EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into this 23rd day of March, 1999, by
and between FIRST NATIONAL BANK, a national banking association, with
principal offices in Christiansburg, Virginia (sometimes hereinafter referred
to as "Employer" or "FNB"), and________________________________, residing at
_____________________________________(sometimes hereinafter referred to as
"Employee").
WITNESSETH:
WHEREAS, Employee has been a principal executive of Employer for a
number of years, and in such capacity has developed an intimate and thorough
knowledge of Employer's business methods, trade secrets, and operations, as
well as personal relationships with key individual employees of Employer and
other banks and companies with which Employer does business;
WHEREAS, the retention of Employee's services for and on behalf of
Employer and/or its subsidiaries, is of material importance to the
preservation and enhancement of the value of Employer's business;
WHEREAS, Employer recognizes that, as is the case with many publicly
held corporations, the possibility of a change of control may arise and that
such possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of Employer and its shareholders;
WHEREAS, the Board of Directors of Employer (the "Board") has determined
that appropriate steps should be taken to reinforce and encourage the
continued attention and dedication of members of Employer's management to
their assigned duties without distraction by the possibility of a change of
control; and
WHEREAS, the Board believes it important, should Employer or its
shareholders receive a proposal for transfer of control of Employer, that
Employee be able to assess such proposal and advise the Board thereon, without
being influenced by the uncertainties of Employee's own employment status.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein set forth, Employer and Employee do hereby agree as follows:
I. Active Term
1.1 Employer hereby employs Employee as Executive Vice President to
perform executive services as hereinafter provided, and Employee hereby
accepts said employment and agrees to render such services to the Employer on
the terms and conditions set forth in this Agreement. This Agreement shall be
for a term of one year beginning on the date of execution of this Agreement
and shall automatically renew on the anniversary date of the Agreement for an
additional period of one year on each renewal date until this is a change in
control (as hereinafter defined); and consequently, upon the anniversary date
each year, the Agreement will be automatically extended and have a remaining
term of one year. This Agreement supercedes and replaces in its entirety the
Change in Control Agreement dated August 25, 1997 between Employee and
Employer.
1.2 During the term of this Agreement, Employee agrees to perform such
duties as are customarily performed by one holding the position of Executive
Vice President, including but not limited to those duties as set forth in a
written job description. In addition, the Employee shall perform such
executive services for Employer as may from time to time be assigned to
Employee by Employer, the Board or any Committee of the Board.
1.3 During the term of this Agreement, Employee shall devote his best
efforts, including such portion of his time and effort as he has customarily
provided in recent years, to the affairs and business of the Employer and its
subsidiaries.
1.4 In the event Employer completes an affiliation with any other
institution in which there is no change in control (as hereinafter defined)
and, as a result of the affiliation, the Employee occupies a position of less
authority than the current position held under the terms of this Agreement and
job responsibilities less than Executive Vice President of First National Bank
the Employee may elect to terminate employment under Section 7.2 of this
Agreement and receive the compensation as provided therein.
1.5 Employee's services shall be rendered principally in Christiansburg,
Virginia but Employee shall travel on behalf of Employer, its subsidiaries or
affiliates, as may be reasonably required.
II. Competitive Activities
2.1 During the term of this Agreement, Employee shall not, directly or
indirectly engage or participate in, become a director of, or render advisory
or other services for, or in connection with, or make any financial investment
in, any entity primarily engaging in financial or investment services which
competes with FNB in the Employer's trading area (as defined in Paragraph 7.3
of this Agreement). Notwithstanding the foregoing, the Employee may invest in
any such financial or investment firm, corporation, business entity or
enterprise so long as the investment is passive and where (i) such investment
does not exceed the greater of (a) five percent (5%) of the equity in any such
entity or (b) an investment of $100,000 and (ii) excluding any passive
investment in securities of a publicly traded companies, such ownership and
any changes therein which are promptly reported in writing by the Employee to
the Board. Notwithstanding anything to the contrary contained in this
Agreement, while Employee is employed by Employer during the term of this
Agreement, Employee shall have no employment contract or other written or oral
agreement concerning his employment as an officer of the Employer with any
entity or person other than the Employer.
