EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "AGREEMENT") is made this 19th
day of July, 1999 between California Independent Bancorp ("BANCORP") and Feather
River State Bank ("BANK") (collectively referred to as the "COMPANY"), on one
hand, and Larry D. Hartwig (the "EXECUTIVE"), on the other hand.
WHEREAS, the parties hereto wish to enter into an employment
agreement to employ the Executive as the President and Chief Executive Officer
of the Company and to set forth certain additional agreements between the
Executive and the Company;
NOW, THEREFORE, in consideration of the mutual covenants and
representations contained herein, the parties hereto agree as follows:
Term.
The Company will employ the Executive, and the Executive will
serve the Company, under the terms of this Agreement for an initial term of
three (3) years (the "Initial Term"), commencing on the date hereof (the
"Effective Date"). Effective as of the expiration of the Initial Term and as of
each anniversary date thereof, the term of this Agreement shall be extended for
an additional one-year period unless, not later than forty-five days prior to
each such respective date, either party hereto shall have given notice to the
other that the term shall not be so extended. Notwithstanding the foregoing, the
Executive's employment hereunder may be earlier terminated, as provided in
Section 4 hereof. The term of this Agreement, as in effect from time to time in
accordance with the foregoing, shall be referred to herein as the "Term". The
period of time between the Effective Date and the termination of the Executive's
employment hereunder shall be referred to herein as the "Employment Period."
Employment.
Positions and Reporting. The Company hereby employs the Executive for the
Employment Period as its Chief Executive Officer and President. During the
Employment Period, the Executive shall report directly to the Board of Directors
of Bank and Bancorp (the "Board").
Authority and Duties. The Executive shall exercise such authority, perform such
executive duties and functions and discharge such responsibilities as are
reasonably associated with the Executive's positions, commensurate with the
authority vested in the Executive pursuant to this Agreement and consistent with
the bylaws of the Company. During the Employment Period, the Executive shall
devote full business time, skill and efforts to the business of the Company.
Notwithstanding the foregoing, the Executive may (i) make and manage personal
business investments of his choice and serve in any capacity with any civic,
educational or charitable organization, or any trade association, without
seeking or obtaining approval by the Board, provided such activities and service
do not materially interfere or conflict with the performance of his duties
hereunder and (ii) with the approval of the Board, serve on the boards of
directors of other corporations.
Bank and Bancorp shall make Executive a director of Bank,
Bancorp and any subsidiaries of Bank and Bancorp contemporaneously with the
execution of this Agreement. As Bank and Bancorp desire that Executive continue
to serve as a director, each shall use its reasonable best efforts to cause
Executive to be elected a director at any meeting of the Boards or of the
shareholders held for the purpose of electing directors during the Term, and
shall use their reasonable best efforts to insure that Executive remains a
director of each subsidiary, including such subsidiaries as may from time to
time come into existence after the date hereof. The Executive shall not be
entitled to receive any additional compensation (excluding the payment or
reimbursement of any expenses incurred by the Executive) for his services as a
director of any of the above entities.
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Compensation and Benefits.
Salary. During the Employment Period, the Company shall pay to the Executive, as
compensation for the performance of his duties and obligations under this
Agreement, a base salary at the rate of $180,000 per annum, payable in arrears
not less frequently than monthly in accordance with the normal payroll practices
of the Company (the "Base Salary"). Such Base Salary shall be subject to review
each year for possible increase by the Board in its sole discretion, but shall
in no event be decreased from the levels set forth above during the Initial
Term, or from its then-existing level during the Employment Period.
Notwithstanding that the Initial Term of this Agreement commences as of July 19,
1999, the first consideration of an increase in base salary shall occur before
the end of calendar year 1999 for possible implementation as of January 1, 2000.
