CHANGE IN CONTROL,
SEVERANCE AND EMPLOYMENT AGREEMENT
FOR XXXXXXX XXXX
(Double Trigger; Cutback)
THIS CHANGE IN CONTROL, SEVERANCE AND EMPLOYMENT AGREEMENT
(the "Agreement"), is made this 31st day of October, 2000, between Xxxxxx United
Bancorp and Xxxxxx United Bank (collectively the "Company"), a New Jersey
corporation which maintains its principal office at 0000 XxxXxxxxx Xxxxxxxxx.,
Xxxxxx, Xxx Xxxxxx and Xxxxxxx Xxxx (the "Executive").
BACKGROUND
WHEREAS, the Executive is presently employed by the Company as
Executive Vice President, and;
WHEREAS, the Board of Directors of the Company believes that
the future services of the Executive are of great value to the Company and that
it is important for the growth and development of the Company that the Executive
continue in his position, and;
WHEREAS, if the Company receives any proposal from a third
person concerning a possible business combination with, or acquisition of
equities securities of, the Company, the Board of Directors of the Company (the
"Board") believes it is imperative that the Company and the Board be able to
rely upon the Executive to continue in his position, and that they be able to
receive and rely upon his advice, if they request it, as to the best interests
of the Company and its shareholders, without concern that the Executive might be
distracted by the personal uncertainties and risks created by such a proposal,
and;
WHEREAS, to achieve that goal, and to retain the Executive's
services prior to any such activity, the Board of Directors and the Executive
have agreed to enter into this Agreement to provide the Executive with continued
employment or certain termination benefits in the event of a Change in Control,
as hereinafter defined;
NOW, THEREFORE, to assure the Company that it will have the
continued dedication of the Executive and the availability of his advice and
counsel notwithstanding the possibility, threat or occurrence of a bid to take
over control of the Company, and to induce the Executive to remain in the employ
of the Company, and for other good and valuable consideration, the Company and
the Executive, each intending to be legally bound hereby agree as follows:
1. Definitions
a. Cause. For purposes of this Agreement "Cause" with
respect to the termination by the Company of Executive's employment shall mean
(i) willful and continued failure by the Executive to materially perform his
duties for the Company under this Agreement after at least one warning in
writing from the Company's Board of Directors identifying specifically any such
material failure and offering a reasonable opportunity to cure such failure;
(ii) the willful engaging by the Executive in material misconduct which causes
material injury to the Company as specified in a written notice to the Executive
from the Board of Directors; or (iii) conviction of a crime (other than a
traffic violation), habitual drunkenness, drug abuse, or excessive absenteeism
other than for illness, after a warning (with respect to drunkenness or
absenteeism only) in writing from the Board of Directors to refrain from such
behavior. No act or failure to act on the part of the Executive shall be
considered willful unless done, or omitted to be done, by the Executive not in
good faith and without reasonable belief that the action or omission was in the
best interest of the Company. The Company shall have the burden of proving cause
by clear and convincing evidence.
b. Change in Control.
(i) Definition. For purposes of this Agreement,
a "Change in Control" shall mean the occurrence of
any of the following events with respect to Xxxxxx
United Bancorp:
(A) The acquisition of the beneficial
ownership, as defined under the Exchange Act, of
25% or more of Xxxxxx United Bancorp's voting
securities or all or substantially all of the
assets of Xxxxxx United Bancorp by a single
person or entity or group of affiliated persons
or entities;
(B) The merger, consolidation or
combination of Xxxxxx United Bancorp with an
unaffiliated corporation in which the directors
of Xxxxxx United Bancorp as applicable
immediately prior to such merger, consolidation
or combination constitute less than a majority
of the board of directors of the surviving, new
or combined entity unless one-half of the board
of directors of the surviving, new or combined
entity were directors of Xxxxxx United Bancorp
immediately prior to such transaction and Xxxxxx
United Bancorp's chief executive officer
immediately prior to such transaction continues
as the chief executive officer of the surviving,
new or combined entity; or
(C) During any period of two consecutive
calendar years, individuals who at the beginning
of such period constitute the Board of Directors
of Xxxxxx United Bancorp cease for any reason to
constitute at least two-thirds thereof, unless
the election or nomination for the election by
Xxxxxx United Bancorp's stockholders of each new
director was approved by a vote of at least
two-thirds of the directors then still in office
who were directors at the beginning of the
period; or
(D) The transfer of all or substantially
all of Xxxxxx United Bancorp's assets or all or
substantially all of the assets of its primary
subsidiaries.
