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November 30, 2004
THIS
CHANGE IN CONTROL AGREEMENT (this “Agreement”), is made as of this 30th day
of November, 2004, among VALLEY NATIONAL BANK (“Bank”), a national
banking association with its principal office at 0000 Xxxxxx Xxxx, Xxxxx, Xxx Xxxxxx,
XXXXXX NATIONAL BANCORP (“Valley”), a New Jersey corporation which
maintains its principal office at 0000 Xxxxxx Xxxx, Xxxxx, Xxx Xxxxxx (Valley and the
Bank collectively are the “Company”) and XXXXXXX X. XXXXXX (the “Executive”).
BACKGROUND
WHEREAS,
the Executive has been continuously employed by the Bank for at least three full years;
WHEREAS,
the Executive throughout his tenure has worked diligently in his position in the
business of the Bank and Valley;
WHEREAS,
the Boards of Directors of the Bank and Valley (either one, the “Board of
Directors” and, together, the “Company Boards”) believe that
the future services of the Executive are of great value to the Bank and Valley and that
it is important for the growth and development of the Bank that the Executive continue in
his position;
WHEREAS,
if the Company receives any proposal from a third person concerning a possible business
combination with, or acquisition of equities securities of, the Company, the Company
Boards believe it is imperative that the Company and the Company Boards 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 Company Boards 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 the Company, as hereinafter defined.
NOW,
THEREFORE, to assure the 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 the Company, and to induce the
Executive to remain in the employ of the Company, and for other good and valuable
consideration, the Company and the Executive, each intending to be legally bound hereby
agree as follows:
1. Definitions
a. Base
Salary. “Base Salary”, as used in Section 9 hereof, means
the annual cash base salary (excluding any bonus and the value of any fringe
benefits) paid to the Executive at the time of the termination of employment
unless such amount has been reduced after a Change in Control, in which case
such amount shall be the highest base salary in effect during the 18 months
prior to the Change in Control.
b. Cause.
For purposes of this Agreement “Cause” with respect to the
termination by the Company of Executive’s employment shall mean (i)
willful and continued failure by the Executive to perform his duties for the
Company under this Agreement after at least one warning in writing from the
Board of Directors identifying specifically any such failure; (ii) the willful
engaging by the Executive in misconduct which causes material injury to the
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,
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 the
Company.
c. Change
in Control. “Change in Control” means any of the following
events: (i) when Valley or a Valley Subsidiary acquires actual knowledge that
any person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange
Act), other than an affiliate of Valley or a Valley Subsidiary or an employee
benefit plan established or maintained by Valley, a Valley Subsidiary or any of
their respective affiliates, is or becomes the beneficial owner (as defined in
Rule 13d-3 of the Exchange Act) directly or indirectly, of securities of Valley
representing more than twenty-five percent (25%) of the combined voting power
of Valley’s then outstanding securities (a “Control Person”); (ii)
upon the first purchase of Valley’s common stock pursuant to a tender or
exchange offer (other than a tender or exchange offer made by Valley, a Valley
Subsidiary or an employee benefit plan established or maintained by Valley,
a Valley Subsidiary or any of their respective affiliates); (iii) the consummation of (A)
a transaction, other than a Non-Control Transaction, pursuant to which Valley is merged
with or into, or is consolidated with, or becomes the subsidiary of another corporation,
(B) a sale or disposition of all or substantially all of Valley’s assets or (C) a
plan of liquidation or dissolution of Valley; (iv) if during any period of two (2)
consecutive years, individuals (the “Continuing Directors”) who at the
beginning of such period constitute the Board of Directors of Valley (the “Valley
Board”) cease for any reason to constitute at least 60% thereof or, following a
Non-Control Transaction, 60% of the board of directors of the Surviving Corporation;
provided that any individual whose election or nomination for election as a member
of the Valley Board (or, following a Non-Control Transaction, the board of directors of
the Surviving Corporation) was approved by a vote of at least two-thirds of the Continuing
Directors then in office shall be considered a Continuing Director; or (v) upon a sale of
(A) common stock of the Bank if after such sale any person (as such term is used in
Section 13(d) and 14(d)(2) of the Exchange Act) other than Valley, an employee benefit
plan established or maintained by Valley or a Valley Subsidiary, or an affiliate of Valley
or a Valley Subsidiary, owns a majority of the Bank’s common stock or (B) all or
substantially all of the Bank’s assets (other than in the ordinary course of
business). For purposes of this paragraph: (I) Valley will be deemed to have become a
subsidiary of another corporation if any other corporation (which term shall include, in
addition to a corporation, a limited liability company, partnership, trust, or other
organization) owns, directly or indirectly, 50 percent or more of the total combined
outstanding voting power of all classes of stock of Valley or any successor to Valley;
(II) “Non-Control Transaction” means a transaction in which Valley is
merged with or into, or is consolidated with, or becomes the subsidiary of another
corporation pursuant to a definitive agreement providing that at least 60% of the
directors of the Surviving Corporation immediately after the transaction are persons who
were directors of Valley on the day before the first public announcement relating to the
transaction; (III) the “Surviving Corporation” in a transaction in
which Valley becomes the subsidiary of another corporation is the ultimate parent entity
of Valley or Valley’s successor; (IV) the “Surviving
Corporation” in any other transaction pursuant to which Valley is merged with or
into another corporation is the surviving or resulting corporation in the merger or
consolidation; and (V) “Valley Subsidiary” means any corporation in an
unbroken chain of corporations, beginning with Valley, if each of the corporations other
than the last corporation in the unbroken chain owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other corporations in
such chain.
