Exhibit 10.5
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is entered into this 17th day of June 2008, but shall be
effective as of January 1, 2008 (hereinafter the "Effective Date") by and
between American Bank of New Jersey, Bloomfield, New Jersey (the "Bank") and
Xxxx X. Xxxxx (hereinafter the "Executive").
WITNESSETH
WHEREAS, the Executive has accepted employment with the Bank as the
President and Chief Operating Officer and is experienced in all phases of the
business of the Bank; and
WHEREAS, the Bank desires to be ensured of the Executive's continued active
participation in the business of the Bank; and
WHEREAS, this Agreement is intended to replace the previous employment
agreement between the Executive and the Bank and to comply with the requirements
of Section 409A of the Internal Revenue Code of 1986, as amended (the "Code"),
and to reflect such additional changes as the Bank deems appropriate;
NOW THEREFORE, in consideration of the mutual covenants and agreements
between the parties, as herein contained, the parties, intending to be legally
bound, do hereby agree as follows:
1._______Employment. The Bank hereby employs the Executive in the capacity
of President and Chief Operating Officer. The Executive hereby accepts said
employment and agrees to render such administrative and management services to
(the Company") as are currently rendered and as are customarily performed
(the Company") as are currently rendered and as are customarily performed by
persons situated in a similar executive capacity. The Executive shall promote
the business of the Bank and the Company. The Executive's other duties shall be
such as the Chief Executive Officer ("CEO") of the Bank or the Board of
Directors for the Bank (the "Board of Directors" or "Board") may from time to
time reasonably direct, including normal duties as an officer of the Bank.
2. Term of Employment. The term of employment of Executive under this
Agreement shall be for the period commencing on the Effective Date and ending
thirty-six (36) months thereafter (hereinafter the "Term"). Additionally, on or
before each annual anniversary date from the Effective Date, the Term of
employment under this Agreement shall be extended for an additional year beyond
the then effective expiration date upon a determination and resolution of the
Board of Directors that the performance of the Executive has met the
1
requirements and standards of the Board, so that the contract, when extended,
will be for a new thirty-six (36) month term. References herein to the Term of
this Agreement shall refer both to the initial term and successive terms.
3. Compensation, Benefits and Expenses.
(a) Base Salary. The Bank shall compensate and pay the Executive during the
Term of this Agreement a minimum base salary at the rate of $258,750 per annum
(hereinafter the "Base Salary"), payable in cash not less frequently than
monthly; provided, that the rate of such salary shall be reviewed by the Board
of Directors not less often than annually, and the Executive shall be entitled
to receive increases at such percentages or in such amounts as determined by the
Board of Directors. The Base Salary may not be decreased without the Executive's
express written consent.
(b) Discretionary Bonus. The Executive shall be entitled to participate in
an equitable manner with all other senior management employees of the Bank in
discretionary bonuses that may be authorized and declared by the Board of
Directors to its senior management executives from time to time, and any
management incentive plan that may be authorized. No other compensation provided
for in this Agreement shall be deemed a substitute for the Executive's right to
participate in such discretionary bonuses when and as declared by the Board. Any
discretionary bonus shall be paid no later than 2 1/2 months after the end of
the year in which the Executive obtains a legally binding right to the bonus. If
the discretionary bonus cannot be paid by that date, then it shall be paid on
the next following April 15, or such other date during the year as permitted by
Section 409A of the Code and the regulations thereunder (Section 409A).
(c) Participation in Benefit and Retirement Plans. The Executive shall be
entitled to participate in and receive the benefits of any plan of the Bank
which may be or may become applicable to senior management relating to pension
or other retirement benefit plans, profit-sharing, stock options or incentive
plans, or other plans, benefits and privileges given to employees and executives
of the Bank, to the extent commensurate with his then duties and
responsibilities, as fixed by the Board of Directors of the Bank.
(d) Participation in Medical Plans and Insurance Policies. The Executive
shall be entitled to participate in and receive the benefits of any plan or
policy of the Bank which may be or may become applicable to senior management
relating to life insurance, short-term and long-term disability, medical,
dental, vision-care, prescription drugs or medical reimbursement plans. During
the term of the Executive's employment with the Bank, the Executive's dependent
family may participate in such programs, with the cost of premiums paid in part
by the Bank and by the Executive in accordance with policies established by the
Board of Directors.
(e) Vacations and Sick Leave. The Executive shall be entitled to paid
annual vacation leave in accordance with the policies as established from time
to time by the Board of Directors, which shall in no event be less than four (4)
weeks per annum. The Executive shall also be entitled to an annual sick leave
benefit as established by the Board for senior management employees of the Bank.
