EXHIBIT 10.3
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into effective the
1st day of January, 2003 (the "Effective Date"), by and between NORTHRIM
BANCORP, INC. and its wholly owned subsidiary, NORTHRIM BANK, a state-chartered
commercial bank, with its principal office in Anchorage, Alaska (collectively,
the "Employer"), and R. XXXX XXXXXXXX (the "Executive").
In consideration of the mutual promises made in this Agreement, the
parties agree as follows:
1. EMPLOYMENT.
Employer employs Executive and Executive accepts employment with
Employer as its Chairman, President and Chief Executive Officer.
2. TERM.
The term of this Agreement (the "Term") shall commence on the Effective
Date and shall continue through December 31, 2003; provided, however, that (i)
on January 1, 2004 and each succeeding January 1, the Term shall automatically
be extended for one additional year unless, not later than ninety (90) days
prior to any such January 1, either party shall have given written notice to the
other that it does not wish to extend the Term and (ii) such one year extensions
of the Term shall not occur on and after the January 1 of the year in which the
Executive will attain age sixty-five (65) but instead the Term shall be extended
only until the date of the Executive's sixty-fifth (65th) birthday. In the event
the Term is not extended, Executive shall have no rights to any of the severance
payments or benefits continuation described in Paragraph 5.
3. DUTIES.
The Executive will serve as Chairman, President and Chief Executive
Officer of the Employer. Executive shall render such executive, management and
administrative services and perform such tasks in connection with the affairs
and overall operation of the Employer as is customary for his position, subject
to the direction of Employer's Board of Directors. Executive shall devote
necessary time, attention and effort to Employer's business in order to properly
discharge his responsibilities under this Agreement.
4. COMPENSATION, BENEFITS, REIMBURSEMENT AND BONUS.
a. In consideration for all services rendered by
Executive during the term of this Agreement, Employer shall pay Executive an
annual base salary (before all customary and proper payroll deductions) of
$270,500, as adjusted from time to time ("Base Salary"). The Board of Directors
of the Employer shall review Executive's salary at the end of each year, in a
manner consistent with that used for all management employees of the Employer,
and in its sole discretion may adjust such salary commensurate with the
Executive's performance under this Agreement.
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b. Under the Employer's Incentive Compensation Plan,
Executive shall be eligible to receive an annual bonus based on performance as
defined by the Board of Directors. Executive's annual target bonus will equal
30% of Base Salary ("Target Bonus"). This is the amount payable for ambitious,
but expected, results as determined by the Board of Directors. Executive's bonus
may be more or less than this amount at the Board of Directors discretion but
may not exceed 40% of Base Salary.
c. Executive shall be eligible for stock option grants
under the Employer's Stock Option Plan. The timing and size of awards will be at
the discretion of the Board of Directors.
d. Executive shall also be entitled to receive an annual
contribution equal to 20% of annual Base Salary in accordance with the
Employer's Supplemental Executive Retirement Plan and the Executive may also
participate in the Employer's Deferred Compensation Plan.
e. Throughout the term of this Agreement, Employer shall
provide Executive with reasonable health insurance, disability and other
employee benefits. Executive shall participate in all employee benefit plans and
programs of Employer on a basis at least as favorable as that accorded to any
other officer of Employer. Employer shall reimburse Executive for his reasonable
expenses (including, without limitation, travel, entertainment, and similar
expenses) incurred in performing and promoting the business of Employer.
Executive shall present from time to time itemized accounts of any such
expenses, subject to any limits of company policy and the rules and regulations
of the Internal Revenue Service.
