Exhibit 10.2
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement") made and entered into
as of the ____ day of _______ , 1997, by and among Provident Bankshares
Corporation, a Maryland corporation (the "Company"), Provident Bank of Maryland,
a Maryland commercial bank and a wholly owned subsidiary of the Company (the
"Bank") and Xxxx X. Xxx (the "Executive").
WHEREAS, the Company and First Citizens Financial Corp., a
Delaware corporation ("Seller"), have entered into an Agreement and Plan of
Merger (the "Merger Agreement"), dated as of March 10, 1997, pursuant to which,
among other things, Seller will be merged with and into the Company;
WHEREAS, the Executive is currently serving as President of
Seller and Citizens Savings Bank, FSB, and the Boards of Directors of the
Company and the Bank desire to secure the employment of the Executive in
accordance herewith;
WHEREAS, the Executive is willing to commit himself to be
employed by the Bank on the terms and conditions herein set forth and thus to
forego opportunities elsewhere; and
WHEREAS, the parties desire to enter into this Agreement as of
the Effective Time, setting forth the terms and conditions for the employment
relationship of the Executive with the Bank;
NOW, THEREFORE, in consideration of the mutual premises and
the respective covenants and agreements of the parties herein contained, the
parties hereto agree as follows:
1. Employment and Term.
(a) Employment. The Bank agrees to employ the Executive, and
the Executive agrees to be employed by the
Bank, in accordance with the terms and provisions of this Agreement.
(b) Term. The term of this Agreement (the "Term") shall
commence on the date (the "Effective Date") on which the Effective Time occurs
and shall continue until the second anniversary of the Effective Date.
2. Duties and Powers of Executive.
(a) Position. For the period during which the Executive
provides services to the Bank (the "Employment Period"), the Executive shall
serve as the Group Manager of the Bank for Xxxxxxxxxx County, Maryland, with
such authority, duties and responsibilities commensurate with his position as
may reasonably be assigned to him by the Bank's Chief Executive Officer and
Board of Directors. During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive shall
devote substantial attention and time during normal business hours to the
business and affairs of the Bank and shall use his reasonable best efforts to
carry out his responsibilities faithfully and efficiently. It shall not be
considered a violation of the foregoing for the Executive to serve on corporate,
industry, civic or charitable boards or committees, as long as such activities
do not materially interfere with the performance of his responsibilities with
the Bank in accordance with this Agreement.
(b) Board Membership. The Executive shall be a member of the
Boards of Directors of the Company and the Bank from and after the first day of,
and continuing throughout, the Term, and each such Board of Directors shall
propose the Executive for reelection thereto throughout the Term.
(c) Location. The Executive's services shall be performed
primarily at Gaithersburg, Maryland (with appropriate office space and
secretarial services commensurate with his title and position), except for such
travel obligations as the parties hereto shall mutually agree upon.
2
3. Compensation.
The Executive shall receive the following compensation for his
services hereunder to the Bank:
(a) Salary. During the Employment Period, the Executive's
annual base salary ("Annual Base Salary") shall be not less than $250,000,
payable in accordance with the Bank's general payroll practices as in effect
from time to time. The Board may from time to time increase the Annual Base
Salary as the Board deems necessary or desirable, including, without limitation,
adjustments to reflect increases in the cost of living. The Annual Base Salary
shall not be reduced after any such increase. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation of the Bank under this
Agreement.
(b) Incentive Compensation. During the Employment Period, the
Executive shall participate in the Company's and the Bank's short-term and
long-term incentive compensation plans, including equity-based compensation
plans, on a basis no less favorable than that of other senior executive officers
of the Bank (the "Senior Officer Group").
(c) Supplemental Retirement Plan. The Bank agrees that, as of
the Effective Time, the Executive's right to the benefit (the "Accrued Benefit")
to which he would have been entitled under the Supplemental Retirement
Agreement, dated March 6, 1996, between the Executive and Citizens Savings Bank,
FSB (the "SERP"), had he terminated his employment at age 55 for Good Reason, as
defined in the SERP (determined without regard to Section 3 of the SERP), shall
become immediately and fully vested and nonforfeitable. The Bank agrees that it
will pay to the Executive the Accrued Benefit (or its equivalent) upon his
termination of employment with the Bank for any reason, commencing upon the
later of the date of such termination or the Executive's attainment of the age
of 65. The aggregate amount of the Accrued Benefit is set forth in Exhibit A
hereto.*
----------------
* Exhibit A to be prepared at the time this Agreement is entered into.