2.2 Employee acknowledges that by virtue of his employment with FNB,
Employee shall be privy to confidential information concerning the activities
and affairs of the Employer, its subsidiaries and affiliates, if any,
including trade secrets and other confidential matters. During the term of
employment, should employee render services to someone else in violation of
Section 2.1 hereof, other than as expressly authorized by the Board, Employer
shall be entitled to immediate equitable relief to restrain such conduct.
Such equitable relief shall be in addition to any other remedies to which
Employer may be entitled under law. Except for the purpose of carrying out
Employee's duties hereunder, Employee shall not remove or retain, or make
copies or reproductions of any inquiries, calculations, letters, papers, or
information of any type or description relating to the business of Employer,
its subsidiaries or affiliates, if any, and Employee shall not divulge to
others any information or data acquired by him while in Employer's employ
relating to methods, processes, or other trade secrets or confidential
information owned or utilized by FNB. Employer shall acquire the sole and
exclusive rights to any innovations, ideas, and concepts, whether or not
subject to patent or trademark protection, and all copyrightable materials
which are conceived by Employee during his employment, which relate to the
business of Employer or any of its subsidiaries or affiliates, which are
confidential, and which are not readily ascertainable from persons or other
sources outside Employer and its subsidiaries and affiliates.
III. Compensation
3.1 Employer shall compensate and pay Employee for his services as
follows:
a. Employee shall be paid a salary at an annual rate set by the
Board from time to time. At a minimum, the base salary shall equal or exceed
the base salary paid Employee at the time of the execution of this agreement.
b. Employee shall be reimbursed, in a manner consistent with
policies of Employer presently or later established for executive personnel,
for all reasonable expenses directly incurred by the Employee in the discharge
of any duties hereunder;
c. Employee shall receive the use of an Employer's car (or a
monthly allowance toward the purchase or lease of a automobile for business
use) and memberships at country clubs and civic clubs; provided, however, that
expenses for meetings and conferences shall not exceed $5,000
annually(excluding VBA) and memberships and club charges shall not exceed
$4,000. Fringe benefits shall not be considered to include health, life,
disability and dental insurance provided to the Employee through group welfare
benefit plans sponsored by FNB nor to retirement benefits provided to Employee
through retirement plans sponsored by FNB. Fringe benefits in excess of the
amount specified herein shall be subject to Board approval.
d. Employee shall receive all FNB sponsored welfare and
retirement plan benefits as shall be made generally and proportionally
available to other executive employees of Employer. Employer shall receive an
annual complete physical examination to be performed by a physician of
Employee's choice with a report of the results provided to Employer.
e. Employee shall receive the number of paid vacation days in
each calendar year determined by Employer from time to time for its executive
officers, but not less than four weeks in any calendar year (prorated in any
calendar year during which the Employee is employed hereunder for less than
the entire year in accordance with the number of days in such calendar year
during which he is employed).
All payments made payable to Employee under this Agreement shall be
subject to withholding for applicable taxes, social security or other
governmental levies and to any other deductions authorized by or for
Employee's benefit, under any welfare or retirement plan established for or
made generally available to employees of Employer.
3.2 Nothing in this Agreement shall prevent the Board from, at any time,
increasing the compensation and fringe benefits to be paid to Employee in the
event the Board, in its sole discretion, shall deem it advisable so to do in
order to compensate Employee for his services.
3.3 The Employer shall not reduce or eliminate any fringe benefit
available to the Employee immediately prior to the execution of this Agreement
unless the Employer pays the Employee a cash allowance in an amount equal to
the value to the Employee of such reduced or eliminated fringe benefit.
IV. Termination Prior to Change, Including
Termination for Cause, and Related Provisions
4.1 Employer shall have the right, at any time prior to a change of
control of Employer(as hereinafter defined) upon written notice of not less
than thirty (30) days, to terminate the Employee's employment hereunder.
