EXHIBIT 10.1
------------
SEPARATION AND RELEASE AGREEMENT
THIS SEPARATION AND RELEASE AGREEMENT ("Agreement") is made by and between
J. Xxxxx Xxxxxxxxx ("Executive") and Columbia Banking System, Inc., a Washington
corporation ("CBSI") together with Columbia State Bank, a Washington banking
corporation ("Columbia Bank") (collectively "Employer") and is in consideration
of their mutual undertakings as set forth in this Agreement.
1. TERMINATION OF EMPLOYMENT: Executive agrees that his employment as Vice
Chairman and Chief Executive Officer of CBSI and Vice Chairman of Columbia
Bank, and his position as a Director of Employer, terminated effective July
1, 2002. Executive agrees that from that date forward, he has no authority
to discharge contracts, enter into agreements, or engage in personnel
activities on behalf of Employer.
2. SEVERANCE PAYMENT: In consideration of the mutual and other promises and
benefits herein, Executive hereby foregoes the severance payment set forth
in Section 5.1 (b) of the December 20, 2000 Amended Employment Agreement.
3. ENHANCED SEVERANCE BENEFITS: Except as provided in this Agreement,
Executive agrees that Employer has no obligation beyond July 1, 2002 to pay
the costs of covering Executive under Employer's group medical, dental
and/or vision plans, as well as Employer's disability and life insurance
plans.
In consideration of this Agreement, Employer will grant or provide to Executive
the enhanced severance benefits set forth in Sections 3.1 through 3.5 below
(collectively, "Enhanced Severance Benefits"). Executive acknowledges that the
Enhanced Severance Benefits are something of value or a benefit that to which
Executive is not otherwise entitled.
3.1 PREMIUMS FOR BENEFITS CONTINUATION. Executive and his covered
dependents may elect COBRA medical, dental and vision plan
continuation coverage for himself and/or his eligible dependents for
the time period and under such conditions as are provided by COBRA.
Employer shall pay the cost of COBRA premiums for a period of
twenty-four (24) months from July 1, 2002, or until COBRA coverage
ceases, whichever first occurs. If COBRA coverage ceases before the
end of twenty-four (24) months, then Employer shall continue to pay
Executive an amount not to exceed the cost of the COBRA premiums to
offset the cost of private health insurance for the balance of the
twenty-four (24) months. Executive will be responsible for payment of
COBRA coverage for his dependents.
3.2 EXECUTIVE SUPPLEMENTAL COMPENSATION AGREEMENT. Executive shall be
entitled to benefits as set forth in Section 3.2 of the August 1, 2001
Executive Supplemental Compensation Agreement between Employer and
Executive (the "ESCA") because the services provided under Section 5
of this Agreement constitute services in connection with a consulting
agreement, and to have
-1-
benefits commence at an "Applicable Percentage" (as defined in the
ESCA) of 60% on August 1, 2004.
3.3 STOCK OPTIONS AND RESTRICTED STOCK. Non-qualified stock options
granted to Executive pursuant to that certain grant of December 20,
2000 in the original amount of ten thousand (10,000) shares at an
original option price of thirteen dollars and twelve and one-half
cents ($13.125) per share (currently eleven thousand five hundred and
fifty (11,550) shares and an option price of eleven dollars and
thirty-six cents ($11.36) per share) shall be vested and
nonforfeitable as of July 1, 2002. Executive may exercise these
options until July 1, 2004. The term to exercise the nonqualified
stock options granted to Executive pursuant to that certain grant of
July 1, 1998 in the original amount of thirty seven thousand five
hundred (37,500) shares, at an original option price of twenty-six
dollars ($26) per share shall be extended to June 30, 2006. The
restricted stock award made to Executive pursuant to that certain
Restricted Stock Award Agreement dated April 22, 1998 (the "Award
Agreement") shall be released from escrow on April 22, 2003.
3.4 LONG TERM CARE PREMIUM. Employer shall waive repayment of $56,449 for
Executive's long term care premium.
3.5 LIFE INSURANCE ENDORSEMENT METHOD SPLIT DOLLAR AGREEMENT. Employer
agrees to continue in effect at its expense and in accordance with
their respective terms as they were on August 1, 2002, the Life
Insurance Endorsement Method Split Dollar Agreement entered into on
August 1, 2001 between Employer and Executive (the "Life Insurance
Agreement"). Executive will be deemed employed by Employer for
purposes of the Life Insurance Agreement as long as the Consulting
Agreement remains in effect.
4. NONCOMPETITION AND NONSOLICITATION PROVISION: The noncompetition agreement
in Section 6 of the ESCA is hereby superseded by this Section 4.
