Exhibit 10.1


 





SECOND
AMENDED AND RESTATED EMPLOYMENT AGREEMENT


 


THIS SECOND AMENDED AND RESTATED EMPLOYMENT
AGREEMENT (the "Agreement"), between The Bank of the Pacific, a Washington business corporation ("The Bank"),
and Denise Portmann ("Executive"), initially entered into effective July 1, 2005, was amended and restated December
29, 2008, and further amended January 11, 2013, is now being further amended and restated as set forth herein effective May 1,
2015.


 


RECITALS


 


A.The Bank of the Pacific is a Washington
banking corporation. The Bank is engaged in the business of commercial banking in Grays Harbor County, Pacific County, Skagit County,
Whatcom County, and Wahkiakum County, Washington. The Bank also engages in business in Oregon counties.


 


B.The Executive represents that she has
considerable experience, expertise and training in management related to banking and services offered by The Bank. The Bank desires
and intends to employ the Executive pursuant to the terms and conditions set forth in this Agreement.


 


C.Both The Bank and the Executive have
read and understand the terms and provisions set forth in this Agreement, and have been afforded a reasonable opportunity to review
this Agreement and to consult with an attorney.


 


AGREEMENT


 


The parties agree as follows:


 


1.Employment. The Bank will
employ the Executive for the Term, except as specifically stated herein, and the Executive accepts employment with The Bank on
the terms and conditions set forth in this Agreement. The Executive's title will continue to be "President and Chief Executive
Officer" for The Bank, and beginning May 1, 2015, will become President and Chief Executive Officer of The Bank's parent corporation,
Pacific Financial Corporation.


 


2.Effective Date and Term.


 


(a)Effective Date. This Agreement
is effective as of the 1st day of May, 2015 (the "Effective Date").


 


(b)Term. The initial term of
this Agreement is two years (24 months), beginning on the Effective Date, and shall automatically renew for an additional
term of one year on each anniversary date of the Agreement, so as to create a two-year term on each anniversary date, unless notice
of termination is provided by either party pursuant to paragraph 5(a).


 


3.Duties. The Executive
will serve as the President and Chief Executive Officer for The Bank and faithfully and diligently perform the duties assigned
to the Executive by The Bank's Board of Directors. The Executive will use her best efforts to perform her duties and will devote
all her working time and attention to these duties. These duties will include, without limitation, the following:


 






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(a)Company Performance. The Executive
will be responsible for all aspects of The Bank's performance, including, without limitation, directing so that daily operational
and managerial matters are performed in a manner consistent with The Bank's policies. These duties will also include formulating
and implementing The Bank's expansion strategies, performing all tasks in connection with The Bank's management and affairs that
are normal and customary to the Chief Executive Officer's position.


 


(b)Modification of Duties. The
Executive will perform such other duties as may be appropriate to her office and as may be prescribed from time to time by The
Bank's Board of Directors. New duties and responsibilities prescribed to the Executive will be consistent with the Executive's
position as The Bank's Chief Executive Officer and shall not include immoral or unlawful acts.


 


4.Compensation.


 


(a)Salary. The Executive will
receive a salary to be paid at regular intervals by The Bank in accordance with its regular payroll schedules. The Executive's
salary will be set and be subject to annual review and adjustment as set forth in paragraph 4(g).


 


(b)Director Fees. As a Director
of The Bank or its affiliates, Executive will receive director fees, including an annual retainer and for regular meeting attendance.


 


(c)Incentive Compensation. Executive
will be eligible to participate in The Bank's approved incentive plan. A disinterested majority of The Bank's Board of Directors
will determine the amount of the bonus pool, if any, based on the profitability, safety, and soundness of The Bank. The Executive's
bonus, if any, will reflect the Executive's performance in her area of responsibility and her contribution to the overall performance
of The Bank during the year, as determined in the sole discretion of The Bank's Board of Directors. No incentive compensation bonus
shall be paid for any calendar year or portion thereof, in which this Agreement is terminated, or in which notice of termination
is given, regardless of reasons for termination, and regardless of which party terminates this Agreement. The Executive will also
be entitled to participate in stock bonus or option plans generally available to senior executives of The Bank.