Annual Bonus. The Executive shall earn bonus amounts in the form of cash and
stock awards based upon the satisfaction of performance criteria that will be
established by the Board of Directors of the Company in its discretion and upon
negotiation with the Executive at the beginning of each year, subject to the
approval of the Board. Performance criteria will include corporate performance
goals consistent with the Company's business plan for the year, as established
by the Company's management and subject to the review and approval of the Board
of Directors. The final determinations as to the actual corporate and individual
performance against the pre-established goals and objectives shall be made by
the Board of Directors in its sole discretion. The amount of the bonus shall be
based upon a stair step formula, where the bonus for achieving 100% of the
performance goals would be a payment of 30% of the Executive's annual base
salary (the "Target") (e.g. the Company would pay the Executive 50% of the
Target for 90% achievement of the performance goals and 110% of the Target for
108% of the performance goals). Executive's bonus shall be paid in one lump sum
to Executive at such time as other executive bonuses are paid.
Other Benefits. During the Employment Period, the Executive shall receive such
life insurance, disability insurance, pension, health insurance, holiday,
vacation and sick pay benefits and other benefits which the Company extends, as
a matter of policy, to its executive employees and, except as otherwise provided
herein, shall be entitled to participate in all deferred compensation and other
incentive plans of the Company, including the Feather River State Bank Employee
Stock Ownership Plan, on the same basis as other like employees of the Company.
Without limiting the generality of the foregoing, the Executive shall be
entitled to four (4) weeks vacation during each year of the Employment Period,
which shall be scheduled in the 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, and thereafter the
Executive shall cease to accrue vacation thereafter until used.
Insurance Policies. The Company shall maintain for Executive a separate term
life insurance policy (such policy to be designated by the Executive) in the
amount of at least $400,000 on the life of the Executive, over and above the
standard group insurance benefits provided by the Company to be maintained in
force during the Term of the Agreement, the beneficiary of which shall be
designated by the Executive. The Company acknowledges that such term life
insurance policy is currently owned by the Executive and shall continue to be
owned by the Executive during and after the Executive's employment hereunder. In
addition, the Company shall maintain for the Executive during the Term of the
Agreement a separate non-cancelable disability insurance, it being understood
and agreed that such policy shall have terms and conditions, and be issued by an
insurer, satisfactory to the Executive.
Business Expenses. During the Employment Period, the Company shall promptly
reimburse the Executive for all documented reasonable business expenses incurred
by the Executive in the performance of his duties under this Agreement, in
accordance with the Company's policies and standards of similar or comparable
companies.
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Car Allowance. The Company shall provide the Executive with a purchased or
leased automobile or pay to Executive as an automobile allowance the sum of $700
per month during the Employment Period, and, in addition, the Company shall pay
all reasonable operating expenses with regard to such automobile and shall
procure and maintain in force at Company's expense an insurance policy on such
automobile which shall include collision, comprehensive medical payments and
liability coverage with the limits mutually agreed to by the Company and the
Executive.
Club Membership. The Company shall provide the use of a country club membership
to the Executive for the promotion of the Company's business. The Company shall
be responsible for all costs related to such membership to the extent such costs
are business related (without regard, however, to whether such costs are
deductible for income tax purposes). If the Company is incapable of holding such
membership in corporate name, the Company shall provide to the Executive funds
necessary to acquire such membership. Executive shall be entitled to use of such
membership during the Term of this Agreement. During the Term of this Agreement,
Executive shall be entitled to purchase such membership interest from the
Company at a purchase price equal to the then fair market value of such
membership.
Moving Expenses. The Company shall pay to Executive all out of pocket moving
costs, including temporary living expenses for a period of up to 120 days and
any expenses incurred by the Executive in connection with the sale of his
principal residence, in connection with Executive's relocation to a location in
closer proximity to the Company.
