Exhibit 10.1

COASTAL FINANCIAL CORPORATION
COASTAL COMMUNITY BANK

CHANGE IN CONTROL SEVERANCE AGREEMENT

THIS CHANGE IN CONTROL SEVERANCE AGREEMENT (“Agreement”) is entered into by and
between COASTAL FINANCIAL CORPORATION, a Washington corporation (“Company”), its
wholly-owned subsidiary, COASTAL COMMUNITY BANK, a Washington state-chartered
bank (“Bank”), and __________ (“Executive”), as of __________.

The Company, the Bank, and Executive agree as follows:

1.

Commitment of Executive. In the event that any person extends any proposal or
offer that is intended to or may result in a Change in Control (defined below),
Executive shall, at the Company’s or the Bank’s request, assist the Company
and/or the Bank in evaluating such proposal or offer. Further, subject to the
additional terms and conditions of this Agreement, in order to receive the
Change in Control Payment (defined below), Executive cannot resign without Good
Reason (as defined below) from the Company or the Bank during any period from
the receipt of a specific Change in Control proposal up to the consummation of
the transaction contemplated by such proposal.

2.

Change in Control. For purposes of this Agreement, “Change in Control” means a
change in control event as defined in Section 409A of the Internal Revenue Code
of 1986, as amended (the “Code”), and the rules, regulations and guidance
promulgated thereunder and issued by the Department of the Treasury, that is one
or more of the following events:

 

a.

Merger. The Company merges into or consolidates with another entity, or merges
another entity into the Company and, as a result, less than a majority of the
combined voting power of the resulting entity or, if applicable, the ultimate
parent thereof, immediately after the merger or consolidation is held by persons
who were stockholders of the Company immediately before the merger or
consolidation;

 

b.

Acquisition of Significant Share Ownership. The acquisition by any person
(within the meaning of Section 13(d) of the Securities Exchange Act, as
amended), other than any employee benefit plan or trust maintained by the
Company, of fifty percent (50%) or more of the combined voting power entitled to
vote generally in the election of directors of the Company’s then outstanding
voting securities;

 

c.

Change in Board Composition. During any period of twelve consecutive months,
individuals who constitute the Company’s Board of Directors at the beginning of
the twelve-month period cease for any reason to constitute at least a majority
of the Company’s Board of Directors; provided, however, that for purposes of
this clause (c), each director who is first elected by the Board of Directors
(or first nominated by the Board of Directors for election by the stockholders)
by a vote of at least two-thirds (2/3) of the directors who were directors at
the beginning of the twelve-month period shall be deemed to have also been a
director at the beginning of such period; or

 

d.

Sale of Assets. A sale, transfer, or other disposition of all or substantially
all of the assets of the Company which is consummated and immediately following
which the persons who were the owners of the Company immediately prior to such
sale, transfer, or disposition, do not own, directly or indirectly and in
substantially the same proportions as their ownership immediately prior to the
sale, transfer, or disposition, more than fifty percent (50%) of the combined
voting power entitled to vote generally in the election of directors of (i) the
entity or entities to which such assets or ownership interest are sold or
transferred or (ii) an entity that, directly or indirectly, owns more than fifty
percent (50%) of the

DC: 7271923-3

 

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combined voting power entitled to vote generally in the election of directors of
the entities described in clause (i).

3.

Payment Obligations.

 

3.1

Termination Following Change in Control. If, consistent with Section 1,
Executive remains employed with the Company and the Bank through the closing of
a Change in Control and concurrent with or within twenty-four (24) months after
the closing of the Change in Control either the Company and the Bank terminate
Executive’s employment for reasons other than for Cause, or Executive terminates
Executive’s employment with the Company and the Bank for Good Reason, then,
subject to Section 11:

 

a.

within ten (10) days following the effective date of Executive’s termination of
employment, the Bank shall pay to Executive, a single lump sum cash payment
(“Change in Control Payment”) in an amount equal to one (1) times, the sum of:
(i) Executive’s base salary as then in effect (but disregarding any reduction
that gave rise to Good Reason), and (ii) the cash bonus earned by Executive for
the year prior to the year in which the Change in Control occurs; and

 

b.

Executive will fully vest in all unvested stock options and/or other equity
incentive compensation awards previously granted to Executive that would have
vested based solely on the continued employment of Executive.

 

3.2

Termination Prior to Change in Control. If (i) the Company or the Bank
terminates Executive’s employment without Cause before a Change in Control, and
(ii) prior to such termination or within ninety (90) days thereafter the Company
and/or the Bank entered or enters into an agreement for a Change in Control or
any party announced, announces or is required by law to announce a prospective
Change in Control, which Change in Control is consummated, then within ten (10)
days following the consummation of such Change in Control the Bank shall pay to
Executive the Change in Control Payment in a single lump sum.

