Exhibit 10.1

 
 
CHANGE OF CONTROL AGREEMENT

 
THIS AGREEMENT is entered into as of the _____ day of __________, 201__ (the
"Effective Date") by and between 1ST SECURITY BANK OF WASHINGTON (the “Bank”), a
Washington chartered savings bank, and _______________________ (the
“Executive”).
 
WITNESSETH:
 
WHEREAS, Executive is the ____________________ of the Bank, and as such is a key
officer whose continued dedication, availability, advice and counsel to the Bank
is deemed important to the Board of Directors of the Bank;
 
WHEREAS, the Bank wishes to retain the services of Executive free from any
distractions or conflicts that could arise as a result of a change in control of
the Bank;
 
NOW, THEREFORE, to assure the Bank of Executive’s continued dedication, the
availability of her advice and counsel to the Board of Directors of the Bank
free of any distractions resulting from a change of control, and for other good
and valuable consideration, the receipt and adequacy whereof each party hereby
acknowledges, the Bank and Executive hereby agree as follows:
 
1.           TERM OF AGREEMENT: This Agreement shall remain in effect until
cancelled by either party hereto, upon not less than 24 months prior written
notice to the other party. The execution of this Agreement shall automatically
cancel and void any change in control or severance agreements which otherwise
might be in effect between Executive and the Bank.
 
2.           CHANGE OF CONTROL: If there is a Change of Control of the Bank
during the term of this Agreement, Executive shall be entitled to a severance
payment in the event the Executive suffers an Involuntary Termination within six
(6) months preceding or 12 months after the Change in Control, unless such
termination is for Cause. The amount of such severance payment shall equal
twelve (12) months of Executive’s then current salary.  Executive’s entitlement
to the severance payment shall be conditioned on Executive signing a severance
agreement containing a comprehensive release of claims.  The severance payment
shall be paid in a lump sum within 45 days of the date of Executive’s
Involuntary Termination but no earlier than 8 days after Executive signs and
returns the severance agreement, subject to the restrictions set forth in
paragraph 12 of this Agreement.
 
3.           LIMITATION OF BENEFITS: It is the intention of the parties that no
payment be made or benefit provided to the Executive that would constitute an
“excess parachute payment” within the meaning of Section 280G of the Code and
any regulations thereunder, thereby resulting in a loss of an income tax
deduction by the Bank or the imposition of an excise tax on the Executive under
Section 4999 of the Code. If the independent accountants serving as auditors for
the Bank immediately prior to the date of a Change of Control determine that
some or all of the payments or benefits scheduled under this Agreement, when
combined with any other payments or benefits provided to the Executive on a
Change of Control by the Bank, and any affiliate of the Bank required to be
aggregated with the Bank under Section 280G of the Code, would constitute
nondeductible excess parachute payments by the Bank under Section 280G of the
Code, then the payments or benefits scheduled under this Agreement will be
reduced to one dollar less than the maximum amount which may be paid or provided
without causing any such payments or benefits scheduled under this Agreement or
otherwise provided on a Change of Control to be nondeductible. The determination
made as to the reduction of benefits or payments required hereunder by the
independent accountants shall be binding on the parties. The Executive shall
have the right to designate within a reasonable period which payments or
benefits
 
 
 
 
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scheduled under this Agreement will be reduced; provided, however, that if no
direction is received from the Executive, the Bank shall implement the
reductions under this Agreement in its discretion.
 
4.           LITIGATION - OBLIGATIONS - SUCCESSORS:
 
(a)           If litigation shall be brought or arbitration commenced for the
specific and sole purpose of challenging, enforcing or interpreting any
provision of this Agreement, and such litigation or arbitration does not end
with judgment or other result in favor of the Bank, the Bank hereby agrees to
indemnify the Executive for her reasonable attorney’s fees and disbursements
incurred in such litigation or arbitration.
 
(b)           The Bank’s obligation to pay the Executive the compensation and
benefits and to make the arrangements provided herein shall be absolute and
unconditional and shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Bank may have against her or anyone else. All amounts payable by the Bank
hereunder shall be paid without notice or demand provided Executive has signed
the required severance agreement.  The Executive shall not be required to
mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise.
 
