Exhibit 10.12
CHANGE IN CONTROL PROTECTION AGREEMENT
AGREEMENT effective as of this 3rd day of June 2004 by and between
Cooperative Bank, a North Carolina-chartered commercial bank (the "Bank"), and
X.X. Xxxxxxx, Xx., an individual (the "Employee").
WHEREAS, the Bank considers it essential to xxxxxx the continuous
employment of key management personnel by minimizing the uncertainty, departures
or distractions of management personnel associated with a Change in Control;
NOW THEREFORE, the Bank and the Employee, in consideration of the premises
and mutual covenants contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
agree as follows:
1. CHANGE IN CONTROL. A "Change in Control" shall be deemed to have
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occurred in any one of the following events:
(a) Merger: The Bank's parent holding company, Cooperative
Bankshares, Inc., (the "Company") merges into or consolidates
with another corporation, or merges another corporation into the
Company and as a result less than a majority of the combined
voting power of the resulting corporation immediately after the
merger or consolidation is held by persons who were stockholders
of the Company immediately before the merger or consolidation;
(b) Acquisition of Significant Share Ownership: a report on Schedule
13D or another form or schedule (other than Schedule 13G) is
filed or is required to be filed under Sections 13(d) or 14(d) of
the Securities Exchange Act of 1934, if the schedule discloses
that the filing person or persons acting in concert has or have
become the beneficial owner of 25% or more of a class of the
Company's voting securities, but this clause (b) shall not apply
to beneficial ownership of Company voting shares held in a
fiduciary capacity by an entity of which Company directly or
indirectly beneficially owns 50% or more of its outstanding
voting securities;
(c) Change in Board Composition: during any period of two consecutive
years, individuals who constitute the Bank's or the Company's
Board of Directors at the beginning of the two-year period cease
for any reason to constitute at least a majority of such Board of
Directors; provided, however, that for purposes of this clause
(c) each director who is first elected by the board (or first
nominated by the board for election by stockholders) by a vote of
at least two-thirds of the directors who were directors at the
beginning of the period shall be deemed to have been a director
at the beginning of the two-year period; or
(d) Sale of Assets: The Company sells to a third party all or
substantially all of the Company's assets.
2. TERMINATING EVENT. A "Terminating Event" shall mean any of the events
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provided in this Section 2 occurring on or subsequent to the effective
date of a Change in Control:
(a) termination by the Bank of the employment of the Employee with
the Bank for any reason other than for Just Cause. Termination
for "Just Cause" shall mean termination by the Bank of the
employment of the Employee with the Bank because of the
Employee's personal dishonesty, incompetence, willful misconduct,
breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, or a willful violation of any
law, rule, or regulation (other than traffic violations or
similar infractions) or final cease-and-desist order or material
breach of any provision of this Agreement, provided, however,
that no act, or failure to act, on the Employee's part shall be
deemed "willful" unless done, or omitted to be done, by the
Employee without reasonable belief that the Employee's act, or
failure to act, was in the best interest of the Bank and any of
its subsidiaries.
(b) termination by the Employee of the Employee's employment with the
Bank for Good Reason. Termination for "Good Reason" shall mean
termination following or upon the occurrence of any of the
following events:
(i) a significant adverse change, not consented to by the
Employee, in the nature or scope of the Employee's
responsibilities, authorities, powers, title, functions or
duties from the responsibilities, authorities, powers,
title, functions or duties exercised by the Employee
immediately prior to the Change in Control; or
(ii) a reduction in the Employee's annual base compensation as in
effect on the date hereof or as the same may be increased
from time to time; or
(iii)an attempt by the Bank to relocate the Employee to, or to
require him to perform regular services, at any location
that is outside of the metropolitan area of Wilmington,
North Carolina; or
(iv) except as required by law, the failure by the Bank or any of
its subsidiaries to continue in effect any benefits or
prerequisites, or any retirement, life insurance, health
insurance or disability plan in which the Employee was
participating immediately prior to the Change in Control
unless the Bank or its successor provides the Employee with
a plan or plans that provide substantially similar benefits,
or the taking of any action by the Bank that would adversely
affect the Employee's benefits under any such plans or
deprive the Employee of any material fringe benefit enjoyed
by the Employee immediately prior to the Change in Control;
or
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(v) the failure by the Bank to obtain an effective agreement
from any successor to assume and agree to perform this
Agreement.