4.

MANDATORY REDUCTION OF PAYMENTS IN CERTAIN EVENTS.

 

4.1

Notwithstanding anything in this Agreement to the contrary, in the event it
shall be determined that any benefit, payment or distribution by the Company,
the Bank or the acquirer in a Change in Control, or any of their respective
successors or affiliates, to or for the benefit of Executive (whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise) (such benefits, payments or distributions are hereinafter referred
to as “Payments”) would, if paid, be subject to the excise tax imposed by
Section 4999 of the Code (the “Excise Tax”), then, prior to the making of any
Payments to Executive, a calculation shall be made comparing (i) the net
after-tax benefit to Executive of the Payments after payment by Executive of the
Excise Tax, to (ii) the net after-tax benefit to Executive if the Payments had
been limited to the extent necessary to avoid being subject to the Excise Tax.
If the amount calculated under (i) above is less than the amount calculated
under (ii) above, then the Payments shall be limited to the extent necessary to
avoid being subject to the Excise Tax (the “Reduced Amount”). The reduction of
the Payments due hereunder, if applicable, shall be made by first reducing cash
Payments against the latest amounts to be paid and then, to the extent
necessary, reducing those Payments having the next highest ratio of Parachute
Value to actual present value of such Payments as of the date of the Change in
Control, reducing the latest amounts to be paid first, as determined by a
nationally recognized accounting firm or compensation consulting firm mutually
acceptable to the Company, the Bank and Executive (the “Determination Firm”).
For purposes of this Section 4.1, present value shall be determined in good
faith in accordance with Section 280G(d)(4) of the Code. For purposes of this
Section 4, the “Parachute Value” of a Payment means the present value as of the
date of the Change in Control of the portion of such Payment that constitutes a
“parachute payment” under Section 280G(b)(2) of

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the Code, as determined by the Determination Firm for purposes of determining
whether and to what extent the Excise Tax will apply to such Payment.

 

4.2

All determinations required to be made under this Section 4, including whether
an Excise Tax would otherwise be imposed, whether the Payments shall be reduced,
the amount of the Reduced Amount, and the assumptions to be utilized in arriving
at such determinations, shall be made in writing in good faith by the
Determination Firm which shall provide detailed supporting calculations to the
Company, the Bank and Executive within fifteen (15) business days after the
receipt of notice from Executive that a Payment is due to be made, or such
earlier time as is requested by the Company or the Bank. All fees and expenses
of the Determination Firm shall be borne solely by the Company or the Bank. Any
determination by the Determination Firm shall be binding upon the Company, the
Bank and Executive. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Determination Firm hereunder, it is possible that Payments which Executive was
entitled to, but did not receive pursuant to Section 4.1, could have been made
without the imposition of the Excise Tax (“Underpayment”), consistent with the
calculations required to be made hereunder. In such event, the Determination
Firm shall determine the amount of the Underpayment that has occurred and any
such Underpayment shall be promptly paid by the Company or the Bank to or for
the benefit of Executive but no later than March 15 of the year after the year
in which the Underpayment is determined to exist, which is when the legally
binding right to such Underpayment arises.

5.

Termination of Agreement. This Agreement terminates immediately if, at any time
before the Change in Control transaction closes, (i) the Company or the Bank
terminates Executive’s employment for Cause, (ii) Executive resigns from the
Company or the Bank without Good Reason, (iii) Executive dies, or (iv) Executive
is unable to perform Executive’s duties and obligations to the Company or the
Bank for a period of ninety (90) consecutive days as a result of a physical or
mental disability, unless with reasonable accommodation Executive could continue
to perform such duties and making these accommodations would not pose an undue
hardship on the Company or the Bank. If no Change in Control has occurred, this
Agreement will terminate ninety (90) days after Executive’s employment is
terminated by the Company or the Bank without Cause or by Executive for Good
Reason, unless prior to or during such ninety-day period, the Company or the
Bank entered into or enters into an agreement for a Change in Control, or a
Change in Control is announced or required by law to be announced, in which case
this Agreement will terminate upon payment of the Change in Control Payment
pursuant to Section 3.2 or the abandonment of such Change in Control.

6.

Definitions.

 

6.1

Cause. “Cause” means any one of the following:

 

a.

Removal or discharge of Executive pursuant to order of, or consent order or
written agreement with any federal or state banking authority;

 

b.