4.2 In the event that, prior to a change of control of Employer (as
hereinafter defined), employment is terminated for cause (as hereinafter
defined), Employee shall have no right to compensation or other benefits for
any period after such termination. For purpose of this subsection, the term
"cause" shall mean personal dishonesty, incompetence, willful misconduct,
willful breach of fiduciary duty, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses), willful
violation of a final cease and desist order, willful or intentional breach or
neglect of Employee's duties hereunder, persistent negligence, or misconduct
in the performance of Employee's duties.
V. Change in Control
5.1 For purposes of this Agreement, a "change in control" of Employer
shall have occurred at such time as (a) the closing of a corporate
reorganization in which the Bank becomes a subsidiary of a holding company,
the majority of the common stock of which is owned by persons who did not the
majority of the common stock of FNB Corporation (or its successor) immediately
prior to the reorganization; (b) individuals who constitute the Board on the
date hereof (the "Incumbent Board") cease for any reason to constitute at
least a majority thereof; provided that any person becoming a director
subsequent to the date hereof whose nomination for election was approved by a
vote of at least three-quarters (3/4) of the directors comprising the
Incumbent Board shall be considered as though such person were a member of the
Incumbent Board for purposes of this subsection; (c) the closing of the merger
of Employer with or into another person; or (d) the closing of the sale,
conveyance or other transfer of substantially all of the assets of Employer to
another person.
5.2 For purposes of this Agreement, the term "person" shall include any
individual, corporation, partnership, group, association or other "person", as
such term is used in section 14(d) of the Exchange Act, other than Employer,
any entity in which the Employer owns a majority of the voting interest or any
employee benefit plan(s) sponsored by Employer.
VI. Termination Following Change in Control
6.1 Employer recognizes that a change in control as defined in Section V
may directly affect the direction and philosophy of FNB. A change in control
may also affect Employee's responsibilities and position with the Employer.
Should a change in control occur after March 23, 2000, Employee shall be
entitled to a lump sum payment of $25,000 due and payable within thirty (30)
days after the change in control. Employee will be entitled also to the
compensation provided in subsection 7.2 of Section VII hereof, upon Employee's
determination to terminate his employment with Employer or upon termination by
Employer or upon termination by Employer of Employee's employment with
Employer.
6.2 Any termination by Employer or by Employee following a change in
control shall be communicated by written notice of termination ("Notice of
Termination") to the other party hereto. Such Notice of Termination shall
specify the date as of which employment shall terminate ("Date of
Termination"), which Date of Termination shall not be more than sixty (60)
days from the date of the Notice of Termination.
VII. Compensation Upon Termination; Other Agreements
7.1 During any period following a change in control that Employee fails
to perform his duties as a result of incapacity due to physical or mental
illness, Employee shall continue to receive a salary which, when added to
insurance benefits received as compensation and social security benefits, will
equal the Employee's rate of compensation immediately prior to the illness.
Any benefits or awards under any plans shall continue to accrue during such
period of illness, to the extent not inconsistent with such Plans, until
Employee's employment is terminated pursuant to and in accordance with Section
VI hereof. Thereafter, Employee's compensation and benefits shall be
determined in accordance with subsection 7.2 hereof and the plans then in
effect.
7.2 Subject to Section X hereof, Employee's employment with Employer
shall be terminated by the Employer or by Employee, then Employee shall be
entitled, without regard to any contrary provisions of any Plan, to the
following benefits:
(A) For the period which the greater of (i) the remaining term of
employment provided in this Agreement or (ii) twelve (12) months, commencing
on the Date of Termination, Employer shall continue to provide Employee with
membership in a country club (the payment of dues and assessments to be paid
by Employer and all other charges such as for food or special member events to
be paid by Employee), and shall make provisions so that Employee's medical
insurance benefits, life insurance and accident insurance plan coverage and
all other welfare and retirement plan and fringe benefits associated with
Employee's employment will continue to be on terms and at levels substantially
the same as those existing on the day prior to the Date of Termination;
(B) Employer shall transfer to Employee title to the automobile
which has been furnished (if any) to Employee for his use immediately prior to
Termination. The transfer of ownership of the vehicle shall be at no expense
(excluding any income tax consequences) to Employee. If the Employee
receives a monthly allowance instead of the use of a furnished automobile, the
Bank shall continue the monthly allowance for the period which the greater of
(i) the remaining term of employment provided in this Agreement or (ii) twelve
(12) months, commencing on the Date of Termination.
