EXHIBIT 10.7
AGREEMENT
BETWEEN
F&M BANCORP
HOME FEDERAL SAVINGS BANK
AND
XXXXXXX X. XXXXXXX, XX.
AGREEMENT, dated as of the 16th day of November 1999, between F&M
Bancorp, a Maryland corporation, Home Federal Savings Bank, a savings bank
(together or separately hereinafter referred to as the "Employers") and Xxxxxxx
X. Xxxxxxx, Xx.(the "Executive").
WITNESSETH:
WHEREAS, the Executive is presently an executive officer of the
Employers; and
WHEREAS, the Employers desire to be ensured of the Executive's
continued active participation in the business of the Employers; and
WHEREAS, in order to induce the Executive to remain in the employ of
the Employers and in consideration of the Executive's agreeing to remain in the
employ of the Employers, the parties desire to specify the severance benefits
which shall be due the Executive in the event that the Executive's employment
with the Employers is terminated under specified circumstances detailed herein:
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereby agree as follows:
1. DEFINITIONS. The following words and terms shall have the meanings
set forth below for the purposes of this Agreement:
(a) Average Annual Compensation. The Executive's "Average Annual
Compensation" for purposes of this Agreement shall be deemed to mean the average
level of compensation paid to the Executive by the Employers or any subsidiary
thereof during the five consecutive calendar years preceding the Date of
Termination which yield the highest such average. Compensation shall include
base salary and bonuses. Compensation shall not include fringe benefits such as
automobiles or other perquisites, but shall include any pre-tax reduction for
contributions to any tax qualified retirement plan, deferred compensation plan,
or flexible benefits plan.
(b) Cause. Cause shall mean (i) personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any law, rule
or regulation (other than traffic violations or similar offenses) or final cease
and desist order, after notice and an opportunity to cure the alleged breach, or
a material breach by the Executive of any agreement on his part made herein.
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(c) Change-in-Control of the Employers. Change-in-Control shall be
deemed to have occurred if the event set forth in any one of the following
paragraphs shall have occurred relative to either or both of the Employers:
(i) any Person is or becomes the Beneficial Owner, directly
or indirectly, of securities of the Employers (not
including in the securities beneficially owned by such
Person any securities acquired directly from the
Employers or their Affiliates) representing 25% or more
of the combined voting power of the Employers' then
outstanding securities, excluding any Person who
becomes such a Beneficial Owner in connection with a
transaction described in clause (A) of paragraph (iii)
below; or
(ii) the following individuals cease for any reason to
constitute a majority of the number of directors then
serving on the Board; individuals who, on the date
hereof, constitute the Board and any new director
(other than a director whose initial assumption of
office is in connection with an actual or threatened
election contest, including but not limited to a
consent solicitation, relating to the election of
directors of the Employers) whose appointment or
election by the Board or nomination for election by the
Employers' shareholders was approved or recommended by
a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors on the
date hereof or whose appointment, election or
nomination for election was previously so approved or
recommended; or
(iii) there is consummated a merger or consolidation of the
Employers or any direct or indirect subsidiary of the
Employers with any other corporation, other than (A) a
merger or consolidation which would result in the
voting securities of the Employers outstanding
immediately prior to such merger or consolidation
continuing to represent (either by remaining
outstanding or by being converted into voting
securities of the surviving entity or any parent
thereof), in combination with the ownership of any
trustee or other fiduciary holding securities under an
employee benefit plan of the Employers or any
subsidiary of the Employers, at least 60% of the
combined voting power of the securities of the
Employers or such surviving entity or any parent
thereof outstanding immediately after such merger or
consolidation, or (B) a merger or consolidation
effected to implement a recapitalization of the
Employers (or similar transaction) in which no Person
is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Employers (not
including in the securities Beneficially Owned by such
Person any securities acquired directly from the
Employers or their Affiliates) representing 25% or more
of the combined voting power of the Employers' then
outstanding securities.
(iv) the shareholders of the Employers approve a plan of
complete liquidation or dissolution of the Employers or
there is consummated an agreement for the sale or
disposition by the Employers of all or substantially
all of the
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Employers' assets, other than a sale or disposition by
the Employers of all or substantially all of the
Employers' assets to an entity, at least 60% of the
combined voting power of the voting securities of which
are owned by shareholders of the Employers in
substantially the same proportions as their ownership
of the Employers immediately prior to such sale;
(v) the Employers ceases to own, directly or indirectly,
securities of any subsidiary representing 50% or more
of the combined voting power of the subsidiary's then
outstanding securities; or
(vi) there is consummated an agreement for the sale or
disposition by the Employers of all or substantially
all of a subsidiary's assets, other than a sale or
disposition by the Employers of all or substantially
all of the subsidiary's assets to an entity, at least
60% of the combined voting power of the voting
securities of which are owned by shareholders of the
Employers in substantially the same proportions as
their ownership of the subsidiary immediately prior to
such sale; provided however, that such a sale or
disposition should only be effective for those
Executives, if any, employed by the subsidiary whose
assets are so sold or otherwise disposed of, and not
all participating Executives.
