EXHIBIT 10.7
PACIFIC COMMERCE BANK
EMPLOYMENT AGREEMENT
THIS AGREEMENT, is made by and between THOMAS D. MICHELLI (the
"Executive") and PACIFIC COMMERCE BANK, a California banking corporation (the
"Bank").
In consideration of the mutual covenants of the parties hereto, it is
agreed that from and after the Commencement Date, the Bank shall employ the
Executive, and the Executive shall work for the Bank, on the following terms
and conditions:
A. TERM OF EMPLOYMENT:
1. TERM. The Bank hereby employs the Executive and the Executive
hereby accepts employment with the Bank for the period of five (5) years (the
"Term"), commencing with the Commencement Date, subject, however, to prior
termination of this Agreement, as hereinafter provided. Where used herein,
"Term" shall refer to the entire period of employment of the Executive by the
Bank hereunder, whether for the period provided above, or whether terminated
earlier as hereinafter provided.
2. COMMENCEMENT DATE. The Term of this Agreement shall commence as of
November 1, 1995 (the "Commencement Date").
B. DUTIES OF EXECUTIVE.
1. DUTIES. The Executive shall serve as President and Chief Executive
Officer of the Bank. Such services shall be performed by the Executive
faithfully, diligently and to the best of his ability and efforts consistent
with the highest and best standards of the banking industry, and shall devote
his full time and effort to such employment.
As the President and Chief Executive Officer of the Bank, the Executive
shall have, subject to policies established by the Board of Directors, the
full power and authority to supervise all personnel, be responsible for all
operations and lending activities, to supervise public relations and
advertising, be responsible for reports to the Board of Directors and to all
applicable regulatory authorities, and to manage and conduct all other
business of the Bank. All such powers and authorities herein given to the
Executive shall be subject to the law vested in the Board of Directors of the
Bank and in the Bank's shareholders.
2. CONFLICTS OF INTEREST. Except as permitted by the prior written
consent of the Board of Directors of the Bank, during the term of this
Agreement, the Executive (i) shall devote the Executive's entire productive
time, ability and attention to the business of the Bank, (ii) 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 is in conflict with the Bank's interests,
(iii) shall not directly or indirectly engage in any activity competitive
with or adverse to the Bank's business or welfare, whether alone, as a
partner, or as an officer, director or employee, and (iv) shall not be more
than a ten percent (10%) shareholder of any competitive entity.
C. COMPENSATION.
1. BASE SALARY. For the Executive's services hereunder, the Bank shall
pay or cause to be paid as a base salary ("Base Salary") to the Executive the
amount of One Hundred Twenty Thousand Dollars ($120,000.00) per year during
each of the years of the Term of this Agreement, beginning with the
Commencement Date; provided, however, that such Base Salary shall be reviewed
and adjusted annually by the Board of Directors of the Bank in accordance
with the Board's evaluation of the performance of the Executive.
2. BONUS COMPENSATION. Commencing with the fiscal year of the Bank
ending December 31, 1995, for each fiscal year in which this Agreement is in
effect (prorated for any of such year for which the Agreement is in effect
for only part of the year), the Executive shall be entitled to receive as an
incentive bonus, four and one-half percent (4 1/2) of the Bank's net earnings
before income and franchise taxes for such fiscal year, provided, however,
that such Bonus Compensation shall be reviewed and adjusted annually by the
Board of Directors of the Bank in accordance with the Board's evaluation of
the performance of the Executive. The bonus herein shall be paid to the
Executive within fifteen (15) days following the end of the fiscal year. Any
amounts received by the Executive hereunder shall be subject to adjustment
within thirty (30) days after issuance of the Bank's audited financial
statements for any year in which a bonus is calculated, to the extent that
the "net earnings" set forth therein vary from that which had been calculated
and upon which such bonus was paid.
