CHANGE IN CONTROL AGREEMENT
Exhibit
10(s)
THIS AGREEMENT
(the “Agreement”) made as of this 15th day of
December, 2009 (the “Effective Date”) by and between Xxxxx Spring Bancorp, Inc., a
registered bank: holding company and a Maryland Corporation (“Bancorp”), Xxxxx Spring Bank, a Maryland
corporation and wholly owned subsidiary of Bancorp with its headquarters in
Olney, Maryland (collectively the “Bank”) and Xxxxx X. Small (the
“Officer”).
WITNESSETH:
WHEREAS,
the Officer is employed as the Executive Vice President of Bancorp and
Executive Vice President and Chief Operating Officer of the Bank.
WHEREAS,
the Bank and the Officer each desire that the Officer be provided with
certain benefits in the event of a Change in Control, as defined
below.
NOW, THEREFORE,
in consideration of the premises and mutual covenants herein contained,
it is agreed as follows:
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1.
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Definitions:
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a. Change in Control. A “Change
in Control” shall be deemed to occur on the earliest of any of the following
events after the date of this Agreement:
i.
The acquisition by any entity, person or group (other than the acquisition by a
tax-qualified retirement plan sponsored by Xxxxx Spring Bancorp, Inc.
(“Bancorp”) or the Bank of beneficial ownership, as that term is defined in Rule
13d-3 under the Securities Exchange Act of 1934, of more than 25% of the
outstanding capital stock of Bancorp or the Bank entitled to vote generally for
the election of directors (“Voting Stock”);
ii.
The commencement by any entity, person, or group (other than Bancorp or
the Bank, a subsidiary of Bancorp or the Bank, or a tax-qualified retirement
plan sponsored by Bancorp or the Bank) of a tender offer or an exchange offer
for more than 20% of the outstanding Voting Stock of Bancorp or the
Bank;
iii. The
effective time of (a) a merger or consolidation of Bancorp or the Bank with one
or more other corporations as a result of which the holders of the outstanding
Voting Stock of Bancorp or the Bank immediately prior to such merger exercise
voting control over less than 80% of the Voting Stock of the surviving or
resulting corporation, or (b) a transfer of substantially all of the property of
Bancorp or the Bank other than to an entity of which Bancorp or the Bank owns at
least 80% of the Voting Stock;
iv. Upon
the acquisition by any entity, person, or group of the control of the election
of a majority of the Bank’s or Bancorp’s directors;
v.
At such time that, during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board of Directors (“Board”)
of Bancorp or the Board of the Bank (the “Continuing Directors”) cease for any
reason to constitute at least two-thirds of such Board, provided that any
individual whose election or nomination for election as a member of the Board
was approved by a vote of at least two-thirds of the Continuing Directors of
such Board then in office shall be considered a Continuing
Director.
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b.
Covered
Period. The “Covered Period” shall mean the period beginning six months
before a Change in Control and ending at the end of the term specified in
Section 2 hereof.
c.
Good Reason.
“Good Reason” shall be deemed to exist at the time that any of the
following events occurs without the Officers express written
consent:
i. A
material reduction in the Officer’s responsibilities or authority in connection
with his employment by Bancorp or the Bank;
ii.
Assignment to the Officer of duties for which he is not reasonably equipped by
his skills and experience;
iii. A
reduction in salary or material reduction in benefits;
iv. A
requirement that the Officer’s principal business office or principal place of
residence be relocated out side any county in which the Bank has its main
office, its branches, or its deposit-taking Automatic Teller Machines;
or
v.
Failure to provide office facilities, secretarial services, and other
administrative services to Officer that are substantially equivalent to the
facilities and services provided to the Officer immediately after the Effective
Date (excluding brief periods during which office facilities may be temporarily
unavailable due to fire, natural disaster, or other calamity).
vi.
The Officer’s resignation for any reason during the first sixty (60) days
immediately following the first twelve months after the effective date of a
definitive purchase and assumption agreement, the execution of which brought
about the Change in Control.
