EXHIBIT 10.1
Proposed Form of Employment Agreement for Xxxxx X. Xxxx
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of this ___ day of __________, 1999 by and between Alaska Pacific Bancshares,
Inc. (the "Company"), and its wholly owned subsidiary, Alaska Federal Savings
Bank (the "Bank"), and Xxxxx X. Xxxx (the "Employee").
WHEREAS, the Employee is currently serving as the President and Chief
Executive Officer of the Company and of the Bank;
WHEREAS, the Employee has made and will continue to make a major
contribution to the success of the Company and the Bank in the position of
President and Chief Executive Officer;
WHEREAS, the board of directors of the Company and the board of
directors of the Bank (collectively, the "Board of Directors") recognize that
the possibility of a change in control of the Bank or the Company may exist and
that such possibility, and the uncertainty and questions which may arise among
management, may result in the departure or distraction of key management to the
detriment of the Company, the Bank and their respective stockholders;
WHEREAS, the Board of Directors believes that it is in the best
interests of the Company and the Bank for the Company and the Bank to enter into
this Agreement with the Employee in order to assure continuity of management of
the Company and its subsidiaries; and
WHEREAS, the Board of Directors 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. 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 "Consolidated Subsidiaries" means any subsidiary or
subsidiaries of the Company (or its successors) that are part of the affiliated
group (as defined in Section 1504 of the Internal Revenue Code of 1986, as
amended (the "Code"), without regard to subsection (b) thereof) that includes
the Bank, including but not limited to the Company.
(c) The term "Date of Termination" means the date upon which the
Employee's employment with the Company or the Bank or both ceases, as specified
in a notice of termination pursuant to Section 8 of this Agreement.
(d) The term "Effective Date" means the date of this Agreement.
(e) The term "Involuntary Termination" means the termination of the
employment of Employee (i) by either the Company or the Bank or both without his
express written consent; or (ii) by the Employee by reason of a material
diminution of or interference with his duties, responsibilities or benefits,
including (without limitation) any of the following actions unless consented to
in writing by the Employee: (1) a requirement that the Employee be based at any
place other than Juneau, Alaska, or within a radius of 35 miles from the
location of the Company's administrative offices as of the date of this
Agreement, except for reasonable travel on Company or Bank business; (2) a
material demotion of the Employee; (3) 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 Bank- or
Company-wide reduction in staff; (4) 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 Bank or
the Company; (5) a material permanent increase in the required hours of work or
the workload of the Employee; or (6) the failure of the board of directors of
the Company (or a board of directors of a successor of the Company) to elect him
as President and Chief Executive Officer of the Company (or a successor of the
Company) or any action by the board of directors of the Company (or a board of
directors of a successor of the Company) removing him from such office, or the
failure of the board of directors of the Bank (or any successor of the Bank) to
elect him as President and Chief Executive Officer of the Bank (or any successor
of the Bank) or any action by such board (or a board of a successor of the Bank)
removing him from such office. The term "Involuntary Termination" does not
include Termination for Cause, termination of employment due to death or
permanent disability pursuant to Section 7(f) of this Agreement, retirement or
suspension or temporary or permanent prohibition from participation in the
conduct of the Bank's affairs under Section 8 of the Federal Deposit Insurance
Act.
2
(f) The terms "Termination for Cause" and "Terminated For Cause"
mean termination of the employment of the Employee with either the Company or
the Bank, as the case may be, 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 (except as provided below) material breach of
any provision of this Agreement. No act or failure to act by the Employee shall
be considered willful 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 Company or the Bank. The Employee shall not be
deemed to have been Terminated for Cause 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 a majority of the entire membership of the
Board of Directors 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 that in the good faith opinion of the Board of Directors the Employee
has engaged in conduct described in the preceding sentence and specifying the
particulars thereof in detail.
2. Term. The term of this Agreement shall be a period of three years
commencing on the Effective Date, subject to earlier termination as provided
herein. 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 year in addition to the then-remaining term, 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.