D. EXECUTIVE BENEFITS:
1. VACATION. The Executive shall be entitled to a vacation each year
during the Term, which vacation shall not be more than four (4) weeks per
year. The time for such vacation shall be by mutual agreement to the
Executive and the Bank; provided, however, that the Executive is required to
and shall take at least two (2) weeks of said vacation, which shall be taken
consecutively. It is further agreed that said vacation time shall not be
accumulated from year to year. However, the Executive shall have until March
31 of the following year to use any vacation time not used during the
immediately preceding year.
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2. AUTOMOBILE. During the Term hereunder, the Bank shall provide the
Executive, for the Executive's sole use, a full-size executive-class
automobile, the type and make of which to be determined by the Bank. Except
for expenses of fuel in connection with the Executive's personal use of such
automobile (which expense shall be paid by the Executive), the Bank shall pay
all operating expenses of any nature whatsoever with regard to such
automobile provided the 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 deductible compensation to the Executive. The Bank shall also
procure and maintain in force throughout the duration of the Term a full
coverage insurance policy on said automobile, with coverage, limits and terms
to be determined by the Bank.
3. GROUP MEDICAL AND LIFE INSURANCE BENEFITS. The Bank shall provide
for the Executive, his spouse and dependents, at the Bank's expense,
participation in medical, accident, and health insurance benefits equivalent
to the normal and customary benefits currently available under California
Banker's Association Group Insurance Program for an employee of the
Executive's salary level, and life insurance coverage for the Executive in
the amount equal to three times the Executive's total compensation earned
during the past year. Said coverage shall be in existence or take effect as
of the Commencement Date hereof, shall continue throughout the Term and may
continue thereafter in accordance with the terms of subparagraph F.2 and F.4
hereof.
4. SICK LEAVE. The Executive shall be entitled to one (1) day for each
calendar month worked during the first year of this Agreement, and thereafter
twelve (12) days of sick leave each year. Said sick leave shall not be
accumulated from year to year.
E. BUSINESS EXPENSES AND REIMBURSEMENTS.
1. BUSINESS EXPENSES. The Executive shall be entitled to reimbursement
by the Bank for any reasonable, ordinary and necessary business expenses
incurred by the Executive in the performance of the Executive's duties and in
acting for the Bank during the Term, which types of expenditures shall be
determined by the Board of Directors, which shall include memberships in such
clubs and civil groups that will assist in developing the business of the
Bank, provided that
a. 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 and not as deductible compensation to the Executive; and
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b. The 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 deductible business expenses of the Bank and not as
deductible compensation to the Executive.
2. CONFERENCE EXPENSES. The Executive shall be entitled to
reimbursement by the Bank for his reasonable ordinary expenses incurred by
the Executive and his spouse in attending banking conferences conducted by
recognized banking groups such as the Western Bank Association, Independent
Banker's Association, California Banker's Association, and American Banker's
Association. It is expressly agreed and understood, however, that the Bank's
Board of Directors' approval shall be necessary prior to the attendance by
the Executive at any such conference.
F. TERMINATION
1. FOR CAUSE OR DISABILITY. The Bank may terminate this Agreement at
any time without further obligation or liability of the Bank to the
Executive, by action of the Board of Directors, if the Executive fails to
perform or habitually neglects the Executive's duties, if the Executive
engages in illegal activities which materially adversely affect the Bank's
reputation in the community or which evidence the lack of the Executive's
fitness or ability to perform the Executive's duties as determined by the
Board of Directors. This Agreement may also be terminated if the Executive
is found by the Bank's Board of Directors to be physically or mentally
disabled (as hereinafter defined). Such termination shall not prejudice any
remedy which the Bank may have at law, in equity, or under this Agreement.
For purposes of this Agreement only, physical or mental disability shall
be defined as the Executive being unable to fully perform under this
Agreement for a period of ninety (90) days out of any one hundred twenty
(120) day period. If there should be a dispute between the Bank and the
Executive as to the Executive's physical 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 Society. The certification of
such physician or psychiatrist as to the question in dispute shall be final
and binding upon the parties thereto.