(C) For the period which is the greater of (i) the remaining term
of employment provided for in this Agreement or (ii) twelve (12) months,
commencing on the Date of Termination, Employee the Annual Compensation
theretofore received by Employee from Employer. Payment shall be made each
month when the Employer's payroll is customarily paid unless Employee
irrevocably elects to receive all salary compensation due hereunder in a lump
sum which shall be paid within thirty (30) days of the Employee's election.
Should Employee elect to receive a lump sum settlement instead of monthly
payments, the amount payable shall be reduced to the present value of monthly
payments by using the one year certificate of deposit rate then in effect at
FNB. For purposes of this Agreement, "Annual Compensation" shall mean
Employee's current annual base salary immediately preceding the change in
control in accordance with Section 3.1(a) hereof.
(D) The Employee shall be fully vested under the Bank's ESOP Plan
and retain all of his rights under the ESOP Plan as of the date when the last
compensation under this Agreement is due to paid to Employee.
7.3 The amount of any payment provided for in this Section VII shall not
be reduced, offset or subject to recovery by the Employer by reason of any
compensation earned by Employee as a result of subsequent employment by
another employer, other than employment with a banking institution whose
headquarters are located in any county in Virginia whose county seat lies
within fifty (50) miles by highway from Christiansburg, Virginia.
7.4 Notwithstanding the other provisions of this Section VII, should
Employer terminate Employee for cause as defined in subsection 4.2, no further
compensation shall be paid to Employee after the Date of Termination.
Otherwise, Employee shall be entitled to the full compensation provided for
herein after his Termination, whether such Termination is initiated by
Employee or Employer.
VIII. Successors; Binding Agreement
8.1 This Agreement shall inure to the benefit of and be binding upon any
corporate or other successor of Employer which shall result from a change in
control of Employer as defined in Section V hereof. Employer shall require
any such successor, by an agreement in form and substance satisfactory to
Employee, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent as Employer would be required to perform if no
such succession had taken place.
8.2 This Agreement shall inure to the benefit and be enforceable by
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Employee should
die while any amount would still be payable to Employee hereunder at the time
of death of Employee, such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to Employee's devisee,
legatee or the devisee's or legatee's designee; or if there be no such
devisee, legatee or designee, to Employee's estate.
IX. Fees and Expenses
9.1 Both Employer and the Employee covenant and agree that in the event
of a breach or default of either party of any of the terms of this agreement,
then the defaulting party shall reimburse the non-defaulting party for any and
all legal expenses incurred to enforce the contract, including reasonable
attorney's fees.
X. Taxes
10.1 All payments to be made to Employee under this Agreement will be
subject to required withholding of federal, state and local income and
employment taxes.
10.2 Notwithstanding anything to the contrary in this Agreement, in the
event that mutually satisfactory independent auditors (the "Auditors") shall
determine that any payment or distribution by Employer to or for Employee's
benefit (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise) (a "Payment") would be a "parachute
payment" as defined in Section 280G of the Code, then the aggregate present
value of amounts payable or distributable to or for Employee's benefit
pursuant to this Agreement (such payments or distributions pursuant to this
Agreement are hereinafter referred to as "Agreement Payments") shall be
reduced (but not below zero) to the Reduced Amount. For purposes of this
subsection 10.2 of this Section X, the "Reduced Amount" shall be an amount
expressed in present value which maximizes the aggregate present value of
Agreement Payments such that the aggregate present value of Payments does not
constitute a parachute payment.
10.3 If the Auditors determine that any Payment would be a "parachute
payment" as defined in Section 280G of the Code, Employer shall promptly give
Employee notice to that effect and a copy of the detailed calculation thereof
and of the Reduced Amount. Employee may then elect, in his sole discretion,
which and how much of 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 the Employee shall advise Employer in
writing of Employee's election within ten (10) days of Employee's receipt of
notice. If no such election is made by Employee, Employer 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 Employee promptly of such
election. For purposes of this subsection 10.3 of this Section X, present
value shall be determined in accordance with Section 280G(D)(4) of the Code.
