Exhibit 10.5
AGREEMENT
THIS AGREEMENT, dated as of November 22, 1995 (the "Agreement"), is by and
between Covenant Bank for Savings, a New Jersey savings bank (the "Company"),
and Xxxxxxx X. Xxxxx, Xx. (the "Employee").
BACKGROUND
The Company considers it essential to the best interests of its
stockholders to xxxxxx the continuous employment of the Employee. In this
connection, the Board of Directors of the Company (the "Board") recognizes that,
in the future, the possibility of a termination of employment of the Employee
may exist and that such possibility, and the uncertainty and questions which it
might raise, may result in the departure or distraction of the Employee to the
detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to enforce
and encourage the continued attention and dedication of the Employee to his
assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility in the future of an employment
termination.
In order to induce Employee to remain in the employ of the Company, the
Company agrees that Employee shall receive the severance benefits set forth in
this Agreement in the event Employee's employment with the Company is terminated
under the circumstances described below.
NOW THEREFORE, in consideration of the premises and the mutual agreements,
covenants and promises hereafter set forth, the parties hereby agree as follows:
I. Term of Agreement. This Agreement shall commence on the date hereof (the
"Effective Date"), and shall continue in effect until such time as the
Employee's employment shall have terminated and all obligations hereunder shall
have been satisfied.
1. Change in Control.
(a) For purposes of this Agreement, a "Change in Control" shall have
occurred if any of the following events shall occur:
(i) the Company is merged, consolidated or reorganized into or
with another corporation or other legal person in any transaction or
series of related transactions (other than a transaction to which only
the Company and one or more of its subsidiaries are parties) and as a
result of such merger, consolidation or reorganization less than a
majority of the combined voting power of the then-outstanding voting
securities of the surviving entity or person immediately after
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such transaction or series of related transactions are held in the
aggregate by persons or entities who were holders of voting securities
of the Company immediately prior to such transaction;
(ii) the Company sells all or substantially all of its assets to
any other corporation or other legal person in any sale or series of
related sales (other than a transaction to which only the Company and
one or more of its subsidiaries are parties); or
(iii) any person, corporation or group of associated persons
acting in concert within the meaning of Section 13(d)(3) or 4(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
excluding, for this purpose, the Company or its subsidiaries, or any
employee benefit plan of the Company or its subsidiaries, becomes a
direct or indirect beneficial owner of shares of stock of the Company
(within the meaning of Rule 13d-3 promulgated under the Exchange Act)
representing an aggregate of more than 50% of the votes then entitled
to be cast at an election of directors of the Company.
(b) For purposes of this Agreement, a "Potential Change in Control of
the Company" shall be deemed to have occurred if:
(i) the Company enters into an agreement, the consummation of
which would result in the occurrence of a Change in Control of the
Company;
(ii) any person (including the Company) publicly announces an
intention to take or to consider taking actions which if consummated
would constitute a Change in Control of the Company;
(iii) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control of the
Company has occurred.
2. Termination Events.
(a) General. Employee shall be entitled to the benefits provided in
Section 4 hereof upon termination of employment in the following
circumstances:
(i) if none of the events described in Section 2 constituting a
Change in Control of the Company shall have occurred within two years
prior to the Date of Termination (as defined below), Employee shall be
entitled to the benefits provided in Section 4 unless such termination
is (A) because of Employee's death, (B) by the Company for Cause (as
defined below), or (C) by Employee other than for Good Reason (as
defined below)
(ii) if any of the events described in Section 2 constituting a
Change in Control of the Company shall
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have occurred and the Date of Termination is prior to the second
anniversary of the date such Change in Control of the Company
occurred, Employee shall be entitled to the benefits provided in
Section 4 unless such termination is (A) because of Employee's death.
(b) Cause. Termination by the Company of Employee's employment for
"Cause" shall mean termination: (a) upon the commission by Employee of a
willful unlawful act, such as embezzlement, against the Company which is
intended to enrich the Employee at the expense of the Company or upon
Employee's conviction of a felony; or (b) in the event of willful, gross
neglect or willful, gross misconduct, resulting in either case in material
harm to the Company. For purposes of this Subsection, no act, or failure to
act, on Employee's part shall be deemed "willful" unless done, or omitted
to be done, by Employee not in good faith and without reasonable belief
that his action or omission was in the best interest of the Company.
