This Employment
Agreement (this “ Agreement t”) is made this
7 th
day of November, 2005 (the “
Effective Date ”), between SOUTHWEST COMMUNITY BANK, a
California banking corporation (the “ Bank ”),
having a principal place of business at 5810 El Camino Road,
Carlsbad, California 92024, and FRANK J. MERCARDANTE (“
Executive ”), whose residence address is 1657
Independence Way, Vista, California 92084, with reference to the
following:
WHEREAS,
the Bank is a banking corporation duly organized, validly existing,
and in good standing under the laws of the State of California,
with power to own property and carry on its business as it is now
being conducted;
WHEREAS,
the Bank desires to continue to avail itself of the skill,
knowledge, and experience of Executive in order to insure the
successful management of its business;
WHEREAS ,
the Bank and Executive entered into that certain Employment
Agreement dated January 29, 1998 (the “Original
Agreement”), which Original Agreement has been amended by
mutual agreement of the parties through the Effective
Date;
WHEREAS ,
the parties hereto desire to specify the terms of Executive’s
continued employment by the Bank as controlling Executive’s
continued employment with the Bank; and
WHEREAS,
the parties wish to enter into this Agreement to reflect the
Original Agreement as amended by the parties through the Effective
Date and to supersede the Original Agreement;
NOW,
THEREFORE , in consideration of the mutual covenants
hereinafter set forth, and intending to be legally bound, it is
agreed that from and after the Effective Date, the following terms
and conditions shall apply to Executive’s said
employment:
1.
Term . The Bank hereby employs Executive and Executive
hereby accepts employment with the Bank for the period commencing
on the Effective Date and terminating on January 1, 2009,
unless terminated earlier as provided for in this Agreement (the
“ Term ”).
1.
Duties . Executive shall perform the duties of Chief
Executive Officer of the Bank, subject to the powers by law vested
in the Board of Directors of the Bank and in the Bank’s
shareholder(s). During the Term, Executive shall perform
exclusively the services
herein
contemplated to be performed by Executive faithfully, diligently,
and to the best of Executive’s ability, consistent with the
highest and best standards of the banking industry and in
compliance with all applicable laws and the Bank’s Articles
of Incorporation, Bylaws, and internal written policies.
2.
Conflicts of Interest . Except as permitted by the prior
written consent of the Board of Directors of the Bank, Executive
shall devote Executive’s entire productive time, ability, and
attention to the business of the Bank during the Term, and
Executive shall not directly or indirectly render any services of a
business, commercial, or professional nature, to any other person,
firm, or corporation, whether for compensation or otherwise, which
are in conflict with the Bank’s interest. Notwithstanding the
foregoing, Executive may make investments of a passive nature in
any business or venture, provided, however, that neither such
business or venture is in competition, directly or indirectly, in
any manner with the Bank.
(a) Nothing
provided in this Section shall prevent the Executive from
purchasing or otherwise beneficially owning, without restriction on
amount, any securities issued by the Bank or the Bank’s
corporate parent, Southwest Community Bancorp (the “
Company ”).
(b) During
the term of this Agreement, Executive shall not directly or
indirectly engage in competition with, or own any interest in any
business which competes with, any business of the Bank or the
Company or any of their subsidiaries; provided, however, that the
provisions of this Section 2 shall not prohibit his ownership of
not more than 5% of the voting stock of any publicly held
corporation, or prohibit ownership of not more than 5% of any
mutual fund.
1.
Salary . For Executive’s services hereunder,
commencing with the Effective Date, the Bank shall pay or cause to
be paid as annual base salary to Executive the sum of Three Hundred
Twenty Thousand Dollars ($320,000) for each year (i.e., 12-month
period) of the Term (the “ Base Salary ”). Said
salary shall be payable in equal installments in conformity with
Bank’s normal payroll periods. Annual adjustments commencing
January 1, 2006, may be made in the discretion of the Board of
Directors.
2.