Willful misfeasance or gross negligence in the performance of Executive’s
duties, including without limitation the concealment from or knowing failure to
disclose to, any federal or state banking authority or the Board of Directors
any material matters affecting the safety and soundness of the Company or the
Bank;

 

c.

Indictment (or equivalent under applicable law) with respect to, the conviction
of, or a plea of guilty or no contest to, a felony, or any other crime involving
moral turpitude, fraud, theft, embezzlement, or dishonesty, or other crime that
results in Executive’s incarceration, with the exclusion of traffic violations;

 

d.

Misconduct or illegal conduct, including, without limitation, moral turpitude,
fraud, theft, embezzlement, or sexual or other harassment; or

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e.

A violation of any employment policy or code of conduct of the Company or Bank
as may be in effect from time to time, if such violation causes or is reasonably
expected to cause, material reputational or financial harm, or is otherwise
injurious, or reasonably expected to be injurious, to the Company or to any
entity in control of, controlled by or under common control with the Company.

 

6.2

Good Reason. “Good Reason” means any one or more of the following:

 

a.

Material reduction of Executive’s base salary or elimination of any significant
compensation or benefit plan benefiting Executive (without replacement with a
plan with materially similar aggregate value or opportunity), unless the
reduction or elimination is generally applicable to substantially all similarly
situated employees (or similarly situated employees of a successor or
controlling entity of the Company or the Bank) who formerly benefited;

 

b.

The assignment to Executive without Executive’s consent of materially diminished
authority or duties that are materially inconsistent with Executive’s position
as of the date of this Agreement; or

 

c.

A relocation or transfer of Executive’s principal place of employment that would
increase Executive’s commute on a regular basis by more than thirty (30) miles
each way .

The Company, the Bank and Executive agree that “Good Reason” shall not exist
unless and until Executive provides the Company and the Bank with written notice
of the acts alleged to constitute Good Reason within ninety (90) days of
Executive’s knowledge of the occurrence of such event, and the Bank and the
Company fail to cure such acts within thirty (30) days of receipt of such
notice, if curable. Executive must terminate Executive’s employment within sixty
(60) days following the expiration of such cure period for the termination to be
on account of Good Reason.

7.

Arbitration. At either the Company’s, the Bank’s, or Executive’s request, the
parties must submit any dispute, controversy, or claim arising out of or in
connection with, or relating to, this Agreement or any breach or alleged breach
of this Agreement, to arbitration under the American Arbitration Association’s
rules then in effect (or under any other form of arbitration mutually acceptable
to the parties). A single arbitrator agreed on by the parties will conduct the
arbitration. If the parties cannot agree on a single arbitrator, each party must
select one arbitrator and those two arbitrators will select a third arbitrator.
This third arbitrator will hear the dispute. The arbitrator’s decision is final
(except as otherwise specifically provided by law) and binds the parties, and
any party may request any court having jurisdiction to enter a judgment and to
enforce the arbitrator’s decision. The arbitrator will provide the parties with
a written decision naming the substantially prevailing party in the action. In
any arbitration, if Executive is the prevailing party, the Company and Bank
shall pay all reasonable attorney’s fees of Executive, as well as the expenses
and administrative fees related to the arbitration. If the Company and Bank are
the prevailing party at the arbitration, each party shall pay its own attorney’s
fees and expenses and its share of the administrative fees and expenses related
to the arbitration. All proceedings will be held at a place designated by the
arbitrator in Snohomish County, Washington. The arbitrator, in rendering a
decision as to any state law claims, will apply Washington law.

8.

Withholding. All payments required to be made by the Company or the Bank
hereunder to Executive shall be subject to the withholding of such amounts, if
any, relating to tax or other payroll deductions as the Company or the Bank may
reasonably determine should be withheld pursuant to any applicable law or
regulation.

9.

Other Compensation and Terms of Employment. This Agreement is not an employment
agreement. Accordingly, except with respect to the Change in Control Payment,
this Agreement shall have no effect on the determination of any compensation
payable by the Company or the Bank to Executive, or upon any of the other terms
of Executive’s employment with the Company or the Bank. The specific
arrangements referred to herein are not intended to exclude any other benefits
which may be available to Executive upon a

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termination of employment with the Company or the Bank pursuant to employee
benefit plans of the Company or the Bank or otherwise.

10.

Miscellaneous Provisions.

 

10.1

Entire Agreement. This Agreement constitutes the entire understanding and
agreement between the parties concerning its subject matter and supersedes all
prior agreements, correspondence, representations, or understandings between the
parties relating to its subject matter.

