ESQUIRE FINANCIAL HOLDINGS, Inc. EMPLOYMENT AGREEMENT
Exhibit 10.3
ESQUIRE FINANCIAL HOLDINGS, Inc.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (“Agreement”) is made effective as of October 1, 2015 (the “Effective Date”), by and among Esquire Financial Holdings, Inc., a Maryland corporation (the “Company”), its wholly-owned subsidiary, Esquire Bank, N.A., a national banking association with its main office in Garden City, New York (the “Bank”), and Xxxxxx Xxxxxxx, a resident of New York (“Executive”).
WHEREAS, Executive is currently employed as the Executive Chairman of the Board of the Company and the Executive Chairman of the Board of the Bank; and
WHEREAS, the Company and the Bank consider the maintenance of a competent and experienced executive management team to be essential to their long-term success; and
WHEREAS, the Board of Directors of the Company (the “Company’s Board”) has determined that it is in the best interests of the Company that Executive continue to serve as the Company’s Executive Chairman, and the Board of Directors of the Bank (the “Bank’s Board”) has determined that it is in the best interests of the Bank that Executive continue to serve as the Bank’s Executive Chairman, in each case pursuant to this written employment agreement, which will be the successor to, and will supersede in its entirety, any of the Executive’s prior employment and any all other prior agreements and understandings between Executive and either the Company or the Bank regarding Executive’s employment by either; and
WHEREAS, Executive is willing to continue to serve the Company and the Bank in the positions and on the terms and conditions hereinafter set forth;
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. |
business time, attention, skill and efforts to the faithful performance of his duties under this Agreement, including activities and services related to the organization, operation and management of the Company, the Bank and their subsidiaries, as well as participation in community, professional and civic organizations; provided, however, that, with the approval of the Company’s Board, as evidenced by a resolution thereof, Executive may serve, or continue to serve, on the boards of directors of, and hold any other offices or positions in, any such other companies or organizations that, in the judgment of the Company’s Board, will not present any conflict of interest with the Company, the Bank or their subsidiaries, or materially negatively impact or interfere with Executive’s performance of his duties pursuant to this Agreement.
2. | TERM OF EMPLOYMENT. |
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3. | COMPENSATION AND BENEFITS. |
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calendar year. Payment to Executive for any calendar year of a Bonus under the Bonus Plan, if any, shall not be construed as an increase in Executive’s Base Salary. Any payment to Executive of a Bonus under the Bonus Plan in any year shall not be offset against, and shall not preclude payment to Executive of, any other special cash incentive compensation or cash bonus under any other incentive compensation plan, program or arrangement of the Company or the Bank that may be applicable to Executive from time to time.
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participated or was eligible to participate as of the Effective Date. Executive shall also be entitled to participate in any employee benefits or perquisites the Company and/or the Bank offers to senior officers or employees from time to time during the Term of his employment. Neither the Company nor the Bank will, 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 (other than a reduction or elimination of Executive’s benefits under one or more benefit plans maintained by the Company and/or the Bank as part of a good faith, overall reduction or elimination of such plans or benefits applicable to all participants in a manner that does not discriminate against Executive (except as such discrimination may be necessary to comply with applicable law)) without separately providing for an arrangement that ensures Executive receives or will receive the economic value that Executive would otherwise lose as a result of such adverse changes. Without limiting the generality of the foregoing provisions of this paragraph (f), Executive shall be entitled to participate in or receive benefits under all plans relating to stock options, restricted stock awards or restricted stock units, stock purchases, pension, profit sharing, employee stock ownership, supplemental retirement, directors’ retirement, group life insurance, medical and other health and welfare coverage that are made available by the Company or the Bank currently or at any time in the future during the Term of this Agreement, subject to and on a basis consistent with, the terms, conditions and overall administration of such plans and arrangements. In addition, during the Term of Executive’s employment hereunder, the Bank shall pay the initial and all subsequent annual premiums payable on one or a series of term life insurance policies, to be selected and owned by Executive and insuring the life of Executive, which will at all times provide for a death benefit in an amount at least equal to three times Executive’s average Base Salary plus Bonus under the Bonus Plan for the prior two (2) full calendar years, and under which policies Executive will have the power to designate the beneficiary(ies).
4. | CERTAIN EARLY TERMINATIONS OF EMPLOYMENT; PAYMENTS AND BENEFITS. |
(a) Termination of Executive by the Company or the Bank, Not for Cause. If at any time during the Term of Executive’s employment under this Agreement, the Company and/or the Bank early terminates Executive’s employment (other than a Termination Following a Change in Control under Section 6, a Termination for Cause under Section 7, or a Termination due to Disability under Section 12), the Bank (i) shall pay to Executive the cash payment specified in paragraph (c) of this Section 4, below, and (ii) shall provide and pay to Executive those post-termination benefits and payments specified in paragraph (d) of this Section 4, below. A termination of Executive’s employment by the Company and/or the Bank pursuant to the foregoing sentence (any such, a “Termination Not for Cause”) shall be effected by way of a written Notice of Termination delivered by the Company and/or the Bank to Executive, as defined and subject to the terms and conditions set forth in Section 8(b) below, which notice, among other things, shall identify the proposed Termination Date, which date may not be earlier than the date of the notice. The ultimate Termination Date of Executive’s employment shall be the proposed Termination Date identified in the Notice of Termination, unless prior to such date the parties shall mutually agree in writing (a) that there will not be any such termination of Executive’s employment under this Section 4(a), or (b) that such termination will take place but as of some other date that is earlier or later than such proposed Termination Date, in which event such other date will become the actual Termination Date.
