Document:

an20131105-ex10_2.htm

Exhibit 10.2

 

Total Shareholder Return Performance Unit Award Program (the “Program”)

Performance Period August 6, 2013 – July, 2016

I. Purpose of the Program

 

The purpose of the Program is to align AngioDynamics’ executive compensation program with the interests of shareholders and to reinforce the concept of pay for performance by comparing the relative Total Shareholder Return (“TSR”) of shares of AngioDynamics’ Common Stock (the “Common Stock”) to the TSR of a pre-defined peer group (the “Peer Group”) of companies over a three-year period beginning on August 6, 2013.

The Program entails the grant of Performance Unit Awards, and the program shall be administered under the AngioDynamics 2004 Stock and Incentive Award Plan, as amended (the “Plan”). Terms not defined in this Program document but defined in the Plan shall have the meaning ascribed to such term in the Plan.  The Program is established under section 5.II of the Plan and is intended to qualify for the performance-based compensation exception under Section 162(m) of the Internal Revenue Code (“Code”).

II. Eligible Participants

 

The Program covers members of the Executive Management Team (“EMT”) on the date that awards are granted under the Program as determined and in the amounts established by the Board of Directors (the “Board”).

The Board may review Program eligibility criteria for Participants in the Program from time to time and may revise such criteria at any time, even within a Program year, with or without notice and within its sole discretion.

III.  Performance Share Units

 

Pursuant to the Plan and this Program, the Board may, in its sole discretion, grant Performance Unit Awards to members of the EMT (the “Grant Date”).  Each Performance Unit Award shall specify a target number of shares of Common Stock underlying the Performance Unit Award (the “Target Amount”).  Shares of Common Stock underlying the Performance Unit Award granted under the Program (the “Performance Unit Awards”) shall be issued only upon satisfaction of both the performance vesting criteria described in this Section III and the payment eligibility criteria described in Section VII.  The applicable performance criteria are based on the TSR of AngioDynamics’ Common Stock relative to the TSR of the common stock of the companies in the Peer Group.

 

  

  

  

 

The TSR for AngioDynamics and all other companies in the Peer Group will be measured in two annual Performance Cycles as well as an aggregate Performance Cycle (as defined below) over a three-year period beginning on August 6, 2013 and ending on the day that is the second trading day following AngioDynamics’ annual earnings announcement for its fiscal year ended May 31, 2016 (the “Performance Period”).

The number of shares of Common Stock that vest under the Performance Unit Award will be in a range of 0% to 200% of the Target Amount of shares of Common Stock pursuant to the Performance Unit Award granted to the Participant based upon AngioDynamics’ TSR percentile ranking relative to the Peer Group as follows:

	
TSR Performance

Percentile Rank

	
Performance Share Units

as a Percent of Target

	
75th Percentile or above

	
200%

	
50th Percentile

	
100%

	
25th Percentile

	
50%

	
Below 25th Percentile

	
0%

If the minimum level of performance set forth above is achieved for a relevant Performance Cycle, the number of shares of Common Stock vesting under the Performance Unit Award will be calculated linearly between each set of data points.

Following the end of each of Performance Cycle 1 and Performance Cycle 2, the Board shall determine the number of shares of Common Stock, based upon 1/3 of the shares of Common Stock underlying the Target Amount of the Performance Unit Award, that shall become vested pursuant to AngioDynamics’ relative TRS percentile rank during the applicable Performance Cycle.  Notwithstanding anything contained in this Program or the applicable grant agreement to the contrary, in no event shall the number of shares that vest pursuant to each of Performance Cycle 1 and Performance Cycle 2 exceed 1/3 of the Target Amount.  For the avoidance of doubt, an amount of shares equal to a percentage between 50% and 100% of 1/3 of the Target amount may vest during each of Performance Cycle 1 and Performance Cycle 2.

Following the end of the Performance Period, the Board shall determine the number of shares of Common Stock, based upon the total number of shares of Common Stock underlying the Target amount of the Performance Unit Award, that shall become vested pursuant to AngioDynamics’ relative TRS percentile rank during the Performance Period pursuant to the table set forth above.

 

  

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The Board shall issue a number of shares of Common Stock underlying the Performance Unit Award to the Participant in accordance with this Program and the applicable grant agreement equal to the sum of (A) (i) the number of shares of Common Stock, if any, that vested in Performance Cycle 1, (ii) the number of shares of Common Stock, if any, that vested in Performance Cycle 2, and (B) the number equal to, but in no event less than zero, the sum of (i) the number of shares of Common Stock, if any, that vested in the Aggregate Performance Cycle, minus (ii) the sum of the shares of Common Stock, if any, that vested pursuant to Performance Cycle 1 and Performance Cycle 2.

The Board’s determination regarding the Company’s performance to the performance criteria with respect to each Performance Cycle shall be final and binding.

Shares of Common Stock will be delivered or otherwise made available to the Participant as soon as practicable (and in all events within sixty (60) days) after the end of the Performance Period. Any shares of Common Stock underlying a Performance Unit Award as to which the performance criteria of this Section III have not been satisfied as of the end of the Performance Period will be forfeited in their entirety.

 

IV. Calculation of Total Shareholder Return and Definitions

The TSR for AngioDynamics and each other company in the Peer Group shall include any cash dividends paid during the Performance Period and shall be determined as follows:

Total Shareholder Return for each Performance Cycle =

 

(Change in Stock Price + Dividends Paid) / Beginning Stock Price

“Beginning Stock Price” with respect to AngioDynamics means the closing price as quoted on the NASDAQ Global Select Market of one share of the Company’s Common Stock on the beginning date of the applicable Performance Cycle.  “Beginning Stock Price” with respect to each other company in the Peer Group means the daily average closing price as quoted on the New York Stock Exchange or the NASDAQ Global Select Market, as applicable, of one (1) share of common stock for the two calendar months prior to the beginning of each Performance Cycle.

“Change in Stock Price” means the difference between the Beginning Stock Price and the Ending Stock Price.

“Dividends Paid” means the total of all cash dividends paid on one (1) share of stock during the applicable Performance Cycle.

 

  

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“Ending Stock Price” with respect to AngioDynamics means the closing price as quoted on the NASDAQ Global Select Market of one share of the Company’s Common Stock on the ending date of the applicable Performance Cycle.  “Ending Stock Price” with respect to each other company in the Peer Group means the daily average closing price as quoted on the New York Stock Exchange or the NASDAQ Global Select Market, as applicable, of one (1) share of common stock for the last two calendar months of the Performance Cycle.

“Performance Cycle” means the applicable period among Performance Cycle 1, Performance Cycle 2, and the Aggregate Performance Cycle.

“Performance Cycle 1” is the Performance Cycle during which the Beginning Stock Price is determined as of August 6, 2013 and the Ending Stock Price is determined as of the date that is the second trading day following AngioDynamics’ earnings announcement for the fiscal year ended May 31, 2014.

“Performance Cycle 2” is the Performance Cycle during which the Beginning Stock Price is determined as of the date that is the second trading day following AngioDynamics’ earnings announcement for the fiscal year ended May 31, 2014 and the Ending Stock Price is determined as of the date that is the second trading day following AngioDynamics’ earnings announcement for the fiscal year ended May 31, 2015.