Notwithstanding anything in this Agreement to the contrary, during the
twelve (12) month period beginning on the effective date of a Change in Control
(as defined in Section 1) and continuing through the first anniversary of such
date, the Executive may voluntarily terminate his employment under this
Agreement for any reason and such termination shall constitute termination for
Good Reason.
3. SEVERANCE PAYMENT. In the event a Terminating Event occurs within two
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years after a Change in Control,
(a) the Bank shall pay to the Employee a sum equal to 2.99 times the
Employee's "base amount," within the meaning of ss.280G(b)(3) of
the Internal Revenue Code of 1986 ("Code"), as amended. Such
payment shall be made in a lump sum not later than thirty (30)
days after the Terminating Event.
(b) the Bank shall continue the Employee's benefits under any of the
Bank's medical and benefit plans, life insurance plans, and
disability income plans, (collectively, the "Employee Benefit
Plans" and each individually an "Employee Benefit Plan"), upon
the same terms as in effect on the date of the Terminating Event
through the 36-month period following the Terminating Event.
Solely for purposes of benefits continuation under the Employee
Benefit Plans, the Employee shall be deemed to be an active
employee. To the extent that benefits required under this Section
3(b) cannot be provided under the terms of any Employee Benefit
Plan, the Bank shall enter into alternative arrangements that
will provide the Employee with comparable benefits.
4. LIMITATION ON BENEFITS. Notwithstanding anything in this Agreement to
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the contrary, in the event that the aggregate payments or benefits to
be made or afforded to Employee under this Agreement, together with
any other payments or benefits received or to be received by Employee
in connection with a Change in Control, would be deemed to include an
"excess parachute payment" under ss.280G of the Code, then such
payments or benefits shall be reduced to the extent necessary to avoid
treatment as an excess parachute payment with the allocation of any
reduction among such payments and benefits to be determined by
Employee.
5. TERM. This Agreement shall take effect on the date first set forth
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above and remain in effect for so long as the Employee remains an
Employee of the Bank, subject to the rights of the Employee hereunder
upon the occurrence of a Terminating Event.
6. WITHHOLDING. All payments made by the Bank under this Agreement shall
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be net of any tax or other amounts required to be withheld by the Bank
under applicable law.
7. NO MITIGATION. The Bank agrees that, if the Employee's employment by
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the Bank is terminated during the term of this Agreement, the Employee
is not required to seek other
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employment or to attempt in any way to reduce any amounts payable or
benefits to be provided to the Employee by the Bank pursuant to
Section 3(a) and (b) hereof. Further, the amount of any payment
provided for in this Agreement shall not be reduced by any
compensation earned by the Employee as the result of employment by
another employer, by retirement benefits, by offset against any amount
claimed to be owed by the Employee to the Bank or otherwise.
8. ASSIGNMENT. Neither the Bank nor the Employee may make any assignment
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of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other party, and
without such consent any attempted transfer shall be null and void and
of no effect. This Agreement shall inure to the benefit of and be
binding upon the Bank and the Employee, their respective successors,
executors, administrators, heirs and permitted assigns, including, in
the case of the Bank, any other corporate entity which the Bank may be
merged or otherwise combined or which may acquire the Bank or its
assets in whole or substantial part. In the event of the Employee's
death after a Terminating Event but prior to the completion by the
Bank of all payments due him under Section 3(a) and (b) of this
Agreement, the Bank shall continue such payments to the Employee's
beneficiary designated in writing to the Bank prior to his death (or
to his estate, if the Employee fails to make such designation).
9. ENFORCEABILITY. If any portion or provision of this Agreement shall to
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any extent be declared illegal or unenforceable by a court of
competent jurisdiction, then the remainder of this Agreement, or the
application of such portion or provision in circumstances other than
those as to which it is so declared illegal or unenforceable, shall
not be affected thereby, and each portion and provision of this
Agreement shall be valid and enforceable to the fullest extent
permitted by law.
