EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), between THE BANK OF GRAYS
HARBOR, a Washington banking corporation ("Bank") and XXXXXX X. XXXXXXX
("Executive"), is effective 5-20, 1998 ("Effective Date").
RECITALS
A. The Bank is a Washington banking corporation and direct subsidiary of
Harbor Bancorp, Inc., a Washington corporation ("Bancorp"). The Bank is
engaged in the business of commercial banking in Grays Harbor County,
Washington. The Bank desires and intends to employ the Executive
pursuant to the terms and conditions set forth in this Agreement.
B. The Executive has considerable experience, expertise and training in
management related to banking and services offered by the Bank.
C. Both the Bank and the Executive have read and understood the terms and
provisions set forth in this Agreement, and have been afforded a
reasonable opportunity to review this Agreement with their respective
legal counsel.
AGREEMENT
The parties agree as follows:
1. EMPLOYMENT. The Bank will employ the Executive for the Term, and the
Executive accepts employment with the Bank on the terms and conditions
set forth in this Agreement. The Executive's title will be "President
and Chief Executive Officer."
2. EFFECTIVE DATE AND TERM.
(a) EFFECTIVE DATE. This Agreement is effective as of the
Effective Date.
(b) TERM. The term of this Agreement ("Term") is three years,
beginning on the Effective Date.
3. DUTIES. The Executive will serve as President and Chief Executive
Officer of the Bank. The Executive will faithfully and diligently
perform the duties assigned to the Executive from time to time by the
Bank's Board of Directors. The Executive will use his best efforts to
perform his duties and will devote all his working time and attention
to these duties. These duties will include, without limitation, the
following:
(a) BANK PERFORMANCE. The Executive will be responsible for all
aspects of the Bank's performance, including, without
limitation, directing that daily operational and managerial
matters are performed in a manner consistent with the Bank's
policies. These duties will also include formulating and
implementing the Bank's
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expansion strategies and performing all other tasks in
connection with the Bank's management and affairs that are
normal and customary to the Executive's position.
(b) MODIFICATION OF DUTIES. The Executive will perform such other
duties as may be appropriate to his office and as may be
prescribed from time to time by the Bank's Board of Directors.
New duties and responsibilities prescribed by the Board will
be consistent with the Executive's position as the Bank's
President and Chief Executive Officer, and may not include
immoral or unlawful acts.
4. COMPENSATION.
(a) SALARY. Initially, the Executive will receive a salary of
$115,000 per year, to be paid in biweekly installments of
$4,791.67, in accordance with the Bank's regular payroll
schedule. The Executive's salary will be subject to annual
review and adjustment as set forth in Section 4(0.
(b) INCENTIVE COMPENSATION. A disinterested majority of the
Bank's Board of Directors will annually determine the
amount of bonus, if any, to be paid by the Bank to the
Executive for each year during the Term. In making this
determination, the Bank's Board of Directors will consider
factors such as the Executive's performance of his duties
and the safety, soundness, and profitability of the Bank.
The Executive's bonus, if any, will reflect the Executive's
contribution to the performance of the Bank during the
year. The Executive will also be entitled to participate in
stock bonus or stock option plans generally available to
senior executives of the Bank and Bancorp.
(c) STANDARD EXECUTIVE BENEFITS. The Bank will provide to the
Executive no less than the standard benefits provided to
senior Bank executives in accordance with the Bank's
benefit plans and policies, including but not limited to
health insurance, disability insurance and coverage equal
to the Executive's current salary at the time of any
disability, and four (4) weeks of paid vacation per year
accrued in accordance with the Bank's benefits plans and
policies. The Executive will also be entitled to
participate in retirement plans, including 401(K) and
deferred compensation plans, and including any supplements
or additions to such plans, which are generally available
to senior executives of the Bank and Bancorp.
(d) AUTOMOBILE. The Bank will provide the Executive with the use
of an automobile, of a model typically appropriate for the
performance of the services by a similarly situated executive.
(e) EXPENSES. The Bank will reimburse the Executive for all
reasonable expenses that the Executive may incur in the
performance of his duties, including but not limited to
expenses for travel, lodging, meals, entertainment, annual
banking conventions and monthly country club dues.
(f) ANNUAL REVIEW AND Adjustment. The Executive's compensation, as
set forth in this Section 4, will be subject to annual review
and adjustment by a disinterested
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majority of the Bank's Board of Directors. In no case,
however, will the Executive's salary, vacation, car
allowance and expense reimbursement for director's fees be
less than the amounts set forth in this Section 4.
