EMPLOYMENT AGREEMENT
EXHIBIT
10.7
THIS
AGREEMENT is
entered into this as of April 1, 2004 (this “Agreement”) by and
between The Xxxxxx Bank (the “Bank”) and
Shore Bancshares, Inc. “Shore
Bancshares”, with
the Bank, collectively, the “Companies”) and
Xxxxxx Xxxxx (the “Employee”).
WHEREAS,
Bank is a
subsidiary of Midstate Bancorp, Inc., which has merged into Shore Bancshares
(the “Merger”);
and
WHEREAS, the
Employee has been employed by the Bank as President and Chief Executive Officer;
and
WHEREAS,
the
parties hereto desire by writing set forth the continued employment relationship
of the Companies and the Employee;
NOW
THEREFORE, it is
AGREED as follows:
1. The
Employee is employed as the President and Chief Executive Officer of The Xxxxxx
Bank. The Employee shall render administrative and management services to the
Companies such as are customarily performed by persons situated in similar
executive capacity. The Employee shall also promote, by entertainment or
otherwise, as and to the extent permitted by law, the business of the Companies.
The Employee’s other duties shall be such as the Boards of Directors of the
Companies (the “Boards”) may from
time to time reasonably direct, including normal duties of an officer of the
Companies.
2. The
Companies agree to pay the Employee during the term of this Agreement a salary
at the rate of $105,000.00 per annum, in cash not less frequently than twice
monthly or at some other reasonable frequency as other employees of the
Companies are paid. Such rate of salary, or increased rate of salary, if any, as
the case may be, shall be reviewed by the Boards, or by a committee designated
by the Boards, no less often than annually and may be increased; which increases
may not be unreasonably denied; but not decreased, in such amounts as the Boards
in their discretion may decide.
3. The
Employee shall be eligible to participate in such discretionary bonuses when and
as declared by the Boards.
4. (a) The
Employee shall be entitled to participate in any plan of the Companies relating
to pension, profit sharing, or other retirement benefits and medical coverage or
reimbursement plans the Companies may adopt for the benefit of its
employees.
(b) The
Employee shall be eligible to participate in any fringe benefits which may be or
become applicable to the Companies’ officers including participation in any
stock option or incentive plans adopted by the Boards, a reasonable expense
account, and any other benefits which are commensurate with the responsibilities
and functions to be performed by the Employee under this Agreement.
5. The
initial term of employment under this Agreement shall be for 48 months
commencing on the date of this Agreement. Upon the expiration of the 48 month
initial term of employment, the term of employment shall automatically be
extended for another 12 month period and then for successive 12 month periods
without further action by the parties, unless either party shall have served
notice upon the other 90 days prior to the commencement of any period, of its
intention that this Agreement shall terminate at the end of the then current
term of employment.
6. (a) The
Employee shall devote his full time and best efforts to the performance of his
employment under this Agreement. During the term of this Agreement, the Employee
shall not, at any time or place, either directly or indirectly, engage in any
business or activity in competition with the business affairs or interest of the
Companies.
(b) During
the term of this Agreement and, in the event of termination prior to expiration
of such term, except as otherwise provided in the next sentence, the Employee
will not be a director, officer, or employee of, or consultant to, any federal
or state financial, institution other than the Companies or their subsidiaries
or affiliates, operating within 50 miles of any of the Companies. Such
non-compete covenant shall terminate and be of no further force and effect upon
the earliest to occur of (i) one year after the expiration date of this
Agreement or (ii) one year after termination of the Employee’s employment under
Subsection 9(c) or 9(f).
(c) Nothing
contained in this Section 6 shall be deemed to prevent or limit the right of the
Employee to invest in the capital stock or other securities of any business
dissimilar from that of the Companies or, solely as a passive and minority
investor in any business.
7. The
Employee shall perform his duties under this Agreement in accordance with such
reasonable standards expected of employees with comparable positions in
comparable organizations and as may be established from time to time by the
Boards.
8. At such
reasonable times as the Boards shall in their discretion permit, the Employee
shall be entitled, without loss of pay, to absent himself voluntarily from the
performance of his employment under this Agreement, all such voluntary absences
to count as vacation time; provided that:
(a) The
Employee shall be entitled to an annual vacation in accordance with the policies
as periodically established by the Boards for senior management officials of the
Companies, which shall in no event be less than three weeks.
(b) The
Employee shall not be entitled to receive any additional compensation from the
Companies on account of his failure to take a vacation; nor shall he be entitled
to accumulate unused vacation from one fiscal year to the next except to the
extent authorized by the Boards for senior management officials of the
Companies.
(c) In
addition to the aforesaid paid vacations, the Employee shall be entitled without
loss of pay, to absent himself voluntarily from the performance of his
employment with the Companies for such additional periods of time and for such
valid and legitimate reasons as the Boards in their discretion may
determine.
