EXHIBIT 10.2
EMPLOYMENT AGREEMENT
DATED OCTOBER 31, 1997
BETWEEN
PACIFIC COMMUNITY BANKING GROUP
AND
MR. E. LYNN CASWELL
EMPLOYMENT AGREEMENT AND CONTRACT
THIS EMPLOYMENT AGREEMENT ("Agreement") is approved as of October 31, 1997, with
an effective date of September 1, 1997 (the effective date of employment), by
and between PACIFIC COMMUNITY BANKING GROUP ("PCBG" or "the Company"), with
headquarters located at 23332 Mill Creek Drive, Suite 230, Laguna Hills,
California 92653, and E. LYNN CASWELL, residing at 28551 Breckenridge Drive,
Laguna Niguel, California 92677 (the "Employee").
A. PCBG is a corporation organized for the purpose of carrying on the
business of a multi-bank holding and financial services company.
B. PCBG desires to avail itself of the skill, knowledge and experience of
Employee/Founder in order to insure the successful management of its
business;
C. The parties hereto desire to specify the terms of Employee's
employment by PCBG as its Chairman of the Board (as an Officer as well
as Director position) and Chief Executive Officer in this written
agreement which supersedes all prior agreements, whether written or
oral; and
D. The employment, the duration thereof, the compensation to be paid to
Employee, termination and other terms and conditions of employment
provided in this Agreement were duly fixed, stated, approved and
authorized for and on behalf of PCBG by action of its Board of
Directors at a meeting held on October 31, 1997.
NOW, THEREFORE, on the basis of the foregoing facts and in consideration of
the mutual covenants and agreements contained herein, the parties hereto agree
as follows:
1. TERM
(a) Subject to the provisions below, PCBG agrees to employ Employee,
and Employee agrees to be employed by PCBG, subject to the terms
and conditions of this Agreement, for a five-year, four-month
period commencing on September 1, 1997 and ending on December 31,
2002.
The term for which Employee is employed hereunder is hereinafter
referred to as the "Employment Period." The Term hereof shall be
automatically renewed for a five-year period, unless written notice
is given and received six months prior to the end of the contract
term of the intention of either party not to renew the same.
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2. DUTIES AND AUTHORITIES
(a) During the Employment Period, Employee shall devote all his
productive time, ability and attention to the business and
affairs of the Company. Employee shall not directly render
service of a business, commercial or professional nature to any
other person or organization without the consent of the Board of
Directors of PCBG, provided, however, that nothing contained
herein shall prohibit Employee from serving as an advisor or
director of any corporation which does not compete with the
business of the Company, or any charitable or non-profit
organization. Employee agrees during the Employment Period to
use his best efforts, skill and abilities to promote the
Company's interests and to serve as the Chairman of the Board (as
an Executive Officer as well as Director position) and Chief
Executive Officer of the Company. Employee's duties shall
include all responsibilities normally assigned to the Chairman
and Chief Executive Officer. The Company shall also cause
Employee to be nominated, and management proxies will be voted to
elect Employee as a director of PCBG during the entire term of
this Agreement, and as a director of any company that acquires
PCBG during the term hereof. Employee shall receive any and all
Director's fees paid to the Company's Directors during the term
of this Agreement.
3. COMPENSATION
(a). From the Commencement Date and continuing through the Term, the
Company agrees to pay Employee a base annual salary in the amount
of $135,000, payable in installments on the normal payroll dates
of the Company, except as amended by Section 3(m) of this
Agreement. Base salary, total cash compensation and total
compensation of Employee shall in no event be less than that of
any other Company officer or that of any officer of any
subsidiary or affiliate, adjusted annually. The Board of
Directors may elect to adjust upward the base annual salary and
other compensation of Employee from time to time, at its sole
discretion.
(b). During the term of this Agreement, Employee shall also receive
annual increases to the compensation described in Section 3.(a)
equal to the cumulative annual increase to the Orange County
Consumer Price Index as shown in the Los Angeles Times from time
to time, but not less than 3% per annum.
