SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT ("Agreement") is made and entered into as of the
______ day of ___________, 1998, by and among ELDORADO BANK, a California
banking corporation (the "Bank"), and ________________, the [OFFICE] of the
Bank ("Officer").
R E C I T A L S :
A. WHEREAS, the Bank is a wholly owned subsidiary of Commerce Security
Bancorp, Inc., a Delaware corporation (the "Company");
B. WHEREAS, Officer is the [OFFICE] and a current employee of the
Bank; and
C. WHEREAS, it is deemed to be in the best interest of the Bank and
the Company to take appropriate steps to provide severance arrangements under
certain circumstances to certain officers who remain employees of the Bank;
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein contained, it is agreed as
follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms
when used in this Agreement shall have the meanings set forth below:
(a) "CAUSE" shall mean Officer, after the date of this Agreement,
(i) has been convicted by a court of competent jurisdiction of any
criminal offense involving dishonesty, breach of trust or
misappropriation, or has entered a plea of NOLO CONTENDERE to such an
offense; or (ii) has committed an act of fraud, embezzlement, theft, or
any act which would cause termination of coverage under the Bank's
Banker's Blanket Bond as to Officer (as distinguished from termination of
coverage as to the Bank as a whole); or (iii) has committed a willful
violation of the Bank's Code of Conduct or any law, rule or regulation
governing the operation of the Bank or any of its affiliates or the
insurance of deposits held by the Bank (A) which is a felony or
misdemeanor, or (B) which the Board of Directors of the Bank determines in
good faith will likely have or has had a material adverse effect on the
business, interests or reputation of the Bank or any of its affiliates; or
(iv) has committed a willful and unauthorized disclosure of material
confidential information regarding the Bank or any of its subsidiaries or
affiliates, which disclosure the Board of Directors of the Company
determines in good faith will likely have or has had a material adverse
effect on the Bank or any of its subsidiaries or affiliates.
(b) "CHANGE OF CONTROL" shall mean any transaction or series of
related transactions as a result of which
(i) the Company consummates a reorganization, merger or
consolidation of the Company, or sale or other disposition of all or
substantially all of the assets of the Company (each a "Business
Combination"), in each case UNLESS immediately following the
consummation of such Business Combination all of the following
conditions are satisfied: (x) Persons, who, immediately prior to
such Business Combination, were the beneficial owners of the voting
securities entitled to vote generally in the election of directors of
the Company (the "Outstanding Voting Securities"), beneficially own
(within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), directly or
indirectly, more than one-third (_) of, respectively, the then
outstanding shares of common stock and the combined voting power of
the then Outstanding Voting Securities entitled to vote generally in
the election of directors, as the case may be, of the entity (the
"Resulting Entity") resulting from such Business Combination
(including, without limitation, an entity which as a result of such
transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more
subsidiaries); (y) no Person (other than any limited partner of
Dartmouth Capital Group, L.P. or shareholder of Dartmouth Capital
Group, Inc., any employee benefit plan (or related trust) of the
Company or the Resulting Entity) beneficially owns (within the
meaning of Rule 13d-3), directly or indirectly, more than twenty
percent (20.0%) of, respectively, the then outstanding shares of
common stock of the Resulting Entity or the combined voting power of
the then Outstanding Voting Securities of the Resulting Entity,
except to the extent that such Person's beneficial ownership of the
Company immediately prior to the Business Combination exceeded such
threshold; and (z) at least one-half (1/2) of the members of the board
of directors of the Resulting Entity were members of the Board of
Directors of the Company at the time the Company's Board of Directors
authorized the Company to enter into the definitive agreement
providing for such Business Combination; or
(ii) any Person (other than a limited partner of Dartmouth
Capital Group, L.P. or a shareholder of Dartmouth Capital Group,
Inc.) acquires beneficial ownership (within the meaning of Rule 13d-
3) of more than twenty percent (20.0%) of the combined voting power
(calculated as provided in Rule 13d-3 in the case of rights to
acquire securities) of the then Outstanding Voting Securities of the
Company; PROVIDED, HOWEVER, that for purposes of this clause, the
following acquisitions shall not constitute a Change of Control: (x)
any acquisition directly from the Company, (y) any acquisition by the
Company and (z) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any entity
controlled by the Company.