3. Employment. The Employee shall be employed as the President and
Chief Executive Officer of the Company and as the President and Chief Executive
Officer of the Bank. As such, the Employee shall have supervision and control
over the daily operations of the Company and the Bank, shall render
administrative and management services as are customarily performed by persons
situated in similar executive capacities, and shall have such other powers and
duties as the Board of Directors may prescribe from time to time. The Employee
shall also render services to any subsidiary or subsidiaries of the Company or
the Bank as requested by the Company or the Bank from time to time consistent
with his executive position. The Employee shall devote his best efforts and
reasonable time and attention to the business and affairs of the Company and the
Bank to the extent necessary to discharge his responsibilities hereunder. The
Employee may (i) serve on charitable boards or committees and, in addition, on
such corporate boards as are approved in a resolution adopted by a majority of
the Board of Directors, which approval shall not be withheld unreasonably and
(ii) manage personal investments, so long as such activities do not interfere
materially with performance of his responsibilities hereunder.
4. Cash Compensation.
(a) Salary. The Company and the Bank jointly agree to pay the
Employee during the term of this Agreement a base salary (the "Salary") the
annualized amount of which shall be not less
than the annualized aggregate amount of the Employee's base salary from the
Company and any Consolidated Subsidiaries in effect at the Effective Date;
provided that any amounts of salary
3
actually paid to the Employee by any Consolidated Subsidiaries shall reduce the
amount to be paid by the Company and the Bank to the Employee. The Salary shall
be paid no less frequently than monthly and shall be subject to customary tax
withholding. The amount of the Employee's Salary shall be increased (but shall
not be decreased) from time to time in accordance with the amounts of salary
approved by the Board of Directors or the board of directors of any of the
Consolidated Subsidiaries after the Effective Date. The amount of the Salary
shall be reviewed by the Board of Directors at least annually during the term of
this Agreement.
(b) Bonuses. The Employee shall be entitled to participate in an
equitable manner with all other executive officers of the Company and the Bank
in such performance-based and discretionary bonuses, if any, as are authorized
and declared by the Board of Directors for executive officers.
(c) Expenses. The Employee shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Employee in performing
services under this Agreement in accordance with the policies and procedures
applicable to the executive officers of the Company and the Bank, provided that
the Employee accounts for such expenses as required under such policies and
procedures.
5. Benefits.
(a) Participation in Benefit Plans. The Employee shall be entitled
to participate, to the same extent as executive officers of the Company and the
Bank generally, in all plans of the Company and the Bank relating to pension,
retirement, thrift, profit-sharing, savings, group or other life insurance,
hospitalization, medical and dental coverage, travel and accident insurance,
education, cash bonuses, and other retirement or employee benefits or
combinations thereof. In addition, the Employee shall be entitled to be
considered for benefits under all of the stock and stock option related plans in
which the Company's or the Bank's executive officers are eligible or become
eligible to participate.
(b) Fringe Benefits. The Employee shall be eligible to participate
in, and receive benefits under, any other fringe benefit plans or perquisites
which are or may become generally available to the Company's or the Bank's
executive officers, including but not limited to supplemental retirement,
incentive compensation, supplemental medical or life insurance plans, company
cars, club dues, physical examinations, financial planning and tax preparation
services.
6. Vacations; Leave. The Employee shall be entitled (i) to annual paid
vacation in accordance with the policies established by the Board of Directors
for executive officers, and (ii) to voluntary leaves of absence, with or without
pay, from time to time at such times and upon such conditions as the Board of
Directors may determine in its discretion.
7. Termination of Employment.
(a) Involuntary Termination. The Board of Directors may terminate
the Employee's employment at any time, but, except in the case of Termination
for Cause, termination of employment shall not prejudice the Employee's right to
compensation or other benefits under this Agreement. In the event of Involuntary
Termination other than after a Change in Control which
4
occurs during the term of this Agreement, the Company and the Bank jointly shall
(i) pay to the Employee during the remaining term of this Agreement the Salary
at the rate in effect immediately prior to the Date of Termination, payable in
such manner and at such times as the Salary would have been payable to the
Employee under Section 4(a) if the Employee had continued to be employed by the
Company and the Bank, and (ii) provide to the Employee during the remaining term
of this Agreement substantially the same group life insurance, hospitalization,
medical, dental, prescription drug and other health benefits, and long-term
disability insurance (if any) for the benefit of the Employee and his dependents
and beneficiaries who would have been eligible for such benefits if the Employee
had not suffered Involuntary Termination, on terms substantially as favorable to
the Employee, including amounts of coverage and deductibles and other costs to
him, as if he had not suffered Involuntary Termination.
(b) Termination for Cause. In the event of Termination for Cause,
the Company and the Bank shall pay to the Employee the Salary and provide
benefits under this Agreement only through the Date of Termination, and shall
have no further obligation to the Employee under this Agreement.