Notwithstanding
the foregoing, a reduction or elimination of the Officer’s benefits under one or
more benefit plans maintained by Bancorp or the Bank as part of a good faith,
overall reduction or elimination of such plan or plans or benefits thereunder
applicable to all participants in a manner that does not discriminate against
the Officer (except as such discrimination may be necessary to comply with law)
shall not constitute an event of Good Reason or a material breach of this
Agreement, provided that benefits of the type or to the general extent as those
offered under such plan or plans prior to such reduction or elimination are not
available to other officers of Bancorp or the Bank or any company that controls
either of them under a plan or plans in or under which the Officer is not
entitled to participate and to receive benefits on a fair and nondiscriminatory
basis.
Notwithstanding
the foregoing, it is expected that the Bank will perform all duties and
agreements to be performed herein, and they shall have the right to cure
non-performance, to the extent such performance is reasonably capable of being
cured, and shall promptly upon receipt of written notice of non-performance that
the Officer describes and alleges to be Good Reason, comply with the
requirements of such notice. and further if they shall not comply with such
notice to the satisfaction of the Officer within forty-eight (48) hours after
delivery thereof, (except if such compliance cannot be reasonably completed
within forty-eight (48) hours, if Bank shall not commence to comply with such
period and thereafter proceed to completion with due diligence) the Officer
shall have the right to proceed with notice of a “Good Reason” termination as
specified above.
d. Just Cause. Termination for
“Just Cause” shall mean termination of employment by reason of the
Officer’s:
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i.
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Personal
dishonesty;
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ii.
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Willful
misconduct;
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iii.
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Breach
of fiduciary duty involving personal
profit;
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iv.
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Intentional
failure to perform duties; or
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v.
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Willful
violation of any law, rule, or regulation (other than traffic violations
or similar offenses) or final cease-and-desist
order.
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Notwithstanding
the foregoing, it is expected that Officer will perform all duties and
agreements to be performed herein, and Officer shall have the right to cure
non-performance, to the extent such performance is reasonably capable of being
cured, and shall promptly upon receipt of written notice of non-performance that
Bancorp or the Bank describes and alleges to be Just cause, comply with the
requirements of such notice, and further if Officer shall not comply with such
notice to the satisfaction of the Bank within forty-eight (48) hours after
delivery thereof, (except if such compliance cannot be reasonably completed
within forty-eight (48) hours, if Officer shall not commence to comply within
such period and thereafter proceed to completion with due diligence) the Bank
shall have the right to proceed with a “Just Cause “ termination as described
above.
The Bank
shall determine if Just Cause exists with respect to its employment of the
Officer in the exercise of its good faith discretion.
e.
Total Annual Compensation.
For purposes of this Agreement, Total Annual Compensation shall
mean:
i.
One-year’s base salary at the highest rate in effect in the period beginning six
months before the last Change in Control to occur before termination of the
Officer’s employment; plus
ii.
Other compensation, including, without limitation, bonus payments, at the rate
paid for (i) the calendar year preceding such Change in Control, or (ii) the
calendar year preceding termination of the Officer’s employment, whichever is
greater, but shall not include the value of benefits that are not subject to
current federal income taxation to the Officer. Such other compensation for a
calendar year shall be annualized on a monthly basis based upon the number of
months in the calendar year in which the Officer was employed.
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2.
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Term. The term
of this Agreement shall be the period commencing on the Effective Date and
ending on the last moment of the second anniversary of the Effective Date.
On each anniversary of the Effective Date prior to a termination of the
Agreement, the term under this Agreement shall be extended for an
additional one-year period beyond the then effective expiration date
without action by any party, provided that neither the Bank nor the
Officer shall have given written notice at least sixty (60) days prior to
such anniversary date of its or his desire that the term not be
extended.
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3.
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Termination in
Connection with a Change in
Control.
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a.
If, within the Covered Period, the Bank shall terminate the Officer’s
employment without Just Cause or the Officer shall terminate his employment with
Good Reason, the Bank shall, within ten calendar days of the termination of
Officer’s employment, make a lump-sum cash payment to him equal to 2.99 times
his Total Annual Compensation.
b.
Also in the event of such a termination, the Officer shall, for three calendar
years following the Officer’s termination of employment, continue to participate
in any benefit plans of The Bank that provide health (including medical and
dental), life and disability insurance, or similar coverage upon terms no less
favorable than the most favorable terms provided to executive officers of the
Bank during such period.
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4.
