Exhibit 10.12
EMPLOYMENT
AGREEMENT
This Employment Agreement (the
“ Agreement ”) is effective as of
November 17, 2006 (the “ Effective Date ”)
by and between James H. Burgess (“ Executive ”)
and 1 st Pacific Bank of California, a California
state-chartered bank (the “ Bank ”), with regard
to the following:
A. Executive has
served as the Executive Vice President and Chief Financial Officer
of the Bank under an Employment Agreement between Executive and the
Bank dated November 17, 2003, as amended on November 17, 2004
(collectively, the “ Former Employment Agreement
”).
B. Executive and
the Bank have agreed that Executive shall continue to serve as the
Executive Vice President and Chief Financial Officer and a
full-time employee of the Bank under the terms of this Agreement,
and as such is expected to make a major contribution to the
profitability, growth and financial strength of the
Bank.
C. The Bank
considers the availability of Executive’s services,
managerial skills and business experience to be in the best
interests of the Bank and the shareholders of the Bank and desires
to assure the continued services of Executive on behalf of the
Bank.
D. Executive is
willing to be employed by the Bank upon the understanding that the
Bank will provide him with income security and benefits if his
employment with the Bank is terminated, upon certain terms and
conditions.
NOW, THEREFORE, for valuable
consideration the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1.
Definitions .
“ Bank ” means
1st Pacific Bank of California, a California state-chartered bank,
its successors and permitted assigns.
“ Bank Board ”
means the Board of Directors of the Bank.
“ Beneficiary ”
means the person or entity to receive rights or benefits under this
Agreement, as set forth in this Agreement, in the event of the
death of Executive. Unless otherwise specified in a written
notice to the Bank, the Beneficiary shall be the spouse of
Executive, if any, and if there is none, the estate of Executive
(including any trust created by the terms of Executive’s
will) or, if Executive provides the Bank with written notice
thereof prior to his death, any trust as to which Executive was a
settlor with a power of revocation.
“ Benefits ”
means the types and amounts of benefits provided under
Paragraph 3.6, provided that if at the date of reference the
terms of any Bank insurance plan prohibit the continuance or
recommencement of insurance benefits that Executive formerly held,
the Bank shall be obligated to pay to Executive in cash on a
monthly basis an amount equal to the Bank’s former premium
payments (pro rated on a monthly basis) for the benefit of
Executive under such plan, except that if Executive is entitled to
COBRA health insurance benefits the
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amount shall be increased to the
amount payable by Executive for such benefits if higher than the
Bank’s former premium payments.
“ Change of Control
” means the occurrence of any of the following
events:
(i)
any “person” (as used in Section 13(d) of the
Securities Exchange Act of 1934 and the rules promulgated
thereunder) becomes the “beneficial owner” (as defined
in Rule 13d-3) of securities representing a majority of the
voting power of the then outstanding securities of the Bank;
or
(ii)
a sale of assets involving all or substantially all of the assets
of the Bank, or a merger or consolidation of the Bank in which the
holders of securities of the Bank immediately prior to such event
hold in the aggregate less than a majority of the securities of the
Bank or any other surviving or resulting entity immediately after
such event.
Notwithstanding the foregoing, a
Change in Control shall not be deemed to have occurred in the event
the Bank forms a holding company as a result of which the holders
of the Bank’s outstanding voting securities immediately prior
to the transaction hold, in approximately the same relative
proportions as they held prior to the transaction, substantially
all of the outstanding voting securities of a holding company
owning all of the Bank’s outstanding voting securities after
the completion of the transaction.
“ Change of Control
Severance Benefits ” means (i) an amount equal to
the sum of (y) one (1) times Executive’s base annual
salary at the rate then in effect in accordance with
Paragraph 3.1, plus (z) the amount actually paid by the
Bank to Executive under the Plan for the immediately preceding
year, if any; and (ii) continuation of benefits provided under
Paragraph 3.6 or substitute equivalent benefits in the event
that the particular benefits (for instance, insurance coverage) are
not carried by the Bank under its programs following the Change of
Control Termination, for a period of twelve (12) months.
