THIS AGREEMENT CONTAINS A BINDING, IRREVOCABLE AGREEMENT TO ARBITRATE AND IS
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SUBJECT TO ARBITRATION PURSUANT TO TITLE 15, CHAPTER 48 (UNIFORM ARBITRATION
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ACT) OF THE CODE OF LAWS OF SOUTH CAROLINA
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CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT (the "Agreement") is made as of January 24, 2006 (the
"Effective Date") by and among Xxxxx X. Xxxxxx (the "Employee"), a resident of
the state of South Carolina; Islands Bancorp, Inc. (the "Company"), a
corporation organized under the laws of the State of South Carolina and a bank
holding company; and Islands Community Bank, N.A. (the "Bank"), a national bank
organized under the laws of the United Sates and wholly-owned subsidiary of the
Company.
WHEREAS, the Employee is currently employed as the Chief Financial Officer
of the Company and the Bank; and
WHEREAS, the Company and the Bank (sometimes collectively referred to
herein as the "Employer") desire to induce the Employee to continue in the
employ of the Company and the Bank by offering this agreement providing
severance benefits to the Employee in certain circumstances following a Change
in Control (as defined below) of the Company or the Bank.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms
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and conditions shall have the meanings set forth in this Section 1:
(a) "Area" means the geographic area within a 25-mile radius of
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each location where the Employer (or any subsidiary or parent company of
Employer) maintains an office or branch at any time during the term of this
Agreement.
(b) "Board of Directors" means the Board of Directors of the
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Company or the Bank, as the context implies.
(c) "Business of theEmployer" means the business conducted by the
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Company and the Bank, which is the business of banking, including the
solicitation of time and demand deposits and the making of residential,
consumer, commercial and corporate loans.
(d) "Cause" shall mean any of (i) the commission by Employee of a
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willful act (including, without limitation, a dishonest, fraudulent or
unethical act, or willful or recurring insubordination) or a grossly
negligent act, or the willful or grossly negligent omission to act by
Employee, which is intended to cause, causes or is reasonably likely to
cause material harm to Employer (including harm to its business
reputation); (ii) the indictment of Employee for the commission or
perpetration by Employee of any felony or any crime
involving dishonesty, moral turpitude or fraud; (iii) the material breach
by Employee of this Agreement; (iv) the material violation by Employee of
any federal or state banking law, rule or regulation, causing or
permitting, whether intentionally or negligently, Employer to materially
violate any federal or state banking law, rule or regulation; (v) the
suspension or temporary prohibition of Employee's participation in the
conduct of the affairs of Employer or any subsidiary of Employer by notice
served under Section 8(e) of the Federal Deposit Insurance Act (12 U.S.C.,
Section 1818 (e)); (vi) the receipt of any form of notice, written or
otherwise, that any regulatory agency having jurisdiction over Employer
intends to institute any form of formal or informal (e.g., a memorandum of
understanding which relates to Employee's performance) regulatory action
against Employee or Employer (provided that the Board of Directors
determines in good faith, with Employee abstaining from participating in
the consideration of and vote on the matter, that the subject matter of
such action involves acts or omissions by or under the supervision of
Employee or that termination of Employee would materially advance
Employer's compliance with the purpose of the action or would materially
assist Employer in avoiding or reducing the restrictions or adverse effects
to Employer related to the regulatory action), not including items
contained in any regulatory action in place prior to the Employee's
employment; (vi) the exhibition by Employee of a standard of behavior
within the scope of her employment that is materially disruptive to the
orderly conduct of Employer's business operations (including, without
limitation, substance abuse or sexual misconduct) to a level which, in the
Board of Directors' good faith and reasonable judgment, with Employee
abstaining from participating in the consideration of and vote on the
matter, is materially detrimental to Employer's best interest; (viii) the
failure of Employee to devote her full business time and attention to her
employment that, if susceptible of cure, remains uncured 60 days following
written notice to Employee of such failure; or (ix) the failure by the
Employee to achieve or maintain the reasonable performance goals
established by Employer's management and approved by the Board of Directors
from time to time for Employee and Employer that, if susceptible of cure,
remains uncured 60 days following written notice to Employee of such
failure.
