EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), between The Bank of the
Pacific, a Washington business corporation ("the Bank") and Xxxxxx X. Xxxx
("Executive") is dated as of January 2, 2003 and will be effective January 2,
2003.
RECITALS
A. The Bank of the Pacific is a Washington banking corporation. The Bank
is engaged in the business of commercial banking in Grays Harbor
County, Pacific County and Wahkakiam County, Washington.
B. The Executive represents he has considerable experience, expertise and
training in management related to banking and services offered by the
Bank. The Bank desires and intends to employ the Executive pursuant to
the terms and conditions set forth in this Agreement.
C. Both the Bank and the Executive have read and understand the terms and
provisions set forth in this Agreement, and have been afforded a
reasonable opportunity to review this Agreement and to consult with an
attorney.
AGREEMENT
The parties agree as follows:
1. EMPLOYMENT. The Bank will employ the Executive for the Term,
except as specifically stated herein, and the Executive
accepts employment with the Bank on the terms and conditions
set forth in this Agreement. The Executive's title will be
"President and Chief Executive Officer" for the Bank.
2. EFFECTIVE DATE AND TERM.
(a) EFFECTIVE DATE. This Agreement is effective as of the
2nd Day of January 2003
(b) TERM. The initial term of this Agreement is one year
(12 months), beginning on the Effective Date stated
in paragraph 2.(a), after which it shall renew for a
term of one year (12 months) unless notice of
termination or nonrenewal is provided by either party
pursuant to paragraph 5(a).
3. DUTIES. The Executive will serve as the President and Chief
Executive Officer and faithfully and diligently perform the
duties assigned to the Executive by The Bank's Board of
Directors. The Executive will use his best efforts to perform
his duties and will
devote all his working time and attention to these duties.
These duties will include, without limitation, the following:
(a) COMPANY PERFORMANCE. The Executive will be
responsible for all aspects of The Bank's
performance, including, without limitation, directing
that daily operational and managerial matters are
performed in a manner consistent with The Bank's
policies. These duties will also include formulating
and implementing The Bank's expansion strategies
performing all tasks in connection with The Bank's
management and affairs that are normal and customary
to the Chief Executive Officer's position.
(b) MODIFICATION OF DUTIES. The Executive will perform
such other duties as may be appropriate to his office
and as may be prescribed from time to time by The
Bank's Board of Directors. New duties and
responsibilities prescribed to the Executive will be
consistent with the Executive's position as The Bank
President and Chief Executive Officer, and shall not
include immoral or unlawful acts.
4. COMPENSATION.
(a) SALARY. Initially, the employee will receive a salary
of $158,000 per year, to be paid at regular intervals
by the Bank in accordance with its regular payroll
schedules. The Executive's salary will be subject to
annual review and adjustment as set forth in Section
4(g).
(b) DIRECTOR FEES. As a Company Director, Executive will
receive director fees including annual retainer and
regular meeting attendance.
(c) INCENTIVE COMPENSATION. Executive will be eligible to
participate in the Executive bonus program. A
disinterested majority of the Bank's Board of
Directors will determine the amount of the bonus
pool, if any, based on the profitability, safety and
soundness of the Bank. The Executive's bonus, if any,
will reflect the Executive's performance in his area
of responsibility and his contribution to the overall
performance of the Bank during the year, as
determined in the sole discretion of the Bank's Board
of Directors. No incentive compensation bonus shall
be paid for any calendar year or portion thereof, in
which this Agreement is terminated or not renewed, or
in which notice of nonrenewal or termination is
given, regardless of reasons for termination or
nonrenewal, and regardless of which party terminates
or declines to renew this Agreement. The Executive
will also be entitled to participate in stock bonus
or stock option plans generally available to senior
executives of the
Bank.
(d) STANDARD BENEFITS. The Bank will provide to the
Executive the standard benefits provided in
accordance with the Bank's benefit plans and
policies, including but not limited to health
insurance, disability insurance, life insurance and
five (5) weeks of paid vacation per year accrued in
accordance with the Bank's benefit plans and
policies. The Executive will also be entitled to
participate in retirement plans, including 401(K)
plans and deferred compensation plans, and including
any supplements or additions to such plans, which are
generally available to senior executives of the Bank.
(e) AUTOMOBILE. The Bank will provide the Executive with
the use of an automobile, of a model typically
appropriate for the performance of the services by a
similarly situated executive.
(f) EXPENSES. The Bank will reimburse the Executive for
all reasonable expenses that the Executive may incur
in the performance of his duties including monthly
country club dues. The Executive will request
reimbursement and provide documentation of such
expenses within a reasonable time, but no later than
90 days after the expense has been incurred.
(g) ANNUAL REVIEW AND ADJUSTMENT. The Executive's
compensation, as set forth in this Section 4(a), will
be subject to annual review and adjustment by a
disinterested majority of the Bank's Board of
Directors or Executive Committee. In no case,
however, will the Executive's salary, vacation, and
expense reimbursement be less than the amounts set
forth in this Section 4.
