Exhibit 10.11
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into this 1ST day of
January, 2004 (the "Effective Date"), by and between NORTHRIM BANK, a
state-chartered commercial bank and wholly owned subsidiary of NORTHRIM BANCORP,
INC., with its principal office in Anchorage, Alaska (the "Employer"), and
XXXXXX X. SHAKE (the "Executive").
In consideration of the mutual promises made in this Agreement, the
parties agree as follows:
1. EMPLOYMENT.
Employer employs Executive and Executive accepts employment with Employer
as its Senior Vice President and Executive Loan Manager.
2. TERM.
The term of this Agreement (the "Term") shall commence on the Effective
Date and shall continue through December 31, 2004; provided, however, that (i)
on January 1, 2005 and each succeeding January 1, the Term shall automatically
be extended for one additional year unless, not later than ninety (90) days
prior to any such January 1, either party shall have given written notice to the
other that it does not wish to extend the Term and (ii) such one year extensions
of the Term shall not occur on and after the January 1 of the year in which the
Executive will attain age sixty-five (65) but instead the Term shall be extended
only until the date of the Executive's sixty-fifth (65th) birthday. In the event
the Term is not extended, Executive shall have no rights to any of the severance
payments or benefits continuation described in Paragraph 5.
3. DUTIES.
Executive will serve as Senior Vice President and Executive Loan Manager.
Executive shall render such executive, management and administrative services
and perform such tasks in connection with the affairs and overall operation of
the Employer as is customary for his position, subject to the direction of
Employer's Chairman, President, and Board of Directors. Executive shall devote
necessary time, attention and effort to Employer's business in order to properly
discharge his responsibilities under this Agreement.
4. COMPENSATION, BENEFITS, REIMBURSEMENT AND BONUS.
a. In consideration for all services rendered by Executive during
the term of this Agreement, Employer shall pay Executive an
annual base salary (before all customary and proper payroll
deductions) of $150,000, as adjusted from time to time ("Base
Salary"). The Board of Directors of the Employer shall review
Executive's salary at the end of each year, in a manner
consistent with that used for all management employees of the
Employer, and in its sole discretion may adjust such salary
commensurate with the Executive's performance under this
Agreement.
b. Employer shall pay Executive a car allowance of $400 per
month.
c. Under the Employer's Incentive Compensation Plan, Executive
shall be eligible to receive an annual bonus based on performance as defined by
the Board of Directors. Executive's annual target bonus will equal 25% of Base
Salary ("Target Bonus"). This is the amount payable for ambitious, but expected,
results as determined by the Board of Directors. Executive's bonus may be more
or less than this amount at the Board of Directors discretion but may not exceed
35% of Base Salary.
d. Executive shall be eligible for stock option grants under the
Employer's Stock Option Plan. The timing and size of awards will be at the
discretion of the Board of Directors.
e. Executive shall also be entitled to receive an annual
contribution equal to 5% of annual Base Salary in accordance with the Employer's
Supplemental Executive Retirement Plan. Executive will also participate in the
Employer's Deferred Compensation Plan, with annual premiums of $45,000 paid by
Employer.
f. Throughout the term of this Agreement, Employer shall provide
Executive with reasonable health insurance, disability and other employee
benefits. Executive shall participate in all employee benefit plans and programs
of Employer on a basis at least as favorable as that accorded to any other
officer of Employer. Employer shall reimburse Executive for his reasonable
expenses (including, without limitation, travel, entertainment, and similar
expenses) incurred in performing and promoting the business of Employer.
Executive shall present from time to time itemized accounts of any such
expenses, subject to any limits of company policy and the rules and regulations
of the Internal Revenue Service.
