EMPLOYMENT AGREEMENT
THIS
AGREEMENT
(the
"Agreement"), made as of this 26th day of March, 2008, (Effective Date) by,
between and among Xxxxx Spring Bancorp, Inc., a Maryland corporation and
registered bank holding company (Bancorp), Xxxxx Spring Bank, a Maryland
corporation and wholly owned commercial banking subsidiary of Bancorp with
its
main office and headquarters located in Olney, Maryland (Bank), and Xxxxxx
X.
Xxxxxxxx (Officer).
WITNESSETH
WHEREAS,
the
Officer is currently employed as an Executive Vice President and Chief Revenue
Officer of the Bank.
WHEREAS,
the
Board is very interested in an appropriate succession planning process for
the
position of President and Chief Executive Officer of Bancorp and
Bank.
WHEREAS,
as a
result of the skill, knowledge, and experience of the Officer, the board of
directors of Bancorp and Bank (collectively the "Board") desires to retain
the
services of the Officer in newly created positions, President of Bancorp and
President and Chief Revenue Officer of the Bank, and which position is intended
to assist the Board with its succession planning responsibilities noted
above.
WHEREAS,
the
Officer desires to serve as the President of Bancorp and President and Chief
Revenue Officer of the Bank.
WHEREAS,
the
Officer and the
Board
desire to enter into an agreement setting forth the terms of conditions of
the
employment of the Officer as President of Bancorp and the Bank and Chief Revenue
Officer of the Bank and the related rights and obligations of each of the
parties.
NOW,
THEREFORE,
in
consideration of the premises and mutual covenants herein contained, it is
agreed as follows:
1. Employment.
As
described further herein, the Officer shall be employed as the President of
Bancorp and President and Chief Revenue Office of the Bank during the Term
of
this Agreement. Officer shall report directly to the Chairman of the Board
and
Chief Executive Officer of Bancorp and the Bank. During the Term, the Officer
shall perform such duties and shall have all powers which are assigned to the
Officer by the Chairman of the Board and Chief Executive Officer. The Officer’s
major job accountabilities are set forth in a job description maintained by
the
Human Resources Division and which job description may be revised from time
to
time by the Human Resources Committee of the Board. The Officer's duties
include, but are not limited to:
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(a)
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Management
oversight of the day-to-day activities of all revenue components
of the
Bank and recommendations
to the Chairman and Chief Executive Officer concerning the strategies,
policies, and tactics of the Bank related
thereto;
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(b)
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Developing
a business plan with objectives to be achieved during the plan year
in
support of strategic goals; and
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(c)
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Promoting
the services of the Bank and conducting and coordinating marketing
and
promotional activities designed to develop new business and future
business initiatives;
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(d)
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Providing
complete, timely, and accurate reports, as required, regarding the
revenue
activities of the Bank;
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(e)
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Providing
effective leadership and supervision to promote efficiency and optimum
performance of Bank officers and
employees;
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(f)
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Oversight
of the credit risk management processes of the Bank’s Credit Risk Policy,
and related procedures.
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2. Location
and Facilities.
The
Officer will be furnished with the working facilities and staff customary for
executive officers with the title and duties set forth in Section 1 and as
are
necessary for the Officer to perform the duties of the position. The location
of
such facilities and staff shall be at the principal administrative offices
of
Bank, or at such other site or sites agreed to by the Board.
3. Term
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a.
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The
term of this Agreement (the “Term”) shall consist of the period commencing
at the Effective Date and continuing through December 31, 2008 and
any
extension of the Term made pursuant to this Section 3.
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b.
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The
Term shall be extended for an additional period of three (3) months
beyond
December 31, 2008, without action by any party, provided that neither
the
Bank nor the Officer shall have given written notice at least thirty
(30)
days prior to the expiration date of its or the Officer’s desire that the
Term not be extended.
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At
the Effective Date, this Agreement shall supersede any prior employment
agreement between the Officer and Bank including, but not limited
to, all
prior employment agreements between Officer and Bank, which shall
be
deemed terminated by agreement of the parties immediately prior to
the
Effective Date.
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4. Base
Compensation.
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a.
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The
Bank agrees to pay the Officer during the Term of this Agreement
a base
salary at the rate of $350,000 per annum, payable in cash not less
frequently than twice monthly, as may be adjusted in accordance with
this
Section 4.
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b.
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The
Human Resources Committee of the Board shall perform an annual analysis
of
the Officer's performance and of the compensation of officers performing
similar functions at financial institutions of comparable size and
performance. The Board shall establish the annual salary rate to
be paid
to the Officer based upon this analysis and on such other factors
as it
deems pertinent. The annual salary rate may be maintained, increased
or
decreased, provided that no such action shall (i) reduce the rate
of
salary below the amount set forth in Section 4.a. or (ii) reduce
the rate
of salary paid to the Officer for any months prior to the month in
which
notice of the reduction is provided in writing to the Officer.
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c.
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In
the absence of action by the Board, the Officer shall continue to
receive
salary at the amount set forth in Section 4.a. or, if another rate
has
been established under the provisions of this Section 4, the rate
last
properly established by action of the Board under the provisions
of this
Section 4.
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5. Bonuses.
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a.
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The
Officer shall be entitled to participate in a bonus program as determined
by the Board based upon recommendation of the Human Resources Committee.