5. TERMINATION.
(a) NOTICE OF TERMINATION OR NONRENEWAL. Either party may
unilaterally terminate or decline to renew this
Agreement for any reason by providing the other party
with written notice of the termination or nonrenewal
no less than ninety (90) days prior to the
termination date or the final date of the then
current Term of this Agreement.
(b) TERMINATION OR NONRENEWAL BY THE BANK: In the event
that the Bank provides the Executive with a notice of
termination without cause or nonrenewal under this
paragraph, The Bank will pay to the Executive his
salary from the date of the notice for the balance of
the then current Term or for twelve (12) months from
the date of the notice, whichever is greater, and in
its discretion will advise the Executive of those
duties and responsibilities, if any, it wants him to
perform during this time. All forfeiture provisions
regarding restricted stock awards and all vesting
requirements regarding stock options shall lapse or
be deemed fully completed.
(c) TERMINATION OR NONRENEWAL BY THE EXECUTIVE: In the
event that the Executive seeks to terminate or refuse
to renew this Agreement without providing at least
ninety (90) days' written notice prior to the
termination date of final date of the then current
Term, the Executive shall pay to the Bank liquidated
damages as follows: (A) in the event the Executive
provides notice of termination or nonrenewal 29 days
or less prior to the termination date of the
Agreement, the Executive shall pay the Bank $25,000
in liquidated damages; (B) in the event that the
Executive provides notice of termination or
nonrenewal at least 30 days but not more than 59 days
prior to the termination date of the Agreement, the
Executive shall pay to the Bank $20,000 in liquidated
damages; (C) in the event that the Executive provides
notice of termination or nonrenewal at least 60 days
but not more than 89 days prior to termination of
this Agreement, the Executive shall pay to the Bank
$15,000 in liquidated damages.
(d) TERMINATION BY THE BANK FOR CAUSE. Notwithstanding
paragraph 4(a), The Bank may immediately terminate
this Agreement with no advance notice if termination
is for cause. For purposes of this Agreement, "cause"
means dishonesty; fraud; commission of a felony or of
a crime involving moral turpitude; deliberate
violation of statutes, regulations, or orders
pertaining to financial institutions or reckless
disregard of such statutes, regulations, or orders;
destruction or theft of Bank property or assets of
customers of The Bank; physical attack of a fellow
employee or a customer; intoxication at work; use of
narcotics or alcohol to an extent that materially
impairs Executive's performance of his duties;
willful malfeasance or gross negligence in the
performance of Executive's duties; violation of law
in the course of employment that has a material
adverse impact on The Bank, its employees, or its
customers; Executive's refusal to perform Executive's
duties; Executive's refusal to follow reasonable
instructions or directions; misconduct materially
injurious to The Bank; significant neglect of duty;
or any material breach of Executive's duties or
obligations to The Bank that results in material harm
to The Bank. If termination occurs under this
paragraph, the Executive will be entitled to receive
only the salary earned through the date this
Agreement is terminated and shall not be entitled to
any payment pursuant to paragraph 4(a), and except as
otherwise provided by law, participation in benefit
plans ceases upon termination of this Agreement.
(e) DEATH OR DISABILITY. Notwithstanding paragraph 4(a),
this Agreement will
terminate immediately upon the Executive's death.
Notwithstanding paragraph 4(a), if the Executive is
unable to perform his duties and obligations under
this Agreement for a period of 90 days as a result of
a disability that substantially limits one or more of
his major life activities, this Agreement will
terminate immediately upon expiration of such 90 day
period unless Executive is thereafter able to perform
the essential functions of the position referenced in
paragraph 3 with or without a reasonable
accommodation. If termination occurs under this
paragraph, the Executive or his estate will be
entitled to receive only the salary earned through
the date this Agreement is terminated and shall not
be entitled to any payment pursuant to paragraph
5(b), and except as otherwise provided by law,
participation in benefit plans ceases upon
termination of this Agreement, except that as of such
termination date, all vesting requirements regarding
then currently pending stock options shall be deemed
fully completed.
(f) TERMINATION RELATED TO A CHANGE IN CONTROL. This
paragraph will apply to any termination related to a
Change in Control, as set forth herein.
i. "Change in Control" means a change "in the ownership
or effective control" or "in the ownership of a
substantial portion of the assets" of The Bank,
within the meaning of Section 280G of the Internal
Revenue Code. An initial public offering by The Bank
will not, however, be deemed to be a Change in
Control under this Agreement.
ii. Termination by The Bank. Notwithstanding the
provisions of paragraph 5(a), if The Bank or its
successors in interest by merger, or their
transferees in the event of a purchase and assumption
transaction, and for reasons other than the
provisions in paragraphs 5(d) and 5(e), terminates
this Agreement within two (2) years following a
Change in Control, or terminates this Agreement
before a Change in Control and a Change in Control
occurs within nine (9) months after the termination,
The Bank will pay the Executive three (3) times the
highest amount of W-2 compensation received by the
Executive during any of the three most recent
calendar years ending on or prior to the effective
date of termination, less statutory payroll
deductions, and as of such date, all forfeiture
provisions regarding restricted stock awards and all
vesting requirements regarding then currently pending
stock options shall be deemed fully completed.