4.1 The noncompetition and nonsolicitation restrictions in this Section 4
shall be the same as and coincident with the Consulting Period. If
Executive enters into Competitive Activity or Solicitation in
Employer's market area during the first twelve (12) months of the
Consulting Period, then the Enhanced Severance Benefits and the
balance of payments under the Consulting Agreement will terminate
unless such activity or solicitation is terminated within fifteen (15)
days of Executive's receipt of written notice from Employer. If
Executive enters into Competitive Activity or Solicitation in
Employer's market area during the balance of the Consulting Period,
then the amount to be paid under the Consulting Agreement will be
reduced by 20% and, with respect to the other Enhanced Severance
Benefits, the Employer's obligations under Section 3.1 will terminate,
and the Applicable Percentage under the ESCA, as described in Section
3.2, will be reduced from 60% to 40%. "Competitive Activity" means
Executive, or a company owned or controlled by Executive, acting as an
employee, consultant, agent, officer, director or manager, or in any
other representative capacity, for or on behalf of any bank or
financial institution or owning more than ten percent (10%) of the
shares in or
-2-
ownership interest in a bank or financial institution which does
business in Employer's market area. "Solicitation" means soliciting or
attempting to solicit any employee of Employer or its affiliates to
leave the employ of those companies, or in any way interfere with the
relationship between Employer and any employees of Employer or its
affiliates. Employer's market area is defined as the following
counties in the State of Washington in which Employer maintains a
branch or other offices, now or during the Consulting Period: King,
Kitsap, Xxxxxx, and Xxxxxxxx. As used herein, "banks and financial
institutions" consist of banks, credit unions, and savings and loan
associations.
4.2 Notwithstanding the foregoing, Employer agrees to Executive's
participation in a joint venture that he contemplates with Economic
Investment Advisors and Northrim Bank, Anchorage, Alaska, which, if
carried out, will offer, construct, provide and manage investment
portfolios and associated products for investment customers, which are
delivered or distributed through various means and channels, including
banks and other financial institutions. Employer acknowledges that
such participation by Executive will not be deemed to be a Competitive
Activity so long as such joint venture does not make commercial or
consumer loans or accept deposits in Employer's market area.
5. CONSULTING PERIOD:
5.1 Executive shall serve as a consultant with Employer from July 1, 2002
through August 1, 2004 ("Consulting Period"). During the Consulting
Period Executive shall (a) represent and promote the goodwill of
Employer and its affiliates in the Washington communities served by
Employer and its affiliates, (b) maintain communication with
management by meeting twice annually with the President and Chairman
of the Board of the Bank at their invitation, (c) provide consultation
on banking matters as an experienced bank executive, and (d) comply
with all written policies of Employer applicable to his activities as
a consultant or otherwise. Executive shall not participate in
establishing or administering policy of Employer. There shall be no
"on premises" requirement for Executive.
5.2 In consideration, Executive shall be paid at an annual rate of Two
Hundred Thirty Five Thousand Dollars ($235,000), in proportionate
monthly installments. Executive shall be responsible for all state,
federal, and local taxes, including estimated taxes, and employment
reporting for Executive and any agents, employees, associates or
subcontractors of Executive. Executive agrees to indemnify and hold
harmless Employer to the fullest extent permitted by law against and
from any and all liability for such taxes, reporting or other similar
costs or expenses arising from or related to the services provided by
Executive during the Consulting Period and any agents, employees,
associates or subcontractors of Executive pursuant to providing
consulting services under this Agreement.
5.3 Executive and Employer will enter into a Consulting Agreement
implementing the terms of this Section 5 (the "Consulting Agreement").
Executive and
-3-
Employer will characterize his relationship with Employer during the
Consulting Period as that of a "consultant." Performance by Executive
of his duties as a consultant during the Consulting Period shall be
considered "employment" for purposes of the ESCA, the Award Agreement,
and the Life Insurance Agreement. Executive may elect, at his
discretion, to perform his consulting duties described in this Section
5 in the name of, and have the corresponding payments required to be
made by Employer made to, J. Xxxxx Xxxxxxxxx & Company, a company
wholly owned and controlled by Executive so long as (a) the services
are in fact provided by Executive, (b) the Consulting Agreement
terminates on the death of Executive, and (c) J. Xxxxx Xxxxxxxxx &
Company agrees to keep all non-public information received from
Employer confidential. In the event and to the extent of such an
election, the term "Executive" will be deemed for purposes of this
Section 5 to include such company.