Stock Options. Concurrently with the execution of this Agreement, the Company
and Executive will enter into a Stock Option Agreement, which shall be in the
form of Exhibit A attached hereto (subject to such changes as the parties shall
agree to after good faith negotiations during the thirty-day period immediately
following the execution hereof), pursuant to which the Company shall grant to
the Employee the option to purchase up to 90,000 shares of common stock of
Bancorp on the terms and conditions set forth therein. The Stock Option
Agreement shall provide that the per-share exercise price of such stock options
shall be the closing price per share of Bancorp's common stock on the applicable
vesting date. The Stock Option Agreement shall further provide that such stock
options shall vest and become exercisable in the following increments and at the
following times: (i) 55.555555% of the options (entitling the Executive to
purchase 50,000 shares of Bancorp's common stock) shall vest and become
exercisable upon execution of this Agreement; (ii) 22.222222% of the options
(entitling the Executive to purchase 20,000 shares of Bancorp's common stock)
shall vest and become exercisable on the day immediately preceding the first
anniversary of the date of this Agreement; and (iii) 22.222222% of the options
(entitling the Executive to purchase 20,000 shares of Bancorp's common stock)
shall vest and become exercisable on the day immediately preceding the second
anniversary of the date of this Agreement. Additionally, the Board of Directors
shall annually consider the grant to Executive of additional amounts of stock
options; provided, however, that this Agreement shall not obligate the Company
to issue any options to the Executive except as set forth in Exhibit A.
Salary Continuation. The Company and Executive shall enter into a Salary
Continuation Agreement which shall provide that if Executive continues to be
employed by the Company at least until he reaches age 65, upon retirement the
Executive will receive an annual payment of $75,000 per year for 15 years
following such retirement. The Executive will be vested for the accrual amount
each year and will become vested in the amount of each additional year's accrual
until he becomes 100% vested. The Executive shall be entitled to the entire
amount vested upon the termination of this Agreement. In the event of a Change
of Control, the Executive will become fully vested and, if the Agreement is
terminated within 12 months of the Change of Control, the Executive will be
entitled to the full amount of the Salary Continuation Agreement.
Termination of Employment.
Termination for Cause. The Company may terminate the Executive's employment
hereunder for cause.
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For purposes of this Agreement and subject to the Executive's opportunity to
cure as provided in Section 4(c) hereof, the Company shall have "cause" to
terminate the Executive's employment hereunder if Executive shall commit any
of the following:
the Executive has willfully and materially breached a material
provision of this Agreement, and, if such breach is curable, it has not been
cured or reasonably commenced being cured within 30 days after written notice
from the Company;
the Executive is convicted of or pleads guilty to a felony involving
financial misconduct or moral turpitude.
Termination for Good Reason. The Executive shall have the right at any time to
terminate his employment with the Company for any reason. For purposes of this
Agreement and subject to the Company's opportunity to cure as provided in
Section 4(c) hereof, the Executive shall have "good reason" to terminate his
employment hereunder if such termination shall be the result of:
a diminution during the Employment Period in the Executive's title, duties
or responsibilities as set forth in Section 2 hereof;
a breach by the Company of the compensation and benefits provisions set
forth in Section 3 hereof;
a material breach by the Company of any material terms of this Agreement; or
a Change of Control (as defined); provided, however, it shall only
constitute "good reason" if the Executive terminates this Agreement within 12
months of the Change in Control; or
the relocation of the Executive's principal place of employment to any
location more than 50 miles from the Company's present principal place of
business.
Notice and Opportunity to Cure. Notwithstanding the foregoing, it shall be a
condition precedent to the Company's right to terminate the Executive's
employment for "cause" and the Executive's right to terminate his employment for
"good reason" that (1) the party seeking the termination shall first have given
the other party written notice stating with specificity the reason for the
termination ("breach") and (2) if such breach is susceptible of cure or remedy,
a period of 30 days from and after the giving of such notice shall have elapsed
without the breaching party having effectively cured or remedied such breach
during such 30-day period, unless such breach cannot be cured or remedied within
30 days, in which case the period for remedy or cure shall be extended for a
reasonable time (not to exceed 30 days) provided the breaching party has made
and continues to make a diligent effort to effect such remedy or cure.
