EXHIBIT 10.2
PROPOSED FORM OF SEVERANCE AGREEMENT FOR CERTAIN SENIOR OFFICERS
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS CHANGE IN CONTROL SEVERANCE AGREEMENT (the "Agreement") is made
and entered into as of this ___ day of ____________, 1999 (the "Commencement
Date"), by and between ALASKA PACIFIC BANK (which, together with any successor
thereto which executes and delivers the assumption agreement provided for in
Section 5(a) hereof or which otherwise becomes bound by all of the terms and
provisions of this Agreement by operation of law, is hereinafter referred to as
the "Bank"), and _____________________ (the "Employee").
WHEREAS, the Employee is currently serving as
_________________________________; and
WHEREAS, the Board of Directors of the Bank (the "Board") recognizes
that, as is the case with
many publicly held corporations, the possibility of a change in control of the
Bank or of its holding company, Alaska Pacific Bancshares, Inc. (the "Company"),
may exist and that such possibility, and the uncertainty and questions which it
may raise among management, may result in the departure or distraction of
management personnel to the detriment of the Bank, the Company and its
stockholders; and
WHEREAS, the Board believes it is in the best interests of the Bank to
enter into this Agreement with the Employee in order to assure continuity of
management of the Bank and to reinforce and encourage the continued attention
and dedication of the Employee to the Employee's assigned duties without
distraction in the face of potentially disruptive circumstances arising from the
possibility of a change in control of the Company and/or the Bank, although no
such change is now contemplated; and
WHEREAS, the Board has approved and authorized the execution of this
Agreement with the Employee;
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein, it is AGREED as follows:
1. Certain Definitions.
(a) The term "Change in Control" means (1) an event of a nature
that results in the acquisition of control of the Company or the Bank within the
meaning of the Savings and Loan Holding Company Act under 12 U.S.C. Section
1467a and 12 C.F.R. Part 574 (or any successor statute or regulation) or
requires the filing of a notice with the Federal Deposit Insurance Corporation
under 12 U.S.C. Section 1817(j) (or any successor statute or regulation); (2) an
event that would be required to be reported in response to Item 1 of the current
report on Form 8-K, as in effect on the Effective Date, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 0000 (xxx "Xxxxxxxx Xxx"); (3) any
person (as the term is used in Sections 13(d) and 14(d) of the Exchange Act) is
or becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange
Act) directly or indirectly of securities of the Company or the Bank
representing 25% or more of the combined voting power of the Company's or the
Bank's outstanding securities; (4) individuals who are members of the board of
directors of the Company immediately following the Effective Date or
who are members of the board of directors of the Bank immediately following the
Effective Date (in each case, the "Incumbent Board") cease for any reason to
constitute at least a majority thereof, provided that any person becoming a
director subsequently whose election was approved by a vote of at least
three-quarters of the directors comprising the Incumbent Board, or whose
nomination for election by the Company's or the Bank's stockholders was approved
by the nominating committee serving under an Incumbent Board, shall be
considered a member of the Incumbent Board; or (5) consummation of a plan of
reorganization, merger, consolidation, sale of all or substantially all of the
assets of the Company or a similar transaction in which the Company is not the
resulting entity, or a transaction at the completion of which the former
stockholders of the acquired corporation become the holders of more than 40% of
the outstanding common stock of the Company and the Company is the resulting
entity of such transaction; provided that the term "Change in Control" shall not
include an acquisition of securities by an employee benefit plan of the Bank or
the Company.
(b) The term "Commencement Date" means the date of this Agreement.
(c) The term "Consolidated Subsidiaries" means any subsidiary or
subsidiaries of the Company (or its successors) that are part of the
consolidated group of the Company (or its successors) for federal income tax
reporting.
