EXHIBIT 10.14
CHANGE OF CONTROL AGREEMENT
THIS AGREEMENT, made as of the 17th day of April, 2003, by and between
CHEROKEE BANK, N.A. (hereinafter referred to as "Bank") and XXXX X. XXXXXX
(hereinafter referred to as "Employee"), establishes a severance arrangement
between the parties in the event of a change of control of Bank.
WITNESSETH:
WHEREAS, Employee is currently serving as the Senior Lending Officer of
Cherokee Bank, N.A. and
WHEREAS, Bank desires that Employee continue to serve as the Senior Lending
Officer of the Bank by providing Employee a measure of security; and
WHEREAS, Bank wants to continue to have the benefits of Employee's full
time and attention to the affairs of the Bank without diversion due to concerns
about a possible change of control;
NOW, THEREFORE, in consideration of ONE DOLLAR and other good and valuable
consideration, receipt of which is hereby acknowledged, Bank and Employee agree
as follows:
1. PAYMENT OF SEVERANCE AMOUNT. If the Employee's employment by the Bank
or any subsidiary or successor of the Bank shall be subject to an
Involuntary Termination within the Covered Period, then the Bank shall
pay to the Employee an amount equal to the Severance Amount, payable
within 15 days after the Termination Date. In addition, Employee will
immediately be entitled to payment of the Severance Amount and the
other benefits hereunder if, following a Change of Control, any
successor to Bank refuses to acknowledge and accept the obligations of
Bank hereunder either directly or by operation of law. If for any
reason or no reason, the Bank takes the position that some or all of
the benefits provided hereunder are not due and owing to Employee or
that it will not pay Employee any or all of the benefits provided
hereunder, Employee may, at his discretion, submit the resolution of
such dispute to arbitration as provided in Paragraph 5 below by
notifying Bank in writing of his intent to do so.
2. DEFINITIONS. All the terms defined in this Paragraph 2 shall have the
meanings given below throughout this Agreement.
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(a) An "AFFILIATE" shall mean any entity, which owns or controls, is
owned by or is under common ownership or control with, the Bank.
(b) "BASE ANNUAL SALARY" shall, as determined on the Termination
Date, be equal to the greater of:
i. the Employee's annual salary excluding bonuses and special
incentive payments on the date of the earliest Change of
Control to occur during the Covered Period; or
ii. the Employee's annual salary excluding bonuses and special
incentive payments on the Termination Date.
(c) "CHANGE IN DUTIES" shall mean any one or more of the following:
i. a significant change in the nature or scope of the
Employee's authorities or duties from those applicable to
him immediately prior to the date on which a Change of
Control occurs;
ii. a reduction in the Employee's Base Annual Salary from that
provided to him immediately prior to the date on which a
Change of Control occurs;
iii. any diminution in the Employee's eligibility to participate
or level of participation in bonus, stock option, incentive
award and other compensation plans which provide
opportunities to receive compensation, from the greater of:
- the opportunities provided by the Bank (including its
subsidiaries) for executives with comparable duties: or
- the opportunities under any such plans under which he
was participating immediately prior to the date on
which a Change of Control occurs;
iv. a diminution in employee benefits (including but not limited
to medical, dental, life insurance and long-term disability
plans) and perquisites applicable to Employee, from the
greater of:
- the employee benefits and perquisites provided by the
Bank (including its subsidiaries) to executives with
comparable duties; or
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- the employee benefits and perquisites to which he was
entitled immediately prior to the date on which a
Change in Control occurs;
v. a change in the location of the Employee's principal place
of employment by the Bank (including its subsidiaries) by
more than 50 miles from the location where he was
principally employed immediately prior to the date on which
a Change of Control occurs to which Employee has not agreed;
vi. any reduction in the Employee's title with Bank;
vii. if Employee, because of any change in circumstances
resulting from a Change of Control, is adversely affected
with respect to his ability to exercise the authorities,
powers, functions or duties attached to his position
immediately prior to the date on which a Change of Control
occurs.
