EMPLOYMENT AGREEMENT
This
Employment Agreement
("Agreement") is effective as of the 1st
day of May, 2007
("Effective Date"), is entered into as of June 30, 2007 and amends and
restates that certain Employment Agreement made as of October 1, 2003, as
amended ("Old Agreement") between Temecula Valley Bank, a state chartered
banking corporation ("Bank"), and Xxxxxxx X. Xxxxxxxx
("Executive").
W
I T
N E S S E T H
WHEREAS,
upon the recommendation of the
Executive Compensation Committee and at the direction of Bank's Board of
Directors ("Board of Directors"), with Executive abstaining from
participation in such actions, the Old Agreement is hereby revised and restated
as provided herein.
WHEREAS,
Bank desires that Executive
continue to be employed as Bank's President, Chairman of the Board and Chief
Executive Officer on the terms set forth herein.
WHEREAS,
Executive is willing to accept
such employment under the terms and conditions herein stated.
NOW,
THEREFORE, in consideration of the
mutual covenants and agreements hereinafter contained, and other good and
valuable consideration, it is hereby agreed as follows:
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1.
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TERM
OF EMPLOYMENT.
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A) Term.
Bank hereby agrees to employ Executive and Executive hereby accepts employment
with Bank until such date and upon such terms as provided in this Agreement
(the
"Term").
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2.
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DUTIES
OF EXECUTIVE.
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A) Duties. Executive
shall perform the duties of President, Chairman of the Board and Chief Executive
Officer of Bank, subject to the powers by law vested in the Board of Directors
of Bank and in Bank's shareholder, and shall serve as a Director of Bank. During
the Term, Executive shall perform the services herein contemplated to be
performed by Executive with due care faithfully, diligently, to the best of
Executive's ability and in compliance with all applicable laws and Bank's
Articles of Incorporation and Bylaws.
B) Exclusivity. Executive
shall devote substantially all of Executive's entire productive time, ability
and attention to the business of Bank during the Term. Executive shall not
directly or indirectly render any services of a business, commercial or
professional nature to any other person, firm or corporation for compensation
without prior consent evidenced by a resolution duly adopted by the Board of
Directors, or Executive Committee thereof. Notwithstanding the foregoing,
Executive may (i) make investments of a passive nature in any business or
venture; or (ii) serve in any capacity in civic, charitable or social
organizations.
C) Physical
Examination. Executive may, in his discretion, take an annual
physical examination during each year during the Term of this Agreement with
said physical examination(s) conducted at the expense of Bank.
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3.
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COMPENSATION.
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A) Salary. For
Executive's services hereunder, Bank shall pay, or cause to be paid, as annual
gross base salary, to Executive of not less than $500,000 during each of the
years of the Term, beginning with the Effective Date. Executive's salary shall
be payable in equal installments in conformity with Bank's normal payroll
periods as in effect from time to time. The Board of Directors shall also,
from
time to time, and at least once each year grant such additional "merit"
increases, if any, in, the base salary as are determined after review to be
appropriate in the discretion of the Board of Directors. Bank and Executive
both
contemplate that his base salary shall be increased as Bank grows and profits.
Executive shall also, so long as he serves on the Board of Directors, be
entitled to directors and committee fees, and any other compensation or benefits
provided to outside directors of Bank (including, but not limited to, committee
fees, any director retirement benefits, any stock options granted to directors
in such capacity, etc.) in addition to the compensation and benefits provided
to
him as an employee pursuant to this Agreement.
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4.
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EXECUTIVE
BENEFITS.
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A) Vacation. Executive
shall be entitled to vacation leave accruing at the rate of two and one-half
vacation days for each month in which he works (and a pro rata portion thereof
for partial weeks, except that banking holidays shall be treated as days worked)
during each year of the Term. Executive shall be entitled to vacation pay in
lieu of vacation. Time spent by Executive at (or traveling to and from)
seminars, conventions or conferences related to Bank business shall not be
counted against his vacation leave.
B) Automobile. Bank
shall provide for the use of Executive a suitable automobile (equivalent to,
or
better than, a Lexus LS 430), commensurate with his position, and shall pay
all
the expenses (including, but not limited to, maintenance, fuel, insurance,
registration) related thereto during the Term.