“Aggregate Performance Cycle” is the Performance Cycle during which the Beginning Stock Price is determined as of August 6, 2013 and the Ending Stock Price is determined as of the end of the Performance Period.

Example: If the Beginning Stock Price for a company was $25.00 per share, and the company paid $2.50 in dividends over the Performance Cycle, and the Ending Stock Price was $30.00 per share (thereby making the Change in Stock Price $5.00 ($30.00 minus $25.00)), then the TSR for that company would be thirty percent (30%). The calculation is as follows: 0.30 = ($5.00 + $2.50) / $25.00

 

V. Calculation of Percentile Performance

 

Following the calculation of the TSR for the Performance Cycle for AngioDynamics and each other company in the Peer Group, AngioDynamics and the other companies in the Peer Group will be ranked, in order of maximum to minimum, according to their respective TSR for the Performance Cycle.

After this ranking, the percentile performance of AngioDynamics as compared to the other companies in the Peer Group shall be determined by the following formula:

 

 

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P = 1 -

	
R – 1

	
N – 1

“P” represents the percentile performance which will be rounded, if necessary, to the nearest whole percentile by application of standard scientific rounding conventions.

“N” represents the number of companies in the Peer Group, including AngioDynamics.

“R” represents AngioDynamics’ ranking versus the other companies in the Peer Group.

Example: If AngioDynamics ranked 10th out of 56 companies, the performance (“P”) therefore will be in the 84th percentile.

This calculation is as follows: 0.837 = 1 - (10 - 1) / (56 - 1)

 

VI. Peer Group

 

The companies in the Peer Group can be found in Appendix A attached hereto.

If, during the Performance Period, two companies in the Peer Group merge, the surviving company shall remain in the Peer Group.

If, during the Performance Period, a company in the Peer Group merges with, or is acquired by, a company that is not in the Peer Group, and the company in the Peer Group is the surviving company, then the surviving company shall not be included in the Peer Group.

If, during the Performance Period, a company in the Peer Group merges with, or is acquired by, a company that is not in the Peer Group, and the company in the Peer Group is not the surviving company or the surviving company is no longer publicly traded, then the surviving company shall not be included in the Peer Group.

If, during the Performance Period, a company in the Peer Group sells all or substantially all of its assets, such company shall not be included in the Peer Group.

If, during the Performance Period, a company in the Peer Group splits-off or spins-off or consummates any other extraordinary reorganization transaction, and such spin-off, split-off or reorganization comprises more than 20% of the assets of the company prior to such spin-off, split-off or reorganization, such company shall not be included in the Peer Group.

 

  

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If, during the Performance Period, a company in the Peer Group files for bankruptcy or otherwise ceases to be traded or quoted on any national exchange, such Company shall remain in the Peer Group.  If no public stock price information is available for such company after it files for bankruptcy or otherwise ceases to be traded or quoted on a national securities exchange, the TSR for such company shall equal a total loss of equity (or -100%) for each Performance Cycle during the Performance Period for which no stock price information is available.

If, during the Performance Period, any company is excluded from the Peer Group pursuant to this Section VI, such company shall be excluded for all Performance Cycles during the Performance Period.  The triggering event for determining whether a company shall be excluded from the Peer Group pursuant to this Section VI shall be the first official announcement of an SEC reportable event.

 

VII. Payment Eligibility Criteria

 

Except as set forth below with respect to a Change in Control or termination of employment due to Retirement, death, or Disability, (i) no shares of Common Stock underlying the Performance Unit Award shall issue prior to the end of the Performance Period and (ii) a participant must be employed by the Company (as defined below) through the end of the Performance Period to be eligible to receive shares of Common Stock that have vested under the Performance Unit Award pursuant to Section III of this Program.

Death. If the Participant’s employment with AngioDynamics or its subsidiaries or affiliates is terminated due to death on or after the Grant Date, but prior to the end of the Performance Period, the Performance Unit Award shall remain eligible to vest following the end date of the Performance Cycle during which the date of such termination occurs according to the vesting provisions set forth in Section III of this Program and, in addition to any shares of Common Stock that vested prior to the date of such termination, the Participant shall receive a pro-rated portion of the Common Stock underlying the Performance Unit Award that would otherwise vest based upon the provisions set forth in Section III of this Program on the applicable end date of the Performance Cycle that immediately follows the date of such termination, with the pro-rata portion based on the Participant’s whole months of service with the Company during the Performance Period prior to the date of such termination; provided that a partial month of employment will be considered a whole “month of service” for purposes of this Program only if the Participant was employed by AngioDynamics for at least fifteen (15) days during such month.  Any portion of the Performance Unit Award that remains unvested on the end date of the Performance Cycle during which the date of such termination occurred (after giving effect to such pro-ration) shall be considered to have terminated on such date.  The Participant may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit granted to the Participant under this Program 

 

  

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is to be paid in case of his or her death before he or she receives any or all such benefit.  Each such designation shall revoke all prior designations by the Participant, shall be in a form prescribed by AngioDynamics, and will be effective only when filed by the Participant in writing with the Secretary of the Company during the Participant’s lifetime.  In the absence of any such designation, benefits remaining unpaid at the Participant’s death shall be paid to the Participant’s estate.

Retirement or Disability. If the Participant’s employment with AngioDynamics or its subsidiaries or affiliates is terminated due to Retirement or Disability on or after the Grant Date, but prior to the end of the Performance Period, the Performance Unit Award shall remain eligible to vest pursuant to Section III of this Program on the end date of the Performance Cycle during which the date of such termination occurs and, in addition to any shares of Common Stock that vested prior to the date of such termination, the Participant shall receive a pro-rated portion of the Common Stock underlying the Performance Unit Award that would otherwise vest pursuant to Section III of this Program based on performance during the Performance Cycle during which the date of such termination occurs, with the pro-rata portion based on the Participant’s whole months of service with AngioDynamics during the Performance Period prior to the date of such termination; provided that a partial month of employment will be considered a whole “month of service” for purposes of this Agreement only if the Participant was employed by AngioDynamics for at least fifteen (15) days during such month.  Any portion of the Performance Unit Award that remains unvested on the end date of the Performance Cycle during which the date of such termination occurred (after giving effect to such pro-ration) shall be considered to have terminated on such date.

Other Termination of Employment -- Eligibility Conditions. If the Participant’s employment with AngioDynamics or any and of its subsidiaries or affiliates is terminated or the Participant separates from AngioDynamics or its affiliates or subsidiaries for any reason other than death, Retirement or Disability, the Performance Unit Award shall terminate and no shares of Common Stock, whether vested or remaining subject to eligibility conditions or satisfaction of the performance conditions set forth in Section III of this Program, shall be issued.

