Baycom Corp — 8-K exhibit

1.

Term of Employment

1.1

Term.  The Employers hereby employ the Executive and the Executive hereby accepts employment with each of the Employers for the period commencing with the Effective Date and continuing for three (3) years thereafter (the “Term”), subject, however, to renewal or prior termination of this Agreement as hereinafter provided.  Where used herein, “Term” shall refer to the entire period of employment of the Executive by the Employers hereunder, whether for the period provided above, or whether renewed or terminated earlier as hereinafter provided.

2.

Duties of the Executive

2.1

Duties.  The Executive shall perform the duties of President and Chief Executive Officer of both the Company and the Bank, as described more fully in the job description for such positions approved by the Boards of Directors, and subject to the powers by law vested in the Boards of Directors. The Executive shall perform such duties faithfully and to the best of his ability, consistent with applicable law and industry standards, and subject to reasonable direction from the Boards of Directors.

2.2

Conflicts of Interest.  Except as permitted by the prior written consent of each of the Boards of Directors, the Executive shall devote substantially all of the  Executive’s  professional time and  attention to the business of the Employers during the Term, and the Executive shall not directly or indirectly render any services of a business, commercial or professional nature to any other person, firm or corporation, whether for compensation or otherwise, which are in conflict with the Employers’ interests. Notwithstanding the foregoing, the Executive may make investments of a passive nature in any business or venture, provided however, that such business or venture is neither in competition, directly or indirectly, in any manner with the Employers nor a customer of the Employers, and also may engage in civic and charitable activities and may also invest in any company listed on a national securities exchange provided that the Executive does not own 1% or more of such company’s outstanding shares.

3.

Compensation

3.1

Salary.  The Employers shall pay to the Executive an annual base salary at the rate of at least six hundred seventy-five thousand dollars ($675,000) per year beginning on the Effective Date, subject to adjustments as may be determined from time to time by the Boards of Directors in their discretion; provided, however, that the Boards of Directors shall not reduce the Executive’s base salary without the Executive’s prior written consent.  Said salary shall be payable in equal installments in conformity with the Bank’s normal payroll period and in accordance with federal and state wage and hour laws.

3.2

Incentive Bonus.  Annually, the HR/Compensation Committee of the Boards of Directors shall adopt an incentive program based on factors that the Committee believes in good faith are appropriate in its discretion, including but not limited to the financial and operational performance of the Employers. Any discretion exercised by the Compensation Committee shall be applied reasonably and in good faith consistent with past practices. Cash incentive bonuses will be based on the programs adopted annually and will be payable in a lump sum not later than

3.3

Annual Restricted Stock Grants.  Beginning in the first quarter of calendar year 2027 and each year thereafter during the Term, the Company shall grant to the Executive an annual award of restricted stock (each, an “Annual Restricted Stock Grant”) with a grant date value equal to twenty-five percent (25%) of the Executive’s base salary as of the end of the immediately preceding calendar year, divided by the fair market value of the Company’s common stock on the date of grant, with the number of shares rounded to the nearest whole share. Such grants shall be made in a consistent and timely manner each year and shall not be unreasonably delayed or withheld, subject only to the availability of shares under the applicable equity plan. Each Annual Restricted Stock Grant shall vest in equal annual installments over a period of five (5) years, with the first installment vesting on the first anniversary of the date of grant. Any performance-based conditions shall be reasonable, clearly defined in writing at the time of grant, and applied in good faith consistent with past practices.

4.

Executive Benefits

4.1

Vacation.  The Executive shall be entitled to four (4) weeks of vacation each year during the Term, prorated for any portion of a year, which vacation shall be taken at such times as are agreed upon by the Executive and the Boards of Directors; provided, however, that during each year of the Term, the Executive is encouraged to take meaningful, consecutive vacation time each year to promote rest and effectiveness. The Executive may accrue a maximum of 30 days of vacation. Once the Executive reaches the maximum accrual amount, the

4.2

Automobile.  During the Term, the Employers shall pay to the Executive, as an automobile allowance, the sum of eight hundred dollars ($800) per month, which is an allowance for all automobile costs and expenses, including, but not limited to, fuel, license, maintenance, insurance, repairs and purchase or lease payments.

4.3

Group Insurance Benefits.  During the Term, the Bank, at Bank’s expense, shall provide for the Executive all such group insurance benefits as the Bank provides to its most senior executives from time to time. Any additional coverage may be obtained by the Executive at the Executive’s expense.  Additionally, the Bank shall, at its expense, provide the Executive with a group life insurance policy, payable to a beneficiary of the Executive’s choice, in an amount that is available under the group insurance benefits program.