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Adjustment of Certain
Payments and Benefits.
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a.
In the event that payments pursuant to this Agreement (including, without
limitation, any payment under any plan, program, or arrangement referred to in
Section 3 hereof) would result in the imposition of a penalty tax pursuant to
Section 28OG of the Internal Revenue Code, such payments shall be reduced to
equal the maximum amount that may be paid under such Section 28OG without
exceeding such limits. In the event any such reduction in payments is necessary,
the Officer may determine, in his sole discretion, which categories of payments
(including, without limitation, the value of benefits, acceleration of vesting,
or receipt of benefits or amounts) are to be reduced or eliminated.
b.
Payments made to the Officer pursuant to this Agreement or otherwise, are
subject to and conditioned upon their compliance with Section I (W) of the
Federal Deposit Insurance Act (“FDIA”), relating to “golden parachute” and
indemnification payments and certain other benefits.
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5.
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Confidentiality.
The Officer agrees to maintain the confidentiality of any and all
information concerning the operation or financial status of Bancorp, the
Bank, and any of their subsidiaries; the names or addresses of any of the
borrowers, depositors, and other customers of any such companies; any
information concerning or obtained from such customers; and any other
information concerning Bancorp or the Bank or any of their subsidiaries to
which he may be exposed during the course of his employment. The Officer
further agrees that, unless required by law or specifically permitted by
Bancorp or the Bank in writing, he will not disclose to any person or
entity, either during or subsequent to his employment, any of the
above-mentioned information which is not generally known to the public,
nor shall he employ such information in any way other than for the benefit
of The Bank.
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6.
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Successors and
Assigns.
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a.
This Agreement shall inure to the benefit of and be binding upon any corporate
or other successor of the Bank that shall acquire, directly or indirectly, by
merger, consolidation, purchase or otherwise, all or substantially all of the
assets or stock of the Bank.
b.
Since the Bank is contracting for the unique and personal skills of the Officer,
the Officer shall be precluded from assigning or delegating his rights or duties
hereunder without first obtaining the written consent of the Bank.
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7.
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No Mitigation.
The Officer shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise
and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Officer in any subsequent
employment.
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8.
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No Plan
Created. The Officer and the Bank expressly declare and agree that
this Agreement was negotiated among them and that no provision or
provisions of this Agreement are intended to, or shall be deemed to,
create any plan for purposes of the Employee Retirement Income Security
Act or any other law or regulation, and the Bank and the Officer each
expressly waives any right to assert the contrary. Any assertion in any
judicial or administrative filing, hearing, or process by or on behalf of
the Officer or the Bank that such a plan was so created by this Agreement
shall be deemed a material breach of this Agreement by the party making
such an assertion or on whose behalf such assertion was
made.
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9.
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No Additional Rights:
Third Party Beneficiary.
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a.
This Agreement does not confer any right to employment or any other right not
specifically stated herein. Any assertion in any judicial or administrative
filing, hearing, or process by or on behalf of the Officer or the Bank that it
does so shall be deemed a material breach of this Agreement by the party making
such an assertion or on whose behalf such assertion was made.
b.
Bancorp is a third party beneficiary, with notice thereof, to Section 5 of
this Agreement. This Agreement is for the benefit of the parties hereto, and,
except as expressly stated herein with respect to Bancorp, is not intended to be
for the benefit of, or to be enforceable by, any other person.
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10.
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Certain Regulatory
Events.
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a.
If the Officer is removed and/or permanently prohibited from participating in
the conduct of the Bank’s affairs by an order issued under Sections 8(e)(4) or
8(g)(1) of the FDIA, all obligations of the Bank under this Agreement shall
terminate as of the effective date of the order, but vested rights of the
parties shall not be affected.
b.
If the Bank is in default (as defined in Section 3(x)(1) of FDIA), all
obligations of the Bank under this Agreement shall terminate as of the date of
default, but vested rights of the parties shall not be affected.
c.
If a notice served under Sections 8(e)(3) or 8(g)(l) of the FDIA suspends and/or
temporarily prohibits the Officer from participating in the conduct of the
Bank’s affairs, the Bank’s obligations under this Agreement shall be suspended
as of the date of such service, unless stayed by appropriate proceedings. If the
charges in the notice are dismissed, the Bank may, in its discretion, (i) pay
the Officer all or part of the compensation withheld while its contract
obligations were suspended, and (ii) reinstate (in whole or in part) any of its
obligations that were suspended.
