1
EXHIBIT 10.1
GRANT NATIONAL BANK
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), dated as of March 24, 1998,
between GRANT NATIONAL BANK ("Bank") and XXXXXXXX X. XXXXXX ("Officer") takes
effect on the effective date of the Consolidation ("Effective Date").
RECITALS
A. UNITED SECURITY BANCORPORATION ("USBN") has entered into a Plan and
Agreement of Consolidation (the "Plan") on its own behalf and on behalf of a
national banking association to be formed by it under the title "New Grant
National Bank" ("New Bank") with the Bank, pursuant to which New Bank will be
consolidated with the Bank under the charter of the Bank ("Consolidation"). As a
result of the Consolidation, the Bank will be a wholly owned subsidiary of USBN.
B. Before the Consolidation, Officer has served as President and CEO of
the Bank.
C. USBN and the Bank desire Officer to continue his employment at the
Bank under the terms and conditions of this Agreement, and Officer desires to
continue his employment at the Bank under the terms and conditions of this
Agreement.
AGREEMENT
The parties agree as follows.
1. EMPLOYMENT. The Bank agrees to employ Officer and Officer accepts
employment by the Bank on the terms and conditions set forth in this Agreement.
Officer's title will be "President and Chief Executive Officer" of the Bank.
During the Term of this Agreement, Officer will serve as a director of the Bank.
2. EFFECTIVE DATE AND TERM.
(a) Effective Date. This Agreement is effective as of the Effective
Date.
(b) Term. The term of this Agreement ("Term") is three (3) years,
beginning on the Effective Date.
(c) Abandonment or Termination of the Consolidation. If the Plan
terminates before closing of the Consolidation, this Agreement
will not become effective and will be void.
3. DUTIES. The Bank will employ Officer as its President and Chief
Executive Officer. In the event that USBN elects to merge the Bank into an
affiliate of USBN, then the title and duties of Executive with respect to the
entity surviving such merger shall be determined by the Chief Executive or
Operating Office of USBN or his or her designee. Officer will faithfully and
diligently perform his assigned duties, which are as follows:
(a) Bank Performance. Officer 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 USBN's and the Bank's policies. Officer will exert his
best efforts and devote all his working time and attention to Bank's
affairs. Officer may delegate responsibility for the day-to-day
operation of Bank's business to the Executive Vice
1
2
President subject to the general direction and control of Bank's board
of directors; however, he will continue to hold ultimate responsibility
for the Bank's performance. Officer will perform the duties of President
consistent with the Bank's bylaws and the direction of its board of
directors.
(b) Integration with USBN. Officer will participate in the
integration of the Bank's commercial banking activities with USBN's
existing operations.
(c) Development and Preservation of Business. Officer will be
responsible for the development and preservation of banking
relationships and other business development efforts (including
appropriate civic and community activities) in Grant County, Washington.
(d) Report to Board. Officer will report directly to the Chief
Operating Officer of USBN and to the Board of Directors of the Bank. The
Bank's board of directors may, from time to time, modify Officer's title
or add, delete, or modify Officer's performance responsibilities to
accommodate management succession, as well as any other management
objectives of the Bank or of USBN. Officer will assume any additional
positions, duties, and responsibilities as may reasonably be requested
of him with or without additional compensation, as appropriate and
consistent with Sections 3(a), 3(b) and 3(c) of this Agreement.
4. EXTENT OF SERVICES. Officer will at all times faithfully, industriously,
and to the best of his ability, experience and talents, perform all the duties
that may be required of and from the Bank's President under this Agreement. To
the extent that such activities do not interfere with his duties under Section
3, Officer may participate in other businesses as a passive investor, but (a)
Officer may not actively participate in the operation or management of those
businesses, and (b) Officer may not, without the Bank's prior written consent,
make or maintain any investment in a business with which the Bank and/or USBN
has an existing competitive or commercial relationship.
5. SALARY. Initially, Officer will receive a salary of $98,600 per year,
to be paid monthly in accordance with the Bank's regular payroll schedule. The
Bank will annually review Officer's compensation, in connection with the advice
and recommendations of the Chief Operating Officer of USBN.