d. Continuously
Employed. “Continuously employed”, as used in Section 9,
means continuously employed by the Bank but excludes any period of employment
by a bank or financial institution acquired by or merged into the Bank and
excludes any period of employment by the Bank if such period is separated from
the current employment with the Bank by a break in service (other a break in
service resulting solely from illness, disability or family leave).
e. 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 first anniversary of the Change in Control or (ii) the date the
Executive would attain age 65 or (iii) the death of the Executive. For the
purpose of this Agreement, a Change in Control shall be deemed to have occurred
at the date specified in the definition of Change-in-Control.
f. Exchange
Act. “Exchange Act” means the Securities Exchange Act of
1934, as amended.
g. Good
Reason. When used with reference to a voluntary termination by Executive of
his employment with the 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, duties,
responsibilities and status with the Company immediately prior to a Change in
Control. A change in title or positions resulting merely from a merger of the
Bank or Valley into or with another bank or company which does not downgrade in
any way the Executive’s powers, duties and responsibilities shall not meet
the requirements of this paragraph;
(2) A
reduction by the 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 the Company to continue any bonus plan in which Executive
participated immediately prior to the Change in control or a failure by the
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 more than
35 miles from his present office location, except for required travel on the
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 the Company to continue in effect any employee benefit plan, program
or arrangement (including, without limitation the Company’s retirement
plan, benefit equalization plan, life insurance plan, health and accident plan,
disability plan, deferred compensation plan or long term stock incentive plan)
in which Executive is participating immediately prior to a Change in Control
(except that the Company may institute or continue plans, programs or
arrangements providing Executive with substantially similar benefits); the
taking of any action by the 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 the 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 by the Company to obtain an assumption in writing of the obligations of
the Company to perform this Agreement by any successor to the 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 the Company during the
term of this Agreement which is not effected pursuant to all of the
requirements of this Agreement; and, for purposes of this Agreement, no such
purported termination shall be effective.
h. Pro-rata
Bonus Amount. “Pro-rata Bonus Amount”, as used in Section
9, means an amount equal to a “portion” of the highest cash bonus
paid to the Executive in the three calendar years immediately prior to the
Change in Control. The “portion” of such cash bonus shall be a
fraction, the numerator of which is the number of calendar months or part
thereof which the Executive has worked in the calendar year in which the
termination occurs and the denominator of which is 12.
2. Employment.
The 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 by the bank as a
Senior Officer, or such other corporate or divisional profit center as shall
then be the principal successor to the business, assets and properties of the
Company, with substantially 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 the 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. The Company shall pay to the Executive compensation for his
services during the Contract Period as follows:
a. Base
Salary. A base annual salary equal to the annual salary in effect as of the
Change in Control. The annual salary shall be payable in installments in
accordance with the Company’s usual payroll method.
b. Annual
Bonus. An annual cash bonus equal to at least the average of the bonuses
paid to the Executive in the three years prior to the Change in Control. The
bonus shall be payable at the time and in the manner which the Company paid
such bonuses prior to the Change in Control.
c. Annual
Review. The Board of Directors during the Contract Period shall review
annually, or at more frequent intervals which the Board of Directors determines
is appropriate, the Executive’s compensation and shall award him
additional compensation to reflect the Executive’s performance, the
performance of the Company and competitive compensation levels, all as
determined in the discretion of the Board of Directors.
5. Expenses
and Fringe Benefits.
a. Expenses.
During the Contract Period, the Executive shall be entitled to reimbursement
for all business expenses incurred by him with respect to the business of the
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.
b. Benefit
Equalization Plan. During the Contract Period, if the Executive was
entitled to benefits under the Company’s Benefit Equalization Plan (“BEP”)
prior to the Change in Control, the Executive shall be entitled to continued
benefits under the BEP after the Change in Control and such BEP may not be
modified to reduce or eliminate such benefits during the Contract Period.
c. Club
Membership and Automobile. If prior to the Change in Control, the Executive
was entitled to membership in a country club and/or the use of an automobile,
he shall be entitled to the same membership and/or use of an automobile at
least comparable to the automobile provided to him prior to the Change in
Control.
d. Other
Benefits. The Executive also shall be entitled to vacations and sick days,
in accordance with the practices and procedures of the 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 senior
officers of the Company, all upon terms as favorable as those enjoyed by other
senior officers of the Company. Notwithstanding anything in this paragraph 5(d)
to the contrary, if the Company adopts any change in the benefits provided for
senior officers of the Company, and such policy is uniformly applied to all
officers of the Company (and any successor or acquirer of the Company, if any),
then no such change shall be deemed to be contrary to this paragraph.