(d) The term "Date of Termination" means the date specified in the
Notice of Termination (which, in the case of a Termination for Cause shall not
be less than 30 days from the date such Notice of Termination is given, and in
the case of a termination for Good Reason shall not be less than 15 nor more
than 60 days from the date such Notice of Termination is given); PROVIDED,
HOWEVER, that if within 15 days after any Notice of Termination is given, or, if
later, prior to the Date of Termination (as determined without regard to this
proviso), the party receiving such Notice of Termination notifies the other
party that a dispute exists concerning the termination, then the Date of
Termination shall be the date on which the dispute is finally determined,
whether by mutual written agreement of the parties, by a binding arbitration
award, or by a final judgment, order or decree of a court of competent
jurisdiction (which is not appealable or with respect to which the time for
appeal therefrom has expired and no appeal has been perfected); and PROVIDED,
FURTHER, that the Date of Termination shall be extended by a notice of dispute
only if such notice is given in good faith and the party giving such notice
pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Bank will continue to pay
the Employee the Employee's full salary at the rate in effect when the notice
giving rise to the dispute was given and continue the Employee as a participant
in all benefit and fringe benefit plans in which the Employee was participating
when the notice giving rise to the dispute was given, until the dispute is
finally resolved in accordance with this Section 1(d).
(e) The term "Good Reason" means the occurrence, without the
Employee's express written consent, of a material diminution of or interference
with the Employee's duties, responsibilities or benefits, including (without
limitation) any of the following circumstances unless such circumstances are
fully corrected prior to the Date of Termination specified in the Notice of
Termination given by the Employee in respect thereof:
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(i) a requirement that the Employee be based at any
location not within 35 miles of Juneau, Alaska, or that
he substantially increase his travel on Company or Bank
business;
(ii) a material demotion of the Employee;
(iii) a material reduction in the number or seniority of
personnel reporting to the Employee or a material
reduction in the frequency with which, or in the nature
of the matters with respect to which such personnel are
to report to the Employee, other than as part of a
Company-wide or Bank-wide reduction in staff;
(iv) a reduction in the Employee's salary or a material
adverse change in the Employee's perquisites, benefits,
contingent benefits or vacation, other than as part of
an overall program applied uniformly and with equitable
effect to all members of the senior management of the
Company or the Bank;
(v) a material and extended increase in the required hours
of work or the workload of the Employee;
(vi) the failure of the Bank to obtain a satisfactory
agreement from any successor to assume the obligations
and liabilities under this Agreement, as contemplated
in Section 5(a) hereof; or
(vii) any purported termination of the Employee's employment
that is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 4
hereof (and, if applicable, the requirements of Section
1(g) hereof), which purported termination shall not be
effective for purposes of this Agreement.
(f) The term "Notice of Termination" means a notice of termination
of the Employee's employment pursuant to Section 7 of this Agreement.
(g) The term "Termination for Cause" means termination of the
employment of the Employee because of the Employee's personal dishonesty,
incompetence, willful misconduct, breach of a fiduciary duty involving personal
profit, intentional failure to perform stated duties, willful violation of any
law, rule, or regulation (other than traffic violations or similar offenses) or
final cease-and-desist order, or material breach of any provision of this
Agreement. No act or failure to act by the Employee shall be considered
intentional unless the Employee acted or failed to act with an absence of good
faith and without a reasonable belief that his action or failure to act was in
the best interest of the Bank. Notwithstanding the foregoing, no Termination for
Cause shall be deemed to have occurred unless and until there shall have been
delivered to the Employee a copy of a resolution, duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of the
Board at a meeting of the Board duly called and held for such purpose (after
reasonable notice to the Employee and an opportunity for the Employee, together
with the Employee's counsel, to be heard before the Board), stating
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that in the good faith opinion of the Board the Employee has engaged in conduct
described in the preceding sentence and specifying the particulars thereof in
detail.
2. Term.
(a) The term of this Agreement shall be a period of one year
commencing on the Commencement Date, subject to extension or earlier termination
as provided herein.