Bonuses . During the Term, Executive shall be entitled to
receive as an incentive, a bonus as determined and payable in
accordance with the Bank’s Senior Executive Officer Bonus
Plan as set forth on Exhibit “A” hereto as it may be
amended from time to time by mutual agreement of the Board of
Directors and Executive, together with such other bonus as the
Board of Directors shall determine from time to time in its sole
and absolute discretion (collectively, the “ Incentive
Bonus ”).
1.
Vacation . From and after the Effective Date, Executive
shall be entitled to six (6) weeks vacation during each year
of the Term; provided, however, that for each year of the Term,
Executive is required to and shall take at least two (2) weeks
of said vacation (the “ Mandatory Vacation ”),
which shall be taken consecutively. Executive shall be entitled to
carry forward to the immediately succeeding year of the Term (the
“ Carry Forward Period ”) up to two
(2) weeks of unused vacation time for each year of the
Term
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(the “
Unused Vacation ”). Should any portion of the Unused
Vacation remain unused by Executive at the end of the Carry Forward
Period, Bank shall pay Executive an amount equal to the product
resulting from multiplying (i) the number of days of the
Unused Vacation that remain unused at the end of the Carry Forward
Period, by (ii) the dollar amount resulting from
Executive’s Base Salary then in effect divided by 260. Upon
payment of same, Bank shall owe Executive no further benefit on
account of the Unused Vacation. Executive shall receive
compensation for any vacation in excess of the Unused Vacation not
used by Executive in any one year of the Term, calculated in the
same manner as set forth in the previous sentence.
2.
Automobile . During the Term hereunder, the Bank shall
provide Executive, for Executive’s sole use, a suitable full
sized automobile, the specific make and model of such automobile to
be determined by Executive, which automobile shall at no time be
older than three (3) years. The Bank shall pay all operating
expenses of any nature whatsoever with regard to such automobile,
provided Executive furnishes to the Bank adequate records and other
documentary evidence required by federal and state statutes and
regulations issued by the appropriate taxing authorities for the
substantiation of such payments as deductible business expenses of
the Bank and not as deductible compensation to Executive. The Bank
shall also procure and maintain in force an automobile liability
insurance policy on such automobile, containing all reasonable and
necessary coverage.
3.
Group Medical and Life Insurance Benefits . At such time as
Executive shall request in writing during the Term (the “
Request Date ”), the Bank shall provide for Executive
and Executive’s spouse, at Bank’s expense,
participation in the Bank’s existing medical, dental,
accident and health insurance benefits in accordance with benefits
provided to Bank employees generally, but at a level commensurate
for an employee of Executive’s salary level (the “
Insurance Coverage ”). Said Insurance Coverage shall
be in effect as of the Request Date (or as soon thereafter as the
Bank’s policies for the Insurance Coverage will permit) and
shall continue throughout the Term. Except in the event of
Executive’s termination pursuant to Paragraphs F.1 or F.3, or
in the event Executive terminates this Agreement pursuant to
Paragraph F.5, Bank shall continue to provide or pay the
premiums for the Insurance Coverage with substantially similar
benefits, deductibles, co-pays and coverage limits as the Bank is
providing for Executive as of the end of the Term, at the
Bank’s expense, for Executive and Executive’s spouse
from and after the end of the Term throughout the remainder of
Executive’s and Executive’s spouse’s natural
lives. The Bank’s liability to Executive or Executive’s
spouse for any breach of this Paragraph D.3 shall be limited
to the amount of premiums required hereunder to be payable by the
Bank to obtain or maintain, as applicable, the coverage’s
contemplated herein.
4.
Stock Options . All options to purchase shares of the
Company’s authorized but unissued Common Stock heretofore
granted to Executive shall remain in full force and effect subject
to the terms and conditions of those options as so granted. The
Bank and Executive acknowledge and agree that as of the Effective
Date Executive has been granted options which remain unexercised to
purchase those shares of Company Common Stock as listed on Exhibit
“B” hereto.
5.