Change in Control of the Company.  Notwithstanding anything to the contrary in this Agreement, in the event of a Change in Control (as defined in this Program) of AngioDynamics on or after the Grant Date, but prior to the end of the Performance Period and prior to the Participant’s termination of employment for any reason, the Participant shall immediately vest in 100% of the Target Amount of shares of Common Stock subject to the Performance Unit Award. Notwithstanding anything to the contrary in this Agreement, in the event the Participant’s employment with AngioDynamics or any of its subsidiaries or affiliates terminates due to one of the reasons expressly covered above (except as described in “Other Termination of 

 

  

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Employment” set forth above) and a Change in Control of AngioDynamics occurs subsequent to such a termination of employment (but during the Performance Period), the pro-rata vesting provided for in such sections shall be based on the Target Amount of shares of Common Stock subject to the Performance Unit Award.  Any shares of Common Stock subject to the Performance Unit Award that become vested pursuant to this section of the Program shall be issued to the Participant upon or as soon as practicable (and in all events within thirty (30) days) after the effective date of the Change in Control of AngioDynamics (or, if so provided by the Board, immediately prior to the Change in Control).  In the event a Change in Control of AngioDynamics occurs following the last day of the Performance Period, prior to the Participant’s termination of employment for any reason, and prior to the date all vested shares of Common Stock underlying the Performance Unit Award are issued pursuant to this Program, any shares of Common Stock subject to the Performance Unit Award that became vested pursuant to this paragraph of the Program shall be issued to the Participant upon or as soon as practicable (and in all events within thirty (30) days) after the effective date of the Change in Control of AngioDynamics (or, if so provided by the Board, immediately prior to the Change in Control).

For the purposes of this Program, Change in Control shall mean shall mean that any of the following events has occurred:

 

(i)           any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company's then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (A) of paragraph (iii) below; or

 

(ii)           the following individuals cease for any reason to constitute a  majority of the number of directors serving on the Board: individuals who, at the beginning of any period of two consecutive years or less (not including any period prior to the date of this Agreement), constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company's shareholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of such period or whose appointment, election or nomination for election was previously so approved or recommended; or

 

(iii)           there is consummated a merger or consolidation of the Company or any Subsidiary with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding 

 

  

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immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary, at least 60% of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company's then outstanding securities; or

 

(iv)           the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets, other than a sale or disposition by the Company of all or substantially all of the Company's assets to an entity, at least 60% of the combined voting power of the voting securities of which are owned by shareholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale.

 

VIII. Termination, Suspension or Modification and Interpretation of the Program

 

The Board has sole authority over administration and interpretation of the Program and retains the right to exercise discretion as it sees fit, except that, the Board shall have no discretion to increase the number of shares of Common Stock in which a Participant may vest above the amount described in Section III.  The Board may terminate, suspend or modify and if suspended, may reinstate with or without modification all or part of the Program at any time, with or without notice to the Participant.  The Board reserves the exclusive right to determine eligibility to participate in this Program and to interpret all applicable terms and conditions, including eligibility criteria.

 

IX. Other

 

This document sets forth the terms of the Program and is not intended to be a contract or employment agreement between the Participant and AngioDynamics, its subsidiaries or affiliates.  As applicable, it is understood that both the Participant and AngioDynamics have the right to terminate the Participant’s employment with the company at any time, with or without cause and with or without notice, in acknowledgement of the fact that their employment relationship is “at will.”

 

  

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To the extent section 409A of the Code (“Section 409A”) applies to any Performance Unit Award under this Program, the Performance Unit Award shall be interpreted in a manner consistent with Section 409A. Where Section 409A applies, in the case of any payment made on termination of employment, a termination of employment shall not be deemed to have occurred unless such termination is also a “separation from service” within the meaning of Section 409A and, for purposes of any such provision, references to a “termination,” “termination of employment,” or like terms shall mean “separation from service.”  Where Section 409A applies, in the case of a payment made upon a Change in Control, a Change in Control shall not be deemed to have occurred unless there is a change in the ownership or effective control of AngioDynamics, or in the ownership of a substantial portion of the assets of AngioDynamics, as defined in Section 409A.  Where required by Section 409A in the case of a specified employee (as determined under Section 409A), payments on termination shall be made on the first business day of the seventh month following termination.

  

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APPENDIX A

	
Abaxis Inc.

	
Lakeland Industries Inc.

	
Abiomed Inc.

	
Lemaitre Vascular, Inc.

	
Accuray Inc.

	
Mako Surgical Corp.

	
AlphaTec Holdings Inc.

	
Masimo Corporation

	
Arthrocare Corporation

	
Medical Action Industries Inc.

	
Articure, Inc.

	
Merit Medical Systems, Inc.

	
Atrion Corporation

	
Mine Safety Appliances Company

	
C.R. Bard, Inc.

	
Natus Medical Incorporated

	
Becton, Dickinson & Company

	
NuVasive, Inc.

	
Boston Scientific Corporation

	
NxStage Medical, Inc.

	
Cantel Medical Corp.

	
Resmed Inc.

	
Conmed Corporation

	
Rochester Medical Corporation

	
CryoLife, Inc.

	
RTI Surgical, Inc.

	
Cutera, Inc.

	
Solta Medical, Inc.

	
Cyberonics, Inc.

	
Span-America Medical Systems, Inc.

	
Cynosure, Inc.

	
Spectranetics Corporation

	
Dexcom, Inc.

	
St. Jude Medical, Inc.

	
Digirad Corp

	
Steris Corporation

	
Edwards Lifesciences Corporation

	
Stryker Corporation

	
Endologix, Inc.

	
Symmetry Medical Inc.

	
Exactech, Inc.

	
Synergetics USA, Inc.

	
Haemonetics Corporation

	
Teleflex Incorporated

	
ICU Medical, Inc.

	
Thoratec Corporation

	
Insulet Corporation

	
Varian Medical Systems, Inc.

	
Integra Lifesciences Holdings Corporation

	
Vascular Solutions, Inc.

	
Intricon Corporation

	
Volcano Corporation

	
Intuitive Surgical, Inc.

	
Wright Medical Group, Inc.

	
Invacare Corporation

	
Zimmer Holdings, Inc.ex10_103013.htm

EMPLOYMENT AGREEMENT

 

This Agreement (“Agreement”) is made effective as of the 30th day of October 2013  (the “Effective Date”), by and among SIMPLICITY BANK (the “Bank”), a federally chartered stock savings bank, with its principal administrative office at 1359 N. Grand Ave., Covina, California 91724 and DUSTIN LUTON (“Executive”).  Any reference to the “Company” herein shall mean SIMPLICITY BANCORP, INC., the holding company of the Bank.  The Company is a party to this Agreement for the sole purpose of
guaranteeing the payments required hereunder, except as otherwise provided herein.

 

WHEREAS, Executive and Kaiser Federal Bank (which changed its name to Simplicity Bank) were parties to an employment agreement dated as of November 19, 2011 (“Original Agreement”);

 

WHEREAS, the parties desire to enter into this Agreement to replace the Original Agreement; and

 

NOW, THEREFORE, in consideration of the mutual covenants herein contained, and upon the other terms and conditions hereinafter provided, the parties hereby agree as follows:

 

	
1.  

	
POSITION AND RESPONSIBILITIES

 

During the period of Executive’s employment hereunder, Executive agrees to serve as President and Chief Executive Officer of the Bank.  As President and Chief Executive Officer, the Executive shall report to the Board of Directors of the Bank (the “Board”) and be responsible for the operation of the Bank and for meeting growth and profitability goals through the proper management of the financial, human, and physical resources of the Bank.  Furthermore, Executive shall provide leadership, stewardship and strategic vision to the Bank.  During said period, Executive has agreed to serve as President and Chief Executive Officer of the Company, and also agrees to serve,
if elected, as an officer and director of any subsidiary or affiliate of the Bank or the Company.

 

	
2.  