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(b) Termination of Employment by Executive for Good Reason.
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own employment under Section 4(b) above, the Bank shall pay to Executive (or, if Executive dies after such termination of employment but before such payment, to his beneficiary(ies) or his estate, as the case may be), within the period following the Termination Date specified below, an amount in cash equal to the sum of:
(A) | the greater of: |
(i) | the total dollar amount of Base Salary that would have been payable to Executive hereunder through the Expiration Date of his Term of employment, as in effect immediately prior to his termination, assuming his Base Salary would have continued at its current per annum rate as of the Termination Date throughout such remaining Term, and with no discounting to reflect the assumed current value of future payments; or |
(ii) | one hundred percent (100%) of Executive’s Base Salary as of the Termination Date; plus |
(B) | the dollar amount of the Bonus received by Executive under the Bonus Plan for the most recently completed calendar year preceding the Termination Date, multiplied by the greater of: |
(i) | the number of years (including partial years) included in the period extending from January 1 of the calendar year in which the Termination Date falls until the Expiration Date of the remaining Term of Executive’s employment, as in effect immediately prior to his termination; or |
(ii) | one (1.0). |
Such total amount shall be paid to Executive in a single lump sum cash distribution made within thirty (30) days following the Termination Date; provided however, if, at the Termination Date, Executive is a “Specified Employee” of the Company or the Bank, as defined in Treasury Regulation 1.409-1(i), then, solely to the extent required to avoid penalties under Section 409A of the Internal Revenue Code (the “Code”), such payment shall be delayed until the first day of the seventh full month following the Termination Date. Such payment shall not be reduced in the event Executive obtains other employment following such early termination of his employment hereunder.
(d) Other Post-Termination Benefits. In the event of any Termination without Cause of the Executive’s employment under Section 4(a), above, or any Termination for Good Reason by Executive of his own employment under Section 4(b), above, Executive and his family will no longer be eligible, on and after the Termination Date, to participate in any employee benefit plans, arrangements and perquisites of the Company and/or the Bank, subject to their rights to continuing medical and dental coverage under COBRA, provided however, that the Company and/or the Bank shall pay the cost of Executive’s (and, to the extent eligible under the terms of the applicable plans, Executive’s family members’) continuing medical and dental coverage, as in effect on the Termination Date, and as amended from time to time thereafter, for a period of eighteen (18) months following such Termination Date (the “COBRA Period”), to the extent that Executive and his family members elect COBRA continuation coverage for such period (with the
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cost of any such COBRA coverage which is self-funded by the Company and/or the Bank to be includable in the taxable income of Executive). In addition, following any termination of employment under this Section 4, the Bank or its successor will pay to Executive, in a single lump sum cash distribution, an amount equal to the sum of:
(A) | the estimated cost of a medical and dental coverage for Executive and his eligible family members for a period extending from the last day of the COBRA Period until the Expiration Date of the remaining Term of Executive’s employment, determined immediately prior to the termination of his employment, based on the coverage and cost levels in effect for Executive and his family on the Termination Date, plus |
(B) | the expense of converting Executive’s Company-paid life insurance to an individual life insurance policy. |
Such amount shall be paid to Executive within the thirty (30) day period following the Termination Date, provided however, if, at the Termination Date, Executive is a Specified Employee as defined in Treasury Regulation Section 1.409A-1(i), then, solely to the extent required to avoid penalties under Section 409A of the Code, such payment shall be made within the first thirty (30) days after the first day of the seventh calendar month commencing after such Termination Date. Executive in his discretion may use all or a portion of such cash payment to purchase the coverage described in subparagraph (A) above and/or to pay for the conversion of the policy described in subparagraph (B) above.
5. | VOLUNTARY TERMINATION BY EXECUTIVE OF EMPLOYMENT WITHOUT GOOD REASON. |
(a) 30 Day Prior Notice. If at any time during the Term of Executive’s employment under this Agreement, Executive elects to voluntarily terminate his own employment with the Company and the Bank, other than any such early termination that qualifies as (i) a Termination for Good Reason by Executive of his own employment under Section 4(b), above, (ii) a Termination Following a Change in Control by Executive (for Good Reason or without Good Reason) under Section 6, below, or (iii) a termination for Disability or upon Retirement under Section 12, below, Executive shall be obligated to deliver, and shall deliver to each of the Company and the Bank, a prior written Notice of Termination, as defined and subject to the terms and conditions set forth in Section 8(b), below, which notice, among other things, shall identify the proposed Termination Date, which may not be earlier than the thirtieth (30th) day nor later than the forty-fifth (45th) day following the date of the notice. Any such termination of employment (a “Voluntary Termination of Employment”) shall be subject to the right of the Company and/or the Bank to extend the period of Executive’s employment hereunder for a specified period beyond the proposed Termination Date identified by Executive in his notice, as provided in paragraph (c) below.
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due to Executive as of or after the Termination Date under any other compensation or benefit plan, policy or arrangement of the Company and/or the Bank as in effect on the Termination Date, including any vested benefits or amounts payable thereunder to Executive as a former employee, in accordance with the terms and conditions of such plans, policies and arrangements, including retirement plans and health and welfare plan. Except as provided in the preceding sentence or in the ensuing paragraph 5(c), Executive shall not be entitled to receive any further compensation or benefits from the Company and/or the Bank after or as a result of any Voluntary Termination of Employment by Executive, except such as may be required to be paid or provided to him under applicable law.