3
(d) Other Plans. During the Employment Period, the Executive
shall be eligible to participate in all other savings, retirement, welfare
(including without limitation medical and life insurance) and fringe benefit
plans, practices, policies and programs applicable generally to employees of the
Bank or the Senior Officer Group, and, in addition, the maintenance of those
fringe benefits to which the Executive was entitled immediately prior to the
date of the Merger Agreement (consisting principally of a membership at the
Congressional Country Club and reimbursement of related expenses, and the use of
a car and reimbursement of car-related expenses). In addition to appropriate
office space and secretarial support in Gaithersburg as described in Section
2(c), the Bank shall also provide the Executive with office space and
secretarial services, commensurate with his title and position, at the Bank's
headquarters in Baltimore, Maryland.
4. Expenses. The Bank shall reimburse the Executive for all reasonable
expenses, including those for travel and entertainment, properly incurred by him
in the performance of his duties hereunder in accordance with policies
established from time to time by the Board of Directors of the Bank (the
"Board").
5. Termination of Employment.
(a) Death; Disability. The Executive's employment shall
terminate automatically upon his death or Disability during the Employment
Period. For purposes of this Agreement, "Disability" shall be deemed to occur
if, as a result of the Executive's incapacity due to physical or mental illness,
the Executive shall have been absent from the full-time performance of his
duties with the Bank for a period of six (6) consecutive months, the Bank shall
have given the Executive a Notice of Termination (as defined in paragraph (e) of
this Section 5) for Disability and, within thirty (30) days after such Notice of
Termination is given, the Executive shall not have returned to the full-time
performance of his duties.
(b) By the Bank for Cause. The Bank may terminate the
Executive's employment during the Employment Period for Cause. For purposes of
this Agreement, "Cause" shall mean (i) the willful and continued failure by the
Executive substantially to perform his duties with
4
the Bank (other than any such failure resulting from his incapacity due to
physical or mental illness or any such actual or anticipated failure after the
issuance of a Notice of Termination for Good Reason by the Executive pursuant to
paragraph (e) of this Section 5) after a written demand for substantial
performance is delivered to the Executive by the Board, which demand
specifically identifies the manner in which the Board believes that the
Executive has not substantially performed his duties, or (ii) the willful
engaging by the Executive in conduct that is demonstrably and materially
injurious to the Bank or its subsidiaries, monetarily or otherwise. For purposes
of clauses (i) and (ii) of this definition, no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done, or omitted to be done,
by the Executive without reasonable belief that his act, or failure to act, was
in the best interest of the Bank.
(c) By the Bank without Cause or the Executive without Good
Reason. Notwithstanding any other provision of this Agreement, the Bank may
terminate the Executive's employment other than for Cause and the Executive may
terminate his employment other than for Good Reason (as defined in paragraph (d)
of this Section 5).
(d) By the Executive for Good Reason. The Executive may
terminate his employment during the Employment Period for Good Reason. For
purposes of this Agreement, "Good Reason" shall mean the occurrence, without the
written consent of the Executive, of an event constituting a material breach of
this Agreement by the Bank that has not been fully cured within ten (10) days
after written notice thereof has been given by the Executive to the Bank.
(e) Notice of Termination. Any termination by the Bank or by
the Executive shall be communicated by Notice of Termination to the other party
hereto given in accordance with Section 10(b) of this Agreement. For purposes of
this Agreement, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement relied upon, (ii)
to the extent applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated, and (iii) if the Date of
Termination (as defined in paragraph (f) of this Section 5) is
5
other than the date of receipt of such notice, specifies the termination date
(which date shall be not more than thirty (30) days after the giving of such
notice). Further, a Notice of Termination for Cause is required to include a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the Board at a meeting of the
Board which was called and held for the purpose of considering such termination
(after reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel, to be heard before the Board) finding
that, in the good faith opinion of the Board, the Executive was guilty of
conduct set forth in clause (i) or (ii) of the definition of Cause herein, and
specifying the particulars thereof in detail. The failure by the Executive or
the Bank to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not waive any right
of the Executive or the Bank hereunder or preclude the Executive or the Bank
from asserting such fact or circumstance in enforcing the Executive's or the
Bank's rights hereunder.
(f) Date of Termination. "Date of Termination" means (i) if
the Executive's employment is terminated by the Bank for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Bank other than for Cause, the date on which the
Bank notifies the Executive of such termination, (iii) if the Executive's
employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to the
full-time performance of his duties during such thirty (30) day period), and
(iv) if the Executive's employment is terminated by reason of death, the date of
death.