 


(d)Standard Benefits. The Bank
will provide to the Executive the standard Executive benefits provided in accordance with The Bank's benefit plans and policies,
including but not limited to health insurance, disability insurance, life insurance and five weeks of paid vacation per year accrued
in accordance with The Bank's benefit plans and policies. The Executive also will be entitled to participate in retirement plans,
including 401(k) plans.


 


(e)Automobile. The Bank will
provide the Executive with the use of an automobile, of a model typically appropriate for the performance of the services by a
similarly situated executive.


 






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(f)Expenses. The Bank will reimburse
the Executive for all reasonable expenses that the Executive may incur in the performance of her duties including monthly country
club dues. The Executive will request reimbursement and provide documentation of such expenses within a reasonable time, but no
later than 90 days after the expense has been incurred.


 


(g)Annual Review and Adjustment.
The Executive's compensation will be subject to annual review and adjustment by a disinterested majority of The Bank's Board of
Directors or Compensation Committee. In no case, however, will the Executive's salary, vacation and expense reimbursement be less
than the amounts set forth in paragraphs 4(a)-(f).


 


(h)Reimbursements. If the value
of any reimbursement or in-kind benefit provided under this paragraph 4 is includible in the Executive’s taxable income,
then: (i) the reimbursement or in-kind benefit provided shall be paid no later than the last day of the calendar year after
the calendar year in which the expense was incurred (or such earlier time as specifically provided for in this paragraph 4),
(ii) the amount eligible for reimbursement or in-kind benefit provided in one calendar year will not affect the amount eligible
for reimbursement or in-kind benefit provided in any other calendar year, and (iii) the right to reimbursement or in-kind
benefits is not subject to liquidation or exchange for another benefit.


 


5.Termination.


 


(a)Notice of Termination. Either
party may unilaterally terminate this Agreement for any reason by providing the other party with written notice of the termination
no less than 90 days prior to the termination date.


 


(b)Termination by The Bank. In
the event that The Bank provides the Executive with a notice of termination without cause under paragraph 5(a), The Bank will
pay to the Executive an amount equal to the salary she would have received from the date of termination through the end of the
then-current Term, plus any accrued but unused vacation days paid based on the Executive's salary at the date of termination. Such
payment will be made in equal monthly payments beginning on the 15th day of the calendar month immediately following the termination
date and ending on the date which is the 15th day of the third calendar month of the calendar year immediately following the termination
date. All forfeiture provisions affecting restricted stock awards and all vesting requirements affecting stock options shall lapse
or be deemed fully completed.


 


(c)Termination by the Executive.
If the Executive voluntarily terminates employment with The Bank, other than for "good reason" as provided in paragraph 5(f),
the Executive will be entitled to salary through the date of termination and to such other benefits as may be provided under the
terms of The Bank benefit plans. In the event the Executive seeks to terminate this Agreement without providing at least 90 days'
written notice prior to the termination date, the Executive will pay to The Bank liquidated damages as follows: (i) in the
event the Executive provides notice of termination 29 days or less prior to the termination date, the Executive shall pay The Bank
$25,000 in liquidated damages; (ii) in the event the Executive provides notice of termination at least 30 days but not more
than 59 days prior to the termination date, the Executive shall pay The Bank $20,000 in liquidated damages; (iii) in the event
the Executive provides notice of termination at least 60 days but not more than 89 days prior to termination date, the Executive
shall pay to The Bank $15,000 in liquidated damages.


 






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(d)Termination by The Bank for Cause.
Notwithstanding paragraph 5(a), The Bank may immediately terminate this Agreement without advance notice if the termination
is for cause. For purposes of this Agreement, "cause" means dishonesty; fraud; commission of a felony or of a crime involving
moral turpitude; deliberate violation of statutes, regulations, or orders pertaining to financial institutions or reckless disregard
of such statutes, regulations, or orders; destruction or theft of property or assets of The Bank or its customers; physical attack
of a fellow employee or a customer; intoxication at work; use of narcotics or alcohol to an extent that materially impairs Executive's
performance of her duties; willful malfeasance or gross negligence in the performance of Executive's duties; violation of law in
the course of employment that has a material adverse impact on The Bank, its employees, or its customers; Executive's refusal to
perform Executive's duties; Executive's refusal to follow reasonable instructions or directions; misconduct materially injurious
to The Bank; significant neglect of duty; or any material breach of Executive's duties or obligations to The Bank that results
in material harm to The Bank. If termination occurs under this paragraph, the Executive will be entitled to receive only the salary
earned through the date this Agreement is terminated, and except as otherwise provided by law, participation in benefit plans ceases
upon termination of this Agreement.