	
TERMS

 

(a) The term of this Agreement and the period of Executive’s employment hereunder shall begin as of the Effective Date and shall continue for twenty-four (24) full calendar months thereafter.  Reference herein to the term of this Agreement shall refer to both such initial term and such extended terms.

 

(b) Commencing on the Effective Date and continuing on each anniversary date thereafter (the “Anniversary Date”), this Agreement shall renew for an additional year such that the remaining term shall be twenty-four (24) months, provided, however, that in order for the Agreement to renew, the disinterested members (as defined below) of the Board must take the following actions prior to each non-renewal notice period (as described in the next sentence): (i) at least sixty (60) days prior to the Anniversary Date, conduct a comprehensive performance evaluation and review of Executive for purposes of
determining whether to extend the Agreement; and (ii) affirmatively approve the renewal or non-renewal of the Agreement, which decision shall be included in the minutes of the Board’s meeting.  For purposes of this Agreement, “disinterested members” of the Board means any director who qualifies as a “non-employee director” under Rule 16b-3 of the Securities Exchange Act of 1934 and who also qualifies as an “outside director” under Section 162(m) of the Internal Revenue Code of 1986 as amended.

 

  

  

  

(c) If the decision of such disinterested members of the Board is not to renew the Agreement, then the Board shall provide the Executive with a written notice of non-renewal (“Non-Renewal Notice”) at least thirty (30) days and not more than sixty (60) days prior to any Anniversary Date, such that this Agreement shall terminate at the end of twelve (12) months following such Anniversary Date.

 

(d) The failure of the disinterested members of the Board to take the actions set forth herein before any Anniversary Date will result in the automatic non-renewal of this Agreement, even if the Board fails to affirmatively issue the Non-Renewal Notice to Executive.  If the Board fails to inform Executive of its determination regarding the renewal or non-renewal of this Agreement, the Executive may request, in writing, the results of the Board’s action (or non-action) and the Board shall, within thirty (30) days of the receipt of such request, provide a written response to Executive.

 

(e) Notwithstanding the foregoing, in the event that at any time prior to the Anniversary Date the Company or the Bank has entered into an agreement to effect a transaction which would be considered a Change in Control as defined under Section 6(a)(iii) hereof, then the term of this Agreement shall be extended and shall terminate twenty-four (24) months following the date on which the Change in Control occurs.

 

(f) During the period of his employment hereunder, except for periods of absence occasioned by illness, reasonable vacation periods, and reasonable leaves of absence, Executive shall faithfully perform his duties hereunder including activities and services related to the organization, operation and management of the Bank.

 

	
3.  

	
COMPENSATION AND REIMBURSEMENT

 

(a) The compensation specified under this Agreement shall constitute the salary and benefits paid for the duties described in Section 1.  The Bank shall pay Executive as compensation a salary of not less than $380,000 per year (“Base Salary”).  Such Base Salary shall be payable in accordance with the customary payroll practices of the Bank.  During the period of this Agreement, Executive’s Base Salary shall be reviewed at least annually.  Such review shall be conducted by a committee designated
by the Board (the “Committee”), and the Board may increase, but not decrease, Executive’s Base Salary (any increase in Base Salary shall become the “Base Salary” for purposes of this Agreement).  In addition to the Base Salary provided in this Section 3(a), the Bank shall provide Executive at no cost to Executive with all such other benefits as are provided uniformly to regular, full-time employees of the Bank.

 

  

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(b) The Bank will provide Executive with employee benefit plans, arrangements and perquisites substantially equivalent to those in which Executive was participating or otherwise deriving benefit from immediately prior to the beginning of the term of this Agreement, and the Bank will not, without Executive’s prior written consent, make any changes in such plans, arrangements or perquisites which would adversely affect Executive’s rights or benefits thereunder, except for amendments that are generally applicable to all employees.  Without limiting the generality of the foregoing provisions of
this Section 3(b), Executive will be entitled to participate in or receive benefits under any employee benefit plans including but not limited to, retirement plans, supplemental retirement plans, pension plans, profit-sharing plans, health-and-accident plans, medical coverage or any other employee benefit plan or arrangement made available by the Bank in the future to its senior executives and key management employees, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements.  Executive will be entitled to incentive compensation and bonuses as provided in any plan of the Bank in which Executive is eligible to participate (and he shall be entitled to a pro rata distribution for earned compensation under any incentive compensation or bonus plan as to any year in which a termination of employment occurs, other
than Termination for Cause).  Nothing paid to Executive under any such plan or arrangement will be deemed to be in lieu of other compensation to which Executive is entitled under this Agreement.

 

(c) In addition to the Base Salary provided for by Section 3(a), the Bank shall pay or reimburse Executive for all reasonable travel and other reasonable expenses incurred by Executive in performing his obligations under this Agreement and may provide such additional compensation in such form and such amounts as the Board may from time to time determine.  All reimbursements pursuant to this Seciton 3(c) shall be paid promptly by the Bank and in any event no later than March 15 of the year immediately following the calendar year in which the expense was incurred.

 

	
4.  

	
OUTSIDE ACTIVITIES

 

Executive may serve as a member of the board of directors of business, community and charitable organizations subject to the approval of the Board, provided that in each case such service shall not materially interfere with the performance of his duties under this Agreement or present any conflict of interest.  Where such service to and participation in outside organizations is for the benefit of the Bank, the Bank shall reimburse Executive his reasonable expenses associated therewith.  Such reimbursement shall be paid promptly by the Bank and in any event no later than March 15 of the year immediately following the calendar year in which the expense was incurred.

 

	
5.  

	
WORKING FACILITIES AND EXPENSES

 

Executive’s principal place of employment shall be at the Bank’s principal executive offices.  The Bank shall provide Executive, at his principal place of employment, with a private office, stenographic services and other support services and facilities suitable to his position with the Bank and necessary or appropriate in connection with the performance of his duties under this Agreement.  The Bank shall reimburse Executive for his ordinary and necessary business expenses incurred in connection with the performance of his duties under this Agreement, including, without limitation, fees for memberships in such clubs and organizations that Executive and the Board mutually agree are
necessary and appropriate to further the business of the Bank, and travel and reasonable entertainment expenses.  Reimbursement of such expenses shall be made upon presentation to the Bank of an itemized account of the expenses in such form as the Bank may reasonably require.  Such reimbursement shall be paid promptly by the Bank and in any event no later than March 15 of the year immediately following the calendar year in which the expense was incurred.

 

  

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6.  

	
PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION

 

(a) The provisions of this Section 6 shall apply upon the occurrence of an Event of Termination (as herein defined) during Executive’s term of employment under this Agreement.  As used in this Agreement, an “Event of Termination” shall mean and include any one or more of the following:

 

(i) the involuntary termination by the Bank of Executive’s full-time employment hereunder for any reason other than (A) Retirement, death or Disability, as defined in Section 7 below, or (B) Termination for Cause as defined in Section 8 hereof.

 

(ii) Executive’s voluntary resignation from the Bank’s employ for “Good Reason.”  Good Reason shall mean:

 

(A)           a material diminution in Executive’s base compensation;

(B)           a material diminution in Executive’s authority duties or responsibilities;

(C)           a requirement that Executive must report to a corporate officer or employee instead of reporting directly to the Board;

(D)           a material diminution in the budget over which Executive retains authority;

(E)           a change in the geographic location at which Executive must perform his duties that is more than fifty (50) miles from the location of Executive’s principal workplace on the date of this Agreement; or

(F)           any other action or inaction that constitutes a material breach by the Bank of this Agreement.

