AMENDED AND RESTATED SEVERANCE AGREEMENT
----------------------------------------
THIS AGREEMENT, made and entered as of this 21st day of June, 1993,
as amended and restated as of the 18th day of March, 1996 ("Effective
Date"), by and between Stockton Savings Bank, f.s.b., a federally
chartered savings bank, with its principal executive offices at ▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Bank") and W. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
("Employee");
WHEREAS, Employee is currently employed by Bank and is considered a
key employee of Bank;
WHEREAS, Bank desires to retain the services of Employee;
WHEREAS, from time to time Bank has made payments and provided
benefits to employees who have terminated employment with Bank ("Prior
Severance Arrangements");
WHEREAS, Bank and Employee desire to set forth the amounts payable
and benefits to be provided by Bank to Employee in the event of a
termination of Employee's employment with Bank under the circumstances set
forth herein after the happening of a Change in Control (as defined
herein);
WHEREAS, the parties intend that the provisions of this Agreement
shall be in lieu of Employee's right to make any claim or demand with
respect to any severance policy of Bank arising from or alleged to arise
from the Prior Severance Arrangements; and
WHEREAS, Bank and Employee intend to amend and restate in its
entirety the Severance Agreement between them dated as of June 21, 1993;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein and intending to be legally bound hereby, the
parties agree as follows:
1. Continued Employment. In reliance upon the promises of Bank
hereinafter contained, Employee agrees that, for a period of no less than
one (1) year commencing on the date set forth above, and subject to
reasonable absences for illness, holiday, and vacation pursuant to Bank's
policies and practices in effect on the date hereof, Employee will
continue his or her employment with Bank and shall devote his or her best
efforts to such duties as may be assigned to him or her by Bank from time
to time.
2. Prior Severance Arrangements. Except to the extent set forth
herein, in the event of the termination of Employee's employment with
Bank, Employee shall make no claim or demand arising or alleged to arise
from any severance plan, program, policy or arrangement (including but not
limited to the Prior Severance Arrangements) that Bank may have had in
effect, may currently sponsor or may hereafter adopt. Notwithstanding the
foregoing, in the event of a termination of Employee's employment with
Bank, Employee (and his or her spouse, heirs, estate and/or personal
representative, as the case may be) shall be entitled to receive any
benefits payable under any employee benefit plan, program, policy or
arrangement as such may then be in effect that is not a severance plan,
program, policy or arrangement.
3. Effective Date. This Agreement shall be effective as of the
date first above written ("Effective Date") and shall continue and remain
in full force and effect until the termination of Employee's employment
with Bank, unless earlier terminated by the parties in writing. The
completion of one (1) year of employment with Bank by Employee as set
forth in Section 1 shall not be a condition precedent to the effectiveness
of this Agreement or to the payments of amounts or provision of benefits
hereunder in the event Employee's employment with Bank is terminated under
the circumstances described in Section 4(b).
4. Termination of Employment.
(a) Requiring No Payments Under Section 5. In the event
Employee's employment with Bank is terminated under any of the following
circumstances, no payments shall be or become due and owing and Bank shall
have no other obligations under Section 5 of this Agreement:
(i) by either party for any reason prior to a Change in
Control, except as otherwise provided in Section 4(b)(iii)
below;
(ii) by either party for any reason at any time more than
the Applicable Number of Months (as hereinafter defined) after a
Change in Control;
(iii) by Bank, contemporaneously with or subsequent to a
Change in Control, for reason of "Cause" (as hereinafter
defined) or upon the death or "Disability" (as hereinafter
defined) of Employee; or
(iv) by Employee, contemporaneously with or subsequent to a
Change in Control, upon his or her retirement or resignation for
reasons other than "Good Reason" (as hereinafter defined).