5. TERMINATION.
(a) NOTICE OF TERMINATION. The Bank's Board of Directors and the
Executive may unilaterally terminate this Agreement for any
reason by providing the other party with 30 days' prior
written notice of the termination, delivered in person or by
certified U.S. mail to the Bank's main office address or to
the Executive's last known address as reflected in the Bank's
personnel records. Notice shall be effective upon either
personal delivery or three days following mailing by certified
U.S. mail.
(b) TERMINATION BY BANK FOR CAUSE OR BY EXECUTIVE WITHOUT GOOD
REASON. If, before the end of the Term, the Bank terminates
this Agreement for Cause or the Executive terminates this
Agreement without Good Reason, the Bank will pay the Executive
the salary earned and expenses reimbursable under this
Agreement incurred through the date of the Executive's
termination. The Executive will have no right to receive
compensation or other benefits for any period after
termination under this Section 5(b).
(c) OTHER TERMINATION. If, before the end of the Term, the Bank
terminates this Agreement without Cause, or the Executive
terminates this Agreement for Good Reason, as defined
below, the Bank will pay the Executive three (3) times the
base compensation received by the Executive during the most
recent calendar year ending on or prior to the effective
date of termination less statutory payroll deductions and
payable in accordance with the Bank's ordinary payroll
policies and procedures, and as of such date, all
forfeiture provisions regarding restricted stock awards and
all vesting requirements regarding stock options shall
lapse or be considered completed. In no case will
compensation be less than that stated in Section 4(a).
(d) DEATH OR DISABILITY. This Agreement will terminate
immediately (1) upon the Executive's death or (2) if the
Executive is unable to perform his duties and obligations
under this Agreement for a period of 60 days as a result of
a physical or mental disability that substantially limits
one or more of his major life activities arising at any
time during the Term, unless the Executive could continue,
with reasonable accommodation, to perform his duties and
making such accommodations would not require the Bank to
expend any funds. If termination occurs under this Section
5(d), the Executive or his estate will be entitled to
receive only the compensation and benefits earned and
expenses reimbursable through the date this Agreement is
terminated, and as of such date, all forfeiture provisions
regarding restricted stock awards and all vesting
requirements regarding stock options shall lapse or be
considered completed.
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(e) TERMINATION RELATED TO A CHANGE IN CONTROL.
(1) TERMINATION BY BANK. If Bancorp or the Bank, or
their successors in interest by merger, or their
transferees in the event of a purchase and
assumption transaction, and for reasons other than
the Executive's death, disability, or Cause, (1)
terminates this Agreement within two (2) years
following a Change in Control (as defined below)
or (2) terminates this Agreement before a Change
in Control and a Change in Control occurs within
nine months after the termination, the Bank will
pay the Executive the payments as set forth in
Section 5(e)(3).
(2) TERMINATION BY THE EXECUTIVE. If a Change in Control
occurs, then the Executive may for any reason
terminate this Agreement within two year following
the Change in Control. The Executive must deliver
notice of his termination in accordance with the
notice provisions set forth in Section 5(a). The Bank
will pay the Executive the payment described in
Section 5(e)(3) following the effectiveness of notice
delivered under this Section 5(e)(2).
(3) PAYMENTS. If Section 5(e)(1) or (2) is triggered
as described in those Sections, the Bank will pay
the Executive three (3) times the base
compensation received by the Executive during the
most recent calendar year ending on or prior to
the effective date of termination less statutory
payroll deductions and payable in accordance with
the Bank's ordinary payroll policies and
procedures, and as of such date, all forfeiture
provisions regarding restricted stock awards and
all vesting requirements regarding stock options
shall lapse or be considered completed. In no case
will compensation be less than stated in Section
4(a).
(f) LIMITATIONS ON PAYMENTS RELATED TO CHANGE IN CONTROL. The
following apply notwithstanding any other provision of this
Agreement:
(1) The payment described in Section 5(e)(3) will be
less than the amount that would cause it to be a
"parachute payment" within the meaning of Section
280G(b)(2)(A) of the Internal Revenue Code; and
(2) The Executive's fight to receive the payment
described in Section 5(e)(3) terminates (i)
immediately, if before the Change in Control
transaction closes, the Executive terminates his
employment without Good Reason or the Bank terminates
the Executive's employment for Cause, or (ii) two
years after a Change in Control occurs.
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(g) DEFINITION OF "CHANGE IN CONTROL." "Change in Control"
means a change "in the ownership or effective control" or
"in the ownership of a substantial portion of the assets"
of Bancorp or the Bank, within the meaning of Section 280G
of the Internal Revenue Code. An initial public offering by
Bancorp or the Bank will not, however, be deemed to be a
change in Control under this Agreement.
(h) RETURN OF BANK PROPERTY. If and when the Executive ceases, for
any reason, to be employed by the Bank, the Executive must as
soon as possible return to the Bank, all property of Bancorp
and the Bank.