(c) During the term of this Agreement, the Company agrees within
sixty days after the end of the fiscal year to pay to Employee a
bonus of not less than 10% of Employee's base salary at the end
of the Company's fiscal year. The amount may be increased at the
discretion of the Board of Directors, or reduced or eliminated at
its discretion if the Company's net pretax
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profits are less than 0.80% of Average Assets of the Company for
the fiscal year.
(d) During the term of this Agreement, the Company agrees to pay to
Employee an automobile expense allowance in the amount of $900.00
per month, and necessary insurance costs, such amount to be
adjusted by 3% per annum. It is deemed in the Company's best
interests to provide commercial insurance to afford greater
protection to the Company from liability.
(e) During the Employment Period, Employee shall be eligible to
participate in any pension or profit-sharing plan, or similar
benefit plan or retirement program of the Company now or
hereafter existing, to the extent that he is eligible under the
provisions thereof and commensurate with his position in
relationship to other participants.
(f) Employee will be entitled to vacation of four (4) weeks per annum
during the term of this agreement, at the convenience of the
Company. Employee will also be granted appropriate and
reasonable time to attend industry meetings, seminars and
conventions which are important to the Company's business, or of
which the employee is an officer, Director or committee member.
Employee shall also be granted appropriate and reasonable time to
serve as a Director of the Federal Reserve Bank of San Francisco.
(g) The Company will provide Employee and his dependents with group
medical, accident, and health insurance coverage, without cost to
Employee, and the Company will provide Employee income
continuation disability insurance coverage consistent with
Employee's executive employment, and life insurance coverage in
an amount equal to four (4) times annual salary. Such insurance
coverages shall take effect at the earliest possible date after
the commencement date of this agreement. Company shall reimburse
Employee for the uninsured or deductible portions of Employee's
annual physical and Employee shall complete such physical each
year during the employment term.
(h) During the term of this Agreement, and effective as soon as
practicable one year after the effective date of this contract,
and subject to the successful completion of the first acquisition
or merger transaction, PCBG shall purchase an income
continuation policy or plan for the benefit of Employee to be
effective at Employee's normal retirement date or full disability
in an amount payable at $60,000 per annum for a period of fifteen
(15) years after retirement. As a retirement and/or pension
plan, the policy as funded shall be the property of Employee if
Employee completes the term of this Agreement, or upon his death
ownership shall pass to his spouse or to his estate should no
spouse be living or existent
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upon his death. The conditions contained in Section 9(a) herein
shall also apply, but shall not change the provisions of this
section.
(i) In order for the Employee to carry out the Company's business
interests, including entertainment, business development, and
community responsibilities, the Company agrees within one (1)
year of the effective date of this Agreement to purchase as owner
for Employee's benefit and in Employee's name, an equity
membership in an area country club of the Employee's choosing, at
a reasonable cost as applicable to such area clubs. Upon
Employee's termination or resignation for any reason, Employee
may purchase said membership from the Company at its unamortized
remaining balance, if any.
(j) Upon timely presentation to the Company of necessary and proper
documentation in accordance with the regulations of the Internal
Revenue Service, the Company will reimburse Employee for any
necessary, usual, customary and reasonable business expenses
incurred by Employee in connection with his position or for the
Company's benefit, including the costs of cellular phone service
related to Company business. The company will also pay for the
business related charges associated with the Employee's
memberships at the Center Club, Costa Mesa, and the Balboa Bay
Club, Newport Beach, as being advantageous to the Company's
business and business development interests.
Any expenses of Employee for his activities in industry
association groups, the Federal Reserve Bank of San Francisco, or
other business, industry, civic, or charitable organizations
which are not reimbursed by those groups will be reimbursed by
the Company to the Employee upon presentation of proper
documentation.
All of Employee's documented expenses paid for the benefit of the
Company's organization from inception, for start-up costs, travel
expense, and ongoing operations which have not been reimbursed
will be repaid to Employee or credited to Employee's stock
purchase commitment as a founding investor of the Company.
Documentation to be provided to Company's outside auditors and
accountants prior to stock distribution.