(d) A "CHANGE OF CONTROL" shall be deemed to have occurred if:
i. any "person," including a "group" as determined in
accordance with section 13 (d) (3) of the Securities
Exchange Act of 1934 (the "Exchange Act") (other than the
Bank, any subsidiary of the Bank, or any employee benefit
plan, as defined in ERISA, of any of the foregoing) is or
becomes the beneficial owner, directly or indirectly, of
securities of the Bank representing 25% or more of the
combined voting power of the Bank's then outstanding
securities;
ii. as a result of, or in connection with, any tender offer or
exchange offer, merger or other business combination, sale
of assets or contested election, or any combination of the
foregoing transactions (a "Transaction"), the persons who
were directors of the Bank before the Transaction shall
cease to constitute a majority of the Board of Directors of
the Bank or any successor to the Bank;
iii. the Bank is merged or consolidated with another corporation
and as a result of the merger or consolidation less than 75%
of the outstanding voting securities of the surviving or
resulting corporation shall then be owned in the aggregate
by the former shareholders of the Bank, other than (x)
affiliates within the meaning of the Exchange Act or (y) any
party to the merger or consolidation;
iv. a tender offer or exchange offer is made and consummated for
the ownership of securities of the
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Bank representing 50% or more of the combined voting power
of the Bank's then outstanding voting securities; or
v. the Bank transfers substantially all of its assets to
another corporation, which is not a wholly owned subsidiary
of Bank.
(e) "COVERED PERIOD" for the Employee shall mean one year following
the occurrence of any Change of Control, including a Change of
Control following another/other Change(s) of Control.
(f) "INVOLUNTARY TERMINATION" shall mean any termination which:
i. does not result from a resignation by the Employee (other
than a resignation pursuant to clause (ii) of this
subparagraph (f)); or
ii. results from a resignation following any Change in Duties;
provided, however, the term "Involuntary Termination" shall
not include:
- a Termination for Cause, or
- any termination as a result of death, disability,
or normal retirement pursuant to a retirement plan
to which the Employee was subject prior to any
Change in Control.
(g) "SEVERANCE AMOUNT" is equal to one hundred percent (100%) of the
Employee's Base Annual Salary, plus an amount equal to the
average of the annual amounts Employee was awarded during the
preceding three years under the Bank's Senior Management
Incentive Compensation Plan.
(h) "TERMINATION FOR CAUSE" shall mean only a termination as a result
of fraud, gross negligence, gross dereliction of duties,
misappropriation of or intentional material damage to the
property or business of the Bank (including its subsidiaries), or
a commission of a felony by the Employee. In the event that the
Bank takes the position that there is a Termination for Cause,
the Bank shall so notify the Employee in writing at the
Termination Date and Employee may, at his discretion, submit the
determination of such matter to arbitration by notification to
Bank that he elects his rights pursuant to Paragraph 5 below
within thirty (30) days after the receipt of such notification.
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(i) "VOTING SECURITIES" shall mean any securities, which ordinarily
possess the power to vote in the election of directors without
the happening of any pre-condition or contingency.
3. OTHER EMPLOYEE BENEFITS. If the Employee's employment by the Bank or
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any subsidiary or successor of the Bank shall be subject to an
Involuntary Termination within the Covered Period, then the following
provisions shall also apply:
(a) MEDICAL DENTAL, LIFE INSURANCE AND LONG-TERM DISABILITY BENEFITS.
To the extent that the Employee or any of the Employee's
dependents may be covered under the terms of any medical, dental,
life insurance or long-term disability plans of the Bank (or any
subsidiary) for active employees immediately prior to the
termination, the Bank will provide the Employee and those
dependents with equivalent coverages for twenty-four (24) months
from the termination. The coverages may be procured directly by
the Bank (or any subsidiary, if appropriate) apart from, and
outside of the terms of the plans themselves; provided that the
Employee and the Employee's dependents comply with all of the
conditions of the medical, dental, life insurance or long-term
disability plans. In consideration for these benefits, the
Employee must make contributions equal to those required from
time to time from Executive Officers of Bank (or its
subsidiaries) for equivalent coverages under the medical, dental,
life insurance, or long-term disability plans. Bank shall not be
entitled to amend or modify the benefits for Employee or any of
his dependents or any of the terms or conditions thereof without
the prior written consent of Employee. The foregoing health
benefits are not intended to be a substitute for any benefits
required under COBRA. Notwithstanding the foregoing, Employee's
rights to the foregoing benefits shall terminate as to any
benefit on substantially similar terms, without limitations or
exclusions for pre-existing conditions or similar limitations,
through a program of a subsequent employer.