(c)           The Bank will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Bank, by agreement in form and substance
satisfactory to the Executive, to expressly assume and agree to perform this
Agreement in its entirety.  Failure of the Bank to obtain such agreement prior
to the effectiveness of any such succession shall be a breach of this Agreement
and shall entitle the Executive to the compensation described in Section 2.  As
used in this Agreement, the “Bank” shall mean 1st Security Bank of Washington
and any successor to its business and/or assets as aforesaid which executes and
delivers the agreement provided for in this Section 4(c) or which otherwise
becomes bound by all the terms and provisions of this Agreement by operation of
law.
 
5.           NOTICES: For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
 
If to the Executive:
 
 
 
If to the Bank:
 
 
 
 
Chief Executive Officer
6920 220th St. SW, Suite 205
Mountlake Terrace, WA  98043
 
 
 

or at such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
 
6.           MODIFICATION - WAIVERS - APPLICABLE LAW: No provisions of this
Agreement may be modified, waived or discharged unless such waiver, modification
or discharge is
 
 
 
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agreed to in writing, signed by the Executive and on behalf of the Bank by such
officer as may be specifically designated by the Board of Directors of the Bank.
No waiver by either party hereto at any time of any breach by the other party
hereto of, or in compliance with, any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not set forth expressly in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the state of Washington.
 
7.           INVALIDITY - ENFORCEABILITY: The invalidity or unenforceability of
any provisions of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force and
effect. Any provision in this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective only to the
extent of such prohibition or unenforceability without invalidating or affecting
the remaining provisions of this Agreement, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
 
8.           SUCCESSOR RIGHTS: This Agreement shall inure to the benefit of and
be enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die while any amounts would still be payable to her hereunder,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to her executor or, if there is no such
executor, to her estate.
 
9.           HEADINGS: Descriptive headings contained in this Agreement are for
convenience only and shall not control or affect the meaning or construction of
any provision in this Agreement.
 
10.           ARBITRATION: Any dispute, controversy or claim arising under or in
connection with this Agreement shall be settled exclusively by arbitration
before a single neutral arbitrator in Seattle, Washington (or as close thereto
as feasible) in accordance with the Employment Arbitration Rules of JAMS then in
effect. The Bank shall pay all administrative fees associated with such
arbitration. Judgment maybe entered on the arbitrator's award in any court
having jurisdiction. Subject to Section 4(a), unless otherwise provided in the
rules of JAMS, the arbitrator shall award to the substantially prevailing party
the costs of arbitration, including reasonable attorneys' fees and expenses
(including amounts paid to the arbitrator).
 
11.           CONFIDENTIALITY:
 
(a)           The Executive acknowledges that the Bank may disclose certain
confidential information to the Executive during the term of this Agreement to
enable her to perform her duties hereunder.  The Executive hereby covenants and
agrees that she will not, without the prior written consent of the Bank, during
the term of this Agreement or at any time thereafter, disclose or permit to be
disclosed to any third party by any method whatsoever any of the confidential
information of the Bank or its affiliates.  For purposes of this Agreement,
“confidential information” shall include, but not be limited to, any and all
records, notes, memoranda, data, ideas, processes, methods, techniques, systems,
formulas, patents, models, devices, programs, computer software, writings,
research, personnel information, customer information, the Bank’s financial
information, plans, or any other information of whatever nature in the
possession or control of the Bank or its affiliates which has not been published
or disclosed to the general public, or which gives to the Bank or its affiliates
an
 
 
 
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opportunity to obtain an advantage over competitors who do not know of or use
it.  The Executive further agrees that if her employment is terminated for any
reason, she will leave with the Bank and will not take originals or copies of
any records, papers, programs, computer software and documents and all matter of
whatever nature which was furnished or made available to the Executive by the
Bank, its affiliates or any customer or which the Executive prepared in the
course and scope of her employment.
 
(b)           The foregoing paragraph shall not be applicable to testimony
required by the Executive to be given in a judicial or regulatory proceeding
pursuant to an order of a judge or administrative law judge issued after the
Executive and her legal counsel urge that the aforementioned confidentiality be
preserved.  The Executive shall give the Bank immediate notice of any subpoena
or court order issued to her where the subject matter might reasonably include
Bank business.
 
(c)           The foregoing covenants will not prohibit the Executive from
disclosing confidential or other information to other employees of the Bank or
its affiliates or any third parties to the extent that such disclosure is
necessary to the performance of her duties under this Agreement.
 