C) Medical
and Life Insurance Benefits. Bank shall provide for Executive, in
accordance with Bank's policy now in effect or as shall be amended from time
to
time, participation in a comprehensive major medical ("Medical Benefits")
and dental, with life insurance benefits, equivalent to the maximum available
from time to time under the California Bankers Association Group Insurance
Program for an employee of Executive's salary level. Any such insurance for
which Executive votes in favor as a director, or endorses as an officer, shall
be deemed to meet the requirements of this Section. At any time, Medical
Benefits are not provided by Bank to Executive during his lifetime, Bank shall
pay insurance premiums for substantially similar medical benefits, at a cost
to
Bank not to exceed $1,500 per month (with Executive to pay any excess premium);
provided, however, that at any time Bank is unable to provide such a benefit
due
to the actions of a third party (i.e. no insurance company will provide such
coverage), then Executive may obtain his own insurance and, in connection with
such insurance, Bank will contribute the lesser of: (i) $1,500 per month (with
Executive to pay any excess premium); or (ii) the amount of the monthly premium
charged to Executive (collectively, the "Other Medical Benefit"). Term
life insurance benefits shall be provided to Executive, at Bank's expense during
the Term, in an amount not less than $250,000 until age ___, with Executive
to
be entitled to make an irrevocable designation of the beneficiary and owner
of
the policy thereunder. Executive's Salary Continuation Agreement with Bank
currently in effect shall be maintained by Bank in accordance with its
terms.
D) Bonus. For
each year end within the Term, Executive shall be entitled to an Incentive
Bonus
determined in accordance with this Section if the Threshold Test is met. The
Threshold Test shall be deemed to have been met if one or more of the following
exists: (i) Bank's regular outside independent loan reviewer gives a favorable
review of the loan quality of Bank at, or within four months of, the end of
the
year; (ii) net loan losses for the year do not exceed one percent of gross
outstanding loans at the beginning of the year; or (iii) the latest report
of
supervisory activity of Bank by the Bank's principal state or federal regulator
rates Bank no less than satisfactory. The Incentive Bonus shall equal 4 % of
Bank's "Profits." For purposes of this Section 4.D, "Profits" shall mean the
net
income of Temecula Valley Bancorp Inc. (“Company”) before income taxes and
before the effect of this bonus or any other bonuses based on the profits of
Bank and Company. This bonus shall be payable in January of the year following
completion of the year on which it is based, or as soon thereafter as is
practical after Bank's certified public accountants have delivered their report
on Bank's condition and results of operations for the year. The Incentive Bonus
shall be paid on or before March 15 of the calendar year following the year
in
which it was earned.
E) Sick
Leave. Executive shall be entitled to sick leave in accordance
with Bank's Personnel Policy, accruing at a rate of not less than one day per
month or partial month of service. Accrued sick leave may be carried over from
prior periods, but Executive shall not be entitled to be paid in lieu
thereof.
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5.
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BUSINESS
EXPENSES AND REIMBURSEMENT.
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Executive
shall be entitled to
reimbursement by Bank for any ordinary and necessary business expenses incurred
by Executive in the performance of Executive's duties and in acting for Bank
during the Term, provided that such expenses are approved in accordance with
Bank policy.
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6.
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TERMINATION.
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A) Termination
With Cause.
(i) Except
as otherwise provided herein, Executive’s employment with Bank may be terminated
by Bank, at Bank's option with the affirmative vote of 80% or more of the
members of the Board of Directors after an independent evaluation by an
arbitrator selected jointly by Executive and the Board of Directors
finds:
(a) Executive
has been convicted of a felony or of a gross misdemeanor involving moral
turpitude in connection with Executive's employment with the Bank;
or
(b) Executive
has committed a willful violation of any law or significant Bank policy in
connection with Executive's employment with the Bank; and
(c) Either
(a) or (b) resulted in a material adverse effect on the Bank.
(ii) Executive's
employment with Bank may be terminated by Bank, at Bank's option, with notice
to
Executive or his heirs, upon the occurrence of either of the following
events:
(a) Executive
1) is unable to engage in any substantial, gainful activity by reason of any
medically determinable physical or mental impairment which can be expected
to
result in death or can be expected to last for a continuous period of not less
than 12 months, or 2) is, by reason of any medically determinable physical
or
mental impairment which can be expected to result in death or can be expected
to
last for a continuous period of not less than 12 months, receiving income
replacement benefits for a period of not less than three months under an
accident and health plan covering employees of the Bank. Medical determination
of disability may be made by either the Social Security Administration or by
the
provider of an accident or health plan covering employees of the Bank, provided
that the definition of disability under such a plan complies with the
requirements set forth herein. Upon the request of the Board of Directors,
Executive shall submit proof to the Board of Directors of Social Security
Administration's or the provider's determination.
