Exhibit 10.2
EMPLOYMENT AGREEMENT
THIS IS AN EMPLOYMENT AGREEMENT dated as of July 1, 1995 between The
Community Bank (the "Bank") and Xxxxxx X. Xxxxx, III (the "Executive").
The Bank desires to retain the services of the Executive on the terms
and conditions set forth in this Agreement.
The Executive is the President and Chief Executive Officer of
the Bank.
It is in the best interest of the Bank and the Executive to secure the
continued services of the Executive.
NOW, THEREFORE, to induce the Executive to remain and continue in the
employ of the Bank, the Bank and the Executive agree as follows:
ARTICLE I
1. Employment. Bank hereby employs Executive, and Executive accepts
such employment, for the period beginning as of the date of this Agreement and
ending on June 30, 1998 which period of employment may be extended or terminated
only upon the terms and conditions set forth in this Agreement.
2. Renewal Term. This Agreement shall automatically renew after the
ending date for successive terms of one year. If Bank or Executive elect not to
renew this Agreement, the party making such election must provide the other
party at least 120 days notice in writing of such election. In the event of the
termination of this Agreement by Bank under paragraph 8 of this Article I,
Executive shall be paid the sums and benefits provided in such paragraph.
3. Executive Duties. Executive agrees that, during the term of his
employment under this Agreement and in his capacity as President and Chief
Executive Officer, he will devote his full business time and energy to the
business, affairs and interests of the Bank, and will serve it diligently and to
the best of his ability. The services and duties to be performed by Executive
shall be those appropriate to his office and title as currently and from time to
time specified in the Bank's by-laws or otherwise specified by its Board of
Directors and shall be limited to the Bank's trade area (the "trade area") as
defined in the Community Reinvestment Act Statement of the Bank in effect on the
date of this Agreement. Moreover, Executive shall not be required to relocate to
an area outside of the trade area.
4. Compensation. Bank agrees to pay Executive, and Executive agrees to
accept, as compensation for all services rendered by him to the Bank during the
period of his employment under this Agreement, base compensation at the annual
rate of $112,500.00 in the first year, which shall be payable in conformity with
Bank's policy relating to salaried employees. Such salary shall be increased in
the sole and absolute discretion of the Bank's Board of Directors.
The Bank shall reimburse the Executive for his reasonable
costs and expenses associated with his membership in the Country Club of
Petersburg.
The Bank shall provide to the Executive, an automobile of
Executive's selection, subject to the approval of the Bank's
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Executive Committee.
The Bank shall continue in effect the existing Incentive
Compensation Plan for the Executive.
5. Participation in Benefit Plans and Reimbursement of
Business Expenses.
(i) During the term of his employment under this Agreement, Executive
shall be entitled to participate in any pension, group insurance,
hospitalization, deferred compensation or other benefit or incentive plans or
benefits of the Bank presently in effect, or adopted by the Bank and generally
available to all employees of senior executive status.
(ii) During the term of this Agreement, to the extent that such
expenditures meet the requirements of the Internal Revenue Code for
deductibility by the Bank for federal income tax purposes and are substantiated
by the Executive as required by the Internal Revenue Service and policies of the
Bank, the Bank shall reimburse the Executive promptly for all expenditures made
in accordance with rules and policies established by the Board of Directors of
the Bank.
6. Illness. In the event Executive is unable to substantially perform
his duties under this Agreement on a full-time basis for a period of six
consecutive months by reason of illness or other physical or mental disability,
and at or before the end of such period he does not return to work on a
full-time basis, the Bank may terminate this Agreement without further
compensation being due the Executive from the Bank pursuant to this Agreement,
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except benefits accrued through the date of such termination under employee
benefit plans of the Bank.
7. Death. In the event of Executive's death during the term of this
Agreement, his estate, legal representative or named beneficiaries (as directed
by Executive in writing) shall be paid Executive's compensation from the Bank at
the rate in effect at the time of Executive's death for a period of one month
from the date of Executive's death.
8. Termination by Bank. Notwithstanding the provisions of paragraph 2
of this Article I, the Board of Directors of the Bank may, in its sole
discretion, terminate the Executive's employment under this Agreement at any
time by giving not less than thirty days written notice to the Executive.
Subject to Section 18(k) of the Federal Deposit Insurance Act, in such event,
unless the Bank terminates the Executive's employment for cause in accordance
with paragraph 9 of ARTICLE I of this Agreement, the Executive shall be paid,
during the six months that follow such termination, the salary and benefits that
the Executive would have been entitled to receive during such period of time had
such termination not occurred. The salary and benefits will be due Executive
regardless of any subsequent employment by Executive which is not in violation
of this Agreement.