(k) The Company agrees to grant to the Employee, as both Chief
Executive Officer and as the Company Founder assuming the
associated risks of such an enterprise, the greater of two
hundred fifty thousand (250,000) ten year incentive stock option
shares, or options equal to 5% of the Company's outstanding
common stock after the option grant, at the earliest possible
date after the effective date of this Agreement. The options
will have an exercise price equal to the then fair market value
of the Company's common stock on the date of grant of said option
shares. Should regulations or the amount of outstanding Company
stock not allow for the full grant contained in this Agreement,
the remainder will be
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automatically granted as available under the Company's Stock
Option Plan. The options shall be vested immediately, but be
exercisable after one (1) year, in an amount not to exceed 33
1/3 % per year for the first three years after exercise date,
subject to Section 10 herein. The amount of the options
granted to Employee shall remain at the greater of two
hundred thousand (200,000) ten year incentive stock option
shares, or options equal to 5% of the Company's outstanding
common stock after the option grant during the term of this
Agreement, or as soon as thereafter available under the terms
of the Plan.
(l) During the organization and initiation of PCBG's business affairs
and operations Employee's salary and auto allowance will be
prorated as follows:
- One-half of the contract amount for the period from
September 1, 1997 to the last day of the month following the
first agreement on the principle terms of the Company's
first proposed acquisition or merger transaction.
- Full amount of the contract amount from the first of the
month thereafter.
- Benefits to be fully compensated or reimbursed from
September 1, 1997.
- Unpaid amounts, if any, from the above may be reimbursed or
credited to Employee's stock purchase commitment as a
founding investor of PCBG.
4. CONFIDENTIAL INFORMATION.
Without the prior written permission of the Company in each case,
Employee shall not publish, disclose or make available to any other
person, firm or corporation, either during or after the termination of
this Agreement, any confidential information which Employee may obtain
during the Employment Period, or which Employee may create prior to
the end of the Employment Period relating to the business of the
Company, or to the business of any customer or supplier of any of
them; provided, however, Employee may use such information during the
Employment Period for the benefit of the Company. At the termination
or expiration of this Agreement, Employee shall return all documents,
files, notes, writings and other tangible evidence of such
confidential information to the Company.
5. COVENANT NOT TO SOLICIT CUSTOMERS OR FELLOW EMPLOYEES.
Employee agrees that for a period of six (6) months following the
termination of his employment, assuming that such termination was
voluntary, he will not solicit
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the business of any customer with whom the Company or a subsidiary
bank has done business during the preceding one year period. If
that termination is by action of the Board of Directors he shall
be under no constraints regarding a covenant not to solicit
customers or fellow employees. Employee further agrees not to
solicit the services of any officer or employee of the Company
during such 6-month period.
6. REMEDY.
Employee understands that, because of the unique character of the
services to be rendered by Employee hereunder, the Company would not
have any adequate remedy at law for the material breach by Employee of
any one or more of the covenants set forth in this Agreement and
agrees that in the event of any such material breach, the Company may
in addition to the other remedies which may be available to it:
(a) Declare forfeited any moneys representing salary, contingent
payments or other fringe benefits due and payable to
Employee, and, or alternatively,
(b) File a suit in equity to enjoin Employee from the breach of
such covenants.
7. TERMINATION OF EMPLOYEE WITHOUT CAUSE.
The Board of Directors may not terminate Employee's employment
hereunder without Cause. Employee shall not have the right to resign
without cause. In the event that the Board of Directors and Employee
shall mutually agree that irreconcilable differences unrelated to
cause or any material breach of this agreement have arisen, they may
mutually agree to the separation of Employee. In such case, Employee
will be entitled to the remainder of all salary, benefits, options,
and allowances due under this contract, but in no event less than the
equivalent of two (2) years of said salary, benefits and allowances,
adjusted for all applicable state and federal taxes.