(b) Requiring Payments Under Section 5. In the event
Employee's employment with Bank is terminated under any of the following
circumstances, Bank shall make the payments and provide the benefits as
set forth in Section 5:
(i) by Bank, contemporaneously with or within the
Applicable Number of Months after a Change in Control, for any
reason other than (A) for Cause or (B) upon the death or
Disability of Employee;
- 2 -
(ii) by Employee, contemporaneously with or within the
Applicable Number of Months after a Change in Control, for Good
Reason; or
(iii) before a Change in Control occurs either (A) by Bank
other than for Cause or upon the death or Disability of
Employee, or (B) by Employee for Good Reason, and in either case
it is reasonably demonstrated that the termination of employment
(x) was at the request of a Third Party (as hereinafter defined)
that has taken steps reasonably calculated to effect a Change in
Control or (y) otherwise arose in connection with or in
anticipation of a Change in Control.
(c) Cause. For the purposes of this Agreement, the term
"Cause" shall mean Employee's personal dishonesty, incompetence, willful
misconduct, breach of 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.
(d) Disability. For purposes of this Agreement, the term
"Disability" shall mean the complete inability of Employee to perform his
or her duties by reason of his or her total and permanent disability, as
determined by an independent physician selected with the approval of
Bank's Board of Directors and Employee.
(e) Good Reason. For purposes of this Agreement, the term
"Good Reason" shall, absent Employee's written consent to the contrary,
mean:
(i) any material breach by Bank of its obligations
contained in this Agreement;
(ii) the assignment to Employee of any duties inconsistent
with the status of his or her position with Bank on the day
immediately preceding the happening of a Change in Control or an
alteration in the nature or status of Employee's duties and
responsibilities that renders Employee's position to be of less
dignity, responsibility or scope from that which existed on the
day immediately preceding the happening of a Change in Control;
provided, however, that, in the event Employee terminates his or
her employment prior to a Change in Control, the assignment or
alteration shall have occurred reasonably contemporaneously with
such termination of employment;
(iii) a reduction by Bank in Employee's annual base salary
as in effect on the day immediately preceding the happening of a
Change in Control or as the same may be increased from time to
time, except for proportional across-the-board salary reductions
similarly affecting all of Bank's employees; provided, however,
that, in the event Employee terminates his or her employment
- 3 -
prior to a Change in Control, the reduction in annual base
salary shall have occurred reasonably contemporaneously with
such termination of employment;
(iv) the relocation of Bank's principal executive offices
to a location other than Stockton, California or Bank's
requiring Employee to be based anywhere other than Bank's
principal executive offices except for required travel on Bank's
business to an extent substantially consistent with Employee's
present business travel obligations; or
(v) any material reduction by Bank or California Financial
Holding Company, a Delaware corporation ("CFHC"), of the
benefits enjoyed by Employee under any of Bank's or CFHC's
pension, retirement, profit sharing, savings, life insurance,
medical, health-and-accident, disability or other employee
benefit plans, programs or arrangements as in effect from time
to time, the taking of any action by Bank or CFHC that would
directly or indirectly materially reduce any of such benefits or
deprive Employee of any material fringe benefits, or the failure
by Bank to provide Employee with the number of paid vacation
days to which he or she is entitled on the basis of years of
service with Bank in accordance with Bank's normal vacation
policy; provided, however, that this paragraph (v) shall not
apply to any proportional across-the-board reduction or action
similarly affecting all employees of Bank or CFHC.
