EXHIBIT 10.1
INTERWEST BANCORP, INC.
EMPLOYMENT AGREEMENT
XXXXXXX X. XXXXXX
This Employment Agreement ("Agreement") is made and entered into this 19th
day of May, 2000, by and between InterWest Bancorp, Inc., a Washington
corporation (the "Company") and Xxxxxxx X. Xxxxxx ("Xxxxxx"), who agree as
follows:
1. EMPLOYMENT. The Company agrees to employ Xxxxxx, and Xxxxxx agrees
to accept employment with the Company, on the terms and conditions set forth
herein. Xxxxxx'x title with the Company shall be Chairman of the Board
("Chairman"). The position of Chairman is a non-executive position.
2. TERM. The term of this Agreement began on April 17, 2000, and shall
terminate on April 17, 2003, unless earlier terminated as provided in Paragraph
5 hereof (the "Term").
3. DUTIES. Xxxxxx will serve as Chairman and will conduct the meetings of
the Board of Directors (the "Board") and the Annual Meeting of Shareholders, and
will provide such other services as requested by the President and/or the Board.
Xxxxxx will maintain relationships with community bankers, assist if requested
with possible future acquisitions, and attend bank conferences deemed beneficial
to the Company.
4. COMPENSATION. Commencing October 17, 2000, (following completion of his
transitional salary continuation of three months at full salary and three months
at one-half salary), the Company shall pay Xxxxxx, as compensation for services
to be rendered under paragraph 3, $5,500 per month (partial months prorated)
("Base Salary"), to be paid in accordance with the Company's regular payroll
schedule, together with reimbursement for reasonable and necessary out-of-pocket
expenses incurred in providing the services outlined in paragraph 3. In
addition, Xxxxxx, subject to eligibility requirements, shall be covered by and
entitled to participate in employee benefit plans available to all non-executive
officers of the Company. Xxxxxx shall receive no additional compensation for
serving as a member of the Board without Board approval.
5. TERMINATION.
(a) TERMINATION BY COMPANY FOR CAUSE. If Xxxxxx is removed for Cause as
Chairman prior to the expiration of the Term, the Company will pay Xxxxxx his
Base Salary and reimbursable expenses through the date of termination, together
with the entire severance pay benefit he was entitled to receive under the
Severance Pay Plan ($486,500) (the "Severance Benefit"), subject to any
reduction under Paragraph 6 hereof. For the purposes of this Agreement, the term
"Cause" shall mean fraudulent or dishonest acts, a gross abuse of authority in
discharge of duties to the Company, or acts that are detrimental or hostile to
the interests of the Company, as determined in good faith by a majority of the
other members of the Board.
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(b) OTHER TERMINATION BY COMPANY. If Xxxxxx is removed as Chairman prior
to the expiration of the Term, without Cause, the Company will pay Xxxxxx his
Base Salary and reimbursable expenses through the date of termination, together
with the Severance Benefit, increased by .75% a month (compounded annually) for
the full Term, for a total severance payment of $630,032, subject to any
reduction under Paragraph 6 hereof.
(c) TERMINATION BY XXXXXX. If Xxxxxx resigns as Chairman prior to the
expiration of the Term, Xxxxxx shall be entitled to receive his Base Salary and
reimbursable expenses incurred through the date of termination, together with
the Severance Benefit, increased by .75% a month (compounded annually) for each
month of service during the Term prior to the date of termination, with partial
months to be prorated, subject to any reduction under Paragraph 6 hereof.
(d) TERMINATION BY DEATH OR DISABILITY. This Agreement terminates (1) if
Xxxxxx dies, or (2) if Xxxxxx is unable to perform his duties and obligations
for a period of ninety (90) days as a result of a physical or mental disability
arising at anytime during the Term, unless with reasonable accommodation Xxxxxx
could continue to perform his duties under this Agreement. If termination occurs
under this Paragraph 5(d), Xxxxxx or his estate shall be entitled to receive the
Severance Benefit, increased by .75% a month (compounded annually) for each
month of service during the Term prior to the date of termination, with partial
months to be prorated, subject to any reduction under Paragraph 6 hereof.
(e) TERMINATION BY CHANGE OF CONTROL.
(1) In the event a Change of Control (as defined in 5(e)(3) herein)
of the Company is publicly announced within one year from the
date of the execution of this Agreement, and prior to the date
of the announcement Xxxxxx'x employment has not been terminated
under Paragraph 5(a), (c) or (d) above, and the announced
Change of Control occurs, on the effective date of the Change
of Control, Xxxxxx shall receive the Severance Benefit,
increased by .75% a month (compounded annually) for each month
of service during the Term prior to the effective date of the
Change of Control, with partial months to be prorated. If this
Paragraph 5(e)(1) applies, Paragraph 6, REDUCTION IN TOTAL
SEVERANCE PAYMENT/STOCK OPTIONS, shall not apply.
(2) In the event a Change of Control of the Company is publicly
announced and occurs after the expiration of the first year,
but prior to the end of the third year, from the date of
execution of this Agreement, and Xxxxxx'x employment has not
been terminated under Paragraph 5(a), (c) or (d) above,
Xxxxxx'x employment shall terminate upon the effective date
of the Change of Control. If termination occurs under this
Paragraph 5(e)(2), Xxxxxx shall receive the Severance
Benefit, increased by .75% a month, compounded annually, for
each month of service during the Term prior to the effective
date of the Change of Control, with partial months to be
prorated, subject to any reduction under Paragraph 6 hereof.