Notwithstanding the provisions of this paragraph 8, no termination of
this Agreement shall be made pursuant to this paragraph 8, (a) following a
"Change of Control" of the Bank as defined in paragraph 10 of ARTICLE II of this
Agreement, or (b)
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during any period of time when the Bank has knowledge that any person, entity or
concern has taken steps reasonably calculated to effect a Change of Control of
the Bank until, in the opinion of its Board of Directors, the person, concern or
entity has abandoned or terminated its efforts to effect a Change of Control.
Any good faith determination by the bank's Board of Directors that the person,
concern or entity has abandoned or terminated its efforts to effect a Change of
Control shall be conclusive and binding on the Executive. Such determination
shall be promptly communicated to the Executive in writing by the Bank's
Secretary.
9. Resignation - Other Termination.
(i) Notwithstanding the provisions of paragraph 2
of this Article I, the Board of Directors of the Bank may, in its sole
discretion, terminate the Executive's employment for cause. For the purposes of
this Agreement, "Cause" shall mean the Executive's gross negligence or willful
misconduct, which is detrimental to the best interests of the Bank's business
operations. For purposes of this paragraph, no act, or failure to act, on the
Executive's part shall be considered "willful" unless done, or omitted to be
done, by him not in good faith and without reasonable belief that his act or
omission was in the best interest of the Bank; provided that any act or omission
to act on the Executive's behalf in reliance upon an opinion of counsel to the
Bank or counsel to the Executive shall not be deemed willful. The Executive
shall not be deemed to have been terminated for Cause unless there shall have
been delivered to him a copy of a certifi-
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cation by a majority of the outside members of the Board of Directors of the
Bank finding that, in the good faith opinion of such majority, the Executive was
guilty of conduct which is deemed to be Cause within the meaning of the first
sentence of this paragraph and specifying the particulars thereof in detail,
after reasonable notice to the Executive and an opportunity for him, together
with his counsel, to be heard before such majority.
(ii) In the event that Executive resigns from or voluntarily
terminates his employment with the Bank at any time, or if the Bank terminates
the Executive's employment for Cause in accordance with paragraph 9(i) of
Article I of this Agreement, this Agreement shall terminate upon the date of
such resignation or other termination of employment, in which event the Bank
shall have no obligation to make any further payment under this Agreement.
However, Executive shall be entitled to receive any benefits that he would
otherwise be eligible to receive under any benefits plans of the Bank.
ARTICLE II
10. Change of Control. The provisions of Article II of this Agreement
shall become operative only when there is a "Change of Control" of the Bank. For
purposes of this Agreement, a Change of Control occurs if, after the date of
this Agreement, (i) any person, including a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934 becomes the owner or beneficial
owner of Bank securities having 20% or more of the combined voting power of the
then outstanding Bank securities that may be cast for
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the election of the Bank's directors other than as a result of the issuance of
securities initiated by the Bank, or open market purchases approved by the Board
of Directors, as long as the majority of the Board of Directors approving the
purchases is a majority at the time the purchases are made; or (ii) as the
direct or indirect result of, or in connection with, a tender or exchange offer,
a merger or other business combination, a sale of assets, contested election, or
any combination of these events, the persons who were directors of the Bank
before such events cease to constitute a majority of the Bank's Board, or any
successor's board, within two years of the last of such transactions. For
purposes of this Agreement, the Control Change Date is the date on which an
event described in (i) or (ii) occurs. If a Change of Control occurs on account
of a series of transactions, the Control Change Date is the date of the last of
such transactions.
11. Termination After Change of Control. If a Change of Control of the
Bank occurs, this Agreement shall continue in force until terminated in
accordance with the provisions of this Article II. If, after a Change of Control
occurs, the Executive's employment is terminated, the Executive shall be
entitled to receive the payments specified in this Article II unless termination
is for cause. However, if such termination is by reason of the disability or
death of the Executive, the provisions of paragraphs 6 or 7 of Article I shall
govern such termination.
(i) The Bank may terminate the Executive's
employment for Cause in accordance with paragraph 9 of Article I of
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this Agreement.