(f) Change in Control. For purposes of this Agreement, a
"Change in Control" shall mean the occurrence, after the Effective Date,
of any of the following events, directly or indirectly or in one or more
series of transactions:
(i) A consolidation or merger of Bank or CFHC
with any third party (which includes a single person
or entity or a group of persons or entities acting in
concert) not wholly owned directly or indirectly by
Bank or CFHC (a "Third Party"), unless Bank or CFHC is
the entity surviving such merger or consolidation;
(ii) A transfer of all or substantially all of
the assets of Bank or CFHC to a Third Party or a
complete liquidation or dissolution of Bank or CFHC;
(iii) A Third Party, directly or indirectly,
through one or more subsidiaries or transactions or
acting in concert with one or more persons or
entities:
(A) acquires beneficial ownership of more
than 20% of any class of voting stock of Bank or
CFHC;
- 4 -
(B) acquires irrevocable proxies
representing more than 20% of any class of
voting stock of Bank or CFHC;
(C) acquires any combination of beneficial
ownership of voting stock and irrevocable proxies
representing more than 20% of any class of voting
stock of Bank or CFHC;
(D) acquires the ability to control in
any manner the election of a majority of the
directors of Bank or CFHC; or
(E) acquires the ability to directly
or indirectly exercise a controlling
influence over the management or policies of
Bank or CFHC;
(iv) any election has occurred of persons to the
Board of Directors of CFHC ("Board") that causes a
majority of the Board to consist of persons other than
(A) persons who were members of the Board on the
Effective Date and/or (B) persons who were nominated
for election as members of the Board by the Board (or
a committee of the Board) at a time when the majority
of the Board (or of such committee) consisted of
persons who were members of the Board on the Effective
Date; provided, however, that any persons nominated
for election by the Board (or a committee of the
Board), a majority of whom are persons described in
clauses (A) and/or (B), or are persons who were
themselves nominated by such Board (or a committee of
such Board), shall for this purpose be deemed to have
been nominated by a Board composed of persons
described in clause (A); or
(v) A determination is made by the Office of
Thrift Supervision ("OTS"), the Federal Deposit
Insurance Corporation ("FDIC"), the Securities and
Exchange Commission ("SEC") or any similar agency
having regulatory control over Bank or CFHC that a
change in control, as defined in the banking,
insurance, or securities laws or regulations then
applicable to Bank or CFHC, has occurred.
Notwithstanding any provision contained herein, a Change in Control shall
not include any of the above described events if they (A) are related to
or occur in connection with the appointment of a receiver or a conservator
for Bank or CFHC, provision of assistance under Section 13(c) of the
Federal Deposit Insurance Act ("FDI Act"), the approval of a supervisory
merger, a determination that Bank is in default as defined in Section 3(x)
of the FDI Act, insolvent or in an unsafe or unsound condition to transact
- 5 -
business or the suspension, removal and/or temporary or permanent
prohibition by the OTS, the FDIC, the SEC or another bank regulatory
agency of Employee from participation in the conduct of Bank's or CFHC's
business or affairs or (B) are the result of a Third Party inadvertently
acquiring beneficial ownership or irrevocable proxies or a combination of
both for 20% or more of any class of Bank's or CFHC's voting stock, and
the Third Party as promptly as practicable thereafter divests itself of
beneficial ownership or irrevocable proxies for a sufficient number of
shares so that the Third Party no longer has beneficial ownership or
irrevocable proxies or a combination of both for 20% or more of any class
of Bank's or CFHC's voting stock.
(g) Applicable Number of Months. For purposes of this
Agreement, the "Applicable Number of Months" shall mean twenty-four (24)
months.
5. Obligations of Bank Upon Termination of Employment. Upon
termination of Employee's employment with Bank under the circumstances set
forth in Section 4(b), Employee shall, notwithstanding such termination,
be entitled to receive the following payments and provided with the
following benefits:
(a) Base Salary. Bank shall pay Employee, within ten (10) days
after the termination of his or her employment, a lump sum payment equal
to the aggregate of the future base salary payments Employee would have
received if he or she had continued in Bank's employ until the Applicable
Number of Months following the date his or her employment is terminated
(unless a reduction in compensation preceded Employee's resignation or
retirement for Good Reason, in which case Bank shall pay Employee a lump
sum payment based on Employee's highest base salary in effect during the
twelve-month period preceding the termination of employment), discounted
to present value at a discount rate equal to the per annum rate offered on
the date employment is terminated (or the next preceding date on which
that rate is published) on U.S. Treasury bills with maturities of the
Applicable Number of Months.
(b) Bonus. Bank shall pay Employee, within ten (10) days after
the termination of his or her employment, a lump sum payment equal to his
or her projected bonus for the current year, which shall be computed
assuming that Employee had remained in the employ of Bank until the end of
the current year and that all performance goals or other performance
measures have been met at the then current level for the remainder of the
year.