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(c) "DISABILITY OF OFFICER" shall mean if Officer is Disabled and
such disability continues for a period of any six (6) months out of a one
(1) year period. "DISABLED" shall mean Officer's inability, through
physical or mental illness or other cause, to perform normal and customary
duties which Officer is required to perform for the Bank. In determining
whether Officer is Disabled, the Bank may rely upon the written statement
provided by a licensed physician acceptable to the Bank. Officer shall
allow examination from time to time by any licensed physician selected by
the Bank and agreed to by Officer. All such examinations will be
conducted within a reasonable time period.
(d) "GOOD REASON" shall mean the occurrence of Officer (i) being
delegated or assigned duties by the Board of Directors (the "Board") of
the Bank or the Chief Executive Officer of the Bank by a communication in
writing which are substantially inconsistent with the position and status
held by Officer immediately prior to the effective date of the Change of
Control; or (ii) having had removed by the Board or the Chief Executive
Officer by a communication in writing such authority and responsibility
which is necessary to carry out the duties of the position held by Officer
immediately prior to the effective date of the Change of Control; or
(iii) having a substantial and adverse alteration in the nature, status,
or prestige of Officer's responsibilities due to the action of the Board
or the Chief Executive Officer, which is verifiable by tangible evidence;
or (iv) being relocated to an office more than twenty-five (25) miles from
the location of the Bank's executive offices as in effect immediately
prior to the effective date of the Change of Control; or (v) having his or
her base compensation reduced by ten percent (10%) or more from such base
compensation in effect on the date immediately preceding the effective
date of the Change of Control. In addition, without limiting the scope of
the immediately preceding sentence, any action by the Bank which would
constitute a termination without cause within the meaning of the Company's
1997 Stock Option Plan shall also constitute "Good Reason" for purposes of
this Agreement.
(e) "PERSON" shall have the meaning ascribed to such term in Section
3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), which definition shall include a "person" within the meaning of
Section 13(d)(3) of the Exchange Act.
(f) "WITHOUT CAUSE" shall mean any termination of Officer by the
Bank except for a termination (i) for Cause, (ii) as a result of the
death of Officer, or (iii) as a result of the Disability of Officer.
2. SEVERANCE PAYMENT.
(a) Except as provided in Section 2(b), if (i) Good Reason exists
within two
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(2) years following a Change of Control, and Officer gives written
notice to the Bank within ninety (90) days after the occurrence of
such Good Reason that Officer is terminating his or her employment with
the Bank for Good Reason, or (ii) the Bank terminates Officer Without
Cause within two (2) years following a Change of Control, and, in either
event, provided that Officer has delivered to Bank a General Release and
Confidentiality Agreement in the form of EXHIBIT "A" attached hereto (the
"Waiver and Release"), the Bank will pay Officer in a lump sum an amount
(the "Severance Payment") equal to twelve (12) times Officer's base
monthly salary as in effect either at the time of termination or, if
greater, immediately prior to the effective date of the Change of Control.
The Severance Payment shall be reduced by required deductions for
applicable taxes and other withholdings and for any outstanding
obligations owed by Officer to the Bank that are then due and payable,
which deductions and withholdings are specifically authorized by Officer.
The Severance Payment shall be in addition to any sums to which Officer
would be entitled without signing the Waiver and Release. The Severance
Payment will be paid not more than five (5) calendar days after the
"Effective Date" of the Waiver and Release as provided therein. Each
Change of Control and each Good Reason following a Change of Control shall
give Officer a separate right to give the notice set forth in the first
sentence of this paragraph 2.
(b) Notwithstanding any other provision of this Agreement, the bank
shall have no obligations to make the Severance Payment if such Severance
Payment is prohibited by applicable federal or state law, including
without limitation Part 359 of the regulations of the Federal Deposit
Insurance Corporation (12 CFR Section 359 et seq.) or any successor
provision.