8. Termination of Employee for Cause.
(a) Notwithstanding anything herein contained, on or after the date
hereof and prior to the end of the Employment Period, the Company
shall have the right to terminate Employee's employment hereunder
for Cause (as defined in Subsection 10(b) below) by giving to
Employee written notice of such termination as of a date (not
earlier than thirty (30) days after such notice) to be specified
in such notice, and the Employment Period shall terminate on the
date so specified, whereupon Employee shall be entitled to
receive six (6) months salary at the rate provided in Section 3,
plus his accrued vacation pay; provided, however, that if
termination is due to physical or mental disability of Employee,
such termination shall not affect any rights which Employee may
have at the time of termination
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pursuant to any insurance or other death benefit, bonus,
retirement, or arrangements of the Company; or any stock option
plan or any options thereunder, which rights shall continue to
be governed by the provisions of such plans and arrangements,
and Sections 7, 8, and 9 of this Agreement.
(b) For purposes of this Agreement, "Cause" shall mean the
determination by the Board of Directors, acting in good faith and
by two-thirds vote in a duly constituted meeting, that Employee
has (i) willfully failed to perform or habitually neglected the
appropriate duties which he is required to perform hereunder; or
(ii) willfully failed to follow any significant policy of the
Company which materially or adversely affects the condition of
the Company; or (iii) engaged in any activity in contravention of
any significant company policy, statute, regulation or
governmental policy which materially or adversely affects the
Company's condition; or (iv) willfully refused to follow any
lawful and appropriate instruction from the Board of Directors
unless Employee asserts that compliance with such instruction
would cause the Company or Employee to violate any statute,
regulation, governmental or Company policy; or (v) subject to
Subsection (c) below, become physically or mentally disabled and
evidences his inability to discharge his duties as Chief
Executive Officer of the Company; or (vi) been convicted of or
pleaded guilty or nolo contendere to any felony; or (vii)
committed any act which would cause termination of coverage under
the Company's Bond as to Employee, as distinguished from
termination of coverage as to the Company as a whole. For
purposes of this Agreement, "Cause" shall also mean the Company
is required to remove or replace Employee by formal order or
instruction, including a consent order or agreement, from the
California State Banking Department, the Federal Reserve Bank, or
any other supervisory authority having jurisdiction.
(c) If Employee becomes disabled and such disability continues for a
period of three hundred and sixty-five (365) consecutive days,
then upon expiration of such 365-day period, if the term of this
Agreement has not already expired, the Company may, in its
discretion, terminate the Agreement and all benefits due
hereunder, but Employee shall be entitled upon such termination
to receive disability payments in accordance with such disability
plan as may be established for the payment of disability
benefits; provided, however, that if such disability is job
related, as determined by an arbitrator mutually acceptable to
the Company and Employee or Employee's representative, then the
compensation due hereunder shall continue for the entire
remaining term of this Agreement, but not less than three (3)
years, and all options shall be handled as described in Section 9
under the "consulting" provisions therein. The provisions of
Sections 3(g) and 3(h) shall also apply if Employee is disabled,
in addition to the terms of this section.
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9. (a) Should the Company determine to sell to or merge with another
company, corporation, firm, or individual(s); or engage in a
consolidation, dissolution or transfer of the assets of the
Company, internally or externally in such a manner as to
fundamentally change its existing structure, or transfer or sell
effective (20% or more) or actual (50% or more) controlling
ownership of the Company, the Company will, at the conclusion of
such activity, and as a condition thereof, pay all remaining
salary, benefits, and allowances due the Employee under this
contract, but in no event, not less than the equivalent of three
(3) years of said salary, benefits and allowances with the gross
amount increased and adjusted for all applicable state and
federal taxes. All other rights or benefits granted to Employee
under the terms of this Agreement shall be immediately vested.
(b) Such payment shall terminate this Agreement in all respects, but
shall not prohibit Employee from continuing as an Employee under
a new agreement with the Company or a successor company. Upon
such events as described in Sections 7 and 8 herein, Employee
will become a consultant of the Company or a successor company,
without employment restriction, at a payment of $1.00 per year
for a period equal to the remaining grant period of any
unexercised stock options, and such options or replacement
options shall remain in force for the full term of their original
grant. Employee, at his sole discretion only, may waive the
provisions of this Section.