Upon the occurrence of any event described above that constitutes Good Reason, Executive shall have the right to elect to terminate his employment under this Agreement by resignation within ninety (90) days following an event constituting Good Reason, provided, however that the Bank shall have at least thirty (30) days to cure such condition.  Notwithstanding the preceding sentence, in the event of a continuing breach of this Agreement by the Bank, Executive, after giving due notice within the prescribed time frame of an initial event specified above, shall not waive any of his rights solely under this Agreement and this Section  6 by virtue of the fact that Executive has submitted his resignation
but has remained in the employment of the Bank and is engaged in good faith discussions to resolve any occurrence of an event constituting Good Reason.

 

  

4

  

(iii)  (A) Executive’s involuntary termination by the Bank (other than Termination for Cause) on the effective date of, or at any time following, a Change in Control, or (B) Executive’s resignation from employment with the Bank or the Company (or any successor thereto) following a Change in Control for Good Reason.  For these purposes, a Change in Control of the Bank or the Company shall mean a change in control of a nature that: (i) would be required to be reported in response to Item 5.01 of the current report on Form 8-K, as in effect on the date hereof, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”); or (ii) results in a Change in Control of the Bank or the Company within the meaning of the Home Owners’ Loan Act, as amended, and applicable rules and regulations promulgated thereunder (collectively, the “HOLA”) as in effect at the time of the Change in Control; or (iii) without limitation, such a Change in Control shall be deemed to have occurred at such time as (a) any “person” (as the term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of Company’s outstanding securities, except for any securities purchased by the Bank’s employee stock ownership
plan or trust; or (b) individuals who constitute the Board on the date hereof (the “Incumbent Board”) cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board, or whose nomination for election by the Company’s stockholders was approved by the same Nominating Committee serving under an Incumbent Board, shall be, for purposes of this clause (b), considered as though he or she were a member of the Incumbent Board; or (c) a plan of reorganization, merger, consolidation, sale of all or substantially all the assets of the Bank or the Company or similar transaction in which the Bank or Company is not the surviving
institution occurs or is effected; or (d) a proxy statement soliciting proxies from stockholders of the Company, by someone other than the current management of the Company is distributed, seeking stockholder approval of a plan of reorganization, merger or consolidation of the Company or similar transaction with one or more corporations as a result of which the outstanding shares of the class of securities then subject to the plan are exchanged for or converted into cash or property or securities not issued by the Company; or (e) a tender offer is made for 25% or more of the voting securities of the Company and the shareholders owning beneficially or of record 25% or more of the outstanding securities of the Company have tendered or offered to sell their shares pursuant to such tender offer and such tendered shares have been accepted by the tender offeror.

 

(b) Upon the occurrence of an Event of Termination , other than an Event of Termination under Section 6(a)(iii) following a Change in Control, within thirty (30) days after the Date of Termination, as defined in Section 9(b), the Bank shall pay Executive, or, in the event of his subsequent death, his beneficiary or beneficiaries, or his estate, as the case may be, as severance pay or liquidated damages, or both, a lump sum equal to (i) the Executive’s earned but unpaid Base Salary and benefits, plus (ii) one (1) times the Executive’s annualized Base Salary.  In addition, the Bank will cause
to be continued, at the Bank’s expense, life insurance coverage and non-taxable medical and dental insurance coverage, if any, substantially identical to the coverage maintained by the Bank for Executive prior to his termination, provided, however, such medical coverage shall cease upon the earlier of (i)  twelve (12) months from the Date of Termination or (ii) the date Executive becomes eligible for comparable benefits through a new employer, or Medicare coverage, provided further, that if Executive is covered by family coverage or coverage for himself and a spouse, then the Executive’s family or spouse shall continue to be covered for the remainder of the twelve (12) month period or, in the case of the spouse, until the spouse becomes eligible for comparable benefits through a new employer, or Medicare coverage or obtains healthcare coverage elsewhere, whichever
period is less.  Notwithstanding anything herein to the contrary, if as the result of any change in, or interpretation of, the laws applicable to the continued welfare benefits hereunder, such benefits are deemed illegal or subject to penalties, then the Bank shall, to the extent permitted under such laws, pay to the Executive a cash lump sum payment reasonably estimated to be equal to the amount of welfare benefits (or the remainder of such amount) that the Executive is no longer permitted to receive in-kind.  Such lump sum payment shall be required to be made no later than two and one-half months following the Executive’s Date of Termination, or if later, within two and one-half months following a determination that such payment would be illegal or subject to penalties.

 

  

5

  

(c) Upon the occurrence of an Event of Termination under Section 6(a)(iii) following a Change in Control, within thirty (30) days after the Date of Termination, as defined in Section 9(b), the Bank shall pay Executive, or, in the event of his subsequent death, his beneficiary or beneficiaries, or his estate, as the case may be, as severance pay or liquidated damages, or both, a lump sum equal to (i) the Executive’s earned but unpaid Base Salary and benefits, plus (ii) two (2) times the sum of (A) Executive’s annualized Base Salary and (B) the highest rate of annual cash bonus earned by Executive
under the Annual Incentive Plan during the two (2) years immediately prior to the year in which the Executive’s Date of Termination occurs.  In addition, the Bank will cause to be continued, at the Bank’s expense, life insurance coverage and non-taxable medical and dental insurance coverage, if any, substantially identical to the coverage maintained by the Bank for Executive prior to his termination, provided, however, such medical coverage shall cease upon the earlier of (i)  twenty-four (24) months from the Date of Termination or (ii) the date Executive becomes eligible for comparable benefits through a new employer, or Medicare coverage, provided further, that if Executive is covered by family coverage or coverage for herself and a spouse, then the Executive’s family or spouse shall continue to be covered for the remainder of the twenty-four
(24) month period or, in the case of the spouse, until the spouse becomes eligible for comparable benefits through a new employer, or Medicare coverage or obtains healthcare coverage elsewhere, whichever period is less.  Notwithstanding anything herein to the contrary, if as the result of any change in, or interpretation of, the laws applicable to the continued welfare benefits hereunder, such benefits are deemed illegal or subject to penalties, then the Bank shall, to the extent permitted under such laws, pay to the Executive a cash lump sum payment reasonably estimated to be equal to the amount of welfare benefits (or the remainder of such amount) that the Executive is no longer permitted to receive in-kind.  Such lump sum payment shall be required to be made no later than two and one-half months following the Executive’s Date of Termination, or if later,
within two and one-half months following a determination that such payment would be illegal or subject to penalties.

 

Notwithstanding anything in this Agreement to the contrary, in no event shall the aggregate payments or benefits to be made or afforded to Executive under this Agreement , either as a stand-alone benefit or when aggregated with other payments to, or for the benefit of, Executive (collectively referred to as the “Change in Control Benefits”) that are contingent on a change in control (as defined under Code Section 280G), constitute an “excess parachute payment” under Code Section 280G or any successor thereto, and in order to avoid such a result, Executive’s benefits payable under this Agreement shall be reduced by the minimum amount necessary so that the Change in Control Benefits
that are payable to Executive are not subject to penalties under Code Sections 280G and 4999.

 

  

6

  

(d) Notwithstanding anything to the contrary herein, Executive’s voluntary resignation for any reason other than for Good Reason shall not entitle Executive to any payments under Section 6 of this Agreement.

