CHANGE OF CONTROL AGREEMENT
EXHIBIT
10(a)(4)
This
CHANGE OF CONTROL AGREEMENT (the "AGREEMENT") is made and entered into as of
January 1, 2007, by, between and among XXXXXX XX XXXX of Xxxxx Point, New York
("CHAIRMAN"), PATRIOT NATIONAL BANK, a national banking association with
headquarters located in Stamford, Connecticut ("BANK"), and PATRIOT NATIONAL
BANCORP, INC., the parent bank holding company of the Bank
("BANCORP").
W
I T N E
S S E T H
WHEREAS,
it is contemplated that from time to time one or more entities may consider
the
possibility of acquiring Bancorp or Bank or that a Change of Control (as
hereinafter defined) may otherwise occur, with or without the approval of the
Board of Directors of Bancorp or the Board of Directors of Bank;
and
WHEREAS,
the Boards of Directors of Bancorp and Bank have determined that it is in the
best interests of Bancorp and its securityholders to provide incentive to
Chairman to remain as Chairman of the Board and CEO of Bancorp and Chairman
of
the Board of the Bank (the "Positions") during any period prior to or during
a
possible Change of Control of Bancorp or the Bank and for a period of up to
six
months following a Change of Control of Bancorp or the Bank, with the continued
dedication and objectivity of Chairman, notwithstanding the possibility, threat
or occurrence of a Change of Control; and
WHEREAS,
the Parties (as hereinafter defined) desire to enter into this Agreement to
reflect the terms and conditions contained herein;
NOW,
THEREFORE, in consideration of the mutual promises and covenants hereinafter
described and for other good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the Parties hereto hereby agree
as
follows:
1. DEFINED
TERMS. The terms defined below shall have the following meanings for purposes
of
this Agreement:
(a) "AGREEMENT"
means this Change of Control Agreement, as amended, restated, supplemented
or
modified from time to time and together with any exhibits or attachments
hereto.
(b)
"CAUSE"
shall mean (i) the continued failure by Chairman substantially to perform his
duties in the Positions (other than any such failure resulting from his
incapacity due to physical or mental illness) or (ii) the engaging by Chairman
in conduct which is materially injurious to Bancorp or Bank, monetarily or
otherwise, in either case as determined by the Board of Directors of Bancorp
or
Bank.
(c) "CHANGE
OF CONTROL" means:
(i) a
change
in control of the direction and administration of Bancorp's business of a nature
that would be required to be reported in response to Item 6(e) of Schedule
14A
of Regulation 14A (or any successor rule or regulation) promulgated under the
Exchange Act, whether or not Bank or Bancorp is then subject to such reporting
requirements;
(ii) any
person (as such term is used in Sections 14(d) and 14(d)(2) of the Exchange
Act
but excluding any employee benefit plan of Bancorp or Bank), other than (x)
Xxxxxx Xx Xxxx and his family members or family trusts, or (y) any trustee
or
other fiduciary holding securities under an employee benefit plan of Bancorp
or
Bank, by merger or otherwise, is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities
of
Bancorp representing 25% or more of the combined voting power of Bancorp's
outstanding securities then entitled ordinarily (and apart from rights accruing
under special circumstances) to vote for the election of directors;
(iii) the
Bancorp shall complete a sale of all or substantially all of the assets of
Bancorp;
(iv) the
Bank
shall complete a sale of all or substantially all of the assets of
Bank;
(v) the
Board
of Directors of Bancorp shall approve any merger, consolidation or like business
combination or reorganization of Bancorp, the consummation of which results
in
the occurrence of any event described in clause (ii) above;
(vi) the
Board
of Directors of Bank shall approve any merger, consolidation or like business
combination or reorganization of Bank, the consummation of which results in
someone other than Bancorp owning the Bank or its successor;
(vii) the
Board
of Directors of Bancorp determines that any person (as such term is used in
Sections 14(d) and 14(d)(2) of the Exchange Act but excluding any employee
benefit plan of Bancorp), other than Xxxxxx Xx Xxxx and his family members
or
family trusts, directly or indirectly exercises a controlling influence over
the
management or policies of Bancorp; or
(viii) the
Board
of Directors of Bank determines that any person (as such term is used in
Sections 14(d) and 14(d)(2) of the Exchange Act but excluding any employee
benefit plan of Bank), other than Bancorp or Xxxxxx Xx Xxxx and his family
members or family trusts, directly or indirectly exercises a controlling
influence over the management or policies of Bank;
PROVIDED,
HOWEVER, that (i) the filing of a Form 13D or G by any person or (ii) any event
mandated or directed by a regulatory body having jurisdiction over Bancorp's
or
Bank's operations, shall not of itself be deemed a Change of
Control.
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(d) "CHANGE
OF CONTROL PAYMENTS" has the meaning set forth in Section 2 of this
Agreement.
(e) "DISABILITY"
means any physical or mental condition that (i) would qualify Chairman for
a
disability benefit under any long-term disability plan maintained by Bank and
applicable to such Chairman, or (ii) renders Chairman unable to perform
substantially his obligations in the Positions for the reasonably foreseeable
future (not less than ninety (90) days), as determined by the Board of Directors
of Bank after considering competent medical evidence.