(c) Voluntary Termination. The Employee's employment may be
voluntarily terminated by the Employee at any time upon 90 days' written notice
to the Company and the Bank or such shorter period as may be agreed upon between
the Employee and the Board of Directors. In the event of such voluntary
termination, the Company and the Bank shall be obligated jointly to continue to
pay to the Employee the Salary and provide benefits under this Agreement only
through the Date of Termination, at the time such payments are due, and shall
have no further obligation to the Employee under this Agreement.
(d) Change in Control. In the event of Involuntary Termination after
a Change in Control which occurs at any time following the Effective Date while
the Employee is employed under this Agreement, the Company and the Bank jointly
shall (i) pay to the Employee in a lump sum in cash within 25 business days
after the Date of Termination an amount equal to 299% of the Employee's "base
amount" as defined in Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code"); and (ii) provide to the Employee during the remaining term
of this Agreement substantially the same group life insurance, hospitalization,
medical, dental, prescription drug and other health benefits, and long-term
disability insurance (if any) for the benefit of the Employee and his dependents
and beneficiaries who would have been eligible for such benefits if the Employee
had not suffered Involuntary Termination, on terms substantially as favorable to
the Employee, including amounts of coverage and deductibles and other costs to
him, as if he had not suffered Involuntary Termination.
(e) Death. In the event of the death of the Employee while employed
under this Agreement and prior to any termination of employment, the Company and
the Bank jointly shall pay to the Employee's estate, or such person as the
Employee may have previously designated in writing, the Salary which was not
previously paid to the Employee and which he would have earned if he had
continued to be employed under this Agreement through the last day of the
calendar month in which the Employee died, together with the benefits provided
hereunder through such date.
(f) Disability. If the Employee becomes entitled to benefits under
the terms of the then-current disability plan, if any, of the Company or the
Bank (the "Disability Plan") or becomes
5
otherwise unable to fulfill his duties under this Agreement, he shall be
entitled to receive such group and other disability benefits, if any, as are
then provided by the Company or the Bank for executive employees. In the event
of such disability, this Agreement shall not be suspended, except that (i) the
obligation to pay the Salary to the Employee shall be reduced in accordance with
the amount of disability income benefits received by the Employee, if any,
pursuant to this paragraph such that, on an after-tax basis, the Employee shall
realize from the sum of disability income benefits and the Salary the same
amount as he would realize on an after-tax basis from the Salary if the
obligation to pay the Salary were not reduced pursuant to this Section 7(f); and
(ii) upon a resolution adopted by a majority of the disinterested members of the
Board of Directors, the Company and the Bank may discontinue payment of the
Salary beginning six months following a determination that the Employee has
become entitled to benefits under the Disability Plan or otherwise unable to
fulfill his duties under this Agreement.
(g) Temporary Suspension or Prohibition. If the Employee is
suspended and/or temporarily prohibited from participating in the conduct of the
Bank's affairs by a notice served under Section 8(e)(3) or (g)(1) of the FDIA,
12 U.S.C. ss. 1818(e)(3) and (g)(1), the Bank's obligations under this Agreement
shall be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the Bank may in its
discretion (1) pay the Employee all or part of the compensation withheld while
its obligations under this Agreement were suspended and (ii) reinstate in whole
or in part any of its obligations which were suspended.
(h) Permanent Suspension or Prohibition. If the Employee is removed
and/or permanently prohibited from participating in the conduct of the Bank's
affairs by an order issued under Section 8(e)(4) or (g)(1) of the FDIA, 12
U.S.C. ss. 1818(e)(4) and (g)(1), all obligations of the Bank under this
Agreement shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected.
(i) Default of the Bank. If the Bank is in default (as defined in
Section 3(x)(1) of the FDIA), all obligations under this Agreement shall
terminate as of the date of default, but this provision shall not affect any
vested rights of the contracting parties.
(j) Termination by Regulators. All obligations under this Agreement
shall be terminated, except to the extent determined that continuation of this
Agreement is necessary for the continued operation of the Bank: (1) by the
Director of the Office of Thrift Supervision (the "Director") or his or her
designee, at the time the Federal Deposit Insurance Corporation enters into an
agreement to provide assistance to or on behalf of the Bank under the authority
contained in Section 13(c) of the FDIA; or (2) by the Director or his or her
designee, at the time the Director or his or her designee approves a supervisory
merger to resolve problems related to operation of the Bank or when the Bank is
determined by the Director to be in an unsafe or unsound condition. Any rights
of the parties that have already vested, however, shall not be affected by any
such action.