5. TERMINATION OF AGREEMENT.
a. TERMINATION DUE TO A CHANGE IN CONTROL. If Employer
(either Northrim BanCorp, Inc. or Northrim Bank) is subjected to a Change of
Control (as defined in Section 5(f)(i)), and either Employer or its assigns
terminates Executive's employment without Cause or Executive terminates his
employment for Good Reason within 730 days of such Change of Control, then
Employer shall pay Executive upon the effective date of such termination all
Base Salary earned and all reimbursable expenses incurred under this Agreement
through such termination date, plus a pro rata portion of any annual Target
Bonus for the year of termination. In addition, Employer shall pay Executive an
amount equal to three (3) times Executive's highest Base Salary over the prior
three (3) years, plus an amount equal to three (3) times the Target Bonus or
three (3) times the average bonus paid over the prior three (3) years, whichever
is greater. In addition, Employer shall provide the benefits described in
Sections 5(b)(i) and (ii) below. Provided, also, that the payment and benefits
described in this Section 5(a) will only be paid conditioned upon Executive
signing an agreement, in a form acceptable to Employer, that releases and holds
Employer harmless from all known and unknown claims and liabilities arising out
of Executive's employment with Employer or the performance of this Agreement
("Release Agreement").
b. TERMINATION BY EMPLOYER WITHOUT CAUSE OR BY EXECUTIVE
FOR GOOD REASON. If Employer terminates Executive's employment without Cause, or
if Executive terminates his employment for Good Reason, Employer shall pay
Executive upon the effective date of such termination all Base Salary earned and
all reimbursable expenses incurred under this Agreement through such termination
date, plus a pro rata portion of any annual Target Bonus for the year of
termination. In addition, Employer shall pay Executive an amount equal to two
(2) times
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Executive's highest Base Salary over the prior three (3) years, plus an amount
equal to two (2) times the Target Bonus or two (2) times the average bonus paid
over the prior three (3) years, whichever is greater. Provided, however, that
the payment and benefits described in this Section 5(b) will only be made
conditioned upon Executive signing a Release Agreement.
(i) BENEFITS CONTINUATION. In addition,
Executive shall be entitled to health and dental insurance benefits for a period
of eighteen (18) months following the termination of this Agreement. These
benefits will be provided at Employer's expense, but such period shall count
towards the Employer's continuation of coverage obligation under Section 4980B
of the Internal Revenue Code ("COBRA").
(ii) AGE AND SERVICE CREDIT. Executive shall also
be entitled to receive age credit and credit for period of service towards all
pension/SERP plans for the remaining period of time covered by this Agreement.
If Executive is hired by Employer, its assigns, any company in control of
Employer, or any company controlled by Employer during the period covered by
this Agreement, then Executive will be entitled to be treated for all purposes
relating to future compensation, benefits, and retirement, as if this Agreement
had never been terminated and as if Executive had performed his responsibilities
as an Executive throughout the period originally covered by this Agreement.
c. TERMINATION BY EMPLOYER FOR CAUSE OR BY EXECUTIVE
WITHOUT GOOD REASON. If Employer terminates Executive's employment for Cause or
if Executive terminates his employment without Good Reason, Employer shall pay
Executive upon the effective date of such termination only such Base Salary
earned and expenses reimbursable under this Agreement incurred through such
termination date. In such case, Executive shall have no right to receive
compensation or other benefits for any period after termination under this
Agreement.
d. TERMINATION DUE TO DISABILITY. If Employer terminates
Executive's employment on account of any mental or physical Disability that
prevents Executive from discharging his duties under this Agreement, Executive
shall be entitled to: (A) all Base Salary earned and reimbursement for expenses
incurred under this Agreement through the termination date, plus a pro rata
portion of any annual Target Bonus for the year of termination. In addition,
Employer shall pay Executive full Base Salary for the year following the
termination date (less the amount of any payments received by Executive during
such one (1) year period under any Employer-sponsored disability plan), and (B)
health and dental insurance benefits for a period of one (1) year following the
termination date, which benefits will be provided at Employer's expense, but
such period shall count towards the Employer's continuation of coverage
obligation under Section 4980B of Code (commonly referred to as "COBRA").