6. DEFINITION OF "CAUSE". Cause means any one or more of the following:
(a) The Executive's material breach of any provision of this
Agreement, and his failure to cure such breach within ten (10)
days after written notice from the Bank to the Executive
specifying in reasonable detail the alleged breach;
(b) The Executive's gross negligence in the performance of his
duties, and his failure to cure such gross negligence within
ten (10) days after written notice from the Bank to the
Executive specifying in reasonable detail the alleged
violation;
(c) The Executive's conviction of a felony; or
(d) The Executive's gross misconduct in the course and scope of
his employment with the Bank.
7. DEFINITION OF "GOOD REASON". "Good Reason" means any one or more of the
following:
(a) The Bank's material breach of any provision of this Agreement,
and its failure to cure such breach within ten (10) days after
written notice from the Executive to the Chairman of the
Bank's Board of Directors specifying in reasonable detail the
alleged breach;
(b) The assignment to the Executive without his express written
consent of duties substantially inconsistent with and/or in
diminution of the positions, duties, responsibilities and
status contemplated by paragraph 3 of this Agreement; or
(c) A relocation or transfer of the Executive's principal place of
employment that would require the Executive to commute on a
regular basis more than 25 miles each way from his current
business office at the Bank on the date of tiffs Agreement,
unless the Executive consents to the relocation or transfer.
8. CONFIDENTIALITY. The Executive, and any person acquiring confidential
information from the Executive, will not, after signing this Agreement.
including during and after its Term, disclose to any other person or
entity any confidential information concerning Bancorp, the Bank or
their business operations or customers, or use for his (their) own
purposes or permit or assist in the use of such confidential
information unless (1) Bancorp or the Bank consents to the use or
disclosures of their respective information, (2) the use or
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disclosure is consistent with the Executive's duties under this
Agreement, or (3) disclosure is required by law or court order.
9. NONCOMPETITION.
(a) PARTICIPATION IN A ..COMPETING BUSINESS. During the Term
and for two (2) years after the Executive's employment with
the Bank ends (regardless of whether the Executive's
employment ends at the end of the Term or at some other
point after the end of the Term), the Executive will not
become involved with a Competing Business or serve,
directly or indirectly, a Competing Business in any manner,
including, without limitation, as a shareholder, member,
partner, director, officer, manager, investor, organizer,
"founder,' employee, consultant, or agent; PROVIDED
HOWEVER, that the Executive may acquire and passively own
an interest not exceeding five percent (5 %) of the total
equity interest in any company (whether or not such company
is a Competing Business).
(b) NO SOLICITATION. During the Term and for two (2) years
after the Executive's employment with the Bank ends
(regardless of whether the Executive's employment ends at
the end of the Term or at some other point after the end of
the Term), the Executive will not solicit or attempt to
solicit (1) any employees of Bancorp, the Bank, or their
subsidiaries or affiliates to leave employment or (2) any
customers of the Bank, or any of its subsidiaries or
affiliates, to remove their business from the Bank, or any
of its subsidiaries or affiliates, or to participate in any
manner in a Competing Business. Solicitation prohibited
under this Section includes solicitation by any means,
including, without limitation, meetings, letters or other
mailings, electronic communications of any kind, and
Internet communications.
(c) EMPLOYMENT OUTSIDE GRAYS HARBOR COUNTY. Following any
termination of Executive's employment, nothing in this
Agreement prevents the Executive from accepting employment
outside Grays Harbor County from a Competing Business, as long
as the Executive will not (1) act as an employee or
representative or agent of the Competing Business within Grays
Harbor County or (2) have any responsibilities for the
Competing Business' operations within Grays Harbor County.
(d) COMPETING BUSINESS. "Competing Business" means any company
that competes with or will compete with Bancorp or the Bank in
Grays Harbor. The term "Competing Business" includes, without
limitation, any existing or newly formed financial institution
or trust company.
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10. ENFORCEMENT.
(a) The Bank and the Executive stipulate that, in light of all
of the facts and circumstances of the relationship between
the Executive and the Bank, the agreements referred to in
Sections 8 and 9 (including without limitation their scope,
duration and geographic extent) are fair and reasonably
necessary for the protection of the Bank's confidential
information, goodwill and other protectable interests. If a
court of competent jurisdiction should decline to enforce
any of those covenants and agreements, the Executive and
the Bank request the Court to reform these provisions to
restrict the Executive's use of confidential information
and the Executive's ability to compete with the Bank to the
maximum extent, in time, scope of activities, and
geography, the court finds enforceable.