(f) "EXCHANGE
ACT" means the Securities Exchange Act of 1934, as amended.
(g) "INTERNAL
REVENUE CODE" means the Internal Revenue Code of 1986, as amended.
(h) "PARTY"
or "PARTIES" means, individually or collectively, Chairman, Bancorp and/or
Bank.
(i) "PATRIOT"
means, collectively, Bancorp and Bank.
2. CHANGE
OF
CONTROL PAYMENT.
(a) If
there
is a Change of Control, (i) during any time Chairman is in the Positions, or
(ii) within six (6) months following the date Chairman is no longer in the
Positions, other than for Cause or by reason of Chairman's death or Disability,
then Chairman shall be entitled to receive a payment (the "CHANGE OF CONTROL
PAYMENT") in consideration of services previously rendered to Patriot. The
Change of Control Payment shall be made as a lump sum cash payment equal to
the
greater of (A) 2.5 times Chairman's annual base salary (calculated as of the
date of the Change of Control or, in the case of Section 2(a)(ii), calculated
as
of the date of prior termination), or (B) 2.5 times Chairman's total
compensation, including salary and any cash incentive compensation, from Patriot
for services rendered for the last full calendar year immediately preceding
the
Change of Control. The Change of Control Payment shall be paid in full within
15
days following the date of the Change of Control; PROVIDED, HOWEVER, that such
payment may be deferred for such period (not to exceed six months) following
the
date of the Change of Control if Bancorp or the Bank requests that Chairman
continue to provide services to it. If Chairman voluntarily terminates his
service to Bancorp or Bank prior to the date (not more than six months following
the date of the Change of Control) specified by Bancorp or Bank, Chairman shall
forfeit his right to receive the Change of Control Payment. The Change of
Control Payment shall not be reduced by any other compensation which Chairman
may receive from Bancorp or Bank or from other employment with another employer.
In addition, and notwithstanding the foregoing, in the event Chairman gives
Bancorp or Bank notice that Chairman is voluntarily resigning or otherwise
leaving the Positions and thereafter a Change of Control occurs, Chairman shall
have no right to receive the Change of Control Payment.
(b) All
payments made pursuant to this Agreement will be subject to withholding of
applicable income and employment taxes.
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(c) If,
after
a Change of Control, Chairman prevails in any action to enforce this Agreement,
then Bancorp or Bank shall be obligated to reimburse Chairman for all reasonable
fees and expenses, including reasonable attorneys' fees of counsel chosen by
Chairman in his sole discretion.
(d) Notwithstanding
any other provision of this Agreement or of any other agreement, understanding
or compensation plan, Bank shall not be obligated to pay any amounts which
violate restrictions imposed, or which may in the future be imposed, on such
payments by Bank pursuant to Section 18(k)(1) of the Federal Deposit Insurance
Act, or any regulations or orders which are or may be promulgated thereunder;
nor shall any payments be made which would constitute an "unsafe or unsound
banking practice" pursuant to 12 U.C.C. Section 18(b).
(e) Notwithstanding
any other provision hereof, in the event that any payment or benefit received
or
to be received by Chairman in connection with a Change of Control would not
be
deductible (in whole or part) as a result of Section 280G of the Internal
Revenue Code, by Patriot, an affiliate or other person making such payment
or
providing such benefit, the Change of Control Payment shall be reduced until
no
portion is not deductible, or the Change of Control Payment is reduced to zero.
For purposes of this limitation, (i) no portion of the Change of Control Payment
the receipt or enjoyment of which Chairman shall have effectively waived in
writing prior to the date of payment of the Change of Control Payment shall
be
taken into account; (ii) no portion of the Change of Control Payment shall
be
taken into account which in the opinion of tax counsel selected by Patriot's
independent auditors and acceptable to Chairman does not constitute a "parachute
payment" within the meaning of Section 280G(b)(2) of the Internal Revenue Code;
(iii) the Change of Control Payment shall be reduced only to the extent
necessary so that such payment shall constitute reasonable compensation for
services actually rendered within the meaning of Section 280G(b)(4) of the
Internal Revenue Code or are otherwise not subject to disallowance as
deductions, in the opinion of the tax counsel referred to in clause (ii); and
(iv) the value of any non cash benefit or any deferred payment or benefit
included in the Change of Control Payment shall be determined by Patriot's
independent auditors, in accordance with the principles of Sections 280G(d)(3)
and (4) of the Internal Revenue Code. In the event that Patriot's independent
auditors cannot or decline to act as aforesaid, their duties may be discharged
by such other independent professional firm as the Board of Directors of Bancorp
may determine.
3. TERM.
This Agreement shall terminate on the earliest of: (i) immediately, upon
Chairman's voluntary resignation or otherwise leaving the Positions for Cause,
death or Disability, (ii) six months following Chairman's voluntary resignation
or otherwise leaving the Positions, other than for Cause, death or Disability,
or (iii) six months following receipt by Chairman of the Change of Control
Payment.