(c) Good Reason. For purposes of this Agreement, "Good Reason" shall
mean, without Employee's express written consent, the occurrence of any of
the following circumstances unless such circumstances are fully corrected
prior to the Date of Termination (as defined below) specified in the Notice
of Termination (as defined below) given in respect thereof:
(i) a reduction by the Company in Employee's annual base salary
or employee benefits as in effect immediately prior to such reduction;
(ii) the Company's requiring Employee to be based at a Company
office more than twenty (20) miles from the Company's offices at which
Employee is principally employed on the date hereof except for
required travel on the Company's business to an extent substantially
consistent with Employee's present business travel obligations;
(iii) a material reduction in Employee's position, duties or
responsibilities as in effect immediately prior to such reduction;
(iv) the failure of the Company to obtain the agreement to assume
and to perform this Agreement by any successor as contemplated in
Section 5 hereof; or
(v) any purported termination of Employee's employment that is
not effected pursuant to a Notice of Termination satisfying the
requirements of Subsection 3(d) hereof, which purported termination
shall not be effective for purposes of this Agreement.
Employee's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstance constituting Good Reason
hereunder.
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(d) Notice of Termination. Any purported termination of Employee's
employment by the Company or by Employee shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section
6. "Notice of Termination" shall mean a notice that shall indicate the
specific termination provision in this Agreement relied upon and, if
applicable, shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Employee's
employment under the provision so indicated.
(e) Date of Termination, Etc. "Date of Termination" shall mean the
date specified in the Notice of Termination (which in the case of a
termination by the Company, other than termination based on death, shall
not be less than thirty (30) days from the date such Notice of Termination
is given, and in the case of a termination by Employee, shall not be less
than thirty (30) nor more than sixty (60) days from the date such Notice of
Termination is given); provided, however, that if within fifteen (15) days
after any Notice of Termination is given, or, if the Notice of Termination
is not properly given, prior to the Date of Termination (as determined
without regard to an extension of such Date of Termination as described in
this proviso), the party receiving such Notice of Termination notifies the
other party that a dispute exists concerning the termination, then the Date
of Termination shall be the date on which the dispute is finally
determined, either by mutual written agreement of the parties, by a final
and binding arbitration award or by a court of competent jurisdiction; and
provided, further, that the Date of Termination shall be extended by a
notice of dispute only if such notice is given in good faith and the party
giving such notice pursues the resolution of such dispute with reasonable
diligence. Notwithstanding the pendency of any dispute, the Company will
continue to pay Employee his full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to, base
salary) and continue to allow Employee to participate in all compensation,
benefit and insurance plans in which Employee was participating when the
notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this Subsection. Amounts paid under this
Subsection are in addition to all other amounts due under this Agreement,
and shall not be offset against or reduce any other amounts due under this
Agreement and shall not be reduced by any compensation earned by Employee
as the result of employment by another employer.
3. Compensation Upon Termination.
(a) In the event that Employee is entitled to benefits hereunder upon
termination pursuant to Section 3(a) hereof, Employee shall be entitled to
the benefits provided below:
(i) the Company shall pay to Employee his full base salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given, plus all other amounts to which
Employee is entitled under any compensation plan
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of the Company, in each case without giving effect to any reduction in
salary or benefits which would constitute Good Reason pursuant to
Section 3(c)(i) hereof, at the time such payments are due;
(ii) the Company shall pay to Employee, at the time specified in
Subsection 4(b), a lump sum severance payment equal to two times
Employee's annual rate of base salary in effect at the time Notice of
Termination is given (without giving effect to any reduction in salary
which would constitute Good Reason pursuant to Section 3(c)(i)
hereof);
(iii) the Company shall provide continued uninterrupted health
care coverage to Employee substantially comparable to (and no less
beneficial to Employee than) that in effect at the time Notice of
Termination is given (without giving effect to any reduction in
benefits which would constitute Good Reason pursuant to Section
3(c)(i) hereof), for a period of two years following such Date of
Termination; and
(iv) vesting and exercisability of all options granted to
Employee under the Company's Incentive Stock Option Plan prior to the
date hereof, and all such options granted hereafter which shall
specifically indicate in such grant that they are subject to this
provision (collectively, "Covered Options") shall be accelerated to
the fullest extent possible; provided, however, that in the event that
any such Covered Options do not become immediately fully vested and
exercisable then such Covered Options shall be canceled and in
exchange therefor the Company shall pay to Employee, at the time
specified in Subsection 4(b), an amount equal to the difference (the
"Spread") between the exercise price for such Covered Options and the
Fair Market Value of the underlying shares of Common Stock as of the
Date of Termination; provided, further, however, that in the event
that a Change in Control or Potential Change in Control has occurred
and such Change in Control would otherwise be accounted for under the
"pooling of interests" method of accounting, and if such cash payment
would prevent such pooling treatment, then in lieu of such cash
payment Employee shall receive consideration in the same form as
holders of Common Stock receive in such Change in Control, which
consideration shall have a Fair Market Value equal to the Spread. For
purposes hereof, "Fair Market Value" of any security shall mean the
closing price of such security on the trading day immediately prior to
the date of determination; provided, however, that in the event that a
Change in Control or Potential Change in Control has occurred as of
the Date of Termination, the Fair Market Value of the Company's Common
Stock shall be not less than the amount paid to holders of such Common
Stock in such Change in Control.