4.4

Other Equity Stock Awards. Periodically, the Company may grant awards to the Executive pursuant to its equity incentive plans in addition to those grants set forth in Section 3.3 above. Such equity awards will be in an amount determined by the Board of Directors of the Company or a committee thereof.  Any equity awards shall be evidenced by a grant agreement in the form approved by the Board of Directors of the Company or a committee thereof.  Any grant shall be subject to such other terms and conditions as may be contained in the equity incentive plan, including, but not limited to, terms relating to the vesting of restricted shares and grant price of equity grant, and the effect of certain events, such as termination of employment and mergers or acquisitions, provided that all of such awards shall become fully vested upon either (a) termination of the Executive’s employment due to death or disability or by the Employers pursuant to Section 6.3 hereof without Cause (as defined in Section 6.1.1 below), (b) a  Change in Control (as defined in the 2024 Omnibus Incentive Plan or any applicable subsequent plan) of the Company or the Bank if no Replacement Award is provided to the Executive, or (c) termination of the Executive’s employment by the Executive for Good Reason (as defined in Section 6.3 below).

4.5

Retirement, Profit Sharing and Other Plans.  The Executive shall be entitled to participate in any retirement plans, profit-sharing plans, medical expense reimbursement plans, and other similar plans that the Employers may establish with respect to all employees; provided, however, that nothing herein shall require the Employers to establish or maintain any of such plans.

4.6

The Employers shall not materially reduce the Executive’s benefits without providing substantially equivalent replacement benefits, except for such changes in benefits that affect all similarly situated executive officers.

5.

Reimbursement for Business Expenses

5.1

Expense Reimbursement.  The Executive shall be entitled to reimbursement by the Employers for any ordinary and necessary business expenses incurred by the Executive in the performance of the Executive’s duties and in acting for the Employers during the Term, and provided that:

5.1.1

Each such expenditure is of a nature qualifying it as a proper deduction on the federal and state income tax returns of the Employers as a business expense and not as compensation to the Executive; and

5.1.2

The Executive furnishes to the Employers, in accordance with the Employers’ internal policies, adequate records and other documentary evidence required by federal and state statutes and regulations issued by the appropriate taxing authorities for the substantiation of such expenditures as deductible business expenses of the Employers and not as compensation to the Executive.

6.

Termination

6.1

Termination for Cause.  The Employers may terminate this Agreement for Cause at any time without further obligation or liability to the Executive, by action of the Boards of Directors. Notwithstanding the foregoing, upon termination the Executive shall be entitled to payment of his accrued and unpaid salary, unreimbursed business expenses incurred prior to termination, accrued but unpaid vacation, and such health, retirement and other benefits that may be available following termination, but only to the extent provided by the Employers’ benefit plans and policies or as required by law.

6.1.1

Definition of Cause.  Each of the following events constitute Cause for termination of this Agreement: (i) the Executive fails to perform or habitually neglects the duties which the Executive is required to perform hereunder; (ii) the Executive engages in illegal activity which materially adversely affects the Employers’ reputation in the community or which evidences the lack of the Executive’s fitness or ability to perform the Executive’s duties as determined by the Boards of Directors in good faith; (iii) any breach of fiduciary duty, personal dishonesty, deliberate or repeated disregard of the policies or procedures of the Employers as adopted by the Boards of Directors or a committee thereof or refusal or failure to act in accordance with any direction or order of the Boards of Directors or a committee thereof, except those in contravention of any law or regulation, or any act by the Executive which causes termination of coverage of the Executive under any fidelity or blanket bond; (iv) gross negligence adversely affecting

6.1.2

Warning Notice.  If the Executive fails to perform the Executive’s duties in a satisfactory manner or habitually neglects such duties, the Employers shall take the following actions before terminating the Executive for such Cause: (i) the Employers shall have first given the Executive written notice setting forth the specific facts and grounds for the Employers’ determination of the Executive’s unsatisfactory performance or habitual neglect (the “Warning Notice”); (ii) promptly after the Employers shall have given the Warning Notice, the Boards of Directors (or a committee thereof) shall have met with the Executive and informed the Executive of the grounds for termination for Cause, the extent and nature of the Executive’s unsatisfactory performance or habitual neglect, what the Executive must do to remedy such unsatisfactory performance or habitual neglect, and a reasonable period of time (not less than thirty (30) days unless the nature of the failure, neglect or conduct of the Executive is of such magnitude that if such failure, neglect or conduct is permitted for up to an additional 30 days, such continuation would significantly and adversely affect the Employers) by which the Executive shall have demonstrated satisfactory improvement or shall have remedied the  deficient performance or habitual neglect (the “Cure Period”).  If by the end of the Cure Period the Executive shall not have made sufficient progress reasonably satisfactory to either of the Boards of Directors, the Executive may be terminated for Cause on the terms described in this Agreement.

