Exhibit 10.1
SEVERANCE AGREEMENT AND GENERAL RELEASE
     THIS SEVERANCE AGREEMENT AND GENERAL RELEASE (“Agreement”) is entered into
between Michal Cann (subsequently referred to as “Mr. Cann”) and Washington
Banking Company, Inc., Whidbey Island Bank and all of its subsidiaries or
affiliates (collectively, “WBC” or “Employer”). Both parties to this Agreement
wish to clearly set forth the terms and conditions of Mr. Cann’s separation from
employment with WBC and resolve all issues related to the employment agreement
between Mr. Cann and WBC dated May 6, 2005 (“Employment Agreement”).
     In exchange for enhanced severance and other benefits described in this
Agreement, Mr. Cann and WBC agree as follows:
     1. Resignation. Mr. Cann hereby resigns from employment (including all
officer positions) with and the Boards of Directors of WBC and Whidbey Island
Bank effective September 30, 2008. (“Retirement Date”). Between the date of this
agreement and the Retirement Date, Mr. Cann shall be expected to perform his
normal duties as directed by Tony Pickering, Chairman of the Board of Directors,
and any task necessary to transition his responsibilities to others, and WBC
shall provide Mr. Cann his regular Base Salary (as defined in the Employment
Agreement) and benefits.
     2. Vacation. As of the Retirement Date, WBC shall pay to Mr. Cann an amount
equal to his accrued but unused vacation. This payment, less normal payroll and
withholding taxes, shall be made with the next regularly scheduled payroll after
the Retirement Date.
     3. Enhanced Severance Payment. Consistent with the Employment Agreement,
WBC shall pay Mr. Cann two years of his Base Compensation, less applicable
payroll and withholding taxes, as severance pay. For the purposes of this
Agreement, the Base Compensation used to calculate the severance pay shall be
(a) the highest Base Salary paid to Mr. Cann over the three years immediately
preceding the Retirement Date plus (b) two times his last-paid annual bonus or
the average annual bonus (cash plus the value of any stock issued in lieu of
cash bonuses) paid to Mr. Cann over the previous three years, whichever is
greater. This severance pay will be paid as follows: (a) one-half of the total
amount paid in a lump sum on or before the next regularly scheduled payroll date
after the Effective Date of this Agreement; and (b) the remaining one-half paid
in equal installments in conjunction with WBC’s regularly scheduled payroll
through September 30, 2009. In the event of Mr. Cann’s death prior to payment of
the entire severance obligation, any remaining unpaid severance pay due under
this paragraph will be accelerated and paid in a lump sum to his estate.
     4. Stock Options. On the Retirement Date, WBC shall accelerate the vesting
of Mr. Cann’s unvested stock options and restricted stock. Other than this
accelerated vesting, the terms of all of Mr. Cann’s stock options shall be
governed by any applicable plan or grant.
     5. Medical Insurance/COBRA. After September 30, 2008, Mr. Cann shall have
the right to purchase group medical, dental and vision insurance continuation
coverage pursuant to his rights under the COBRA statute and regulations.
Provided that Mr. Cann elects continuation

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coverage under COBRA, WBC shall pay Mr. Cann’s insurance premiums for the group
medical, dental and vision insurance continuation coverage for up to eighteen
(18) months beginning October 1, 2008, and ending March 31, 2010, provided,
however, if Mr. Cann becomes eligible for another employer’s health insurance
plan or otherwise becomes ineligible to continue his health insurance under
COBRA, such health insurance premium payments shall cease. Mr. Cann shall notify
WBC immediately upon eligibility for another such health plan.
     6. Other Benefits. After the Retirement Date, Mr. Cann’s participation and
conversion rights in any other benefits programs shall be governed by the terms
of the applicable plan and any legal requirements.
     7. Automobile. Upon the Retirement Date, WBC agrees to transfer title to
Mr. Cann to the automobile (2005 Chevrolet Tahoe) that Mr. Cann has been using
for WBC-related business.
     8. Confidentiality. Mr. Cann acknowledges that under the provisions of
previously executed agreements, and under applicable laws including the
Washington Trade Secrets Act, he is obligated to maintain confidential all trade
secret, proprietary, confidential and other information not publicly known of or
about WBC or any of its customers, employees or business partners. Mr. Cann
affirms his agreement to maintain the confidentiality of all such information,
including his obligations under Section 8 of his Employment Agreement. In
addition, Mr. Cann agrees to maintain the confidentiality of the terms of this
Agreement, except that he may share the terms with his wife, attorney or tax
advisor. Similarly, WBC agrees to maintain the confidentiality of this
Agreement, except that WBC may share the terms with its senior management (such
as its President), Board members, attorneys, accountants, regulatory authorities
and as may be required by law.
     9. References. All inquiries about Mr. Cann including any requests for
reference information shall be directed to WBC’s Vice President of Human
Resources, who shall confirm Mr. Cann’s title, dates of employment and that he
departed WBC as a voluntary retirement.
     10. Return of Property. As of the Retirement Date, Mr. Cann will return to
WBC all company-owned property in his possession, if any, specifically including
all keys and card key badges to company buildings or property, all company-owned
equipment, and all company documents and papers, including but not limited to
trade secrets or confidential company information.
     11. Non-Solicitation of Employees and Customers. Mr. Cann reaffirms his
nonsolicitation obligations stated in Section 9 of his Employment Agreement,
except that the parties agree that the period of the non-solicitation
restriction shall be reduced from two years to one year from the Retirement
Date.
     12. Non-Competition Agreement. Mr. Cann reaffirms his non-competition
obligations under Section 7 of the Employment Agreement, except that the parties
agree that the period of the non-competition restriction shall be reduced from
two years to one year from the Retirement Date.