6. INCENTIVE COMPENSATION. Each year during the Term, the Bank's board of
directors, subject to ratification by USBN's board of directors, will determine
the amount of bonus, if any, to be paid by the Bank to Officer for that year. In
making this determination, the Bank's board of directors will consider factors
such as Officer's performance of his duties and the safety, soundness and
profitability of the Bank. Officer's bonus, if any, will reflect Officer's
contribution to the performance of the Bank during the year, also taking into
account the nature and extent of incentive bonuses paid to comparable senior
officers at USBN and its banking subsidiaries. This bonus will be paid to
Officer no later than January 31 of the year following the year in which the
bonus is earned by Officer.
7. BENEFITS. Officer will be entitled to participate in any group life
insurance, disability, health and accident insurance plans, profit sharing and
pension plans and in other employee fringe benefit programs the Bank or USBN may
have in effect from time to time for its similarly situated employees, in
accordance with and subject to any policies adopted by the Bank's or USBN's
board of directors with respect to the plans or programs. Such programs may
include without limitation, any incentive or employee stock option plan,
deferred compensation plan, 401(k) plan, Supplemental Executive Retirement Plan
(SERP), and USBN's senior management salary continuation program. Neither the
Bank nor USBN through this Agreement obligates itself to make any particular
benefits available to its employees.
2
3
8. BUSINESS EXPENSES. The Bank will provide Officer with a monthly car
allowance of $500. The Bank will reimburse Officer for ordinary and necessary
expenses (including, without limitation, travel, entertainment, and similar
expenses) incurred in performing and promoting the Bank's business. Officer will
present from time to time itemized accounts of these expenses, subject to any
limits of Bank policy or the rules and regulations of the Internal Revenue
Service.
9. TERMINATION OF EMPLOYMENT.
(a) Termination By Bank for Cause. If the Bank terminates
Officer's employment for Cause (defined below) or Officer terminates his
employment without Good Reason (defined below) before the Term of this
Agreement expires, the Bank will pay Officer the salary earned and
expenses reimbursable under this Agreement incurred through the date of
his termination. Officer will have no right to receive compensation or
other benefits for any period after termination under this Section 9(a),
and Officer will be subject to the noncompetition and nonsolicitation
requirements of Section 11 through the remainder of the Term and for the
12-month period following the Term.
(b) Other Termination By Bank. If the Bank terminates Officer's
employment without Cause or Officer terminates his employment for Good
Reason (defined below) before the Term of this Agreement expires, the
Bank will pay Officer for the remainder of the Term the compensation and
other benefits he would have been entitled to if his employment had not
terminated, and Officer will be subject to the noncompetition and
nonsolicitation requirements of Section 11 through the remainder of the
Term only.
(c) Death or Disability. This Agreement terminates (1) if Officer
dies or (2) if Officer is unable to perform his duties and obligations
under this Agreement for a period of 90 days as a result of a physical
or mental disability arising at any time during the term of this
Agreement, unless with reasonable accommodation Officer could continue
to perform his duties under this Agreement and making these
accommodations would not require the Bank to expend any funds. If
termination occurs under this Section 9(c), Officer or his estate will
be entitled to receive all compensation and benefits earned and expenses
reimbursable through the date Officer's employment terminated.
(d) Return of Bank Property. If and when Officer ceases, for any
reason, to be employed by the Bank, Officer must return to the Bank all
keys, pass cards, identification cards and any other property of the
Bank or USBN. At the same time, Officer also must return to the Bank all
originals and copies (whether in hard copy, electronic or other form) of
any documents, drawings, notes, memoranda, designs, devices, diskettes,
tapes, manuals, and specifications which constitute proprietary
information or material of the Bank or USBN. The obligations in this
paragraph include the return of documents and other materials which may
be in his desk at work, in his car, in place of residence, or in any
other location under his control.
(e) Cause. "Cause" means any one or more of the following:
(i) Willful misfeasance or gross negligence in the
performance of Officer's duties;
(ii) Conviction of a crime in connection with his
duties;
(iii) Conduct demonstrably and significantly harmful
to the Bank, as reasonably determined on the
advice of legal counsel by the USBN's or the
Bank's board of directors; or
3
4
(iv) Permanent disability, meaning a physical or
mental impairment which renders Officer
incapable of substantially performing the duties
required under this Agreement, and which is
expected to continue rendering Officer so
incapable for the reasonably foreseeable future.