 

(e) Notwithstanding anything in this Agreement to the contrary, Executive shall not be entitled to any severance payments or benefits under this Section 6 unless and until Executive executes a release of his claims against the Bank, the Company and any affiliate, and their owners, officers, directors, successors, assigns, agents, attorneys, and insurers, releasing said persons from any and all claims, rights, demands, causes of action, suits, arbitrations or grievances relating to the employment relationship, including claims under (i) Title VII of the Civil Rights Act of 1964 (race, color, religion, sex and
national origin discrimination); (2) 42 U.S.C. Section 1981 (age discrimination); (3) 29 U.S.C. Section 621-634 (age discrimination); (4) 29 U.S.C. Section 206(d)(i) (equal pay); (5) the California Fair Employment and Housing Act (discrimination including race, color, national origin, ancestry, religion, physical or mental disability, medical condition, military status, marital status, sex, gender, sexual orientation or age) and (6) Section 1542 of the Civil Code of the State of California, but not including claims for benefits under tax-qualified plans or other benefit plans in which Executive is vested, claims for benefits required by applicable law or claims with respect to obligations set forth in this Agreement that survive the termination of this Agreement.  In order to comply with the requirements of Code Section 409A and applicable age discrimination laws, the release
shall be provided to Executive no later than the date of his Date of Termination and Executive shall have no fewer than twenty-one (21) days to consider the release, and following Executive’s execution of the release, Executive shall have seven (7) days to revoke said release as it relates to any age discrimination claims available to Executive under federal law.

 

	
7.  

	
TERMINATION UPON RETIREMENT, DISABILITY OR DEATH

 

(a)  Retirement.

 

(1)           For purposes of this Agreement, termination by the Bank of Executive’s employment based on “Retirement” that is not in connection with a Change in Control shall mean termination of Executive’s employment by the Board upon Executive’s attainment of age 65, or such later date as determined by the Board.  Upon termination of Executive’s employment because of Retirement, Executive shall be entitled to all benefits under any retirement plan of the Bank and other plans to which Executive is a party, but Executive shall not be entitled to the termination benefits specified in Section 6.

 

  

7

  

(2)           For purposes of this Agreement, if the Executive’s employment terminates in connection with a Change in Control based on “Retirement,” Executive shall be entitled to all benefits under any retirement plan of the Bank and any other plans to which Executive is a party, but Executive shall not be entitled to the termination benefits specified in Section 6.  “Retirement” shall mean termination of Executive’s employment by mutual agreement between the Executive and the Board upon Executive’s attainment of age 65, or such later date as determined by the Board.  However, if an Event of
Termination described in Section 6 occurs at or after the Executive’s attainment of age 65 and the Executive and the Board have not mutually agreed that the Executive will terminate employment due to “Retirement,” then the Executive shall be entitled to the termination benefits specified in Section 6.

 

(b)  Disability.  In the event Executive is unable to perform his duties under this Agreement on a full-time basis for a period of six (6) consecutive months by reason of “Disability” within the meaning of Code Section 409A, the Bank may terminate this Agreement, and (i) the Executive shall receive benefits under any disability insurance or other similar such program which the Bank may provide or pursuant to any workman’s or Social Security disability program; and (ii) to the extent such disability benefits is less than the Executive’s then-current after-tax Base Salary, the Bank shall
pay the Executive the difference between such disability benefits and the then-current after-tax Base Salary that the Executive would have received had the Disability not occurred (calculated as a gross amount, such that the Executive’s then-current after-tax Base Salary shall remain the same after the Disability as before the Disability).  The Bank shall provide such differential payments to the Executive for the remaining term of the Agreement, or one year, whichever is the longer period of time.  Such differential payments shall be made to the Executive in regular installments on the Bank’s regularly scheduled payroll dates, starting no later than thirty (30) days after the date of the Executive’s Disability.  Each installment shall be treated as a separate payment for purposes of Code Section 409A..

 

(c)  Death.  In the event of Executive’s death during the term of the Agreement, (i) his estate, legal representatives or named beneficiaries (as directed by Executive in writing) shall be paid Executive’s Base Salary at the rate in effect at the time Executive’s death for a period of one (1) year from the date of Executive’s death (payable in accordance with the Bank’s regular payroll practices), and (ii) the Bank will continue to provide at the Bank’s sole expense, non-taxable medical and dental and other benefits normally provided for the Executive’s family for
twelve (12) months after Executive’s death and that COBRA group health care continuation coverage shall run concurrently with such twelve (12) month period.

 

	
8.  

	
TERMINATION FOR CAUSE

 

The term “Termination for Cause” shall mean termination because of Executive’s personal dishonesty, incompetence, willful misconduct, any breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule, or regulation (other than minor traffic violations or similar offenses) or final cease-and-desist order, conviction or plea of “no contest” for any felony or a crime of moral turpitude or material breach of any provision of this Agreement.  In determining incompetence, the acts or omissions shall be measured against standards generally prevailing in the savings institutions industry.  Executive
shall not have the right to receive Base Salary or other compensation for any period after Termination for Cause.

 

  

8

  

 

	
9.  

	
NOTICE

 

(a) Any purported termination by the Bank or by Executive shall be communicated by Notice of Termination to the other party hereto.  For purposes of this Agreement, a “Notice of Termination” shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated.

 

(b) “Date of Termination” shall mean (A) if Executive’s employment is terminated for Disability, thirty (30) days after a Notice of Termination is given (provided that he shall not have returned to the performance of his duties on a full-time basis during such thirty (30) day period), and (B) if his employment is terminated for any other reason, the date specified in the Notice of Termination, provided, however, that the date specified in the Notice of Termination shall be the date of Executive’s Separation from Service (as defined in Section 14(f) below).

 

(c) If the party receiving a Notice of Termination desires to dispute or contest the basis or reasons for termination, the party receiving the Notice of Termination must notify the other party within thirty (30) days after receiving the Notice of Termination that such a dispute exists, and shall pursue the resolution of such dispute in good faith and with reasonable diligence pursuant to Section 20 of this Agreement.  During the pendency of any such dispute, neither the Company nor the Bank shall be obligated to pay Executive’s Base Salary or other compensation beyond the Date of
Termination.  Any amounts paid to Executive upon resolution of such dispute under this Section shall be offset against or reduce any other amounts due under this Agreement.

 

	
10.  

	
POST-TERMINATION OBLIGATIONS

 

(a) All payments and benefits to Executive under this Agreement shall be subject to Executive’s compliance with paragraph (b) of this Section and Section 11 during the term of this Agreement and for one (1) full year after the expiration or termination hereof.

 

(b) Executive shall, upon reasonable notice, furnish such information and assistance to the Bank as may reasonably be required by the Bank in connection with any litigation in which it or any of its subsidiaries or affiliates is, or may become, a party.

 

	
11.  