“ Change of Control
Termination ” means the termination of employment of
Executive within twelve (12) months after a Change of Control
(i) by the Bank under Paragraph 4.1.5; or (ii) by
Executive under Paragraph 4.2 for Good Cause.
“ Code ” means
the Internal Revenue Code of 1986, as amended.
“ Disability ”
shall be deemed to occur on the date the Executive is, by reason of
any medically determinable physical or mental impairment that can
be expected to result in death or can be expected to last for a
continuous period of not less than 12 months, receiving income
replacement benefits for a period of not less than three months
under an accident and health plan covering employees of the
Bank.
“ Executive ”
means James H. Burgess.
“ Expiration Date
” means December 31, 2008.
“ Good Cause ”
means: (i) a reduction in Executive’s base salary
below the rate then in effect in accordance with
Paragraph 3.1; (ii) the Bank requiring that Executive be
based
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at a location more than fifty (50)
miles from the Bank’s headquarters as of the Effective Date
(excluding travel for Bank business and other temporary relocations
of no more than thirty (30) days individually); (iii) a
reduction in his title; or (iv) the continuation after a
Change of Control, or imposition within six (6) months after a
Change of Control, of a material reduction in the duties or
authority of Executive so that he is no longer performing
substantially all of the duties of a chief credit officer of a
community bank.
“ Plan ” means
the 1st Pacific Bank of California Incentive Compensation Plan for
Senior Management, in substantially the form attached hereto as
Exhibit A , as the same may be amended from time to
time.
“ Separation Agreement
” means the Separation and General Release of Claims,
substantially in the form attached hereto as Exhibit B
.
“ Trade Secrets and Other
Proprietary and Confidential Information ” means and
consist of, for example, and not intending to be inclusive,
information concerning any matters relating to the business of the
Bank, any of its customers, governmental relations, customer
contacts, underwriting methodology, loan program configuration and
qualification strategies, marketing strategies and proposals, or
any other information concerning the business of the Bank, its
subsidiaries and affiliates, and the Bank’s good will;
provided that “Trade Secrets and Other Proprietary and
Confidential Information” shall not be deemed to include
information that is or becomes, through no fault of Executive, in
the public domain.
2.
Rights and Duties of Executive .
2.1
Employment . The Bank hereby employs Executive as its
Executive Vice President and Chief Financial Officer, and Executive
accepts the duties described herein, and agrees to discharge the
same faithfully and to the best of his ability. Executive
shall perform such other duties as shall be from time to time
prescribed by the Chief Executive Officer of the Bank and shall
report to and be subject to the direction of the Chief Executive
Officer of the Bank. Executive shall devote his full business
time and attention to the business and affairs of the
Bank.
2.2
Termination of Former Employment Agreement . As of the
Effective Date, the Former Employment Agreement shall terminate
without further liability of the Bank or Executive thereunder of
any kind.
2.3
At-Will Employment . Executive’s employment with
the Bank is not for a fixed period of time and can be terminated at
the will of either Executive or the Bank at any time, with or
without notice, and with or without cause. There are no
agreements between Executive and the Bank contrary to
Executive’s at-will status. Neither a Bank Board member
nor a manager, supervisor, employee or agent of the Bank is
authorized to alter Executive’s at-will status, except for
the Chairperson of the Bank Board, and then only in a writing
signed both by the Chairperson of the Bank Board and Executive
following adoption of a resolution by the Bank Board authorizing
the specific change reflected in such writing and authorizing the
Chairperson of the Bank Board to sign such writing. Executive
should neither assume nor imply any promise of employment for any
specified period of time except through such a signed
writing. This
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Agreement shall terminate
immediately without further liability or obligation to Executive if
(i) the Bank is closed by any supervisory authority, or
(ii) any supervisory authority demands, by proposed consent
agreement or by a Prompt Corrective Action Directive, or pursuant
to cease and desist powers, the removal of Executive from his
position as the Executive Vice President or Chief Financial Officer
of the Bank. Should Executive remain employed under this
Agreement through the Expiration Date, Executive’s employment
with the Bank shall automatically terminate on that date and this
Agreement shall be of no force or effect on or after that date,
subject to Paragraphs 5.4 and 8.6.
