AGREEMENT
This AGREEMENT is entered into this 24th day of March, 1999, by and between
THE BANK OF HEMET, a California corporation (hereinafter referred to as the
"Bank"), PACIFIC COMMUNITY BANKING GROUP, a California corporation (hereinafter
referred to as the "Company"), and XXXXXX X. XXXXXXXX, XX. (hereinafter referred
to as the "Executive"). This Agreement will become effective upon the
completion of the acquisition of the Bank by the Company pursuant to the First
Restatement of Agreement and Plan of Reorganization dated January 5, 1999, as
amended.
RECITALS
WHEREAS, Executive has been an Executive Officer of the Bank since 1994 and
will become Executive Vice President and Chief Financial Officer of the Company
upon the completion of the acquisition of the Bank by the Company;
WHEREAS, the Bank and the Company desire to continue to avail itself of the
skill, knowledge and experience of Executive in order to ensure the successful
operation of the Bank and the Company without distraction; and
WHEREAS, to induce Executive to remain in the employ of the Bank and the
Company, and to continue as an Executive Officer of the Bank and to become
Executive Vice President and Chief Financial Officer of the Company, the Bank
and the Company are willing to provide benefits to Executive in the event his
employment is terminated or adversely affected as provided herein.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
hereinafter set forth, the parties hereto covenant and agree as follows:
A. TERM OF AGREEMENT
This Agreement shall terminate upon the first to occur of (i) the
termination of Executive's employment with Bank and/or the Company for Cause,
Disability (both as defined below), death of Executive, or voluntarily by
Executive other than for Good Reason, and shall have occurred between the
effective date of this Agreement and December 31, 2002 (the "Term of this
Agreement"), or (ii) December 31, 2002.
B. EFFECT ON EMPLOYMENT
This Agreement is not intended to alter or otherwise change the current
employment relationship between Executive and the Bank and/or the Company
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except as described in the following Paragraphs, and Executive further
acknowledges his employment at-will status with the Bank and the Company as
described under the Bank's Personnel Policy.
C. TERMINATION OF EMPLOYMENT
If Executive's employment is terminated by the Bank and the Company, or
Executive terminates employment with the Bank and/or the Company pursuant to
Paragraph C.3. below, and unless such termination is (a) because of his death,
(b) for Cause or Disability (both as defined below) or (c) by Executive other
than for Good Reason (as defined below), he shall be entitled to the benefits
provided in Paragraph D.2(a). or D.2(b). below.
1. DISABILITY. If, as a result of Executive's incapacity due to
physical or mental illness, he shall have been absent from or unable to perform
his duties with the Bank and/or the Company for a period of three consecutive
months, and if within 30 days after written notice of termination is given
(which notice may not be given prior to the expiration of the three-month
period) he shall not have recommenced the full-time performance of his duties,
the Bank and/or the Company may terminate his employment for "Disability."
2. CAUSE. Termination of Executive's employment for "Cause" shall
mean the determination by the Bank and/or the Company that the Executive has (i)
willfully failed to perform or habitually neglected the appropriate duties which
he is required to perform hereunder; or (ii) willfully failed to follow any
significant policy of the Company which materially or adversely affects the
condition of the Company; or (iii) engaged in any activity in contravention of
any significant company policy, statute, regulation or governmental policy which
materially or adversely affects the Company's condition; or (iv) willfully
refused to follow any lawful and appropriate instruction from the Board of
Directors unless Executive asserts that compliance with such instruction would
cause the Company or Executive to violate any statute, regulation, governmental
or Company policy; or (v) subject to Section C.1 above, become physically or
mentally disabled and evidences his inability to discharge his duties as Chief
Financial Officer of the Company; or (vi) been convicted of or pleaded guilty or
nolo contendere to any felony; or (vii) committed any act which would cause
termination of coverage under the Company's Bond as to Executive, as
distinguished from termination of coverage as to the Company as a whole. For
purposes of this Agreement, "Cause" shall also mean the Company is required to
remove or replace Executive by formal order or instruction, including a consent
order or agreement, from the California Department of Financial Institutions,
the Federal Reserve Bank, or any other supervisory authority having
jurisdiction.