	
NON-COMPETITION AND NON-SOLICITATION

 

(a) Non-Compete/Non-Solicitation.  Upon any termination of Executive’s employment hereunder, other than a termination, (whether voluntary or involuntary) in connection with a Change in Control, as a result of which the Bank is paying Executive benefits under Section 6 of this Agreement, Executive agrees not to compete with the Bank and/or the Company while using the Bank or the Company’s confidential, proprietary, and/or trade secret information for a period of one (1)
year following such termination within twenty-five (25) miles of any existing branch of the Bank or any subsidiary of the Company or within twenty-five (25) miles of any office for which the Bank, the Company or a Bank subsidiary of the Company has filed an application for regulatory approval to establish an office, determined as of the effective date of such termination, except as agreed to pursuant to a resolution duly adopted by the Board.  Executive agrees that during such period and within said area, cities, towns and counties, Executive shall not work for or advise, consult or otherwise serve with, directly or indirectly, any entity whose business materially competes with the depository, lending or other business activities of the Bank and/or the Company. The parties hereto, recognizing that irreparable injury will result to the Bank and/or the Company, its business and
property in the event of Executive’s breach of this Subsection 11(a) agree that in the event of any such breach by Executive, the Bank and/or the Company will be entitled, through the arbitration process, in addition to any other remedies and damages available, to an injunction to restrain the violation hereof by Executive, Executive’s partners, agents, servants, employers, employees and all persons acting for or with Executive.  Executive represents and admits that Executive’s experience and capabilities are such that Executive can obtain employment in a business engaged in other lines and/or of a different nature than the Bank and/or the Company, and that the enforcement of a remedy by way of injunction will not prevent Executive from earning a livelihood.  Nothing herein will be construed as prohibiting the Bank
and/or the Company from pursuing any other remedies available to the Bank and/or the Company for such breach or threatened breach, including the recovery of damages from Executive through the arbitration process.

 

  

9

  

In addition, upon any termination of Executive’s employment hereunder, other than a termination (whether voluntary or involuntary) in connection with a Change Control, as a result of which the Bank is paying Executive benefits under Section 6 of this Agreement, Executive agrees not to solicit, provide any information, advice or recommendation or take any other action intended (or that a reasonable person acting in like circumstances would expect) to have the effect of causing any customer of the Bank or its affiliates to terminate an existing business or commercial relationship with the Bank while using the Bank’s confidential, proprietary, and/or trade secret information.

 

(b) Confidentiality.  Executive recognizes and acknowledges that the knowledge of the business activities and plans for business activities of the Bank and affiliates thereof, as it may exist from time to time, is a valuable, special and unique asset of the business of the Bank.  Executive will not, during or after the term of his employment, disclose any knowledge of the past, present, planned or considered business activities of the Bank or affiliates thereof to any person, firm, corporation, or other entity
for any reason or purpose whatsoever (except for such disclosure as may be required to be provided to any federal banking agency with jurisdiction over the Bank or Executive).  Notwithstanding the foregoing, Executive may disclose any knowledge of banking, financial and/or economic principles, concepts or ideas which are not solely and exclusively derived from the business plans and activities of the Bank, and Executive may disclose any information regarding the Bank or the Company which is otherwise publicly available.  In the event of a breach or threatened breach by Executive of the provisions of this Section, the Bank will be entitled, through the arbitration process, to an injunction restraining Executive from disclosing, in whole or in part, the knowledge of the past, present, planned or considered business activities of the Bank or affiliates thereof, or from
rendering any services to any person, firm, corporation, other entity to whom such knowledge, in whole or in part, has been disclosed or is threatened to be disclosed.  Nothing herein will be construed as prohibiting the Bank from pursuing any other remedies available to the Bank for such breach or threatened breach, including the recovery of damages from Executive.

 

  

10

  

 

	
12.  

	
SOURCE OF PAYMENTS

 

All payments provided in this Agreement shall be timely paid in cash or check from the general funds of the Bank.  The Company, however, guarantees payment and provision of all amounts and benefits due hereunder to Executive and, if such amounts and benefits due from the Bank are not timely paid or provided by the Bank, such amounts and benefits shall be paid or provided by the Company.

 

	
13.  

	
NO EFFECT ON EMPLOYEE BENEFITS PLANS OR PROGRAMS

 

The Board may terminate Executive’s employment at any time, but, any termination of Executive’s employment, other than Termination for Cause shall have no effect on or prejudice the vested rights of Executive under the Company’s or the Bank’s qualified or non-qualified retirement, pension, savings, thrift, profit-sharing or stock bonus plans, group life, health (including hospitalization, medical and major medical), dental, accident and long term disability insurance plans or other employee benefit plans or programs, or compensation plans or programs in which Executive was a participant.  Executive shall not have the right to receive any Base Salary or other compensation for any
period after Termination for Cause as defined in Section 8, except as otherwise required by applicable law.

 

	
14.  

	
REQUIRED REGULATORY PROVISIONS

 

(a) If Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the Bank’s affairs by a notice served under Section 8(e)(3) (12 U.S.C. §1818(e)(3)) or 8(g)(1) (12 U.S.C. §1818(g)(1)) of the Federal Deposit Insurance Act (“FDIA”), as amended by the Financial Institutions Reform, Recovery and Enforcement Act of 1989, the Bank’s obligations under this Agreement shall be suspended as of the date of service, unless stayed by appropriate proceedings.  If the charges in the notice are dismissed, the Bank may in its
discretion (i) pay Executive all or part of the Base Salary or other compensation withheld while its contract obligations were suspended and (ii) reinstate (in whole or in part) any of its obligations which were suspended.

 

(b) If Executive is removed and/or permanently prohibited from participating in the conduct of the Bank’s affairs by an order issued under Section 8(e)(4) (12 U.S.C. §1818(e)(4)) or 8(g)(1) (12 U.S.C. §1818(g)(1)) of the FDIA, all obligations of the Bank under this Agreement shall terminate as of the effective date of the order, but vested rights of the contracting parties shall not be affected.

 

(c) If the Bank is in default as defined in Section 3(x)(1) (12 U.S.C. §1813(x)(1)) of the FDIA, all obligations under this Agreement shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the contracting parties.

 

(d)      All obligations under this Agreement shall be terminated, except to the extent determined that continuation of this Agreement is necessary for the continued operation of the Bank: (i) by the Office of the Comptroller of the Currency (the “OCC”), at the time the Federal Deposit Insurance Corporation (the “FDIC”) enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) (12 U.S.C. §1823(c)) of the FDIA; or (ii) by the OCC at the time the OCC approves a supervisory merger to resolve problems related to operation of the Bank or when
the Bank is determined by the OCC to be in an unsafe or unsound condition.  Any vested rights shall not be affected by such action.

 

  

11

  

(e) Notwithstanding anything herein contained to the contrary, any payments to Executive by the Company, whether pursuant to this Agreement or otherwise, are subject to and conditioned upon their compliance with Section 18(k) of the FDIA, 12 U.S.C. § 1828(k), and the regulations promulgated thereunder in 12 C.F.R. Part 359, Golden Parachute and Indemnification Payments.

 

(f) Notwithstanding anything herein to the contrary, payments to or for the benefit of Executive hereunder shall not exceed three times Executive’s annual average compensation for the five most recent taxable years, within the meaning of applicable OCC rules (formerly Section 310 of the Office of Thrift Supervision Examination Handbook).

 

(g) Notwithstanding anything else in this Agreement to the contrary, Executive’s employment shall not be deemed to have been terminated unless and until Executive has a Separation from Service within the meaning of Code Section 409A.  For purposes of this Agreement, a “Separation from Service” shall have occurred if the Bank and Executive reasonably anticipate that either no further services will be performed by Executive after the Date of Termination (whether as an employee or as an independent contractor) or the level of further services performed is less than 50% of the average
level of bona fide services in the thirty-six (36) months immediately preceding the termination.  For all purposes hereunder, the definition of Separation from Service shall be interpreted consistent with Treasury Regulation Section 1.409A-1(h)(ii).