2.4
Outside Activities . Executive shall not have other
employment, consulting, charitable or independent contractor work
that materially interferes with the fulfillment of
Executive’s duties to the Bank. Executive shall not
undertake expanded commitments to business or charitable activities
or engage in new such activities before consulting with the
President and Chief Executive Officer of the Bank. Executive
will not provide services to, hold or make any investment in or
loan to, or participate in the management or business of, any bank,
savings and loan, credit union, thrift and loan, industrial loan or
other entity engaged in the business of making loans or accepting
deposits or both; provided that Executive may own less than 5% of
the voting stock of any company that files reports under the
Securities Exchange Act of 1934.
3.
Compensation and Benefits . In consideration for the
services to be rendered by Executive to the Bank, the Bank agrees
to provide Executive with the following compensation and
benefits:
3.1
Salary . The Bank shall pay Executive a minimum annual
salary, pro rated for partial years, at the rate of One Hundred
Forty Seven Thousand Five Hundred Dollars ($147,500) for the period
of the Effective Date through December 31, 2007, increasing to One
Hundred Fifty Seven Thousand Five Hundred Dollars ($157,500) for
the period of January 1, 2008 through December 31, 2008, due and
payable biweekly, or otherwise in accordance with the Bank’s
policy for the scheduling of salary payments to employees as in
effect from time to time. Other salary increases, if any,
shall only be as approved by the Bank Board in its sole
discretion.
3.2
Withholding and Deductions . The Bank shall withhold
and/or deduct from any and all salary or other payments to
Executive, all taxes which may be required to be deducted or
withheld under any provision of law (including, but not limited to,
social security payments and income tax withholding) now in effect
or which may become effective any time during Executive’s
employment with the Bank.
3.3
Executive Incentive Compensation . In general, the
Bank believes that superior performance of Executive should be
rewarded and encouraged by incentive compensation. The Bank
Board shall adopt the Plan pursuant to which Executive may be
entitled to incentive compensation provided that the performance
goals of the Bank as set forth in the Plan are achieved and the
terms and conditions of the Plan are satisfied. In addition,
Executive shall be entitled to other incentive compensation and
bonuses as the Bank Board may determine in its sole
discretion. Notwithstanding the foregoing, Executive shall
not participate in the Bank’s Team Share Plan.
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3.4
Automobile Allowance . The Bank shall pay Executive an
automobile allowance of Six Hundred Dollars ($600.00) per month,
subject to withholding. This is an allowance for all
automobile costs and expenses, including, but not limited to, fuel,
license, maintenance, insurance, repairs and purchase or lease
payments.
3.5
Expense Reimbursement . The Bank agrees to reimburse
Executive for all ordinary and necessary expenses incurred by
Executive on behalf of the Bank in accordance with the Bank’s
policies and procedures as in effect from time to time, including
entertainment, meal and travel expenses.
3.6
Insurance . The Bank shall provide life insurance with
a life insurance benefit equal to at least one and one-half times
the annual salary of Executive at the rate then in effect under
Paragraph 3.1, which shall be provided through any group life
insurance plan of the Bank at the Bank’s option. The
Bank shall provide to Executive the long term disability insurance
provided by the Bank to employees at the Effective Date under the
Bank’s group plan or shall replace it with similar coverage
so long as Executive is employed by the Bank. Executive shall
be entitled to participate in such other insurance benefits as are
generally provided to the employees of the Bank from time to
time.
3.7
Vacation . Executive shall be entitled to five (5)
weeks of vacation time and pay per annum, which shall be scheduled
in Executive’s discretion, subject to and taking into account
applicable banking laws and regulations. Unused vacation may
be accrued up to a maximum of six (6) weeks of unused vacation in
addition to the vacation to which Executive may be entitled in the
current year, and thereafter Executive shall cease to accrue unused
vacation until used. Vacation must be accrued before taken,
and if not yet accrued, must have the prior approval of the Chief
Executive Officer of the Bank to be taken. Vacation may be
used only at the time or times approved by the Chief Executive
Officer of the Bank.
