CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT (the "Agreement"), is made this 4TH day of
November, 1998, between FIRST WASHINGTON FINANCIAL CORP. ("COMPANY"), a banking
corporation organized under the laws of the State of New Jersey, with its
principal office at U.S. Xxxxx 0.00 & Xxxx Xxxxxx, Xxxxxxx, Xxx Xxxxxx 00000;
and C. XXXXXXX XXXXXXXXX (the "Executive").
BACKGROUND
WHEREAS, the Executive is employed by the Company;
WHEREAS, the Executive has worked diligently in his position in the
business of the Company;
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;
WHEREAS, if Company receives any proposal from a third person
concerning a possible business combination with, or acquisition of equities
securities of 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;
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 govern the Executive's termination benefits in
the event of a Change in Control of Company, as hereinafter defined.
NOW, THEREFORE, to assure 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 Company, and to induce the Executive to remain in the employ of
Company, and for other good and valuable consideration, 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 Company of Executive's employment shall mean (i) willful and
continued failure by the Executive to perform his duties for Company under this
Agreement after at least one warning in writing from the Company's Board of
Directors identifying specifically any such failure; (ii) the willful engaging
by the Executive in misconduct which causes material injury to 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) which is either a
felony or an indictable offense or in the reasonable opinion of the Board of
Directors is of such a nature that it should be cause for termination, 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 Company.
B. Change in Control. "Change in Control" shall mean the occurrence
of
(1) The acquisition of the beneficial ownership of at least 25 0
of Company's voting securities or all or substantially all of the assets of
Company by a single person or entity, or a group of affiliated persons or
entities acting in concert.
(2) The merger, consolidation or combination of Company with an
unaffiliated corporation in which the directors of Company 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.
(3) The transfer of all or substantially all of Company's
assets.
(4) The election to the Board of Directors of Company during any
consecutive three year period of a group of individuals constituting a majority
of the Board who were not serving as directors of Company immediately prior to
the consecutive three year period.
C. Time of Chancre in Control. For purposes of this Agreement, a
Change in Control of Company shall be deemed to occur on the earlier of:
(1) The first date on which a single person or entity, or a
group of affiliated persons or entities acting in concert, acquire the
beneficial ownership of 25% or more of Company's voting securities; or
(2) The date of election of such Board members as to constitute
a change in the majority of Board members during any consecutive three year
period; or
(3) The effective date of any merger, consolidation, combination
or sale of assets as defined in paragraph 1B above.
D. Contract Period. "Contract Period" shall mean the period
commencing the day immediately preceding a Change in Control and ending on the
earlier of (i) the third anniversary of the Change in Control, or (ii) the date
the Executive would attain age 65, or (iii) the death of the Executive.
E. Good Reason. When used with reference to a voluntary termination
by Executive of his employment with Company, "Good Reason" shall mean any of the
following, if taken without Executive's express written consent:
(1) The assignment to Executive of any duties inconsistent with,
or the reduction of powers or functions associated with, Executive's position,
title, duties, responsibilities and status with 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 offices) 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 merely from a merger of
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 and responsibilities
are accepted in writing by the Executive, in the sole discretion of the
Executive.
(2) A reduction by Company in Executive's annual base
compensation as in effect immediately prior to a Change in Control or the
failure to award Executive annual increases in accordance herewith;
(3) A failure by Company to continue any bonus plan in which
Executive participated immediately prior to the Change in Control or a failure
by 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;
(4) The Company's transfer of Executive to another geographic
location outside of New Jersey 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;
(5) The failure by Company to continue in effect any employee
benefit plan, program or arrangement (including, without limitation the
Company's 401(k) plan, the Company's Employee Stock Ownership 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
(except that Company may institute or continue plans, programs or arrangements
providing Executive with substantially similar benefits); the taking of any
action by 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 Company to
provide Executive with the number of paid vacation days to which Executive was
entitled immediately prior to such Change in Control;
(6) The failure of Company to obtain an assumption in writing of
the obligations of Company to perform this Agreement by an successor to Company
and to provide such assumption to the Executive prior to any Change in Control;
or
(7) Any purported termination of Executive's employment by
Company during the term of this Agreement which is not effected pursuant to all
of the requirements of this Agreement; and, of purposes of this Agreement, no
such purported termination shall be effective.
2. Employment. Company hereby agrees to employ the Executive, and the
Executive hereby accepts employment, during the Contract Period upon the terms
and conditions set forth herein.