Provided, however, that the payment and benefits described in this Section 5(d)
will only be made conditioned upon Executive signing a Release Agreement.
e. TERMINATION UPON DEATH OF EXECUTIVE. Executive's term
of employment under this Agreement shall be terminated upon the death of
Executive. In such case, the Employer shall be obligated to pay to the surviving
spouse of Executive, of if there is none, to the Executive's estate: (A) that
portion of Executive's Base Salary that would otherwise have been paid to him
for the month in which his death occurred, and (B) any amounts due him pursuant
to the Employer's pension plan, any supplemental deferred compensation plan, and
any other death, insurance, employee benefit plan or stock benefit plan provided
to Executive by the Employer.
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f. TERMINATION DEFINITIONS.
(i) "CHANGE OF CONTROL." For purposes of this
Agreement, the term "Change of Control" shall mean the occurrence of one or more
of the following events: (A) One person or entity acquiring or otherwise
becoming the owner of twenty-five percent or more of Employer's outstanding
common stock; (B) Replacement of a majority of the incumbent directors of
Northrim BanCorp, Inc. or Northrim Bank by directors whose elections have not
been supported by a majority of the Board of either company, as appropriate; (C)
Dissolution or sale of fifty percent or more in value of the assets, of either
Northrim BanCorp, Inc. or Northrim Bank; or (D) A change "in the ownership or
effective control" or "in the ownership of a substantial portion of the assets"
of Employer, within the meaning of Section 280G of the Internal Revenue Code.
(ii) "CAUSE." For purposes of this Agreement,
termination for "Cause" shall include termination because Executive (A)
continually fails to substantially perform his duties with the Employer, (B) is
adjudged guilty of any crime involving a breach of his fiduciary duties to the
Employer, (C) is willfully and continually failing to comply with any law, rule,
or regulation (other than traffic violations or similar offenses) or final cease
and desist order of a regulatory agency having jurisdiction over Employer, or
(D) is unable to substantially perform his duties with the Employer due to drug
addiction or chronic alcoholism. Notwithstanding the foregoing, Executive shall
not be deemed to have been terminated for Cause unless and until there shall
have been delivered to him a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the entire membership
of the Employer's Board of Directors at a meeting of the Board called for such
purpose (after reasonable notice to Executive and an opportunity for him,
together with his counsel, to be heard before the Board), finding that in the
good faith opinion of the Board, he was guilty of conduct that constitutes Cause
(as defined above) and specifying the conduct in detail.
(iii) "DISABILITY." For purposes of this
Agreement, "Disability" shall mean a medically diagnosed physical or mental
impairment that may be expected to result in death, or to be of long, continued
duration, and that renders Executive incapable of performing the duties required
under this Agreement. Employer's Board of Directors, acting in good faith, shall
make the final determination of whether Executive is suffering under any
Disability (as herein defined) and, for purposes of making such determination,
may require Executive to submit himself to a physical examination by a physician
mutually agreed upon by the Executive and Employer's Board of Directors at
Employer's expense.
(iv) "GOOD REASON." For purposes of this
Agreement, termination for "Good Reason" shall mean termination by Executive as
a result of any material breach of this Agreement by Employer. Good Reason shall
include, but not be limited to: (A) a material reduction in Executive's
compensation defined as a reduction equal to or greater than five percent (5%)
of Executive's then annual base salary, (B) a material reduction in Executive's
duties and responsibilities, but not merely a change in title, or (C) relocation
of Executives primary workplace by more than fifty (50) miles.
6. EXCISE TAX GROSS-UP.
a. In the event that Executive becomes entitled to
payments and benefits described in Section 5 ("Payments and Benefits") and those
Payments and Benefits thereby trigger a
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"parachute payment" as defined by Section 280G of the Internal Revenue Code and
are subject to any excise tax imposed under Section 4999 of the Internal Revenue
Code of 1986 ("Excise Tax"), then Employer shall pay to or for the benefit of
Executive, an additional amount ("Gross-Up Payment") such that the net amount
retained by Executive after deduction of any Excise Tax on the Payments and
Benefits and any federal, state and local income tax and Excise Tax upon the
payments provided for under Section 5(a), shall be equal to the amount of the
Payments and Benefits.