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3. GOOD REASON. Termination by Executive of his employment for
"Good Reason" shall mean termination by him after any of the following events
occur without his express written consent:
(i) A reduction in Executive's then current annual salary or
benefits;
(ii) A material diminution in Executive's title, authority or
responsibilities;
4. NOTICE OF TERMINATION. Any purported termination by the Bank
and/or the Company, or by Executive for Good Reason, shall be communicated by
written "Notice of Termination" to the other party hereto. A Notice of
Termination shall mean a notice which indicates the specific termination
provision in this Agreement relied upon and sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
Executive's employment under the provision so indicated.
5. DATE OF TERMINATION. The "Date of Termination" shall mean (i) if
Executive's employment is terminated by death, the date of death, (ii) if
Executive's employment is terminated for Disability, 30 days after Notice of
Termination is given (provided that Executive shall not have recommenced the
full-time performance of his duties during such 30-day period), (iii) if
Executive's employment is terminated pursuant to subparagraph 2 or 3 above, the
date specified in the Notice of Termination, which shall be not less than 30
days after the date such Notice of Termination is given, and (iv) if Executive
voluntarily terminates employment for other than for Good Reason, the date
specified in the Notice of Termination, which shall be not less than 30 days
after the Notice of Termination is given.
D. BENEFITS
1. REGULAR COMPENSATION. If Executive's employment shall be
terminated by the Bank and/or the Company for Disability, Cause, or his death,
or by Executive other than for Good Reason, the Bank and/or the Company shall
pay Executive the full accrued base salary and accrued incentive bonus through
the Date of Termination, less withholding required by law, at the rate in effect
at the time Notice of Termination is given or death occurs, and the Bank and the
Company shall have no further obligation to him under this Agreement.
2. SEVERANCE BENEFITS. (a) If Executive's employment shall be
terminated by the Bank and/or the Company other than for Disability, Cause or
his death, or by Executive for Good Reason, within twelve (12) months of the
effective date of this Agreement, Executive shall be entitled to receive an
amount equal to
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Executive's base salary paid by the Bank and/or the Company to Executive for the
previous eighteen (18) months. Such amount shall be payable to Executive in a
lump sum payment within three (3) business days following the Date of
Termination, less withholding as required by law. In addition, the Bank and/or
the Company shall continue payment of all of Executive's benefits in effect on
the date of Executive's termination including health and other medical benefits
for a period of eighteen (18) months from the Date of Termination. Payment of
the foregoing amounts shall discharge the Bank and the Company from any further
obligation and liability to Executive under this Agreement.
(b) If Executive's employment shall be terminated by the Bank and/or
the Company other than for Disability, Cause or his death, or by Executive for
Good Reason, after twelve (12) months from the effective date of this Agreement
until December 31, 2002, Executive shall be entitled to receive an amount equal
to Executive's base salary paid by the Bank and/or the Company to Executive for
the previous twelve (12) months. Such amount shall be payable to Executive in a
lump sum payment within three (3) business days following the Date of
Termination, less withholding as required by law. In addition, the Bank and/or
the Company shall continue payment of all of Executive's benefits in effect on
the date of Executive's termination including health and other medical benefits
for a period of twelve (12) months from the Date of Termination. Payment of the
foregoing amounts shall discharge the Bank and the Company from any further
obligation and liability to Executive under this Agreement.
Notwithstanding the foregoing, in the event that any payment or
benefit received or to be received by Executive in connection with the
termination of employment pursuant to the terms of this Agreement would not be
deductible (in whole or in part) by the Bank and/or the Company as a result of
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), the
amount of the payment shall be reduced until no portion is not deductible as a
result of Section 280G of the Code.
3. BONUS. Executive shall be entitled to a bonus in the minimum
amount of $60,000 which shall be payable no later than February 29, 2000. In
addition, during the term of this Agreement, Executive may receive such bonuses,
if any, as the Board of Directors in its sole discretion shall determine.
4. STOCK OPTIONS. Upon the completion of the acquisition of the
Bank by the Company, Executive shall be granted a ten-year incentive stock
option of 50,000 option shares under the Company's 1999 Stock Option Plan at an
exercise price equal to the Company's initial public offering price. Such stock
options shall be vested at 33 1/3 percent each year starting December 31, 1999.