3. IRC PROVISIONS. Notwithstanding any other provision of this
Agreement, in the event it is determined by the Bank in its reasonable
discretion that the payment of the Severance Amount to Officer would be
nondeductible by the Bank for federal income tax purposes because of Section
280G of the Internal Revenue Code of 1986, as amended (the "Code"), the
Severance Payment shall be reduced to an amount which maximizes the Severance
Payment without causing any portion of the same to be nondeductible by the
Bank because of Section 280G of the Code. Any such reduction shall be
applied to the Severance Payment or the other amounts due to Officer in such
manner as Officer may reasonably specify within thirty (30) days following
notice from the Bank of the need for such reduction or, if Officer fails to
so specify timely, as determined by the Bank.
4. EMPLOYEE BENEFITS. All employee benefits provided by the Bank
shall cease upon termination of Officer's employment, whether for Good
Reason, Without Cause, or for any other reason, and the Bank shall have no
further responsibility with respect thereto after such termination; PROVIDED,
HOWEVER, that nothing contained in this Agreement shall affect any right
Officer may have pursuant to the Federal entitlement to continued group
health care coverage as provided in the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA") or any successor legislation or
comparable state law; and PROVIDED FURTHER that if
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Officer is entitled to receive a Severance Payment pursuant to paragraph 2
hereof, and if Officer elects under COBRA to continue to receive any benefits
thereunder, the Bank shall reimburse Officer for the amount of such Officer's
COBRA payments for the first six months after such termination.
5. TERM. The term of this Agreement shall be a rolling twelve (12)
months, with the Bank being able to terminate the Agreement upon twelve (12)
months prior written notice to the Officer; PROVIDED, HOWEVER, that if a
Change of Control has occurred, no such termination shall be effective prior
to the ninetieth (90th) day after the second (2nd) anniversary of the Change
of Control.
6. EMPLOYMENT "AT WILL". Neither this Agreement nor the Severance
Payment payable hereunder shall be deemed to limit, replace or otherwise
affect the "at will" nature of Officer's employment with the Bank. Officer's
employment with the Bank continues to be for an unspecified term and may be
terminated at will at any time with or without cause or notice by either the
Bank or Officer. This at-will relationship cannot be changed absent an
express intent as set forth in an individualized written employment contract
signed by both Officer and the Chief Executive Officer of the Bank.
7. ARBITRATION. (a) It is the intention and agreement of the parties
hereto that no dispute, disagreement, claim or controversy (collectively a
"Controversy") arising in connection with this Agreement, Officer's
employment or the termination of that employment, be subject to civil
litigation or other judicial process (other than to compel compliance with
this paragraph or to enforce an award issued as a result of a proceeding
hereunder). Therefore, to the fullest extent allowed by law, any Controversy
arising out of or relating to this Agreement, the breach of this Agreement,
the facts and circumstances preceding the execution of this Agreement, the
interpretation of any provision of this Agreement, Officer's employment or
the termination of that employment, which cannot be resolved through
agreement of the parties, shall be settled by means of binding arbitration
conducted in accordance with the procedures set forth in paragraph 9 of the
Waiver and Release. The matters subject to binding arbitration shall include,
but not be limited to, any Controversy regarding wrongful termination,
employment discrimination, and harassment of any kind, and shall include
statutory claims arising under laws such as Title VII of the Civil Rights
Act, the Age Discrimination in Employment Act, and the California Fair
Employment and Housing Act.
8. MITIGATION. Officer shall have no obligation to mitigate damages
based upon Officer's termination pursuant to paragraph 2 above, and the
Severance Payment shall not be reduced as a result of Officer obtaining other
employment within twelve (12) months of Officer's termination.