(e) "Change in Control" means the occurrence of any of the
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following events on or after the Effective Date:
(i) within any 12-month period (beginning on or after the
Effective Date) the persons who constitute the Board of Directors of
the Company or the Bank immediately before such 12-month period (the
"Incumbent Directors") cease for any reason to constitute at least a
majority of such Board of Directors; provided, however, that any
person becoming a director subsequent to the Effective Date shall be
deemed to be an Incumbent Director if that director was elected to
such Board of Directors by, or on the recommendation of or with the
approval of, at least two-thirds (2/3) of the directors who then
qualified as Incumbent Directors; and provided further that no
director whose initial assumption of office is in connection with an
actual or threatened election contest relating to the election of
directors shall be deemed an Incumbent Director;
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(ii) the consummation of a reorganization, merger or
consolidation of the Company or the Bank, with respect to which
persons who were the stockholders of the Company or the Bank, as the
case may be, immediately prior to such reorganization, merger or
consolidation do not, immediately thereafter, own more than fifty
percent (50%) of the combined voting power entitled to vote in the
election of directors of the reorganized, merged or consolidated
entity's then outstanding voting securities; or
(iii) the sale, transfer or assignment of all or
substantially all of the assets of the Company and the Bank to any
third party.
(f) "Confidential Information" means data and information relating
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to the Business of the Employer (which does not rise to the status of a
Trade Secret) which is or has been disclosed to the Employee or of which
the Employee became aware as a consequence of or through her relationship
to the Company and the Bank and which has value to the Company and the Bank
and is not generally known to its competitors. Without limiting the
foregoing, Confidential Information shall include the following:
(i) all items of information that could be classified as a
trade secret pursuant to South Carolina law;
(ii) the names, addresses and banking requirements of the
customers of the Company and the Bank and the nature and amount of
business done with such customers;
(iii) the names and addresses of employees and other business
contacts of the Company and the Bank;
(iv) the particular names, methods and procedures utilized by
the Company and the Bank in the conduct and advertising of their
business;
(v) the applications, operating system, communication and
other computer software and derivatives thereof, including, without
limitation, sources and object codes, flow charts, coding sheets,
routines, subrouting and related documentation and manuals of the
Company and the Bank; and
(vi) marketing techniques, purchasing information, pricing
policies, loan policies, quoting procedures, financial information,
customer data and other materials or information relating to the
Company's and the Bank's manner of doing business.
Confidential Information shall not include any data or information
that has been voluntarily disclosed to the public by the Company or the
Bank (except where such public disclosure has been made by the Employee
without authorization) or that has been independently developed and
disclosed by others, or that otherwise enters the public domain through
lawful means.
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(g) "Good Reason" means, with respect to a voluntary resignation
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by the Employee, any one of the following events, but only if such event
first arose within forty-five (45) days of such resignation, the Employee
first provided the Employer with written notice of the event within fifteen
(15) days after the event occurred and an opportunity to cure for at least
ten (10) business days from its receipt of the notice and the circumstances
continued, uncured, through the effective date of the Employee's
resignation:
(i) the assignment of duties to the Employee that, in the
aggregate, are not commensurate with her training and experience;
(ii) a reduction in the Employee's base salary rate or annual
bonus opportunity effected by the Employer, unless such reduction
applies generally to senior executives of the Employer; or
(iii) a requirement by the Employer that the Employee's
services be rendered primarily at a location more than twenty-five
(25) miles from any business office maintained by the Employer as of
the Effective Date.
(h) "Trade Secrets" means information, without regard to form,
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including, but not limited to, technical or nontechnical data, formulas,
patterns, compilations, programs, devices, methods, techniques, drawings,
processes, financial data, financial plans, product plans or lists of
actual or potential customers or suppliers which (i) derives economic
value, actual or potential, from not being generally known to, and not
being readily ascertainable by proper means by, other persons who can
obtain economic value from its disclosure or use, and (ii) is the subject
of efforts that are reasonable under the circumstances to maintain its
secrecy.
2. TERM. The term of this Agreement (the "Term") shall become
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effective as of the Effective Date and shall remain in effect until the earliest
of (a) the Employee's termination of employment with the Company and the Bank,
regardless of the manner in which it was effected, prior to a Change in Control;
(b) the last day of the thirteenth (13th) calendar month immediately following
the calendar month containing the effective date of a Change in Control (the
period from the effective date of a Change in Control through the last day of
such thirteenth (13th) calendar month is referred to herein as the "Post-Change
in Control Period") provided there has been no Qualifying Termination of
Employment (as defined in Section 3) prior thereto; or (c) until all amounts
that may be payable to the Employee pursuant to Section 3 below have been paid
in connection with a Qualifying Termination of Employment.
3. SEVERANCE BENEFITS UPON TERMINATION OF EMPLOYMENT. If, while this
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Agreement is in effect, the Employee: (a) is involuntarily terminated by the
Company and the Bank without Cause during the Post-Change in Control Period; (b)
resigns her employment with the Company and the Bank for Good Reason during the
Post-Change in Control Period; or (c) resigns for any reason during the
thirteenth (13th) month of the Post-Change in Control Period (each, a
"Qualifying Termination of Employment"), the Bank shall pay to the Employee in a
lump-sum an amount equal to two times the sum of (a) the Employee's salary as in
effect at the
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effective time of the termination of employment and (b) the amount of the bonus
earned by the Employee during the prior calendar year (the "Lump Sum Payment").