(b) The Executive acknowledges that the Bank will suffer immediate
and irreparable harm that will not be compensable by damages
alone, if the Executive repudiates or breaches any of the
provisions of Sections 8 and 9 or threatens or attempts to do
so. For this reason, under these circumstances, the Bank, in
addition to and without limitation of any other rights,
remedies or damages available to it at law or in equity, will
be entitled to obtain temporary, preliminary, and permanent
injunctions in order to prevent or restrain the breach, and
the Bank will not be required to post a bond as a condition of
the granting of this relief.
11. ADEQUATE CONSIDERATION. The Executive specifically acknowledges the
receipt of adequate consideration for the covenants contained in
Sections 8 and 9 and that the Bank is entitled to require him to comply
with these Sections. These Sections will survive termination of this
Agreement. The Executive represents that if his employment is
terminated, whether voluntarily or involuntarily, the Executive has
experience and capabilities sufficient to enable the Executive to
obtain employment in areas which do not violate this Agreement and that
the Bank's enforcement of a remedy by way of injunction will not
prevent the Executive from earning a livelihood.
12. ARBITRATION.
(a) ARBITRATION. The parties may submit any dispute,
controversy or claim arising out of or in connection with,
or relating to, this Agreement or any breach or alleged
breach of this Agreement, to arbitration under the American
Arbitration Association's rules then in effect (or under
any other form of arbitration mutually acceptable to the
parties) upon either party's written request delivered
within sixty (60) days of the date of the dispute,
controversy or claim arises. A single arbitrator agreed
upon by the parties will conduct the arbitration. If the
parties cannot agree on a single arbitrator, each party
must select one arbitrator and those two arbitrators will
select a third arbitrator. This third arbitrator will hear
the dispute. The arbitrator's decision is final (except as
otherwise specifically provided by law) and binds the
parties, and either party may request any court having
jurisdiction to enter a judgment and to enforce the
arbitrator's decision. The arbitrator will provide the
parties with a written decision naming the
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substantially prevailing party in the action. This
prevailing party is entitled to reimbursement from the
other party for its costs and expenses, including
reasonable attorneys' fees.
(b) GOVERNING LAW. All proceedings will be held at a place
designated by the arbitrator in Grays Harbor County,
Washington. The arbitrator, in rendering a decision as to any
state law claims, will apply Washington law.
(c) Exception to Arbitration. Notwithstanding the above, if the
Executive violates Section 8 or 9, the Bank will have the
fight to initiate the court proceedings described in Section
10(b), in lieu of an arbitration proceeding under this Section
12.
13. MISCELLANEOUS PROVISIONS.
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding between the parties concerning its subject
matter and supersedes all prior agreements. Accordingly, the
Executive specifically waives the terms of and all of his
rights under all employment, change-in-control and salary
continuation agreements, whether written or oral, he has
previously entered into with Bancorp, the Bank or any of their
subsidiaries or affiliates.
(b) BINDING EFFECT. This Agreement will bind and inure to the
benefit of the Bank's and the Executive's heirs, legal
representatives, successors and assigns.
(c) LITIGATION EXPENSES. If either party successfully seeks to
enforce any provision of this Agreement or to collect any
amount claimed to be due under it, this party will be entitled
to reimbursement from the other party for any and all of its
out-of-pocket expenses and costs including, without
limitation, reasonable attorneys' fees and costs incurred in
connection with the enforcement of collection.
(d) WAIVER. Any waiver by a party of its rights under this
Agreement must be written and signed by the party waiving its
rights. A party's waiver of the other party's breach of any
provision of this Agreement will not operate as a waiver of
any other breach by the breaching party.
(e) COUNSEL REVIEW. The Executive acknowledges that he has had the
opportunity to consult with independent counsel with respect
to the negotiations, preparation, and execution of this
Agreement.
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(f) ASSIGNMENT. The services to be rendered by the Executive
under this Agreement are unique and personal. Accordingly,
the Executive may not assign any of his rights or duties
under this Agreement.
(g) AMENDMENT. This Agreement may be modified only through a
written instrument signed by both parties.
(h) SEVERABILITY. The provisions of this Agreement are severable.
The invalidity of any provision will not affect the validity
of other provisions of this Agreement.
(i) GOVERNING LAW AND VENUE. This Agreement will be governed and
construed in accordance with Washington law, except to the
extent that certain matters may be governed by federal law.
Except as otherwise provided in Section 12(c), the parties
must bring any legal proceeding arising out of this Agreement
in Grays Harbor County, Washington, and the parties will
submit to jurisdiction in that county.
(j) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original, but
all of which taken together will constitute one and the same
document.
Signed: May 20, 1998:
THE BANK OF GRAYS HARBOR XXXXXX X. XXXXXXX, individually
/s/ Xxxxxx X. Xxxxxxx
--------------------------------- ---------------------------------
By: Xxxxxx X. Xxxxxxx, President and
Its: Chief Executive Officer
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