(b) PROFIT-SHARING PLANS. An amount equal to the amount of the
Employee's account balance which is not vested under any
profit-sharing plans (including, without limitation, plans with
401(k) arrangements) maintained by Bank immediately prior to the
termination of Employee shall be paid by Bank to Employee within
15 days after the Termination Date. Such amount shall be repaid
by Employee to Bank, without interest, in the event
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that the profit-sharing plan(s) is/are terminated and Employee
receives distribution of his fully vested account from a
terminated plan. In addition, at each of the two consecutive plan
year ends the first of which coincides with or next follows the
Termination Date, Bank shall pay to Employee (within 15 days
after the end of the plan year) the amounts which employee would
have been allocated under the profit-sharing plans from
contributions (including, without limitation, matching
contributions under any 401(k) plan or arrangement) made by the
Bank for such plan years had Employee not been terminated, had he
continued to earn the Base Annual Salary, and had he elected to
make employee deferrals to any 401(k) plan at the level such
deferrals were made by Employee immediately prior to his
termination. In addition, if the Employee has, or should have, an
Excess Benefit Account under the Supplemental Executive
Retirement Program or similar account under any other deferred
compensation plan which is designed to supplement the Bank's 401
(k) plan, the entire account, including any nonvested portion,
shall be paid by Bank to Employee within 15 days after the
Termination Date. If, at the two consecutive plan year ends of
the Excess Plan (or other deferred compensation plan, as
applicable) the first of which coincides with or next follows the
Termination Date, Employee's Excess Benefit Account, or similar
account under any other deferred compensation plan would have
been credited with amounts (based on Employee's Base Salary
Amount and employee deferrals to any 401 (k) and other deferred
compensation plans at the level such deferrals were made by
Employee immediately prior to his termination) if Employee had
not been terminated, then Bank shall pay to Employee said amounts
within 15 days after the end of each respective plan year. The
Excess Plan shall be deemed amended to reflect the above
provisions as applicable to Employee and the provisions shall
also apply to any deferred compensation plan, which is
subsequently adopted by Bank under which Employee participates.
(c) STOCK PLANS. Employee shall receive full vesting and all
restrictions against Employee shall lapse with respect to and
under any stock plans maintained by Bank immediately prior to the
Termination Date. Employee shall have six months following the
Termination Date in which to exercise the rights granted below.
The six-month exercise period shall apply notwithstanding any
shorter exercise period, which may be provided for under the
stock option agreement in the case of Employee's termination of
employment. To the extent that the
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provision set forth in the previous sentence conflicts with
Employee's stock option agreement, the stock option agreement is
deemed amended and the provision in the previous sentence shall
control. Provided, however, the exercise period shall in no event
be extended beyond the date on which the option would expire
under the stock option agreement if Employee had not been
Terminated. During the six-month period (or shorter period if the
options would expire within such shorter period under the stock
option agreement if Employee had not been terminated) following
the Termination Date, the Employee shall be entitled to elect one
(but not more than one) of the following alternatives:
1) To exercise any stock options not exercised prior
to the Termination Date;
2) To make a written demand for payment by Bank of an
amount equal to the difference between the value
of the stock which is subject to the options and
the exercise price for the stock subject to said
options. For this purpose, the "value" of the
stock subject to the options shall be the greater
of (i) the fair market value of the stock on the
date Employee demands payment hereunder, or (ii)
the highest fair market value of the stock on the
date any Change of Control occurred, or (iii) the
highest consideration (whether in cash or in kind)
paid in connection with any Change of Control
event to any shareholder of Bank for such
shareholder's shares of stock in Bank by the
"person" or "group," as determined in accordance
with Section 13(d) (3) of the Exchange Act, which
attained control pursuant to said Change of
Control event, Bank shall make payment of the
appropriate amount, as determined above, within 15
days after Employee makes the written demand.
(d) MISCELLANEOUS BENEFITS. Employee may continue using any
Bank-owned automobile and any Bank-provided country club
privileges through the end of the month in which the Termination
date occurs.
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(e) OTHER EMPLOYEE BENEFITS. The benefits hereunder shall not be
affected by or reduced because of any other benefits (including,
but not limited to, a severance pay plan which is independent of
a Change of Control) to which Employee may be entitled by reason
of his continuing employment with Bank or the termination of his
employment with Bank, and no other such benefit by reason of such
employment shall be affected or reduced because of the benefits
bestowed by this Agreement; provided, however, that the foregoing
will not be interpreted to require duplicative medical benefits.