3. Position. During the Contract Period, the Executive shall be
employed as a senior officer of Company or such other corporate or divisional
profit center as shall then be the principal successor to the business, assets
and properties of Company, with the same title and the same duties and
responsibilities as before the Change in Control. The Executive shall devote his
full time and attention to the business of 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 service on his part in the operation of such
investments.
4. Cash Compensation. Company shall pay to the Executive compensation
for his services during the Contract Period as follows:
A. Base Compensation. The base compensation shall be equal to the
annual compensation, including both salary and bonus, as were paid to or accrued
for the Executive in the 12 months immediately prior to the Change in Control.
The annual salary portion of base compensation shall be payable in installments
in accordance with Company's usual payroll method. The bonus shall be payable at
the time and in the manner which the Company paid such bonuses prior to the
Change in Control. Any increase in the Executive's annual compensation pursuant
to paragraph 4B below, or otherwise, shall automatically and permanently
increase the base compensation.
B. Annual Increase. The Board of Directors of Company during the
Contract Period shall review annually, or at more frequent intervals which the
Board determines is appropriate, the Executive's compensation and shall award
him additional compensation to reflect the impact of inflation, the Executive's
performance,. the performance of the Company and competitive compensation
levels, all as determined in the discretion of the Board of Directors.
Additional compensation may take any form including but not limited to increases
in the annual salary, incentive bonuses and/or bonuses not geared to
performance. However, in no event shall the percentage increase in annual
compensation be less than the annual percentage increase in the Consumer Price
Index for Urban Wage Earners and Clerical Workers (New York and Northern New
Jersey - All Items) during the preceding twelve months.
5. Expenses and Fringe Benefits. During the Contract Period, the
Executive shall be entitled to reimbursement for all business expenses incurred
by him with respect to the business of 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. If prior to the Change in Control, the Executive was
entitled to the use of an automobile, he shall be entitled to the same use of an
automobile at least comparable to the automobile provided to him prior to the
Change in Control, and he shall be entitled to vacations and sick days, in
accordance with the practices and procedures of 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 Executive
officers of Company, all upon terms as favorable as those enjoyed by other
Executive officers of Company. Notwithstanding anything in this section to the
contrary, if Company adopts any change in the expenses allowed to, or fringe
benefits provided for, Executive officers of Company, and such policy is
uniformly applied to all Executive officers of Company, and any successor or
acquiror of Company, if any, including the chief Executive officer of such
entity, then no such change shall be deemed to be contrary to this section.
6. Termination for Cause. 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. In the event of 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 6
consecutive months in any 18 month period, Company may terminate the employment
of the Executive. In such event, the Executive shall not be entitled to any
further benefits under this Agreement other than payments under any disability
policy which Company may obtain for the benefit of senior officers generally.
8. Death Benefits. Upon the Executive's death during the Contract
Period, the Executive shall be entitled to the benefits of any life insurance
policy paid for by Company and naming the Estate of the Executive as the
beneficiary or having allowed the Executive to name the beneficiary, but his
Estate shall not be entitled to any further benefits under this Agreement.
9. Termination Without Cause or Resignation for Good Reason. Company
may terminate the Executive without Cause during the Contract Period by 20 days
prior written notice to the Executive, and the Executive may resign for Good
Reason during the Contract Period upon four weeks' prior written notice to
Company specifying the Good Reason. If Company terminates the Executive's
employment during the Contract Period without Cause or if the Executive Resigns
for Good Reason, Company shall within 20 business days of the termination of
employment pay the Executive a lump sum equal to 2.99 times the highest annual
compensation, including only salary and cash bonus, paid the Executive during
any of the three calendar years immediately prior to the Change in Control (the
"Lump Sum Payment"). During the remainder of the Contract Period Company also
shall continue to provide the Executive with and pay for medical and hospital
insurance, disability insurance and life insurance, as were provided and paid
for at the time of the termination of his employment with Company. Company shall
also sell to the Executive for a purchase price of $1.00 the automobile, if any,
used by the Executive while employed by Company.
The Executive shall not have a duty to mitigate the damages suffered by
him in connection with the termination by Company of his employment without
Cause or a resignation for Good Reason during the Contract Period.
10. Resignation Without Good Reason. The Executive shall be entitled to
resign from the employment of Company at any time during the Contract Period
without Good Reason, but upon such resignation the Executive shall not be
entitled to any additional compensation for the time after which he ceases to be
employed by Company, and shall not be entitled to any of the other benefits
provided hereunder. No such resignation shall be effective unless in writing
with four weeks' notice thereof.