"Affiliate" shall have the meaning set forth in Rule
12b-2 promulgated under Section 12 of the Exchange
Act.
"Beneficial Owner" shall have the meaning set forth
in Rule 13d-3 under the Exchange Act.
"Board" shall mean the boards of directors of
either or both of the Employers as applicable.
"Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended from time to time.
"Person" shall have the meaning given in Section
3(a)(9) of the Exchange Act, as modified and used in
Sections 13(d) and 14(d) thereof, except that such
term shall not include (i) the Employers or any of
their subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of
the Employers or any of their Affiliates, (iii) an
underwriter temporarily holding securities pursuant
to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the
shareholders of the Employers in substantially the
same proportions as their ownership of stock of the
Employers.
A "Potential Change-in-Control" shall be deemed to have occurred if the
event set forth in any one of the following paragraphs shall have occurred:
(i) the Employers enter into an agreement, the consummation of
which would result in the occurrence of a Change-in-Control;
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(ii) the Employers or any Person publicly announces an intention to
take or to consider taking actions which, if consummated,
would constitute a Change-in-Control;
(iii) any Person becomes the Beneficial Owner, directly or
indirectly, of securities of the Employers representing 15% or
more of either the then outstanding shares of common stock of
the Employers or the combined voting power of the Employers'
then outstanding securities (not including in the securities
beneficially owned by such Person any securities acquired
directly from the Employers or their affiliates); or
(iv) the Board adopts a resolution to the effect that a Potential
Change-in-Control has occurred.
(d) CODE. Code shall mean the Internal Revenue Code of 1986, as
amended.
(e) DATE OF TERMINATION. "Date of Termination" shall mean:
(i) if the Executive's employment is terminated for Cause or
for Disability, the date specified in the Notice of Termination, and (ii) if the
Executive's employment is terminated for any other reason, the date on which a
Notice of Termination is given or as specified in such Notice.
(f) DISABILITY. Termination by the Employers of the Executive's
employment based on "Disability" shall mean termination because of any physical
or mental impairment which qualifies the Executive for disability benefits under
the applicable long-term disability plan maintained by the Employers or, if no
such plan applies, which would qualify the Executive for disability benefits
under the Federal Social Security System.
(g) GOOD REASON. Termination by the Executive of the Executive's
employment for "Good Reason" shall mean termination by the Executive based on:
(i) without the Executive's express written consent, the
assignment by the Employers to the Executive of any duties which are materially
inconsistent with the Executive's positions, duties, responsibilities and status
with the Employers immediately prior to a Change-in-Control of the Employers, or
a material change in the Executive's reporting responsibilities, titles or
offices as an employee and as in effect immediately prior to such a
Change-in-Control, or any removal of the Executive from or any failure to
re-elect or re-appoint the Executive to any of such responsibilities, titles or
offices, except in connection with the termination of the Executive's employment
for Cause, Disability or Retirement or as a result of the Executive's death or
by the Executive other than for Good Reason, or assignment by the Employers to
the Executive of duties which cannot effectively be performed at the Employer's
principal offices at Washington or Xxxxxxxxx County, Maryland, (ii) without the
Executive's express written consent, a reduction by the Employers in the
Executive's compensation as in effect on the date of the Change-in-Control of
the Employers or as the same may be increased from time to time thereafter,
(iii) without the Executive's express written consent, a failure by the
Employers to provide the Executive with the same fringe benefits that were
provided to the Executive immediately prior to a Change-in-Control of the
Employers, or with a package of fringe benefits (including paid vacations) that,
though one or more of such benefits may vary from
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those in effect immediately prior to such Change-in-Control, is substantially
comparable in all material respects to such fringe benefits taken as a whole,
(iv) any purported termination of the Executive's employment for Cause or
Disability which is not effected pursuant to a Notice of Termination satisfying
the requirements of paragraph (i) below; or (v) the failure by the Employers to
obtain the assumption of and agreement to perform this Agreement by any
successor as contemplated in Section 6 hereof.