Termination Upon Death or Permanent and Total Disability. The Employment Period
shall be terminated by the death of the Executive. The Employment Period may be
terminated by the Company if the Executive shall be subject to a "permanent
disability" as such term is defined in the disability insurance purchased by the
Company pursuant to Section 3(d) ("Disability"). If the Employment Period is
terminated by reason of Disability of the Executive, the Company shall give
30-days' advance written notice to that effect to the Executive.
Definition of Change in Control. A "Change in Control" shall be deemed to have
taken place if:
there shall be consummated 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 capital stock are converted into cash,
securities or other property (other than a consolidation or merger of the
Company in which the holders of the Company's voting stock immediately prior to
the consolidation or merger shall, upon consummation of the consolidation or
merger, own at least 50% of the voting stock) or any sale, lease, exchange or
other transfer (in one transaction or a series of transactions contemplated or
arranged by any party as a single plan) of all or substantially all of the
assets of the Company; or
any person (as such term is used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) shall, after
the date hereof, become the beneficial owner (as defined in Rules 13d-3 and
13d-5 under the Exchange Act), directly or indirectly, of
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securities of the Company representing 30% or more of the voting power of all
of the then outstanding securities of the Company having the right under
ordinary circumstances to vote in an election of the Board (including, without
limitation, any securities of the Company that any such person has the right to
acquire pursuant to any agreement, or upon exercise of conversion rights,
warrants or options, or otherwise, shall be deemed beneficially owned by such
person); or
individuals who as of the date hereof constitute the entire Board and
any new directors whose election by the Company's shareholders, or whose
nomination for election by the Company's board, shall have been approved by a
vote of at least a majority of the directors then in office who either were
directors at the date hereof or whose election or nomination for election shall
have been so approved (the "Continuing Directors") shall cease for any reason to
constitute a majority of the members of the Board.
Consequences of Termination.
Termination Without Cause or for Good Reason. In the event of termination of the
Executive's employment hereunder by the Company without "cause" (other than upon
death or Disability) or by the Executive for "good reason" (each as defined in
Section 4 hereof), the Executive shall be entitled to the following severance
pay and benefits:
Severance Pay - a lump sum amount equal to twenty-four (24) months of
the Executive's annual Base Salary; provided, however, in the event the
Agreement is terminated either by the Company or the Executive following a
Change in Control, the Executive shall be entitled to receive two and one half
(2 1/2) times the highest annual compensation amount paid to the Executive
within the three years preceding the Change in Control;
Club and Car Allowance - continuation of the monthly car allowance and
club membership and related expenses set forth in Section 3 for a period of
twelve consecutive calendar months commencing on the first month following the
effective date of termination, including any period of time between the
effective date of termination and the first day of the first calendar month
following such effective date; and
Benefits Continuation - continuation for 30 months (the "Severance
Period") of coverage under the group medical care, disability and life insurance
benefit plans or arrangements in which the Executive is participating at the
time of termination with the Company continuing to pay its share of premiums and
associated costs as if Executive continued in the employ of the Company;
provided, however, that the Company's obligation to provide such coverages shall
be terminated if the Executive obtains comparable substitute coverage from
another employer at any time during the Severance Period. The Executive shall be
entitled, at the expiration of the Severance Period, to elect continued medical
coverage in accordance with Section 4980B of the Internal Revenue Code of 1986,
as amended (or any successor provision thereto) (the "Code"). In addition, the
Executive shall be entitled to continued coverage under the Company's medical
benefit plans pursuant to the terms of COBRA, provided that for the Severance
Period, such coverage will be at no cost to the Executive.
Termination Upon Disability. In the event of termination of the Executive's
employment hereunder by the Company on account of Disability, the Executive
shall be entitled to the following severance pay and benefits:
Severance Pay - severance payments in the form of continuation of the
Executive's Base Salary as in effect immediately prior to such termination for a
period of 6 months following the first date of Disability; and
Benefits Continuation - the same benefits as provided in Section
5(a)(ii) and (iii) above, to be provided during the Employment Period while the
Executive is suffering from Disability and for a period of 6 months following
the effective date of termination of employment by reason of Disability.