(d) In
addition, the Employee shall be entitled to an annual sick leave as established
by the Boards for senior management officials of the Companies. In the event any
sick leave shall not have been used during any year, such leave shall not accrue
to subsequent years unless authorized by the Boards. Upon termination of his
employment, the Employee shall not be entitled to receive any additional
compensation from the Companies for unused sick leave.
9. The
Employee’s employment under this Agreement shall be terminated upon the
following occurrences:
(a) The death
of the Employee during the term of this Agreement, in which event the Employee’s
estate shall be entitled to receive the compensation due the Employee through
the last day of the calendar month in which the Employee’s death shall have
occurred (including any bonus under Section 3, pro rated through the last day of
such calendar month, to which the Employee would have been eligible to receive
had he been alive when bonuses were next declared), and any vested rights and
benefits of the Employee pursuant to any plan of the Companies, whether or not
written.
(b) The
Boards may terminate the Employee’s employment at any time, but any termination
by the Boards other than termination for Cause (defined below), shall not
prejudice the Employee’s right to compensation or other benefits as provided for
under this Agreement. The Employee shall have no right to receive compensation
or other benefits, except at the discretion of the Boards after termination for
Cause. Termination for “Cause” shall
mean termination for gross negligence or gross neglect or the commission of a
felony or gross misdemeanor involving moral turpitude, fraud, dishonesty or
willful violation of any law that results in any adverse effect on either of the
Companies, or for intentional failure to perform stated duties.
(c) In the
event the Employee’s employment under this Agreement is terminated by the Boards
without Cause, the Companies shall be obligated to pay the Employee the payment
of one-year salary based on the current year salary at the time of termination.
Said sum shall be paid in one lump sum within 15 days of the
termination.
(d) If the
Employee is removed and/or permanently prohibited from participating in the
conduct of the Companies’ business by an order issued by the Delaware
Commissioner of Financial Regulation, the Federal Deposit Insurance Corporation,
the Board of Governors of the Federal Reserve System, or other appropriate
supervisory agency, obligations under this Agreement shall terminate, as of the
effective date of the order, but vested rights of the parties shall not be
affected.
(e) The
voluntary termination by the Employee during the term of this Agreement with the
delivery of no less than 90 days written notice to the Boards, in which case the
Employee shall be entitled to receive only his compensation, vested rights, and
all employee benefits up to the date of his termination, unless otherwise
provided by law.
(f) Notwithstanding
any other provision of this Agreement to the contrary (except this Subsection
9(f)), the Employee may voluntarily terminate the Employee’s employment within
12 months following a Change in Control of the Companies during the initial 48
month term of this Agreement, and the Employee shall thereupon be entitled to
receive the payment of one year salary based on the current year salary at the
time of termination, upon the occurrence of any of the following events, or
within 90 days thereafter, which have not been consented to in advance by the
Employee in writing: (i) a
reduction in the Employee’s base compensations in effect on the date of the
Change in Control or as the same may be increased from time to time;
(ii) the
failure by the Companies to continue to provide the Employee with the
compensation and benefits provided for under this Agreement, as the same may be
changed by mutual agreement from time to time, or with benefits substantially
similar to those provided to the Employee under any employee benefit plan in
which the Employee is a participant at the time of the Change in Control, or the
taking of any action which would materially reduce any of such benefits or
deprive the Employee of any material fringe benefit enjoyed by the Employee at
the time of the Change in Control; (iii) the
assignment to the Employee of duties and responsibilities materially different
from those normally associated with the Employee’s position as referenced at
Section 1; or (iv) a
material diminution or reduction in the Employee’s responsibilities or authority
(including reporting responsibilities) in connection with the Employee’s
employment with the Companies. Said sum shall be paid in one lump sum within 15
days of the termination.
The term
“Change
in Control” shall
mean any one of the following events: (i) the
acquisition of ownership, holding or power to vote more than 25% of the
Companies’ voting stock; (ii) the
acquisition of the ability to control the election of a majority of the
Companies’ directors; (iii) the
acquisition of a controlling influence over the management or policies of
Companies by any person or by person acting as a “group” within
the meaning of Section 12(d) of the Securities Exchange Act of 1934);
(iv) the
acquisition of control of the Companies within the meaning of 12 C.F.R. Part
5.50 or its applicable equivalent (except in the case of (i), (ii), (iii), or
(iv) if this paragraph, the Companies’ mere formation of a holding company shall
not itself constitute a Change in Control), or (v) during
the period of two consecutive years, individuals (the “Continuing
Directors”) who at
the beginning of such period constitute the Boards of the Companies (the
“Existing
Board”) cease
for any reason to constitute at least two-thirds thereof, provided that any
individual whose election as a member of the Existing Board was approved by a
vote of at least two-thirds of the Continuing Directors then in office shall be
considered a Continuing Director. For purposes of this paragraph only, the term
“person” refers
to an individual or a corporation, partnership, trust, association, joint
venture, pool, syndicate, sole proprietorship, unincorporated organization or
any other form of entity not specifically listed herein.