(b) Executive
is subject to a final removal or prohibition order issued by an appropriate
federal banking agency pursuant to Section 8(e) of the Federal Deposit Insurance
Act.
B) Termination
Without Cause or Resignation for Good Reason.
(i) Executive's
employment with Bank may be terminated by Bank without cause upon written notice
to Executive or by Executive for Good Reason, as defined below.
(ii) Executive's
employment with Bank may be terminated by Executive without cause upon written
notice to Bank.
C) Compensation
Upon Termination.
(i) If
Executive's employment with Bank is terminated by Bank pursuant to Section
6.A,
or by Executive pursuant to Section 6.B(ii), Executive shall then only be
entitled to receive the amount of his annual gross salary, as in effect
immediately prior to termination, payable through the effective date of such
termination plus proration of the Incentive Bonus described in Section 4.D
above
(calculated as provided in Section 6.C(ii) but on a pro rata basis for the
number of full months lapsed within the year of termination) and any incurred
but not yet reimbursed business expenses (subject to the provisions of Section
5
hereof). The amounts payable under this Section 6.C(i) shall be paid in a lump
sum upon termination.
(ii) If
Executive's employment is terminated by Bank or any successor pursuant to
Section 6.B(i), by Executive pursuant to Section 6.B(i) or by Bank or any Bank
or Company successor within one year before or after any Change of Control,
as
defined below, and such termination is not based upon Section 6.A, he shall
be
paid on the date of termination the same amount as if the termination had been
pursuant to Section 6.A, plus an amount equal to the greater of: (a) one times
the annual gross base salary of Executive (as in effect immediately prior to
termination) plus the amount equal to the Incentive Bonus provided in
Section 4.D above as though a full year had lapsed (calculated as follows:
the dollar amount of the Incentive Bonus for the number of months lapsed in
the
year of termination, divided by the number of months lapsed in that year and
the
resulting number multiplied by 12); or (b) two times Executive's annual gross
base salary, as in effect immediately prior to termination, to be paid in a
lump
sum, less any applicable withholding deductions.
(iii) Notwithstanding
the foregoing, to the extent that 12 U.S.C. §1828 and regulations promulgated
pursuant thereto prohibit, or limit, the payment of compensation pursuant to
this Section 6.C and other provisions of this Agreement, Executive's right
to
compensation hereunder shall be similarly prohibited or limited.
(iv) Good
Reason shall mean that without Executive's express written consent, the
assignment to Executive of any duties inconsistent with his positions, duties,
responsibilities and status with Bank; or a change in his reporting
responsibilities, titles or offices; or any removal of Executive from or any
failure to re-elect Executive to any of such positions, except in connection
with the termination of his employment pursuant to Section 6.A or retirement
or
as a result of his death or by Executive other than for Good Reason; or a
reduction by Bank in Executive's annual gross base salary as in effect on the
date hereof or as the same may be increased from time to time.
(v) Notwithstanding
anything to the contrary set forth herein, Executive shall continue to receive
the Other Medical Benefits until death as set forth in Section 4.C.
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7.
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CHANGE
OF CONTROL DEFINED.
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The
term
"Change of Control" shall be as defined in Section 1.409A-3(i)(5) of the 409A
regulations of the Internal Revenue Code, and shall mean a change in the
ownership of Bank or Company (Section 1.409A-3(i)(5)(v)); a change in the
effective control of Bank or Company (Section 1.409A-3(i)(5)(vi)), or a change
in the ownership of a substantial portion of the assets of Bank or Company
(Section 1.409A-3(i)(5)(vii)).
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8.
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RESTRICTION
ON TIMING OF DISTRIBUTION.
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Notwithstanding
any provision of this Agreement to the contrary, distributions to Executive
may
not commence earlier than six (6) months after the date of a Separation from
Service (as defined below) (or, if earlier, the date of death of Executive)
if,
pursuant to Internal Revenue Code Section 409A, as may be amended from time
to
time ("Section 409A"), Executive is considered a "specified employee"
(under Internal Revenue Code Section 416(i)) of Bank if any stock of Bank or
Company is publicly traded on an established securities market, or otherwise.
In
the event a distribution is delayed pursuant to this Section 8, the originally
scheduled distribution shall be delayed for six months, and shall commence
instead on the first day of the seventh month following Separation from Service.
If payments are scheduled to be made in installments, the first six months
of
installment payments shall be delayed, aggregated and paid instead on the first
day of the seventh month, after which all installment payments shall be made
on
their regular schedule. If payment is scheduled to be made in a lump sum, the
lump sum payment shall be delayed for six months and instead be made on the
first day of the seventh month. "Separation from Service" shall mean that
Executive has experienced a termination of employment from Bank which will
be
deemed to have occurred where the facts and circumstances indicate that
Executive and Bank reasonably anticipated that Executive would permanently
reduce his level of bona fide service to Bank to a level not to exceed 45%
of
the average level of bona fide services provided to Bank in the immediately
preceding 12 months.
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9.
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TAX
CONSEQUENCES.
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To
the
extent amounts deferred under this Agreement become includible in Executive's
income under Section 409A as a result of the failure of the Agreement to comply
with the requirements of Section 409A or regulations promulgated thereunder,
the
Bank shall make a payment to Executive equal to (1) the resulting combined
state
and federal income tax liability of Executive; (2) the amount of any excise
tax
imposed on amounts includible in Executive's income; and (3) the amount of
any
underpayment penalties imposed on Executive under Section 409A. This payment
shall be made in a lump sum to Executive no less than 30 days prior to the
end
of any tax year in which amounts first become includible in income pursuant
to
Section 409A and regulations thereunder. Calculation of amounts includible
in
income shall be made according to regulations issued under Section
409A.
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10.
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GENERAL
PROVISIONS.
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A)
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Ownership
of Books and Records;
Confidentiality.
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(i) All
records or copies thereof of the accounts of customers, and any other records
and books relating in any manner whatsoever to the customers of Bank, and all
other files, books and records and other materials owned by Bank or used by
it
in connection with the conduct of its business, whether prepared by Executive
or
otherwise coming into his possession, shall be the exclusive property of Bank
regardless of who actually prepared the original material, book or record.
All
such books and records and other materials, together with all copies thereof,
shall be immediately returned to Bank by Executive on any termination of his
employment. Executive shall be entitled to copies of any policies, procedures
or
forms prepared with his assistance.
(ii) During
the Term, Executive will have access to and become acquainted with what
Executive and Bank acknowledge are trade secrets, to wit, knowledge or data
concerning Bank, including its operations and business, and the identity of
customers of Bank, including knowledge of their financial condition, their
financial needs, as well as their methods of doing business. Executive shall
not
disclose any of the aforesaid trade secrets, directly or indirectly, or use
them
in any way, either during the Term or thereafter, except as required in the
course of Executive's employment with Bank. Executive shall not solicit any
employee or customer of Bank to become an employee or customer of another
institution until six months following the termination; provided, however,
that
Executive shall not be prohibited from soliciting customers with which he had
a
banking relationship established at another employer prior to the commencement
of the term hereof.
B) Assignment
and Modification. This Agreement, and the rights and duties
hereunder, may not be assigned by either party hereto without the prior written
consent of the other, and the parties expressly agree that any attempt to assign
the rights of any party hereunder without such consent will be null and void;
provided, however, that Bank's rights and obligations hereunder shall be
assignable without consent by operation of law in the event of a merger or
similar transaction involving Bank.
C) Further
Assurance. From time to time each party will execute and deliver
such further instruments and will take such other action as the other party
reasonably may request in order to discharge and perform the obligations and
agreements hereunder.
D) Arbitration. Except
as otherwise specifically provided herein, any dispute, controversy or claim
arising out of or relating to this Agreement, or a breach thereof (other than
matters pertaining to injunctive relief, including, but not limited to,
temporary restraining orders, preliminary injunctions and permanent
injunctions,) shall be finally settled by arbitration in accordance with the
rules then prevailing of the American Arbitration Association. Judgment upon
the
award rendered in such arbitration may be entered and enforced in any court
of
competent jurisdiction. The prevailing party shall be entitled to all costs
of
arbitration or litigation as determined by the arbitrators or the court,
including, but not limited to, reasonable attorneys' fees. Any excluded matter
shall be determined by the San Diego County Superior Court, subject to any
rights of appeal which may exist. The arbitration, including the rendering
of
the award, shall take place in the County of San Diego, State of California,
unless otherwise agreed to in writing by the parties. In reaching a decision,
the arbitrator(s) shall be bound by the terms of this Agreement. The award
and
judgment thereon shall include interest, at the legal rate, from the date that
the sum awarded to the prevailing party was originally due and payable. The
parties hereto agree that the arbitrator(s) shall have jurisdiction to award
punitive damages. Arbitration shall be the exclusive means of resolution of
disputes, controversies or claims arising out of this Agreement and which are
subject to arbitration. The parties agree that they shall be entitled to conduct
discovery in accordance with Sections 1283.05 and 1283.1 of the California
Code
of Civil Procedure, or any successor provision thereof, in the same manner
as
though the dispute were within the jurisdiction of the Superior Court of the
State of California.