The Lump Sum Payment is sometimes referred to in this Agreement as the
"Severance Benefit." If the aggregate present value (determined as of the date
of the Change in Control in accordance with the provisions of Section 280G of
the Internal Revenue Code, as amended, and the rules and regulations promulgated
thereunder (collectively, the "Code")) of both the Severance Benefit and all
other payments to the Employee in the nature of compensation which are
contingent on a change in ownership or effective control of the Company or the
Bank or in the ownership of a substantial portion of the assets of the Company
or the Bank (the "Aggregate Severance") would result in a "parachute payment,"
as defined under Section 280G of the Code, then the Aggregate Severance shall
not be greater than an amount equal to 2.99 multiplied by Employee's "base
amount" for the "base period," as those terms are defined under Section 280G.
In the event the Aggregate Severance is required to be reduced pursuant to this
Section 3, the Employee shall be entitled to determine which portions of the
Aggregate Severance are to be reduced so that the Aggregate Severance satisfies
the limit set forth in the preceding sentence.
The Lump Sum Payment shall be paid to the Employee as soon as practicable
following the effective date of the Qualifying Termination of Employment. The
Employer shall be entitled to withhold appropriate employment and income taxes,
if required by applicable law, from any Severance Benefit that becomes payable.
4. CONFIDENTIALITY. In the event of the occurrence of a Change in
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Control during the Term, the Employee agrees that:
(a) except to the extent necessary to perform the duties assigned
to her by the Employer, the Employee will hold Confidential Information and
Trade Secrets in trust and strictest confidence, and will not use,
reproduce, distribute, disclose or otherwise disseminate the Confidential
Information and Trade Secrets or any physical embodiments thereof and may
in no event take any action causing or fail to take the action necessary to
prevent, any Confidential Information and Trade Secrets disclosed to or
developed by the Employee to lose its character or cease to qualify as
Confidential Information or Trade Secrets; and
(b) the covenants of confidentiality set forth herein will apply
only from and after the occurrence of a Change in Control during the
remaining term of the Employee's employment but, in such event, will extend
to any Confidential Information and Trade Secrets disclosed by the Employer
or developed by the Employee at any time during her employment with the
Employer. The covenants restricting the use of Confidential Information
will apply from the effective date of the Change in Control and will
continue and be maintained by the Employee for a period of twelve (12)
months following the Employee's termination of employment, regardless of
the reason. The covenants restricting the use of Trade Secrets will apply
from the effective date of the Change in Control and will continue and be
maintained by the Employee following Employee's termination of employment,
regardless of the reason, for so long as permitted by applicable law.
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5. NOT USED.
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6. NONSOLICITATION. If the Employee experiences a termination of
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employment, regardless of the reason, during the Post-Change in Control Period,
the Employee agrees that, for twelve (12) months following the Employee's
termination of employment:
(a) the Employee will not (except on behalf of or with the prior
written consent of the Employer), on the Employee's own behalf or in the
service or on behalf of others, solicit, divert or appropriate or attempt
to solicit, divert or appropriate, directly or by assisting others, any
business from any of the customers of the Bank, including actively sought
prospective customers, with whom the Employee has or had material contact
during the last two (2) years of the Employee's employment, for purposes of
providing products or services that are competitive with those provided by
the Employer; and
(b) the Employee will not on the Employee's own behalf or in the
service or on behalf of others, solicit, recruit or hire away or attempt to
solicit, recruit or hire away, directly or by assisting others, any
employee of the Company and/or the Bank with whom the Employee has or had
material contact during the last two (2) years of the Employee's
employment, whether or not such employee is a full-time employee or a
temporary employee of the Company and/or the Bank and whether or not such
employment is pursuant to a written agreement and whether or not such
employment is for a determined period or is at will.
7. REMEDIES. The Employee agrees that, in addition to all remedies
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provided by law or in equity, the Employer shall be entitled to specific
performance of this Agreement and to both temporary and permanent injunctions to
prevent a breach or contemplated breach by the Employee of the covenants in
Sections 4, 5 and 6 hereof. If the Employee breaches her obligations pursuant
to Sections 4, 5 or 6 hereof, the Employee will forfeit any amounts owed to the
Employee under Section 3 hereof which have not been paid to the Employee.
8. NO MITIGATION. No amounts or benefits payable to the Employee
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hereunder shall be subject to mitigation or reduction by income or benefits the
Employee receives from other sources.
9. CONTINUED EMPLOYMENT. Nothing herein shall entitle Employee to
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continued employment with the Company and/or the Bank or to continued tenure in
any specific office or position. The Employee's employment with the Company and
the Bank shall be terminable at the will of the Company or the Bank, as the case
may be, with or without Cause, subject to the terms of any other written
agreement as may be in effect between the parties.