(g) Any
payments made to the Employee pursuant to this Agreement, or otherwise, are
subject to, and conditioned upon their compliance with 12 U.S.C. Section 1828(k)
and any regulations promulgated thereunder.
(h) As a
condition of receiving any payments under paragraph 9(c) or 9(f), Employee shall
be required to sign a release and covenant not to xxx.
10. (a) The
suspension of the Employee from office and/or temporary prohibition from
participation in the conduct of the affairs of the Companies pursuant to notice
served by the appropriate regulatory agency, unless stayed by appropriate
proceedings, shall suspend, as of the date of such service, all obligations of
the Companies under the terms of this Agreement.
(b) In the
event the charges specified in a notice served as provided in Section 10(a)
shall be dismissed, the Companies shall (i) pay the
Employee any compensation withheld from the Employee pursuant to the suspension
of the Companies’ obligations as required in Section 10(a) and (ii)
reinstate the obligations suspended as required in Section 10(a).
11. If the
Employee shall become disabled or incapacitated, as determined by the Employee’s
physician, to the extent that he is unable to perform the duties provided in
Section 1, he shall nevertheless continue to receive the following percentages
of his compensation, inclusive of any benefits which may be payable to the
Employee under the provisions of any disability insurance in effect for the
Employee, under Section 2 for the following periods of disability: 100% for the
first 6 months, 75% for the next 12 months, and 50% thereafter for the remainder
of the initial term, or any renewal thereof, of this Agreement. Upon returning
to active full-time employment, the Employee’s full compensation as set forth in
this Agreement shall be reinstated. In the event that the Employee returns to
active employment on other than a full-time basis, then his compensation as set
forth in Section 2 may be reduced in proportion to the time spent in said
employment. If he is again unable to perform the duties provided in Section 1
due to illness or other incapacity, benefits under this Section 11 shall
(a) begin
again at 100% for the first 6 months if he has been engaged in active full-time
employment for more than 12 months immediately prior to such later absence or
inability or (b) resume
where benefits left off if he has been engaged in active full-time employment
for 12 months or less immediately prior to such later absence or
inability.
12. (a) This
Agreement shall inure to the benefit of and be binding upon any corporate or
other successor of the companies which shall acquire, directly or indirectly, by
merger, consolidation, purchase, or otherwise, all or substantially all of the
assets of the Companies.
(b) Since the
Companies are contracting for the unique and personal skills of the Employee,
the Employee shall be precluded from assigning or delegating his rights or
duties hereunder without first obtaining the written consent of the
Companies.
13. In the
event a dispute arises over benefits or other provisions under this Agreement,
then the parties hereto agree to submit the dispute to non-appealable binding
arbitration. The Board of Arbitrators shall consist of three members, with one
member selected by the Employee, one member selected by the Companies, and the
third member selected by the first two members. The party responsible for the
payment of the costs of such arbitration (including any legal fees and expenses
incurred by the Employee) shall be determined by the Board. The Board shall be
bound by the rules of the American Arbitration Association in making their
determination. The parties hereto agree that they and their heirs, personal
representatives, successors, and assigns shall be bound by the decision of such
Board with respect to any controversy properly submitted to it for
determination.
Where a
dispute arises as to the Companies’ discharge of the Employee for Cause, such
dispute shall likewise be submitted to arbitration as above described and the
parties hereto agree to be bound by the decision hereunder.
14. This
Agreement supercedes all prior agreements with respect to your employment with
the Companies.
15. No
amendments or additions to this Agreement shall be valid unless in writing and
signed by both parties, except as herein otherwise provided.
16. This
Agreement shall be governed in all respects whether as to validity,
construction, capacity, performance or otherwise, by the laws of the State of
Maryland, except to the extent that Federal law shall be deemed to
apply.
17. The
provisions of this Agreement shall be deemed severable and the invalidity or
unenforceability of any provision shall not affect the validity and
enforceability of the other provisions hereof.
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date written
above.
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ATTEST: |
THE
XXXXXX BANK |
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/s/
Xxxxx X. Xxxxxxxxx |
/s/
W. Xxxxx Xxx, Xx. |
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W.
Xxxxx Xxx, Xx., Chairman |
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ATTEST: |
SHORE
BANCSHARES, INC. |
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/s/
Xxxxx X. Xxxxxxxxx |
X.
Xxxxxxxx Xxxxxxxx |
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X.
Xxxxxxxx Xxxxxxxx, Chairman |
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WITNESS: |
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/s/
Xxxxx X. Xxxxxxxxx |
/s/
Xxxxxx Xxxxx |
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Xxxxxx
Xxxxx |
