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Exhibit
10.17
SEVERANCE
AGREEMENT
THIS SEVERANCE AGREEMENT
(“Agreement”) is made and entered into effective this
1st day of August, 2007, by and between Heritage Bank, (the
“Bank”) and Donald Hinson (“Executive”).
The Bank is the wholly-owned subsidiary of Heritage Financial
Corporation (the “Company”).
RECITALS
1. The Bank currently
receives the exclusive services of Executive as its employee, and
both the Bank and Executive desire that this employment
relationship continue.
2. In order to encourage
Executive to continue his/her employment relationship with the
Bank, thereby allowing the Bank to maximize the benefits obtainable
by its shareholder and the shareholders of the Company from any
such change, the Bank desires to provide a severance benefit to
Executive. This Agreement supercedes any severance agreement which
may currently exist.
In consideration of the
mutual promises, covenants, agreements and undertakings contained
in this Agreement, the parties hereby contract and agree as
follows:
AGREEMENT
1. Term . The
term of this Agreement (“Term”) shall commence as of
the date first above written and shall end on March 31, 2010,
unless extended in writing by the parties.
2. Severance
Payment .
2.1 Determination of
Payment . In the case of a Termination Event, as defined in
Section 4, the Bank shall pay to Executive a severance payment
(“Severance Payment”) in an amount equal to the amount
of Executive’s then-current annual base salary in addition to
all salary and benefits earned through the effective date of
Executive’s termination, and vesting of all stock options and
lapse of all restrictions with respect to restricted stock awards
shall occur. The severance benefit, vesting and lapse of all
restrictions described in the preceding sentence shall be paid and
shall occur, respectively, (i) in the case of a Termination
Event described in paragraph 4.1, upon the effective date of
termination, and (ii) in the case of a Termination Event
described in paragraph 4.2, upon the effective date of the Change
in Control.
Notwithstanding any other
provision herein, if the payment under this Section, either alone
or together with other payments for benefits which the Executive
has the right to receive from the Bank, would constitute a
“parachute
payment” as defined in
Section 280G of the Internal Revenue Code of 1986, as amended
(“Code”), such Severance Payment shall be reduced to
the largest amount as will result in no portion of the Severance
Payment under this Section 2.1 being subject to the excise tax
imposed by Section 4999 of the Code. The determination of any
reduction in the Severance Payment under this Section, pursuant to
the foregoing provision shall be made by the Bank, in good faith,
and such determination shall be conclusive and binding on the
Executive.
Also not withstanding any
other provision herein, if the Executive is deemed to be a
“Specified Employee” as defined herein, then payment of
his or her benefits under Section 4.1 that is payable because
Executive’s employment terminates as set forth in
Section 4.1, shall be delayed until six months and one day
after the date the benefit under Section 4.1 is payable,
unless Executive dies between such date and the payment date at
which time all such benefits shall then commence. Benefits
otherwise payable during the six months and one day payment delay
shall be paid in one lump sum without interest on or shortly after
the expiration of the six month and one day period.
3. Other Compensation
and Terms of Employment . Except with respect to the
Severance Payment, this Agreement shall have no effect on the
determination of any compensation payable by the Bank to the
Executive, or upon any of the other terms of Executive’s
employment with the Bank.
4. Termination
Events . A Termination Event shall be deemed to occur upon,
and only upon, one or more of the following:
4.1 Termination of
Executive’s employment by the Bank without Cause (as defined
below) or by Executive for Good Reason (as defined below) within
365 days following the effective date of a Change in Control (as
defined below); or
4.2 Termination of
Executive’s employment by the Bank without Cause prior to a
Change in Control if such termination occurs at any time from and
after sixty days prior to the public announcement by the Bank or
any other party of a transaction which will result in a Change in
Control; provided that the effective date of the Change in Control
occurs within eighteen (18) months of Executive’s
termination.
5. Definitions
.
5.1 Cause .
“Cause” shall mean only (i) willful misfeasance,
failure to follow direction by a senior officer or gross negligence
in the performance of Executive’s duties, (ii) conduct
demonstrably and significantly harmful to the Bank (which would
include willful violation of any final cease and desist order
applicable to the Bank), or (iii) conviction of a
felony.
5.2 Change in Control
. For purposes of this Agreement, “Change in Control”
shall mean a change in the ownership of the Company or Heritage
Bank, a change in the effective control of the Company or Heritage
Bank or a change in the ownership of a substantial portion of the
assets of the Company or Heritage Bank, in each case as provided
under Section 409A of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder.
5.3 Good Reason .
“Good Reason” shall mean (i) any reduction of
Executive’s sala
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