(i) | fifty percent (50%) of the total dollar amount of the Base Salary payable to Executive for such Extension Period, plus |
(ii) | thirty-seven and one-half percent (37.5%) of the dollar amount of the annual bonus Executive received under the Bonus Plan for the most recent preceding fiscal year. |
During that portion of the Extension Period in which Employee’s employment continues, the Bank shall pay to Executive his Base Salary and such additional cash compensation, and the Company and/or the Bank shall provide to Executive such additional benefits and perquisites, as would normally be paid or provided to him during the Term of his employment hereunder, includable amounts, if any, payable to Executive under the Bonus Plan. Failure by Executive to continue in the employment of the Company and the Bank for the full duration of any Extension Period elected by the Company and/or the Bank under this paragraph (c) shall result in forfeiture by Executive of any right to receive the Transition Bonus or any portion thereof otherwise payable to him under this paragraph (c), as well as the forfeiture by Executive of any other unvested rights Executive may have to any other compensation or benefits as of the date of Executive’s discontinuation of employment.
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6. | TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE IN CONTROL. |
(a) Payment Upon Termination After a Change in Control. If a Change in Control, as defined in Section 25, below, shall occur, and
(i) | within twenty-four (24) months after the effective date of such Change in Control, the Company and/or the Bank shall terminate Executive’s employment hereunder (other than pursuant to a Termination For Cause under Section 7, below), or |
(ii) | within twenty-four (24) months after the effective date of such Change in Control, Executive shall terminate his own employment hereunder for Good Reason (as defined in Section 25), or |
(iii) | within twelve (12) months after the effective date of such Change in Control, Executive shall terminate his own employment hereunder, for any reason or no reason but not for Good Reason, |
the Bank shall pay and provide to Executive (or if Executive dies following such termination of employment and prior to such payment, to his beneficiary or beneficiaries or his estate, as the case may be), as severance pay or liquidated damages, or both, (A) the cash payment as specified in paragraph (b), below, and (B) certain post-termination benefits, as specified in paragraph (c) below. Any such termination of employment under this Section 6 (each, a “Termination Following a Change-in-Control”) shall be effected by way of a written Notice of Termination, as defined and subject to the terms and conditions set forth in Section 8(b), below, delivered by the party(ies) electing to terminate Executive’s employment to the other party or each of the other parties hereto, which notice, among other things, shall identify the proposed Termination Date, which in the case of each such termination shall meet the specified conditions applicable to each set forth in the ensuing sentences, as well as any other information required in connection with such termination. The Termination Date for any Termination Following a Change in Control described in subparagraph (a)(i) or subparagraph (a)(ii), above (and the proposed Termination Date identified in the Notice of Termination relating to any such termination), shall not be later than the day before the second anniversary of the effective date of the Change in Control, and, in the case of any Termination Following a Change in Control described in subparagraph (a)(ii), above, shall not be earlier than the thirtieth (30th) day following the date of the Notice of Termination. The Termination Date for any Termination Following a Change in Control described in subparagraph (a)(iii), above (and the proposed Termination Date identified in the Notice of Termination relating to any such termination), shall not be later than the day before the first anniversary of the effective date of the Change in Control. The Notice of Termination for any Termination Following a Change in Control described in subparagraph (a)(ii), above, must
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also identify with reasonable specificity the action or event, or series of action and events, constituting the Good Reason underlying Executive’s election, and any such attempted Termination Following a Change in Control under subparagraph (a)(ii), above, shall also be subject to possible cure by the Company and/or the Bank, as such cure is described in Section 4(b)(ii), above, which cure if achieved will render such attempted termination ineffective.
(b) Cash Payment. In the event any Termination Following a Change in Control under this Section 6 becomes effective, the Bank shall pay to Executive, as severance pay or liquidated damages, or both, an amount in cash equal to 299% of Executive’s average Annual Compensation (as defined below) over the five (5) most recently completed calendar years ending with the year immediately preceding the calendar year in which the effective date of such Change in Control occurs. In determining Executive’s average Annual Compensation, “Annual Compensation” shall include Base Salary and any other taxable income, including, but not limited to, amounts related to Base Salary, the vesting or exercise of restricted stock or stock option awards, commissions, bonuses (whether paid or accrued for the applicable period), as well as retirement benefits, director or committee fees and fringe benefits paid or to be paid to Executive or paid for Executive’s benefit during any such year, amounts paid or to be paid to any profit sharing or employee stock ownership plan, if any, and other retirement contributions or benefits, including to any tax-qualified plan or arrangement (whether or not taxable) made or accrued on behalf of Executive for such year. If a Change in Control occurs within less than five years after Executive’s current employment by the Company and/or the Bank commenced, then average Annual Compensation shall be determined based on the number of full calendar years for which Executive has been continuously employed by the Company and/or the Bank prior to the year in which the Change in Control occurs. All cash amounts payable to Executive under this paragraph (b) of Section 6 shall be paid in a single cash lump sum distribution within thirty (30) days following the Termination Date of Executive’s employment; provided however, if, at the Termination Date, Executive is a “Specified Employee,” as defined in Treasury Regulation 1.409-1(i), then, solely to the extent required to avoid penalties under Section 409A of the Code, such payment shall be made within the first thirty (30) days after the first day of the seventh full month commencing after such Termination Date. Such payment shall not be reduced in the event Executive obtains other employment following such early termination of his employment hereunder.
