Form of Change of Control Agreement
Exhibit
10.1
Form
of Change of Control
Agreement
Date
________________
Dear
_____________:
Vineyard
Bank (the "Bank") considers it essential to its best interests, the best
interests of its sole shareholder, Vineyard National Bancorp (the “Company”),
and the best interests of the Company’s shareholders, to xxxxxx the continuous
employment of key management personnel. In this connection, the Bank recognizes
that, as is the case with many businesses, the possibility of a change in
control may exist and that such possibility and the uncertainty and questions
which it may raise among management, may result in the departure or distraction
of management personnel to the detriment of the Bank, the Company and their
respective shareholders.
The
Board
of Directors of the Bank has determined that appropriate steps should be
taken
to reinforce and encourage the continued attention and dedication of members
of
the Bank's executive management, including yourself, to their assigned duties
without distraction in the face of potentially disturbing circumstances arising
from the possibility of a change in control.
In
order
to induce you to remain in the employ of the Bank, the Bank agrees that subject
to the terms and conditions set forth in this letter agreement ("Agreement"),
if
a Change in Control (within the meaning of Section 2) occurs and you are
employed by the Bank immediately prior thereto, the Bank will provide you
with
the Retention Benefit specified in Section 4.
1. Term
of
Agreement.
This
Agreement will begin on the date hereof and will continue in effect through
_____________. Beginning on ___________, and each January 1 thereafter, the
Agreement will automatically be extended for one additional year unless,
not
later than September 30 of the preceding year, the Bank gives you notice
that it
does not wish to extend this Agreement; provided, however, that any such
notice
that is given on or after a Change in Control will not be valid unless you
consent thereto in writing.
2. Change
in
Control.
For
purposes of this Agreement, a “Change in Control” shall mean:
(i)
The
consummation of a merger or consolidation of the Company with or into another
entity or any other corporate reorganization if more than 50% of the combined
voting power (which voting power shall be calculated by assuming the conversion
of all equity securities convertible (immediately or at some future time)
into
shares entitled to vote, but not assuming the exercise of a warrant or right
to
subscribe to or purchase those shares) of the continuing or Surviving Entity’s
securities outstanding immediately after such merger, consolidation or other
reorganization is owned, directly or indirectly, by persons who were not
shareholders of the Company immediately prior to such merger, consolidation
or
other reorganization; provided,
however,
that in
making the determination of ownership by the shareholders of the Company,
immediately after the reorganization, equity securities which persons own
immediately before the reorganization as shareholders of another party to
the
transaction shall be disregarded; or
(ii)
The
sale, transfer or other disposition of all or substantially all of the Company’s
assets.
(iii)
A
transaction will not constitute a Change in Control if its sole purpose is
to
change the state of the Company’s incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who
held
the Company’s securities immediately before such transaction.
3. Timing
of, and Conditions
to, Retention Payment Following Change in Control.
(i) If
you
are employed by the Bank immediately prior to a Change in Control, unless
you
have been Unreasonably Uncooperative (as hereinafter defined) you will be
entitled to receive the Retention Benefit on the earlier of (A) the
90th
day
following the Change in Control; or (B) as soon as practicable (but not more
than ten days) following the first occurrence on or after the Change in Control
of any of the following: (1) the termination of your employment by the Bank
(without regard to the reason of the termination of your employment), (2)
your
duties, title, responsibilities or compensation being meaningfully reduced
by
the Bank, or (3) your being required to perform your duties at a location
that
is more than 25 miles from their original location. In the event that you
have
been Unreasonably Uncooperative, you will forfeit your right to receive any
benefit hereunder. For purposes hereof you will be deemed to have been
“Unreasonably Uncooperative” if and only if the Bank’s Chief Executive Officer
immediately prior to the Change in Control, in his sole discretion, provides
you
and the Bank with written notice that he has made an affirmative determination
that you have been unreasonably uncooperative with the Bank during the period
immediately prior to and immediately following the Change in Control. In
making
such determination, the Bank’s Chief Executive Officer immediately prior to the
Change in Control will take into account all factors that he, in his sole
discretion, deems relevant, including, but not limited to, (i) your position,
duties and title prior to the Change in Control and (ii) the potential desire
of
the new beneficial owners of the Bank to replace some or all of the Bank’s
management team with other personnel and to have the old management team
reasonably assist them in the transition. The determination of the Bank’s Chief
Executive Officer immediately prior to the Change in Control with respect
thereto shall be binding, even though such determination may be somewhat
subjective.