The Officer also shall participate in any and all other fringe benefits
which are or may become available to executive officers of the Bank,
including, for example, any stock option or incentive compensation
plans,
Executive Incentive Retirement Plan, long term care insurance, disability
income insurance, Group Term Replacement Plan, and any other benefits
that
are commen-surate with the responsibilities and functions to be performed
by the Officer under this Agreement. No other compensation provided
for in
this Agreement shall be deemed a substitute for the Officer's right
to
participate in such discretionary bonuses or fringe benefits.
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6. Benefit
Plans.
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a.
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The
Officer shall be entitled to participate in such life insurance,
medical,
dental, pension, profit sharing, and retirement plans and other programs
and arrangements as may be approved from time to time by the Bank,
for the
benefit of the employees of the Bank.
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b.
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The
Officer shall be entitled to fringe benefits in accordance with the
plans,
practices, policies and programs of Bank available to executive management
of Bank. Without limiting the foregoing, Officer shall continue to
be
provided with a corporate membership at the Manor Country Club located
on
Carrollton Rd. Rockville, MD (or such other club as the parties may
mutually agree upon), and be provided with an automobile allowance
of
$1000.00 per month, payable each regular pay period in equal
amounts.
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7. Paid
Time Off.
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a.
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The
Officer shall be entitled to paid time off time (i.e., vacation and
sick
days, herein referred to as “PTO”) and paid holidays pursuant to the
plans, practices, programs and policies of Bank and available to
executive
officers of Bank; provided, however, that notwithstanding anything
to the
contrary in the plans, practices, programs and policies of Bank,
(i)
Officer shall be entitled to at least 240 hours of PTO per annum,
to be
taken at reasonable times and in reasonable periods as the Officer
and
Bank shall mutually determine, and provided that no PTO shall interfere
with the duties required to be rendered by the Officer hereunder;
and (ii)
in addition to the foregoing, the 296 hours of accrued but unused
PTO that
Officer is credited with as of the Effective Date, as evidenced in
the
“etime” records maintained by the Human Resources department shall remain
available to Officer, and (iii) at the end of calendar years 2008,
Officer shall be permitted to carry over for use in the subsequent
calendar year(s) all accrued but unused PTO hours in accordance with
the
policies of the Bank now in effect for executive officers.
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b.
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Officer
shall continue to be credited with the 440 hours under the Extended
Illness Benefit policies of the Bank currently available to Officer
as of
the Effective Date.
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c.
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In
addition to paid time off, the Officer shall be entitled, without
loss of
pay, to voluntarily take time off from work for such additional periods
of
time and for such valid and legitimate reasons as the Chief Executive
Officer may in his discretion determine. Further, the Officer may
request
and be granted a leave or leaves of absence, with or without pay
as deemed
appropriate in the discretion of the Board, at such time or times
and upon
such terms and conditions as the Board in its discretion may
determine.
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8. Expense
Payments and Reimbursements.
The
Officer shall be reimbursed in a reasonably prompt manner for all reasonable
out-of-pocket business expenses incurred in connection with the Officer’s
services under this Agreement upon substantia-tion of such expenses in
accordance with applicable policies of the Bank.
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9.
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Loyalty
and Confidentiality.
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a.
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During
the Term of this Agreement the Officer: (i) shall devote all the
Officer’s
time, attention, skill, and efforts to the faithful performance of
the
Officer’s duties hereunder; provided, however, that from time to time, the
Officer may serve on the boards of directors of, and hold any other
offices or positions in, companies or organizations which will not
present
any conflict of interest with the Bank or any of their subsidiaries,
unfavorably affect the performance of Officer's duties pursuant to
this
Agreement or violate any applicable statute or regulation; (ii) devote
reasonable periods of time to charitable and community activities;
and
(iii) manage personal business interests. Notwithstanding the foregoing,
Officer shall not engage in any business or activity contrary to
the
business affairs or interests of the Bank or their
subsidiaries.
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b.
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Nothing
contained in this Agreement shall prevent or limit the Officer's
right to
invest in the capital stock or other securities of any business dissimilar
from that of Bancorp and their subsidiaries or, solely as a passive,
minority investor in any business.
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c.
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The
Officer agrees to maintain the confidentiality of any and all information
concerning the operation or financial status of the Bank; the names
or
addresses of any of their borrowers, depositors, clients, and other
customers; any information concerning or obtained from such clients
or
customers; and any other information concerning the Bank, or their
subsidiaries to which the Officer may be exposed during the course
of
employment. The Officer further agrees that, unless required by law
or
specifical-ly permitted by the Bank in writing, the Officer will
not
disclose to any person or entity, either during or subsequent to
the
officer’s employment, any of the above-mentioned information which is not
generally known to the public, nor shall the Officer employ such
information in any way other than for the benefit of the Bank.
Notwithstanding the above provisions of this Section 9(c), the Officer
may
provide such information to Officer’s legal counsel relevant to pending or
threatened legal action in which the Officer is or may be a party
to the
extent it is provided with the understanding and in a fashion that
such
information is and remains subject to attorney-client privilege of
the
Officer and Officer does not waive such privilege, and to Officer’s
certified public accountant, to the extent that such information
is
reasonably necessary for the calculation of Officer’s federal, state, or
local taxes, and in all events, provided that no disclosure of any
such
information: (i) is contrary to applicable law, including, without
limitation, federal and state laws pertaining to the confidentiality
of
customer information and trade secrecy laws, or (ii) violates any
other
confidentiality agreement or policy to which Officer, the Bank or
any of
their subsidiaries is subject.