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(A) | the estimated cost of a medical and dental coverage for Executive and his eligible family members for a period extending from the last day of the COBRA Period until the Expiration Date of the remaining Term of Executive’s employment, determined immediately prior to the termination of his employment, based on the coverage and cost levels in effect for Executive and his family on the Termination Date, plus |
(B) | the expense of converting Executive’s Company-paid life insurance to an individual life insurance policy. |
Such amount shall be paid to Executive within the thirty (30) day period following the Termination Date, provided however, if, at the Termination Date, Executive is a Specified Employee as defined in Treasury Regulation Section 1.409A-1(i), then, solely to the extent required to avoid penalties under Section 409A of the Code, such payment shall be made within the first thirty (30) days after the first day of the seventh calendar month commencing after such Termination Date. Executive in his discretion may use all or a portion of such cash payment to purchase the coverage described in subparagraph (A) above and/or to pay for the conversion of the policy described in subparagraph (B) above.
7. | TERMINATION OF EXECUTIVE’S EMPLOYMENT FOR CAUSE. |
(a) At any time during the Term of this Agreement, including after a Change in Control, the Company and/or the Bank may terminate Executive’s employment hereunder for “Cause,” as defined in Section 25, below. In the event that any termination under this Section 7 (a “Termination for Cause”) becomes effective, Executive shall not have any rights to receive, and shall not receive, any compensation or benefits for any period after the Termination Date, including compensation or benefits that he would otherwise have been entitled to receive after a termination of his employment under any other provisions of this Agreement, except for any such compensation or benefits that he is entitled to receive as a matter of law.
(b) In order for a Termination for Cause to become effective under this Section 7, each of the following must occur:
(i) | Notice. The Company and/or the Bank must deliver to Executive a written Notice of Termination, as defined and meeting the requirements set forth in Section 8(b) below, which notice (i) clearly discloses that the Company and/or the Bank, as applicable, intends to terminate Executive for Cause within the meaning of this Section 7, (ii) sets forth in reasonable detail the facts and circumstances allegedly constituting such Cause such that Executive has a fair opportunity to understand and defend himself against such allegations; and (iii) advises Executive of his right to request a hearing, as described in subparagraph (b)(ii), below, and the date or range of dates for such hearing, if requested. |
(ii) | Hearing. The Company and/or the Bank, as applicable, shall provide Executive with an opportunity to be heard, with assistance of counsel if he so desires, before the Company’s Board and/or the Bank’s Board, as applicable, at a hearing to be held on a date or within a range of dates identified in the Notice of Termination, |
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which date may not in any event be earlier than the thirtieth (30th) day after the date of the notice, for the purpose of enabling Executive to demonstrate, through written and/or verbal rebuttal, that Cause for his termination under this Section 7 does not exist. The hearing may be held in conjunction with a regular or special meeting of such board (or each such board) at which the Executive’s Termination for Cause will subsequently be evaluated and determined. |
(iii) | Final Determination by Board. After the hearing (if there is a hearing), or after a period of at least thirty (30) days has elapsed after the date of the Notice of Termination (if there is not a hearing), each of the Company’s Board and the Bank’s Board, acting at a regular or special meeting of such board duly called and held, shall make a final determination in its reasonable discretion as to whether Cause for the termination of Executive exists and if the board determines, by the affirmative vote of not less than three-fourths of the entire membership thereof (excluding Executive), that Cause for the termination of Executives does exist and that Executive should be terminated for Case, there shall be delivered to Executive written notice of the final determination of such board or boards that Executive be terminated for Cause and identifying the effective date of such termination (the Termination Date). |
(c) Without limiting the foregoing, the Company and/or the Bank, on or after delivery to Executive of the initial Notice of Termination to Executive, may suspend Executive, with or without pay, for a period not to exceed forty (40) days, and such suspension shall not constitute either a Termination without Cause or a Termination for Good Reason of Executive under the Agreement.
8. | CERTAIN NOTICES |
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termination, and (iii) the date of the notice, determined as provided below. The Notice of Termination shall also set forth such other information, if any, as may be required in the particular termination provision under which the election is being made. The Notice of Termination must be delivered in person by the terminating party (or one of the terminating parties, if there is more than one), or by a representative or agent of any such party, to each of the other party(ies), at the address of the particular party (which shall be the street address of the main office of the Bank on such date, and for Executive, the street address of his principal residence on such date). The date of any Notice of Termination is the date such notice is delivered to the last party entitled to such delivery to whom delivery is made. Such date of delivery shall be set forth on the notice itself, or shall be communicated by the terminating party to each of the other parties by other means, including email or other electronic means of communication, on or as soon as possible after the date of the notice.
(c) Upon delivery by any party to any other party of a Notice of Termination with respect to any early termination of Executive’s employment under this Agreement, the ability of any other party to early terminate Executive’s employment hereunder shall be suspended until the attempt by the party giving the earlier Notice of Termination to achieve such termination is abandoned or fails, provided however, that no provision in this Agreement, including this Section 8(c), will prevent, suspend, or in any way delay or interfere with any determination by the Company and/or the Bank to notify Executive that he is being terminated for Cause and to proceed with all actions required in connection with such termination, which determination, once reached and communicated to Executive by way of a Notice of Termination, will preempt and preclude any other attempt by any party, including Executive, to early terminate his employment, until the for Cause termination proceeding has been completed or abandoned.