(f) Good Reason. "Good Reason" means only any one or more of
the following:
(i) Reduction, without Officer's consent, of
Officer's salary or reduction or elimination of
any compensation or benefit plan benefiting
Officer, unless the reduction or elimination is
generally applicable to substantially all Bank
employees (or employees of a successor or
controlling entity of the Bank) formerly
benefitted;
(ii) The assignment to Officer without his consent of
any authority or duties materially inconsistent
with Officer's position as of the date of this
Agreement or the substantive diminishment of his
duties; or
(iii) A relocation or transfer of Officer's principal
place of employment that would require Officer
to commute on a regular basis more than 30 miles
each way from Ephrata, Washington.
10. CONFIDENTIALITY. Officer will not, after the date this Agreement is
signed, including during and after its Term, use for his own purposes or
disclose to any other person or entity any confidential business information
concerning the Bank or USBN or their business operations, unless (1) the Bank or
USBN consents to the use or disclosure of their respective confidential
information; (2) the use or disclosure is consistent with Officer's duties under
this Agreement or (3) disclosure is required by law or court order. For purposes
of this Agreement, confidential business information includes, without
limitation, various confidential information concerning all aspects of current
and future operations, nonpublic information on investment management practices,
marketing plans, pricing structure and technology of either the Bank or USBN,
whether or not such information qualifies as a "trade secret" under applicable
laws. Officer will also treat the terms of this Agreement as confidential
business information.
11. NONCOMPETITION. Subject to the restrictions in Sections 9(a) and 9(b)
above, during the Term and the terms of any extensions or renewals of this
Agreement (the "Employment Period") and for the 12-month period following
termination of the Employment Period, Officer will not, directly or indirectly,
as a shareholder, "founder," director, officer, employee, partner, agent,
consultant, lessor, creditor or otherwise:
(a) provide management, supervisory or other services to any
person or entity engaged or, in the case of a business to be formed or
in formation, that will engage in any business in Grant County,
Washington which is competitive with the business of the Bank or USBN or
any of their subsidiaries as conducted during the Employment Period;
(b) persuade or entice, or attempt to persuade or entice, any
employee of the Bank or USBN to terminate his/her employment with the
Bank or USBN or to participate in any manner in the formation of any
business referenced under Section 11(a); or
(c) persuade or entice or attempt to persuade or entice, any
person or entity to terminate, cancel, rescind or revoke its business or
contractual relationships with the Bank or USBN.
4
5
12. ENFORCEMENT.
(a) The Bank and Officer stipulate that, in light of all of the
facts and circumstances of the relationship between Officer and the
Bank, the agreements referred to in Sections 10 and 11 (including
without limitation their scope, duration and geographic extent) are fair
and reasonably necessary for the protection of the Bank's and USBN's
confidential information, goodwill and other protectable interests. If a
court of competent jurisdiction should decline to enforce any of those
covenants and agreements, Officer and the Bank will request the court to
reform these provisions to restrict Officer's use of confidential
information and Officer's ability to compete with the Bank and USBN to
the maximum extent, in time, scope of activities, and geography, the
court finds enforceable.
(b) Officer acknowledges the Bank and USBN will suffer immediate
and irreparable harm that will not be compensable by damages alone if
Officer repudiates or breaches any of the provisions of Sections 10 or
11 or threatens or attempts to do so. For this reason, under these
circumstances, the Bank, in addition to and without limitation of any
other rights, remedies or damages available to it at law or in equity,
will be entitled to obtain temporary, preliminary and permanent
injunctions in order to prevent or restrain the breach, and the Bank
will not be required to post a bond as a condition for the granting of
this relief.
13. COVENANTS. Officer specifically acknowledges the receipt of adequate
consideration for the covenants contained in Sections 10 and 11 and that the
Bank is entitled to require him to comply with these Sections. These Sections
will survive termination of this Agreement. Officer represents that if his
employment is terminated, whether voluntarily or involuntarily, Officer has
experience and capabilities sufficient to enable Officer to obtain employment in
areas which do not violate this Agreement and that the Bank's or USBN's
enforcement of a remedy by way of injunction will not prevent Officer from
earning a livelihood.