6. Obligations of the Bank Upon Termination.
(a) Termination for Good Reason or Other Than for Cause. If
the Executive shall terminate his employment for Good Reason or the Bank shall
terminate the Executive's employment other than for Cause, death or Disability,
the Executive shall be entitled to the following benefits:
6
(i) the Bank shall pay to the Executive a lump sum
amount in cash equal to the sum of (A) the Executive's Annual Base
Salary through the Date of Termination to the extent not theretofore
paid, (B) an amount equal to the short-term incentive compensation
target benefit under the short-term incentive plan described in Section
3(b) of this Agreement for the fiscal year that includes the Date of
Termination multiplied by a fraction the numerator of which shall be
the number of days from the beginning of such fiscal year to and
including the Date of Termination and the denominator of which shall be
365, and (C) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and any
accrued vacation pay, in each case to the extent not theretofore paid.
(The amounts specified in clauses (A), (B) and (C) shall be hereinafter
referred to as the "Accrued Obligation"). The amounts specified in this
Section 6(a)(i) shall be paid within thirty (30) days after the Date of
Termination; and
(ii) in lieu of any further salary payments to the
Executive for periods subsequent to the Date of Termination and in lieu
of any severance benefit otherwise payable to the Executive, the Bank
shall continue to pay the Executive for the remainder of the Term (1)
the Annual Base Salary as in effect immediately prior to the Date of
Termination, in accordance with the Bank's general payroll practices,
and (2) for each full twelve-month period remaining in the Term, the
highest annual bonus earned by the Executive pursuant to any annual
bonus or incentive plan maintained by the Bank in respect of any of the
three fiscal years of the Bank ending immediately prior to the fiscal
year in which occurs the Date of Termination, payable in accordance
with the Bank's practices with respect to the payment of bonuses; and
(iii) for the remainder of the Term and continuing
until the one year anniversary of the expiration of the Term, the Bank
shall arrange to provide the Executive and his depen-
7
dents life, disability, accident and health insurance benefits
substantially similar to those provided to the Executive and his
dependents immediately prior to the Date of Termination, at no greater
cost to the Executive than the cost to the Executive immediately prior
to the Date of Termination; PROVIDED, HOWEVER, that, unless the Bank
otherwise determines, such health insurance benefits shall be provided
through a third-party insurer. Benefits otherwise receivable by the
Executive pursuant to this Section 6(a)(iii) shall be reduced to the
extent benefits of the same type are made available to the Executive by
another employer following his termination of employment (and any such
benefits received by the Executive shall be reported to the Bank by the
Executive); and
(iv) for the remainder of the Term, the Bank shall
arrange to provide the Executive with continued participation (or
equivalent benefits) under the retirement plans in which the Executive
was participating as of the Date of Termination, except to the extent
such participation is prohibited by law, or to the extent such plan
constitutes a "qualified plan" under Section 401(a) of the Code.
(b) Termination for Other Reasons. If the Executive's
employment shall be terminated by reason of death or Disability, by the Bank for
Cause, or by the Executive other than for Good Reason, the Bank shall have no
further obligations to the Executive under this Agreement other than (i) the
obligation to pay to the Executive the Accrued Obligation and any postemployment
benefits to which the Executive is entitled under the terms of the Bank's
employee benefit plans and (ii) the obligation to provide the benefits set forth
in Section 6(a)(iii) for the period described therein.
(c) Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration, conducted
before a panel of three arbitrators sitting in a location selected by the
Executive within fifty (50) miles from the location of the Company in accordance
with the rules of the American
8
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
(d) Legal Fees. The Bank shall also pay to the Executive all
reasonable legal fees and expenses incurred by the Executive in disputing in
good faith any issue hereunder relating to the termination of the Executive's
employment, in seeking in good faith to obtain or enforce any benefit or right
provided by this Agreement or in connection with any tax audit or proceeding to
the extent attributable to the application of section 4999 of the Code to any
payment or benefit provided hereunder. Such payments shall be made within five
(5) business days after delivery of the Executive's written requests for payment
accompanied with such evidence of fees and expenses incurred as the Bank
reasonably may require.
(e) Payment. The amount described in Section 6(a)(ii)(A) shall
be paid to the Executive in a lump sum within five (5) days following the Date
of Termination; PROVIDED, HOWEVER, that, if the Executive so elects at least 90
days prior to the Date of Termination, such amount shall be paid, without regard
to the discount described in Section 6(a)(ii)(A), over the period prescribed by
the Executive in his election and, if so requested by the Executive, shall be
transferred by the Bank, in cash, within five (5) days following the Date of
Termination, to a grantor trust meeting the requirements of Section 670 of the
Code pursuant to a trust agreement reasonably acceptable to the Executive.