9. | SECTION 280G TAX GROSS-UP. |
(i) | such Parachute Taxes; |
(ii) | all Parachute Taxes payable by Executive as a result of the Company’s and/or the Bank’s payment or reimbursement of amounts under subparagraph (i), above, this subparagraph (ii) or subparagraph (iii) below; and |
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(iii) | all Federal, state, and local income taxes payable by Executive as a result of the Company’s or the Bank’s payment or reimbursement of amounts under subparagraphs (i) and (ii), above, and this subparagraph (iii). |
10. | POST-TERMINATION OBLIGATIONS. |
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(b) Post-Termination Cooperation. Executive agrees, upon prior reasonable notice and reimbursement by the Company and/or the Bank of reasonable costs and expenses of Executive, including for his time, to cooperate with the Company, the Bank or their subsidiaries in any legal matters that may require Executive’s participation and/or assistance during the twenty-four (24) month period following the Expiration Date of Executive’s employment under this Agreement or any earlier termination of such employment. Executive expressly agrees to provide reasonable assistance (including testimony where appropriate) in such matters. The Company and/or the Bank will only request such assistance from Executive if such assistance is reasonably necessary.
11. | NON-COMPETITION, NON-SOLICITATION, NON-DISCLOSURE AND NON-DISPARAGEMENT. |
(a) Non-Compete. Upon the expiration of Executive’s employment under this Agreement or the earlier termination of such employment, including without limitation under Section 4, 5, 7 or 12(c) of this Agreement, for a period of one year following such Expiration Date or Termination Date, Executive agrees not to compete with the Company, the Bank or any of their subsidiaries, in any city, town or county in which the office that was Executive’s normal business office immediately before such expiration or termination is located or in which the Company, the Bank or any of their subsidiaries has an office or has filed an application for regulatory approval to establish an office, determined as of the Expiration Date or Termination Date, except as may be agreed to by the Company or the Bank pursuant to a resolution duly adopted by the Company’s Board and/or the Bank’s Board. Executive agrees that during such period and within said 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 Company, the Bank or their subsidiaries. The parties hereto, recognizing that irreparable injury will result to the Company, the Bank and their subsidiaries, including their business and property, in the event of Executive’s breach of this Section 11(a), agree that in the event of any such breach by Executive, the Company and/or the Bank will be entitled, in addition to any other remedies and damages available, to an injunction to restrain the violation hereof by Executive, Executive’s partners, agents, servants, employees and all persons acting for or under the direction of Executive. Executive represents and admits that, in the event of the expiration or early termination of his employment under this Agreement, Executive’s experience and capabilities are such that Executive will likely be able to obtain employment in a business engaged in other lines and/or of a different nature than the Company and its subsidiaries, 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 Company, the Bank or their subsidiaries from pursuing any other remedies available to them for such breach or threatened breach by Executive of this Section 11(a), including the recovery of damages from Executive.
(b) Non-Solicitation. Executive recognizes that the business of the Company and the Bank is highly competitive, and therefore acknowledges and agrees that at all times while employed by the Company and/or the Bank and for a period of one year following the Expiration Date of Executive’s employment under this Agreement or earlier termination of such employment, Executive shall not, directly or indirectly, individually or together with any other person, as owner, shareholder, investor, member, partner, proprietor, principal, director, officer, executive, manager, agent, representative, independent contractor, consultant or otherwise:
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(i) | solicit in any manner or seek to obtain the business of any person who is or was a customer or an active prospective customer of the Company or the Bank during the one-year period prior to the Expiration Date or Termination Date of Executive’s employment; or |
(ii) | request or advise any customer, supplier, vendor or others who were doing business with the Company or the Bank during the one-year period prior to the Expiration Date or Termination Date of Executive’s employment, or any other person, to terminate, reduce, limit or change their business or relationship with the Company or the Bank; or |
(iii) | induce, request or attempt to influence any officer of the Company or the Bank to terminate his or her employment with the Company or the Bank; |
provided, however, that nothing in this Section or any other provision of this Agreement shall preclude or prohibit Executive, if Executive’s Term of employment with the Company and/or the Bank shall have expired or Executive’s employment shall have been early terminated, and within one year after the Expiration Date or Termination Date, Executive shall have accepted employment with a successor employer (“New Employer”), from (a) entering into discussions or negotiations with any customers or active prospective customers of the Company or the Bank referred to in subparagraph (i) above regarding their entering into business or customer relationships or opening accounts with the New Employer, or (b) engaging in discussions or negotiations with any officers of the Company or the Bank referred to in subparagraph (iii) above regarding their accepting employment with the New Employer, if in each such case such discussions and negotiations are not the result, directly or indirectly, of solicitations, inducements, approaches, overtures or other expressions of interest initiated by Executive with such customers or officers but rather are the result, directly or indirectly, of any one or more such actions taken by such customers or such officers with Executive in his capacity as an employee of New Employer.