2
(f) Expenses. The Bank shall reimburse the Executive or otherwise provide
for or pay for all reasonable expenses incurred by the Executive in furtherance
of, or in connection with the business of the Bank, including, but not by way of
limitation, use of a Bank leased automobile and related traveling expenses, and
all reasonable entertainment expenses, subject to such reasonable documentation
and other limitations as may be established by the Board of Directors of the
Bank. If such expenses are paid, in the first instance, by the Executive, the
Bank shall reimburse the Executive therefor.
(g) Changes in Benefits. The Bank shall not make any changes in such plans,
benefits or privileges previously described in Section 3(c), (d) and (e) which
would adversely affect the Executive's rights or benefits thereunder, unless
such change occurs pursuant to a program applicable to all executive officers of
the Bank and does not result in a proportionately greater adverse change in the
rights of, or benefits to, the Executive as compared with any other executive
officer of the Bank. Nothing paid to Executive under any plan or arrangement
presently in effect or made available in the future shall be deemed to be in
lieu of the salary payable to Executive pursuant to Section 3(a) hereof.
4. Loyalty; Non-competition.
(a) The Executive shall devote his full time and attention to the
performance of his employment under this Agreement. During the term of the
Executive's employment under this Agreement, the Executive shall not engage in
any business or activity contrary to the business affairs or interests of the
Bank or the Company.
(b) Nothing contained in this Section 4 shall be deemed to prevent or limit
the right of Executive to invest in the capital stock or other securities of any
business dissimilar from that of the Bank or the Company , or, solely as a
passive or minority investor, in any business.
5. Standards. During the term of this Agreement, the Executive shall
perform his duties in accordance with such reasonable standards expected of
executives with comparable positions in comparable organizations and as may be
established from time to time by the Board of Directors.
6. Termination and Termination Pay. The Executive's employment under this
Agreement shall be terminated upon any of the following occurrences:
(a) The death of the Executive during the term of this Agreement, in which
event the Executive's estate shall be entitled to receive the compensation due
the Executive for at least one calendar month after the date of the Executive's
death.
(b) The Board of Directors may terminate the Executive's employment at any
time, but any termination by the Board of Directors other than termination for
Just Cause, shall not prejudice the Executive's right to compensation or other
benefits under this Agreement. The Executive shall have no right to receive
compensation or other benefits for any period after termination for "Just
Cause". The Board may, within its sole discretion and acting in good faith,
terminate the Executive for Just Cause and shall notify such Executive
3
accordingly. Termination for Just Cause shall be defined as termination because
of the Executive's personal dishonesty, incompetence, willful misconduct, breach
of fiduciary duty involving personal profit, intentional failure to perform
stated duties, willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or final cease-and-desist order, or
material breach of any provision of this Agreement.
(c) Except as provided pursuant to Section 9 hereof, in the event
Executive's employment under this Agreement is terminated by the Board of
Directors without Just Cause, the Bank shall be obligated to continue to pay the
Executive the salary provided pursuant to Section 3(a) herein, through the
remaining term of this Agreement, but in no event for a period of less than one
year, and the cost of Executive obtaining all health, life, disability, and
other benefits which the Executive would be eligible to participate in through
such date based upon benefit levels substantially equal to those being provided
Executive at the date of termination of employment. No payment shall be made
under this Section 6(c) unless the Executive's termination of employment
qualifies as a Separation from Service (as that phrase is defined in Section
409A taking into account all rules and presumptions provided for in the Section
409A regulations). If the Executive is a Specified Employee (as defined in
Section 409A) at the time of his Separation from Service, then payments under
this Section 6(c) which constitute deferred compensation under Section 409A
shall not be paid until the 185th day following the Executive's Separation from
Service, or his earlier death (the Delayed Distribution Date). To the extent
permitted by Section 409A, amounts payable under this Section 6(c) which are
considered deferred compensation shall be treated as payable after amounts which
are not considered deferred compensation.
(d) The voluntary termination by the Executive during the term of this
Agreement with the delivery of no less than 60 days written notice to the Board
of Directors, other than pursuant to Section 9(b), in which case the Executive
shall be entitled to receive only the compensation, vested rights, and all
employee benefits up to the date of such termination.
7. Regulatory Exclusions.
(a) If the Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C.
1818(e)(3) and (g)(1)), the Bank's obligations under the Agreement shall be
suspended as of the date of service, unless stayed by appropriate proceedings.
If the charges in the notice are dismissed, the Bank may in its discretion (i)
pay the Executive all or part of the compensation withheld while its contract
obligations were suspended and (ii) reinstate (in whole or in part) any of its
obligations which were suspended.