6.1.3

Other Terms.  Termination under this section shall not prejudice any remedy which the Employers may have at law, in equity, or under this Agreement. Termination pursuant to this section shall become effective immediately upon the giving of notice of termination by the Employers.

6.2

Termination Due to Death or Disability. The Boards of Directors may terminate the Executive’s employment due to physical or mental disability upon at least thirty (30) days’ written notice if the Executive is found by the Boards of Directors, in good faith, to be physically or mentally incapable of performing the Executive’s duties for a continuous period of ninety (90) days or more. If there should be a dispute between the Employers and the Executive as to the Executive’s physical or mental disability for purposes of this Agreement, the question shall be settled by the opinion of an impartial reputable physician or psychiatrist agreed upon by the parties or their representatives, or if the parties cannot agree within ten

6.3

Termination without Cause by the Employers or for Good Reason by the Executive.  If the employment of the Executive is terminated without Cause by the Employers (with termination due to death or disability governed solely by Section 6.2 above) or if the Executive terminates his employment for Good Reason (as defined in Section 6.3(ii) hereof), then the Executive shall be entitled to a severance payment (the “Severance Payment”) equal to: (x) if such termination occurs within six (6) months prior to or twenty-four (24) months following a Change in Control (as hereinafter defined), two (2) times the sum of (a) the Executive’s annual base salary prevailing at the date of such termination and (b) the Executive’s target incentive bonus for the year of termination; or (y) if such termination occurs outside the foregoing CIC window, two (2) times the sum of (a) the Executive’s annual base salary and (b) the Executive’s target incentive bonus for the year of termination. The Severance Payment shall be subject to the provisions of Sections 6.3(iii) and (iv) below. For the purposes of this section:

6.4

Termination without Good Reason by the Executive. In the event the Executive elects to terminate this Agreement without Good Reason pursuant to this paragraph, the Executive shall not be entitled to any salary, benefits or other compensation of any kind under this Agreement, except for such compensation as may be due and payable through and including the effective date of termination or as may be required by this Agreement or applicable law.

6.5

Effect of Termination. In the event of the termination of this Agreement prior to the completion of the Term specified herein, the Executive shall be entitled to the salary earned by the Executive prior to the date of termination as provided for in this Agreement, computed pro rata up to and including that date. The Executive shall not be entitled to any further compensation after the date of termination, except as expressly provided in this Section 6. Except as may otherwise be expressly agreed or provided, on the expiration of the Term, this Agreement shall terminate and shall be of no further force or effect and the Executive shall not be entitled to any compensation or benefits of any kind. After notice of termination is given, whether by the Employers or the Executive, the Employers may require the Executive to cease performing services for the Employers and may prohibit the Executive from coming onto the Employers’ premises through the effective date of termination, provided that the Employers nonetheless compensate the Executive through the effective date of termination.

6.6

Golden Parachute Provision. Notwithstanding anything in this Agreement to the contrary, in the event it is determined that any payment or distribution by the Bank or the Company (or their successors) to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise) (such benefits, payments or distributions are hereinafter referred to as “Payments”) would, if paid, be subject to the excise tax imposed by Code Section 4999 (the “Excise Tax”), then, prior to the making of any Payments to the Executive, a calculation shall be made comparing (i) the net after-tax benefit to the Executive of the Payments after payment by the Executive of the Excise Tax, to (ii) the net after-tax benefit to the Executive if the Payments had been limited to the extent necessary to avoid being subject to the Excise Tax. If the amount calculated under (i) above is less than the amount calculated under (ii) above, then the Payments shall be limited to the extent necessary to avoid being subject to the Excise Tax (the “Reduced Amount”). The reduction of the Payments due hereunder, if applicable, shall be made by first reducing cash Payments and then, to the extent necessary, reducing those Payments having the next highest ratio of Parachute Value to actual present value of such Payments as of the date of the Change in Control, as determined by the Determination Firm (as defined below). For purposes of this Section 6.6, present value shall be determined in accordance with Code Section 280G(d)(4). The “Parachute Value” of a Payment means the present value as of the date of the Change in Control of the portion of such Payment that constitutes a “parachute payment” under Code Section 280G(b)(2), as determined by the Determination Firm (as defined below) for purposes of determining whether and to what extent the Excise Tax will apply to such Payment.