(ii) The Executive may terminate his employment for
Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
a) The assignment of duties to the Executive by
the Bank which (i) are materially different from the Executive's duties
immediately prior to the Change of Control, or (ii) result in the Executive
having a significantly less authority and/or responsibility than he had prior to
the Change of Control, without his express written consent;
b) The relocation of Executive to an area outside
the trade area.
c) A reduction by the Bank of the Executive's base
salary in effect on the date of the Change of Control, or a failure by the Bank
to increase such salary each year after such Change of Control by an amount
which at least equals, on a percentage basis, the percentage increase, if any,
in the cost of living as set forth in the Consumer Price Index for the area in
which the principal office of the Bank in located (1967=100) published by the
Bureau of Labor Statistics of the United States Department of Labor over the
preceding year, unless the failure to so increase the Executive's salary is
waived in writing by the Executive;
d) The removal of Executive from or the failure to
re-elect Executive to the position of President and Chief Executive Officer of
the Bank, except in connection with a termination of the Executive's employment
by the Bank for Cause or by reason of his
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disability;
e) The failure of the Bank to provide the
Executive with substantially the same fringe benefits that were provided to him
immediately prior to the Change of Control.
f) The failure of the Bank to obtain the assump-
tion of an agreement to perform this Agreement by any successor as
contemplated in paragraph 13(ii).
(iii) Notwithstanding the provisions of paragraph 11(i) and
11(ii), following a Change of Control, the Bank may terminate the Executive's
employment without cause at any time in any lawful manner, subject to the Bank's
providing to the Executive the payments and benefits specified in paragraph
12(ii).
(iv) The Executive may terminate his employment at any time
after a Change of Control, but if such termination is not for Good Reason, or
Good Reason is alleged but ultimately determined pursuant to paragraph 11(vi)
not to be justifiable, then upon such termination date Executive shall be
entitled to the payments and benefits from the Bank specified in paragraph
12(iii) of this Agreement.
(v) Termination either by the Bank pursuant to paragraph 11(i)
or 11(iii) above, or by the Executive pursuant to paragraph 11(ii) or 11(iv)
above, shall be communicated by written Notice of Termination to the other
party. For purposes of Article II of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision(s)
in this Agreement relied upon except for a termination pursuant to
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paragraph 11(iii) or 11(iv) which shall set forth in a reasonable detail the
facts and circumstances claimed to provide a basis for termination of employment
under the provision so indicated.
(vi) "Date of Termination" shall mean the date specified in
the Notice of Termination, which shall be not less than thirty nor more than
ninety days after such Notice of Termination is given; provided, that if within
thirty days after any Notice of Termination is given pursuant to paragraph 11(i)
or 11(ii) the party receiving such Notice of Termination notifies the other
party that a dispute exists concerning the termination, then pending the
resolution of such dispute the Bank shall continue to pay the Executive the same
base salary and provide him the same or substantially comparable fringe benefits
that he was paid and provided immediately prior to the delivery of the Notice of
Termination. If a termination by the Bank pursuant to paragraph 11(i) above is
challenged by the Executive and the termination is ultimately determined to be
justified, then all sums paid by the Bank to the Executive pursuant to this
paragraph 11(iv), plus the cost to the Bank of providing the Executive such
fringe benefits from the date of termination to the date of the resolution of
such dispute, shall be promptly repaid by the Executive to the Bank. However,
the Bank shall not be relieved of its obligation to make payments to the
Executive pursuant to paragraph 12(iii) in the event that a termination by the
Executive pursuant to paragraph 11(ii) is challenged by the Bank and the
termination is ultimately determined not to be for Good Reason. If it is
ultimately
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determined that a termination by the Bank pursuant to paragraph 11(i) was not
justified, or that a termination by the Executive pursuant to paragraph 11(ii)
was for Good Reason, the Executive shall be entitled to retain all sums paid to
him pending the resolution of such dispute and he shall also be entitled to
receive the payments and other benefits provided for in paragraph 12(ii), and
the Date of Termination shall be the date on which the dispute is finally
settled.
12. Termination Provisions.
(i) If the Executive's employment is terminated for Cause
pursuant to paragraph 9 of Article I, and if such termination is challenged by
the Executive and the challenge is resolved in favor of the Bank, the Bank shall
be obligated to the Executive according to Article I only, and the Bank shall
have no further obligation to Executive under Article II.
(ii) If within three years after a Change of Control of the
Bank, (1) the Bank terminates the Executive's employment in accordance with the
provisions of paragraph 11(iii), or (2) the Executive terminates his employment
pursuant to paragraph 11(ii) at any time during the period beginning with a
Change of Control and ending three years after the Change of Control, then,
except as provided in Section 14 of this Agreement.
a) On the Executive's last day of employment with
the Bank, the Bank shall pay to the Executive as compensation for services
rendered to the Bank, a cash amount (subject to any applicable payroll or other
taxes required to be withheld) equal to
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2.99 times the compensation paid to the Executive by the Bank for the twelve
months ending with the Executive's termination, provided that, at the option of
the Executive, the amount required to be paid hereby shall be paid by the Bank
in equal monthly installments over the sixty months succeeding the Date of
Termination, payable on the first day of each month. For purposes of this
paragraph 12(ii) compensation shall include only base salary and cash bonuses
paid to Executive.