10. ASSIGNMENT. The rights and obligations of the Employer under this
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Agreement shall inure to the benefit of the Employer's successors and assigns.
This Agreement may be assigned by the Company or the Bank to any legal successor
or to an entity which purchases all or substantially all of the assets of the
Company or the Bank, as the case may be. In the event of any assignment of this
Agreement permitted by this Section 10, the terms "Company," "Bank"
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and/or the "Employer" as defined herein will refer to the assignee(s), as
appropriate, and the Employee will not be deemed to have terminated employment
hereunder until the Employee terminates employment from the assignee(s).
11. ARBITRATION. Any controversy or claim arising out of or relating
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to this Agreement, or the breach thereof, shall be adjudicated through binding
arbitration before a single arbitrator in accordance with the Commercial
Arbitration Rules of the American Arbitration Association. The Employer and the
Employee agree that they will seek to enforce any arbitration award in the Court
of Common Pleas in Beaufort County, South Carolina, the Fourteenth Judicial
Circuit. The decision of the arbitration panel shall be final and binding upon
the parties and judgment upon the award rendered by the arbitration panel may be
entered by any court having jurisdiction. The Employer and the Employee agree to
share equally the fees and expenses associated with the arbitration proceedings,
except as otherwise provided by Section 12 below.
EMPLOYEE MUST INITIAL HERE: /S/ CJN
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12. ATTORNEYS' FEES. With respect to arbitration of disputes and if
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litigation ensues between the parties concerning the enforcement of an
arbitration award and the Employee prevails on all of the material issues
pertinent to the dispute, the Employer will reimburse the Employee for all
costs, expenses, reasonable attorneys' fees and reasonable expenses incurred by
the Employee (or the Employee's estate in the event of her death) in connection
with the dispute.
13. NOTICE. All notices, consents, waivers and other communications
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required or permitted by this Agreement shall be in writing and shall be deemed
given to a party when (a) delivered to the appropriate address by hand or by
nationally recognized overnight courier service (costs prepaid); (b) sent by
facsimile with confirmation of transmission by the transmitting equipment; or
(c) received or rejected by the addressee, if sent by certified mail, return
receipt requested, in each case to the following addresses or facsimile numbers
and marked to the attention of the person (by name or title) designated below
(or to such other address, facsimile number or person as a party may designate
by written notice to the other parties):
If to the Employer, to the Employer at: Islands Community Bank
0000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Chairman
If to the Employee, to the Employee at: Xx. Xxxxx X. Xxxxxx
00 Xxxxxxxx Xxxxx #000
Xxxxxx Xxxx, XX 00000
14. HEADINGS. Sections or other headings contained herein are for
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reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15. ENTIRE AGREEMENT. This Agreement contains the entire understanding
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of the parties with respect to the subject matter hereof.
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16. SEVERABILITY. In the event that one or more of the provisions of
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this Agreement shall be or become invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not be affected thereby.
17. APPLICABLE LAW AND CHOICE OF FORUM. This Agreement shall be
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construed and enforced under and in accordance with the laws of the State of
South Carolina. The parties agree that any appropriate state or federal court
located in South Carolina shall have exclusive jurisdiction of any case or
controversy arising under or in connection with Sections 4 through 7 of this
Agreement shall be a proper forum in which to adjudicate such case or
controversy. The parties consent and waive any objection to the jurisdiction or
venue of such courts.
18. AMENDMENT. This Agreement may not be modified, amended,
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supplemented or terminated except by a written agreement between the Employer
and the Employee.
19. SURVIVAL. The provisions of Sections 4, 5, 6, 7, 11, 12, 17 and 20
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of this Agreement shall survive, as necessary and to the extent applicable, the
expiration of the Term or any other termination of this Agreement.
20. CONFIDENTIALITY AND PROFESSIONALISM. Employee represents and
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agrees that Employee will keep the terms, amount, value, and nature of
consideration paid to Employee, and the fact of this Agreement completely
confidential, and that Employee will not hereafter disclose any information
concerning this Agreement to anyone other than Employee's immediate family and
professional representatives who will be informed of and bound by this
confidentiality clause.
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IN WITNESS WHEREOF, each of the parties has executed this Agreement as of
the date and year first above written.
THE COMPANY:
Islands Bancorp
By: /s/ D. Xxxxxx Xxxxxxx
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Print Name: D. Xxxxxx Xxxxxxx
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Title: Chairman of the Board of Directors
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THE BANK:
Community Bank, N.A.
By: /s/ D. Xxxxxx Xxxxxxx
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Print Name: D. Xxxxxx Xxxxxxx
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Title: Chairman of the Board of Directors
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EMPLOYEE:
/s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
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