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     13. Release. In exchange for the enhanced severance and other benefits
described above, Mr. Cann, on behalf of himself and his marital community,
irrevocably and unconditionally waives, releases, and forever discharges, WBC
and all of its parent, affiliated or subsidiary organizations, any
employer-sponsored employee benefit plans and each of their respective
directors, officers, agents, trustees, employees, employee-spouses, successors
and assigns (collectively “the Releases”), from any and all claims or damages
(including attorney’s fees and costs actually incurred), whether known or
unknown, which have arisen through the date of this Agreement related in any way
to his employment by WBC or his separation. This release includes but is not
limited to, claims under federal, state or local laws prohibiting discrimination
in employment, including the Age Discrimination in Employment Act, and the
Employee Retirement Income and Security Act of 1974, as well as any tort or
contract claims or any other claims arising from any alleged legal restrictions
of the right of WBC to compensate, manage or terminate its employees. This
release shall not prohibit Mr. Cann from filing a charge with the Equal
Employment Opportunity Commission but shall be a waiver of any damages or
monetary recovery therefrom. This release does not affect or include claims
Mr. Cann may have in a capacity other than as an employee, such as rights as a
shareholder or customer of WBC.
     14. Voluntary Agreement. Mr. Cann understands and acknowledges the
significance and consequences of this Agreement. Mr. Cann acknowledges that it
is voluntary and he has not signed it as a result of any coercion. Mr. Cann
acknowledges that he was given at least twenty-one (21) days after receipt of
this document during which to consider this Agreement and that he has been
encouraged to consult with an attorney prior to signing it, and that he signs it
only after careful consideration and analysis. In the event that Mr. Cann signs
this Agreement before expiration of this consideration period, the remaining
time shall be waived.
     15. Revocation Period. Mr. Cann understands and acknowledges that he has
seven (7) days after signing this Agreement to revoke it. This Agreement will
not be effective until the eighth day after it is signed or the Retirement Date,
whichever occurs later (“Effective Date”).
     16. No Admission of Liability. This Agreement shall not be considered as
evidence of any violation of any statute or law, or any wrongdoing or liability
on the part of Mr. Cann or WBC or its agents or employees.
     17. Non-Disparagement. Mr. Cann reaffirms his obligations not to disparage
WBC or its past or present officers, directors, agents, employees, products or
services in any form or forum to any person or entity as stated in Section 10 of
his Employment Agreement. WBC, through its President and Board of Directors,
shall not disparage Mr. Cann. Both WBC and Mr. Cann shall characterize
Mr. Cann’s departure as a voluntary retirement.
     18. Entire Agreement. The Agreement contains the entire understanding
between Mr. Cann and WBC regarding the subject matter of this Agreement. It
supersedes the Employment Agreement and all other agreements that relate to the
termination of Mr. Cann’s employment (or the benefits available as a result
thereof) between the parties except that Sections 7, 8, 9, and 10 of the
Employment Agreement shall remain in effect except as expressly modified herein.
This Agreement may not be modified except in writing signed by Mr. Cann and by
WBC.

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     19. Miscellaneous. This Agreement is entered into without reliance on any
promise or representation, written or oral, other than those expressly contained
herein. It supersedes any other such promises or representations unless
specifically identified in this Agreement. This Agreement shall bind the heirs,
personal representatives, successors and assigns of both Mr. Cann and WBC. If
any provision of this Agreement is determined to be invalid or unenforceable, in
whole or in part, this determination will not affect any other provision of this
Agreement and the provision in question shall be modified by the court so as to
be rendered enforceable. This Agreement shall be deemed to have been entered
into and shall be construed and enforced in accordance with the laws of the
State of Washington and an action for breach of this Agreement may only be filed
in federal or state courts residing in King County, Washington.
MR. CANN ACKNOWLEDGES AND UNDERSTANDS THAT THE ABOVE AGREEMENT INCLUDES A
RELEASE OF ALL CLAIMS, KNOWN AND UNKNOWN, TO THE EXTENT SPECIFIED IN SECTION 13
ABOVE AND EXECUTES THIS AGREEMENT WITH FULL KNOWLEDGE OF ITS CONTENTS AND
OPPORTUNITY FOR CONSULTATION WITH LEGAL COUNSEL.

                Dated: 9/23/08  Employee:    /s/ Michal Cann         Michal
Cann           

          Dated: 9/23/08  Washington Banking Company, Inc.
      By:   /s/ Anthony B. Pickering         Its Chairman of Board of Directors 
           

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