11. Non-Disclosure of Confidential Information.
A. Non-Disclosure of Confidential Information. Except in the course
of his employment with Company and in the pursuit of the business of 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 Company or any of its subsidiaries or
affiliates. The Executive agrees that, among other things, all information
concerning the identity of and the Company's relations with its customers is
confidential information.
B. Specific Performance. Executive agrees that 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 effect the force and effect of the remaining valid
portions.
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 3
years 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 3 years) unless the Board of Directors of Company, by a
majority vote of the Directors then in office votes not to extend the Initial
Term. The Executive shall be promptly notified of the passage of such
resolution.
B. No Effect Prior to Chancre in Control. This Agreement shall not
affect any rights of Company or the Executive prior to a Change in. Control or
any rights of the Executive granted in any other agreement, plan or
arrangements. The rights, duties and benefits provided hereunder shall only
become effective upon a Change in Control. If the employment of the Executive by
Company is terminated for any reason prior to a Change in Control, this
Agreement shall thereafter be of no further force and effect.
13. Waiver of Rights Under Existing Change in Control Agreement.
Executive and First Washington State Bank (the "Bank") have been parties to that
certain Change in Control Agreement dated as of December 6, 1995 (the "C-IN-C
Agreement"). Pursuant to this Agreement, the C-IN-C Agreement is terminated.
Under the terms of the C-IN-C Agreement, the Company's acquisition of the Bank
constituted a "change in control" of the Bank. Executive and the Company
acknowledge that such was not an intended consequence of the Company's
acquisition of the Bank, and, in connection with the execution of this Agreement
and termination of the C-IN-C Agreement, Executive hereby agrees to waive any
and all rights he may have under the C-IN-C Agreement due to the occurrence of
the change in control under the C-IN-C Agreement.
14. Certain Reduction of Payments by Company.
A. Anything in this Agreement to the contrary notwithstanding,
prior to the payment of any compensation or benefits payable under Section 9
hereof, the certified public accountants of Company immediately prior to a
Change of 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
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 Company
for Federal income purposes because of Section 2806 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 Executive pursuant
to this Agreement (such payments or distributions pursuant to this Agreement are
thereinafter 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 Company because of said Section 2806 of the Code.
B. If under paragraph A of this section the Certified Public
Accountants determine that any Payment would more likely than not be
nondeductible by Company because of Section 2806 of the Code, 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
Company in writing of his election within 20 business days of his receipt of
notice. If no such election is made by the Executive within such 20-day period,
Company 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 Company and Executive and shall be made within 20 days of a termination of
employment of Executive. Company may suspend for a period of up to 30 days after
termination of employment the Lump Sum Payment and any other payments or
benefits due to the Executive under Section 9 hereof until the Certified Public
Accountants finish the determination and the Executive (or 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, Company
shall pay to or distribute to or for the benefit of Executive such amounts as
are then due to Executive under this Agreement and shall promptly pay to or
distribute for the benefit of Executive in the future such amounts as become due
to Executive under this Agreement.
C. As a result of the uncertainty in the application of Section
2806 of the Code, it is possible that Agreement Payments may have been made by
Company which should not have been made ("Overpayment") or that additional
Agreement Payments which will have not been made by 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 Company or
Executive which said Certified Public Accountant 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 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 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 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.
15. Severance Compensation and Benefits 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 Company, except that the Executive shall not be
entitled to the benefits of any other plan or program of Company expressly
providing for severance or termination pay if the Executive is terminated
without Cause or resigns for Good Reason after a Change in Control.
16. Miscellaneous. The terms of this Agreement shall be governed by,
and interpreted and construed in accordance with the provisions of, the laws of
New Jersey and, to the extent applicable, federal law. This Agreement supersedes
all prior agreements and understandings with respect to the matters covered
hereby including the Agreement referred to in paragraph 13 above. The amendment
or termination of this Agreement may be made only in a writing executed by
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, merge,
consolidation, liquidation or otherwise) to all or substantially all of the
assets of 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, Company has caused this Agreement to be signed by
its duly authorized representatives pursuant to the authority of its Board of
Directors, and the Executive has personally executed this Agreement, all as of
the day and year first written above.
FIRST WASHINGTON FINANCIAL CORP.
BY:
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XXXXXX XXXXXXX, SECRETARY XXX XXXXXX, CHAIRMAN
WITNESS:
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XXXX XXXXXXXX C. XXXXXXX XXXXXXXXX
(EXECUTIVE)