6.7

Notice of Termination of Employment. If the Executive’s employment is terminated (i) by the Employers without Cause pursuant to Section 6.3 above, or (ii) by the Executive without Good Reason pursuant to Section 6.4 above, written notice of such termination shall be given by the terminating party to the other parties at least ninety (90) days prior to the date of termination, unless the parties otherwise agree to an earlier termination date.

7.

Affirmative Covenants of the Executive

7.1

No Pre-Existing Restrictive Covenants. The Executive is not a party to any existing agreement, arrangement, confidentiality clause, non-solicitation clause, non-competition clause or any other form of restrictive covenant or policy that would prevent him from lawfully (i) accepting the Employers’ offer of employment, (ii) performing his services hereunder or (iii) soliciting new customers of the Employers, or that would otherwise limit the Executive’s ability

7.2

Non-Disparagement. During the period commencing on the date of this Agreement and continuing through and including the two-year anniversary of the termination of the Executive’s employment, the Executive agrees that he shall not knowingly make, or cause to be made, any disparaging or critical remarks, comments or statements about or against the Employers or their respective subsidiaries or affiliates or any director, officer or employee of any such entities at any time in the future, except for any statements by him made pursuant to lawful subpoena or legal process. The Employers agree to direct their respective executive officers and directors to refrain from making any statements about the Executive that would disparage or reflect unfavorably upon the image or reputation of the Executive; provided, however, that nothing herein shall prohibit the Employers from complying with their obligations under applicable law or their policies regarding public statements. Nothing in this section shall prohibit honest and good faith reporting to law enforcement authorities or compliance with applicable law. This section shall survive any termination of this Agreement.

8.1

Trade Secrets and Confidential Information.  During the Term, the Executive will have access to and become acquainted with the Employers’ trade secrets and confidential information, including, but not limited to, proprietary information and data concerning the Employers’ operations, business, sources of business, know-how, customer lists and information about customers’ financial condition, needs, and methods of doing business. The Executive shall not disclose any of such trade secrets or confidential information, directly or indirectly, or use them in any way, either during the Term or for a period of one (1) year after the termination of the Executive’s employment, except as required in the course of the Executive’s employment with the Employers. Nothing contained in this Agreement limits the Executive’s ability to file a charge or complaint with the Equal Employment Opportunity Commission, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, the Securities and Exchange Commission or any other federal, state or local governmental agency or commission that has jurisdiction over the Company or the Bank or any of their subsidiaries or affiliates (the “Government Agencies”). The Executive further understands that this Agreement does not limit his ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Employers or any of their subsidiaries or affiliates. This Agreement does not limit the Executive’s right to receive an award for information provided to any Government Agencies. In addition, pursuant to the Defend Trade Secrets Act of 2016, the Executive understands that an individual may not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (i) is made (A) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney; and (B) solely

8.2

Indemnification. To the maximum extent permitted by law and applicable regulations, the Employers shall pay any and all expenses incurred by the Executive in connection with the defense or settlement of, and shall pay and satisfy any judgments, awards, fines and penalties rendered, assessed or levied against the Executive in, any judicial, arbitration, mediation or administrative suit, action, hearing, inquiry or proceeding (whether or not the Employers are joined as a party) relating to acts or omissions of the Executive alleged to have occurred while an “agent” of the Employers, provided, however, that the Employers shall not be obligated to defend, indemnify or hold harmless the Executive from the consequences of the Executive’s own grossly negligent or reckless acts or omissions or willful misconduct or dishonesty.  In addition, to the maximum extent permitted by law, the Employers shall advance to the Executive, upon receipt of the undertaking required by California Corporations Code Section 317(f), any expenses incurred in defending against any such proceeding to which the Executive is a party or has been threatened to be made a party.  The Employers shall provide the Executive with coverage under such directors’ and officers’ liability insurance and any additional insurance to indemnify and insure the Employers and the Executive from and against the aforementioned liabilities. The provisions of this Subsection shall apply to the estate, executor, administrator, heirs, legatees or devisees of the Executive.