Termination Upon Death. In the event of termination of the Executive's
employment hereunder on account of the Executive's death, the Executive's heirs,
estate or personal representatives under law, as applicable, shall be entitled
to the payment of the Executive's Base Salary as in effect immediately prior to
death for a period of not less than two calendar months in addition to the
payment of benefits pursuant to the Executive's life insurance policies, as
provided for in Section 3(c) and (d) above. The Executive's beneficiary or
estate shall not be required to remit to the Company any payments received
pursuant to
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any life insurance policy purchased pursuant to Section 3(c) above.
Accrued Rights. Notwithstanding the foregoing provisions of this Section 5, in
the event of termination of the Executive's employment hereunder for any reason,
the Executive shall be entitled to payment of any unpaid portion of his Base
Salary through the effective date of termination, and payment of any accrued but
unpaid rights solely in accordance with the terms of any incentive bonus or
employee benefit plan or program of the Company.
Conditions to Severance Benefits. (i) The Company shall have the right to seek
repayment of the severance payments and benefits provided by this Section 5 in
the event that the Executive fails to honor in accordance with their terms the
provisions of Section 6 hereof. For purposes only of this Section, Executive
shall be treated as having failed to honor the provisions of Section 6 hereof
only upon the vote of two-thirds of the Board following notice of the alleged
failure by the Company to the Executive, an opportunity for the Executive to
cure the alleged failure for a period of 30 days from the date of such notice
and the Executive's opportunity to be heard on the issue by the Board.
Confidentiality. The Executive agrees that he will not at any time
during the Employment Period or at any time thereafter for any reason, in any
fashion, form or manner, either directly or indirectly, divulge, disclose or
communicate to any person, firm, corporation or other business entity, in any
manner whatsoever, any confidential information or trade secrets concerning the
business of the Company, including, without limiting the generality of the
foregoing, the techniques, methods or systems of its operation or management,
any information regarding its financial matters, or any other material
information concerning the business of the Company (including customer lists),
its manner of operation, its plans or other material data (the "Business"). The
provisions of this Section 6 shall not apply to (i) information disclosed in the
performance of the Executive's duties to the Company based on his good faith
belief that such a disclosure is in the best interests of Company; (ii)
information that is, at the time of the disclosure, public knowledge; (iii)
information disseminated by the Company to third parties in the ordinary course
of business; (iv) information lawfully received by the Executive from a third
party who, based upon inquiry by the Executive, is not bound by a confidential
relationship to the Company; or (v) information disclosed under a requirement of
law or as directed by applicable legal authority having jurisdiction over the
Executive.
Breach of Restrictive Covenants. The parties agree that a breach or
violation of Section 6 hereof will result in immediate and irreparable injury
and harm to the innocent party, and that such innocent party shall have, in
addition to any and all remedies of law and other consequences under this
Agreement, the right to seek an injunction, specific performance or other
equitable relief to prevent the violation of the obligations hereunder.
Notice. For the purposes of this Agreement, notices, demands and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or (unless otherwise
specified) mailed by United States certified or registered mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Company, to:
California Independent Bancorp
1227 Bridge Street, Suite C
Yuba City, CA 95991
Attn: Chairman of the Board of Directors
of California Independent Bancorp
If to the Executive, to:
Larry D. Hartwig
3603 E. Mandeville Place
Orange, California 92867
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or to such other respective addresses as the parties hereto shall designate to
the other by like notice, provided that notice of a change of address shall be
effective only upon receipt thereof.
Arbitration. Except as provided in Section 7 hereof, any dispute or
controversy arising under or in connection with this Agreement shall be settled
exclusively by arbitration in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
Waiver of Breach. Any waiver of any breach of this Agreement shall not
be construed to be a continuing waiver or consent to any subsequent breach on
the part either of the Executive or of the Company.