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10. Termination
and Termination Pay.
During
the Term, subject to Section 11 of this Agreement, the Officer's employment
under this Agreement may be terminated in the following
circumstances:
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a.
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Death.
The Officer's employment under this Agreement shall terminate upon
the
Officer’s death during the Term of this Agreement, in which event the
Officer's estate shall be entitled to receive the compensa-tion due
to the
Officer through the last day of the calendar month in which the Officer’s
death occurred, as well as any vested benefits due to the Officer’s estate
pursuant to the terms of the plans, policies or practices of the
Bank
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b.
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Disability.
The
Bank or the Officer may terminate the Officer’s employment after having
established the Officer’s Disability. For purposes of this Agreement,
“Disability” means the
Officer is unable to engage in any substantial gainful activity by
reason
of any medically determinable physical or mental impairment that
can be
expected to result in death or can be expected to last for a continuous
period of not less than twelve (12) months.
In
the event of such Disability, the Officer’s obligation to perform services
under this Agreement will terminate. In the event of such termination,
the
Officer shall be entitled to receive the
following:
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i.
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The
compensation and benefits provided for under this Agreement for any
period
during the Term of this Agreement and prior to the date of termination
pursuant to this Section 10.c. during which the Officer is unable
to work
due to physical or mental infirmity (less any amounts which the Officer
receives under any disability insurance maintained by the
Bank);
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ii.
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For
the
period beginning upon the date of termination pursuant to this Section
10.c. and continuing until
the earlier of (A) the expiration of
the remaining Term
of this Agreement, or (B) the one-year anniversary of Officer’s
termination due to Disability, (X) salary at the highest rate paid
pursuant to Section 4 of this Agreement during the twelve months
prior to
the establishment of such disability under this Section 10.c.,
reduced by any payments received by the Officer following
termination under any
disability plan or policy maintained by the Bank and (Y)
Continued Welfare Benefits”.“Continued
Welfare Benefits” shall mean benefits the same or substantially equivalent
to those group health benefits which would have been provided to
Officer
in accordance with the plans described in Section 6(a) of this Agreement
if Officer’s employment had not been terminated, or, upon the expiration
of Officer’s eligibility for continuation in Bank’s welfare benefit plans
through the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) or
otherwise, a lump sum payment in lieu of such benefits equal to the
cost
to the Bank, of providing such benefits for such period if the Officer’s
employment had not been terminated, grossed up for the effect of
individual federal and state taxes on such payment at the combined
marginal federal and state tax rate applicable to such officer for
the
calendar year preceding such
termination.
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As
a
condition to any such benefits under this Agreement, the Bank Board’s Human
Resources Committee may require the Officer to submit to such physical or mental
evaluations and tests as it deems reasonably appropriate.
c. Just
Cause.
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i.
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The
Board may, by written notice to the Officer in the form and manner
specified in this paragraph, immediately terminate the Officer’s
employ-ment with the Bank at any time for Just Cause. The Officer
shall
have no right to receive compensa-tion or other benefits for any
period
after termination for Just Cause. Termina-tion for "Just Cause" shall
mean
termination because of, in the good faith determina-tion of the Board,
provided that such determination is consistent with the treatment
of other
executives of the Bank and the Officer's:
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(1)
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Personal
dishonesty that has a material and detrimental effect on the Bank
or
Bancorp;
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(2)
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Willful
misconduct;
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(3)
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Intentional
breach of fiduciary duty involving personal profit;
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(4)
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Intentional
failure to perform duties under this
Agreement;
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(5)
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Other,
continuing material failure to perform duties assigned to the Officer
under this Agreement after reasonable notification (which shall be
stated
in writing and given at least fifteen days prior to termination)
by the
Board of such failure;
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(6)
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Willful
violation of (X) any law, rule or regulation (other than traffic
violations or similar offenses) involving moral turpitude that has
a
material and detrimental effect on the Bank or (Y) a final
cease-and-desist order;
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(7)
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Being
the subject of any legal or disciplinary event that is material to
an
evaluation of the Officer’s integrity or ability to meet contractual
commitments to a client and that is required to be disclosed by Securities
and Exchange Commission Rule 206(4)-4, as then in effect, or a successor
to such Rule; or
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(8)
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Material
breach by the Officer of any provision of this Agreement.
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ii.
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Notwithstanding
the foregoing, the Officer shall not be deemed to have been terminated
for
Just Cause unless there shall have been delivered to the Officer
a copy of
a resolution duly adopted by the affirmative vote of not less than
a
majority of the entire membership of the Board at a meeting called
and
held for the purpose (after reasonable notice to the Officer and
an
opportunity for the Officer to be heard before the Board), finding
that in
the good faith opinion of the Board that the Officer was guilty of
conduct
described above and specifying the particulars
thereof.
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iii.
