EXHIBIT 10.1
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 27, 2004 and will be effective January 27,
2004.
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 27th Day of
January 2004.
(b) Term. The initial term of this Agreement is three years, beginning on
the effective date stated in paragraph 2(a), and shall automatically
renew for an additional term of one year on each anniversary date of
the Agreement, so as to create a three year term on each anniversary
date, 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 $164,320.00
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 27, 2004:
THE BANK OF THE PACIFIC EXECUTIVE
/s/ Xxxxxx X. Xxxxx /s/ Xxxxxx X. Xxxx
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Xxxxxx X. Xxxxx, Chairman Xxxxxx X. Xxxx