6. Termination
for Cause. The 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 4 consecutive months in any 12 month
period, the Company may terminate the employment of the Executive. In such
event, the Executive shall not be entitled to any further benefits under this
Agreement.
8. Death
Benefits. Upon the Executive’s death during the Contract Period, his
estate shall not be entitled to any further benefits under this Agreement.
9. Termination
Without Cause or Resignation for Good Reason. The Company may terminate the
Executive without Cause during the Contract Period by written notice to the
Executive providing four weeks notice. The Executive may resign for Good Reason
during the Contract Period upon four weeks’ written notice to the Company
specifying facts and circumstances claimed to support the Good Reason. The
Executive shall be entitled to give a Notice of Termination that his or her
employment is being terminated for Good Reason at any time during the Contract
Period, not later than twelve months after any occurrence of an event stated to
constitute Good Reason. If the Company terminates the Executive’s
employment during the Contract Period without Cause or if the Executive Resigns
for Good Reason, the Company shall, subject to section 12 hereof:
a. Within
20 business days of the termination of employment pay the Executive a lump sum
equal to: (i), if the Executive has been continuously employed by the Bank for
6 full years or more, two (2) years of Base Salary plus a Pro-rata Bonus Amount
or (ii), if the Executive has been continuously employed by the Bank for less
than 6 full years but more than three years, then one (1) year of Base Salary
plus a Pro-rata Bonus Amount; and
b. Continue
to provide the Executive with medical, dental and life insurance for the period
equal to the equivalent period of the lump sum payment (i.e. 1 or 2 years) as
were provided at the time of termination of his employment with the Company, at
the Company’s cost (subject to normal co-pays, deductible and employee
contributions). Upon expiration of benefit coverages, full COBRA benefits (18
months) will be made available to Executive.
The
Executive shall not have a duty to mitigate the damages suffered by him in connection
with the termination by the Company of his employment without Cause or a resignation for
Good Reason during the Contract Period. If the Company fails to pay the Executive the
lump sum amount due him hereunder or to provide him with the health, hospitalization and
insurance benefits due under this section, the Executive, after giving 10 days’ written
notice to the Company identifying the Company’s failure, shall be entitled to
recover from the Company all of his reasonable legal fees and expenses incurred in
connection with his enforcement against the Company of the terms of this Agreement. The
Executive shall be denied payment of his legal fees and expenses only if a court finds
that the Executive sought payment of such fees without reasonable cause.
10. Resignation
Without Good Reason. The Executive shall be entitled to resign from the
employment of the Company at any time during the Contact 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
the 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
the Company and in the pursuit of the business of the 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 the 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 the 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 affect 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. Certain
Reduction of Payments by the Company.
a. Anything
in this Agreement to the contrary notwithstanding, prior to the payment of any
lump sum amount payable hereunder, the certified public accountants of the
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 the 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 the
Company for Federal income purposes because of Section 280G 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 the Company because of said Section 280G 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 the Company
because of Section 280G of the Code, the 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 the 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, the 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
the Company and Executive shall be made within 20 business days of a
termination of employment of Executive. With the consent of the Executive, the
Company may suspend part or all of the lump sum payment due under Section 9
hereof and any other payments due to the Executive hereunder until the
Certified Public Accountants finish the determination and the Executive (or the
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, the 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 280G of the Code, it
is possible that Agreement Payments may have been made by the Company which
should not have been made (“Overpayment”) or that additional
Agreement Payments which will have not been made by the 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 the Company or Executive which said Certified Public
Accountants 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 the 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 the Company in and for 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 the 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.
13. 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, prior to a Change in Control,
the Personnel and Compensation Committee of the Bank notifies the Executive in
writing at any time that the Contract is not so extended, in which case the
Initial Term shall end upon the later of (i) 3 years after the date hereof, or
(ii) twenty-four months after the date of such written notice. Notwithstanding
anything to the contrary contained herein, the Initial Term shall cease when
the Executive reaches age 65.
b. No
Effect Prior to Change in Control. This Agreement shall not effect any
rights of the Company to terminate the Executive prior to a Change in Control
or any rights of the Executive granted in any other agreement or contract or
plan with the Company. The rights, duties and benefits provided hereunder shall
only become effective upon and after a Change in Control. If the full-time
employment of the Executive by the Company is ended for any reason prior to a
Change in Control, this Agreement shall thereafter be of no further force and
effect.
14. 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 or agreements with the Company, except that if the Executive received any
payment hereunder, he shall not be entitled to any payment under the Company’s
severance policy for officers and directors.
15. Miscellaneous.
This Agreement is the joint and several obligation of the Bank and Valley. The
terms of this Agreement shall be governed by, and interpreted and construed in
accordance with the provisions of, the laws of New Jersey. This Agreement
supersedes all prior agreements and understandings with respect to the matters
covered hereby, including expressly any prior agreement with the Company
concerning change in control benefits. The amendment or termination of this
Agreement may be made only in a writing executed by the 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 the
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.
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