9. CONFIDENTIALITY. Officer understands and agrees (a) that Officer
will maintain all proprietary and confidential information of the Bank as
proprietary and confidential at all times during and after his/her
employment, (b) that Officer will not disclose or communicate such
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information to any third party or make use of it on his/her own behalf or on
behalf of any third party, and (c) upon his/her termination, that Officer
will deliver all tangible forms or media which Officer may have containing
such information to the Bank. For purposes of this Paragraph 9, "information"
includes trade secrets and all non-public records, practices, letters, plans,
drawings, computer programs and data, technical data, financial and other
business data pertaining to the Bank or any of its affiliates, customers,
vendors or other persons associated with the Bank. Officer acknowledges and
further agrees that the disclosure of such information would be a material
breach of this Agreement for which the Bank shall be entitled to any remedies
available to it in law or in equity.
10. COVENANT NOT TO DISRUPT BUSINESS. Officer hereby covenants and
agrees that he or she will not now, or for a period of one (1) year after the
effective date of Officer's termination of employment, whether or not
following a Change of Control, disrupt, damage, impair or interfere with the
business of the Bank, whether by way of interfering with or soliciting its
employees, or disrupting its relationships with customers, loan packagers,
representatives, vendors, brokers or otherwise. After termination of
employment, Officer is not, however, restricted from being employed by or
engaged in a competing business.
11. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which,
together, shall constitute one and the same instrument.
12. PARTIAL INVALIDITY. Any provision of this Agreement which shall
prove to be invalid, void or illegal shall in no way affect, impair or
invalidate any other provision hereof, and such other provisions shall remain
in full force and effect.
13. TIME. Time is of the essence with respect to the performance of
every provision of this Agreement.
14. GOVERNING LAW. The terms and provisions of this Agreement shall be
governed and construed pursuant to the laws of the State of California except
to the extent governed by Federal law.
15. CONSTRUCTION. Headings at the beginning of each paragraph are
solely for the convenience of the parties and are not a part of this
Agreement. Whenever required by the context of this Agreement, the singular
shall include the plural and the masculine shall include the feminine and
vice versa. This Agreement shall not be construed as if it had been prepared
by one of the parties, but rather as if both parties had prepared the same.
Unless otherwise indicated, all references to paragraphs are to this
Agreement. The exhibit referred to in this Agreement is attached and
incorporated by this reference.
16. INTEGRATION. This Agreement represents the entire and integrated
agreement between the Bank and Officer regarding the subject matter hereof
and supersedes all prior
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negotiations, representations or agreements, either written or oral. If the
Officer receives a severance payment pursuant to this Agreement, the Officer
shall not be eligible to receive any severance benefit under the Company's
Severence Pay Plan or any successor plan. Not withstanding the immediately
preceding sentence, if Officer is subject to a "Covered Termination" (as
defined in the Company's Severence Pay Plan), in circumstances not involving
a change of control, Officer shall be eligible to receive severance benefits
if and to the extent provided in the Company's Severance Pay Plan.
17. SUCCESSORS AND ASSIGNS. The terms, covenants and conditions herein
contained shall be binding upon and shall inure to the benefit of the heirs,
successors and assigns of the parties hereto.
18. NO WAIVER. No waiver by either party of any breach or default
hereunder shall be deemed a waiver of any other breach or default, and no
delay or forbearance by either party hereunder in enforcing any of its rights
or remedies shall be deemed a waiver of any such rights or remedies, unless
such waiver is embodied in a writing signed by the authorized representative
of the party to be bound.
IN WITNESS WHEREOF, this Agreement has been executed effective on the
day and year hereinabove set forth.
"BANK" ELDORADO BANK
By:
---------------------------
Its:
-----------------------
"OFFICER"
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EXHIBIT "A"
GENERAL RELEASE AND CONFIDENTIALITY AGREEMENT
---------------------------------------------
This General Release and Confidentiality Agreement ("Waiver and
Release"), including a release of severance pay claims, is entered into this
____ day of _____, 199__, by and between _____________("Officer") and
Eldorado Bank (the "Bank").
1. Within ten (10) calendar days of the "Effective Date" of this Waiver
and Release, as defined in Paragraph 4 below, and assuming Officer is
otherwise eligible for benefits under the terms of his/her Severance
Agreement, dated November __, 1997 ("Agreement"), the Bank agrees to pay
Officer the Severance Payment as provided in Paragraph 2 of the Agreement.