(c) Benefits. During the Applicable Number of Months following
the date Employee's employment is terminated, at Bank's expense, Employee
shall participate in and be covered by all employee benefit plans,
programs, policies or arrangements of Bank applicable to executive
employees, whether funded or unfunded; provided, however, that, in the
event any administrator or any insurance carrier contests Employee's
participation in or coverage under such plan, program, policy or
arrangement, then Bank, in respect to insurance arrangements, shall cause,
- 6 -
at its own cost or expense, equivalent insurance coverage to be provided
and, in respect to arrangements other than insurance arrangements, shall
make cash payments to Employee in an amount equal to the amount that would
have been contributed by Bank with respect to Employee at the times such
amounts would have been contributed; and provided further, however, that,
to the extent Bank has an obligation to provide continuation coverage
within the meaning of Section 4980(B)(f) of the Internal Revenue Code of
1986, as amended ("Code"), the period for which benefits are provided
under this Section 5(c) constitutes a portion of such continuation
coverage.
6. Limitations; Excise Tax.
(a) Section 1828(k). Notwithstanding anything to the contrary
in this Agreement, any payments made to Employee pursuant to this
Agreement, or otherwise, are subject to and conditioned upon their
compliance with 12 U.S.C. Section 1828(k) and any regulations promulgated
thereunder.
(b) Excess Parachute Payment. Notwithstanding anything to the
contrary in this Agreement, if tax counsel selected by Bank and acceptable
to Employee determines that any portion of any payment by Bank or CFHC
under this Agreement or otherwise would constitute an "excess parachute
payment," then the payments to be made to Employee under this Agreement
shall be reduced such that the value of the aggregate payments that
Employee is entitled to receive under this Agreement and any other
agreement, plan or program of Bank and/or CFHC shall be one dollar ($1)
less than the maximum amount of payments that Employee may receive without
becoming subject to the tax imposed by Section 4999 of the Code.
(c) Bank Not Responsible for Excise Tax. If the Internal
Revenue Service assesses an excise tax against Employee pursuant to
Sections 280G and 4999 of the Code, Bank shall be under no obligation to
Employee with respect to the amount of (i) the excise tax or (ii) any
additional federal income tax due from and payable by Employee as the
result of his or her receipt of any payment hereunder or otherwise.
7. No Duty to Mitigate. Employee shall not be required to mitigate
the amount of any payment required hereunder by seeking other employment
or otherwise, nor shall the amount paid hereunder be reduced or offset by
any compensation earned or received by Employee as result of employment
with another employer, self-employment, or any amount received from any
other plan, program, policy or arrangement; provided, however, that
benefits provided under Section 5(c) shall be reduced to the extent
comparable benefits are actually received by Employee from or through
another employer.
- 7 -
8. Miscellaneous.
(a) General Creditor. All payments required hereunder shall be
made from Bank's general assets and Employee shall have no rights greater
than the rights of a general creditor of Bank.
(b) Notices. All notices and other communications required or
permitted to be given under this Agreement shall be in writing and shall
be deemed to have been duly given if delivered personally or sent by
certified mail, return receipt requested, first-class postage prepaid, to
the parties to this Agreement at the following addresses:
(i) if to Bank at:
Stockton Savings Bank, f.s.b.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
and
(ii) if to Employee at the address set forth
at the end of this Agreement
or to such other address as either party to this Agreement shall have last
designated by notice to the other party. All such notices and
communications shall be deemed to have been received on the earlier of the
date of receipt or the third business day after the date of mailing
thereof.
(c) Binding Effect; Benefits. This Agreement shall be binding
upon and inure to the benefit of the parties to this Agreement and their
respective successors and assigns. Nothing in this Agreement, express or
implied, is intended or shall be construed to give any person, other than
the parties to this Agreement or their respective successors or assigns,
any legal or equitable right, remedy or claim under or in respect of any
agreement or any provision contained herein.