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Notwithstanding
the foregoing, it is expected that Officer will perform all duties
and
agreements to be performed herein, and Officer shall have the right
to
cure non-performance, to the extent such performance is reasonably
capable
of being cured, and shall promptly upon receipt of written notice
of
non-performance, comply with the requirements of such notice, and
further
if Officer shall not comply with such notice to the satisfaction
of the
Board within five (5) business days after delivery thereof, (except
if
such compliance cannot be reasonably completed within five (5) business
days, if Officer shall not commence to comply within such period
and
thereafter proceed to completion with due diligence) the Board shall
have
the right to proceed with the Board meeting specified in the preceding
paragraph.
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d. Certain
Regulatory Events.
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i.
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If
the Officer is removed and/or permanently prohibited from participating
in
the conduct of the affairs of the Bank by an order issued under Sections
8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA")
(12
U.S.C. §§ 1818(e)(4) and (g)(1)), Officer’s employment shall ter-minate as
of the effective date of the order, and Officer shall be entitled
to
receive the compensa-tion due to the Officer through the date of
termination, as well as any vested benefits due to the Officer pursuant
to
the terms of the plans, policies or practices of
Bank.
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ii.
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If
the Bank is in default (as defined in Section 3(x)(1) of FDIA), Officer’s
employment shall terminate as of the date of default, and Officer
shall be
entitled to receive the compensa-tion due to the Officer through
the date
of termination, as well as any vested benefits due to the Officer
pursuant
to the terms of the plans, policies or practices of
Bank.
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iii.
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If
a notice served under Sections 8(e)(3) or (g)(1) of the FDIA (12
U.S.C. §§
1818(e)(3) and (g)(1)) suspends and/or temporarily prohibits the
Officer
from participating in the conduct of the affairs of the Bank or BANK,
Officer’s employment under this Agreement shall be suspended as of the
date of such service, unless stayed by appropriate proceedings. If
the
charges in the notice are dismissed, the Bank may, in its discretion,
(i)
pay the Officer all or part of the compensation withheld while its
contract obligations were suspende-d, and (ii) reinstate (in whole
or in
part) any of its obliga-tions which were suspended.
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e.
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Voluntary
Termination by Officer.
In addition to the Officer’s other rights to terminate under this
Agreement, the Officer may voluntarily terminate employment with
Bank
during the Term of this Agreement upon at least thirty days' prior
written
notice to the Bancorp and Bank, in which case the Officer shall be
entitled to receive the compensa-tion due to the Officer through
the date
of termination, as well as any vested benefits due to the Officer
pursuant
to the terms of the plans, policies or practices of Bank.
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f. Without
Just Cause or With Good Reason.
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i.
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In
addition to termination pursuant to Section 10.a. through 10.e.:
the Board
may, by written notice to the Officer, immediately terminate the
Officer’s
employ-ment with Bank at any time for a reason other than Just Cause
(a
termination "Without Just Cause"); and the Officer may, by written
notice
to the Board, immediately terminate this Agreement at any time within
thirty days following an event of "Good Reason" as defined below
(a
termination "With Good Reason").
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ii.
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Subject
to Section 11 hereof, in the event of termination under this Section
10.f., the Officer shall be entitled to receive eighteen months of
current
salary, at the highest annual rate in effect pursuant to Section
4 of this
Agreement, plus any annual cash bonuses for the year at the amount
received, after the Effective Date, by the Officer in the calendar
year
preceding the termination, plus any vested benefits due to the Officer
pursuant to the terms of the plans, policies or practices of Bank.
The sum
due under this Section 10.f. shall be paid in one lump sum within
ten
calendar days of such termination.
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iii.
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"Good
Reason" shall exist if, without the Officer's express written consent,
Bank materially breaches any of its respective obligations under
this
Agreement during the Term. Without limitation, such a material breach
shall be deemed to occur upon any of the
following:
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(1)
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A
material reduction in the Officer’s respon-sibilities or authority in
connection with the Officer’s employment with
Bank;
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(2)
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Assignment
to the Officer of duties of a nonexecutive nature or duties for which
the
Officer is not reasonably equipped by the Officer’s skills and experience;
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(3)
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A
material reduction in salary or benefits contrary to the terms of
this
Agreement, or, following a Change in Control as defined in Section
11 of
this Agreement, any material reduction in salary or material reduction
in
benefits below the amounts to which the Officer was entitled prior
to the
Change in Control;
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(4)
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Termination
of incentive and benefit plans, programs, or arrangements, or reduction
of
the Officer's participation to such an extent as to materially reduce
their aggregate value below their aggregate value as of the Effective
Date;
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(5)
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A
requirement that the Officer’s principal business office or principal
place of residence be relocated outside the Washington-Baltimore
Consolidated Metropolitan Statistical Area (“CMSA”); or the assignment to
the Officer of duties that would reasonably require such a
relocation;
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(6)
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A
requirement that the Officer spend more than thirty normal working
days
away from the Washington-Baltimore CMSA during any consecutive
twelve-month period; or
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(7)
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Failure
to provide office facilities, secretarial services, and other
administrative services to Officer which are substantially equivalent
to
the facilities and services provided to the Officer at the Effective
Date
(excluding brief periods during which office facilities may be temporarily
unavailable due to fire, natural disaster, or other calamity).
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(8)
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In
the event of a Change in Control as defined in Section 11 of this
Agreement, Officer shall have the right to resign for any reason
during
the first thirty (30) days immediately following the first six months
after the closing date of a definitive acquisition agreement, the
execution of which brought about a Change in
Control.