(ii) Time of Change in Control. For purposes of
this Agreement, a Change in Control of Xxxxxx United
Bancorp shall be deemed to occur on the earlier of:
(A) The first date on which a single person
or entity or group of affiliated persons or
entities acquire the beneficial ownership of 25%
or more of Xxxxxx United Bancorp's voting
securities; or
(B) Forty-five (45) days prior to the date
Xxxxxx United Bancorp enters into a definitive
agreement to merge, consolidate, combine or sell
the assets of Xxxxxx United Bancorp; provided
however, that for purposes of any resignation by
the Executive, the Change in Control shall not
be deemed to occur until the consummation of the
merger, consolidation, combination or sale, as
the case may be, except if this Agreement is not
expressly assumed in writing by the acquiring
company, then the Change in Control shall be
deemed to occur the day before the consummation;
and further provided that if any definitive
agreement to merge, consolidate, combine or sell
assets is terminated without consummation of the
acquisition, then no Change in Control shall
have been deemed to have occurred; or
(C) The date upon which the election of
directors occurs qualifying under Section
b(i)(C) above.
c. Contract Period. "Contract Period" shall mean the
period commencing the day immediately preceding a Change in Control and ending
on the earlier of (i) one year after the consummation of any event giving rise
to the Change in Control or (ii) the date the Executive would attain age 65.
d. Exchange Act. "Exchange Act" means the Securities
Exchange Act of 1934, as amended.
e. Good Reason. When used with reference to a
voluntary termination by Executive of his employment with the Company, "Good
Reason" shall mean any of the following, if taken without Executive's express
written consent:
(i) The assignment to Executive of any duties
inconsistent with, or the reduction of authority,
powers or responsibilities associated with,
Executive's position, title, duties, responsibilities
and status with the Company immediately prior to a
Change in Control; any removal of Executive from, or
any failure to re-elect Executive to, any position(s)
or office(s) Executive held immediately prior to such
Change in Control. A change in position, title,
duties, responsibilities and status or position(s) or
office(s) resulting from a Change in Control or from
a merger or consolidation of the Company into or with
another bank or company shall not meet the
requirements of this paragraph if, and only if, the
Executive's new title, duties and responsibilities
are accepted in writing by the Executive, in the sole
discretion of the Executive.
(ii) A reduction by the Company in Executive's
annual base compensation as in effect immediately
prior to a Change in Control or the failure to award
Executive any annual increases in accordance
herewith;
(iii) A failure by the Company to continue any
bonus plan in which Executive participated
immediately prior to the Change in Control or a
failure by the Company to continue Executive as a
participant in such plan on at least the same basis
as Executive participated in such plan prior to the
Change in Control unless the elimination of bonus
programs is applied consistently throughout the
Surviving Company following a Change in Control;
(iv) The Company's transfer of Executive to a
geographic location other than the corporate
headquarters of the Company or the main office of the
Bank or more than 25 miles from his present office
location, except for required travel on Company's
business to an extent substantially consistent with
Executive's business travel obligations immediately
prior to such Change in Control;
(v) The failure by the Company to continue in
effect any employee benefit plan, program or
arrangement (including, without limitation the
Company's 401(k) plan, the Company's pension plan,
life insurance plan, health and accident plan,
disability plan, or stock option plan) in which
Executive is participating immediately prior to a
Change in Control, unless the elimination of such
programs is applied consistently throughout the
Surviving Company following a Change in Control,
(except that the Company may institute or continue
plans, programs or arrangements providing Executive
with substantially similar benefits); the taking of
any action by the Company which would adversely
affect Executive's participation in or materially
reduce Executive's benefits under, any of such plans,
programs or arrangements; the failure to continue, or
the taking of any action which would deprive
Executive, of any material fringe benefit enjoyed by
Executive immediately prior to such Change in
Control; or the failure by the Company to provide
Executive with the number of paid vacation days to
which Executive was entitled immediately prior to
such Change in Control;
(vi) The failure by the Company to obtain an
assumption in writing of the obligations of the
Company to perform this Agreement by any successor to
the Company and to provide such assumption to the
Executive prior to any Change in Control; or
(vii) Any purported termination of Executive's
employment by the Company during the term of this
Agreement which is not effected pursuant to all of
the requirements of this Agreement; and, for purposes
of this Agreement, no such purported termination
shall be effective.