4.
Termination .
4.1
Employer Right to Terminate Employment . Nothing in
this Agreement shall adversely affect the right of the Bank Board
to terminate Executive. The Bank Board has the right to
terminate the employment of Executive with the Bank at will, with
or without cause, upon delivery of written notice to Executive
(except in the case of death of Executive, in which event
termination shall automatically occur at the date of death), and
including, but not limited to, for any of the following
grounds:
4.1.1
Willful breach or habitual neglect or inability (except where such
inability is due to Disability or death) to perform
Executive’s duties hereunder, including without limitation
failure to cooperate with the Bank Board in the structuring,
documentation or negotiation of a transaction that might result in
a Change of Control;
4.1.2
Malfeasance or misfeasance in the performance of Executive’s
duties hereunder, imposition of a regulatory order to remove
Executive, failure to comply with a direction by the Chief
Executive Officer of the Bank, material breach of Bank policy or
procedure, or breach of this Agreement;
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4.1.3
Immoral or illegal conduct, conviction of a felony, conviction of a
misdemeanor involving moral turpitude;
4.1.4
Disability or death;
4.1.5
Determination in the complete discretion of the Bank Board that the
employment of Executive should be terminated prior to the
Expiration Date, without reference to the grounds set forth in
Paragraphs 4.1.1, 4.1.2, 4.1.3 or 4.1.4, and specification of
the termination date in the notice described in
Paragraph 4.1.
4.2
Termination by Executive . Executive may terminate his
employment with the Bank at will, for any reason, and without
advance notice. However, as a courtesy, Executive is
requested to deliver written notice to the Bank three
(3) months in advance of the date such termination is to take
effect, except with respect to a termination for Good Cause.
Executive may terminate his employment with the Bank prior to the
Expiration Date for Good Cause upon thirty (30) days notice to the
Bank and the Bank’s failure to cure within that time.
To be effective, such notice must be given by Executive within
fifteen (15) days of the occurrence of the event that constitutes
Good Cause, provided that if Good Cause results from a material
reduction in the duties or authority of Executive so that he is no
longer performing substantially all of the duties of a chief
financial officer of a community bank and such reduction occurs
before a Change of Control occurs and continues after the Change of
Control occurs, Executive shall be required to give the thirty (30)
day notice described above within fifteen (15) days of the Change
of Control.
4.3
Termination Upon Expiration . If Executive and the
Bank have not entered into an amendment of this Agreement extending
its term or another written agreement replacing this Agreement on
or prior to the Expiration Date, at that date his employment will
automatically terminate as a result of expiration of this Agreement
at the Expiration Date. Nothing in this Paragraph shall
prejudice the at-will status of Executive or require the Bank to
negotiate with Executive.
4.4
Post-Notice Activities of Executive . In the event
termination is not effective immediately upon the delivery of
notice of termination by the Bank or Executive, the Bank shall have
the right to require that during the period between the giving of
notice and the effective date of termination, Executive’s
activities and responsibilities be curtailed as deemed appropriate
by the Bank. Such curtailment shall include, without
limitation, removing Executive from corporate offices, requiring
Executive to be physically absent from the Bank’s facilities,
and eliminating Executive’s access to computer systems,
e-mail and telephone systems.
4.5
Automatic Resignations . Upon notice of termination of
employment Executive shall, automatically and without further
action by any party, be deemed to have resigned from all
directorships with the Bank and any of its subsidiaries and
affiliates. Upon termination of employment, Executive shall,
automatically and without further action by any party, be deemed to
have resigned from all offices and other capacities with the Bank
and any of its subsidiaries and affiliates.
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5.
Post-Termination Payments and Benefits . The following
are the post-termination payments and benefits to which Executive
is entitled upon termination of employment with the
Bank.
5.1
Termination Resulting from Breach . In the event the
employment of Executive is terminated under Paragraphs 4.1.1,
4.1.2 or 4.1.3, the Bank shall provide Executive only a payout of
all accrued but unused vacation as of the date of termination, the
base salary and Benefits, if any, then-provided, on the terms
then-provided, due him through the date of termination and shall
not be obligated to provide any other compensation or
Benefits.