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Upon
the
occurrence of any event described in clauses (1) through (8), above, the Officer
shall have the right to elect to terminate his employment under this Agreement
by resignation upon sixty (60) days prior written notice given within a
reasonable period of time not to exceed ninety (90) days after the initial
event
giving rise to said right to elect; provided, however that the Bank and the
Bancorp shall have at least thirty (30) days to cure such condition and provided
that the Officer actually terminates employment within two years after the
initial occurrence of such event. Notwithstanding the preceding sentence, in
the
event of a continuing breach of this Agreement by the Bank or the Bancorp,
the
Officer, after giving due notice within the prescribed time frame of an initial
event specified above, shall not waive any of his rights solely under this
Agreement by virtue of the fact that the Officer has submitted his resignation
but has remained in the employment of the Bank or the Bancorp and is engaged
in
good faith discussions to resolve any occurrence of an event described in
clauses (1) through (8) above.
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iv.
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Notwithstanding
the foregoing, a reduction or elimination of the Officer's benefits
under
one or more benefit plans maintained by the Bank as part of a good
faith,
overall reduction or elimination of such plan or plans or benefits
there
under applicable to all participants in a manner that does not
discriminate against the Officer (except as such discrimination may
be
necessary to comply with law) shall not constitute an event of Good
Reason
or a material breach of this Agreement, provided that benefits of
the type
or to the general extent as those offered under such plans prior
to such
reduction or elimination are not available to other officers of the
Bank,
its subsidiaries, or any company that controls either of them under
a plan
or plans in or under which the Officer is not entitled to participate,
and
receive benefits, on a fair and nondiscriminatory
basis.
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v.
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With
the exception of a termination pursuant to Section 10.g.iii(8) of
this
Agreement, the parties to this Agreement intend for the payments
to
satisfy the short-term deferral exception under Section 409A of the
Code.
However, notwithstanding anything to the contrary in this Agreement,
to
the extend payments do not meet the short-term deferral exception
of
Section 409A of the Code and, in the event the Officer is a “Specified
Employee” (as defined herein) no payment shall be made to the Officer
under this Agreement prior to the first day of the seventh month
following
the Event of Termination in excess of the “permitted amount” under Section
409A of the Code. For these purposes the “permitted amount” shall be an
amount that does not exceed two times the lesser of: (A) the sum
of the
Officer’s annualized compensation based upon the annual rate of pay for
services provided to the Bank for the calendar year preceding the
year in
which the Officer has an Event of Termination, or (B) the maximum
amount
that may be taken into account under a tax-qualified plan pursuant
to
Section 401(a)(17) of the Code for the calendar year in which occurs
the
Event of Termination. The payment of the “permitted amount” shall be made
within sixty (60) days of the occurrence of the Event of Termination.
Any
payment in excess of the permitted amount shall be made to the Officer
on
the first day of the seventh month following the Event of Termination.
“Specified Employee” shall be interpreted to comply with Section 409A of
the Code and shall mean a key employee within the meaning of Section
416(i) of the Code (without regard to paragraph 5 thereof), but an
individual shall be a “Specified Employee” only if the Bank is a
publicly-traded institution or the subsidiary of a public-traded
holding
company.
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g.
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Continuing
Covenant not to Compete or Interfere with Relationships.
Regardless of anything herein to the contrary, following a termination
(i)
due to Disability (ii) for Just Cause or (iii) by the Officer pursuant
to
Section 10.f.:
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i.
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Without
limitation, the Officer's obligations under Section 9.c. of this
Agreement
will continue in effect as provided thereby; and
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ii.
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During
the remaining Term of this Agreement, the Officer (a) shall not serve
as
an officer or director or employee of any bank holding company, bank,
savings association, trust company, savings and loan holding company,
or
mortgage company (any of which, a "Financial Institution") or any
investment advisory or brokerage firm (either of which, a “Securities
Firm”), in a capacity similar to that described in Section 1 of this
Agreement, which Financial Institution or Securities Firm offers
services
from offices in Washington, D.C., Maryland or Virginia; (b) shall
not
provide services to any client to which the Bank or any of its
subsidiaries provided services through the Officer or under the Officer’s
direction prior to his termination; and (c) shall not interfere with
the
relationship of the Bank or any of its subsidiaries with any of their
employees, agents, or representatives; provided, however, that the
provisions of this noncompetition clause shall not apply to termination
of
the Officer after a Change in Control as defined in Section 11. (It
being
the intent of the parties that the noncompetition clause shall not
apply
to terminations resulting from or due to a Change in
Control.)
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11. Termination
in Connection with a Change in Control.
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a.
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For
purposes of this Agreement, a "Change in Control" shall be deemed
to occur
on the earliest of:
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i.
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The
acquisition by any entity, person or group (other than
the acquisition by a tax-qualified retirement plan sponsored by the
Bank)
of beneficial ownership, as that term is defined in Rule 13d-3 under
the
Securities Exchange Act of 1934, of more than 25% of the outstanding
capital stock of Bancorp or the Bank entitled to vote for the election
of
directors ("Voting Stock");
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ii.
