EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), between PACIFIC FINANCIAL
CORPORATION, a Washington business corporation (the "Company"), BANK OF THE
PACIFIC (the "Bank") and XXXXXXXX X. XXXXXX ("Executive"), is dated as of
September ___, 1999 and will be effective upon the Effective Date of the Merger
(the "Effective Date").
RECITALS
A. The Company is a Washington business corporation and the parent holding
company of the Bank. The Bank is engaged in the business of commercial
banking in Pacific County, Washington.
B. The Company intends to merge with Harbor Bancorp, Inc., Aberdeen,
Washington ("Harbor") with the Bank remaining as a wholly-owned
subsidiary of the resulting corporation (the "Merger") under the terms
of the Agreement and Plan of Merger dated as of June 9, 1999, as
amended (the "Merger Agreement") between the Company and Harbor.
C. The Executive has considerable experience, expertise and training in
management related to banking and services offered by the Company and
the Bank. The Company and the Bank desire and intend to employ the
Executive pursuant to the terms and conditions set forth in this
Agreement.
D. The Company, the Bank and the Executive have read and understand 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.
E. Unless the context requires otherwise, the parties intend for the term
"Company," as used throughout this Agreement, to refer to the Company
and the Bank, unless the context requires otherwise.
AGREEMENT
The parties agree as follows:
1. EMPLOYMENT. The Company and the Bank will employ the Executive for the
Term, and the Executive accepts employment with the Company and the
Bank on the terms and conditions set forth in this Agreement. The
Executive's title with the Company will be "Vice President" and with
the Bank will be "Executive Vice President."
2. EFFECTIVE DATE AND TERM.
(a) EFFECTIVE DATE. This Agreement is effective as of the
Effective Date.
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(b) TERM. Subject to Section 4, the term of this Agreement
("Term") is one year, beginning on the Effective Date.
(c) DUTIES. The Executive will serve as a Vice President of the
Company and Executive Vice President of the Bank. The
Executive will faithfully and diligently perform the duties
assigned to the Executive from time to time by the Company's
Chief Executive Officer. The Executive will use her best
efforts to perform her duties and will devote all her working
time and attention to these duties.
3. COMPENSATION.
(a) SALARY. Initially, the Executive will receive a salary of
$77,553 per year, to be paid by the Company or the Bank in
accordance with their regular payroll schedules.
(b) INCENTIVE COMPENSATION. A disinterested majority of the
Company's Board of Directors will determine the amount of
bonus, based on a formula-driven plan, to be paid to the
Executive during the Term. In making this determination,
the Company's Board of Directors will consider factors such
as the Executive's performance of her duties and the
safety, soundness, and profitability of the Company and the
Bank. The Executive's bonus, if any, will reflect the
Executive's contribution to the performance of the Company
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 Company and the Bank.
If the Executive resigns or retires during the Term, the
Executive will be entitled to the pro rata share of any
incentive compensation she would have received later during
the Term.
(c) STANDARD EXECUTIVE BENEFITS. The Company or the Bank will
provide to the Executive no less than the standard benefits
provided to senior Company and Bank executives in
accordance with the Company'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 five (5) weeks of
paid vacation per year accrued in accordance with the
Company's or 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 Company and the Bank.
(d) EXPENSES. The Company will reimburse the Executive for all
reasonable expenses that the Executive may incur in the
performance of her duties, including but not limited to
expenses for travel, lodging, meals and entertainment.
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4. TERMINATION.
(a) NOTICE OF TERMINATION. The Company'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 Company's main office address
or to the Executive's last known address as reflected in
the Company's personnel records. Notice shall be effective
upon either personal delivery or three days following
mailing by certified U.S. mail.
(b) TERMINATION BY COMPANY FOR CAUSE OR BY EXECUTIVE WITHOUT
GOOD REASON. If, before the end of the Term, the Company
terminates this Agreement for Cause or the Executive
terminates this Agreement without Good Reason, the Company
or the Bank will pay the Executive the salary and bonus
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 4(b).
(c) OTHER TERMINATION. If, before the end of the Term, the
Company terminates this Agreement without Cause, or the
Executive terminates this Agreement for Good Reason, as
defined below, the Company or the Bank will pay the
Executive one (1) times the total 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 Company's or 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 3(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 her 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 her major life activities arising at any
time during the Term, unless the Executive could continue,
with reasonable accommodation, to perform her duties and
making such accommodations would not require the Company to
expend any funds. If termination occurs under this Section
4(d), the Executive or her 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.
(e) TERMINATION RELATED TO A CHANGE IN CONTROL.
(1) TERMINATION BY COMPANY. If the Company or the
Bank, or their successors in interest by merger,
or their transferees in the event of a
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purchase and assumption transaction, and for
reasons other than the Executive's death,
disability, or Cause, (1) terminates this
Agreement within six (6) months following a Change
in Control (as defined below) or (2) terminates
this Agreement without Cause before a Change in
Control and a Change in Control occurs within nine
months after the termination, the Company will pay
the Executive the payments as set forth in Section
4(e)(3).
(2) TERMINATION BY THE EXECUTIVE. If a Change in
Control occurs, then the Executive may for any
reason terminate this Agreement within six (6)
months following the Change in Control. The
Executive must deliver notice of her termination
in accordance with the notice provisions set forth
in Section 4(a). The Company will pay the
Executive the payment described in Section 4(e)(3)
following the effectiveness of notice delivered
under this Section 4(e)(2).