2. WITHOUT CAUSE. Notwithstanding anything to the contrary contained
herein, it is agreed by the parties hereto that the Bank may at any time
elect to terminate this Agreement and Executive's employment by the Bank for
any reason by action of its Board of Directors. Such termination shall be
effective upon 30 days' notice to the Executive from the Bank, and all
benefits provided by the Bank to the Executive hereunder shall thereupon
cease, other than (A) the benefits
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provided to the Executive as described in the succeeding paragraph of this
subparagraph F.2 and (B) the insurance benefits provided to the Executive
hereunder as follows: (i) all group health insurance maintained by the Bank
to provide medical care (as defined in Section 213(d) of the Internal Revenue
Code of 1986, as amended) for the Executive, his spouse and dependents shall
be continued for eighteen (18) months following the effective date of such
termination. The Executive shall notify the Bank or the Bank's group health
plan administrator that he elects Consolidated Omnibus Budget Reconciliation
Act of 1986 ("COBRA") continuation coverage within sixty (60) days of the
later of (a) his date of termination or (b) the date he is given notice of
his right to elect COBRA continuation coverage, in order to qualify for
health insurance benefits during the eighteen (18) month period following the
effective date of his termination. In the event of such notification by the
Executive, the Bank shall pay all premiums to the Bank's group health plan on
behalf of the Executive on the account of such COBRA continuation coverage;
and (ii) the Bank shall pay all premiums on all other insurance benefits
maintained by the Bank for the Executive, his spouse and dependents as
delineated in subparagraph D.3 hereof for eighteen (18) months following the
effective date of such termination.
It is agreed that in the event of such Termination without cause, the
Executive shall be paid a lump sum payment (net of taxes) equal to two times
the Executive's Base Salary and shall also be paid an amount equal to his
accrued but unpaid bonus plus accrued but unpaid vacation days (in accordance
with subparagraph D.1 hereof) and accrued ESOP in lump sum upon the effective
date of termination of this Agreement in accordance with this subparagraph
F.2.
3. BY SUPERVISORY AUTHORITY. This Agreement shall terminate
immediately without further liability or obligation of the Bank to the
Executive (i) if the Bank is closed or taken over by the State Banking
Department or other supervisory authority, including the FDIC, or (ii) if any
such supervisory authority should exercise its cease and desist powers to
remove Executive from office.
4. MERGER OR CORPORATE DISSOLUTION. In the event of: (i) a merger in
which the Bank is not the surviving corporation, (ii) a consolidation, (iii)
a transfer of all or substantially all of the assets of Bank, (iv) any other
corporate reorganization where there is a change of ownership of at least
twenty percent (20%), or in the event of a voluntary or involuntary
dissolution of Bank, as a result of which Executive's employment with the
Bank is terminated at any time within one (1) year from the effective date of
such event, the Executive shall be entitled to receive a lump sum payment
upon such termination an amount equal to three year's then current Base
Salary, his accrued but unpaid bonus and any accrued but unpaid vacation days
(in accordance with subparagraph D.1 hereof) and accrued ESOP; provided,
however, that this subparagraph shall be inapplicable in the event
Executive's employment is terminated during this one (1) year period for any
of the reasons described in subparagraph F.1 hereof. In addition to the
benefits described above in this subparagraph F.4, the Executive shall
receive the insurance benefits provided hereunder as follows: (i) all group
health insurance maintained by the Bank to
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provide medical care (as defined in Section 213(d) of the Internal Revenue
Code of 1986, as amended) for the Executive, his spouse and dependents shall
be continued for eighteen (18) months following the effective date of such
termination. The Executive shall notify the Bank or the Bank's group health
plan administrator that he elects Consolidated Omnibus Budget Reconciliation
Act of 1986 ("COBRA") continuation coverage within sixty (60) days of the
later of (a) his date of termination or (b) the date he is given notice of
his right to elect COBRA continuation coverage, in order to qualify for
health insurance benefits during the eighteen (18) month period following the
effective date of his termination. In the event of such notification by the
Executive, the Bank shall pay all premiums to the Bank's group health plan on
behalf of the Executive on account of such COBRA continuation coverage; and
(ii) the Bank shall pay all premiums on all other insurance benefits
maintained by the Bank for the Executive, his spouse and dependents as
delineated in subparagraph D.3 hereof for eighteen (18) months following the
effective date of such termination.