(c) Non-Disclosure. Executive recognizes and acknowledges that his knowledge of the business activities and plans for business activities of the Company, the Bank and their subsidiaries, as it may exist from time to time, is a valuable, special and unique asset of the business of the Company, the Bank and their subsidiaries. Executive will not, for a period of one year following expiration or termination of his employment hereunder, disclose any knowledge of the past, present, planned or considered business activities of the Company, the Bank and their subsidiaries to any person, firm, corporation or other entity for any reason or purpose whatsoever, unless expressly authorized to do so by the Company’s Board or the Bank’s Board or as required by law. 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 Company, the Bank or their subsidiaries. In the event of a breach or threatened breach by Executive of the provisions of this Section 11(c), the Company and/or the Bank will be entitled to an injunction restraining Executive from disclosing, in whole or in part, knowledge of the past, present, planned or considered business activities of the Company, the Bank or their subsidiaries or from rendering any services to any person, firm, corporation or 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
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as prohibiting the Company and/or the Bank from pursuing any other remedies available to the Company and/or the Bank for such breach or threatened breach of this Section 11(c), including the recovery of damages from Executive.
(d) Disparagement. Executive agrees that, during the Term and thereafter, he will not, directly or indirectly, alone or in conjunction with any other party, make statements to customers or suppliers of the Company and/or the Bank or to other members of the public that are in any way disparaging or negative towards the Company or the Bank, or the products or services of either, or the Company’s or the Bank’s representatives, Directors, or employees.
(e) Remedies. Executive acknowledges and agrees that his obligations under this Section 11 are of a special and unique nature and that a failure to perform any such obligation or a violation of any such obligation would cause irreparable harm to the Company and/or the Bank, the amount of which cannot be accurately compensated for in damages by an action at law. In the event of a breach by the Executive of any of the provisions of this Section 11, the Company and/or the Bank shall be entitled to an injunction restraining the Executive from such breach. Nothing in this Section shall be construed as prohibiting the Company and/or the Bank from pursuing any other remedies available for any breach of this Section 11.
12. | DEATH, DISABILITY OR RETIREMENT. |
(i) | Payments under Company Plans. Upon the determination that Executive has suffered a Disability, as defined in Section 25 of this Agreement, under any group long-term disability plan or program sponsored by the Company or the Bank at such time, disability payments thereunder shall commence within thirty (30) days. |
(ii) | Termination of Employment. In the event of Executive’s Disability, Executive’s obligation to perform services under this Agreement will terminate. |
(iii) | Special Payments and Benefits. Unless the Company or the Bank has previously purchased for the benefit of Executive an individual disability policy providing a disability benefit that, when aggregated with any disability benefit provided under a group disability program sponsored by the Company or the Bank, pays a disability benefit equal to Executive’s Base Salary, then within thirty (30) days of a Disability determination, Executive shall receive from the Company and/or the Bank a lump sum cash payment equal to his annual rate of Base Salary in effect at the date of the Disability determination. Such payment shall be reduced by the amount of any short- or long-term disability benefits payable to Executive under |
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any disability program sponsored by the Company, but in no event shall Executive’s Disability benefit be reduced below zero. In addition, for a one-year period following any Disability determination, to the extent permitted under said programs, the Company and/or the Bank shall pay the cost of Executive’s, and to the extent applicable under any non-taxable medical and dental plans, Executive’s dependents’, continued coverage under such medical and dental plans of the Company in which Executive participated prior to the occurrence of Executive’s Disability, on the same terms as if Executive were actively employed by the Company and/or the Bank. If the Company and/or the Bank cannot provide one or more of the benefits set forth in this paragraph because Executive is no longer an employee, applicable rules and regulations prohibit such benefits, or the payment of such benefits in the manner contemplated would subject the Company and/or the Bank or Executive to penalties, then the Company and/or the Bank shall pay the Executive a cash lump sum payment reasonably estimated to be equal to the value of such benefits. Such cash lump sum payment shall be made within thirty (30) days after the Termination Date, or, if on such date, Executive is a “Specified Employee,” as defined in Treasury Regulation 1.409A-1(i)), then solely to the extent required to avoid penalties under Section 409A of the Code, such payment shall be made within thirty (30) days after the first day of the seventh month following Executive’s Termination Date. Executive shall also be entitled to receive any other benefits available to employees terminated for Disability under any benefit plans or programs in which Executive participated prior to his Disability. |
13. | EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFIT PLANS. |
This Agreement contains the entire understanding between the parties hereto regarding the issues addressed herein, and supersedes any prior employment or change in control agreement between the Company and/or the Bank (or their predecessors) and Executive, except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to Executive of a kind elsewhere provided. No provision of this Agreement shall be interpreted to mean that Executive is subject to receiving fewer benefits than those available to him without reference to this Agreement.
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14. | NO ATTACHMENT. |
15. | MODIFICATION AND WAIVER. |
16. | 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 remaining 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.
17. | 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.
18. | GOVERNING LAW. |
This Agreement shall be governed by the laws of the State of New York without regard to principles of conflicts of law of the State of New York and applicable federal law.
19. | DISPUTE RESOLUTION. |
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20. | KEY-MAN LIFE INSURANCE. |
The Company and/or the Bank may, in its sole discretion, elect to purchase key man life insurance on the life of Executive under which the Company and/or the Bank is designated as the beneficiary. Executive agrees to submit, at any reasonable time and location, to any physical examination required by the insurance carrier designated by the Company and/or the Bank and to execute any documents necessary to effect the issuance of such policy.
21. | INDEMNIFICATION. |
The Company and/or the Bank shall provide Executive (including his heirs, executors and administrators) with coverage under a standard directors’ and officers’ liability insurance policy at the expense of the Company and/or the Bank, and each of the Company and the Bank shall indemnify Executive (and his heirs, executors and administrators) 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 Company or the Bank, as applicable (whether or not he continues to be such 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, attorneys’ fees and the costs of reasonable settlements.