4. ASSIGNMENT.
This Agreement will be binding on and will inure to the benefit of the Parties
hereto and their respective successors, permitted assigns and legal
representatives. Without otherwise limiting the foregoing, "Bancorp" or "Bank"
as used herein shall refer to any successor institution whether by merger,
consolidation, acquisition or otherwise.
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5. NON-COMPETITION
AGREEMENT. If Chairman receives the Change of Control Payment, Chairman
absolutely and unconditionally agrees with Bancorp and Bank that, for a period
of six (6) months from the date of receipt of the Change of Control Payment,
Chairman will not, anywhere in the Restricted Area (as defined below), either
directly or indirectly, solely or jointly with any person or persons (a
"COMPETITOR"), as an employee, consultant or advisor (whether or not engaged
in
business for profit), or as an individual proprietor, partner, shareholder
(provided that ownership of less than 5% of the voting power shall be
permitted), director, officer, joint venturer, investor (provided that such
investment will not be a violation if it is limited to less than 5% of the
ownership of such entity), lender or in any other capacity, compete with the
business of Bancorp or the Bank as conducted or proposed to be conducted as
of
the date of the Change of Control. As used herein, "RESTRICTED AREA" shall
be
Fairfield and New Haven Counties, Connecticut; Westchester, Nassau and Suffolk
Counties, New York and Manhattan, New York, and any town or branch in which
the
Bank has an office as of the time of the Change of Control.
6. ENTIRE
AGREEMENT; NO WAIVER. This Agreement contains the entire agreement between
the
Parties with respect to the subject matter herein and may not be modified or
amended except by a written instrument signed by the Parties. Neither the
failure to insist upon strict performance of any of the terms, covenants or
conditions of this Agreement, nor the acceptance of monies due hereunder with
knowledge of a breach of this Agreement, shall be deemed a waiver of any rights
or remedies that either Party may have or a waiver of any subsequent breach
or
default in any of such agreements, terms, covenants and conditions.
7. FURTHER
INSTRUMENTS. Each of the Parties agrees to execute all further instruments
and
documents and to take all further action as the other Party may reasonably
request in order to effectuate the terms and purposes of this
Agreement.
8. MODIFICATION
AND SEVERABILITY. Wherever possible, each provision of this Agreement shall
be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be deemed modified to the extent necessary
to make it enforceable under applicable law. If any such provision is not
enforceable as set forth in the preceding sentence, the unenforceability of
such
provision shall not affect the other provisions of this Agreement, but this
Agreement shall be construed as if such unenforceable provision had never been
contained herein.
9. GOVERNING
LAW. It is the intention of the Parties that the internal substantive laws,
and
not the laws of conflicts, of the State of Connecticut should govern the
enforceability and validity of this Agreement, the construction of its terms
and
the interpretation of the rights and duties of the Parties.
10. JURY
WAIVER. The Parties, and any principals for whom they are agents, waive the
right to a trial by jury in any action arising between the Parties or their
principals under this Agreement, whether such actions are claims in contract,
tort, statute, or otherwise, or made by claim, counterclaim, third-party claim
or otherwise.
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11. NOTICES.
All notices, requests, consents, instructions, approvals and other
communications required or permitted hereunder shall be validly given, if in
writing and delivered personally, or sent by registered or certified mail or
nationally recognized air courier service, postage prepaid at the address listed
above or at such other address as such Party may specify by written notice
to
each other Party. Each such notice, request, consent, instruction, approval
and
other communication shall for all purposes of this Agreement be treated as
being
effective or having been given when delivered, if delivered personally, or,
if
sent by mail, at the earlier of its actual receipt or three (3) days after
the
same has been deposited in a regularly maintained receptacle for the deposit
of
United States mail, addressed and postage prepaid as aforesaid, and if by air
courier, one (1) day after the same has been deposited with such air
courier.
12. HEADINGS.
The titles and headings of the various sections and paragraphs in this Agreement
are intended solely for convenience of reference and are not intended for any
other purpose whatsoever, or to explain, modify or place any construction upon
or on any of the provisions of this Agreement.
13. INTERPRETATION.
This Agreement shall be construed as a whole according to its fair meaning.
It
shall not be construed strictly for or against either Party. Unless the context
indicates otherwise, the term "or" shall be deemed to include the term "and"
and
the singular or plural number shall be deemed to include the other.
14. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which will
be deemed an original, but which collectively will constitute one and the same
instrument.
[Signature
page follows]
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IN
WITNESS WHEREOF, the Parties have executed this Agreement on the date first
above written.
PATRIOT
NATIONAL BANCORP, INC.
By:
/s/
Xxxx X. Xxxxxxxxx
Xxxx
X.
Xxxxxxxxx
Chair
of
Compensation Committee
PATRIOT
NATIONAL BANK
By:
/s/
Xxxx X. Xxxxxxxxx
Xxxx
X.
Xxxxxxxxx
Chair
of
Compensation Committee
CHAIRMAN
/s/
Xxxxxx Xx Xxxx
Xxxxxx
Xx
Xxxx
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