b. For purposes of determining whether any of the
Payments and Benefits is subject to the Excise Tax and the amount of such Excise
Tax, the definitions of the Code apply.
c. For purposes of determining the amount of the
Gross-Up Payment, Executive shall be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation in the calendar year in which
the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of Executive's
residence on the termination date of employment, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and
local taxes based on the marginal rate referenced above. In the event that the
Excise Tax is subsequently determined to be less than the amount taken into
account hereunder at the termination date, Executive shall repay to Employer, at
the time that the amount of such reduction in Excise Tax is finally determined,
the portion of the Gross-Up Payment attributable to such reduction plus interest
on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of
the Code.
d. In the event that the Excise Tax is determined to
exceed the amount taken into account hereunder at the time of the termination of
Executive's employment (including by reason of any payment, the existence or
amount of which cannot be determined at the time of the Gross-Up Payment),
Employer shall make an additional Gross-Up Payment in respect of such excess
(plus any interest, penalties or additions payable by Executive with respect to
such excess, but only to the extent that such interest, penalties or additions
would not have been reduced by prompt payment by the Executive to the
appropriate tax authority of the Gross-Up Payments previously received) at the
time that the amount of such excess is finally determined.
e. Executive and Employer agree to reasonably cooperate
with the other in connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax with respect to
the Payments and Benefits.
7. COVENANT NOT TO COMPETE.
a. Executive agrees that for the term of this Agreement
and for a period of two (2) years after this Agreement is terminated pursuant to
Section 5(a) or (b) (with the understanding that the two (2) year period will be
shortened to one (1) year upon the completion of a transaction constituting a
Change of Control, as defined in Section 5(f)(i)), Executive will not directly
or indirectly be employed by, own, manage, operate, join, or benefit in any way
from any business activity that is competitive with Employer's business or
reasonably anticipated business of which Executive has knowledge. For purposes
of the foregoing, Executive will be deemed to be connected with such business if
the business is carried on by: (a) a partnership in which Executive is a general
or limited partner; or (b) a corporation of which Executive is a shareholder
(other than a
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shareholder owning less than 5% of the total outstanding shares of the
corporation), officer, director, employee or consultant.
b. The parties agree that if a trial judge with
jurisdiction over a dispute related to this Agreement should determine that the
restrictive covenant set forth above is unreasonably broad, the parties
authorize such trial judge to narrow the covenant so as to make it reasonable,
given all relevant circumstances, and to enforce such covenant. The provisions
of this paragraph shall survive termination of this Agreement.
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
a. During the term of Executive's employment and
thereafter, Executive agrees to hold Employer's Confidential Information in
strict confidence, and not disclose or use it at any time except as authorized
by Employer and for Employer's benefit. If anyone tries to compel Executive to
disclose any Confidential Information, by subpoena or otherwise, Executive
agrees immediately to notify Employer so that Employer may take any actions it
deems necessary to protect its interests. Executive's agreement to protect
Employer's Confidential Information applies both during the term of this
Agreement and after employment ends, regardless of the reason it ends.
b. "Confidential Information" includes, without
limitation, any information in whatever form that Employer considers to be
confidential, proprietary, information and that is not publicly or generally
available relating to Employer's: trade secrets (as defined by the Uniform Trade
Secrets Act); know-how; concepts; methods; research and development; product,
content and technology development plans; marketing plans; databases;
inventions; research data and mechanisms; software (including functional
specifications, source code and object code); procedures; engineering;
purchasing; accounting; marketing; sales; customers; advertisers; joint venture
partners; suppliers; financial status; contracts or employees. Confidential
Information includes information developed by Executive, alone or with others,
or entrusted to Employer by its customers or others.