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(3) For the purposes of this paragraph "change in control" means
a change "in the ownership or effective control" or "in the
ownership of a substantial portion of the assets" of the
Company, within the meaning of Section 280G of the Internal
Revenue Code.
6. REDUCTION IN TOTAL SEVERANCE PAYMENT/STOCK OPTIONS. Xxxxxx currently
has the following stock options outstanding, which are "out of the money."
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Grant Date Options Exercise Price Expiration Date
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12/17/96 3,000 $21.83 12/16/06
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1/9/98 3,000 $24.92 1/8/08
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3/17/98 37,500 $27.73 3/16/03
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12/16/98 30,000 $20.75 12/15/03
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12/21/99 45,000 $17.50 12/20/04
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If Xxxxxx exercises any of the options described in the above chart
("Applicable Options"), his total severance payment shall be reduced by any Gain
on Exercise. For the purposes of this Agreement, Gain on Exercise shall be
determined by subtracting the exercise price from the closing price on the date
of exercise, and multiplying that number by the number of options exercised.
The following example is provided for illustrative purposes only.
Assume Xxxxxx exercised 45,000 options with an exercise price
of $17.25, and the closing price on the date of exercise was $20.00.
Further assume that on the date of exercise, Xxxxxx'x total severance
payment would, prior to adjustment, be $575,000.00 as calculated under
Paragraph 5 hereof. The gain on the exercise would be $2.75 ($20.00
minus $17.25) x 45,000 or $123,750.00. This amount would be
subtracted from the $575,000.00, reducing the total severance payment
to $451,250.00 ($575,000.00 minus $123,750.00).
Adjustment to the severance payment will be made on the date(s) the
option(s) are exercised. Adjustments could occur at any time during the term and
following the expiration of the term of this Agreement until all Applicable
Options have either been exercised or have expired.
7. PAYMENT OF TOTAL SEVERANCE PAYMENT. Unless Paragraph 5(e)(1) applies,
the total severance payment shall be paid on the last to occur of (1) the day
following the exercise of the last of the Applicable Options, (2) the day
following the date of the expiration of the last of the Applicable Options, or
(3) the termination of this Agreement. If all the Applicable Options have not
been exercised or expired on the date of termination of this Agreement, the
right to adjustment of the total severance payment shall survive the termination
of this Agreement, and
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expire on the date following the last day on which the last Applicable Options
must be exercised or expire.
8. CONFIDENTIALITY. Xxxxxx will not, after signing this Agreement,
including during and after its term, use for his own purposes or disclose to any
other person or entity any confidential information concerning the Company or
its subsidiaries or their business operations or customers, unless: (1) the
Company consents to the use or disclosure of their respective confidential
information; (2) the use or disclosure is consistent with Xxxxxx'x duties under
this Agreement; or (3) disclosure is required by law or court order.
9. ARBITRATION.
(a) ARBITRATION. At either party's request, the parties must 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). A
single arbitrator agreed on 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 substantially prevailing party in the action. This
prevailing party is entitled to reimbursement from the other party for its costs
and expenses, including reasonable attorney's fees.
(b) GOVERNING LAW. All proceedings will be held at a place designated
by the arbitrator in King County, Washington. The arbitrator, in rendering a
decision as to any state law claims, will apply Washington law.
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10. MISCELLANEOUS PROVISIONS.
(a) ENTIRE AGREEMENT. With the exception of the Deferred Compensation
Agreement discussed hereafter, this Agreement constitutes the entire
understanding between the parties concerning employment and executive benefits
of any kind whatsoever and supersedes all prior agreements. Accordingly, Xxxxxx
specifically waives the terms of and all of his rights under all employment,
change-in-control and salary continuation agreements and any other similar
benefit agreements, whether written or oral, he has entered into with the
Company or any of its subsidiaries or affiliates. These agreements include, but
are not limited to, the Severance Pay Plan dated January 31, 2000, and the
Change in Control Agreement dated January 21, 2000. The Deferred Compensation
Agreement dated October 11, 1989, and amended in 1993 and 1995, shall continue
in place and its terms honored, with deferrals of $2,500 a month to continue
through July 17, 2000, and deferrals of $1,250 a month from July 18 through
October 17, 2000, with partial months prorated, after which salary deferrals
will be discontinued. Pay-outs under the Deferred Compensation Agreement shall
be made in accordance with the options available therein.
(b) BINDING EFFECT. This Agreement will bind and inure to the benefit
of the Company's and Xxxxxx'x heirs, and legal representatives, successors and
permitted 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
or 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. Xxxxxx acknowledges that he has had the opportunity
to consult with independent counsel with respect to the negotiation,
preparation, and execution of this Agreement.
(f) ASSIGNMENT. The services to be rendered by Xxxxxx under this
Agreement are unique and personal. Accordingly, Xxxxxx may not assign any of
his rights or duties under this Agreement.
(g) AMENDMENT. This Agreement may not be modified or amended except by a
written instrument signed by both parties with the prior written consent of the
Company.
(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.
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(i) GOVERNING LAW AND VENUE. This Agreement will be governed by and
construed in accordance with Washington law, except to the extent that certain
matters may be governed by federal law. Any legal proceeding arising out of this
Agreement shall be brought in King County, Washington, and the parties will
submit to jurisdiction in that county.
(j) COUNTERPARTS. This Agreement may be executed in one or more
facsimile counterparts, each of which will be deemed an original, but all of
which taken together will constitute one and the same document.
Executed as of the date first above written.
INTERWEST BANCORP, INC.
By: /s/
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Xxxxxxx X. Xxxxx, President and CEO
/s/
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XXXXXXX X. XXXXXX
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