(b) The payments provided for in Subsection 4(a) shall be made not
later than the fifth day following the Date of Termination; provided,
however, that if the amounts of such payments cannot be finally determined
on or before such day, the Company shall pay to Employee on such day an
estimate, as determined in good faith by the Company, of the minimum amount
of
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such payments and shall pay the remainder of such payments (together with
interest at the rate provided in Section 1274(b)(2)(B) of the Internal
Revenue Code (the "Code")) as soon as the amount thereof can be determined
but in no event later than the thirtieth day after the Date of Termination.
In the event that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall constitute a
loan by the Company to Employee payable on the fifth day after demand
therefor by the Company (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code).
(c) Employee shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in
this Section 4 be reduced by any compensation earned by Employee as the
result of employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by Employee to the Company, or
otherwise.
(d) Notwithstanding any provision of this Agreement to the contrary,
the aggregate present value of all "payments in the nature of compensation"
(within the meaning of Section 280G of the Code) provided to Employee in
connection with a Change in Control of the Company or the termination of
Employee's employment shall be one dollar less than the amount that is
fully deductible by the Company under Section 280G of the Code and, to the
extent necessary, payments and benefits under this Agreement shall be
reduced in order that this limitation not be exceeded. It is the intention
of this Subsection 4(d) to avoid excise taxes on Employee under Section
4999 of the Code or the disallowance of a deduction in the Company pursuant
to Section 280G of the Code. Notwithstanding the foregoing, this Section
shall not apply in the event of termination of employment within two years
following a Change in Control if such termination is by the Company without
Cause or by Employee for Good Reason.
4. Successors; Binding Agreement.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the
same extent that the Company could be required to perform this Agreement if
no such succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle Employee to
compensation from the Company in the same amount and on the same terms to
which Employee would be entitled hereunder if Employee terminated his
employment for Good Reason following a Change in Control of the Company,
except that for purposes of implementing the foregoing, the date on which
any such succession becomes effective shall be deemed the Date of
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Termination. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation
of law, or otherwise.
(b) This Agreement shall inure to the benefit of and be enforceable by
Employee and his personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
(c) All benefits to be paid hereunder shall be in addition to any
disability, workers' compensation, or other Company benefit plan
distribution, unpaid vacation or other unpaid benefits that Employee has at
the Date of Termination.
5. Notice. For the purpose 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 United States
certified or registered mail, return receipt requested, postage prepaid,
addressed to the following addresses:
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To the Company:
Covenant Bank for Savings
00 Xxxxx Xxxxxxx Xxxx
Xxxxxxxxxxx, XX 00000
Attn: Chief Executive Officer
To the Employee:
Xxxxxxx X. Xxxxx, Xx.
00 Xxxxxxxx Xxxxx
Xxxxxx, XX 00000
All notices to the Company shall also be directed to the attention of the
Board with a copy to the Secretary of the Company, or to such other address as
either party may have furnished to the other in writing in accordance herewith,
except that notice of change of address shall be effective only upon receipt.
6. Governing Law. The validity, interpretation, construction and
performance of this agreement shall be governed by the laws of the State of New
Jersey, without giving effect to the principles of conflict of laws of such
state.
7. No Right to Continued Employment. This Agreement does not give to
Employee any right to continued employment, and does not give to Employee any
rights or remedies based on termination of employment except as expressly set
forth herein.
8. Miscellaneous. No provisions of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Employee and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto or compliance with
any condition or provision of this Agreement to be performed by such other
party, shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, expressed or implied with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. All references to sections of the Exchange Act and
the Code shall be deemed also to refer to any successor provisions to such
sections. Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law.
9. Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity of enforceability of any other
provision of this Agreement which shall remain in full force and effect.
10. 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 agreement.
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11. Prior Agreements. Any and all agreements relating to the subject matter
hereof previously entered into between the Company and Employee are hereby
mutually terminated and canceled, and each of the parties mutually releases and
discharges the other from any and all obligations and liabilities whatsoever
existing under it by reason of any such agreements, it being the intention of
the Company and Employee that this Agreement shall supersede and be in place of
any and all prior agreements or understandings between them. This Agreement
shall not affect Employee's rights under that certain letter dated March 1, 1994
between Covenant and Employee, except as to the paragraph thereof headed
"Severance", which is superseded hereby so long as this Agreement is not held to
be invalid or unenforceable in any respect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
EMPLOYEE: COVENANT BANK FOR SAVINGS
/s/ Xxxxxxx X. Xxxxx, Xx. /s/ Xxxxxxx X. Xxxxxx
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XXXXXXX X. XXXXX, XX. By: Xxxxxxx X. Xxxxxx
Title: Chief Executive Officer