9. NONSOLICITATION.
During the course of Executive's employment and for a period of one (1)
year from the date of termination of employment for any reason, Executive shall
not directly or indirectly solicit or entice any of the following to cease,
terminate or reduce any relationship with Employer or to divert any business
from Employer: (a) any person who was an employee of Employer during the one-
(1) year period immediately preceding the termination of Executive's employment;
(b) any customer or client of Employer; or (c) any prospective customer or
client of Employer from whom Executive actively solicited business within the
last six (6) months of Executive's employment.
10. NON-DISPARAGEMENT.
Executive will not, during the Term or after the termination or
expiration of this Agreement or Executive's employment, make disparaging
statements, in any form, about Employer's officers, directors, agents,
employees, products or services which Executive knows, or has reason to believe,
are false or misleading.
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11. MUTUAL AGREEMENT TO ARBITRATE.
a. In the event of a dispute or claim between Executive
and Employer related to Employee's employment or termination of employment, all
such disputes or claims will be resolved exclusively by confidential arbitration
in accordance with the National Rules for the Resolution of Employment Disputes
of the American Arbitration Association ("AAA"). This means that the parties
agree to waive their rights to have such disputes or claims decided in court by
a jury. Instead, such disputes or claims will be resolved by an impartial AAA
arbitrator whose decision will be final.
b. The only disputes or claims that are not subject to
arbitration are any claims by Executive for workers' compensation or
unemployment benefits, and any claim by Executive for benefits under an employee
benefit plan that provides its own arbitration procedure. Also, Executive and
Employer may seek injunctive relief in court in appropriate circumstances.
c. The arbitration procedure will afford Executive and
Employer the full range of statutory remedies. Employer will pay all costs that
are unique to arbitration, except that the party who initiates arbitration will
pay the filing fee charged by AAA. Executive and Employer shall be entitled to
discovery sufficient to adequately arbitrate their claims, including access to
essential documents and witnesses, as determined by the arbitrator and subject
to limited judicial review. In order for any judicial review of the arbitrator's
decision to be successfully accomplished, the arbitrator will issue a written
decision that will decide all issues submitted and will reveal the essential
findings and conclusions on which the award is based.
12. MISCELLANEOUS.
a. This Agreement contains the entire agreement between
the parties with respect to Executive's employment with Employer, and is subject
to modification or amendment only upon agreement in writing signed by both
parties.
b. This Agreement shall bind and inure to the benefit of
the heirs, legal representatives, successors and assigns of the parties, except
that Employer's rights and obligations may not be assigned.
c. If any provision of this Agreement is invalid or
otherwise unenforceable, all other provisions shall remain unaffected and shall
be enforceable to the fullest extent permitted by law.
d. In the event of any claim or dispute arising out of
this Agreement, the party that substantially prevails shall be entitled to
reimbursement of all expenses incurred in connection with such claim or dispute,
including, without limitation, attorneys' fees and other professional fees. This
paragraph shall apply to expenses incurred with or without suit, and in any
judicial, arbitration or administrative proceedings, including all appeals
therefrom.
e. Any notice required to be given under this Agreement
to either party shall be given by personal service or by depositing a copy of
such notice in the United States registered or certified mail, postage prepaid,
addressed to the following address, or such other address as addressee shall
designate in writing:
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EMPLOYER: 0000 "X" Xxxxxx
Xxxxxxxxx, XX 00000
EXECUTIVE: 00000 Xxxxxx Xxxxx
Xxxxxxxxx, XX 00000-0000
f. This Agreement shall be governed by and construed in
accordance with the laws of the State of Alaska.
EMPLOYER: NORTHRIM BANCORP, INC.
By: /s/ Xxxxxx X. Xxxxx
----------------------------------------
Xxxxxx X. Xxxxx
Its: Chairman of the Compensation
Committee of The Board of
Directors
NORTHRIM BANK
By: /s/ Xxxxxx X. Xxxxx
----------------------------------------
Xxxxxx X. Xxxxx
Its: Chairman of the Compensation
Committee of The Board of
Directors
EXECUTIVE: /s/ R. Xxxx Xxxxxxxx
--------------------------------------------
R. Xxxx Xxxxxxxx
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