5. EFFECT OF TERMINATION. Notwithstanding any other provision of
this paragraph F to the contrary, in the event of termination of this
Agreement by any of the manners specified herein or by the Executive prior to
the completion of the Term, the Executive shall be entitled to the salary
earned by the Executive prior to the date of termination as provided for in
this Agreement computed PRO RATA up to and including that date; however, the
Executive shall be entitled to no further compensation for services rendered
after the effective date of termination except as provided in subparagraph
F.2 above regarding termination without cause and subparagraph F.4 above
regarding merger or corporate dissolution. Executive further agrees that in
the event of any such termination, he will resign from the Board of Directors
of the Bank as of the effective date of termination of this Agreement.
G. GENERAL PROVISIONS.
1. RETURN OF DOCUMENTS. The Executive expressly agrees that all
manuals, documents, files, reports, studies, instruments or other materials
used and/or developed by the Executive are solely the property of the Bank,
and that the Executive has no right, title or interest therein. Upon
termination of this Agreement, the Executive or the Executive's
representative shall promptly deliver possession of all said property to the
Bank in good condition.
2. NOTICES. Any notice, demand or other communication required or
permitted hereunder shall be deemed to be properly given when personally
served in writing, when deposited in the United States mail, postage prepaid,
or when communicated to a public telegraph company for transmittal addressed
to the party at his or its address.
3. APPLICABLE LAW. Except to the extent governed by the laws of
the United States, this Agreement is to be governed by and construed in
accordance with the laws of the State of California.
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4. INVALID PROVISIONS. Should any provisions of this Agreement for any
reason be declared invalid, void, or unenforceable by a court of competent
jurisdiction, the validity and binding effect of any remaining portion shall
not be affected, and the remaining portions of this Agreement shall remain in
full force and effect as if this Agreement had been executed with said
provisions eliminated.
5. ENTIRE AGREEMENT. This Agreement contains the entire agreement of
the parties. It supersedes any and all other agreements, either oral or in
writing, between the parties hereto with respect to the employment of the
Executive by the Bank. Each party to this Agreement acknowledges that no
representation, inducements, promises or agreements, oral or otherwise, have
been made by any party, or anyone acting on behalf of any party, which are
not embodied herein, and that no other agreement, statement or promise not
contained in this Agreement shall be valid or binding. This Agreement may
not be modified or amended by oral agreement, but only by an agreement in
writing signed by the Bank and the Executive.
6. TAXES. All payments stipulated hereunder to be "lump sum" payments
shall be reduced by the Bank as appropriate to meet all tax withholding
requirements.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the date set forth below.
DATED: 11/1/95 PACIFIC COMMERCE BANK
By: /s/ Alfred B. Salganick, M.D
----------------------------
Alfred B. Salganick, M.D.
Chairman of the Board
DATED: 11/1/95 /s/ THOMAS D. MITCHELLI
-------------------------
THOMAS D. MITCHELLI
FIRST AMENDMENT
TO
EMPLOYMENT AGREEMENT
This First Amendment (the "Amendment") to Employment Agreement (the
"Agreement") is made and entered into as of April 22, 1998 by and among
Pacific Commerce Bank (the "Bank"), Scripps Bank, and Thomas D. Michelli (the
"Executive") with regard to the following:
A. As of the date of this Amendment the Bank is entering into an
Agreement and Plan of Merger with Scripps Bank under which the Bank will
merge (the "Merger") with and into Scripps Bank (the "Agreement and Plan of
Merger").
B. Upon the closing of the transactions contemplated by the Agreement
and Plan of Merger, Scripps Bank will assume all contractual obligations of
the Bank as a result of the Merger.
C. One of the contractual obligations of the Bank that would be assumed
by Scripps Bank as a result of the Merger would be the Agreement, under
which, among other things, the Executive is entitled to bonus compensation
based on the profitability of the Bank.