(h) IRS. IRS shall mean the Internal Revenue Service.
(i) NOTICE OF TERMINATION. Any purported termination by the Employers
for Cause or Disability or by the Executive for Good Reason shall be
communicated by written "Notice of Termination" to the other party hereto. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice which:
(i) indicates the specific termination provision in this
Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated, (iii) specifies a Date of
Termination, which shall be not less than thirty (30) nor more than ninety (90)
days after such Notice of Termination is given, except in the case of the
Employers' termination of Executive's employment for Cause, and (iv) is given in
the manner specified in Section 7 hereof.
2. BENEFITS UPON TERMINATION
(a) If the Executive's employment by the Employers shall be
terminated subsequent to a Change-in-Control or Potential
Change-In-Control of the Employers (i) by the Employers other
than for Cause, Disability, or as a result of the Executive's
death, or (ii) by the Executive for Good Reason, then the
Employers shall, subject to the provisions of Section 3
hereof, if applicable, pay to the Executive an amount equal to
the sum of 3.0 times the Executive's Average Annual
Compensation. Such payment shall be made in thirty-six (36)
equal monthly installments, beginning on the first day of the
month following the month in which the Executive's employment
as terminated.
(b) If the Executive's employment by the Employers shall be
terminated prior to a Change-in-Control or Potential
Change-in-Control of the Employers other than for Cause, the
Employers shall pay the Executive an amount equal to one and
one-half (1.5) times the Executive's Average Annual
Compensation. Such payment shall be made in eighteen (18)
equal monthly installments, beginning the first day of the
month following the month during which the Executive's
employment is terminated.
3. MITIGATION; EXCLUSIVITY OF BENEFITS.
(a) The Executive shall not be required to mitigate the amount of any
benefits hereunder by seeking other employment or otherwise, nor shall the
amount of any such benefits be reduced by any compensation earned by the
Executive as a result of employment by another employer after the Date of
Termination or otherwise.
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(b) The specific arrangements referred to herein are not intended
to exclude any other benefits which may be available to the
Executive upon a termination of employment with the Employers
pursuant to employee benefit plans of the Employers or
otherwise.
4. COMPETITION; CONFIDENTIAL INFORMATION.
The Executive and the Employers recognize that due to the nature of his
employment, and his relationship with Employers, the Executive has had and will
have access to, and has acquired and will acquire, and has assisted and will
assist in developing, confidential and proprietary information relating to the
business and operations of Employers and their affiliates, including, without
limiting the generality of the foregoing, information with respect to their
present and prospective services, systems, clients, customers, agents, and sales
and marketing methods. The Executive acknowledges that such information has been
and will be of central importance to Employer's business and that disclosure of
it to or its use by others could cause substantial loss to Employers. The
Executive and Employers also recognize that an important part of the Executive's
duties will be to develop good will for Employers through his personal contact
with clients of Employers and that there is a danger that this good will, a
proprietary asset of Employer's may follow the Executive if and when his
relationship with Employers is terminated. The Executive accordingly agrees as
follows:
(a) The Executive agrees that, upon termination of his employment
hereunder:
(i) The Executive will not directly or indirectly accept
employment within a radius of fifty (50) miles
measured from 000-000 Xxxx Xxxxxxxxxx Xxxxxx,
Xxxxxxxxxx, Md. 21741-1179 with any other banking
institution or affiliate thereof, or in connection
with any employment outside of the fifty (50) mile
radius solicit any of the banking business of clients
or customers of the Employers or any of their
affiliates for a period of two years from the date of
such termination.
(ii) The Executive will not in connection with any
employment outside of the fifty (50) mile radius
directly or indirectly solicit the banking business
of any potential client who had been identified and
discussed as such within the Employers by the time of
such termination for a period of two years from such
termination. In the event that the Executive violates
the provisions of this subparagraph without knowledge
of such violation, upon notice from the Employers
informing him of the nature of such violation, the
Executive shall immediately terminate any actions
which constitute such violation.
(b) The Executive shall not retain copies of any documents
(including without limitation, customer lists) containing any
such trade secrets or confidential or proprietary information
of the Employers or their affiliates.
(c) It is recognized that damages in the event of breach of any
provision of this paragraph 4 by the Executive would be
difficult, if not impossible, to ascertain, and it is
therefore agreed that the Employers, in addition to and
without limiting any other remedy or right they may have,
shall have the right to an injunction or other
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equitable relief in any court or competent jurisdiction,
enjoining any such breach; and the Executive hereby waives any
and all defenses he may have on the ground of the lack of
jurisdiction or competence of the court to grant such an
injunction or other equitable relief. The existence of this
right shall not preclude any other rights and remedies at law
or in equity which the Employers may have.
