:  (a)if sent by hand delivery, upon delivery; (b) if sent by mail, upon
the earlier of the date of receipt or three (3) days after deposit in the U.S.
mail, first class and postage prepaid; and (c) if sent by telecopy, upon
receipt.

     2.  Costs, Expenses and Attorneys' Fees.  Borrower shall pay to Bank
         -----------------------------------
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel), expended or
incurred by Bank in connection with (a) the preparation of amendments and
waivers, if any, of this letter and the other Loan Documents, (b) the
enforcement of Bank's rights and/or the collection of any amounts which become
due to Bank under any of the Loan Documents, and (c) the prosecution or defense
of any action in any way related to any of the Loan Documents, including without
limitation, any action for declaratory relief, whether incurred at the trial or
appellate level, in an arbitration proceeding or otherwise, and including any of
the foregoing incurred in connection with any bankruptcy proceeding (including
without limitation, any adversary proceeding, contested matter or motion brought
by Bank or any other person) relating to any Borrower or any other person or
entity.

     3.  Successors, Assignment.  This letter shall be binding upon and inure to
         ----------------------
the benefit of the heirs, executors, administrators, legal representatives,
successors and assigns of the parties; provided however, that Borrower may not
assign or transfer its interest hereunder without Bank's prior written consent.
Bank reserves the right to sell, assign, transfer, negotiate or grant
participations in all or any part of, or any interest in, Bank's rights and
benefits under each of the Loan Documents.  In connection therewith Bank may
disclose all documents and information which Bank now has or hereafter may
acquire relating to any credit extended by Bank to Borrower, Borrower or its
business, or any collateral required hereunder.

     4.  Entire Agreement; Amendment.  This letter and the other Loan Documents
         ---------------------------
constitute the entire agreement between Borrower and Bank with respect to any
extension of credit by Bank subject hereto and supersede all prior negotiations,
communications, discussions and correspondence concerning the subject matter
hereof.  This letter may be amended or modified only in writing
<PAGE>

Greater Bay Bancorp
November 4, 1999
Page 12

signed by each party hereto.

     5.  No Third Party Beneficiaries.  This letter is made and entered into for
         ----------------------------
the sole protection and benefit of the parties hereto and their respective
permitted successors and assigns, and no other person or entity shall be a third
party beneficiary of, or have any direct or indirect cause of action or claim in
connection with, this letter or any other of the Loan Documents to which it is
not a party.

     6.  Severability of Provisions.  If any provision of this letter shall be
         --------------------------
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or any remaining provisions of this
letter.

     7.  Governing Law.  This letter shall be governed by and construed in
         -------------
accordance with the laws of the State of California.

     8.  Confidentiality.  Bank acknowledges that it and  Borrower and
         ---------------
Borrower's Bank Subsidiaries compete with one another in a number of areas,
including competing for potential acquisitions of other financial institutions.
In consideration of the foregoing, Bank agrees to execute a Confidentiality
Agreement in the form and content of Exhibit B hereto.

     9.  Arbitration.
         -----------

     (a) Arbitration.  Upon the demand of any party, any Dispute shall be
         -----------
resolved by binding arbitration (except as set forth in (e) below) in accordance
with the terms of this letter.  A "Dispute" shall mean any action, dispute,
claim or controversy of any kind, whether in contract or tort, statutory or
common law, legal or equitable, now existing or hereafter arising under or in
connection with, or in any way pertaining to, any of the Loan Documents, or any
past, present or future extensions of credit and other activities, transactions
or obligations of any kind related directly or indirectly to any of the Loan
Documents, including without limitation, any of the foregoing arising in
connection with the exercise of any self-help, ancillary or other remedies
pursuant to any of the Loan Documents.  Any party may by summary proceedings
bring an action in court to compel arbitration of a Dispute.  Any party who
fails or refuses to submit to arbitration following a lawful demand by any other
party shall bear all costs and expenses incurred by such other party in
compelling arbitration of any Dispute.

     (b)  Governing Rules.  Arbitration proceedings shall be administered by the
          ---------------
American Arbitration Association ("AAA") or such other administrator as the
parties shall mutually agree upon in accordance with the AAA Commercial
Arbitration Rules.  All Disputes submitted to arbitration shall be resolved in
accordance
<PAGE>

Greater Bay Bancorp
November 4, 1999
Page 13

with the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the Loan
Documents. The arbitration shall be conducted at a location in California
selected by the AAA or other administrator. If there is any inconsistency
between the terms hereof and any such rules, the terms and procedures set forth
herein shall control. All statutes of limitation applicable to any Dispute shall
apply to any arbitration proceeding. All discovery activities shall be expressly
limited to matters directly relevant to the Dispute being arbitrated. Judgment
upon any award rendered in an arbitration may be entered in any court having
jurisdiction; provided however, that nothing contained herein shall be deemed to
be a waiver by any party that is a bank of the protections afforded to it under
12 U.S.C. 91 or any similar applicable state law.