f. Voting Securities. "Voting securities" means
Xxxxxx United Bancorp's common stock, together with any preferred stock entitled
to vote generally in elections for directors or other matters. With respect to
preferred stock, in determining the percentage of beneficial ownership of voting
securities, the number of votes to which the holder is entitled in the election
of directors with the common holders, and not the number of shares, shall be the
basis of the calculation.
2. Employment. During the Contract Period, the Company hereby
agrees to employ the Executive, and the Executive hereby accepts employment upon
the terms and conditions set forth herein.
3. Position. During the Contract Period and prior to a Change
in Control the Executive shall be employed as an Executive Vice President. Upon
a Change in Control as herein defined, the Executive's position shall be
governed by his title, position, status, duties and authority as in effect
immediately prior to the Change in Control. The Executive shall devote his full
time and attention to the business of the Company, and shall not during the
Contract Period be engaged in any other business activity. This paragraph shall
not be construed as preventing the Executive from managing any investments of
his which do not require any substantial service on his part in the operation of
such investments.
4. Cash Compensation. The Company shall pay to the Executive
compensation for his services during the Contract Period as follows:
a. Annual Salary. An annual salary equal to the
annual salary in effect as of the Change in Control. The annual salary shall be
payable in installments in accordance with the Company's usual payroll method.
The annual salary shall not be reduced during the Contract Period.
b. Annual Bonus. An annual cash bonus equal to higher
of a) the highest bonus paid to the Executive during the three fiscal years
prior to the Change in Control or b) the highest full year bonus to which the
Executive would have been entitled during the three fiscal years prior to the
Change in Control. The bonus shall be payable at the time and in the manner
which the Company paid such bonuses prior to the Change in Control.
c. Annual Review. The Company during the Contract
Period shall review annually, or at more frequent intervals which the Company
determines is appropriate, the Executive's compensation and shall award his
additional compensation to reflect the Executive's performance, the performance
of the Company and competitive compensation levels, all as determined in the
discretion of the Company.
5. Expenses and Fringe Benefits.
a. Expenses. During the Contract Period, the
Executive shall be entitled to reimbursement for all business expenses incurred
by him with respect to the business of the Company in the same manner and to the
same extent as such expenses were previously reimbursed to him immediately prior
to the Change in Control.
b. Club Membership and Automobile. If, prior to the
Change in Control, the Executive was entitled to membership in a country club
and/or the use of an automobile, he shall be entitled to the same membership
and/or use of an automobile at least comparable to the automobile provided to
him prior to the Change in Control during the Contract Period.
c. Other Benefits. The Executive also shall be
entitled to vacations and sick days, in accordance with the practices and
procedures of the Company, as such existed immediately prior to the Change in
Control. During the Contract Period, the Executive also shall be entitled to
hospital, health, medical and life insurance, and any other benefits enjoyed,
from time to time, by senior officers of the Company, all upon terms as
favorable as those enjoyed by other senior officers of the Company.
Notwithstanding anything in this paragraph 5(c) to the contrary, if the Company
adopts any change in the benefits provided for senior officers of the Company,
and such policy is uniformly applied to all officers of the Company (and any
successor or acquirer of the Company, if any), including the chief executive
officer of such entities, then no such change shall be deemed to be contrary to
this paragraph.