10. WAIVER. No waiver of any provision hereof shall be effective unless
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made in writing and signed by the waiving party. The failure of any
party to require the performance of any term or obligation of this
Agreement, or the waiver by any party of any breach of this Agreement,
shall not prevent any subsequent enforcement of such term or
obligation or be deemed a waiver of any subsequent breach.
11. NOTICES. Any notices, requests, demands and other communications
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provided for by this Agreement shall be sufficient if in writing and
delivered in person or sent by registered or certified mail, postage
prepaid, to the Employee at the last address the Employee has filed in
writing with the Bank, or to the Bank at its main office, attention of
the Board of Directors.
12. EFFECT ON OTHER PLANS; PRIOR AGREEMENTS. An election by the Employee
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to resign after a Change in Control under the provisions of this
Agreement shall not be deemed a voluntary termination of employment by
the Employee for the purpose of interpreting the provisions of any of
the Bank's benefit plans, programs or policies. Nothing in this
Agreement shall be construed to limit the rights of the Employee under
the Bank's benefit plans, programs or policies except as otherwise
provided in Section 4 hereof, and except that the Employee shall have
no rights to any severance benefits under any severance pay plan. This
Agreement supercedes and replaces in its entirety the Agreement dated
12/18/97 between the Employee and the Bank.
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13. REIMBURSEMENT OF EXPENSES. In the event any dispute shall arise
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between the Employee and the Bank as to the terms or interpretation of
this Agreement, whether instituted by formal legal proceedings or
otherwise, including any action taken by the Employee to enforce the
terms hereof or in defending against any action taken by the Bank, the
Bank shall reimburse the Employee for all costs and expenses,
including reasonable attorneys' fees, arising from such dispute,
proceedings or actions, if the ultimate outcome is substantially in
favor of the Employee. Such reimbursement shall be paid within 10 days
of Employee furnishing to the Bank written evidence, which may be in
the form, among other things, of a canceled check or receipt, of any
costs or expenses incurred by the Employee. Any such request for
reimbursement by the Employee shall be made no more frequently than at
30 day intervals.
14. AMENDMENT. This Agreement may be amended or modified only by a written
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instrument signed by the Employee and by a duly authorized
representative of the Bank.
15. GOVERNING LAW. This is a North Carolina contract and shall be
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construed under and be governed in all respects by the laws of the
State of North Carolina, without regard to conflict of law principles.
16. OBLIGATIONS OF SUCCESSORS. In addition to any obligations imposed by
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law upon any successor to the Bank, the Bank will use its best efforts
to require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the
business or assets of the Bank to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that
the Bank would be required to perform if no such succession had taken
place.
17. CONTRACT OF EMPLOYMENT. Nothing in this Agreement shall be construed
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as creating an express or implied contract of employment and, except
as otherwise agreed in writing between the Employee and the Bank, the
Employee shall not have any right to be retained in the employ of the
Bank.
18. REGULATORY REQUIREMENTS.
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(a) If the Employee is suspended and/or temporarily prohibited from
participating in the conduct of the Bank's affairs by a notice
served under Section 8(e)(3) or (8)(1) of the Federal Deposit
Insurance Act ("FDIA") (12 U.S.C,. 1818(e)(3) and (g)(1)), the
Bank's obligations under the contract shall be suspended as of
the date of service, unless stayed by appropriate proceedings. If
the charges in the notice are dismissed, the Bank may in its
discretion (i) pay the Employee 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 which were
suspended.
(b) If the Employee is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order
issued under Section 8(e)(4) or (g)(1) of the FDIA (12 U.S.C.
1818(e)(4) or (g)(1)), all the obligations of the Bank under the
Agreement shall terminate as of the effective date of the order,
but vested rights of the contracting parties shall not be
affected.
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(c) If the Bank is in default (as defined in Section 3(x)(1) of the
FDIA), all obligations under this Agreement shall terminate as of
the date of default, but this subparagraph shall not affect any
vested rights of the contracting parties.
IN WITNESS WHEREOF, this Agreement has been executed by the parties as of
the date first written above.
COOPERATIVE BANK
Name: Xxxxxxxxx Xxxxxxxx, III
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Title: Chairman, President, CEO
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X.X. Xxxxxxx, Xx.
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Employee Name
/s/ X.X. Xxxxxxx, Xx.
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Employee Signature
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