(3) PAYMENTS. If Section 4(e)(1) or (2) is triggered
as described in those Sections, the Company or the
Bank will pay the Executive one (1) times the
total 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 Company's or 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 3(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 4(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 right to receive the payment
described in Section 4(e)(3) terminates six months
after a Change in Control occurs.
(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 the
Company or the Bank, within the meaning of Section 280G of the
Internal Revenue Code. An initial public offering by the
Company will not, however, be deemed to be a change in Control
under this Agreement.
(h) RETURN OF COMPANY PROPERTY. If and when the Executive ceases,
for any reason, to be employed by the Company, the Executive
must as soon as possible return to the Company, all property
of the Company and the Bank.
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5. 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 her failure to cure such breach within ten (10)
days after written notice from the Company to the Executive
specifying in reasonable detail the alleged breach;
(b) The Executive's gross negligence in the performance of her
duties, and her failure to cure such gross negligence within
ten (10) days after written notice from the Company 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
her employment with the Company.
6. DEFINITION OF "GOOD REASON". "Good Reason" means any one or more of
the following:
(a) The Company'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 Company's Board of Directors specifying in reasonable
detail the alleged breach;
(b) The assignment to the Executive without her express written
consent of duties substantially inconsistent with and/or in
diminution of the positions, duties, responsibilities and
status contemplated by paragraph 2(c) 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 50 miles each way from her current
business office at the Company on the date of this Agreement
(excluding travel between the current main offices of the
Company and Harbor), unless the Executive consents to the
relocation or transfer.
7. 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 the Company, the Bank or
their business operations or customers, or use for her (their) own
purposes or permit or assist in the use of such confidential
information unless (1) the Company or the Bank consents to the use or
disclosures of their respective information, (2) the use or disclosure
is consistent with the Executive's duties under this Agreement, or (3)
disclosure is required by law or court order.
8. NONCOMPETITION.
(a) PARTICIPATION IN A COMPETING BUSINESS. During the Term and
for two (2) years after the Executive's employment with the
Company ends (regardless of whether the Executive's
employment ends at the end of the Term or at some other
point before or after the end of the Term), the Executive
will not become involved with
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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 Company ends
(regardless of whether the Executive's employment ends at
the end of the Term or at some other point before or after
the end of the Term), the Executive will not solicit or
attempt to solicit (1) any employees of the Company, the
Bank, or their subsidiaries or affiliates to leave
employment or (2) any customers of the Company, or any of
its subsidiaries or affiliates, to remove their business
from the Company, 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 PACIFIC AND GRAYS HARBOR COUNTIES.
Following any termination of Executive's employment, nothing
in this Agreement prevents the Executive from accepting
employment outside Pacific and Grays Harbor Counties 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 Pacific or Grays Harbor Counties or (2) have
any responsibilities for the Competing Business' operations
within Pacific or Grays Harbor Counties.
(d) COMPETING BUSINESS. "Competing Business" means any company
that competes with or will compete with the Company or the
Bank in Pacific or Grays Harbor Counties. The term "Competing
Business" includes, without limitation, any existing or newly
formed financial institution or trust company.
9. ENFORCEMENT.
(a) The Company and the Executive stipulate that, in light of
all of the facts and circumstances of the relationship
between the Executive and the Company, the agreements
referred to in Sections 7 and 8 (including without
limitation their scope, duration and geographic extent) are
fair and reasonably necessary for the protection of the
Company's and 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 Company
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 Company to the
maximum extent, in time, scope of activities, and
geography, the court finds enforceable.
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(b) The Executive acknowledges that the Company 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 7 and 8 or threatens or
attempts to do so. For this reason, under these
circumstances, the Company, 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 Company
will not be required to post a bond as a condition of the
granting of this relief.
10. ADEQUATE CONSIDERATION. The Executive specifically acknowledges the
receipt of adequate consideration for the covenants contained in
Sections 7 and 8 and that the Company is entitled to require her to
comply with these Sections. These Sections will survive termination of
this Agreement. The Executive represents that if her 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 Company's enforcement of a remedy by way of injunction will not
prevent the Executive from earning a livelihood.
11. 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 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 7 or 8, the Company will have the
right to initiate the court proceedings
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described in Section 9(b), in lieu of an arbitration
proceeding under this Section 11.
12. MISCELLANEOUS PROVISIONS.
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding between the parties concerning its subject
matter and supersedes all prior agreements, including the
Severance Agreement dated as of January 13, 1999. Accordingly,
the Executive specifically waives the terms of and all of her
rights under all employment, change-in-control and salary
continuation agreements, whether written or oral, she has
previously entered into with the Company, the Bank, or any of
their subsidiaries or affiliates.
(b) BINDING EFFECT. This Agreement will bind and inure to the
benefit of the Company'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 she has had
the opportunity to consult with independent counsel with
respect to the negotiations, preparation, and execution of
this Agreement.
(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 her 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
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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 as of September ___, 1999:
PACIFIC FINANCIAL CORPORATION XXXXXXXX X. XXXXXX
/s/ Xxxxxx X. Xxxx /s/ Xxxxxxxx X. Xxxxxx
--------------------------------- ---------------------------------
Xxxxxx X. Xxxx, President Xxxxxxxx X. Xxxxxx
BANK OF THE PACIFIC
/s/ Xxxxxx X. Xxxx
----------------------------------
Xxxxxx X. Xxxx, President
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