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The
commencement by any entity, person, or group (other than Bancorp
or the
Bank, a subsidiary of Bancorp or the Bank or a tax-qualified retirement
plan sponsored by Bancorp or the Bank) of a tender offer or an exchange
offer for more than 20% of the outstanding Voting Stock of Bancorp
or the
Bank;
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iii.
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The
execution of a definitive agreement of (a) a merger or consolidation
of
Bancorp or the Bank with one or more other corporations as a result
of
which the holders of the outstanding Voting Stock of Bancorp or the
Bank
immediately prior to such merger exercise voting control over less
than
80% of the Voting Stock of the surviving or resulting corporation,
or (b)
a transfer of substantially all of the property of Bancorp or the
Bank
other than to an entity of which Bancorp or the Bank owns at least
80% of
the Voting Stock;
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iv.
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Upon
the acquisition by any entity, person, or group of the control of
the
election of a majority of the Bank's or Bancorp's
directors,
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v.
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At
such time that, during any period of two consecu-tive years, individuals
who at the beginning of such period constitute the Board of Bancorp
or the
Bank (the "Continuing Directors") cease for any reason to constitute
at
least two-thirds thereof, provided that any individual whose election
or
nomination for election as a member of the Board was approved by
a vote of
at least two-thirds of the Continuing Directors then in office shall
be
considered a Continuing Director,
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vi.
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Upon
the sale of substantially all of the stock of Bancorp or Bank to
a person
other than Bancorp or a direct or indirect subsidiary of Bancorp
or the
Bank.
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b.
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Termination.
If within the period beginning six months prior to and ending two
years
after a Change in Control, (i) Bancorp or the Bank shall terminate
the
Officer's employment Without Just Cause, or (ii) the Officer shall
voluntarily terminate employment With Good Reason, Bank shall, within
ten
calendar days of the termination of Officer's employment, make a
lump-sum
cash payment to the Officer equal to 2.99 times the sum of (x) the
Officer’s annual salary at the highest annual rate in effect for any of
the twelve months immediately preceding the date of such termination,
plus
(y) the amount of other compensation received by the Officer pursuant
to
this Agreement during the calendar year preceding the Change in Control.
This cash payment is subject to adjustment pursuant to Section 14
of this
Agreement, and shall be made in lieu of any payment also required
under
section 10.g. of this Agreement because of a termination in such
period.
The Officer's rights under Section 10.g. are not otherwise affected
by
this Section 11. Also, in such event, for three calendar years following
Officer’s termination of employment, the Officer shall continue to
participate in any benefit plans of Bank that provide health (including
medical, dental and vision) life, disability, long term care, or
similar
coverage upon terms no less favorable than the most favorable terms
provided to executive officers of the Bank during such period.
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9
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c.
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Funding
of Trust upon Change in Control.
In order to assure payment to the Officer of amounts that may become
payable pursuant to this Section, unless and to the extent the Officer
has
previously provided a written release of any claims under Section
11 of
this Agreement, not later than ten business days after a Change in
Control, Bancorp or the Bank shall (i) establish a valid trust under
the
law of the State of Maryland with an independent trustee that has
or may
be granted corporate trust powers under Maryland law, (ii) deposit
in such
trust an amount equal to 2.99 times the Officer’s "base amount" as defined
in Section 280G(b)(3) of the Code and regulations promulgated there
under
(Section 280G and related regulations hereinafter referred to as
Section
280G") plus such amounts deemed adequate to cover the obligations
of the
Bank under Section 14 of this Agreement, at the time of the Change
of
Control, and (iii) provide the trustee of the trust with a written
direction to hold said amount and any investment return thereon in
a
segregated account, and to pay such amounts as demanded by the Officer
from the trust upon written demand from the Officer stating the amount
of
the payment demanded from the trust and the basis for the Officer’s rights
to such payment under Section 11 of this Agreement. Upon the earlier
of
the final payment of all amounts demanded by the Officer under this
Section 11 or the date thirty-six months after the Change in Control,
the
trustee of the trust shall pay to the Bank, as applicable, the entire
balance remaining in the trust. Payments from the trust to the Officer
shall be considered payments made by the Bank for purposes of this
Agreement. Payment of such amounts to the Officer from the trust,
however,
shall not relieve the Bank from any obligation to pay amounts in
excess of
those paid from the trust, or from any obligation to take actions
or
refrain from taking actions otherwise required by this Agreement.
Unless
and until a termination of or by the Officer as described in Section
11.b.(i) or (ii), the Officer's rights under this Agreement shall
be those
of a general, unsecured creditor, the Officer shall have no claim
against
the assets of the trust, and the assets of the trust shall remain
subject
to the claims of creditors of the Bank, as applicable. Upon the
termination of the trust as specified herein, the Officer shall have
no
further interest in the trust.
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d.