D. It is a condition to the obligation of Scripps Bank to effect the
Merger that the Bank and the Executive enter into an agreement to be
effective at the "Effective Time," as defined in the Agreement and Plan of
Merger, modifying the terms of the Agreement to provide for payments in
January of 1999 and January of 2000 of $50,000 each. The parties also desire
to memorialize the change in title that the Executive will hold following the
completion of the Merger.
E. The Executive has consented to the change proposed.
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. TITLE AND DUTIES. Paragraph B.1. of the Agreement is hereby deleted
in its entirety and replaced by the following:
The Executive shall serve as a Senior Vice President of Scripps Bank
following the "Effective Time" (as that term is defined in that certain
Agreement and Plan of Merger between the Bank and Scripps Bank) of the
merger of the Bank and Scripps Bank pursuant to the Agreement and Plan
of Merger between the Bank and Scripps Bank. The Executive shall have
such duties and responsibilities as shall be assigned from time to time
by the Chief Executive Officer of Scripps Bank or by the Board of
Directors or any duly authorized committee thereof of Scripps Bank. The
Executive shall perform his duties faithfully, diligently and to the best
of his ability and efforts consistent with the highest and best
standards of the banking industry, and he shall devote his full time and
efforts to such employment.
2. BONUS COMPENSATION. Paragraph C.2. of the Agreement is hereby
deleted in its entirety and replaced by the following:
Scripps Bank will pay the Executive a cash bonus of $50,000 on
January 15,1 1999 and a second cash bonus of $50,000 on January 15,
2000. These bonuses will be in addition to any other compensation to
which the Executive may be entitled under this Agreement or which may
otherwise be granted by Scripps Bank.
3. EFFECTIVENESS. This Amendment shall be effective only in the event
that the Effective Time occurs under the Agreement and Plan of Merger. In
the event of termination of the Agreement and Plan of Merger this Amendment
shall be null and void and the Agreement shall remain in effect without
reference to this Amendment. Notwithstanding any implication to the contrary
in this Amendment, Scripps Bank shall have no obligations under this
Amendment or the Agreement unless and until the Effective Time occurs.
4. ASSUMPTION OF OBLIGATIONS. Upon the Effective Time Scripps Bank
shall assume all obligations of the Bank under the Agreement as amended by
this Amendment. The Agreement, as amended by this Amendment continues in
full force and effect from the date of the Amendment, and shall be binding on
any successor to Scripps Bank.
5. ADVICE TO THE EXECUTIVE. The Executive represents to the other
parties that he has received such advice from his own tax, financial and
legal advisors as he has deemed appropriate. The Executive understands and
agrees that none of the Bank, Scripps Bank or either of their counsel have
provided tax advice or other advice for the benefit of the Executive in the
course of preparation of this Agreement and none of such counsel represent or
owe any particular duties to the Executive. The Executive agrees that he has
relied and will rely only on his own tax, financial and legal advisors
regarding the matters set forth in this Amendment.
6. DEFINITIONS. Each term not otherwise defined herein shall have the
meaning assigned in the document referenced at the first usage of the term.
7. NOTICES. Unless otherwise specifically permitted by this Agreement,
all notices or other communications required or permitted under this
Agreement shall be in writing, and shall be personally delivered or sent by
registered or certified mail, postage prepaid return receipt requested, or
sent by telecopy, provided that the telecopy cover sheet contain a notation
of the date and time of transmission, and shall be deemed received: (i) if
personally delivered, upon the date of delivery to the address of the person
to receive such notice, (ii) if mailed in accordance with the provisions of
this paragraph, two (2) business days after the date placed in the United
States mail, (iii) if mailed other than in accordance with the provisions of
this paragraph or mailed from outside the United
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States, upon the date of delivery to the address of the person to receive
such notice, or (iv) if given by telecopy, when sent. Notices shall be given
at the following addresses:
If to the Corporation:
Pacific Commerce Bank
1196 Third Avenue
Chula Vista, CA 91911
Fax (619) 425-9107
If to Scripps Bank:
Scripps Bank
7817 Ivanhoe Avenue, Suite 201
La Jolla, CA 92037
Attn: Chief Financial Officer
Fax (619) 551-6209
If to the Executive:
Thomas D. Michelli
1011 Vista Madera Lane
El Cajon, CA 92019-3578
The address for delivery of notices may be changed by the relevant party by
giving notice of such change in accordance with this paragraph.