Payment under this paragraph shall be made in
accordance with The Bank's ordinary payroll policies
and procedures, unless the parties
mutually agree to a different payment schedule.
iii. Executive Assignment Related to Change in Control. If
the assignment to the Executive by The Bank or its
successors in interest by merger, or their
transferees in the event of a purchase and assumption
transaction, is other than the position of President
and CEO of The Bank and its Holding Company without
the Executive's express written consent, then the
provisions of paragraph 5(f)(ii) shall apply.
iv. Limitations on Payments Related to Change in Control.
The following apply notwithstanding any other
provision of this agreement:
(1) The payment described in Section 5(f)(ii) shall be
less than the amount that would cause it to be a
"parachute payment" within the meaning of Section
280G (b)(2)(A) of the Internal Revenue Code; and
(2) The executive's right to receive the payment
described in Section 5(f)(ii) terminates (a)
immediately if before the Change in Control
transaction closes, the Executive terminates his
employment without good reason or the Company
terminates the Executive's employment for cause, or
(b) two years after a Change in Control occurs.
6. CONFIDENTIALITY. The Executive will not, after signing this
Agreement, including during and after its Term, disclose to
any other person or entity any confidential information
concerning The Bank or its business operations or customers,
or use for his own purposes or permit or assist in the use of
such confidential information by third parties unless The Bank
consents to the use or disclosures of their respective
information, or disclosure is required by law or court order.
The provisions of this paragraph survive the termination of
the Executives employment by The Bank.
7. NONCOMPETITION. During the Term and for two (2) years after
the Executive's employment with The Bank ends, the Executive
will not become involved with a Competing Business or serve,
directly or indirectly, a Competing Business in any matter.
"Competing Business" means any company that competes with or
will compete with The Bank in Grays Harbor, Pacific and
Wahkiakum Counties, or any other Washington or Oregon county
in which The Bank maintains a banking office(s) at the time of
the termination of this Agreement. "Competing Business"
includes, without limitiation, any existing or newly formed
financial institution or trust company.
8. ENFORCEMENT. The Bank and the Executive agree that, in light
of all of the facts and circumstances of the relationship
between the The Bank and the Executive, the agreements
referred to in paragraphs 5(a), 6 and 7 are fair and
reasonably necessary for the protection of The Bank's
confidential information, goodwill and other protectible
interests. The parties acknowledge and agree that the time and
expense involved in proving in any forum the actual damage or
loss suffered by The Bank if there is a breach of paragraphs
5(a), 6 or 7 make this case appropriate for liquidated
damages. Accordingly, The Bank and the Executive agree that
the following schedule of liquidated damages is reasonable and
fair, and shall be the amount of damages which the Executive
shall pay to The Bank for each, separate breach of paragraphs
5(a), 6 or 7 by the Executive:
a. for a breach of paragraph 5(a), the sum of $25,000;
b. for a breach of paragraph 6, the sum of $100,000;
c. for a breach of paragraph 7, the sum of $250,000.
For purposes of paragraph 7, a "separate breach" shall be
deemed to have occurred with each Competing Business with
which the Executive becomes involved or serves in violation of
paragraph 7.
Neither the breach of paragraphs 5(a), 6 or 7, nor the payment
of liquidated damages by the Executive, shall affect the
continuing validity or enforceability of this Agreement, or
The Bank's right to seek and obtain injunctive relief. If a
court of competent jurisdiction should decline to enforce any
of these covenants and agreements, the Executive and the Bank
hereby stipulate that the Court shall reform these provisions
to restrict the Executive's use of confidential information
and the Executive's ability to compete with The Bank to the
maximum extent, in time, scope of activities, and geography,
as the court finds enforceable.
9. ADEQUATE CONSIDERATION. The Executive specifically
acknowledges the receipt of adequate consideration for the
covenants contained in paragraph 5(a), 6 and 7 and that The
Bank is entitled to require him to comply with these
paragraphs. These paragraphs will survive termination of this
Agreement. The Executive represents that if his employment is
terminated, whether voluntarily or involuntarily, the
Executive has experience and capabilities sufficient to enable
the Executive to obtain employment in areas which do not
violate this Agreement and that the Bank's enforcement of a
remedy by way of injunction will not prevent the Executive
from earning a livelihood.
10. MISCELLANEOUS PROVISIONS. This Agreement constitutes the
entire understanding between the parties concerning its
subject matter. This Agreement will bind and inure to the
benefit of The Bank's and the Executive's heirs, legal
representatives, successors and assigns. This Agreement may be
modified only through a written instrument signed by both
parties. This Agreement will be governed and construed in
accordance with Washington law, except that certain matters
may be governed by federal law. Jurisdiction and venue for
enforcement of any terms of this Agreement shall be in Grays
Harbor County Superior Court.
Signed as of January 2, 2003:
THE BANK OF THE PACIFIC EXECUTIVE
/s/ Xxxxxx X. Xxxxx /s/ Xxxxxx X. Xxxx
---------------------------- --------------------------
Xxxxxx X. Xxxxx, Chairman Xxxxxx X. Xxxx