22. | SUCCESSORS AND ASSIGNS. |
The Company and/or the Bank shall require any successor or assignee, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all of the business or assets of the Company and/or the Bank, expressly and unconditionally to assume and agree to perform the Company’s and/or the Bank’s obligations under this Agreement, in the same manner and to the same extent that the Company and/or the Bank would be required to perform if no such succession or assignment had taken place.
23. | SUBJECT TO APPLICABLE LAW. |
Any payments made or benefits provided by the Company and/or the Bank to Executive pursuant to this Agreement, or otherwise, and any rights or obligations related to such payments or benefits, are subject to and conditioned upon compliance with applicable law, including but not limited to 12 U.S.C. §§371c, 371c-1 and 12 C.F.R. Part 223 promulgated thereunder, and 12 U.S.C. §1828(k) and 12 C.F.R. Part 359 promulgated thereunder.
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24. | SECTION 409A COMPLIANCE. |
The parties intend that all provisions of this Agreement shall either be exempt from or comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”). For purposes of this Agreement, “termination,” “termination date” and “terminate” when used in the context of termination of employment shall mean a “separation from service” with the Company and its affiliates (i.e., generally an entity 50% or more of which is owned or controlled by the Company), as such term is defined in Treasury Regulation Section 1.409A-1(h) (provided, that the reasonably anticipated reduced level of bona fide services, if any, to be performed by Executive after such separation from service shall be less than 50 percent of the average level of bona fide services provided to the Company and its affiliates by Executive in the immediately preceding 36 month period). Nothing in this Agreement shall be interpreted to permit accelerated payment or further deferral of nonqualified deferred compensation, as defined in Section 409A, or any other payment or further deferral in violation of the requirements of Section 409A. Executive does not have any right to make any election regarding the time or form of payment due under this Agreement. Expenses and reimbursement of expenses will be paid by the Company and/or the Bank consistent with their generally applicable policies, and in any event no later than the end of the calendar year following the calendar year in which the expenses are incurred. With respect to reimbursements that constitute taxable income to Executive, no such reimbursements or expenses eligible for reimbursement in any calendar year shall in any way affect the expenses eligible for reimbursement in any other calendar year and Executive’s right to reimbursement shall not be subject to liquidation in exchange for any other benefit. No provision of this Agreement shall be operative to the extent that it will result in the imposition of the additional tax described in Code Section 409A(a)(1)(B)(i)(II) and the parties agree to revise the Agreement as necessary to comply with Section 409A or an exemption therefrom and fulfill the purpose of the voided provision. No provision of this Agreement shall be interpreted or construed to transfer any liability for failure to comply with the requirements of Section 409A from Executive or any other individual to the Company or any of its respective affiliates, employees or agents. Except for the obligation of the Company and/or the Bank under Section 9 of this Agreement to reimburse Executive for certain tax payments he may be required to make resulting from his receipt of certain change of control payments from the Company and/or the Bank, all taxes associated with payments made to Executive pursuant to this Agreement, including any liability imposed under Section 409A, shall be borne by Executive.
25. | CERTAIN DEFINED TERMS. |
For purposes of this Agreement, the following capitalized terms shall have the meanings given to each below
(a) “Cause.” For purposes of any termination of Executive's employment hereunder for “Cause,” Cause shall be deemed to exist if Executive:
(i) | has engaged in any willful act or omission that, in the judgment of Company’s Board or Bank’s Board has caused or will likely cause substantial economic damage to the Company or the Bank (as applicable) or substantial injury to the business reputation of the Company or the Bank (as applicable); or |
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(ii) | has engaged in an act or acts of dishonesty or fraud intended to result in enrichment or advantage to Executive or a third party at the expense of the Company or the Bank or through the use of the Company’s or the Bank’s assets (including proprietary or confidential information); or |
(iii) | has engaged in willful failure (other than due to physical or mental incapacity) to carry out Executive’s duties and responsibilities to the Company or the Bank, including any reasonable directions from the Company’s Board or the Bank’s Board, within the standards of performance which could reasonably be expected of an employee working for a banking institution or bank holding company in a similar position, if such willful failure continues for ninety (90) days or more after written notice of such failure is provided to Executive by the Company or the Bank; or |
(iv) | has willfully failed or refused (A) to comply with any material term or provision of this Agreement, (B) to adhere to the material terms of such employment-related policies or procedures as have been or may be established by the Company or the Bank, or (C) to execute and comply with the material terms of such instruments as may reasonably be requested by the Company or the Bank consistent with the foregoing clauses (A) and (B), including, without limitation, the Company’s or the Bank’s rules and policies with respect to conduct and ethics; or |
(v) | has been convicted or enters a plea of guilty or nolo contendere or enters into a pretrial diversion program or similar program relating to a felony or any crime involving moral turpitude; or |
(vi) | is subject to an order of a federal or state regulatory agency or a court of competent jurisdiction requiring the termination of the Executive's employment with the Bank or the Company, unless Executive has appealed such order and such appeal is pending; or |
(vii) | abuses alcohol or any controlled substance in a manner that materially negatively affects Executive’s performance or abilities at the Company and/or the Bank, whether or not such activity constitutes a crime; or |
(viii) | is prohibited from employment with an FDIC-insured institution under applicable federal law. |
For purposes of this definition of “Cause,” no act, or failure to act, on the part of Executive shall be deemed “willful” unless done, or omitted to be done, by Executive not in good faith and without reasonable belief that Executive’s action or omission was in the best interests of the Company or the Bank.