8. COMPLETE AGREEMENT; MODIFICATIONS. The Agreement, as amended by
this Amendment, (i) constitutes the parties' entire agreement, including all
terms, conditions, definitions, warranties, representations, and covenants,
with respect to the subject matter hereof, (ii) merges all prior discussions
and negotiations between or among any or all of them as to the subject matter
hereof, and (iii) supersede and replace all terms, conditions, definitions,
warranties, representations, covenants, agreements, promises and
understandings, whether oral or written, with respect to the subject matter
hereof. This Amendment may not be amended, altered or modified except by a
writing signed by the party to be bound. With regard to such amendments,
alterations, or modifications, telecopied signatures shall be effective as
original signatures. Any amendment, alteration, or modification requiring
the signature of more than one party may be signed in counterparts.
Following the Effective Time the Bank shall not be considered to be a party
of its signature shall not be required on any amendment, alteration or
modification.
9. FURTHER ACTIONS. Each party agrees to perform any further acts and
execute and deliver any further documents reasonably necessary to carry out
the provisions of the Agreement, as amended by this Amendment.
10. ASSIGNMENT. No party may assign its rights under the Agreement, as
amended by this Amendment, without the prior written consent of the other
parties hereto (excluding the Bank following the Effective Time).
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11. SUCCESSORS AND ASSIGNS. The Agreement, as amended by this
Amendment, shall be binding upon and inure to the benefit of the parties,
their respective successors and permitted assigns.
12. SEVERABILITY. If any portion of this Agreement shall be held by a
court of competent jurisdiction to be invalid, void, or otherwise
unenforceable, the remaining provisions shall remain enforceable to the
fullest extent permitted by law if enforcement would not frustrate the
overall intent of the parties (as such intent is manifested by all
provisions of the Agreement including such invalid, void, or otherwise
unenforceable portion).
13. EXTENSION NOT A WAIVER. No delay or omission in the exercise of any
power, remedy, or right herein provided or otherwise available to any party
shall impair or affect the right of such party thereafter to exercise the
same. Any extension of time or other indulgence granted to a party hereunder
shall not otherwise alter or affect any power, remedy or right of any other
party, or the obligations of the party to whom such extension or indulgence
is granted except as specifically waived.
14. TIME OF ESSENCE. Time is of the essence of each and every term,
condition, obligation and provision hereof.
15. NO THIRD PARTY BENEFICIARIES. The Agreement, as amended by this
Amendment, and each and every provision thereof is for the exclusive benefit
of the parties hereto and the designated beneficiaries of the Executive and
not for the benefit of any third party.
16. ATTORNEYS' FEES. Should any litigation (including any proceedings
in a bankruptcy court) be commenced between the parties hereto or their
representatives concerning any provision of the Agreement, as amended by this
Amendment, or the rights and duties of any person or entity thereunder, the
party or parties prevailing in such litigation shall be entitled, in addition
to such other relief as may be granted, to the attorney's fees and court
costs incurred by reason of such litigation, including attorneys' and
experts' fees incurred in preparation for or investigation of any matter
relating to such litigation.
17. COUNTERPARTS. This Agreement may be signed in multiple counterparts
with the same force and effect as if all original signatures appeared on one
copy; and in the event this Agreement is signed in counterparts, each
counterpart shall be deemed an original and all of the counterparts shall be
deemed to be one agreement.
18. APPLICABLE LAW. This Agreement shall be construed in accordance
with, and governed by, the laws of the State of California.
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IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date set forth above.
/s/ Thomas D. Michelli
-----------------------
Thomas D. Michelli
PACIFIC COMMERCE BANK
By: /s/ [ILLEGIBLE]
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Its: Chairman
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SCRIPPS BANK
By: /s/ [ILLEGIBLE]
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Its: Chairman
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