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Notwithstanding
the foregoing and with the exception of a termination under Section
10.g.iii(8) of this Agreement, the parties to this Agreement intend
for
the payments to satisfy the short-term deferral exception under Section
409A of the Code or, in the case of health and welfare benefits,
not
constitute deferred compensation (since such amounts are not taxable
to
the Officer). However, notwithstanding anything to the contrary in
this
Agreement, to the extent payments do not meet the short-term deferral
exception of Section 409A of the Code and, in the event the Officer
is a
“Specified Employee” (as defined herein) no payment shall be made to the
Officer under this Agreement prior to the first day of the seventh
month
following the Event of Termination in excess of the “permitted amount”
under Section 409A of the Code. For these purposes the “permitted amount”
shall be an amount that does not exceed two times the lesser of:
(A) the
sum of the Officer’s annualized compensation based upon the annual rate of
pay for services provided to the Bank for the calendar year preceding
the
year in which the Officer has an Event of Termination, or (B) the
maximum
amount that may be taken into account under a tax-qualified plan
pursuant
to Section 401(a)(17) of the Code for the calendar year in which
occurs
the Event of Termination. The payment of the “permitted amount” shall be
made within sixty (60) days of the occurrence of the Event of Termination.
Any payment in excess of the permitted amount shall be made to the
Officer
on the first day of the seventh month following the Event of Termination.
“Specified Employee” shall be interpreted to comply with Section 409A of
the Code and shall mean a key employee within the meaning of Section
416(i) of the Code (without regard to paragraph 5 thereof), but an
individual shall be a “Specified Employee” only if the Bank is a
publicly-traded institution or the subsidiary of a publicly-traded
holding
company.
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10
12. Indemnification
and Liability Insurance.
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a.
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Indemnification.
Bancorp and the Bank agree to indemnify the Officer (and the Officer’s
heirs, executors, and administrators) to the fullest extent permitted
under applicable law and regulations against any and all expenses
and
liabilities reasonably incurred by the Officer in connection with
or
arising out of any action, suit, or proceeding in which the Officer
may be
involved by reason of having been a director or officer of the Bank,
or
any of its subsidiaries (whether or not the Officer continues to
be a
director or officer at the time of incurring any such expenses or
liabilities) such expenses and liabilities to include, but not be
limited
to, judgments, court costs and attorney's fees and the cost of reasonable
settlements, such settlements to be approved by the Board of the
Bank, if
such action is brought against the Officer in the Officer’s capacity as an
officer or director of the Bank or any of its subsidiaries.
Indemnification for expenses shall not extend to matters for which
the
Officer has been terminated for Just Cause. Nothing contained herein
shall
be deemed to provide indemnification prohibited by applicable law
or
regulation. Notwithstanding anything herein to the contrary, the
obligations of this Section 12 shall survive the Term of this Agreement
by
a period of seven years.
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b.
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Insurance.
During the period in which indemnification of the Officer is required
under this Section, the Bank shall provide the Officer (and the Officer’s
heirs, executors, and administrators) with coverage under a directors'
and
officers' liability policy at the expense of the Bank, at least equivalent
to such coverage provided to directors and senior officers of the
Bank.
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13. Reimbursement
of Officer's Expenses to Enforce this Agreement.
Bank
shall reimburse the Officer for all out-of-pocket expenses, including, without
limitation, reasonable attorney's fees, incurred by the Officer in connection
with successful enforcement by the Officer of the obligations of the Bank to
the
Officer under this Agreement. Successful enforcement shall mean the grant of
an
award of money or the requirement that the Bank take some action specified
by
this Agreement (i) as a result of court order; (ii) a negotiated settlement;
or
(ii) otherwise the Bank following an initial failure of the Bank to pay such
money or take such action promptly after written demand therefore from the
Officer stating the reason that such money or action was due under this
Agreement at or prior to the time of such demand.
14. Adjustment
of Certain Payments and Benefits.
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a.
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The
Bank shall indemnify and hold the Officer harmless from any and all
loss,
expense, or liability that the Officer may ever incur under Code
§ 4999,
or any successor provision, as the result of payments or benefits
that the
Officer receives from Bancorp or the Bank or any successor to any
of its
interests. The Bank shall have this obligation with respect to any
excise
taxes (and any federal, state, and local income taxes on those excise
taxes) for which the Officer is liable under Code § 4999 (such excise tax,
together with any such interest and penalties, are hereinafter
collectively referred to as the “Excise Tax”), or any successor provision,
pursuant to a tax return on which the Officer reports such excise
tax
liability based on a reasonable analysis (that the Officer need not
file
with the return) prepared by the Officer’s legal counsel. This paragraph
shall survive termination or expiration of this Agreement for any
reason.
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b.
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In
the event it shall be determined that any payment or distribution
by the
Bank to or for the benefit of Officer (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement
or
otherwise, but determined without regard to any additional payments
required under this Section 14) would be subject to the Excise Tax,
then
the Officer shall be entitled to receive an additional payment (a
“Gross-Up Payment”) in an amount such that after payment by Officer of all
taxes (including any interest or penalties imposed with respect to
such
taxes), including, without limitation, any income taxes (and any
interest
and penalties imposed with respect thereto) and Excise Tax imposed
upon
the Gross-Up Payment, Officer retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the
Payments.
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11
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c.
|
All
payments to the Officer required by Section 14(a) and (b) hereof
shall be
made within ten (10) days of the demand by Officer for such payment
supported by a reasonable analysis prepared by Officer’s legal counsel.
If, following receipt by Officer of a Gross-Up Payment under this
Section
14, it is later determined that the actual amount of Excise Tax incurred
is greater than originally estimated, then Officer shall be entitled
to
receive an additional Gross-Up Payment, consistent with the calculations
required to be made hereunder. Such additional Gross-Up Payment shall
be
made within ten (10) days of the demand by Officer for such payment
supported by a reasonable analysis prepared by Officer’s legal
counsel.
