RESTRICTIVE COVENANT AGREEMENT
Exhibit 10.5
RESTRICTIVE COVENANT AGREEMENT
This Restrictive Covenant Agreement, (the "Agreement"), made this the 23rd day of September, 2008, and effective as of the Commencement Date (as defined below) by and betweenHampton Roads Bankshares, Inc., a Virginia corporation ("HRB"), with a principal address of 000 Xxxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxx (23510) and Xxxxx X. Xxxxxx (the "Officer"), with an address of 000 Xxxxxxx Xxxxx, Xxxxxxxxx Xxxx, Xxxxx Xxxxxxxx (27909).
WITNESSETH:
WHEREAS, this Agreement is entered into by HRB and Officer as a condition of the closing of a merger pursuant to that certain Agreement and Plan of Merger (the “Merger Agreement”) dated September 23, 2008, by and between HRB and Gateway Financial Holdings, Inc., a North Carolina financial holding company, (“GFH”), whereby GFH will be merged into HRB and GFH’s wholly owned subsidiary, Gateway Bank & Trust Co., a North Carolina chartered commercial bank (“Gateway”), will become a wholly owned subsidiary of HRB ( the “Merger”);
WHEREAS, Officer is being directly and materially benefited as an equity holder in and executive of GFH as a result of the Merger and through this Agreement with HRB;
WHEREAS, Officer desires to render valuable services to HRB and it is the desire of the HRB to have the benefit of Officer's continued and future loyalty, service and counsel;
WHEREAS, HRB is a Virginia bank holding company which currently has two (2) wholly owned bank subsidiaries and as a consequence of the Merger, will become the parent company of Gateway;
WHEREAS, Officer has particular and peculiar knowledge and background in the operation of a business of the nature of HRB’s business or future business, specifically Gateway’s operations;
WHEREAS, Officer is currently employed as the President of GFH and will become the Chief Executive Officer of Gateway an executive officer of HRB after the closing of the Merger Agreement;
WHEREAS, upon closing of the Merger Agreement, Officer will have integral knowledge of the confidential and trade secret information of HRB and Gateway; and
WHEREAS, HRB desires to protect its investment in GFH, Gateway, Shore Bank and Bank of Hampton Roads and any of its subsidiaries from unfair competition and its confidential information from unauthorized disclosure or misappropriation.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein set forth, the parties covenant and agree as follows:
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Effective Date; Payment to Officer upon Closing of Merger. |
The effective date of this Agreement shall be the closing date of the Merger Agreement; provided, however, this Agreement shall be null and void ab initio if Officer is not serving as the President of GFH on the closing date of the Merger Agreement. In consideration for his covenants and obligations as set forth herein, HRB will pay to Officer a net after-tax amount of Four Hundred Twenty-Five Thousand Dollars and no cents ($425,000.00) upon the closing of the Merger Agreement.
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Restrictive Covenants. |
(a) During Officer's employment with Gateway and for a period of one (1) year following the date Officer's employment with Gateway ends, Officer will not, directly or indirectly, either as a principal, agent, employee, employer, stockholder, partner or in any other individual or representative capacity whatsoever, serve in a position where Officer is engaged in the process of providing services or products that compete with the services or products provided by HRB or any direct or indirect wholly owned subsidiary of HRB, including, but not limited to, Gateway, Bank of Hampton Roads and Shore Bank, their successors or assigns, at any time during the last year of Officer’s employment with Gateway. This restriction shall only apply within a one-hundred (100) mile radius of any office or branch operated by Gateway, Shore Bank, Bank of Hampton Roads, HRB or any direct or indirect wholly owned subsidiary of HRB on the date Officer’s employment with Gateway ends.
(b) During Officer's employment with Gateway and for a period of one (1) year following the later of (i) the date Officer's employment with Gateway ends or (ii) the date Officer ceases to receive any payment from Gateway pursuant to any agreement (except as provided below), Officer will not solicit, or assist any person or entity to solicit, any person or entity who, during the six (6) month period prior to the date Officer’s employment with Gateway ends, paid or engaged Gateway, Shore Bank, Bank of Hampton Roads, HRB or any direct or indirect wholly owned subsidiary of HRB, for products or services, for the purpose of providing services or selling products where those services or products compete with the services or products offered by Gateway, Shore Bank, Bank of Hampton Roads, HRB or any direct or indirect wholly owned subsidiary of HRB, as of the date Officer’s employment with Gateway ends. If Officer’s employment with Gateway is terminated by either Gateway or Officer as a result of a “Change in Control” of HRB, then the duration of the restriction set forth in this section 2(b) shall be one (1) year from the date Officer’s employment with Gateway ends. For purposes of this Agreement, a “Change in Control” shall be defined as (a) the date that any one person, or more than one person, acting as a group, acquires ownership of stock of HRB that, together with stock held by such person or group constitutes more than 50% of the total fair market value or total voting power of the stock of HRB , (b) the date any one person, or more than one person, acting as a group, acquires (or has acquired ownership during the twelve (12) month period ending on the date of the most recent acquisition by such person) ownership of stock of HRB possessing 30% or more of the total voting power of the stock, or (c) the date a majority of the members of HRB’s Board of Directors are replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of HRB’s Board of Directors before the date of the appointment or election.