5. WITHHOLDING.
All payments required to be made by the Employers hereunder to the
Executive shall be subject to the withholding of such amounts, if any, relating
to tax and other payroll deductions as the Employers may reasonably determine
should be withheld pursuant to any applicable law or regulation.
6. ASSIGNABILITY.
The Employers may assign this Agreement and their rights hereunder in
whole, but not in part, to any corporation, bank or other entity with or into
which the Employers may hereafter merge or consolidate or to which the Employers
may transfer all or substantially all of their assets, if in any such case said
corporation, bank or other entity shall by operation of law or expressly in
writing assume all obligations of the Employers hereunder as fully as if it had
been originally made a party hereto, but may not otherwise assign this Agreement
or their rights hereunder. The Executive may not assign or transfer this
Agreement or any rights or obligations hereunder.
7. NOTICE.
For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below:
To the Employers: F&M Bancorp
Attn: Xxxx X. Xxxxxx, President
X.X. Xxx 000
Xxxxxxxxx, Xxxxxxxx 00000
To the Executive: Xxxxxxx X. Xxxxxxx, Xx.
0000 Xxxxxxx Xxxx
Xxxxxxxxxx, Xx. 00000
8. AMENDMENT; WAIVER.
No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing signed by
the Executive and such officer or officers as may be specifically designated by
the Boards of Directors of the Employers to sign on their behalf. No waiver by
any party hereto at any time of any breach by any other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be
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deemed a waiver of similar or dissimilar provisions or conditions at the same or
at any prior or subsequent time.
9. GOVERNING LAW.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Maryland.
10. NATURE OF EMPLOYMENT AND OBLIGATIONS.
(a) Nothing contained herein shall be deemed to create other than a
terminable at will employment relationship between the Employers and the
Executive, and the Employers may, subject to such other arrangements as may
exist between the Employers and the Executive, terminate the Executive's
employment at any time, subject to providing any payments specified herein in
accordance with the terms hereof.
(b) Nothing contained herein shall create or require the Employers to
create a trust of any kind to fund any benefits which may be payable hereunder,
and to the extent that the Executive acquires a right to receive benefits from
the Employers hereunder, such right shall be no greater than the right of any
unsecured general creditor of the Employers.
(c) The obligations of the Employers under the terms of this Agreement
shall be enforceable by the Executive on the basis of the respective Employers'
joint and severable liability.
11. TERM OF AGREEMENT.
This Agreement shall terminate three (3) years after the date first
above written; provided that on or prior to the first anniversary of the date
first above written and each anniversary thereafter, the Boards of Directors of
the Employers shall consider (with appropriate corporate documentation thereof,
and after taking into account all relevant factors, including Executive's
performance as an employee) renewal of the term of this Agreement for an
additional one (1) year, and the term of this Agreement shall be so extended
unless the Boards of Directors of Employers do not approve such renewal and
provide written notice to the Executive, or the Executive gives written notice
to the Employers, thirty (30) days prior to the date of any such anniversary, of
such party's or parties' election not to extend the term beyond their then
scheduled expiration date; and provided further that, notwithstanding the
foregoing to the contrary, this Agreement shall be automatically extended for an
additional one (1) year upon a Change-in-Control of the Employers.
12. HEADINGS
The section headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
13. VALIDITY.
The invalidity or unenforceability of any provision of this Agreement
shall not affect the
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validity or enforceability of any other provisions of this Agreement, which
shall remain in full force and effect.
14. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
15. REGULATORY PROHIBITION.
Notwithstanding any other provision of this Agreement to the contrary,
the obligations of the Employers and the Executive hereunder shall be suspended
or limited, as the case may be, in the event that the FDIC prohibits or limits,
by regulation or order, any payment hereunder pursuant to Section 18(k) of the
FDIA (12 U.S.C. Section 1828(k)).
IN WITNESS WHEREOF, this Agreement has been executed as of the date
first above written.
Attest: F&M BANCORP, FOR ITS SELF AND ITS SUBSIDIARY, HOME FEDERAL
SAVINGS BANK
______________________ By: ______________________________
Xxxx X. Xxxxxx, President
and Chief Executive Officer
---------------------- ------------------------------
Witness Xxxxxxx X. Xxxxxxx, Xx.,
Executive