6. Termination for Cause. The Company shall have the right to
terminate the Executive for Cause, upon written notice to him of the termination
which notice shall specify the reasons for the termination and provide, if
practical, an opportunity for the Executive to cure such Cause. In the event of
a valid termination for Cause the Executive shall not be entitled to any further
benefits under this Agreement.
7. Disability. During the Contract Period if the Executive
becomes permanently disabled, or is unable to perform his duties hereunder for 4
consecutive months in any 12 month period, the Company may terminate the
employment of the Executive. In such event, the Executive shall be entitled to
the payments and benefits provided under Section 9 hereof as if the Executive
had been terminated hereunder without Cause upon such date.
8. Death Benefits. Upon the Executive's death during the
Contract Period, the Executive shall be deemed to terminate without cause as of
the date of death and his estate shall be entitled to the payments and benefits
provided under Section 9 hereof as if the Executive had been terminated without
cause upon such date.
9. Termination Without Cause or Resignation.
a. Termination Without Cause. The Company may
terminate the Executive without Cause during the Contract Period by written
notice to the Executive.
b. Resignation for Good Reason. The Executive may
resign for Good Reason during the Contract Period upon prior written notice to
the Company.
c. Payments and Benefits. If the Company terminates
the Executive's employment during the Contract Period without Cause or if the
Executive resigns for Good Reason under paragraph 9(b), the Company shall, as
promptly as practical but in no event later than 10 business days after the
termination of employment pay the Executive a lump sum (the "Lump Sum") equal to
1.0 times the sum of (i) the annual salary of the Executive immediately prior to
the Change in Control and the higher of, (ii) the highest bonus paid to the
Executive during the three fiscal years prior to the Change in Control or, (iii)
the highest full year bonus to which the Executive would have been entitled
during the three fiscal years prior to the Change in Control. For these
purposes, any deferral of salary by the Executive under the Company's 401(k)
plan or otherwise shall be included in salary. The Company also shall continue
to provide the Executive, his spouse and eligible dependents for a period of one
year following the termination of employment, with health, hospitalization and
medical insurance, as were provided at the time of the Change in Control, at the
Company's cost, subject only to the responsibility of the Executive to continue
to pay a portion of the premium, as well as co-pays or deductibles in such
amounts as were paid by the Executive prior to the termination. The Lump Sum and
the benefits provided hereunder shall be subject to Section 10 hereof.
d. No Duty to Mitigate. The Executive shall not have
a duty to mitigate the damages suffered by him in connection with the
termination by the Company of his employment without Cause under paragraph 9(a)
or a resignation under paragraph 9(b) during the Contract Period. The Company
shall not be entitled to offset from the payment due to the Executive hereunder
any amounts due from or claims against the Executive.
e. Legal Fees and Expenses. If the Company fails to
pay the Executive the Lump Sum due him under this Agreement or to provide him
with the health, hospitalization and medical insurance benefits due under this
Agreement, the Executive, after giving 10 days' written notice to the Company
identifying the Company's failure, shall be entitled to recover from the
Company, monthly upon demand, any and all of his legal fees and other expenses
incurred in connection with his enforcement against the Company of the terms of
this Agreement.
10. Certain Reduction of Payments and Benefits.
a. Reduction. Anything in this Agreement to the
contrary notwithstanding, prior to the payment of the Lump Sum or the benefits
payable hereunder in connection with the Executive's termination of employment,
the certified public accountants for the Company immediately prior to a Change
in Control (the "Certified Public Accountants"), shall determine as promptly as
practical and in any event within 20 business days following the termination of
employment of Executive whether any payment or distribution by the Company 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) (a
"Payment") would more likely than not be nondeductible by the Company for
Federal income purposes because of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), and if it is then the aggregate present value of
amounts payable or distributable to or for the benefit of the Executive pursuant
to this Agreement in connection with the Executive's termination of employment
(such payments or distributions pursuant to this Agreement are hereinafter
referred to as "Agreement Payments") shall be reduced (but not below zero) to
the Reduced Amount. For purposes of this paragraph, the "Reduced Amount" shall
be an amount expressed in present value which maximizes the aggregate present
value of Agreement Payments without causing any Payment to be nondeductible by
the Company because of said Section 280G of the Code.