4. GOLDEN PARACHUTE PAYMENT. It is the intention of the parties that the
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Severance Amount payments and other payments under this Agreement are
reasonable compensation for Employee's service to Bank and its
subsidiaries and shall not constitute "excess parachute payments"
within the meaning of section 280G of the Internal Revenue Code of
1986, as amended, and any regulations thereunder. If the independent
accountants active as auditors for the Bank on the date of a Change of
Control (or another accounting firm designated by them) determine that
the Severance Amount payments or other payments under this Agreement
constitute "excess parachute payments" (without taking into account
any amounts in excess of 299 percent (299%) of the "base amount," as
defined in Section 280G(b) (3) which might otherwise be "reasonable
compensation" within the meaning of section 280G (b) (4)), then the
payments under this Agreement shall, in lieu of the payments otherwise
due, be increased to the sum of (a) the base amount, as defined in
Section 280G (b) (3) plus (b) an amount equal to the quotient of (i)
the "excess parachute payment," as defined in Section 280G (b),
divided by (ii) one (1) minus the rate of tax (expressed as a decimal)
imposed under Code Section 4999. The purpose of the preceding sentence
is that payments hereunder are "grossed up" so that Employee will
receive all amounts due under this Agreement without diminution by
reason of taxes imposed under Section 4999.
5. ARBITRATION AND LITIGATION.
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(a) Arbitration is not required of Employee to resolve any dispute
with Bank hereunder, but is merely an alternative to resolve the
dispute available to Employee if he elects to use it. Bank shall
have no right to avail itself of arbitration unless Employee
agrees to arbitration. All arbitrations pursuant to this
Agreement
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shall be determined in accordance with the rules of the American
Arbitration Association then in effect, by a single arbitrator if
the parties shall agree upon one, or by three arbitrators, one
appointed by each party, and a third arbitrator appointed by the
two arbitrators selected by the parties, all arbitrators from a
panel proposed by the American Arbitration Association. If any
party shall fail to appoint an arbitrator within thirty (30) days
after it is notified to do so, then the arbitration shall be
accomplished by a single arbitrator. Unless otherwise agreed by
the parties hereto, all arbitration proceedings shall be held in
Canton, Georgia. Each party agrees to comply with any award
rendered in such proceeding. The decision of the arbitrator (s)
shall be tendered within sixty (60) days after final submission
of the parties in writing or any hearing before the arbitrators
and shall include their individual votes. If Employee is entitled
to any award pursuant to the determination reached in the
arbitration proceeding, he shall be entitled to payment by Bank
of all attorney's fees, costs and other out-of-pocket expenses
incurred in connection with arbitration.
(b) In the event that any dispute hereunder is resolved through
litigation, and Employee's position in such litigation is
sustained to any extent by the court, then Bank agrees that it
shall pay all of Employee's attorney's fees, court costs and
other out-of-pocket expenses relating to litigation.
6. NOTICES. Notices and all other communications under this Agreement
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shall be in writing and shall be deemed given when personally
delivered or mailed by United States registered or certified mail,
return receipt requested, postage prepaid, address as follows:
If to the Bank to:
Cherokee Bank, N.A.
X X Xxx 0000
Xxxxxx, XX 00000
If to the Employee to:
Xxxx X. Xxxxxx
0000 XxxxxxXxxx Xxxxxx
Xxxxxx, XX 00000
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or to such other address as either party may furnish to the other in
writing, except that notice of changes of address shall be effective
only upon receipt.
7. APPLICABLE LAW. This contract is entered into under, and shall be
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governed for all purposes by, the laws of the State of Georgia.
8. SEVERABILITY. If a court of competent jurisdiction determines that
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any provision of this Agreement is invalid or unenforceable, then the
invalidity or unenforceability of that provision shall not affect the
validity or enforceability of any other provision of this Agreement
and all other provisions shall remain in full force and effect.
9. WITHHOLDING OF TAXES; SET-OFF. Bank may withhold from any benefits
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payable under this agreement all federal, state, city and other taxes
as may be required pursuant to any law, governmental regulation or
ruling. The right of Employee to receive benefits under this
Agreement, however, shall be absolute and shall not be subject to any
set-off, counterclaim, recoupment, defense, duty to mitigate, or other
rights Bank may have against him or anyone else.