(d) Costs of Enforcement. If Employee retains legal counsel to
enforce any or all of his or her rights to benefits under Section 5 above
and he or she substantially prevails in enforcing those rights, Employee
shall be entitled to recover from Bank Employee's reasonable attorneys'
fees, costs and expenses in connection with the enforcement of his or her
rights.
(e) Resolution of Differences Over Breaches of Agreement. In
the event of any controversy, dispute or claim arising out of, or relating
to, this Agreement or the breach thereof, Bank and Employee agree that
such underlying controversy, dispute or claim shall be settled by
arbitration conducted in accordance with this Section 8(e) and the
Commercial Arbitration Rules of the American Arbitration Association
("AAA"). The matter shall be heard and decided, and award rendered, by a
- 8 -
panel of three (3) arbitrators ("Arbitration Panel"). Bank and Employee
shall each select one (1) arbitrator from the AAA National Panel of
Commercial Arbitrators ("Commercial Panel") and the AAA shall elect a
third arbitrator from the Commercial Panel. The award rendered by the
Arbitration Panel shall be final and binding as between the parties hereto
and their heirs, executors, administrators, successors and assigns, and
judgment on the award may be entered by any court having jurisdiction
thereof.
(f) Waiver. Either party hereto may by written notice to the
other (i) extend the time for the performance of any of the obligations or
other actions of the other under this Agreement; (ii) waive compliance
with any of the conditions or covenants of the other contained in this
Agreement; and (iii) waive or modify performance of any of the obligations
of the other under this Agreement. Except as provided in the preceding
sentence, no action taken pursuant to this Agreement, including, without
limitation, any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of
compliance with any representation, warranty, covenant or agreement
contained herein. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver
of any preceding or succeeding breach, and no failure by either party to
exercise any right or privilege hereunder shall be deemed a waiver of such
party's rights or privileges hereunder or shall be deemed a waiver of such
party's rights to exercise that right or privilege at any subsequent time
or times hereunder.
(g) Amendment. This Agreement may be terminated, amended,
modified or supplemented only by a written instrument executed by Employee
and Bank.
(h) Assignability. Neither this Agreement nor any right,
remedy, obligation or liability arising hereunder or by reason hereof
shall be assignable by either Bank or Employee without the prior written
consent of the other party.
(i) Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of California,
regardless of the law that might be applied under principles of conflict
of laws, except as that law is superseded by the laws of the United
States.
(j) Section and Other Headings. The section and other headings
contained in this Agreement are for reference purposes only and shall not
affect the meaning or interpretation of this Agreement.
(k) Withholding of Taxes. Bank may withhold from amounts
required to be paid to Employee hereunder any applicable federal, state,
local and other taxes with respect thereto; provided, however, that Bank
shall promptly pay over the amounts so withheld to the appropriate taxing
bodies and provide to Employee appropriate statements on forms proscribed
for such purposes on the amounts so withheld.
- 9 -
(l) Severability. If, for any reason, any provision of this
Agreement is held invalid, such invalidity shall not affect any other
provision of this Agreement not held so invalid, and each such other
provision shall, to the full extent consistent with law, continue in full
force and effect. If any provision of this Agreement shall be held
invalid in part, such invalidity shall in no way affect the rest of such
provision not held so invalid, and the rest of such provision, together
with all other provisions of this Agreement, shall to the full extent
consistent with law continue in full force and effect. If this Agreement
is held invalid or cannot be enforced, then to the full extent permitted
by law any prior agreement between Bank (or any predecessor thereof) and
Employee shall be deemed reinstated as if this Agreement had not be
executed.
(m) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all
of which together shall be deemed to be one and the same instrument.
IN WITNESS WHEREOF, Bank has caused this Agreement to be executed and
its seal affixed hereunto by its officers thereunto duly authorized and
Employee has signed this Agreement, all as of the date first above
written.
ATTEST: STOCKTON SAVINGS BANK, F.S.B.
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------ ---------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Assistant ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
Secretary President
WITNESS: EMPLOYEE:
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ /s/ W. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------ ------------------------------
Name: W. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Address: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
------------------------------
- 10 -