b. Executive Selection of Reductions. If under
paragraph (a) of this section the Certified Public Accountants determine that
any payment would more likely than not be nondeductible by the Company because
of Section 280G of the Code, the Company shall promptly give the Executive
notice to that effect and a copy of the detailed calculation thereof and of the
Reduced Amount, and the Executive may then elect, in his sole discretion, which
and how much of the Agreement Payments shall be eliminated or reduced (as long
as after such election the aggregate present value of the Agreement Payments
equals the Reduced Amount), and shall advise the Company in writing of his
election within 5 business days of his receipt of notice. If no such election is
made by the Executive within such 5-day period, the Comapny may elect which and
how much of the Agreement Payments shall be eliminated or reduced (as long as
after such election the aggregate present value of the Agreement Payments equals
the Reduced Amount) and shall notify the Executive promptly of such election.
For purposes of this paragraph, present value shall be determined in accordance
with Section 280G(d)(4) of the Code. All determinations made by the Certified
Public Accountants shall be binding upon the Company and the Executive and shall
be made as promptly as practical but in any event within 20 days of a
termination of employment of the Executive. The Company may suspend for a period
of up to 30 days after termination of employment the payment of the Lump Sum and
any other benefits due to the Executive under this Agreement until the Certified
Public Accountants finish the determination and the Executive (or the Company,
as the case may be) elect how to reduce the Agreement Payments, if necessary. As
promptly as practicable following such determination and the elections
hereunder, the Company shall pay to or distribute to or for the benefit of the
Executive such amounts as are then due to the Executive under this Agreement and
shall promptly pay to or distribute for the benefit of the Executive in the
future such amounts as they become due to the Executive under this Agreement.
c. Overpayments and Underpayments. As a result of the
uncertainty in the application of Section 280G of the Code, it is possible that
Agreement Payments may have been made by the Company which should not have been
made ("Overpayment") or that additional Agreement Payments which will have not
been made by the Company could have been made ("Underpayment"), in each case,
consistent with the calculation of the Reduced Amount hereunder. In the event
that the Certified Public Accountants, based upon the assertion of a deficiency
by the Internal Revenue Service against the Company or Executive which said
Certified Public Accountants believe has a high probability of success,
determines that an Overpayment has been made, any such Overpayment shall be
treated for all purposes as a loan to Executive which Executive shall repay to
the Company together with interest at the applicable Federal rate provided for
in Section 7872(f)(2)(A) of the Code; provided, however, that no amount shall be
payable by Executive to the Company in and to the extent such payment would not
reduce the amount which is subject to taxation under Section 4999 of the Code.
In the event that the Certified Public Accountants, based upon controlling
precedent, determine that an Underpayment has occurred, any such Underpayment
shall be promptly paid by the Company to or for the benefit of the Executive
together with interest at the applicable Federal rate provided for in Section
7872(f)(2)(A) of the Code.
11. Non-Disclosure of Confidential Information.
a. Non-Disclosure of Confidential Information. Except
in the course of his employment with the Company and in the pursuit of the
business of the Company or any of its subsidiaries or affiliates, the Executive
shall not, at any time during or following the Contract Period, disclose or use,
any confidential information or proprietary data of the Company or any of its
subsidiaries or affiliates. The Executive agrees that, among other things,
information concerning the identity of and the Company's relations with its
customers is confidential information.
b. Specific Performance. Executive agrees that the
Company does not have an adequate remedy at law for the breach of this section
and agrees that he shall be subject to injunctive relief and equitable remedies
as a result of the breach of this section. The invalidity or unenforceability of
any provision of this Agreement shall not affect the force and effect of the
remaining valid portions. No violation of this Section 11 shall entitle the
Company to withhold any payment or benefit due the Executive hereunder. c.
Survival. This section shall survive the termination of the Executive's
employment hereunder and the expiration of this Agreement.