5. TERMINATION OF AGREEMENT.
a. TERMINATION DUE TO A CHANGE OF CONTROL. If Employer or its
holding company, Northrim BanCorp, Inc., is subjected to a Change of Control (as
defined in Section 5(f)(i)), and either Employer or its assigns terminates
Executive's employment without Cause or Executive terminates his employment for
Good Reason within 730 days of such Change of Control, then Employer shall pay
Executive upon the effective date of such termination all Base Salary earned and
all reimbursable expenses incurred under this Agreement through such termination
date, plus a pro rata portion of any annual Target Bonus for the year of
termination. In addition, Employer shall pay Executive an amount equal to two
(2) times Executive's highest Base Salary over the prior three (3) years, plus
an amount equal to two (2) times the Target Bonus or two (2) times the average
bonus paid over the prior three (3) years, whichever is greater. In addition,
Employer shall provide the benefits described in Sections 5(b)(i) and (ii)
below. Provided, also, that the payment and benefits described in this Section
5(a) will only be paid conditioned upon Executive signing an agreement, in a
form acceptable to Employer, that releases and holds Employer harmless from all
known and unknown claims and liabilities arising out of Executive's employment
with Employer or the performance of this Agreement ("Release Agreement").
b. TERMINATION BY EMPLOYER WITHOUT CAUSE OR BY EXECUTIVE FOR GOOD
REASON. If Employer terminates Executive's employment without Cause, or if
Executive terminates his employment for Good Reason, Employer shall pay
Executive upon the effective date of such termination all Base Salary earned and
all reimbursable expenses incurred under this Agreement through such termination
date, plus a pro rata portion of any annual Target Bonus for
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the year of termination. In addition, Employer shall pay Executive an amount
equal to two (2) times Executive's highest Base Salary over the prior three (3)
years, plus an amount equal to two (2) times the Target Bonus or two (2) times
the average bonus paid over the prior three (3) years, whichever is greater.
Provided, however, that the payment and benefits described in this Section 5(b)
will only be made conditioned upon Executive signing a Release Agreement.
(i) BENEFITS CONTINUATION. In addition, the Executive shall
be entitled to health and dental insurance benefits for a period of eighteen
(18) months following the termination of this Agreement. These benefits will be
provided at Employer's expense, but such period shall count towards the
Employer's continuation of coverage obligation under Section 4980B of the
Internal Revenue Code ("COBRA").
(ii) AGE AND SERVICE CREDIT. Executive shall also be entitled
to receive age credit and credit for period of service towards all pension/SERP
plans for the remaining period of time covered by this Agreement. If Executive
is hired by Employer, its assigns, any company in control of Employer, or any
company controlled by Employer during the period covered by this Agreement, then
Executive will be entitled to be treated for all purposes relating to future
compensation, benefits, and retirement, as if this Agreement had never been
terminated and as if Executive had performed his responsibilities as an
Executive throughout the period originally covered by this Agreement.
c. TERMINATION BY EMPLOYER FOR CAUSE OR BY EXECUTIVE WITHOUT GOOD
REASON. If Employer terminates Executive's employment for Cause or if Executive
terminates his employment without Good Reason, Employer shall pay Executive upon
the effective date of such termination only such Base Salary earned and expenses
reimbursable under this Agreement incurred through such termination date. In
such case, Executive shall have no right to receive compensation or other
benefits for any period after termination under this Agreement.
d. TERMINATION DUE TO DISABILITY. If Employer terminates
Executive's employment on account of any mental or physical Disability that
prevents Executive from discharging his duties under this Agreement, Executive
shall be entitled to: (A) all Base Salary earned and reimbursement for expenses
incurred under this Agreement through the termination date, plus a pro rata
portion of any annual Target Bonus for the year of termination. In addition,
Employer shall pay Executive full Base Salary for the year following the
termination date (less the amount of any payments received by Executive during
such one (1) year period under any Employer-sponsored disability plan), and (B)
health and dental insurance benefits for a period of one (1) year following the
termination date, which benefits will be provided at Employer's expense, but
such period shall count towards the Employer's continuation of coverage
obligation under Section 4980B of Code (commonly referred to as "COBRA").
Provided, however, that the payment and benefits described in this Section 5(d)
will only be made conditioned upon Executive signing a Release Agreement.
e. TERMINATION UPON DEATH OF EXECUTIVE. Executive's term of
employment under this Agreement shall be terminated upon the death of Executive.
In such case, the Employer shall be obligated to pay to the surviving spouse of
Executive, of if there is none, to the Executive's estate: (A) that portion of
Executive's Base Salary that would otherwise have been paid to him for the month
in which his death occurred, and (B) any amounts due him pursuant to the
Employer's
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pension plan, any supplemental deferred compensation plan, and any other death,
insurance, employee benefit plan or stock benefit plan provided to Executive by
the Employer.
f. TERMINATION DEFINITIONS.
(i) "CHANGE OF CONTROL." For purposes of this Agreement, the
term "Change of Control" shall mean the occurrence of one or more of the
following events: (A) One person or entity acquiring or otherwise becoming the
owner of twenty-five percent or more of Employer's outstanding common stock; (B)
Replacement of a majority of the incumbent directors of Northrim BanCorp, Inc.
or Northrim Bank by directors whose elections have not been supported by a
majority of the Board of either company, as appropriate; (C) Dissolution or sale
of fifty percent or more in value of the assets, of either Northrim BanCorp,
Inc. or Northrim Bank; or (D) A change "in the ownership or effective control"
or "in the ownership of a substantial portion of the assets" of Employer, within
the meaning of Section 280G of the Internal Revenue Code.
(ii) "CAUSE." For purposes of this Agreement, termination for
"Cause" shall include termination because Executive (A) continually fails to
substantially perform his duties with the Employer, (B) is adjudged guilty of
any crime involving a breach of his fiduciary duties to the Employer, (C) is
willfully and continually failing to comply with any law, rule, or regulation
(other than traffic violations or similar offenses) or final cease and desist
order of a regulatory agency having jurisdiction over Employer, or (D) is unable
to substantially perform his duties with the Employer due to drug addiction or
chronic alcoholism. Notwithstanding the foregoing, Executive shall not be deemed
to have been terminated for Cause unless and until there shall have been
delivered to him a copy of a resolution duly adopted by the affirmative vote of
not less than three-quarters (3/4) of the entire membership of the Employer's
Board of Directors at a meeting of the Board called for such purpose (after
reasonable notice to Executive and an opportunity for him, together with his
counsel, to be heard before the Board), finding that in the good faith opinion
of the Board, he was guilty of conduct that constitutes Cause (as defined above)
and specifying the conduct in detail.
(iii) "DISABILITY." For purposes of this Agreement,
"Disability" shall mean a medically diagnosed physical or mental impairment that
may be expected to result in death, or to be of long, continued duration, and
that renders Executive incapable of performing the duties required under this
Agreement. Employer's Board of Directors, acting in good faith, shall make the
final determination of whether Executive is suffering under any Disability (as
herein defined) and, for purposes of making such determination, may require
Executive to submit himself to a physical examination by a physician mutually
agreed upon by the Executive and Employer's Board of Directors at Employer's
expense.
(iv) "GOOD REASON." For purposes of this Agreement,
termination for "Good Reason" shall mean termination by Executive as a result of
any material breach of this Agreement by Employer. Good Reason shall include,
but not be limited to: (A) a material reduction in Executive's compensation
defined as a reduction equal to or greater than five percent (5%) of Executive's
then annual base salary, (B) a material reduction in Executive's duties and
responsibilities, but not merely a change in title, or (C) relocation of
Executives primary workplace by more than fifty (50) miles.
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6. EXCISE TAX GROSS-UP.
a. In the event that Executive becomes entitled to payments and
benefits described in Section 5 ("Payments and Benefits") and those Payments and
Benefits thereby trigger a "parachute payment" as defined by Section 280G of the
Internal Revenue Code and are subject to any excise tax imposed under Section
4999 of the Internal Revenue Code of 1986 ("Excise Tax"), then Employer shall
pay to or for the benefit of Executive, an additional amount ("Gross-Up
Payment") such that the net amount retained by Executive after deduction of any
Excise Tax on the Payments and Benefits and any federal, state and local income
tax and Excise Tax upon the payments provided for under Section 5(a), shall be
equal to the amount of the Payments and Benefits.
b. For purposes of determining whether any of the Payments and
Benefits is subject to the Excise Tax and the amount of such Excise Tax, the
definitions of the Code apply.
c. For purposes of determining the amount of the Gross-Up
Payment, Executive shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the highest
marginal rate of taxation in the state and locality of Executive's residence on
the termination date of employment, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes based on the marginal rate referenced above. In the event that the Excise
Tax is subsequently determined to be less than the amount taken into account
hereunder at the termination date, Executive shall repay to Employer, at the
time that the amount of such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction plus interest on
the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of
the Code.
d. In the event that the Excise Tax is determined to exceed the
amount taken into account hereunder at the time of the termination of
Executive's employment (including by reason of any payment, the existence or
amount of which cannot be determined at the time of the Gross-Up Payment),
Employer shall make an additional Gross-Up Payment in respect of such excess
(plus any interest, penalties or additions payable by Executive with respect to
such excess, but only to the extent that such interest, penalties or additions
would not have been reduced by prompt payment by the Executive to the
appropriate tax authority of the Gross-Up Payments previously received) at the
time that the amount of such excess is finally determined.
e. Executive and Employer agree to reasonably cooperate with the
other in connection with any administrative or judicial proceedings concerning
the existence or amount of liability for Excise Tax with respect to the Payments
and Benefits.
7. COVENANT NOT TO COMPETE.
a. Executive agrees that for the term of this Agreement and for a
period of two (2) years after this Agreement is terminated pursuant to Section
5(a) or (b) (with the understanding that the two (2) year period will be
shortened to one (1) year upon the completion of a transaction constituting a
Change of Control, as defined in Section 5(f)(i)), Executive will not directly
or indirectly be employed by, own, manage, operate, join, or benefit in any way
from any business activity that is competitive with Employer's business or
reasonably anticipated business of which
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Executive has knowledge. For purposes of the foregoing, Executive will be deemed
to be connected with such business if the business is carried on by: (a) a
partnership in which Executive is a general or limited partner; or (b) a
corporation of which Executive is a shareholder (other than a shareholder owning
less than 5% of the total outstanding shares of the corporation), officer,
director, employee or consultant.
b. The parties agree that if a trial judge with jurisdiction over
a dispute related to this Agreement should determine that the restrictive
covenant set forth above is unreasonably broad, the parties authorize such trial
judge to narrow the covenant so as to make it reasonable, given all relevant
circumstances, and to enforce such covenant. The provisions of this paragraph
shall survive termination of this Agreement.
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
a. During the term of Executive's employment and thereafter,
Executive agrees to hold Employer's Confidential Information in strict
confidence, and not disclose or use it at any time except as authorized by
Employer and for Employer's benefit. If anyone tries to compel Executive to
disclose any Confidential Information, by subpoena or otherwise, Executive
agrees immediately to notify Employer so that Employer may take any actions it
deems necessary to protect its interests. Executive's agreement to protect
Employer's Confidential Information applies both during the term of this
Agreement and after employment ends, regardless of the reason it ends.
b. "Confidential Information" includes, without limitation, any
information in whatever form that Employer considers to be confidential,
proprietary, information and that is not publicly or generally available
relating to Employer's: trade secrets (as defined by the Uniform Trade Secrets
Act); know-how; concepts; methods; research and development; product, content
and technology development plans; marketing plans; databases; inventions;
research data and mechanisms; software (including functional specifications,
source code and object code); procedures; engineering; purchasing; accounting;
marketing; sales; customers; advertisers; joint venture partners; suppliers;
financial status; contracts or employees. Confidential Information includes
information developed by Executive, alone or with others, or entrusted to
Employer by its customers or others.
