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Fremont Bank and Fremont Bancorporation (collectively, “Bank”) Policy Regarding Excessive and Luxury Expenditures (“Policy”)
This Policy fulfills the requirements under the Emergency Economic Stabilization Act of 2008 (EESA), as amended by the American Recovery and Reinvestment Act of 2009 (ARRA), and the implementing “Interim Final Rule” issued by the U.S. Department of the Treasury (“Treasury”) effective as of June 15, 2009. These statutes and regulations require each recipient of funds under the Capital Purchase Program (CPP) of the Troubled Assets Relief Program (TARP) to have in place a company-wide policy regarding excessive or luxury expenditures.
Approvals “pursuant to this Policy”
Whenever this Policy requires approval “pursuant to this Policy,” such phrase shall be interpreted to mean that the expenditure in question must be approved in advance by the required person in writing (which may include an e-mail) to be placed in a file established solely for the purpose of maintaining a record of such approvals, consistently with the Bank’s records retention policy.
CEO/CFO certifications
The Bank’s CEO and CFO shall report to the Board of Directors a least quarterly and certify to the Board annually that Covered Expenses (as defined below) were properly approved in accordance with the requirements of this Policy.
Accountability for adherence to this Policy
The CEO shall be responsible for implementing adequate controls to assure compliance with this Policy. The CEO may delegate such responsibilities as appropriate, provided the CEO shall not delegate his or her approval or certification duties as set forth in this Policy.
Any associate violating this policy shall be subject to disciplinary action pursuant to the Bank’s Employee Handbook.
Reporting of violations
All associates are required to report any known or suspected violations of this Policy in accordance with the Bank’s Whistleblower Policy.
Covered expenses
The types of expenses covered by this Policy (the “Covered Expenses”) shall include: (i) entertainment or events, (ii) office and facility renovations, (iii) aviation or other transportation services, and (iv) other similar items, activities or events.
Excessive or Luxury Expenditures Policy
Fremont Bancorporation and its subsidiary, Fremont Bank (collectively referred to as the “Bank”) agree to adhere to the following principles and practices related to excessive or luxury expenditures. It is the policy of the Bank that excessive or luxury expenditures, defined as expenditures which are not reasonable expenditures for staff development, performance incentives, or other activities conducted in the normal course of the Bank’s business, shall be prohibited.
All Covered Expenses by the Bank must have a legitimate business purpose, follow a defined approval process, and be reasonable in nature and amount as determined by management or the Board of Directors as required herein. The Board of Directors shall be authorized to delegate its approval authority under this Policy to a committee or committees of the Board of Directors.
In the normal course of business, the Bank provides expense reimbursement to associates for business related expenses in reasonable amounts. To be reimbursed for such legitimate business expenses, the associate must comply with proper documentation requirements, approval processes and timing of reimbursements as set for in the Bank’s “Expense Reimbursement Policy” described in the Fremont Bank Associate Handbook.
This policy regarding Excessive or Luxury Expenditures is intended to strengthen and supplement existing policy and procedures and ensure compliance with the United States Department of the Treasury standards regarding excessive or luxury expenditures.
Entertainment or events - Any entertainment or event expense exceeding $10,000 shall be approved pursuant to this Policy by the CEO. Expenses in excess of $50,000 shall be approved pursuant to this policy by the Board of Directors. Entertainment and event expenses are only permitted if their purpose is (i) for marketing and business development purposes, (ii) to reward or promote associates’ performance, or (iii) for strategic planning purposes.
No entertainment or event expense the principal purpose of which is to reward and promote associates’ performance (e.g., a holiday party) shall occur unless approved pursuant to this Policy by the CEO.
All entertainment or event expenses for strategic planning purposes shall be approved pursuant to this Policy by the CEO.
Costs associated with attendance to conferences or other educational or career advancing events that bear a reasonable relation to associates’ duties and approved by the associate’s supervisor shall not be deemed excessive and are not subject to this Policy.
Office and facility renovations - Office and facility renovations should be consistent with the budget set forth in any strategic planning, as approved by the Board of Directors. All office and facility renovations in excess of $100,000 must be approved pursuant to this Policy by the CEO. All such expenditures in excess of $250,000 must be approved pursuant to this Policy by the Board of Directors. This Policy does not limit management’s ability to make emergency renovations, such as those necessary as a result of an act of nature and to make the facilities operational for customer use.
At no time should renovations be done that would be perceived by a reasonable business person as being extraordinary or excessive.
Aviation or other transportation services - The Bank owns a corporate aircraft. Absent an emergency situation in which senior management may, at its own expense, utilize the airplane with prior approval for personal purposes, in no event shall the corporate airplane be used by an associate unless it is for a business purpose. A business purpose shall included situations in which an associate is accompanied, for good faith business entertainment purposes, by a client or prospective client. Top clients may also be able to charter the bank’s airplane by paying for the actual costs of its use through the Fremont Bank Flying Club and its printed rules of participation. All uses of the corporate airplane shall be reported on a monthly basis to the Board of Directors.
Other similar items, activities or events - For purposes of this Policy, “other similar items, activities or events” shall only include such expenditures that (i) are not generally available to all associates and (ii) are not specifically addressed elsewhere in this Policy or the “Expense Reimbursement Policy”. For illustration purposes, the phrase includes golf club memberships. Such expenditures shall be for legitimate business purposes and reasonable in nature and amount.
This Policy shall not restrict other similar items, activities or events that have a legitimate business purposes (e.g., client development, employee recognition), provided that any such expense shall be approved pursuant to this Policy by the CEO. Where similar items, activities, or events provided by the Bank are used for personal purposes, the cost of those items, activities, or events shall be borne by the associate and they shall be reported to the CEO.
Recognizing that it would be impossible to identify every type of other similar items, activities or events that could fall within the scope of this Policy, this Policy does not place a limit on other similar items, activities or events, but instead requires compliance with the spirit of this Policy as set forth above. Associates shall err on the side of caution when interpreting this provision and seek their supervisor’s approval for any Covered Expense that could be restricted pursuant to this Policy. The CEO shall have ultimate authority to approve other similar activities, items or events.
Reporting
The process of approving and reporting expenditures covered by this Policy, as well as the actual amount of expenditures incurred, may be subject to audit by the Bank’s internal audit staff to confirm Policy compliance. Any violations or departures from Policy requirements shall be promptly reported to the CEO or the CFO, unless such violations or departures relate to the CEO or CFO. Such violations or departures by the CEO or CFO should be promptly reported to the Board of Directors through any member of the Audit Committee or through the Bank’s “Whistleblower Protection Program”. The Bank’s CEO and CFO shall report to the Board of Directors a least quarterly and certify to the Board annually that the approval of any expenditure under this policy requiring prior approval was properly obtained with respect to each such expenditure.
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