10. NOT AN EMPLOYMENT AGREEMENT; SUBSEQUENT EMPLOYMENT. Nothing in this
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Agreement shall give the Employee any rights (or impose any
obligations) to continued employment by the Bank or any subsidiary or
successor of the Bank, nor shall it give the Bank any rights (or
impose any obligations) for the continued performance of duties by the
Employee for the Bank or any subsidiary or successor of the Bank.
Employee's right to receive benefits under this Agreement shall not be
reduced by Employee's employment with any other employer after
terminating employment with the Bank. Any compensation for services
rendered or consulting fees earned after the date of termination shall
not diminish Employee's right to receive all amounts due hereunder.
11. NO ASSIGNMENT. The Employee's right to receive payments or benefits
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under this Agreement shall not be assignable or transferable, whether
by pledge, creation of a security interest or otherwise, other than a
transfer by will or by the laws of descent and distribution. In the
event of any attempted assignment or transfer contrary to this
paragraph the Bank shall have no liability to
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pay any amount so attempted to be assigned or transferred. This
Agreement will inure to the benefit of and be enforceable by the
Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees.
12. SUCCESSORS. This Agreement shall be binding upon and inure to the
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benefit of the Bank, its successors and assigns (including, without
limitation, any Bank into or with which the Bank may merge or
consolidate). The Bank agrees that it will not effect the sale or
other disposition of all or substantially all of its assets under
either (i) the person or entity acquiring the assets or a substantial
portion of the assets shall express assume by an instrument in writing
all duties and obligations of the Bank under this Agreement or (ii)
the Bank shall provide, through the establishment of a separate
reserve for the payment in full of all amounts which are or may
reasonably be expected to become payable to the Employee under this
Agreement.
13. EMPLOYEE'S INDEMNITY. Employee shall be entitled to the indemnity
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provided to officers of Bank immediately prior to the Change of
Control. Any changes to Bank's bylaws or otherwise which reduce any
indemnity granted to officers shall not affect the rights granted
hereunder. Bank shall not reduce any of Employee's indemnity benefits
without the prior written consent of the Employee. Any references to
Georgia law in the bylaws of Bank or other documents granting
indemnity to Employee shall be deemed to be references as of the date
of this Agreement, and any amendments to Georgia law, including a
revocation thereof, shall not reduce the indemnity benefits granted
hereunder.
14. COST OF ENFORCEMENT; INTEREST. Subject to the provisions of Paragraph
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5 above, in the event the Employee collects any part of the Severance
Amount or other benefits hereunder or otherwise enforces the terms of
this Agreement through a lawyer or lawyers, Bank will pay all costs of
such collection or enforcement, including reasonable legal fees
incurred by the Employee. In addition, Bank shall pay to Employee
interest on all or any part of the Severance Amount or other benefits
hereunder that is not paid when due at a rate equal to the Prime Rate
as announced by the _____________________ or its successors from time
to time.
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15. TERM. This agreement shall be effective as of the date first above
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written and shall remain in effect for a period of three years.
Notwithstanding anything herein to the contrary, in the event of a
Change of Control during the initial, or any subsequent, term of this
Agreement, this Agreement shall remain in effect until the later of
(a) the end of the term of the agreement or (b) the day after the last
day in the Covered Period. This Agreement, unless terminated as
provided below, shall be automatically renewed to add an additional
year after each year expires, so that the term is always three years,
without further action by the Employee or the Bank. This Agreement can
be terminated only by either party giving the other notice on or
before June 30 of the year of termination. If the agreement is
terminated under the preceding sentence, the term shall continue for
two years after the end of the year in which the notice of termination
was given. If notice of termination is given after June 30 of a year,
then the term of the Agreement shall continue for three years after
the end of the year in which the notice of termination was given.
IN WITNESS WHEREOF, the parties have caused this agreement to be executed
and delivered as of the day and year first above written.
CHEROKEE BANK, N.A.
By: /s/ Xxxxxx X. Xxxxxxx
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Its: Chairman
By: /s/ Xxxxxx X. Xxxxxxxx
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Its: President and CEO
EMPLOYEE:
/s/ Xxxx X. Xxxxxx
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XXXX X. XXXXXX
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