All determinations made by the Auditors under this paragraph shall be made
within sixty (60) days of the Notice of Termination. In accordance with
Section VII hereof and as promptly as practicable following such determination
and the elections hereunder, Employer shall pay or distribute to or for the
Employee's benefit in the future such amounts as become due to Employee under
this Agreement.
10.4 As a result of the uncertainty in the application of Section 280G
of the Code at the time of the initial determination by the Auditors
hereunder, it is possible the Agreement Payments will have been made by
Employer which should not have been made ("Overpayment") or that additional
Agreement Payments which will have not been made by Employer should have been
made ("Underpayment"), in each case consistent with the calculation of the
Reduced Amount hereunder. In the event that the Auditors, based upon the
assertion of a deficiency by the Internal Revenue Service against Employer or
Employee which the Auditor believes has a high probability of success,
determines that an Overpayment has been made and such Overpayment shall be
treated for all purposes as a loan to Employee which Employee shall repay to
Employer together with interest at the applicable federal rate for short-term
obligations provided for in Section 7872(f)(2) of the Code; provided, however,
that no amount shall be payable by Employee to Employer if and to the extent
such payment would not be considered for federal income tax purposes to reduce
the amount of Payments which are considered to be "parachute payments" within
the meaning of Section 280G of the Code. In the event that the Auditors,
based upon controlling precedent, determine that an Underpayment has occurred,
any such underpayment shall be promptly paid by Employer to or for Employee's
benefit together with interest at the applicable federal rate for short-term
obligations provided for in Section 7872(f)(2) of the Code.
10.5 All determinations made by the Auditors pursuant to Section X shall
be binding upon Employer and Employee.
XI. Survival
11.1 The respective obligations of, and benefits accorded, Employer and
Employee as provided in Sections III, VII, VIII, IX ,X ,XI, XII, XIII, XIV,
XV, XVI, XVII of this Agreement shall survive termination of this Agreement.
XII. Notices
12.1 For purposes 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
registered mail, return receipt requested, postage prepaid and addressed to
the addresses set forth on the first page of this Agreement, provided that all
notices to Employer shall be directed to the attention of the Chairman of the
Board, or to such other addresses either party may have furnished to the other
in writing in accordance herewith; except that notice of change of address
shall be in effect only upon receipt.
XIII. Miscellaneous
13.1 No provision of this Agreement may be modified, waived or
discharged unless such modification, waiver or discharge is agreed to in
writing signed by Employee and the Chairman of the Board or President of
Employer (or highest ranking executive officer of FNB other than Employee, if
applicable). No waiver by either party hereto at any time of any breach by
the other party hereto of, or of 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,
express or implied, with respect to the subject matter hereof have been made
by either party which are not expressly set forth in this Agreement. The
validity, interpretation, construction and performance of this Agreement shall
be governed by the laws of the Commonwealth of Virginia.
XIV. Validity
14.1 The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
XV. Related Agreements
15.1 To the extent that any provision of any other agreement between
Employer or any of its subsidiaries and Employee shall limit, qualify or be
inconsistent with any provision of this Agreement, then for purposes of this
Agreement, while the same shall remain in force, the provision of this
Agreement shall control and such provision of such other agreement shall be
deemed to have been superseded, and to be of no force or effect, as if such
other agreement had been formally amended to the extent necessary to
accomplish such purpose.
XVI. Counterparts
16.1 This Agreement may be executed in one or more counterparts which
shall be construed together as one constituted agreement.
XVII.Governing Law
17.1 This Agreement shall be governed according to the laws of the
Commonwealth of Virginia. Should either party bring suit to enforce the
provisions hereof, Employer and Employee expressly consent to the exclusive
jurisdiction and venue of the Circuit Court of Xxxxxxxxxx County, Virginia to
resolve such dispute.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first written above.
Employer:
First National Bank
J. Xxxxxx Xxxxx, President/CEO
Employee:
