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EXHIBIT 10.11
EMPLOYMENT AGREEMENT
This Agreement ("Agreement") is made and entered into as of January 1, 1998, by
and between Cowlitz Bancorporation, ("Employer"), Cowlitz Bank ("Bank"), and
Xxxxxxx X. Xxxxxxx ("Employee"). As of the date of this Agreement, the
Employer's sole operating unit is its wholly owned subsidiary, Cowlitz Bank (the
"Bank").
In consideration of mutual promises of Employer, Bank and Employee set forth in
this Agreement, the parties agree as follows:
1. EMPLOYMENT. Employer agrees to elect and employ Employee as its President
and Chief Operating Officer, and Employee agrees to serve Employer in those
capacities and, if elected by the shareholders of Employer, to serve on the
Board of Directors. In addition, Employee shall serve as President and
Chief Executive Officer of the Bank. Bank shall compensate Employee and
bonuses shall be based on Bank's financial results. Employee agrees to
perform such services as set forth in Employer's and Bank's Bylaws and as
may be customary to such offices at the direction of their respective
Boards of Directors.
2. SALARY. Bank agrees to pay Employee not less than $200,000 per year
during the term of this Agreement, in equal monthly installments, subject
to usual required withholding. From time to time, and no less frequently
than annually, the Board of Directors shall review the performance and
responsibilities of Employee and may, in its sole discretion, increase such
salary by such additional amount as may be appropriate. In particular, the
expanded duties of Employee arising from the Employer's acquisition of
other operating units shall be considered in determining salary increases.
3. CASH BONUSES. In addition to salary under Section 2, Employee shall be
entitled to annual cash bonuses, determined as follows:
a. FOLLOWING YEARS. For each calendar year during the term of this
Agreement, Employee shall be entitled to a bonus equal to the sum of
five percent (5%) of the Bank's net profits in excess of a one
percent (1%) Return on Assets of the Bank ("ROA") for the calendar
year and seven and one-half percent (7.5%) of the Bank's net
profits in excess of one and one-half percent (1.5%) ROA for the
calendar year. If the Bank's ROA for a year is less than one
percent (1%), no bonus shall be paid under this Section 3.a.
b. ADDITIONAL MERIT BONUSES. In addition to the bonuses, if any, which
Employee may be entitled to, under Section 3.a the Board of Directors
of the Employer in connection with the Employee's annual salary review
shall determine whether Employee's total compensation for the previous
year was appropriate in light of his responsibilities and
accomplishments. The Board of Directors may authorize such additional
bonus amount as they consider reasonable and appropriate in the
circumstances.
c. PAYMENT OF BONUSES. The bonuses under this Section 3 shall be paid
after the end of each calendar year, promptly after the annual
financial results of the Employer and Bank are determined. The Board of
Directors shall retain the authority to adjust the annual performance
goal in order to reflect extraordinary or nonrecurring events.
4. STOCK OPTIONS. As part of this Agreement Employee may also receive
additional consideration in the form of stock options. All options granted
under this Agreement are subject to the Cowlitz Bancorporation, 1997
Long-term Incentive Plan and the rights and restrictions contained therein.
5. DEFERRED COMPENSATION PLAN. As part of this Agreement Employee may also
receive additional consideration in the form of deferred compensation. All
deferred compensation paid subsequent to this Agreement is subject to the
Cowlitz Bancorporation, Supplemental Executive Retirement Plan and the
rights and restrictions contained therein.
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6. DURATION OF THIS AGREEMENT. Employment under this Agreement shall commence
on this date and terminate on the date 36 months after this date, provided
that for each day from and after the date hereof the duration of the
agreement will automatically be extended for an additional day, unless
earlier terminated by any of the following:
a. upon the death of Employee;
b. due to the inability of Employee, as determined by the Board of
Directors, in its discretion, based on competent medical advice, to
perform his duties hereunder, whether by reason of injury or illness
(physical or mental) incapacitating Employee for a continuous period
exceeding 365 days;
c. upon the discharge of Employee by the Board of Directors of Employer
pursuant to Section 7 or 8 hereof;
D. upon Employee voluntarily terminating employment pursuant to Section
9; or
E. upon retirement of Employee.
7. TERMINATION FOR CAUSE. For cause shall mean that the Employer or Bank has
terminated Employee's employment for any of the following reasons:
a. The commission by Employee of an act of fraud or embezzlement
against Employer or of an act which he knew to be in gross violation of
his duties to Employer or Bank (including the unauthorized disclosure
of confidential information);
b. A felony conviction of Employee; or
c. The material failure of Employee to carry out reasonable written
directions of the Board of Directors appropriate to Employee's
executive status.
8. TERMINATION. Employee shall be entitled to the benefits of this Agreement
unless this Agreement terminates early as follows:
a. EARLY TERMINATION. In the event of early termination of this
Agreement for cause as specified in Section 7, Bank shall no longer be
obligated to make any salary payments of any kind whatsoever to
Employee or his estate. Employee or his designees or, if there is no
such designee, the Employee's estate shall be entitled to a cash bonus
for the calendar year in which such employment terminates, based on
results for the entire year, but prorated for the partial year prior to
the date of termination. In addition, Employee shall receive such
benefits to which he has become entitled under the terms of the Cowlitz
Bancorporation, 1997 Long-term Incentive Plan, Supplemental Executive
Retirement Plan, and any benefit plan or program.
b. TERMINATION WITHOUT CAUSE. Employer's or Bank's Board of Directors
may terminate employee at any time in its sole discretion. In the event
such termination is without cause, or caused by the death or disability
of Employee, then Employee shall be entitled to receive, within five
business days after the effective date of such termination, from
Employer or Bank a lump sum equal to three times the Employee's annual
base salary under this Agreement for the calendar year in which such
employment terminates. Additionally, Employee shall be entitled to a
cash bonus for the calendar year in which such employment terminates,
based on results for the entire year, but prorated for the partial year
prior to the date of termination. In addition, if Employer or Bank
discharges Employee for any reason other than for cause, Employee shall
receive such benefits to which he has become entitled under the terms
of the Cowlitz Bancorporation, 1997 Long-term Incentive Plan,
Supplemental Executive Retirement Plan, and any benefit plan or
program.
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9. TERMINATION OF EMPLOYMENT BY NOTICE. Employee may terminate employment upon
30 days written notice to the Employer and Bank. Employee will be required
to perform all duties and will be paid his annual base salary pursuant to
Section 2 and the fringe benefits pursuant to Section 10 accrued, in each
case, through the date of termination. Employee or his designees or, if
there is no such designee, the Employee's estate shall also be entitled to
a cash bonus for the calendar year in which such employment terminates,
based on results for the entire year, but prorated for the partial year
prior to the date of termination.
10. EMPLOYEE BENEFITS. In addition, during the term of this Agreement Employer
or Bank shall provide Employee:
a. all employee benefits, including retirement, vacation and health,
life and disability insurance benefits, as modified from time to time,
as a generally available to officers of Employer and the Bank;
b. reimbursement of travel and entertainment expenses incurred for
Employer;
c. an automobile, insurance, maintenance, and all costs of operations;
d. the initiation fee, monthly dues and assessments for one social or
athletic club, to be selected from time to time by Employee.
11. CHANGE IN CONTROL OF THE EMPLOYER. No benefits shall be payable under
Section 13 unless there has been a Change in Control of the Employer, as
set forth below. Such a Change in Control shall be deemed to have occurred
if any of the following occurs:
a. The acquisition of ownership, directly, or indirectly, beneficially
or of record, by any Person or group (within the meaning of the
Securities Exchange Act of 1934 and the rules of the Securities and
Exchange Commission thereunder as in effect on the date of this
Agreement), other than Employer, a Subsidiary or any employee benefit
plan of Employer or its Subsidiaries, of shares representing more than
50% of (1) the common stock of Employer, (2) the aggregate voting power
of Employer's voting securities or (3) the total market value of
Employer's voting securities;
b. During any period of 25 consecutive calendar months, a majority of
the Board of Directors of Employer (the "Board") ceasing to be composed
of individuals (1) who were members of the Board on the first day of
such period, (2) whose election or nomination to the Board was approved
by individuals referred to in clause (1) above constituting at the time
of such election or nomination at least a majority of the Board or (3)
whose election or nomination to the Board was approved by individuals
referred to in clauses (1) and (2) above constituting at the time of
such election or nomination at least a majority of the Board;
c. The good-faith determination by the Board that any Person or group
(other than a Subsidiary or any employee benefit plan of Employer or
its Subsidiaries) has acquired direct or indirect possession of the
power to direct or cause to direct the management or policies of
Employer or Bank, whether through the ability to exercise voting power,
by contract or otherwise;
d. The merger, consolidation, share exchange or similar transaction
between Employer or Bank and another Person (other than a Subsidiary)
other than a merger or share exchange in which Employer is the
surviving or acquiring corporation; or
e. The sale or transfer (in one transaction or a series of related
transactions) of all or substantially all of Employer's or Bank's
assets to another Person (other than a Subsidiary) whether assisted or
unassisted, voluntary or involuntary.
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For purposes of the above definition of Change in Control:
f. "Person" shall mean any individual, corporation, company, voluntary
association, partnership, limited liability company, joint venture,
trust, unincorporated organization or government (or any agency,
instrumentality or political subdivision thereof); and
g. "Subsidiary" shall mean a corporation that is wholly owned by
Employer, either directly or through one or more corporations which are
wholly owned by Employer.
12. TERMINATION FOLLOWING A CHANGE IN CONTROL OF THE EMPLOYER. If any of the
events described in Section 11 constituting a Change in Control of the
Employer occur, the Employee shall be entitled to the benefits provided in
Section 13 hereof immediately upon a termination of his employment which
occurs within three years after such Change in Control, if such termination
is for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean, without the Employee's express written consent, the occurrence after
a Change in Control of the Employer of any (1) or more of the following:
a. The assignment to the Employee of duties, responsibilities or status
inconsistent with his present duties, responsibilities and status as
the President and Chief Executive Officer of the Bank and President and
Chief Operating Officer of the Employer and or a reduction or
alteration in the nature or status of the Employee's duties and
responsibilities from those in effect as of the date hereof;
b. A reduction of the Employee's base salary which was in effect on the
date of this agreement or as the same has been increased from time to
time;
c. The Employer's requiring the Employee to be based at an office
location other than in or around Longview or Kelso, Washington;
d. The failure by the Employer to continue in effect the Employer's
insurance, disability, deferred compensation plans or any other of the
Employer's employee benefit plans, policies, practices or arrangements
in which the Employee participates, or the failure by the Employer to
continue the Employee's participation therein on substantially the same
basis, both in terms of the amount of benefits provided and the level
of the Employee's participation relative to other participants, as
existed as of the date hereon;
e. The failure of the Employer to obtain a satisfactory agreement from
any successor to the Employer to assume and agree to perform this
Agreement; and
f. Any purported termination by the Employer of the Employee's
employment that is not effected pursuant to a Notice of Termination
satisfying the notice requirements of Section 21 below and, for
purposes of this Agreement, no such purported termination shall be
effective.
13. COMPENSATION UPON TERMINATION FOR CHANGE OF CONTROL. Following a Change in
Control of the Employer, as defined in Section 11 hereof, upon termination
of the Employee's employment by Employer (or its successor) without cause
within three years after a Change in Control of the Employer or by the
Employee for Good Reason within three years after a Change in Control of
the Employer the Employee shall be entitled to the following benefits
("Change in Control Benefits") as benefits and as compensation for the
Covenant Not to Compete set forth in Section 16 hereof:
a. The Employer shall pay the Employee his full Base Salary through the
Date of Termination at the rate in effect at the time Notice of
Termination is given, or the Date of Termination where no Notice of
Termination is required hereunder;
b. The Employer shall pay as Change in Control Benefits, and as
compensation for the Covenant Not to Compete to the Employee, not later
than the tenth day following the Date of Termination, a lump sum
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payment equal to three times the Employee's annual base salary in
effect immediately prior to the occurrence of the circumstances giving
rise to such termination. In addition, Employee shall receive such
benefits to which he has become entitled under the terms of the Cowlitz
Bancorporation, 1997 Long-term Incentive Plan, Supplemental Executive
Retirement Plan, and any benefit plan or program.
c. BENEFITS CONTINUATION
If already participating in the Employer's or Bank's medical, dental,
and/or life insurance plans, the Employee will be entitled to continued
medical/dental benefits coverage for a period of 18 months under the
Consolidated Omnibus Budget Reconciliation Act (COBRA). The Employer or
Bank will assist the Employee by paying 50 percent of the premiums for
coverage in effect before his termination during the first 12 months
and 25 percent of the premiums during the remaining six months. If the
Employee qualifies for a continuation of COBRA benefits after 18 months
then the Employee will be responsible for paying their entire premiums.
The purpose of providing continued benefits coverage is to assist the
Employee with his career transition. Should the Employee accept an
employment opportunity during the 18 months after his termination, his
benefits coverage under COBRA may continue should the Employee have a
need for continuing benefits coverage. However, the Employer or Bank
will not assist with paying his insurance premiums and the Employee
will be responsible for paying his own premiums in its entirety.
d. Limitation on Change in Control Payments. Subject to Section 13(e)
below, the aggregate of all payments, benefits or distributions (or
combination thereof) by the Employer or Bank or one or more trusts
established by the Employer or Bank for the benefit of its employees,
to or for the benefit of Employee pursuant to this Agreement (whether
paid or payable or distributed or distributable pursuant to the terms
of this Agreement, or under the terms of any other plans, program
agreement or arrangement) (" Change in Control Payments") shall not
exceed the maximum Change in Control Payments which Employee may
receive without being subject to the excise tax imposed by Section 4999
of the Internal Revenue Code of 1986, as amended, or any interest or
penalties incurred by Employee with respect to such excise tax (such
excise tax, together with any such interest and penalties, hereinafter
collectively referred to as the "Excise Tax").
x. XXXXX UP.
(i). In the event that it is determined that the aggregate of all
Change in Control Payments to which Employee would be entitled to
receive without regard to Section 13(d) is greater than the sum of
(i) the maximum Change in Control Payments which Employee may
receive without being subject to the Excise Tax plus (ii) Fifty
Thousand Dollars ($50,000.00), then Section 13(d) shall not apply
and Employee shall be entitled to receive (i) all Change in
Control Payments to which Employee is otherwise entitled to
receive without regard to Section 13(d) and (ii) an additional
payment (a "Gross-Up Payment") in an amount such that the net
amount of Change in Control Payments received by Employee, after
the calculation and deduction of any Excise Tax on the Change in
Control Payments and any federal, state and local income taxes,
employment taxes and excise taxes on the Gross-Up Payment provided
for in this Section 13(e), shall be equal to the Change in Control
Payments. In determining this amount, the amount of the Gross-Up
Payment attributable to federal income taxes shall be reduced by
the Gross-Up Payment attributable to state and local income taxes.
Finally, the Gross-Up Payment shall be reduced by income or excise
tax withholding payments made by the Employer or Bank to any
federal, state or local taxing authority with respect to the
Gross-Up Payment that was not deducted from compensation payable
to Employee.
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(ii). Subject to the provisions of Section 13.e.(i), all
determinations required to be made under Section 13, including,
without limitation, whether Section 13(d) is applicable or
inapplicable and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be utilized
in arrive at such determination, shall be made by a certified
public accounting firm designated by Employee which shall provide
detailed supporting calculations both to the Employer or Bank and
to Employee within fifteen (15) business days of the receipt of
notice from Employer or Bank that there has been a Change in
Control Payment, or such earlier time as is requested by the
Employer or Bank. This calculations prepared by such firm shall be
reviewed on behalf of the Employer or Bank by the Employer's or
Bank's independent auditors. In the event of a dispute between the
firm designated by Employee and the Employer's or Bank's
independent auditors, such firms shall jointly select a third
nationally recognized certified public accounting firm (the
"Accounting Firm") to resolve the dispute and the decision of such
third firm shall be final, binding and conclusive upon Employee
and the Employer and the Bank. All reasonable fees and expenses of
the accounting firms shall be borne solely by the Employer or
Bank. Any Gross-Up Payment shall be paid by the Employer or Bank
to Employee within five (5) business days after the receipt of the
Accounting Firm's determination.
f. The Change in Control Payments to be paid pursuant to this agreement
are not intended as stipulated or liquidated damages for breach of any
promise of a term of employment, no such promise being made herein, but
are payments which shall be fully earned as of the Date of Termination
and shall be compensation for the Employee's continued services
rendered to the Employer or Bank after the date hereof and prior to
such Date of Termination; for the covenant Not To Compete provision of
Section 16 hereof; the foregoing of other, possibly more secure
employment; consequential losses which may result from such
termination, including, but not limited to, permanent injury to
reputation, loss of career development opportunities, and emotional
stress; and actual losses which may result from such termination,
including, but not limited to, lost wages and expenses of securing
other employment.
g. The Employer or Bank shall have no obligation to provide or cause to
be provided to the Employee the benefits described in this Agreement,
other than those provided in Section 8(a) above, if the Employer, Bank,
or the Employee shall terminate the Employee's employment prior to a
Change in Control.
14. SUCCESSORS: BINDING AGREEMENT. a. The Employer or Bank shall require any
successor employing the Employee to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Employer
or Bank would be required to perform it if no such succession had taken
place. Failure of the Employer or Bank to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle the Employee to compensation
from the Employer or Bank in the same amount and on the same terms as the
Employee would be entitled to if the Employee terminated his employment for
Good Reason, except that, for purposes of implementing the foregoing, the
date on which any such succession becomes effective shall be deemed the
Date of Termination.
b. This agreement shall inure to the benefit of and be enforceable by the
Employee's personal or legal representatives, executors, administrator,
successors and heirs. If the Employee should die while any amount would
still be payable to him hereunder if he had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Employee's designees or, if there is no
such designee, to the Employee's estate.
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15. CONFIDENTIALITY. Employee acknowledges that during the course of his
employment by Employer and Bank, he will be exposed to, have disclosed to
him and may develop information that is proprietary to Employer and Bank
(the "Confidential Information"). The Confidential Information includes,
but is not limited to, financial data, trade secrets, information
concerning the operation, design and marketing of products and processes,
business plans and procedures, customer lists, file and profiles, needs
analyses, calculations, data, manuals, specifications, performance
standards, instructions and any other material or information related to
Employer and Bank, its business or operations, and the ideas or information
relating thereto. Employee will at no time use or permit any other person
or entity to examine, use or derive benefit from the Confidential
Information, shall maintain the Confidential Information in the strictest
confidence, and shall take all necessary precautions needed to preserve its
confidentiality. All documents and materials evidencing the Confidential
Information, and copies thereof, shall at all times remain the property of
Employer. Upon demand, Employee will deliver to Employer or Bank all
documents and other materials which contain or pertain to the Confidential
Information.
16. NOT TO COMPETE/NO HIRE COVENANT
During the employment period and for eighteen months after termination of
employment with the Employer or Bank for any reason, the Employee shall not
compete, directly or indirectly, with the Employer or Bank or its
affiliates within 40 miles of any geographic area in which the Employer or
Bank or its affiliates conduct business at the time of termination of the
employment period. As used herein, "compete" shall include without
limitation, working for or serving any bank, saving association, credit
union, mortgage broker or similar company, or any affiliate thereof, as an
employee, officer, director, consultant or advisor.
If it is judicially determined that this agreement not to compete, or any
portion thereof, is non-enforceable under applicable law(s) (statute,
common law or otherwise), then it is hereby agreed by the Employee and the
Employer and the Bank that the non-enforceable portion of the agreement not
to compete shall be and hereby are redrafted to conform with those
applicable laws, while leaving the remaining portions of the agreement not
to compete intact. By agreeing to this contractual modification
prospectively at this time, the parties intend to make this agreement not
to compete legal under the law(s) of all applicable states so that the
entire agreement not to compete and/or the entire Agreement as
prospectively modified shall remain in full force and effect and shall not
be rendered void or non-enforceable. Such modifications shall not affect
the payments made to Employee under this agreement. The Employee
acknowledges that his skills are such that he can be gainfully employed in
non-competitive employment and that the agreement not to compete will in no
way prevent him from earning a living.
While employed by the Employer or Bank and for a eighteen month period
immediately following the Date Of Termination of such employment, the
Employee shall not, in any capacity for anyone other than the Employer or
Bank, recruit, hire, or assist others in recruiting or hiring, any person
who is, or within the preceding eighteen month period was, an employee of
or consultant for the Employer or Bank.
17. INJUNCTIVE RELIEF. Employee acknowledges that the breach or threatened
breach of Employee's covenants in Section 15 or 16 will give rise to
irreparable injury to Employer and Bank and its affiliates, which injury
would be inadequately compensable in money damages. Accordingly, Employer
or Bank may seek and obtain a restraining order and/or temporary injunction
prohibiting the breach or threatened breach of any such covenants, in
addition to and not limitation of any other legal remedies that may be
available.
18. ASSIGNMENT. This agreement is a personal contract and, except as
specifically set forth herein, the rights and interests of Employee herein
may not be sold, transferred, assigned, pledged or hypothecated. The rights
and obligations of Employer and Bank hereunder shall be binding upon and
run in favor of the successors and assigns of Employer. In the event of any
attempted assignment or transfer of rights hereunder contrary to the
provisions hereof, Employer and Bank shall have no further liability for
payments hereunder.
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19. REIMBURSEMENT FOR CONTRACT NEGOTIATION EXPENSES. The Employer or Bank shall
pay all of the Employee's reasonable legal, accounting and investment
services fees related to the negotiation of this Agreement. In the event of
any litigation or judicial proceeding arising out of this agreement, the
losing party agrees to pay the prevailing party's reasonable attorney's
fees and costs including those incurred on appeal.
20. INDEMNITY. Employer and Bank agree, to the extent permitted by applicable
law, to indemnify and hold Employee harmless from and against any claims,
suits or proceedings and government investigations in which the Employee is
involved due to his duties while serving Employer or Bank. This commitment
is only applicable if the Employee in good faith and in a manner he
reasonably believed to be in the best interests of the Employer or Bank.
21. NOTICES. Any notice given by either party hereunder shall be in writing and
sent by registered or certified mail. Notice to Employer or Bank shall be
addressed to it at is principle office, 000 Xxxxxxxx Xxxxxx, Xxxxxxxx,
Xxxxxxxxxx 00000-0000, Attention: Secretary, and to Employee at his last
known residence address.
22. MISCELLANEOUS. This Agreement contains the entire agreement between the
parties and shall be governed by the law of the State of Washington. It may
not be changed orally, but only by agreement in writing signed by the party
against whom enforcement of any waiver, change, modification or discharge
is sought. Paragraph headings are for convenience of reference only and
shall be considered a part of this Agreement.
IN WITNESS WHEREOF, this Agreement has been signed by Employer Bank and Employee
on the dates shown below.
EMPLOYER:
Longview, Washington COWLITZ BANCORPORATION
, 1998
By: ________________________
Title: _______________________
EMPLOYEE:
Longview, Washington _______________________________
, 0000 Xxxxxxx X. Xxxxxxx
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