 


(e)Death or Disability. Notwithstanding
paragraph 5(a), this Agreement will terminate immediately upon:


 


(i)The Executive's death; or


 


(ii)If the Executive is unable to perform
her duties and obligations under this Agreement for a period of 90 days as a result of a disability that substantially limits one
or more of her major life activities.


 


If termination occurs under this paragraph 5(e):
(A) the Executive or her estate will be entitled to receive only the salary earned through the date this Agreement is terminated;
(B) except as otherwise provided by law, participation in benefit plans ceases upon termination of this Agreement; and (C) as
of such termination date, all vesting requirements affecting outstanding stock options shall lapse or be deemed fully completed.


 


(f)Termination Related to a Change
in Control. This paragraph will apply to any termination related to a Change in Control, as set forth herein.


 


(i)"Change in Control" means
a change "in the ownership or effective control" or "in the ownership of a substantial portion of the assets"
of The Bank, within the meaning of Section 280G of the Internal Revenue Code. An initial public offering by The Bank will
not, however, be deemed to be a Change in Control under this Agreement.


 


(ii)Termination by The Bank. In the event
The Bank or its successors in interest terminates this Agreement within 24 months following a Change in Control for reasons other
than for cause pursuant to paragraph 5(d), or as the result of the Executive's death or disability pursuant to paragraph 5(e),
The Bank will pay the Executive 24 times the base compensation received by the Executive during the most recent calendar month
ending on or prior to the effective date of termination, plus any accrued but unused vacation days paid based on the Executive's
salary at the date of termination, less statutory payroll deductions. Payment under this paragraph shall be made in accordance
with The Bank's ordinary payroll policies and procedures in equal monthly payments beginning on the 15th day of the calendar month
immediately following the termination date and ending on the date which is the 15th day of the third calendar month of the calendar
year immediately following the termination date.


 






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(iii)Change in Assignment Related to Change
in Control. A termination by the Executive will be deemed to have been for "good reason" and the provisions of paragraph 5(f)(ii)
shall apply if: (A) within 24 months following a Change in Control, and without the Executive's express written consent, the
Executive's assignment with The Bank is changed in a way that results in (I) a material diminution in the Executive's base
compensation, (II) a material diminution of the Executive's authority, duties, or responsibilities, (III) a material
diminution in the authority, duties, or responsibilities of the supervisor to whom the Executive reports, including a requirement
that the Executive report to a corporate officer or employee instead of reporting directly to The Bank's Board of Directors, (IV) a
material diminution in the budget over which the Executive retains authority, (V) a material change in the geographic location
at which the Executive must perform the services, or (VI) any other action or inaction that constitutes a material breach
by The Bank of this Agreement; (B) the Executive provides notice to The Bank of her objection to the change within 90 days
of such change; (C) The Bank fails to remedy the change within 30 days of the notice provided pursuant to subparagraph (B)
of this paragraph 5(f)(iii); and (D) the Executive voluntarily terminates her employment with The Bank within 30 days
of the expiration of the period described in subparagraph (C) of this paragraph 5(f)(iii).


 


(iv)Limitations on Payments Related to
Change in Control. Notwithstanding the foregoing, the payment described in paragraph 5(f)(ii) shall be automatically reduced
to an amount that is less than the amount that would cause it to be a "parachute payment" within the meaning of Section 280G(b)(2)(A)
of the Internal Revenue Code.


 


6.Compliance with IRC Section 409A.
To the extent required by IRC Section 409A of the Internal Revenue Code, and regulations thereunder, payment of severance
benefits to Executive under any provision of paragraph 5 of this Agreement will not be paid, or commenced, until the expiration
of six months following the date of termination of Executive's employment with Corporation. If monthly payments are deferred pursuant
to this paragraph, all such deferred amounts will be paid in a lump sum on the first business day following the expiration of the
six-month period.