(k) Reductions of Benefits. 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
6
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
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.
(l) Further Reductions. Any payments made to the Executive pursuant
to this Agreement, or otherwise, are subject to and conditioned upon their
compliance with 12 U.S.C. 1828(k) and any regulations promulgated thereunder.
8. Notice of Termination. In the event that the Company or the Bank, or
both, desire to terminate the employment of the Employee during the term of this
Agreement, the Company or the Bank, or both, shall deliver to the Employee a
written notice of termination, stating whether such termination constitutes
Termination for Cause or Involuntary Termination, setting forth in reasonable
detail the facts and circumstances that are the basis for the termination, and
specifying the date upon which employment shall terminate, which date shall be
at least 30 days after the date upon which the notice is delivered, except in
the case of Termination for Cause. In the event that the Employee determines in
good faith that he has experienced an Involuntary Termination of his employment,
he shall send a written notice to the Company and the Bank stating the
circumstances that constitute such Involuntary Termination and the date upon
which his employment shall have ceased due to such Involuntary Termination. In
the event that the Employee desires to effect a Voluntary Termination, he shall
deliver a written notice to the Company and the Bank, stating the date upon
which employment shall terminate, which date shall be at least 90 days after the
date upon which the notice is delivered, unless the parties agree to a date
sooner.
9. Attorneys' Fees. The Company and the Bank jointly shall pay all
legal fees and related expenses (including the costs of experts, evidence and
counsel) incurred by the Employee as a result of (i) the Employee's contesting
or disputing any termination of employment, or (ii) the Employee's seeking to
obtain or enforce any right or benefit provided by this Agreement or by any
other plan or arrangement maintained by the Company or the Bank (or a successor)
or the Consolidated Subsidiaries under which the Employee is or may be entitled
to receive benefits; provided that the Company's and the Bank's obligation to
pay such fees and expenses is subject to the Employee's prevailing with respect
to the matters in dispute in any action initiated by the Employee or the
Employee's having been determined to have acted reasonably and in good faith
with respect to any action initiated by the Company or the Bank.
10. No Assignments.
(a) This Agreement is personal to each of the parties hereto, and no
party may assign or delegate any of its rights or obligations hereunder without
first obtaining the written consent of the other parties; provided, however,
that the Company and the Bank shall require any successor or assign (whether
direct or indirect, by purchase, merger, consolidation or otherwise) 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 Company and/or the Bank would be required to perform it
if no such succession or assignment had taken place. Failure 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
7
benefits from the Company and the Bank in the same amount and on the same terms
as the compensation pursuant to Section 7(d) of this Agreement. For purposes of
implementing the provisions of this Section 10(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.
11. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or sent by certified
mail, return receipt requested, postage prepaid, to the Company and Bank at
their home offices, to the attention of the Board of Directors with a copy to
the Secretary of the Company and the Secretary of the Bank, or, if to the
Employee, to such home or other address as the Employee has most recently
provided in writing to the Company or the Bank.
12. Amendments. No amendments or additions to this Agreement shall be
binding unless in writing and signed by both parties, except as herein otherwise
provided.
13. 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.
14. 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.
15. Governing Law. This Agreement shall be governed by the laws of the
State of Alaska.
16. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction.
17. Deferral of Non-Deductible Compensation. In the event that the
Employee's aggregate compensation (including compensatory benefits which are
deemed remuneration for purposes of Section 162(m) of the Code) from the Company
and the Consolidated Subsidiaries for any calendar year exceeds the maximum
amount of compensation deductible by the Company or any of the Consolidated
Subsidiaries in any calendar year under Section 162(m) of the Code (the "maximum
allowable amount"), then any such amount in excess of the maximum allowable
amount shall be mandatorily deferred with interest thereon at 8% per annum to a
calendar year such that the amount to be paid to the Employee in such calendar
year, including deferred amounts and interest thereon, does not exceed the
maximum allowable amount. Subject to the foregoing, deferred amounts including
interest thereon shall be payable at the earliest time permissible.
8
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 Bancshares, Inc.
--------------------- -------------------------------
Xxxxx X. Xxxxx, Secretary By:
Its:
Attest: Alaska Federal Savings Bank
--------------------- -------------------------------
Xxxxx X. Xxxxx, Secretary By:
Its:
Employee
-------------------------------
Xxxxx X. Xxxx
9