12. Term and Effect Prior to Change in Control.
a. Term. Except as otherwise provided for hereunder,
this Agreement shall commence on the date hereof and shall remain in effect for
a period of one (1) year from the date hereof (the "Initial Term") or until the
end of the Contract Period, whichever is later. The Initial Term shall be
automatically extended for an additional one year period on the anniversary date
hereof (so that the Initial Term is always one (1) year) unless on or before
such date the Board of Directors of the Company by resolution passed by a
majority vote of the Directors then in office, votes not to extend the Initial
Term any further. The Company shall promptly advise the Executive in writing of
the passage of such resolution and if it fails to do so the passage of such
resolution shall be ineffective.
b. No Effect Prior to Change in Control. Prior to a
Change in Control, this Agreement shall not affect any rights of the Company to
terminate the Executive or the benefits payable to the Executive. The rights and
liabilities provided hereunder shall only become effective upon a Change in
Control. If the employment of the Executive by the Company is ended for any
reason whatsoever prior to a Change in Control, this Agreement shall thereafter
be of no further force and effect.
13. Compensation and Benefits Provided Not in Derogation of
Other Benefits. Anything to the contrary herein contained notwithstanding, the
payment or obligation to pay any monies, or granting of any benefits, rights or
privileges to Executive as provided in this Agreement shall not be in lieu or
derogation of the rights and privileges that the Executive now has or will have
under any plans or programs of or agreements with the Company, except that the
Executive shall not be entitled to the benefits of any other plan or program of
the Company or agreement with the Company expressly providing for severance or
termination pay or post-employment medical benefits. In furtherance of the
foregoing, this Agreement is not in derogation of, but rather supplemental to,
the rights and benefits of the Executive, if any, under any stock option plan,
restricted stock plan, pension plan, 401(k) plan and SERP.
14. Notice. During the Contract Period, any notice of
termination of the employment of the Executive by the Company or by the
Executive to the Company shall be communicated by written Notice of Termination
to the other party hereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a dated notice which shall (i) indicate the specific
termination provision in this Agreement relied upon; (ii) set forth, if
necessary, in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the employment of the Executive or from the Company
under the provision so indicated; (iii) specify a date of termination, which
shall be not less than four weeks nor more than six weeks after such Notice of
Termination is given, except in the case of termination of employment by the
Company of the Executive for Cause pursuant to Section 6 hereof, in which case
the Notice of Termination may specify a date of termination as of the date such
Notice of Termination is given; and (iv) be given by personal delivery or, if
the individual is not personally available, by certified mail to the last known
address of the individual. Upon the death of the Executive, no Notice of
Termination need be given.
15. Payroll and Withholding Taxes. All payments to be made or
benefits to be provided hereunder by the Company shall be subject to applicable
federal and state payroll or withholding taxes.
16. Miscellaneous. The terms of this Agreement shall be
governed by, and interpreted and construed in accordance with, the laws of New
Jersey. This Agreement supersedes all prior agreements and understandings with
respect to the matters covered hereby. The amendment or termination of this
Agreement may be made only in a writing executed by the Company and the
Executive, and no amendment or termination of this Agreement shall be effective
unless and until made in such a writing. This Agreement shall be binding upon
any successor (whether direct or indirect, by purchase, merger, consolidation,
liquidation or otherwise) to all or substantially all of the assets of the
Company. This Agreement is personal to the Executive and the Executive may not
assign any of his rights or duties hereunder but this Agreement shall be
enforceable by the Executive's legal representatives, executors or
administrators. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, and it shall not be necessary in making
proof of this Agreement to produce or account for more than one such
counterpart. IN WITNESS WHEREOF, the Company has caused this Agreement to be
signed by its duly authorized representatives pursuant to the authority of their
Board of Directors, and the Executive has personally executed this Agreement,
all as of the day and year first written above.
ATTEST: XXXXXX UNITED BANCORP AND
XXXXXX UNITED BANK
By:_____________________________ By: ____________________________
X. Xxxx Van Borkulo-Xxxxx, Esq. Xxxxxxx X. Xxxxxxx,
Corporate Secretary Chairman, President and
Chief Executive Officer
WITNESS:
-------------------------------- --------------------------------
Xxxxxxx Xxxx