(b) “Change-in-Control.” For purposes of this Agreement, a “Change in Control” shall mean (1) a change in ownership of the Company or the Bank as defined and described in subparagraph (i) below, or (2) a change in effective control of the Company or the Bank as defined and described in subparagraph (ii) below, or (3) a change in the ownership of a substantial portion of the assets of the Company or the Bank as defined and described in
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subparagraph (iii) below. The definition of Change in Control in this Agreement shall be construed to be consistent with the requirements of Treasury Regulation 1.409A-3(i)(5), except to the extent modified herein.
(i) | Change in the ownership of the Company or the Bank. A change in the ownership of the Company or the Bank shall occur on the date that any one person, or more than one person acting as a group (as defined in Treasury Regulation 1.409A-3(i)(5)(v)(B)), acquires ownership of stock of such entity that, together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of such entity. |
(ii) | Change in the effective control of the Company or the Bank. A change in the effective control of the Company or the Bank shall occur on the date that either (1) any one person, or more than one person acting as a group (as defined in Treasury Regulation Section 1.409A-3(i)(5)(vi)(D)), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company or the Bank possessing 30% or more of the total voting power of the stock of the Company or the Bank; or (2) a majority of members of the Company’s or the Bank’s Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of such entity’s board prior to the date of the appointment or election, provided that this sub-section (d)(ii)(2) is inapplicable where a majority shareholder of the applicable entity is another corporation. |
(iii) | Change in the ownership of a substantial portion of the Company’s or the Bank’s assets. A change in the ownership of a substantial portion of the Company’s or the Bank’s assets occurs on the date that any one person, or more than one person acting as a group (as defined in Treasury Regulation 1.409A-3(i)(5)(vii)(C)), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company or the Bank that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all of the assets of such entity immediately prior to such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of the entity, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. There is no Change in Control event under this subparagraph (iii) when there is a transfer to an entity that is controlled by the shareholders of the transferring entity immediately after the transfer. |
(c) “Good Reason.” For purposes of this Agreement, “Good Reason” shall mean the occurrence during the Term of Executive’s employment under this Agreement of any one or more of the following actions or events, or series of actions or events, unless the same shall have been expressly consented to, in advance, by Executive in writing: (A) failure by the Company’s Board to elect or re-elect or appoint or re-appoint Executive as Executive Chairman of the Company, or failure by the Bank’s Board to elect or re-elect, or approve or re-approve Executive as Executive Chairman of the Bank, in connection with any annual or other election or
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appointment by the Company or the Bank of their senior officers for an upcoming year or period; (B) any material diminution in Executive’s functions, duties or responsibilities with the Company, the Bank or their subsidiaries, the general effect of which would cause Executive’s position to become one of lesser responsibility, importance or scope from the position and attributes thereof described in Section 1 of this Agreement; (C) relocation of Executive’s principal place of employment to any location more than thirty (30) miles radius from Executive's principal place of employment on the Effective Date of this Agreement, unless the distance in miles between Executive’s principal residence and his new principal place of employment following such relocation is less than the distance in miles between Executive’s principal residence and his principal place of employment immediately prior to such relocation; (D) any determination by the Company’s Board or the Bank’s Board under Section 2(b) to discontinue the automatic extension of Executive’s Term of employment under Section 2(b), above; or (E) any material breach of this Agreement by the Company and/or the Bank.
(d) “Disability.” For purposes of this Agreement, Executive shall be considered to have a “Disability” or be “Disabled” if under any group long-term disability plan or program sponsored by the Company or the Bank at the time of Executive’s physical or mental impairment, Executive would be entitled to recover disability benefits due to Executive’s inability to continue to perform services for the Company or the Bank. If the Company or the Bank sponsors no such plan at the time of Executive’s physical or mental impairment, then “Disability” or “Disabled” shall be construed to comply with Section 409A of the Internal Revenue Code and shall be deemed to have occurred if: (i) Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death, or last for a continuous period of not less than 12 months; (ii) by reason of any medically determinable physical or mental impairment that can be expected to result in death, or last for a continuous period of not less than 12 months, Executive is receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company and/or the Bank; or (iii) Executive is determined to be totally disabled by the Social Security Administration.
26. | COMPANY PERFORMANCE GUARANTEE; SOURCE OF PAYMENTS. |
The Company unconditionally agrees to pay and provide to Executive all amounts and benefits due hereunder to Executive, including amounts and benefits specifically required to be paid and provided by the Bank, if such amounts are not timely paid or provided by the Bank, for any reason or no reason. All payments provided in this Agreement shall be timely paid in cash or check from the general funds of the payor.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
ATTEST: | ESQUIRE FINANCIAL HOLDINGS, INC. | |
/s/ Xxxx Xxxxx | /s/ Xxxxxx Xxxxxxx | |
Secretary | For the Entire Board of Directors | |
ATTEST: | ESQUIRE BANK, N.A. | |
/s/ Xxxx Xxxxx | /s/ Xxxxxx Xxxxxxx | |
Secretary | For the Entire Board of Directors | |
WITNESS: | EXECUTIVE: | |
/s/ Xxxx Xxxxxx | /s/ Xxxxxx Xxxxxxx | |
Secretary | Xxxxxx Xxxxxxx |
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