 


7.Confidentiality. The Executive
will not, after signing this Agreement, including during and after its Term, disclose to any other person or entity any confidential
information concerning The Bank or its business operations or customers, or use for her own purposes or permit or assist in the
use of such confidential information by third parties unless The Bank consents to the use or disclosures of their respective information,
or disclosure is required by law or court order. The provisions of this paragraph survive the termination of the Executive's employment
by The Bank.


 






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8.Noncompetition. During
the Term and for 24 months after the Executive's employment with The Bank ends, the Executive will not become involved with a Competing
Business or serve, directly or indirectly, a Competing Business in any matter. "Competing Business" means any company
that competes with or will compete with The Bank in Grays Harbor, Pacific, Wahkiakum, Whatcom, and Skagit Counties, or any other
Washington or Oregon county in which The Bank maintains a banking office(s) at the time of the termination of this Agreement. "Competing
Business" includes, without limitation, any existing or newly formed financial institution or trust company.


 


9.Enforcement. The Bank
and the Executive agree that, in light of all of the facts and circumstances of the relationship between The Bank and the Executive,
the agreements referred to in paragraphs 5(a), 7, and 8 are fair and reasonably necessary for the protection of The Bank's
confidential information, goodwill and other protectible interests. The parties acknowledge and agree that the time and expense
involved in proving in any forum the actual damage or loss suffered by The Bank if there is a breach of paragraphs 5(a), 7,
or 8 make this case appropriate for liquidated damages. Accordingly, The Bank and the Executive agree that the following schedule
of liquidated damages is reasonable and fair, and shall be the amount of damages which the Executive shall pay to The Bank for
each separate breach of paragraphs 5(a), 7, or 8 by the Executive:


 


(a)for a breach of paragraph 5(a),
up to the sum of $25,000 as described in paragraph 5(c);


 


(b)for a breach of paragraph 7,
the sum of $100,000;


 


(c)for a breach of paragraph 8,
the sum of $250,000.


 


For purposes of paragraph 8, a "separate
breach" shall be deemed to have occurred with each Competing Business with which the Executive becomes involved or serves
in violation of paragraph 8.


 


Neither the breach of paragraphs 5(a),
7, or 8, nor the payment of liquidated damages by the Executive, shall affect the continuing validity or enforceability of this
Agreement, or The Bank's right to seek and obtain injunctive relief. If a court of competent jurisdiction should decline to enforce
any of these covenants and agreements, the Executive and The Bank hereby stipulate that the Court shall reform these provisions
to restrict the Executive's use of confidential information and the Executive's ability to compete with The Bank to the maximum
extent, in time, scope of activities, and geography, as the court finds enforceable.


 


10.Adequate Consideration.
The Executive specifically acknowledges the receipt of adequate consideration for the covenants contained in paragraphs 5(a),
7, and 8, and that The Bank is entitled to require her to comply with these paragraphs. These paragraphs will survive termination
of this agreement. The Executive represents that if her employment is terminated, whether voluntarily or involuntarily, the Executive
has experience and capabilities sufficient to enable the Executive to obtain employment in areas which do not violate this Agreement
and that The Bank's enforcement of a remedy by way of injunction will not prevent the Executive from earning a livelihood.


 






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11.Miscellaneous Provisions.
This Agreement constitutes the entire understanding between the parties concerning its subject matter. This Agreement will bind
and inure to the benefit of The Bank's and the Executive's heirs, legal representatives, successors and assigns. This Agreement
may be modified only through a written instrument signed by both parties. This Agreement will be governed and construed in accordance
with Washington law, except that certain matters may be governed by federal law. Venue for enforcement of any terms of this Agreement
shall be in Grays Harbor County, Washington Superior Court.


 


Signed as of May 1, 2015.


 





	THE BANK OF THE PACIFIC	 	EXECUTIVE	 
	 	 	 	 	 
	 	 	 	 	 
	By:	 	 	Denise Portmann	 
	 	 	 	 	 
	Name:	 	 	 	 
	 	 	 	 	 
	Title:	 	 	 	 


 








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