Non-Assignment; Successors. Neither party hereto may assign his or its
rights or delegate his or its duties under this Agreement without the prior
written consent of the other party; provided, however, that: (i) this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
the Company upon any sale of all or substantially all of the Company's assets,
or upon any merger, consolidation or reorganization of the Company with or into
any other corporation, all as though such successors and assigns of the Company
and their respective successors and assigns were the Company; and (ii) this
Agreement shall inure to the benefit of and be binding upon the heirs, assigns
or designees of the Executive to the extent of any payments due to them
hereunder. As used in this Agreement, the term "Company" shall be deemed to
refer to any such successor or assign of the Company referred to in the
preceding sentence.
Withholding of Taxes. All payments required to be made by the Company
to the Executive under this Agreement shall be subject to the withholding of
such amounts, if any, relating to tax, and other payroll deductions as the
Company may reasonably determine it should withhold pursuant to any applicable
law or regulation.
Excise Tax Provision. Notwithstanding anything elsewhere in this
Agreement to the contrary, if any of the payments or benefits provided for in
this Agreement, together with any other payments or benefits which the Executive
has the right to receive from the Company (or its affiliated companies), would
constitute a "parachute payment" as defined in Section 280G(b)(2) of the
Internal Revenue Code of 1986, as amended (the "Code"), the parties agrees that
the payments or benefits provided to the Executive pursuant to this Agreement
shall be reduced (in each case, in such manner as the Executive in his sole
discretion shall determine) so that the present value of the total amount
received by the Executive that would constitute a "parachute payment" will be
one dollar ($1.00) less than three (3) times the Executive's base amount (as
defined in Section 280G of the Code) and so that no portion of the payments or
benefits received by the Executive would be subject to the excise tax imposed by
Section 4999 of the Code.
Indemnification. To the fullest extent permitted by law, the Company
shall pay as and when incurred all expenses, including legal and attorney costs,
incurred by, or shall satisfy as and when entered or levied a judgement or fine
rendered or levied against, Executive in an action brought by a third party
against Executive (whether or not the Company is joined as a party defendant) to
impose a liability or penalty on Executive for an act alleged to have been
committed by Executive while an officer of the Company; provided, that Executive
was acting in good faith, within what Executive reasonably believed to be the
scope of Executive's employment or authority and for a purpose which the
Executive reasonably believed to be in the best interests of the Company or the
Company's shareholders, and in the case of a criminal proceeding, that the
Executive had no reasonable cause to believe that Executive's conduct was
unlawful. Payments authorized hereunder include amounts paid and expenses
incurred in settling any such action or threatened action. All rights hereunder
are limited by any applicable state or Federal laws.
Severability. To the extent any provision of this Agreement or portion
thereof shall be invalid or unenforceable, it shall be considered deleted
therefrom (but only for so long as such provision or portion thereof shall be
invalid or unenforceable) and the remainder of such provision and of this
Agreement shall be unaffected and shall continue in full force and effect.
Payment. All amounts payable by the Company to the Executive under this
Agreement shall be paid promptly on the dates required for such payment in this
Agreement without notice or demand. Any salary, benefits or other amounts paid
or to be paid to Executive or provided to or in respect of the Executive
pursuant to this Agreement shall not be reduced by amounts owing from Executive
to the
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Company.
Expenses. The Company shall pay or reimburse the Executive for all
legal fees and expenses incurred by him in the drafting, review and negotiation
of this Agreement.
Authority. Each of the parties hereto hereby represents that each has
taken all actions necessary in order to execute and deliver this Agreement.
Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
Governing Law. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of California, without giving
effect to the choice of law principles thereof.
Entire Agreement. This Agreement constitutes the entire agreement by
the Company and the Executive with respect to the subject matter hereof and
supersedes any and all prior agreements or understandings between the Executive
and the Company with respect to the subject matter hereof, whether written or
oral. This Agreement may be amended or modified only by a written instrument
executed by the Executive and the Company.
* * *
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CALIFORNIA INDEPENDENT BANCORP
By: ____________________________
Name: ____________________________
Title: ____________________________
FEATHER RIVER STATE BANK
By: ____________________________
Name: ____________________________
Title: ____________________________
-------------------------------------
Larry D. Hartwig
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