9. NONSOLICITATION.
During the course of Executive's employment and for a period of one (1)
year from the date of termination of employment for any reason, Executive shall
not directly or indirectly solicit or entice any of the following to cease,
terminate or reduce any relationship with Employer or to divert any business
from Employer: (a) any person who was an employee of Employer during the one-
(1) year period immediately preceding the termination of Executive's employment;
(b) any customer or client of Employer; or (c) any prospective customer or
client of Employer from whom Executive actively solicited business within the
last six (6) months of Executive's employment.
10 NON-DISPARAGEMENT.
Executive will not, during the Term or after the termination or expiration
of this Agreement or Executive's employment, make disparaging statements, in any
form, about Employer's officers,
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directors, agents, employees, products or services which Executive knows, or has
reason to believe, are false or misleading.
11. MUTUAL AGREEMENT TO ARBITRATE.
a. In the event of a dispute or claim between Executive and
Employer related to Employee's employment or termination of employment, all such
disputes or claims will be resolved exclusively by confidential arbitration in
accordance with the National Rules for the Resolution of Employment Disputes of
the American Arbitration Association ("AAA"). This means that the parties agree
to waive their rights to have such disputes or claims decided in court by a
jury. Instead, such disputes or claims will be resolved by an impartial AAA
arbitrator whose decision will be final.
b. The only disputes or claims that are not subject to
arbitration are any claims by Executive for workers' compensation or
unemployment benefits, and any claim by Executive for benefits under an employee
benefit plan that provides its own arbitration procedure. Also, Executive and
Employer may seek injunctive relief in court in appropriate circumstances.
c. The arbitration procedure will afford Executive and Employer
the full range of statutory remedies. Employer will pay all costs that are
unique to arbitration, except that the party who initiates arbitration will pay
the filing fee charged by AAA. Executive and Employer shall be entitled to
discovery sufficient to adequately arbitrate their claims, including access to
essential documents and witnesses, as determined by the arbitrator and subject
to limited judicial review. In order for any judicial review of the arbitrator's
decision to be successfully accomplished, the arbitrator will issue a written
decision that will decide all issues submitted and will reveal the essential
findings and conclusions on which the award is based.
12. MISCELLANEOUS.
a. This Agreement contains the entire agreement between the
parties with respect to Executive's employment with Employer, and is subject to
modification or amendment only upon agreement in writing signed by both parties.
b. This Agreement shall bind and inure to the benefit of the
heirs, legal representatives, successors and assigns of the parties, except that
Employer's rights and obligations may not be assigned.
c. If any provision of this Agreement is invalid or otherwise
unenforceable, all other provisions shall remain unaffected and shall be
enforceable to the fullest extent permitted by law.
d. In the event of any claim or dispute arising out of this
Agreement, the party that substantially prevails shall be entitled to
reimbursement of all expenses incurred in connection with such claim or dispute,
including, without limitation, attorneys' fees and other professional fees. This
paragraph shall apply to expenses incurred with or without suit, and in any
judicial, arbitration or administrative proceedings, including all appeals
therefrom.
e. Any notice required to be given under this Agreement to either
party shall be given by personal service or by depositing a copy of such notice
in the United States registered or
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certified mail, postage prepaid, addressed to the following address, or such
other address as addressee shall designate in writing:
EMPLOYER: 0000 "X" Xxxxxx
Xxxxxxxxx, XX 00000
EXECUTIVE: 0000 Xxxx Xxxxxxx
Xxxxxxxxx, XX 00000
f. This Agreement shall be governed by and construed in
accordance with the laws of the State of Alaska.
EMPLOYER: NORTHRIM BANCORP, INC.
By: /s/ Xxxxxx X. Xxxxx
__________________________________________
Xxxxxx X. Xxxxx
Its: Chairman of the Compensation
Committee of The Board of Directors
NORTHRIM BANK
By: /s/ Xxxxxx X. Xxxxx
__________________________________________
Xxxxxx X. Xxxxx
Its: Chairman of the Compensation
Committee of The Board of Directors
EXECUTIVE: /s/ Xxxxxx X. Shake
______________________________________________
Xxxxxx X. Shake
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