E) Notices. All
notices required or permitted hereunder shall be in writing and shall be
delivered in person or sent by certified or registered mail, return receipt
requested, postage prepaid as follows:
To
Bank: Temecula
Valley Bank
00000
Xxxxxxxxx Xxxxx, Xxxxx
X000
Xxxxxxxx,
XX 00000
To
Executive: Xxxxxxx
X. Xxxxxxxx
(as
he
shall provide to Bank
from
time to time)
or
to
such other party or address as either of the parties may designate in a written
notice served upon the other party in the manner provided herein. All notices
required or permitted hereunder shall be deemed duly given and received on
the
date of delivery if delivered in person or on the third day next succeeding
the
date of mailing if sent by certified or registered mail, postage
prepaid.
F) Successors. This
Agreement shall be binding upon, and shall inure to the benefit of, the
successors and assigns of the parties.
G) Entire
Agreement. Except as provided herein and in any separate
agreement for the provision of benefits to Executive, this Agreement constitutes
the entire agreement between the parties, and all prior negotiations,
representations or agreements between the parties, whether oral or written,
are
merged into this Agreement. This Agreement may only be modified by an agreement
in writing executed by both of the parties hereto.
H) Governing
Law. This Agreement shall be construed in accordance with the
laws of the State of California.
I) Executed
Counterparts. This Agreement may be executed in one or more
counterparts, all of which together shall constitute a single agreement and
each
of which shall be an original for all purposes.
J) Section
Headings. The various section headings are inserted for
convenience of reference only and shall not affect the meaning or interpretation
of this Agreement or any section hereof.
K) Close
of Business/Calendar Periods. Unless the context so requires, all
periods terminating on a given day, period of days or date shall terminate
on
the close of business on that day or date, references to "days" shall refer
to
calendar days, references to "months" shall refer to calendar months and
references to "years" shall refer to calendar years. Any singular term includes
the plural and vice versa.
L) Severability. In
the event that any of the provisions, or portions thereof, of this Agreement
are
held to be unenforceable or invalid by any court of competent jurisdiction,
the
validity and enforceability of the remaining provisions or portions thereof,
shall not be affected thereby.
M) Attorneys'
Fees. In the event that any party shall bring an action or
arbitration in connection with the performance, breach or interpretation hereof,
then the prevailing party in such action as determined by the court or other
body having jurisdiction shall be entitled to recover from the losing party
in
such action, as determined by the court or other body having jurisdiction,
all
reasonable costs and expenses of litigation or arbitration, including reasonable
attorneys' fees, court costs, costs of investigation and other costs reasonably
related to such proceeding, in such amounts as may be determined in the
discretion of the court or other body having jurisdiction.
N) Indemnification. Bank
shall indemnify and hold Executive harmless from, claims (defined in the
broadest sense, including claims for monetary or non-monetary relief, and any
claims brought before an administrative agency or body) arising out of, or
related to, his service as an officer, director or agent of Bank, to the fullest
extent permitted by applicable law, including his costs of defense and attorneys
fees and shall advance his costs of defense (including legal fees) related
to
the defense thereof to the extent permitted by applicable law. The provisions
of
this Section N shall survive termination of this Agreement and Executive's
employment with the Bank.
O) Rules
of Construction. The parties hereby agree that the normal rule of
construction, which requires the court to resolve any ambiguities against the
drafting party, shall not apply in interpreting this Agreement. This Agreement
has been reviewed by each party and counsel for each party and shall be
construed and interpreted according to the ordinary meaning of the words used
so
as to fairly accomplish the purposes and intentions of all parties hereto.
Each
provision of this Agreement shall be interpreted in a manner to be effective
and
valid under applicable law, but if any provision shall be prohibited or ruled
invalid under applicable law, the validity, legality and enforceability of
the
remaining provisions shall not, except as otherwise required by law, be affected
or impaired as a result of such prohibition or ruling.
IN
WITNESS WHEREOF, this Agreement is
executed as of the day and year first above written.
Bank: TEMECULA
VALLEY BANK
By: /s/
Xxxxxx X.
Xxxxxxx
Xxxxxx
X. Xxxxxxx
Executive
Vice President /
Chief
Financial
Officer
Executive: /s/
Xxxxxxx X.
Xxxxxxxx
Xxxxxxx
X.
Xxxxxxxx