2
4. Retention
Benefit.
The
“Retention Benefit” payable hereunder is a lump sum payment, payable by check,
in an amount equal to the sum of: (i) your base salary for a ____-month period;
(ii) the average of the two most recent annual incentive bonuses paid to
you
prior to the Change in Control; and (iii) the amount you would have to pay
for
COBRA continuation coverage under the Bank’s group health plans for a ___-month
period had your employment terminated immediately prior to the Change in
Control
and you elected COBRA continuation coverage at such time. For purposes of
clause
(i) of the preceding sentence, “base salary” means your base salary immediately
prior to the Change in Control, but disregarding any reduction of your base
salary that is made in anticipation of the Change in Control.
5. Accelerated
Vesting of
Restricted Shares and Stock Options.
Upon a
Change in Control, to the extent that it has not yet vested, any award to
you
under any of the Company’s Restricted Share Plans that has not previously
terminated and any stock option granted to you under the Company’s 1997
Incentive Stock Option Plan (or any other stock option plan adopted by the
Company) that has not previously terminated, shall fully and immediately
vest.
6. Parachute
Tax.
Notwithstanding anything in this Agreement to the contrary, the amount of
any
payment to be received by you pursuant to this Agreement (including the
accelerated vesting provided for in Section 5) will be reduced (but not below
zero) by the amount, if any, necessary to prevent any part of any payment
or
benefit received or to be received by the you in connection with a Change
in
Control, (whether payable or provided pursuant to this Agreement (but without
regard to this Section 6) or any other agreement, contract, plan or arrangement
with the Bank, any person whose action results in such Change in Control
or any
member of an “affiliated group” (as defined in Section 280G(d)(5) of the
Internal Revenue Code of 1986, as amended (the “Code”)) which includes the Bank)
(such foregoing payments or benefits referred to collectively as the “Total
Payments”), from being treated as an “excess parachute payment” within the
meaning of Section 280G(b)(I) of the Code, but only if and to the extent
such
reduction will also result in, after taking into account all applicable state
and Federal taxes (computed at the highest applicable marginal rate) including
any taxes payable pursuant to Section 4999 of the Code, a greater after-tax
benefit to you than the after-tax benefit to you of the Total Payments computed
without regard to any such reduction. For purposes of the foregoing, (i)
no
portion of the Total Payments will be taken into account which in the opinion
of
nationally-recognized tax counsel selected by you (“Tax Counsel”) does not
constitute a “parachute payment” within the meaning of Section 280G(b)(2)
of the Code; (ii) any reduction in payments pursuant to this Agreement will
be
computed by taking into account, in accordance with Section 280G(b)(4) of
the
Code, that portion of the Total Payments which is reasonable compensation,
within the meaning of Section 280G(b)(4) of the Code, in the opinion of Tax
Counsel; (iii) the value of any non-cash benefits or of any deferred or
accelerated payments or benefits included in the Total Payments will be
determined by Tax Counsel in accordance with the principles of Section
280G(d)(3) and (4) of the Code and the Treasury Regulations thereunder; and
(iv)
in the event of any uncertainty as to whether a reduction in Total Payments
to
the Executive is required pursuant hereto, the Bank will initially make all
payments otherwise required to be paid to you hereunder, and any amounts
so paid
which are ultimately determined not to have been payable hereunder either
(x)
upon our mutual agreement, or (y) upon Tax Counsel furnishing you with its
written opinion setting forth the amount of such payments not to have been
so
payable under this Section 6, or (z) in the event a portion of the Total
Payments shall be determined by a court or an Internal Revenue Service
proceeding to have otherwise been an “excess parachute payment,” the amount so
determined in (x), (y) or (z) shall be repaid by you to the Bank within ten
(10)
business days after the time of such mutual agreement, such opinion is so
furnished to you, or of such determination, as applicable. All fees and expenses
of any Tax Counsel or accounting firm selected under this Section 6 shall
be
borne solely by the Bank.
3
7. Withholding
Taxes.
The
Bank may withhold from all payments due you hereunder all taxes that the
Bank is
required to withhold.