7. Full Settlement; Mitigation.
The Bank's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
subject to any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Bank may have against the Executive or others. In no event
shall the Executive be obligated to seek other employment or take any other
action by way of mitigation of the amounts (including amounts for damages for
breach) payable to the Executive under any of the provisions of this Agreement
and, except as provided in Section 6(a)(iii), such amounts shall not
9
be reduced whether or not the Executive obtains other employment.
8. Confidential Information.
The Executive shall hold in a fiduciary capacity for the
benefit of the Bank all secret, confidential information, knowledge or data
relating to the Bank or any of its affiliated companies and their respective
businesses which shall have been obtained by the Executive during his employment
by the Bank or any of their affiliated companies and that shall not have been or
now or hereafter have become public knowledge (other than by acts by the
Executive or representatives of the Executive in violation of this Agreement).
The Executive shall not, without the prior written consent of the Bank or as may
otherwise be required by law or legal process, communicate or divulge any such
information, knowledge or data to anyone other than the Bank and those
designated by it.
9. Successors.
(a) Assignment by Executive. This Agreement is personal to the
Executive and, without the prior written consent of the Company and the Bank,
shall not be assignable by the Executive otherwise than by will or the laws of
descent and distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
(b) Successors and Assigns of the Bank. This Agreement shall
inure to the benefit of and be binding upon the Company and the Bank, and their
successors and assigns.
(c) Assumption. The Company or the Bank, as the case may be,
shall require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company or the Bank to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Company or the Bank
would be required to perform it if no such succession had taken place. As used
in this Agreement, the "Company" or the "Bank" shall mean the Company or the
Bank as hereinbefore defined and any successor to its businesses and/or assets
as aforesaid that assumes and
10
agrees to perform this Agreement by operation of law, or otherwise.
10. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of Maryland, without reference to its
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended, modified, repealed, waived, extended or discharged except by an
agreement in writing signed by the party against whom enforcement of such
amendment, modification, repeal, waiver, extension or discharge is sought. No
person, other than pursuant to a resolution of the Board of Directors (or a
committee thereof) of the Company or the Bank, as the case may be, shall have
authority on behalf of the Company or the Bank to agree to amend, modify,
repeal, waive, extend or discharge any provision of this Agreement or anything
in reference thereof.
(b) Notices. All notices and other communications hereunder
shall be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return-receipt requested, postage pre-paid,
addressed, in the case of the Company or the Bank, to the Company' or the Bank's
headquarters and, in the case of the Executive, to the address on the signature
page of this Agreement or, in either case, to such other address as either party
shall have subsequently furnished to the other in writing. Notice and
communications shall be effective when actually received by the addressee.
(c) Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
(d) Taxes. The Bank may withhold from any amounts due and
payable under this Agreement such federal, state or local taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(e) No Waiver. The Executive's or the Bank's failure to
insist upon strict compliance with any provision hereof or any other provision
of this Agreement or
11
the failure to assert any right the Executive or the Bank may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 5(d) of this Agreement, or the
right of the Bank to terminate the Executive's employment for Cause pursuant to
Section 5(b) of this Agreement shall not be deemed to be a waiver of such
provision or right or any other provision or right of this Agreement.
(f) Entire Agreement; Survival. This Agreement and the Change
in Control Agreement contemplated by Section 6.7(e) of the Merger Agreement
(collectively, the "New Agreements") entered into as of the date hereof between
the Company and the Executive contain the entire agreement of the Executive, the
Company, the Bank or their respective predecessors or subsidiaries with respect
to the subject matter of the New Agreements, and all promises, representations,
understandings, arrangements and prior agreements are merged into, and
superseded by, the New Agreements. Any provision hereof which by its terms
applies in whole or part after a termination of the Executive's employment
hereunder shall survive such termination.
12
IN WITNESS WHEREOF, the Executive has executed this Agreement
and, pursuant to due authorization from their respective Boards of Directors,
the Company and the Bank have caused this Agreement to be executed, as of the
day and year first above written.
PROVIDENT BANKSHARES CORPORATION
--------------------------------
Name:
Title:
PROVIDENT BANK OF MARYLAND
--------------------------------
Name:
Title:
--------------------------------
Xxxx X. Xxx
Address:
13