     (c)   No Waiver; Provisional Remedies, Self-Help and Foreclosure.  No
           ----------------------------------------------------------
provision hereof shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain provisional or ancillary remedies,
including without limitation injunctive relief, sequestration, attachment,
garnishment or the appointment of a receiver, from a court of competent
jurisdiction before, after or during the pendency of any arbitration or other
proceeding.  The exercise of any such remedy shall not waive the right of any
party to compel arbitration or reference hereunder.

     (d) Arbitrator Qualifications and Powers; Awards.  Arbitrators must be
         --------------------------------------------
active members of the California State Bar or retired judges of the state or
federal judiciary of California, with expertise in the substantive law
applicable to the subject matter of the Dispute.  Arbitrators are empowered to
resolve Disputes by summary rulings in response to motions filed prior to the
final arbitration hearing.  Arbitrators (i) shall resolve all Disputes in
accordance with the substantive law of the state of California, (ii) may grant
any remedy or relief that a court of the state of California could order or
grant within the scope hereof and such ancillary relief as is necessary to make
effective any award, and (iii) shall have the power to award recovery of all
costs and fees, to impose sanctions and to take such other actions as they deem
necessary to the same extent a judge could pursuant to the Federal Rules of
Civil Procedure, the California Rules of Civil Procedure or other applicable
law.  Any Dispute in which the amount in controversy is $5,000,000 or less shall
be decided by a single arbitrator who shall not render an award of greater than
$5,000,000 (including damages, costs, fees and expenses).  By submission to a
single arbitrator, each party expressly waives any right or claim to recover
more than $5,000,000.  Any Dispute in which the amount in controversy exceeds
$5,000,000 shall be decided by majority vote of a panel of three arbitrators;
provided however, that all three
<PAGE>

Greater Bay Bancorp
November 4, 1999
Page 14

arbitrators must actively participate in all hearings and deliberations.

     (e)  Judicial Review.  Notwithstanding anything herein to the contrary, in
          ---------------
any arbitration in which the amount in controversy exceeds $25,000,000, the
arbitrators shall be required to make specific, written findings of fact and
conclusions of law.  In such arbitrations (i) the arbitrators shall not have the
power to make any award which is not supported by substantial evidence or which
is based on legal error, (ii) an award shall not be binding upon the parties
unless the findings of fact are supported by substantial evidence and the
conclusions of law are not erroneous under the substantive law of the state of
California, and (iii) the parties shall have in addition to the grounds referred
to in the Federal Arbitration Act for vacating, modifying or correcting an award
the right to judicial review of (A) whether the findings of fact rendered by the
arbitrators are supported by substantial evidence, and (B) whether the
conclusions of law are erroneous under the substantive law of the state of
California.  Judgment confirming an award in such a proceeding may be entered
only if a court determines the award is supported by substantial evidence and
not based on legal error under the substantive law of the state of California.

     (f) Real Property Collateral; Judicial Reference.  Notwithstanding anything
         --------------------------------------------
herein to the contrary, no Dispute shall be submitted to arbitration if the
Dispute concerns indebtedness secured directly or indirectly, in whole or in
part, by any real property unless (i) the holder of the mortgage, lien or
security interest specifically elects in writing to proceed with the
arbitration, or (ii) all parties to the arbitration waive any rights or benefits
that might accrue to them by virtue of the single action rule statute of
California, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable.  If any
such Dispute is not submitted to arbitration, the Dispute shall be referred to a
referee in accordance with California Code of Civil Procedure Section 638 et
seq., and this general reference agreement is intended to be specifically
enforceable in accordance with said Section 638.  A referee with the
qualifications required herein for arbitrators shall be selected pursuant to the
AAA's selection procedures.  Judgment upon the decision rendered by a referee
shall be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644 and 645.

     (g) Miscellaneous.  To the maximum extent practicable, the AAA, the
         -------------
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the Dispute with the
AAA.  No arbitrator or
<PAGE>

Greater Bay Bancorp
November 4, 1999
Page 15

other party to an arbitration proceeding may disclose the existence, content or
results thereof, except for disclosures of information by a party required in
the ordinary course of its business, by applicable law or regulation, or to the
extent necessary to exercise any judicial review rights set forth herein. If
more than one agreement for arbitration by or between the parties potentially
applies to a Dispute, the arbitration provision most directly related to the
Loan Documents or the subject matter of the Dispute shall control. This
arbitration provision shall survive termination, amendment or expiration of any
of the Loan Documents or any relationship between the parties.

     Your acknowledgment of this letter shall constitute acceptance of the
foregoing terms and conditions.  Bank's commitment to extend any credit to
Borrower pursuant to the terms of this letter shall terminate on November 10,
1999, unless this letter is acknowledged by Borrower and returned to Bank on or
before that date.

                                  Sincerely,

                                  WELLS FARGO BANK,
                                    NATIONAL ASSOCIATION

                                  By: /s/ James A. Gross
                                      --------------------------
                                  Title: Vice President and
                                         Relationship
                                         Manager
                                                ----------------

Acknowledged and accepted as of November 15, 1999:
GREATER BAY BANCORP

By: /s/ Kamran Husain
    -----------------
Title: Senior Vice President-Finance

By: /s/ Steven C. Smith
    -------------------
Title: EVP, CAO & CFO

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