b) In addition to the benefits to which the
Executive is entitled under the retirement plans or programs of the Bank in
effect as of the date of this Agreement or any successors plans or programs in
effect on the Date of Termination of the Executive's employment, the Bank shall
pay the Executive a cash amount equal to the actuarial equivalent of the
retirement pension to which the Executive would have been entitled under the
terms of such retirement plan or programs, without regard to "vesting"
thereunder, had the Executive accumulated three additional years of continuous
service (after any termination pursuant to this Agreement) at the Executive's
base salary rate in effect on the Date of Termination under such retirement
plans or programs reduced by the single sum actuarial equivalent of any amounts
to which the Executive is entitled pursuant to the provisions of such retirement
plans and programs. For the purposes of this paragraph 12(ii)(b), "actuarial
equivalent" shall be determined using the same methods and assumptions utilized
under the Bank's retirement plans and programs immediately prior to the Change
of Control. The Bank's
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obligation under this paragraph 12(ii)(b) may be satisfied by a lump sum payment
in cash or by the purchase of an annuity owned by and payable to the Executive,
which annuity shall provide for payment comparable to payments which the
Executive would receive pursuant to such retirement plans or programs. The
payment shall be made or the annuity shall be purchased and delivered to the
Executive within thirty days following termination. However, at the Executive's
option, payment may be deferred until a later time.
(c) The Bank shall maintain in force and effect,
for the continued benefit of the Executive for a three-year period after the
Date of Termination, all employee benefit plans and programs or arrangements in
which the Executive was entitled to participate immediately prior to the Date of
Termination, provided that the Executive's continued participation is permitted
under the terms of such plans and programs. In the event that the Executive's
participation is not permitted, the Bank shall arrange to provide the Executive
with benefits substantially similar to those which the Executive was entitled to
receive under such plans and programs.
(d) Executive shall have the option to purchase
from the Bank or its successor at its then net book value as shown on the Bank's
records, the motor vehicle then assigned by the Bank to the Executive.
(iii) In the event the Executive terminates his employment at
any time after a Change of Control for other than Good Reason, or Good Reason is
alleged but ultimately determined
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pursuant to paragraph 11(vi) not to be justifiable, then:
(a) On the Executive's last day of employment with
the Bank, the Bank shall pay to the Executive as compensation for services
rendered to the Bank an amount (subject to any applicable payroll or other taxes
required to be withheld) equal to the compensation paid to the Executive for the
six months preceding the Executive's termination, provided that, at the option
of the Executive, the amount required to be paid hereby shall be paid in equal
monthly installments over twelve months succeeding the Date of Termination,
payable on the first day of each such month.
(b) In addition to the benefits to which the
Executive in entitled under the retirement plans or programs of the Bank in
effect as of the date of this Agreement or any successor plans or programs in
effect on the Date of Termination of the Executive's employment, the Bank shall
pay the Executive a cash amount equal to the actuarial equivalent of the
retirement pension to which the Executive would have been entitled under the
terms of such retirement plans or programs, without regard to "vesting"
thereunder, had the Executive accumulated one additional year of continuous
service (after any termination pursuant to this Agreement) at the Executive's
base salary rate in effect on the Date of Termination under such retirement
plans or programs reduced by the single sum actuarial equivalent of any amount
to which the Executive is entitled pursuant to the provisions of such retirement
plans and programs. For purposes of this paragraph 12(iii)(b), "actuarial
equivalent" shall be determined using the same methods
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and assumptions utilized under the Bank's retirement plans and programs
immediately prior to the Change of Control. The Bank's obligation under this
paragraph 12(iii)(b) may be satisfied by a lump sum payment in cash or by the
purchase of an annuity owned and payable to the Executive, which annuity shall
provide for payments comparable to payments which the Executive would receive
pursuant to the retirement plans or programs. The payment shall be made or the
annuity shall be purchased and delivered to the Executive within thirty days
following termination. However, at the Executive's option, payment may be
deferred until a later time.
(c) The Bank shall maintain for the continued
benefit of the Executive, for a one year period after the Date of Termination,
all employee benefit plans and programs in which the Executive was entitled to
participate immediately prior to the Date of Termination provided that continued
participation is possible under the general terms and provisions of such plans
and programs. In the event that the Executive's participation in any such plan
or program is barred, the Bank shall arrange to provide the Executive with
benefits substantially similar to those which the Executive was entitled to
receive under such plans and programs.