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E. GENERAL PROVISIONS
1. RETURN OF DOCUMENTS. Executive expressly agrees that all
manuals, documents, files, reports, studies, instruments or other materials used
and/or developed by Executive related to banking or of a banking nature during
the term of his employment are solely the property of the Bank and/or the
Company, and that Executive has no right, title or interest therein. Upon
termination of Executive's employment, Executive shall promptly deliver
possession of all of said property to the Bank and/or the Company in good
condition.
2. NOTICES. Any notice, request, demand or other communication
required or permitted hereunder shall be in writing and shall be deemed to be
properly given when personally served or forty-eight hours after deposit in the
United States mail, postage prepaid, in each case addressed to the Bank and/or
the Company as its head office location or to Executive at his last residence
address on the Bank or the Company's records. Either party may change its
address by written notice in accordance with this subparagraph.
3. BINDING EFFECT; SUCCESSORS. Except to the extent otherwise
provided herein, this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective executors, administrators,
successors and assigns. The Bank and/or the Company will require any successor
to all or substantially all of its assets to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the Bank
and/or the Company would be required to perform it if no such succession had
taken place. Failure of the Bank and/or the Company to obtain such assumption
and agreement prior to the effectiveness of any such succession shall entitle
Executive to the benefits from the Bank and/or the Company in the same amount
and on the same terms as he would be entitled to hereunder if he terminated his
employment for Good Reason, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination.
4. APPLICABLE LAW. Except to the extent governed by the laws of the
United States, this Agreement is to be governed by and construed under the laws
of the State of California.
5. CAPTIONS AND PARAGRAPH HEADINGS. Captions and paragraph headings
used herein are for convenience only and are not part of this Agreement and
shall not be used in construing it.
6. SEVERABILITY. Should any provision of this Agreement for any
reason be declared invalid, void or unenforceable by a court of competent
jurisdiction, the validly and binding effect of any remaining portion shall not
be
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affected, and the remaining portions of this Agreement shall remain in full
force and effect as if this Agreement had been executed with said provision
eliminated.
7. ENTIRE AGREEMENT. This Agreement contains the entire agreement
of the parties relating to termination of employment as provided herein. It
supersedes any and all other agreements, either oral or in writing, between the
parties hereto with respect to such subject matter, and does not otherwise
modify, alter or change the employment relationship of Executive with the Bank
and/or the Company. Each party to this Agreement acknowledges that no
representations, inducements, promises or agreements, oral or otherwise, have
been made by any party, or anyone acting on behalf of any party, which are not
embodied herein, and that no other agreement, statement or promise not contained
in this Agreement concerning its subject matter shall be valid or binding.
8. MODIFICATION; WAIVER. No provision of this Agreement may be
modified, waived or discharged unless such modification, waiver or discharge is
agreed to in writing and signed by Executive and such officer of the Bank and/or
the Company as may be specifically designated or authorized by the Board of
Directors or by the Chief Executive Officer. No waiver by either party hereto
at any time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time.
9. ARBITRATION. In the event that any dispute shall arise between
the parties concerning the provisions of this Agreement or the performance of
any part of their obligations hereunder, or in the event of an alleged breach of
this Agreement by either of the parties hereto, and the parties are unable to
mutually adjust and settle same, such dispute or disputes shall be submitted to
binding arbitration pursuant to the applicable rules of the American Arbitration
Association, and the decision and determination of the arbitrators shall be
final and conclusive.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
THE BANK OF HEMET
By: /s/ Xxxxx X. Xxxxx
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Xxxxx X. Xxxxx, President and
Chief Executive Officer
By: /s/ Xxxxxx Xxxxx
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Xxxxxx Xxxxx, Assistant Secretary
PACIFIC COMMUNITY BANKING GROUP
By: /s/ E. Xxxx Xxxxxxx
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E. Xxxx Xxxxxxx, Chairman of the Board
By: /s/ Xxxxxx Xxxxxxx
---------------------------------------------
Xxxxxx Xxxxxxx, Secretary
EXECUTIVE
/s/ Xxxxxx X. Xxxxxxxx, Xx.
---------------------------------------------
Xxxxxx X. Xxxxxxxx, Xx.
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