12.           COMPLIANCE WITH SECTION 409A OF THE CODE: Notwithstanding anything
herein to the contrary, any payments to be made in accordance with this
Agreement shall not be made prior to the date that is 185 calendar days from the
date of termination of employment of the Executive if it is determined by the
Bank in good faith that such payments are subject to the limitations set forth
at Section 409A of the Code and regulations promulgated thereunder, and payments
made in advance of such date would result in the requirement that Executive pay
additional interest and taxes in accordance with Section 409A(a)(1)(B)of the
Code.
 
13.           DEFINITIONS: The term “Cause” shall mean the Executive’s personal
dishonesty, incompetence, willful misconduct, breach of a fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful
violation of any law, rule, or regulation (other than traffic violations or
similar offenses) or final cease-and desist order, or material breach of any
provision of this Agreement.  No act or failure to act by the Executive shall be
considered willful unless the Executive acted or failed to act with an absence
of good faith and without a reasonable belief that her action or failure to act
was in the best interest of the Bank or its affiliates.
 
The term “Involuntary Termination” shall mean (i) termination of employment of
the Executive without Cause such that the Executive is no longer employed by the
Bank or any affiliate thereof; (ii) a reduction in the amount of the Executive’s
base salary compared to the amount of Executive’s base salary as of December 31
of the most recent calendar year other than as part of an overall program
applied uniformly and with equitable effect on all senior officers of the Bank;
(iii) a material adverse change in the Executive’s benefits, contingent benefits
or vacation, other than as part of an overall program applied uniformly and with
equitable effect on all senior officers of the Bank; (iv) a requirement that the
Executive perform services principally at a location more than twenty (20) miles
distance from Mountlake Terrace, Washington; or (v) a material demotion of the
Executive, including, but not limited to, a material diminution of the
Executive’s title, duties or responsibilities.
 
The term “Change of Control” shall mean any of the following events occurring:
(i) the acquisition by any “person” or “group” (as defined in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 ("Exchange Act")), other than the
Bank, any parent holding company of the Bank (“Affiliate”) or their employee
benefit plans, directly or indirectly, as “beneficial owner” (as defined in Rule
13d-3, under the Exchange Act) of securities of the Bank or any Affiliate
representing twenty percent (20%) or more of either the then outstanding shares
or the combined voting power of
 
 
 
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the then outstanding securities of the Bank or Affiliate; (ii) either a majority
of the directors of the Bank or any Affiliate elected at the annual stockholders
meeting shall have been nominated for election other than by or at the direction
of the “incumbent directors” of the Bank or any Affiliate, or the “incumbent”
directors” shall cease to constitute a majority of the directors of the Bank or
any Affiliate.  The term “incumbent director” shall mean any director who was a
director of the Bank or any Affiliate on the Effective Date and any individual
who becomes a director of the Bank or any Affiliate subsequent to the Effective
Date and who is elected or nominated by or at the direction of at least
two-thirds of the then incumbent directors; (iii) the stockholders of the Bank
or any Affiliate approve (x) a merger, consolidation or other business
combination of the Bank or any Affiliate with any other “person” or “group” (as
defined in Sections 13(d) and 14(d) of the Exchange Act) or affiliate thereof,
other than a merger or consolidation that would result in the outstanding common
stock of the Bank or any Affiliate immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into common
stock of the surviving entity or a parent or affiliate thereof) at least fifty
percent (50%) of the outstanding common stock of the Bank or any Affiliate or
such surviving entity or a parent or affiliate thereof outstanding immediately
after such merger, consolidation or other business combination, or (y) a plan of
complete liquidation of the Bank or an agreement for the sale or disposition by
the Bank of all or substantially all of the Bank’s assets; or (iv) any other
event or circumstance which is not covered by the foregoing subsections but
which the Board of Directors of the Bank or any Affiliate determines to affect
control of the Bank or any Affiliate and with respect to which the Board of
Directors adopts a resolution that the event or circumstance constitutes a
Change of Control for purposes of the Agreement.
 
The Change of Control Date is the date on which an event described in (i), (ii),
(iii) or (iv) occurs.
 
14.           AT-WILL EMPLOYMENT:  Nothing about this Agreement, including
without limitation the definition of Cause set forth in Section 13, shall modify
the at-will nature of the Executive’s employment.  Either party may terminate
the employment relationship at any time, with or without cause or notice.
 
IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective
Date referred to above.
 

 
EXECUTIVE
        ATTEST: ____________________________________ 
____________________________________       
1ST SECURITY BANK OF WASHINGTON
        ATTEST: ____________________________________   
By:  _________________________________      
Its:  _________________________________

 

                                                      

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