10. With respect to any stock options issued to the Employee that were
outstanding on the date of the termination of his employment under
Sections 8 and 9, any options which would become exercisable had the
Employee remained in the employ of the Company through the end of the
Employment Period but which are not exercisable on the effective date
of the Employee's termination of employment under this Section 10
shall automatically become exercisable upon any such termination, and
shall remain exercisable in full, as described in Sections 8 and 9
herein.
11. The parties to this Employment Agreement and Contract agree that the
compensation provisions are in all respects consistent with the
experience, knowledge and skills of Employee, the risks to him
associated with his position as Company founder, as well as the
current general market conditions for financial industry executives
with similar experience, knowledge, skills, and industry standing to
that of the Employee. Nevertheless, Employee, as the Company's
organizer, founder and initial shareholder, may at his sole discretion
during the Employment Period, elect to postpone, waive, or otherwise
modify (reduce to the Company's benefit) the terms and provisions of
Sections Three (3) and Nine (9) of this Agreement if he deems such
actions to be in the best interests of the Company. Notwithstanding
the foregoing, the lack of any such postponement, waiver, or other
such modification shall not be construed as a failure to consider the
Company's best interests. Nor shall any such postponement, waiver, or
other
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such modification as to one or more provisions imply or be
construed to imply a modification of any other provision contained
herein, or that this Agreement in whole or in part is not in the
best interests of PCBG.
12 TERMINATION UPON EMPLOYEE'S DEATH; EFFECT OF TERMINATION ON OTHER
PLANS.
(a) Notwithstanding anything herein contained, if Employee shall die
this Agreement shall terminate on the date of Employee's death,
whereupon Employee's estate shall be entitled to receive his
salary, accrued vacation, and any bonus earned up through the
date of termination. Such termination shall not affect any
rights which Employee may have at the time of his death pursuant
to any other death benefit, bonus, or retirement benefit.
Additionally, health insurance benefits for the Employee's spouse
will be continued for a period of one year.
(b) Notwithstanding anything herein contained, any termination of
employment under this Section 11 shall not affect any accrued
rights which Employee may have at the time of such termination,
including, but not limited to, any of the Company's plans for
arrangements for insurance, vacation, retirement, and stock
options, which then accrued rights shall continue to be governed
by the provisions of such plans and arrangements to the extent
they are not inconsistent with the terms of this Agreement.
13. MODIFICATION.
This Agreement sets forth the entire understanding of the parties with
respect to the subject matter hereof, supersedes all existing
agreements between them concerning such subject matter, and may be
modified only by written instrument duly executed by each party.
14. NOTICES.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested or delivered against receipt to the party set
forth in the preamble to this Agreement (or to such other address as
the party shall have furnished in writing in accordance with the
provisions of this Section 13). Notice to the estate of Employee
shall be sufficient if addressed to Employee as provided in this
Section 13. Any notice or other communication given by certified mail
shall be deemed given at the time of receipted certification thereof.
15. DISPUTE RESOLUTION PROCEDURES.
Any controversy or claim arising out of this Agreement or the breach
thereof, or the interpretation thereof, except for assertions of fraud
or illegalities, shall be settled by binding arbitration in accordance
with the Rules of the American
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Arbitration Association; and judgment upon the award rendered in
such arbitration shall be final and may be entered in any court
having jurisdiction thereof. Notice of the demand for arbitration
shall be filed in writing with the other party to this Agreement and
with the American Arbitration Association. In no event shall the
demand for arbitration be made after the date when institution or
legal or equitable proceedings based on such claim, dispute or other
matters in question would be barred by the applicable statute of
limitations. This agreement to arbitrate shall be specifically
enforceable under the prevailing arbitration law. Any party
desiring to initiate arbitration procedures hereunder shall serve
written notice on the other party. The parties agree that an
arbitrator shall be selected pursuant to these provisions within
thirty (30) days of the notice of arbitration. In the event of any
arbitration pursuant to these provisions, the parties shall retain
the rights of all discovery provided pursuant to the California Code
of Civil Procedure and the Rules thereunder, except that all time
periods contained in said Code and Rules shall be shortened by fifty
percent (50%) for purposes of arbitration proceedings hereunder.