The Severence Payment shall be in addition to any sums to which
Officer would be entitled without signing this Waiver and Release.
2. In consideration of such Severance Payment and the promises
contained in this Waiver and Release, Officer, for himself/herself and for
his/her heirs, executors, administrators, successors and assigns (the
"Releasors"), hereby waives, releases and forever discharges the Bank and its
officers, directors, employees, agents, insurers, underwriters, subsidiaries,
parents, holding companies (including, but not limited to, Commerce Security
Bancorp, Inc.) affiliates (including, but not limited to, Dartmouth Capital
Group, L.P. and Dartmouth Capital Group, Inc.), successors and assigns (the
"Releasees") from, and agrees to the extent permitted by law not in any
manner to institute, prosecute or pursue, any and all complaints, charges,
claims, obligations, demands, suits, costs, losses, liabilities, damages,
actions or causes of action of any nature whatsoever, whether in law or in
equity known or unknown, suspected or claimed, which Releasors, or any of
them, have or may have against the Releasees, or any of them, concerning any
matter, cause or thing, including without limitation, any claim related to or
arising out of (a) Officer's employment with the Bank or the cessation of
that employment; (b) any common law or statutory tort; (e) any federal,
state, or governmental constitution, statute, regulation or ordinance,
including, without limitation, Title VII of the Civil Rights Act of 1964, the
Age Discrimination in Employment Act, the Employee Retirement Income Security
Act of 1974, as amended, the California Fair Employment and Housing Act, the
California Labor Code, the Equal Pay Act, the Americans With Disabilities
Act, the Rehabilitation Act of 1973, the Racketeer Influenced and Corrupt
Organizations Act, the Financial Reform Recovery and Enforcment Act of 1989,
and/or Section 1981 of Title 42 of the United States Code; and (d) any
agreement, oral or written, express or implied, between Officer and the Bank,
including any employment agreement. This Waiver and Release does not waive
rights or claims that may arise after the date this Waiver and Release is
executed by Officer.
3. As further consideration and inducement for this Waiver and Release,
it is understood and agreed that the Releasors' general release herein
extends to all known and unknown claims and that Releasors waive and release
any and all rights under Section 1542 of
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the California Civil Code or any analogous state, local or federal law,
statute, rule, order or regulation. CALIFORNIA CIVIL CODE SECTION 1542 READS
AS FOLLOWS:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH
THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS
FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR."
4. Officer acknowledges and agrees that (a) he/she has been given a
period of at least twenty-one (21) calendar days to consider this Waiver and
Release and whether or not to sign it, and (b) for a period of seven (7)
calendar days after he/she signs this Waiver and Release, he/she has the
right to revoke it. This Waiver and Release shall not become effective or be
enforceable until such seven (7) calendar day revocation period has expired,
such expiration date being referred to herein as the "Effective Date".
5. Officer executes this Waiver and Release voluntarily without
reliance on any representation by the Bank other than that set forth in this
Waiver and Release. Officer acknowledges that he/she has read and understands
the provisions of the release set forth in Paragraphs 2 and 3 of this Waiver
and Release. The Bank advises Officer to consult with an attorney before
executing this Waiver and Release, and to consider all of its provisions
carefully before signing it.
6. Officer understands and agrees (a) that he/she will maintain all
proprietary and confidential information of the Bank as proprietary and
confidential at all times during and after his/her employment, (b) that
he/she will not disclose or communicate such information to any third party
or make use of it on his/her own behalf or on behalf of any third party, and
(c) upon his/her termination, that he/she will deliver all tangible forms or
media which he/she may have containing such information to the Bank. For
purposes of this Paragraph 6, "information" includes trade secrets and all
non-public records, practices, letters, plans, drawings, computer programs
and data, technical data, financial and other business data pertaining to the
Bank or any of its affiliates, customers, vendors or other persons associated
with the Bank. Officer acknowledges and further agrees that the disclosure of
such information would be a material breach of this Waiver and Release for
which the Bank shall be entitled to recover payments made under this Waiver
and Release in addition to other remedies in law and in equity.