The
occurrence of any of the events described in paragraphs a, b, and c above may be
considered by the Bank in connection with a termination for Just
Cause.
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11.
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Notices. All
notices, requests, demands and other communications in connection with
this Agreement shall be made in writing and shall be deemed to have been
given when delivered by hand or 48 hours after mailing at any general or
branch United States Post Office, by registered or certified mail, postage
prepaid, addressed as follows, or to such other address as shall have been
designated in writing by the
addressee:
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a.
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If
to the Bank:
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Xxxxx
Spring Bank
c/o
Office of General counsel
I7801
Xxxxxxx Xxxxxx
Xxxxx, XX
00000
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b.
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If
to the Officer:
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Xxxxx X.
Small
0000
Xxxxxxxxxx Xxxxx
Xxxxxxxx,
XX 00000
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12.
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Amendments. No
amendments or additions to this Agreement shall be binding unless made in
writing and signed by all of the
parties.
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13.
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Applicable Law.
Except to the extent preempted by Federal law, the laws of the State of
Maryland, without regard to its conflict of laws principles, shall govern
this Agreement in all respects, whether as to its validity, construction,
capacity, performance or otherwise.
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14.
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Severability.
The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions
hereof.
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15.
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Headings.
Headings contained herein are for convenience of reference
only.
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16.
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Entire
Agreement. This Agreement, together with any understanding or
modifications thereof as agreed to in writing by the parties, shall
constitute the entire agreement among the parties hereto with respect to
the subject matter hereof.
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17.
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Section
409A
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(i)
The Officer will be deemed to have a termination of employment for purposes of
determining the timing of any payments that are classified as deferred
compensation only upon a “separation from service” within the meaning of Section
409A.
(ii) If
at the time of the Officer’s separation from service, (a) the Officer is a
“specified employee” (within the meaning of Section 409A and using the
methodology selected by the Bank) and (b) the Bank makes a good faith
determination that an amount payable or the benefits to be provided hereunder
constitutes deferred compensation (within the meaning of Section 409A), the
payment of which is required to be delayed pursuant to the six-month delay rule
of Section 409A in order to avoid taxes or penalties under Section 409A, then
the Bank will not pay the entire amount on the otherwise scheduled payment date
but will instead pay on the scheduled payment date the maximum amount
permissible in order to comply with Section 409A (i.e., any amount that
satisfies an exception under the Section 409A rules from being categorized as
deferred compensation) and will pay the remaining amount (if any) in a lump sum
on the first business day after such six month period.
(iii)
To the extent the Officer would be subject to an additional 20% tax imposed on
certain deferred compensation arrangements pursuant to Section 409A as a result
of any provision of this Agreement, such provision shall be deemed amended to
the minimum extent necessary to avoid application of such tax and the parties
shall promptly execute any amendment reasonably necessary to implement this
Section 17. The Officer and the Bank agree to cooperate to make such amendment
to the terms of this Agreement as may be necessary to avoid the imposition of
penalties and taxes under Section 409A; provided, however, that the Officer
agrees that any such amendment shall provide the Officer with economically
equivalent payments and benefits, and the Officer agrees that any such amendment
will not materially increase the cost to, or liability of, the Bank with respect
to any payment.
(iv)
For purposes of the this Agreement, Section 409A shall refer to Section
409A of the Internal Revenue Code of 1986, as amended, and the Treasury
regulations and any other authoritative guidance issued thereunder.
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IN WITNESS WHEREOF, the
parties hereto have executed this Agreement on the date first set forth
above.
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XXXXX
SPRING BANCORP, INC.
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| /s/ Xxxxxx X. Xxxxxxxx | ||
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Xxxxxx
X. Xxxxxxxx, President and Chief Executive Officer
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XXXXX
SPRING BANK
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| /s/ Xxxxxx X. Xxxxxxxx | ||
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Xxxxxx
X. Xxxxxxxx, President and Chief Executive Officer
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OFFICER
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/s/
Xxxxx X. Small
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Xxxxx
X. Small
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