8.3

Return of Documents.  The Executive expressly agrees that all manuals, documents, files, reports, studies, instruments or other materials used and/or developed by the Executive during the Term are solely the property of the Employers, and that the Executive has no right, title or interest therein.  Upon termination of this Agreement, the Executive or the Executive’s representative shall promptly deliver possession of all of said property to the Employers in original or good operating condition, normal wear and tear excepted.

8.4

Notices.  Any notice, request, demand or other communication required or permitted hereunder shall be deemed to be properly given when personally served in writing, when deposited in the United States mail by either certified or registered mail with return receipt requested, postage prepaid, or when delivered to a generally recognized overnight courier service (such as Federal Express, Express Mail or United Parcel Service) for transmittal, addressed to the party at the address given below for the receipt of notices, or such changed address as may be requested in writing by a party.

8.5

Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the United States where applicable and otherwise by the substantive laws of the State of California.

8.6

Captions and Section Headings.  Captions and section headings used herein are for convenience only and are not a part of this Agreement and shall not be used in construing it.

8.7

Invalid Provisions.  Should any provision of this Agreement for any reason be declared invalid, void or unenforceable by a court of competent jurisdiction, the validity and binding effect of any remaining portion shall not be affected, and the remaining portions of this Agreement shall remain in full force and effect as if this Agreement had been executed with said provision eliminated.

8.8

Entire Agreement.  This Agreement contains the entire agreement of the parties.  It supersedes any and all other agreements, either oral or in writing, between the parties hereto with respect to the employment of the Executive by the Employers.  Each party to this Agreement acknowledges that no representations, inducements, promises or agreements, oral or otherwise, have been made by any party, or anyone acting on behalf of any party, that are not embodied herein, and that no other agreement, statement or promise not contained in this Agreement shall be valid or binding.  This Agreement may not be modified or amended by oral agreement, but only by an agreement in writing signed by the Employers and the Executive.

8.9

Receipt of Agreement.  Each of the parties hereto acknowledges that it or he has read this Agreement in its entirety and does hereby acknowledge receipt of a fully executed copy thereof. A fully executed copy shall be an original for all purposes.

8.10

Attorneys’ Fees.  Each party shall bear such party’s own attorneys’ fees and costs in connection with the negotiation, preparation and delivery of this Agreement.  If any action is instituted to enforce or interpret this Agreement, the party determined to be the prevailing party shall be entitled to recover its reasonable attorneys’ fees and costs incurred in connection with the enforcement or interpretation of this Agreement.

8.11

Assignment.  This Agreement shall inure to the benefit of and be binding upon the parties and their respective successors and assigns, administrators and executors.  This Agreement is for the personal services of the Executive and may not be assigned by the Executive.

8.12

Dispute Resolution: Mandatory Mediation and Arbitration.

8.13

Construction. The Employers and the Executive acknowledge that this Agreement was the result of arms-length negotiations between sophisticated parties, each represented by legal counsel. Each and every provision of this Agreement shall be construed as though all parties participated equally in the drafting of this Agreement, and any rule of construction that a document shall be construed against the drafting party shall not be applicable to this Agreement.

8.14

Section 409A. Notwithstanding anything to the contrary in this Agreement, if at the time of the Executive’s termination of employment the Executive is a “specified employee” within the meaning of Section 409A of the Code, any and all amounts payable under this Agreement on account of such termination that constitute “nonqualified deferred compensation” under Section 409A and would (but for this provision) be payable within six (6) months following the date of termination shall instead be paid on the first business day following the expiration of such six (6)-month period or, if earlier, upon the Executive’s death, with interest from the date payment would otherwise have been made at the applicable federal rate under Section 7872(f)(2)(A) of the Code. Each payment under this Agreement shall be treated as a separate payment for purposes of Section 409A. The parties intend for this Agreement to comply with Section 409A or an exemption thereunder and agree to cooperate in good faith to modify any provision as necessary to achieve such compliance.

8.15

Regulatory Approval.  The terms of this Agreement may be subject to approval by any state or federal regulatory authority having jurisdiction over the Bank, as and to the extent required by applicable law and regulation.

8.16

Regulatory Prohibition.  Notwithstanding any other provision of this Agreement to the contrary, any renewal of this Agreement and any payments made to the Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with Section 18(k) of the Federal Deposit Insurance Act (12 U.S.C. §1828(k)) and the regulations promulgated thereunder, including 12 C.F.R. Part 359.

8.17

Counterparts; Electronic Signatures. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same Agreement. Electronic, pdf or DocuSign signatures shall be deemed original signatures for all purposes under California law.