7. This Waiver and Release does not constitute, and shall not be
admissable as evidence of, an admission by the Bank as to any fact or matter.
8. Officer hereby covenants and agrees that he/she will not now, or for
a period of one (1) year after the Effective Date, disrupt, damage, impair or
interfere with the business of the Bank, whether by way of interfering with
or soliciting its employees, or disrupting its
A-2
relationships with customers, loan packagers, representatives, vendors,
brokers or otherwise. After termination of employment, Officer is not,
however, restricted from being employed by or engaged in a competing business.
9. (a) AGREEMENT TO ARBITRATE. It is the intention and agreement of
the Bank and Officer that no dispute, disagreement, claim or controversy
(collectively a "Controversy") arising in connection with this Waiver
and Release or the Agreement, Officer's employment or the termination of
that employment, be subject to civil litigation or other judicial
process (other than to compel compliance with this paragraph or to
enforce an award issued as a result of a proceeding hereunder).
Therefore, to the fullest extent allowed by law, any Controversy
arising out of or relating to this Waiver and Release or the Agreement,
the breach of this Waiver and Release or the Agreement, the facts and
circumstances preceding the execution of this Waiver and Release or the
Agreement, the interpretation of any provision of this Waiver and
Release or the Agreement, Officer's employment or the termination of
that employment, which cannot be resolved through agreement of the
Releasors and Releasees, shall be settled in accordance with the
procedures set forth in this paragraph 9. This shall include, but not be
limited to, any Controversy regarding wrongful termination, employment
discrimination, and harassment of any kind, and shall include statutory
claims arising under laws such as Title VII of the Civil Rights
Act, the Age Discrimination in Employment Act, and the California Fair
Employment and Housing Act.
(b) NOTICE OF INTENT TO ARBITRATE. Any Releasee or Releasor
("Claimant") desiring to invoke the procedures of this paragraph shall
give written notice to the other of Claimant's intent to institute the
procedures herein provided. Such notice of Controversy shall identify
each and every claim asserted by Claimant, the party involved in the
Controversy, and whether the Controversy is directed against the Bank.
The notice shall further state the nature of the relief sought.
(c) BINDING RESOLUTION. The parties agree to resolve the matter in
Controversy by final and binding arbitration according to the National
Rules for the Resolution of Employment Disputes ("Rules") of the
American Arbitration Association ("AAA").
(d) ENFORCEMENT OF DISPUTE/RESOLUTION. Any party may seek to compel
the other to comply with this arbitration provision by petition to any
court of general jurisdiction. In the case of a judgment on an
arbitrator's award, any party may seek to have the arbitrator's award
entered by any court having jurisdiction thereof.
(e) FEES AND COSTS. The parties agree that the fees and costs
incurred for the Arbitrator shall be assessed equally to Officer and the
Bank. Each party shall bear its own attorney's fees and costs in
connection with its own representation.
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(f) ALTERNATE MEDIATION/ARBITRATION SERVICE. In the event AAA is
not in business at the time this dispute resolution procedure is
initiated, the parties agree to select an alternative arbitration
service in the place of AAA. The Rules of Practice and Procedure to be
followed shall be those of the successor arbitration service. In the
event the parties are unable to agree on an alternative arbitration
service within thirty (30) days of the initiation of this dispute
resolution procedure, then either party may petition the Superior Court
of Orange County to appoint a retired judge to serve as arbitrator
pursuant to the AAA's Rules in effect at the time AAA ceased doing
business.
IN WITNESS WHEREOF, this GENERAL RELEASE AND CONFIDENTIALITY AGREEMENT
has been executed on the day and year hereinabove set forth.
"OFFICER"
Dated:
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On [DATE] , before me personally appeared [OFFICER],
------------------------
personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person who is named in the foregoing GENERAL RELEASE AND
CONFIDENTIALITY AGREEMENT and acknowledged to me that he executed the same,
and that by his signature [OFFICER] duly executed the GENERAL RELEASE AND
CONFIDENTIALITY AGREEMENT.
----------------------------
Notary Public
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