14. ARBITRATION.
(a) Arbitration. At either party's request, the parties must
submit any dispute, controversy or claim arising out of or in connection
with, or relating to, this Agreement or any breach or alleged breach of
this Agreement, to arbitration under the American Arbitration
Association's rules then in effect (or under any other form of
arbitration mutually acceptable to the parties). A single arbitrator
agreed on by the parties will conduct the arbitration. If the parties
cannot agree on a single arbitrator, each party must select one
arbitrator and those two arbitrators will select a third arbitrator.
This third arbitrator will hear the dispute. The arbitrator's decision
is final (except as otherwise specifically provided by law) and binds
the parties, and either party may request any court having jurisdiction
to enter a judgment and to enforce the arbitrator's decision. The
arbitrator will provide the parties with a written decision naming the
substantially prevailing party in the action. This prevailing party is
entitled to reimbursement from the other party for its costs and
expenses, including reasonable attorneys' fees.
(b) Governing Law. All proceedings will be held at a place
designated by the arbitrator in Grant County, Washington. The
arbitrator, in rendering a decision as to any state law claims, will
apply Washington law.
(c) Exception to Arbitration. Notwithstanding the above, if
Officer violates Section 10 or 11, the Bank will have the right to
initiate the court proceedings described in Section 12(b), in lieu of an
arbitration proceeding under this Section 14.
5
6
15. MISCELLANEOUS PROVISIONS.
(a) Entire Agreement. This Agreement constitutes the entire
understanding and agreement between the parties concerning its subject
matter and supersedes all prior agreements, correspondence,
representations, or understandings between the parties relating to its
subject matter, including the personnel agreement between Officer and
the Bank dated as of May 18 1994 and amended as of January 26, 1996.
(b) Binding Effect. This Agreement will bind and inure to the
benefit of the Bank's, USBN's and Officer's heirs, legal
representatives, successors and assigns.
(c) Litigation Expenses. If either party successfully seeks to
enforce any provision of this Agreement or to collect any amount claimed
to be due under it, this party will be entitled to reimbursement from
the other party for any and all of its out-of-pocket expenses and costs
including, without limitation, reasonable attorneys' fees and costs
incurred in connection with the enforcement or collection.
(d) Waiver. Any waiver by a party of its rights under this
Agreement must be written and signed by the party waiving its rights. A
party's waiver of the other party's breach of any provision of this
Agreement will not operate as a waiver of any other breach by the
breaching party.
(e) Assignment. The services to be rendered by Officer under this
Agreement are unique and personal. Accordingly, Officer may not assign
any of his rights or duties under this Agreement.
(f) Amendment. This Agreement may be modified only through a
written instrument signed by both parties and approved in writing by
USBN.
(g) Severability. The provisions of this Agreement are severable.
The invalidity of any provision will not affect the validity of other
provisions of this Agreement.
(h) Governing Law and Venue. This Agreement will be governed by
and construed in accordance with Washington law, except to the extent
that certain matters may be governed by federal law. The parties must
bring any legal proceeding arising out of this Agreement in Grant
County, Washington.
(i) Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original, but all of which
taken together will constitute one and the same document.
(j) Independent Legal Counsel. Officer acknowledges that he has
had the opportunity to consult with independent legal counsel with
respect to the negotiation, preparation, and execution of this
Agreement.
6
7
Signed March 24, 1998:
GRANT NATIONAL BANK
By: /s/ Xxxx Xxxxx
-----------------------------------
Its: Chairman of the Board
XXXXXXXX X. XXXXXX, individually
/s/ Xxxxxxxx X. Xxxxxx
--------------------------------------
Xxxxxxxx X. Xxxxxx
Ratified March 24, 1998: UNITED SECURITY BANCORP, INC.
By: /s/ Xxxxxxx X. Xxxxx
-----------------------------------
Xxxxxxx X. Xxxxx
Its: President and COO
7
8
Ratified May _____, 1998: UNITED SECURITY BANCORP, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------------
Xxxxxxx X. Xxxxxxxx
Its: Chief Executive Officer
7-A