 

(h) Notwithstanding the foregoing, in the event the Executive is a Specified Employee (as defined herein), then, solely, to the extent required to avoid penalties under Code Section 409A, the Executive’s payments shall be delayed until the first day of the seventh month following the Executive’s Separation from Service.  A “Specified Employee” shall be interpreted to comply with Code Section 409A and shall mean a key employee within the meaning of Code Section 416(i) (without regard to paragraph 5 thereof), but an individual shall be a “Specified Employee” only if
the Bank or Company is or becomes a publicly traded company.

 

	
15.  

	
NO ATTACHMENT

 

(a) Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation, or to execution, attachment, levy, or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to affect any such action shall be null, void, and of no effect.

 

(b) This Agreement shall be binding upon, and inure to the benefit of, Executive, the Bank and the Company and their respective successors and assigns.

 

	
16.  

	
ENTIRE AGREEMENT; MODIFICATION AND WAIVER

 

(a) This instrument contains the entire agreement of the parties relating to the subject matter hereof, and supersedes in its entirety any and all prior agreements, understandings or representations relating to the subject matter hereof, except that the parties acknowledge that this Agreement shall not affect any of the rights and obligations of the parties  under any agreement or plan entered into with or by the Bank or the Company pursuant to which the Executive may receive Base Salary or other compensation except as set forth in Section 12 hereof.  No modifications of this Agreement shall
be valid unless made in writing and signed by the parties hereto.

 

  

12

  

(b) This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto.

 

(c) No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel.  No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future as to any act other than that specifically waived.

 

	
17.  

	
SEVERABILITY

 

If, for any reason, any provision of this Agreement, or any part of any provision, is held invalid, such invalidity shall not affect any other provision of this Agreement or any part of such provision not held so invalid, and each such other provision and part thereof shall to the full extent consistent with law continue in full force and effect.

 

	
18.  

	
HEADINGS FOR REFERENCE ONLY

 

The headings of sections and paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement.

 

	
19.  

	
GOVERNING LAW

 

This Agreement shall be governed by the laws of the State of California but only to the extent not superseded by federal law.

 

	
20.  

	
ARBITRATION

 

The Bank and Executive agree that any dispute, claim or controversy arising out of or relating to any interpretation, construction, performance or breach of this Agreement, shall be settled by arbitration to be held in Los Angeles County, California in accordance with the then current rules as adopted by the arbitration company as selected by parties.  If the parties are unable to agree upon an arbitration company a court of competent jurisdiction shall appoint an arbitration company to administer the arbitration.  The dispute will be decided by a single neutral arbitrator.  The arbitrator may grant injunctions or other relief in such dispute or controversy.  The
arbitration shall allow for reasonable discovery as agreed to by the parties or as directed by the arbitrator.  The decision of the arbitrator shall be made in writing and will be final, conclusive and binding on the parties to the arbitration.  If a third party challenges the legality of this Agreement, the Bank shall pay for the Participant’s legal fees in connection with defending such challenge, provided, however, that reimbursement for such expenses shall be made to the Participant no later than 2 1⁄2  months after the end of the year in which the expenses were incurred, in accordance with Code Section 409A and the regulations thereunder.  If the Participant challenges any provision of this Agreement, the Bank shall not reimburse the Participant for any legal fees or
costs. Judgment may be entered on the arbitrator’s decision in any court having jurisdiction.  This arbitration provision is governed by the Federal Arbitration Act.

 

  

13

  

 

	
21.  

	
PAYMENT OF LEGAL FEES

 

Except as set forth in Sections 20 and 22, the Bank shall not pay any legal fees paid or incurred by Executive in connection with this Agreement; provided however, that the Bank shall pay or reimburse legal fees incurred by the Executive in connection with any challenge to the validity of this Agreement asserted by a third party (i.e., a party other than the Bank or the Executive).  .

 

	
22.  

	
INDEMNIFICATION

 

(a)           The Bank shall provide Executive (including his heirs, executors and administrators) with coverage under a standard directors’ and officers’ liability insurance policy at its expense, and shall indemnify Executive (and his heirs, executors and administrators) for the term of the Agreement and for a period of six (6) years thereafter to the fullest extent permitted under applicable law against all expenses and liabilities reasonably incurred by him in connection with or arising out of any action, suit or proceeding in which he may be involved by reason of his having been a director or officer of the Bank or the Company or any
subsidiary or affiliate of the Bank or the Company (whether or not he continues to be a director or officer at the time of incurring such expenses or liabilities), such expenses and liabilities to include, but not be limited to, judgments, court costs and attorneys’ fees and the cost of reasonable settlements (such settlements must be approved by the Board or the board of directors of the Company, as appropriate); provided, however, neither the Bank nor Company shall be required to indemnify or reimburse Executive for legal expenses or liabilities incurred in connection with an action, suit or proceeding arising from any illegal or fraudulent act committed by Executive or act committed by Executive outside the course and scope of Executive’s duties for the Bank.

 

(b)           Notwithstanding the foregoing, no indemnification shall be made unless the Bank gives the OCC at least sixty (60) days’ notice of its intention to make such indemnification.  Such notice shall state the facts on which the action arose, the terms of any settlement, and any disposition of the action by a court.  Such notice, a copy thereof, and a certified copy of the resolution containing the required determination by the Board shall be sent to the Deputy Controller for the applicable OCC District Office.  The notice period shall run from the date of such receipt.  No such indemnification shall be
made if the OCC advises the Bank in writing within such notice period of its objection thereto.

 

(c)           Any indemnification made by the Bank to the Executive pursuant to this Section 16 shall be made in accordance with the requirements of 12 C.F.R. 145.121.

 

  

14

  

 

	
23.  

	
SUCCESSORS AND ASSIGNS

 

The Bank and/or the Company shall require any successor or assignee, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all the business or assets of the Bank or the Company, expressly and unconditionally to assume and agree to perform the Bank’s and the Company’s obligations under this Agreement, in the same manner and to the same extent that the Bank and/or the Company would be required to perform if no such succession or assignment had taken place.

 

[Signature Page Follows]

 

  

15

  

SIGNATURES

IN WITNESS WHEREOF, the Bank and the Company have caused this Agreement to be executed by their duly authorized officers, and Executive has signed this Agreement, on the dates set forth below, effective as of the date set forth above.

 

 

	  	  	
SIMPLICITY BANK

	  	  	  
	  	  	  
	
10/30/2013

	
By:

	
/s/ Donald R. Voss       

	
Date

	  	
Chairman of the Board

	  	  	  
	  	  	
SIMPLICITY BANCORP, INC.

	  	  	  
	  	  	  
	
10/30/2013

	
By:

	
/s/ Donald R. Voss       

	
Date

	  	
Chairman of the Board

	  	  	  
	  	  	  
	  	  	
EXECUTIVE

	  	  	  
	  	  	  
	
10/30/2013

	
By:

	
/s/ Dustin Luton         

	
Date

	  	
Dustin Luton

  

16

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00223-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00223-of-00352.parquet"}]]