(b) Except as provided in section 2(c), beginning on the first
anniversary of the Effective Date, and on each anniversary thereafter, the term
of this Agreement shall be extended for a period of one additional year,
provided that (i) neither the Employee nor the Company has given notice to the
other in writing at least 90 days prior to such anniversary that the term of
this Agreement shall not be extended further; and (ii) prior to such
anniversary, the Board of Directors explicitly reviews and approves the
extension. Reference herein to the term of this Agreement shall refer to both
such initial term and such extended terms.
(c) Nothing in this Agreement shall be deemed to prohibit the Bank
at any time from terminating the Employee's employment during the term of this
Agreement with or without notice for any reason; provided, however, that the
relative rights and obligations of the Bank and the Employee in the event of any
such termination shall be determined under this Agreement.
3. Severance Benefits.
(a) In the event that the Bank shall terminate the Employee's
employment other than Termination for Cause, or the Employee shall terminate his
employment for Good Reason, within 12 months following a Change in Control, the
Bank shall (i) pay the Employee his salary through the Date of Termination at
the rate in effect at the time the Notice of Termination is given, at the time
such payments are due; (ii) continue to pay, for a period of __ months following
the Date of Termination, for the life, health and disability coverage that is in
effect with respect to the Employee and his eligible dependents at the time the
Notice of Termination is given; and (iii) pay to the Employee in a lump sum in
cash, within 25 days after the later of the date of such Change in Control or
the Date of Termination, an amount equal to ___% of the Employee's "base amount"
as determined under Section 280G of the Code, less the aggregate present value
of the payments or benefits, if any, in the nature of compensation for the
benefit of the Employee, arising under any other plans or arrangements (I.E.,
not this Agreement) between the Company or any of the Consolidated Subsidiaries
and the Employee, which constitute "parachute payments" under Section 280G of
the Code.
Notwithstanding any other provision of this Agreement, if payments
and the value of benefits received or to be received under this Agreement,
together with any other amounts and the value of benefits received or to be
received by the Employee, would cause any amount to be nondeductible by the
Company or any of the Consolidated Subsidiaries for federal income tax purposes
pursuant to or by reason of Section 280G of the Code, then payments and benefits
under this Agreement shall be reduced (not less than zero) to the extent
necessary so as to maximize amounts and the value of benefits to be received by
the Employee without causing any amount to become nondeductible
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pursuant to or by reason of Section 280G of the Code. The Employee shall
determine the allocation of such reduction among payments and benefits to the
Employee.
(b) The Employee shall not be required to mitigate the amount of
any payment or benefit provided for in this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for in this Agreement be reduced by any compensation earned by the Employee as
the result of employment by another employer, by retirement benefits after the
Date of Termination or otherwise. This Agreement shall not be construed as
providing the Employee any right to be retained in the employ of the Bank or any
affiliate of the Bank.
4. Notice of Termination. In the event that the Bank esires to
terminate the employment of the Employee during the term of this Agreement, the
Bank shall deliver to the Employee a written notice of termination, stating (i)
whether such termination constitutes Termination for Cause, and, if so, setting
forth in reasonable detail the facts and circumstances that are the basis for
the Termination for Cause, and (ii) specifying the Date of Termination. In the
event that the Employee desires to terminate his employment and determines in
good faith that he has experienced Good Reason to terminate his employment, he
shall send a written notice to the Bank stating the circumstances that
constitute Good Reason and the Date of Termination.
The Employee's right to terminate his employment for Good Reason shall
not be affected by the Employee's incapacity due to physical or mental illness.
The Employee's continued employment shall not constitute consent to, or a waiver
of rights with respect to, any circumstance constituting Good Reason under this
Agreement.