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(c) During Officer's employment with Gateway and for a period of one (1) year following the later of (i) the date Officer’s employment with Gateway ends or (ii) the date Officer ceases to receive any payment from Gateway pursuant to any agreement, Officer agrees that he will not on his own behalf or on behalf of any person or entity, in any capacity, solicit, recruit or hire or assist others in soliciting, recruiting or hiring any person who, during the twelve (12) months preceding the termination of Officer's employment with Gateway, was an employee or officer with Gateway, Shore Bank, Bank of Hampton Roads, HRB or any direct or indirect wholly owned subsidiary of HRB. If Officer’s employment with Gateway is terminated by either Gateway or the Officer as a result of a “Change in Control” (as defined above) of HRB, then the duration of the restriction set forth in this section 2(c) shall be one (1) year from the date Officer’s employment with Gateway ends.
(d) During Officer's employment with Gateway, and at all times thereafter, Officer agrees not to disclose, communicate or divulge to any third party, or use, or permit others to use, any confidential information of Gateway, Shore Bank, Bank of Hampton Roads, HRB or any direct or indirect wholly owned subsidiary of HRB. For purposes of this Agreement, “confidential information” shall mean all information disclosed to Officer, or known to Officer as a consequence of or through Officer’s employment with Gateway, where such information is not generally known by the public or was regarded or treated as proprietary by Gateway, Shore Bank, Bank of Hampton Roads, HRB or any direct or indirect wholly owned subsidiary of HRB.
Subsections (a), (b), (c), and (d) of this Section 2 are intended by the parties hereto as separate and divisible provisions, and if for any reason either one is held to be invalid or unenforceable, neither the validity nor the enforceability of the other shall thereby be affected. If any court holds that the whole or any part of Subsections (a), (b), (c), and (d) is unenforceable by reason of the extent, duration or geographic scope thereof, or otherwise, then the court making such determination shall have the right to reduce such extent, duration, geographic scope, or other provisions hereof, and in its reduced form such Section shall be enforceable in the manner contemplated hereby.
3. Notice of Subsequent Employment. For a period which is the later of one (1) year (i) after Officer's employment with Gateway ends or (ii) the date Officer ceases to receive any payment from Gateway pursuant to any agreement, Officer agrees to notify Gateway of the name and address of Officer's employer and Officer hereby authorizes Gateway to contact any such employer during that period for the limited purpose of making the employer aware of this Agreement and protection against any disclosure of confidential and proprietary information, or unfair competition. If Officer’s employment with Gateway is terminated by either Gateway or Officer as a result of a “Change in Control” (as defined above) of HRB, then the obligations required of Officer set forth in this section 3 shall be one (1) year from the date Officer’s employment with Gateway ends.
4. Remedies. Officer acknowledges that if Officer breaches or threatens to breach this Agreement, in addition to any and all other rights and remedies it may have, HRB shall be entitled to injunctive relief, both temporary and permanent, against Officer, as Officer recognizes that a remedy at law would be inadequate and insufficient. HRB shall be entitled to recover from Officer all costs
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and expenses, including but not limited to reasonable attorney's fees and court costs, incurred by HRB as a result of or arising out of any breach of threatened breach under or pursuant to this Agreement in addition to such other rights and remedies as HRB may have under this Agreement or any other agreement, at law or in equity.
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Miscellaneous. |
(a) Waiver. A waiver by any party of any of the terms and conditions of this
(b) Severabilitv. If any provision of this Agreement, as applied to any circumstances, shall be adjudged by a court to be void and unenforceable, the same shall in no way affect any other provision of this Agreement or the applicability of such provision to any other circumstances.
(c) Amendment. This Agreement may not be varied, altered, modified, changed, or in any way amended except by an instrument in writing, executed by the parties
hereto or their legal representatives.
(d) Nonassignabilitv of Payments. Neither Officer nor his estate shall have any right to commute, sell, assign, transfer or otherwise convey the right to receive any payments hereunder, which payments and the right thereto are expressly declared to be nonassignable and nontransferable.
(g) Assignment. Officer shall not have the right to transfer or assign any or all of his or her rights or interest hereunder. This Agreement may be assigned by HRB.
(h) Background, Enumerations and Headings. The Background, enumerations and headings contained in this Agreement are for convenience of reference only and are not intended to have any substantive significance in interpreting this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.
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Officer: |
Hampton Roads Bankshares, |
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a Virginia banking corporation |
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/s/ Xxxxx X. Xxxxxx (SEAL) |
By: /s/ Xxxx X. Xxxxxx |
(SEAL) |
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Xxxxx X. Xxxxxx |
Print Name: Xxxx X. Xxxxxx
Title: Vice Chairman, President and
Chief Executive Officer
Date: December 31, 2008 Date: December 31, 2008
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