 

10.2

Binding Effect. This Agreement will bind and inure to the benefit of the
Company’s, the Bank’s, and Executive’s heirs, legal representatives, successors,
and assigns.

 

10.3

Waiver. Any waiver by a party of its rights under this Agreement must be written
and signed by the party waiving its rights. A party’s waiver of the other
party’s breach of any provision of this Agreement will not operate as a waiver
of any other breach by the breaching party.

 

10.4

Amendment. This Agreement may be modified only through a written instrument
signed by all parties.

 

10.5

Severability. The provisions of this Agreement are severable. The invalidity of
any provision will not affect the validity of other provisions of this
Agreement.

 

10.6

Counsel Review. Executive acknowledges that Executive has had the opportunity to
consult with independent counsel with respect to the negotiation, preparation,
and execution of this Agreement.

 

10.7

Governing Law and Venue. This Agreement will be governed by and construed in
accordance with Washington law, except to the extent that federal law may govern
certain matters. The parties must bring any legal proceeding arising out of this
Agreement in Snohomish County, Washington.

 

10.8

Counterparts. This Agreement may be executed in one or more counterparts, each
of which will be deemed an original, but all of which taken together will
constitute one and the same document.

 

10.9

Compliance with Section 409A of the Internal Revenue Code.

 

(a)

General. It is the Company’s and the Bank’s intent that the payments and
benefits provided under this Agreement shall be exempt from the application of,
or otherwise comply with, the requirements of Section 409A of the Code (“Section
409A”).

Specifically, any taxable benefits or payments provided under this Agreement are
intended to be separate payments that qualify for the “short-term deferral”
exception to Section 409A to the maximum extent possible, and to the extent they
do not so qualify, are intended to qualify for the involuntary separation pay
exceptions to the maximum extent possible. This Agreement shall be construed,
administered, and governed in a manner that effects such intent, and the Bank
shall not take any action that would be inconsistent with such intent. Without
limiting the foregoing, the payments and benefits provided under this Agreement
may not be deferred, accelerated, extended, paid out or modified in a manner
that would result in the imposition of an additional tax under Section 409A upon
Executive.

If neither the “short-term deferral” nor the involuntary separation pay
exceptions to Section 409A described above applies to a benefit, payment, or
reimbursement under this Agreement, then notwithstanding any provision in this
Agreement to the contrary, it is intended that any payment or benefit which is
provided pursuant to, or in connection with, this Agreement shall be provided
and paid in a manner, and at such time and in such form as complies with the
applicable requirements of Section 409A of the Code to avoid the

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unfavorable tax consequences provided therein for non-compliance. Any reference
in this Agreement to “involuntary termination,” “involuntarily terminate,”
“termination of employment” or similar terms or phrases shall be interpreted as
a “separation from service” within the meaning of Section 409A. For purposes of
Section 409A, any installment payment provided under this Agreement shall be
treated as a separate payment. Any provision in this Agreement that is
determined to violate the requirements of Section 409A shall be void and without
effect. To the extent permitted under Section 409A, the parties shall reform the
provision, provided such reformation shall not subject Executive to additional
tax or interest and Executive shall not be required to incur any additional
compensation as a result of the reformation. In addition, any provision that is
required to appear in this Agreement that is not expressly set forth shall be
deemed to be set forth herein, and this Agreement shall be administered in all
respects as if such provision were expressly set forth. References in this
Agreement to Section 409A include rules, regulations, and guidance of general
application issued by the Department of the Treasury under Section 409A.

 

(b)

Delay of Payments. If Executive is deemed to be a “specified employee” within
the meaning of Section 409A, then payment of benefits under this Agreement that
are on account of a separation from service shall be delayed until six (6)
months and one day after the date the benefit under such provisions is payable,
to the extent required by Section 409A(a)(2)(B)(i), unless Executive dies
between such date and the payment date, at which time all such benefits shall
then commence.

11.

Regulatory Provisions. In no event shall the Bank or the Company be obligated to
make any payment pursuant to this Agreement that is prohibited by Section 18(k)
of the Federal Deposit Insurance Act (codified at 12 U.S.C. § 1828(k)), 12
C.F.R. Part 359, or any other applicable law.

 

 

 

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Effective as of the date first set forth above.

COMPANY:

COASTAL FINANCIAL CORPORATION

By:

Printed Name:Eric Sprink

Title:President & CEO

BANK:

COASTAL COMMUNITY BANK

By:

Printed Name:Eric Sprink

Title:President & CEO

EXECUTIVE:

 

Printed Name:

Title:

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