5. No Assignments.
(a) This Agreement is personal to each of the parties hereto, and
neither party may assign or delegate any of its rights or obligations hereunder
without first obtaining the written consent of the other party; PROVIDED,
HOWEVER, that the Bank shall require any successor or assign (whether direct or
indirect, by purchase, merger, consolidation, operation of law or otherwise) to
all or substantially all of the business and/or assets of the Bank, by an
assumption agreement in form and substance satisfactory to the Employee, to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Bank would be required to perform it if no such
succession or assignment had taken place. Failure of the Bank to obtain such an
assumption agreement prior to the effectiveness of any such succession or
assignment shall be a breach of this Agreement and shall entitle the Employee to
compensation and benefits from the Bank in the same amount and on the same terms
that he would be entitled to hereunder if he terminated his employment for Good
Reason, in addition to any payments and benefits to which the Employee is
entitled under Section 3 hereof. For purposes of implementing the provisions of
this Section 5(a), the date on which any such succession becomes effective shall
be deemed the Date of Termination.
(b) This Agreement and all rights of the Employee hereunder shall
inure to the benefit of and be enforceable by the Employee's personal and legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. In the event of the death of the Employee, unless
otherwise provided herein, all amounts payable hereunder shall
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be paid to the Employee's devisee, legatee, or other designee or, if there be no
such designee, to the Employee's estate.
6. Deferred Payments. If following a termination of the Employee, the
aggregate payments to be made by the Bank under this Agreement and all other
plans or arrangements maintained by the Company or any of the Consolidated
Subsidiaries would exceed the limitation on deductible compensation contained in
Section 162(m) of the Code in any calendar year, any such amounts in excess of
such limitation shall be mandatorily deferred with interest thereon at 8.0% per
annum to a calendar year such that the amount to be paid to the Employee in such
calendar year, including deferred amounts, does not exceed such limitation.
7. Delivery of Notices. For the purposes of this Agreement, all notices
and other communications to any party hereto shall be in writing and shall be
deemed to have been duly given when delivered or sent by certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Employee: _________________________
At the address last appearing
on the personnel records of
the Employee
If to the Bank: Alaska Pacific Bank
0000 Xxxxxx Xxxxxx
Xxxxxx, Xxxxxx 00000
Attention: Secretary
or to such other address as such party may have furnished to the other in
writing in accordance herewith, except that a notice of change of address shall
be effective only upon receipt.
8. Amendments. No amendments or additions to this Agreement shall be
binding unless in writing and signed by both parties, except as herein otherwise
provided.
9. Headings. The headings used in this Agreement are included solely
for convenience and shall not affect, or be used in connection with, the
interpretation of this Agreement.
10. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
11. Governing Law. This Agreement shall be governed by the laws of the
State of Alaska to the extent that federal law does not govern.
12. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by binding
arbitration, conducted before a panel of three arbitrators in a location
selected by the Employee within 100 miles of such Employee's job location
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with the Bank, in accordance with the rules of the American Arbitration
Association then in effect; PROVIDED, HOWEVER, that the Employee shall be
entitled to seek specific performance of his rights under Section 1(d) during
the pendency of any dispute or controversy arising under or in connection with
this Agreement. Judgment may be entered on the arbitrators' award in any court
having jurisdiction.
13. Reimbursement of Expenses. In the event any dispute shall arise
between the Employee and the Bank as to the terms or interpretation of this
Agreement, including this Section 13, whether instituted by formal legal
proceedings or otherwise, including any action taken by the Employee to enforce
the terms of this Section 13, or in defending against any action taken by the
Bank, the Bank shall reimburse the Employee for all costs and expenses incurred
by the Employee, including reasonable attorney's fees, arising from such
dispute, proceedings or actions, unless a court of competent jurisdiction
renders a final and nonappealable judgment against the Employee as to the matter
in dispute. Reimbursement of the Employee's expenses shall be paid within ten
days of the Employee furnishing to the Bank written evidence, which may be in
the form, among other things, of a canceled check or receipt, of any costs or
expenses incurred by the Employee.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.
Attest: ALASKA PACIFIC BANK
----------------------------- ------------------------------
------------------- By:
------------------- Its:
EMPLOYEE
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