6. RELEASE OF CLAIMS: In exchange for those benefits described herein to which
Executive is not otherwise entitled, Executive and his successors and
assigns forever release and discharge Employer, any of Employer's parent,
subsidiary or related entities, any Employer-sponsored Executive benefit
plans in which Executive participates, and all of their respective
officers, directors, trustees, members, agents, Executives, Executives'
spouses, and all of their predecessors, successors and assigns
(collectively "Releasees") from any and all claims, actions, causes of
action, rights, or damages, including costs and attorneys' fees
(collectively "Claims") which Executive may have on behalf of himself,
known, unknown, or later discovered which arose prior to the date Executive
signs this Agreement. This release includes but is not limited to, (i) any
claims under any local, state, or federal laws regulating employment, or
comparable state, county or city laws; (ii) claims under the Employee
Retirement Income Security Act of 1974, as amended; (iii) claims under any
local, state, or federal wage and hour laws alleging any legal restriction
on Employer's right to terminate its Executives, or personal injury Claims,
including without limitation defamation, tortious interference with
business expectancy, or infliction of emotional distress. Executive
represents that he has not filed any claim against Employer or the
Releasees, and that he will not do so at any time in the future concerning
claims released in this Agreement; provided, however, that this will not
limit Executive from filing a claim to enforce the terms of this Agreement.
Nothing in this Section 6 will be construed to limit, waive, amend, modify
or otherwise affect any and all obligations of Employer to indemnify and
defend Executive against and hold him harmless from and in respect of
Claims that may be made against him. Employer represents and warrants to
Executive that, without review or investigation of their files, the
Executive Officers of the Employer are not aware of any claims that the
Employer may have against Executive. For purposes of his provision, the
Executive Officers consist of Xxxxxxx Xxxxxxxxxxxx and Xxxxxxx Xxxxxxx.
7. NONDISPARAGEMENT: The parties pledge that they will make no private or
public comments, statements, or writings critical of the other party or the
Releasees, but this restriction will not prevent either party from
instituting legal action against the other.
8. SUCCESSORS: This Agreement shall be binding upon the parties, and their
heirs, representatives, executors, administrators, successors, and assigns,
and shall enure to the
-4-
benefit of each and all of the Releasees, and to their heirs,
representatives, executors, administrators, successors, and assigns.
9. NO ADMISSION OF LIABILITY: This Agreement shall not be construed as an
admission of a violation of any statute or law or breach of any duty or
obligation by either Executive or Employer.
10. CONFIDENTIALITY: The parties will use their best efforts to keep the terms
of this Agreement confidential. Employer and Executive may acknowledge to
third persons that their parting was on mutually satisfactory terms. Either
party may disclose the terms of this Agreement to their respective
attorneys, accountants, financial advisers, auditors, or similar advisors,
or in response to government requests. Employer may disclose the terms of
this Agreement to its officers, directors, shareholders, or managers who
have a need to know, and may make reference to and attach it as part of
Employer's reports to governmental agencies and its shareholders. Either
party may disclose the terms of Section 4, the noncompetition provision, as
necessary in order to ensure compliance with its terms. Third persons
informed of the terms of this Agreement shall in turn be advised of this
confidentiality provision and requested to maintain the same.
11. ANNOUNCEMENT OF SEPARATION: The parties will mutually agree upon the timing
and content of an announcement regarding Executive's termination of
employment.
12. MISCELLANEOUS:
12.1 In the event that a provision of this Agreement is judicially
determined to be unenforceable as written, such provision shall be
construed so as to give it the maximum effect permitted under
applicable law. In addition, if any of the provisions of this
Agreement are held to be invalid or unenforceable, the remaining
provisions will nevertheless continue to be valid and enforceable.
12.2 This Agreement is made and shall be interpreted and enforced under the
laws of the United States and the State of Washington.
12.3 This Agreement may not be altered or amended except by a written
document executed by all of the parties.
12.4 Notwithstanding anything in this Agreement to the contrary, if the
making of any payments under this Agreement or the Consulting
Agreement is or becomes prohibited by the Federal Deposit Insurance
Act or the rules and regulations of the Federal Deposit Insurance
Corporation, such payment need not be made so long as and to the
extent such prohibition continues.
13. IMPACT ON CHANGE OF CONTROL: The provisions regarding change of control in
Section 5.4 of the ESCA are hereby terminated and shall be of no further
force or effect.
-5-
Executive acknowledges that in signing this Agreement, he has not relied
upon any representation or statement not set forth in this Agreement made by
Employer or any of its representatives.
PLEASE READ CAREFULLY. THIS AGREEMENT CONTAINS A RELEASE OF KNOWN AND UNKNOWN
CLAIMS.
EMPLOYER: EXECUTIVE:
COLUMBIA BANKING SYSTEM, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxxxxx By: /s/ J. Xxxxx Xxxxxxxxx
----------------------------------- ---------------------------------
XXXXXXX X. XXXXXXXXXXXX J. XXXXX XXXXXXXXX
Its Interim Chief Executive
Officer
Dated: 8/27/02 Dated: 8/30/02
----------------------- ----------------------
COLUMBIA STATE BANK
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
XXXXXXX X. XXXXXXX
Its President and Chief Executive
Officer
-6-