13. Litigation - Obligations - Successors. If litigation is instituted
to challenge, enforce or interpret any provision contained in Article II of this
Agreement, and such litigation does not end with judgment in favor of the Bank,
the Bank shall indemnify the Executive for his reasonable attorney's fees and
disbursements incurred in such litigation.
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(i) The Bank's obligation to pay the Executive the
compensation and benefits provided in Article II shall be unconditional and
shall not be affected by any circumstances, including, without limitation, any
set-off, counterclaim, recoupment, defense or other right which the Bank may
have against him. All amounts payable by the Bank under Article II shall be paid
without notice or demand except as provided in paragraph 13. Except as provided
in paragraph 11(vi), each payment made by the Bank shall be final and the Bank
will not seek to recover any part of such payment from the Executive. The
Executive shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment or otherwise.
(ii) The Bank 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 Bank, by agreement in
form and substance satisfactory to the Executive, to expressly assume and agree
to perform this Agreement in its entirety. Failure of the Bank to obtain such
agreement prior to the effectiveness of any such succession shall be a breach of
this Agreement and shall entitle the Executive to compensation from the Bank in
the same amount and on the same terms as he would be entitled under Article II
if he had terminated his employment for Good Reason pursuant to subparagraph
11(ii), except that for purposes of implementation, the date on which any such
succession becomes effective shall be deemed the Date of Termination. As used in
Article II of this Agreement, "Bank" shall mean the Community
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Bank and any successor to its respective business and/or assets which executes
and delivers the Agreement provided for in this paragraph 13.
14. Limitation of Benefits. It is the intention of the parties that no
payment be made or benefit provided to the Executive pursuant to Article II that
would constitute an "excess parachute payment" within the meaning of Section
28OG of the Internal Revenue Code of 1986, an amended (the Code) and any
regulations thereunder, which result in a loss of an income tax deduction by the
Bank or the imposition of an excise tax on the Executive under Section 4999 of
the Code. If the auditors for the Bank on the date of a Change of Control (or
any other accounting firm designated by the Bank) determine that some or all of
the payments or benefits scheduled under this Agreement, as well as any other
payments or benefits on a Change of Control, would be nondeductible by the payor
under Section 28OG of the Code, then the payments scheduled under this Agreement
will be reduced to one dollar less than the maximum amount which may be paid
without causing any such payment or benefit to be nondeductible. The
determination as to the reduction of benefits or payment by the Bank's
independent accountants shall be binding on the parties. The Executive shall
have the right to designate within a reasonable period, which payments or
benefits will be reduced. However, if no direction is received from the
Executive, the Bank shall implement the reductions in its discretion.
ARTICLE III
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15. Notices. For the purposes of this Agreement, notices or
other communications provided for in the Agreement shall be in
writing and shall be deemed to have been given when delivered or
mailed by certified mail, return receipt requested, addressed as
follows:
EXECUTIVE:
000 Xxxxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000
BANK:
c/o Xxxxxxxx X. XxXxxxx, Chairman
P. 0. Xxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000
or at such other address as any party may have furnished to the other in
writing, except that notices of the change of address shall be effective only
upon receipt.
16. Modification - Waiver - Applicable Law. No provision of this
Agreement may be modified or waived unless such waiver or modification is agreed
to in writing, signed by the Executive and on behalf of the Bank by such person
as may be specifically designated by the Board of Directors of the Bank. No
waiver by either party of any breach by the other party of, or compliance with,
any condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of a similar or dissimilar provision or condition of
this Agreement. No agreement or representation with respect to the subject
matter of this Agreement has been made by either party except as expressly set
forth herein. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Virginia.
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17. Invalidity - Enforceability. The invalidity or enforce- ability of
any provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement. Any provision in this Agreement which
is prohibited or unenforceable shall be ineffective only to the extent of such
prohibition or unenforceability without invalidating or affecting the remaining
provisions.
18. Successor Rights. This Agreement shall inure to the benefit of and
be enforceable by the Executive's personal representative, executor,
administrator, heirs, distributees, devisees and legatees. If Executive dies
while any amounts would still be payable to him under either Article I or
Article II, all such amounts, unless otherwise provided in this Agreement, shall
be paid in accordance with the terms of this Agreement to his devisee, legatee
or other designee, or if there is no such designee, to his estate.
/s/ Xxxxxx X. Xxxxx, 3rd
Xxxxxx X. Xxxxx, III
THE COMMUNITY BANK
By: /s/ Xxxxxxxx X. XxXxxxx
Xxxxxxxx X. XxXxxxx
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