8. No
Mitigation.
You
will not be required to mitigate the amount of any payment provided for herein
by seeking other employment or otherwise, nor will the amount of any payment
or
benefit provided for herein be reduced by any compensation earned by you
as the
result of employment by another employer.
9. No
Employment
Contract.
This
Agreement does not constitute a contract of employment, it does not impose
on
the Bank any obligation to retain you as an employee, and it does not prevent
you from terminating your employment. You understand and acknowledge that
you
are an employee at will and that either you or the Bank may terminate our
employment relationship at any time, for any reason, or for no
reason.
10. Assignment.
Your
obligations may not be delegated and, except with respect to the designation
of
beneficiaries in connection with benefits payable to you hereunder, you may
not,
without the Bank’s written consent thereto, assign, transfer, convey, pledge,
encumber, hypothecate or otherwise dispose of this Agreement or any interest
herein. Any such attempted delegation or disposition shall be null and void
and
without effect. This Agreement and all of the Bank’s rights and obligations
hereunder may be assigned or transferred by the Bank to and shall be assumed
by
and be binding upon any successor to the Bank. The term “successor” means, with
respect to the Bank or any of its subsidiaries, any corporation or other
business entity which, by merger, consolidation, purchase of the assets or
otherwise acquires all or a material part of the assets of the
Bank.
11. Death.
This
Agreement will inure to the benefit of and be enforceable by your personal
or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. Unless otherwise provided herein, if
you
should die while any amount would still be payable to you hereunder, all
such
amounts will be paid in accordance with the terms of this Agreement to your
devisee, legatee or other designee or, if there is no such designee, to your
estate.
4
12. Notice.
For the
purpose of this Agreement, notices and all other communications provided
for in
the Agreement will be in writing and will be deemed to have been duly given
when
delivered or mailed by United States registered mail, return receipt requested,
postage prepaid, addressed to the respective addresses set forth on the first
page of this Agreement, provided that all notice to the Bank must be directed
to
the attention of the President, or to such other address as either party
may
have furnished to the other in writing in accordance herewith, except that
notice of change of address will be effective only upon receipt.
13. Final
Expression.
This
Agreement is intended to be a final expression of our agreement with respect
to
the subject matter hereof and is intended as a complete and exclusive statement
of the terms and conditions thereof and supersedes and replaces all prior
negotiations and agreements between us, whether written or oral, with respect
to
the subject matter hereof.
14. Validity.
The
invalidity or unenforceability of any provision of this Agreement will not
affect the validity or enforceability of any other provision of this Agreement,
which will remain in full force and effect.
15. Amendment
and
Waiver.
No
provision of this Agreement may be modified, waived or discharged unless
such
waiver, modification or discharge is agreed to in writing and signed by you
and
the President of the Bank. No waiver by either party hereto at any time of
any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party will be deemed
a
waiver of similar or dissimilar provisions or conditions at the same or at
any
prior or subsequent time.
16. Governing
Law.
This
Agreement will be governed by and construed under the laws of the State of
California, applicable to contracts to be wholly performed in such State,
without regard to the conflict of laws principles thereof.
17. Arbitration.
Any
dispute or controversy arising under or in connection with this Agreement
will
be settled exclusively by arbitration in California, in accordance with the
rules of the American Arbitration Association then in effect. Judgment may
be
entered on the arbitrator's award in any court having jurisdiction; provided,
however, that you will be entitled to seek specific performance of your right
to
be paid during the pendency of any dispute or controversy arising under or
in
connection with this Agreement.
18. Counterparts.
This
Agreement may be executed in several counterparts, each of which will be
deemed
to be an original but all of which together will constitute one and the same
instrument.
If
this
letter sets forth our agreement on the subject matter hereof, kindly sign
and
return to the Bank the enclosed copy of this letter which will then constitute
our agreement on this subject.
5
Sincerely,
By: ____________________________
Name:
Xxxxxx Xxxxxxx
Title: President
and Chief Executive Officer
Section
5
Consented and Agreed to by
By:_______________________
Name:
Xxxxxx Xxxxxxx
Title: President
and Chief Executive Officer
Agreed
to
this ____ day
______, 20__.
______________________ _____________________________
EMPLOYEE
NAME Signature
Date
6