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d.
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If,
after the receipt by Officer of a payment under this Section 14,
Officer
becomes entitled to receive any refund of such amounts, Office shall
promptly file for such refund and repay such amount to Bank promptly
after
receipt of same.
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15. Injunctive
Relief.
If
there is a breach or threatened breach of Section 10.h. of this Agreement or
the
prohibitions upon disclosure contained in Section 9.c. of this Agreement, the
Bank and the Officer agree that there is no adequate remedy at law for such
breach, and that the Bank each shall be entitled to injunctive relief
restraining the Officer from such breach or threatened breach, but such relief
shall not be the exclusive remedy hereunder for such breach. The parties hereto
likewise agree that the Officer shall be entitled to injunctive relief to
enforce the obligations of the Bank under Section 11 of this
Agreement.
16. Successors
and Assigns.
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a.
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This
Agreement shall inure to the benefit of and be binding upon any corporate
or other successor of the Bank which shall acquire, directly or
indirectly, by merger, con-solidation, purchase or otherwise, all
or
substantially all of the assets or stock of Bancorp or the
Bank.
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b.
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Since
the Bank is contracting for the unique and personal skills of the
Officer,
the Officer’s rights or duties hereunder shall be precluded from
assignment or delegation without first obtaining the written consent
of
the Bank, provided that the Officer is not precluded from delegating
duties and powers in connection with the fulfillment of his management
responsibilities specified in Section 1,
hereof.
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17. No
Mitigation.
The
Officer shall not be required to mitigate the amount of any payment provided
for
in this Agreement by seeking other employment or otherwise and no such payment
shall be offset or reduced by the amount of any compensation or benefits
provided to the Officer in any subsequent employment.
12
18. Notices.
All
notices, requests, demands and other communications in connection with this
Agreement shall be made in writing and shall be deemed to have been given when
delivered by hand or 48 hours after mailing at any general or branch United
States Post Office, by registered or certified mail, postage prepaid, addressed
as follows, or to such other address as shall have been designated in writing
by
the addressee:
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a.
|
If
to Bancorp and the Bank:
|
Xxxxx
Spring Bancorp, Inc.
|
|
00000
Xxxxxxx Xxxxxx
|
|
|
Xxxxx,
Xxxxxxxx 00000
|
Attention:
R.E. Xxxxxxxxxx, General Counsel
b. If
to the
Officer:
|
Xxxxxx
X. Xxxxxxxx
|
|
0000
Xxxx Xxxxx Xxxx
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|
Xx.
Xxxx, XX 00000
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19. Joint
and Several Liability; Payments by the Bank.
To the
extent permitted by law, except as otherwise provided herein, Bancorp and the
Bank shall be jointly and severally liable for the payment of all amounts due
under this Agreement. Bancorp hereby agrees that it shall be jointly and
severally liable with Bank for the payment of all amounts due under this
Agreement and shall guarantee the performance of Bank’s obligations there under,
provided that Bancorp shall not be required by this Agreement to pay to the
Officer a salary or any bonuses or any other cash payments, except in the event
that Bank does not fulfill the obligations to the Officer hereunder for such
payments.
20. No
Plan Created by this Agreement.
The
Officer and the Bank expressly declare and agree that this Agreement was
negotiated among them and that no provision or provisions of this Agreement
are
intended to, or shall be deemed to, create any plan for purposes of the Employee
Retirement Income Security Act or any other law or regulation, and the Bank
and
the Officer each expressly waives any right to assert the contrary. Any
assertion in any judicial or administrative filing, hearing, or process by
or on
behalf of the Officer or the Bank that such a plan was so created by this
Agreement shall be deemed a material breach of this Agreement by the party
making such an assertion.
21. Amendments.
No
amendments or additions to this Agreement shall be binding unless made in
writing and signed by all of the parties, except as herein otherwise
specifically provided.
22. Applicable
Law.
Except
to the extent preempted by Federal law, the laws of the State of Maryland shall
govern this Agreement in all respects, whether as to its validity,
construc-tion, capacity, perfor-xxxxx or otherwise.
23. Severability.
The
provisions of this Agreement shall be deemed severable and the invalidity or
unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof.
24. Headings.
Headings contained herein are for convenience of reference only.
25. Entire
Agreement.
This
Agreement, together with any under-standing or modifications thereof as agreed
to in writing by the parties, shall constitute the entire agreement among the
parties hereto with respect to the subject matter hereof, other than written
agreements with respect to specific plans, programs, or arrangements described
in Sections 5 and 6, and supersedes all prior agreements other than with respect
to such specific plans, programs, or arrangements provided.
13
IN
WITNESS WHEREOF,
the
parties hereto have executed this Agreement on the date first set forth
above.
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XXXXX
SPRING BANCORP, INC.
By:
/s/ Hunter X.
Xxxxxx
Hunter
X. Xxxxxx
Chief
Executive Officer
XXXXX
SPRING BANK
By:
/s/ Hunter X.
Xxxxxx
Hunter
X. Xxxxxx
Chief
Executive Officer
OFFICER
/s/
Xxxxxx X.
Xxxxxxxx
Xxxxxx
X. Xxxxxxxx
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14