SERP . The Bank shall provide for Executive’s
participation in the Bank’s Supplemental Executive Retirement
Plan as evidenced by that certain Executive Supplement Compensation
Agreement by and between Bank and Executive dated October 17,
2001.
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6. 401(k) Program . During the Term, the Bank shall provide
for Executive’s participation in the Bank’s 401(k)
retirement plan in accordance with the benefits provided to Bank
employees generally.
7.
Other Benefits . Except as provided herein, during the term
of his employment under this Agreement, Executive shall be entitled
to participate in employee benefit programs and fringe benefits in
accordance with the plans, practices, programs, and policies of the
Bank in effect for which executives of the Bank are eligible
pursuant to the terms of such plans, practices, programs, and
policies, including sick leave; provided, however, Executive shall
not participate in such plans that are applicable only for
Bank’s employees, such as Bank’s employee bonus
program.
E.
REIMBURSEMENT FOR BUSINESS EXPENSES
Executive
shall be entitled to reimbursement by the Bank for any ordinary and
necessary business expenses incurred by Executive in the
performance of Executive’s duties and in acting for the Bank
during the Term, which types of expenditures shall be determined by
the Board of Directors, provided that:
1.
Each such expenditure is of a nature qualifying it as a proper
deduction on the federal and state income tax returns of the Bank
as a business expense (without regard to limitations such as meals)
and not as a deductible compensation to Executive; and
2.
Executive furnishes to the Bank adequate records and other
documentary evidence required by federal and state statutes and
regulations issued by the appropriate taxing authorities for the
substantiation of such expenditures as business expenses of the
Bank and not as deductible compensation to Executive.
1.
Termination for Cause . The Bank may terminate this
Agreement at any time by action of the Board of Directors for
“cause” only if: (a) Executive fails to perform or
habitually neglects the duties which he is required to perform
hereunder; (b) if Executive engages in illegal activity which
materially adversely affects the Bank’s reputation in the
community or which evidences the lack of Executive’s fitness
or ability to perform Executive’s duties as reasonably
determined by the Board of Directors, in good faith;
(c) Executive commits any act which would cause termination of
coverage under the Bank’s Banker’s Blanket Bond as to
Executive (as distinguished from termination of coverage as to the
Bank as a whole); and (d) any regulatory authority having
supervisory authority over Bank exercises its cease and desist
powers to remove Executive from office or advises Bank that
Executive should be removed from office. Such termination shall not
prejudice any remedy which the Bank may have at law, in equity, or
under this Agreement.
2.
Death or Disability . In the event of Executive’s
death, or if Executive is found to be physically or mentally
disabled (as hereinafter defined) by the Board of Directors in good
faith, this Agreement shall terminate.
For purposes of
this Agreement only, physical or mental disability shall be defined
as Executive being unable to fully perform under this Agreement for
a continuous period of ninety (90) days or a cumulative period of
one hundred twenty (120) days in any calendar year. If there
should be a dispute between the Bank and Executive as to
Executive’s physical
4
or mental
disability for purposes of this Agreement, the question shall be
settled by the opinion of an impartial reputable physician or
psychiatrist agreed upon by the parties or their representatives,
or if the parties cannot agree within ten (10) days after a
request for designation of such party, then by a physician or
psychiatrist designated by the San Diego County Medical
Association. The certification of such physician or psychiatrist as
to the question in dispute shall be final and binding upon the
parties hereto.
3.
Action by Supervisory Authority . If the Bank is closed by
or taken over by the California Department of Financial
Institutions or other supervisory authority, including the Federal
Deposit Insurance Corporation, such bank supervisory authority may
immediately terminate this Agreement.
4.
Change in Control Event . In the event of a “Change of
Control” Executive’s employment with the Bank may be
terminated by Executive or by the surviving entity. A Change of
Control shall be deemed to have occurred if:
(a) there
shall be consummated (1) any consolidation or merger of the
Company in which the Company is not the continuing or surviving
corporation, or pursuant to which shares of the Company’s
Common Stock would be converted in whole or in part into cash,
securities, or other property, other than a merger of
the
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