Any arbitration initiated pursuant to these provisions shall be on
an expedited basis and the dispute shall be heard within one hundred
twenty (120) days following the serving of the notice of arbitration
and a written decision shall be rendered within sixty (60) days
thereafter. All rights, causes of action, remedies and defenses
available under California law and equity are available to the
parties hereto and shall be applicable as though in a court of law.
The parties shall share equally all costs of any such arbitration.
16. INDEMNIFICATION.
The Company shall use its most diligent and best efforts to obtain and
maintain a Directors and Officers Liability Insurance Policy in the
largest amount available or reasonably affordable. In addition, to
the fullest extent allowed by law, the Company shall indemnify
Employee for any and all of his actions, or forbearance of any action,
as an employee and Director of the Company, carried out or undertaken
in good faith in the course of his duties, even if such is held to be
negligent. The Company will indemnify Employee, defend, and bear the
cost of defense with regard to any action or threatened action brought
by a third party against the Employee (whether or not the Company is
joined or included as a party defendant) and/or the Company. This
indemnification shall include not only the costs of defense, but also
any other expenses, judgements, fines, settlements, or other amounts
actually and reasonably incurred. This indemnification does not and
will not include illegal acts knowingly and willfully carried out by
the Employee, but will include all actions carried out by the Employee
acting in good faith and in a manner the Employee reasonably believed
to be in the best interest of the Company, so long as the alleged
actions by Employee arose out of and was within the course and full
scope of his employment as an Officer and Director of the Company.
Such indemnification shall also apply to any and all subsidiaries of
the Company as regards the actions of Employee and his involvement and
actions within or regarding those subsidiaries.
17. MISCELLANEOUS.
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(a) This Agreement is drawn to be effective in the State of
California and shall be construed in accordance with California
laws, except to the extent superseded by any other federal law.
No amendment or variation of the terms of this Agreement shall be
valid unless made in writing and signed by Employee and a duly
authorized representative of the Company.
(b) Any waiver by either party of a breach of any provision of this
Agreement shall not operate as to be construed to be a waiver of
any other breach of such provision or of any breach of any other
provision of this Agreement. The failure of a party to insist
upon strict adherence to any term of this Agreement on one or
more occasions shall not be considered a waiver or deprive that
party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must
be in writing.
(c) Employee's rights and obligations under this Agreement shall not
be transferable by assignment or otherwise, such rights shall not
be subject to commutation, encumbrance or the claims of
Employee's creditors, and any attempt to do any of the foregoing
shall be void. The provisions of this Agreement shall be binding
upon and inure to the benefit of the Company, their successors
and those who are its assigns under Section 8.
(d) This Agreement does not create, and shall not be construed as
creating, any rights enforceable by a person not a party to this
Agreement (except as provided in Subsection (c) above.
(e) The headings in this Agreement are solely for the convenience of
reference and shall be given no effect on the construction or
interpretation of this Agreement.
(f) This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. It shall
be governed by and construed in accordance with the laws of the
State of California, without giving effect to conflict of laws,
except where federal law governs.
18. RESIGNATION AS DIRECTOR UPON TERMINATION
Upon termination of this Agreement, Employee, if he is then serving as
a director of the Company, agrees to immediately resign his position
as a director, unless otherwise agreed, by giving written notice of
his resignation to the Secretary of the Board of Directors of the
Company.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be
signed by its duly authorized officer or representative and Employee
has executed this Agreement to be effective as of the day and year
written above on Page 1 herein.
PACIFIC COMMUNITY BANKING GROUP By: /s/ E. Lynn Caswell
-----------------------------
E. Lynn Caswell
Chairman and Chief Executive Officer
EMPLOYEE: By: /s/ E. Lynn Caswell
-----------------------------
E. Lynn Caswell
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