5.2
Other Terminations .
5.2.1
Payments – Disability . In the event the
employment of Executive is terminated under Paragraphs 4.1.4
for disability, the Bank shall provide Executive only the
following:
(a)
the salary due Executive as of the date of termination;
(b)
payment of certain incentive compensation due Executive, if any, in
compliance with the Plan;
(c)
a payout of all accrued but unused vacation as of the date of
termination; and
(d)
continuation of the group medical and other insurance benefits, if
any, then-provided under Paragraph 3.6, for a period of three
(3) months from the date of termination, subject to the
limitations of and to the extent permitted by the policy or
policies under which such benefits are provided.
5.2.2
Payments – Death . In the event the employment
of Executive is terminated under Paragraphs 4.1.4 for death,
the Bank shall provide the Beneficiary only the
following:
(a)
the salary due Executive as of the date of death plus a lump sum
payment equal to three (3) months of the base salary at the rate
then in effect in accordance with Paragraph 3.1;
(b)
payment of certain incentive compensation due Executive, if any, in
compliance with the Plan;
(c)
a payout of all accrued but unused vacation as of the date of
termination; and
(d)
continuation of the group medical and other insurance benefits, if
any, then-provided under Paragraph 3.6, for a period of three
(3) months from the date of termination, subject to the
limitations of and to the extent permitted by the policy or
policies under which such benefits are provided.
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5.2.3
Payments – Termination Under Paragraph 4.1.5
. In the event the employment of Executive is terminated
under Paragraph 4.1.5 or under Paragraph 4.2 for Good Cause,
subject to Executive first entering into the Separation Agreement
and such agreement being fully effective, the Bank shall provide
Executive only the following:
(a)
continued salary at the rate then in effect under Paragraph 3.1 and
the automobile allowance then provided under Paragraph 3.4 for a
period of nine (9) months from the date notice of termination is
delivered to the Executive, or at the option of the Bank a lump sum
payment of such amount, all subject to withholding;
(b)
payment of certain incentive compensation due Executive, if any, in
compliance with the Plan, with Executive’s termination under
this Paragraph 5.2.3 being considered for the limited purpose of
interpreting the Plan in the context of this Agreement as being a
termination “without cause”;
(c)
a payout of all accrued but unused vacation as of the date of
termination; and
(d)
continuation of the group medical and other insurance benefits, if
any, then-provided under Paragraph 3.6, for a period of nine
(9) months from the date of termination, subject to the
limitations of and to the extent permitted by the policy or
policies under which such benefits are provided.
5.2.4
Executive’s Right to Waive Payments . Executive
shall have the right to waive his rights to receive such payments
and Benefits otherwise due under this Paragraph 5.2 by giving
advance written notice of such waiver to the Bank. After
receipt of such notice, the Bank shall have no further obligation
to provide any payments or Benefits under this
Paragraph 5.2.
5.3
Change of Control .
5.3.1
Payment Following Certain Terminations Related to Change of
Control . Subject to Executive first entering into the
Separation Agreement and such agreement being fully effective, in
respect of any Change of Control Termination the Bank shall pay to
Executive the Change of Control Severance Benefits in a lump sum
(except for the benefits under Paragraph 3.6, which shall be
continued) within five (5) days following the date the
Separation Agreement is fully effective.
5.3.2
Executive’s Right to Waive Payments . Executive
shall have the right to waive his rights to receive payments and
Benefits otherwise due under this Paragraph 5.3 by giving
advance written notice of such waiver to the Bank. After
receipt of such notice, the Bank shall have no further obligation
to provide any payments or Benefits under this
Paragraph 5.3.
5.3.3
Adjustments in Payments . The terms of this
Paragraph 5.3.3 override and control any and all other terms
of this Agreement to the extent inconsistent with this
Paragraph 5.3.3. This Paragraph 5.3.3 shall apply
to the extent that the aggregate present value of any or all
payments and benefits in the nature of compensation to (or for the
benefit of)
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Executive provided under this
Agreement or otherwise provided to Executive by or on behalf of the
Bank or any affiliate, parent or controlling entity of the Bank,
constitute a “parachute payment” under the provisions
of Section 280G of the Code, and the regulations thereunder
(the “ Total Payments ”). In the event
that the Total Payments would exceed an amount equal to 299% of
Executive’s “base amount” as that term is defined
in Section 280G of the Code, as determined by the independent
public accountants for the Bank, Executive and the Bank agree that
the payments or benefits provided to Executive under this Agreement
shall be reduced (or the parties shall agree to a reduction in
other payments or benefits included in the Total Payments to the
extent legally and contractually permissible) so that the present
value of the total amount received by Executive that would
constitute a “parachute payment” will be one dollar
($1.00) less than three (3) times Executive’s base amount (as
defined in Section 280G of the Code) and so that no portion of the
payment or benefits received by Executive would be subject to the
excise tax imposed by Section 4999 of the Code.
5.4
Termination at Expiration Date . If Executive’s
employment is terminated as a result of expiration of this
Agreement at the Expiration Date, subject to Executive first
entering into the Separation Agreement and such agreement being
fully effective, the Bank shall provide Executive only the
following:
5.4.1
continued salary at the rate then in effect under Paragraph 3.1 for
a period of six (6) months from the date of termination, or at the
option of the Bank a lump sum payment of such amount, all subject
to withholding;
5.4.2
continuation of the group medical and other insurance benefits, if
any, then-provided under Paragraph 3.6, for a period of six (6)
months from the date of termination, subject to the limitations of
and to the extent permitted by the policy or policies under which
such benefits are provided;
5.4.3
a payout of all accrued but unused vacation as of the date of
termination; and
5.4.4
payment of certain incentive compensation due Executive, if any, in
compliance with the Plan, with Executive’s termination as a
result of expiration being considered for the limited purpose of
interpreting the Plan in the context of this Agreement as being a
termination “without cause.”
5.5
Consideration for Payments and Remedies . Without
limiting any other remedies available to the Bank, the payments to
be made under Paragraphs 5.2, 5.3 or 5.4 (subject to the
exceptions stated therein) after the date of termination of
Executive’s employment shall be subject to Executive’s
execution of the Separation Agreement, and Executive’s
continued compliance with the Separation Agreement and the terms of
this Agreement that are effective after termination of
Executive’s employment, through the making of the last such
payment.
5.6
Death Following Termination . In the event that
Executive dies while receiving any payments under this
Paragraph 5, such payments shall be continued for the benefit
of the Beneficiary, as would otherwise be required under this
Paragraph 5.
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5.7
Nonassignability . Neither Executive nor any other
person or entity shall have any power or right to transfer, assign,
anticipate, hypothecate, mortgage, commute, modify, or otherwise
encumber in advance any of the rights or benefits of Executive
under this Paragraph 5, nor shall any of said rights or
benefits be subject to seizure for the payment of any debts,
judgments, alimony or separate maintenance, owed by Executive or
any other person or entity, or be transferable by operation of law
in the event of bankruptcy, insolvency or otherwise. The
terms of this Paragraph 5.7 shall not affect the
interpretation of any provision of this Agreement.
5.8
Claims Procedure . The Bank Board shall make all
determinations as to rights to benefits under this
Paragraph 5.
5.9
Regulatory Restrictions . The parties understand and
agree that at the time any payment would otherwise be made or
benefit provided under this Paragraph 5, depending on the
facts and circumstances existing at such time, the satisfaction of
such obligations by the Bank may be deemed by a regulatory
authority to be illegal, an unsafe and unsound practice, or for
some other reason not properly due or payable by the Bank.
Among other things, the regulations at 12 C.F.R. Part 30, Appendix
A promulgated pursuant to Section 39(a) of the Federal
Deposit Insurance Act, and at 12 C.F.R. Part 359, or similar
regulations or regulatory action following similar principles may
apply at such time. The Bank agrees that to the extent
reasonably feasible, it will in good faith seek to determine the
position of the appropriate regulatory authority in advance of each
payment or benefit otherwise due under this Paragraph 5,
including seeking the approval or acquiescence of the appropriate
regulatory authorities, if required. Th