(b) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act (12 U.S.C.
1818(e)(4) and (g)(1)), all obligations of the Bank under this Agreement shall
terminate, as of the effective date of the order, but the vested rights of the
contracting parties shall not be affected.
4
(c) If the Bank is in default (as defined in Section 3(x)(1) of Federal
Deposit Insurance Act), all obligations under this Agreement shall terminate as
of the date of default, but this paragraph shall not affect any vested rights of
the contracting parties.
(d) All obligations under this Agreement shall be terminated, except to the
extent determined that continuation of this Agreement is necessary for the
continued operation of the Bank: (i) by the Director of the Office of Thrift
Supervision (hereinafter the "Director of OTS"), or his or her designee, at the
time that the Federal Deposit Insurance Corporation (hereinafter the "FDIC")
enters into an agreement to provide assistance to or on behalf of the Bank under
the authority contained in Section 13(c) of Federal Deposit Insurance Act; or
(ii) by the Director of the OTS, or his or her designee, at the time that the
Director of the OTS, or his or her designee approves a supervisory merger to
resolve problems related to operation of the Bank or when the Bank is determined
by the Director of the OTS to be in an unsafe or unsound condition. Any rights
of the parties that have already vested, however, shall not be affected by such
action.
(e) Notwithstanding anything herein to the contrary, any payments made to
the Executive pursuant to the Agreement, or otherwise, shall be subject to and
conditioned upon compliance with 12 USC 1828(k) and FDIC Regulation 12 CFR Part
359, Golden Parachute Indemnification Payments promulgated thereunder. (f)
Payments under the Agreement that are suspended under this Section 7, but are
later determined by the applicable regulatory authority to be payable, shall be
paid on the earliest date practicable thereafter.
8. Disability. If the Executive shall become disabled or incapacitated to
the extent that he is unable to perform his duties hereunder, by reason of
medically determinable physical or mental impairment ("Disability"), as
determined by a doctor engaged by the Board of Directors, the Bank will pay the
Executive, as disability pay, a weekly payment equal to one hundred percent
(100%) of the Executive's weekly rate of Base Salary for a period of up to one
year and a weekly payment equal to sixty-five percent of the Executive's weekly
rate of Base Salary for the remaining Term of such Agreement. These Disability
payments shall commence on the effective date of the determination of such
Disability and will end on the earlier of (i) the date Executive returns to
full-time employment with the Bank in an executive capacity; (ii) Executive
commences full-time employment with another employer; (iii) Executive's death;
or (iv) the expiration of the Term of this Agreement. Such benefits noted herein
shall be reduced by any benefits otherwise provided to the Executive during such
period under the provisions of any disability insurance coverage of the Bank in
effect for the Executive. Thereafter, if such Disability continues, Executive
shall be eligible to receive benefits provided by the Bank, if any, under the
provisions of disability insurance coverage in effect for Bank employees. Upon
returning to active full-time employment, the Executive's full compensation as
set forth in this Agreement shall be reinstated as of the date of commencement
of such activities. In the event that the Executive returns to active employment
on other than a full-time basis, then his compensation (as set forth in Section
3(a) of this Agreement) shall be reduced in proportion to the time spent in said
employment, or as shall otherwise be agreed to by the parties.
5
9. Change in Control.
(a) Notwithstanding any provision herein to the contrary, in the event of
the involuntary termination of Executive's employment during the term of this
Agreement following any Change in Control of the Bank, or within 24 months
thereafter of such Change in Control, absent Just Cause, the Executive shall be
paid an amount equal to the product of 2.999 times the Executive's "base amount"
as defined in Section 280G(b)(3) of the Code and regulations promulgated
thereunder. Said sum shall be paid in one (1) lump sum not later than the date
of such termination of service, and such payments shall be in lieu of any other
future payments that the Executive would be otherwise entitled to receive under
Section 6 of this Agreement. Notwithstanding the foregoing, all sums payable
hereunder shall be reduced in such manner and to such extent so that no such
payments made hereunder, when aggregated with all other payments to be made to
the Executive by the Bank or the Company, shall be deemed an "excess parachute
payment" in accordance with Section 280G of the Code and be subject to the
excise tax provided at Section 4999(a) of the Code. Further, the Executive and
his dependents shall be eligible to continue participation in the medical and
dental reimbursement programs available to continuing employees of the Bank or
its successor entity with the cost of such participation to be paid by the
Executive. Any successor or assignee of the Bank following a Change in Control
of the Bank or the Company shall be required to maintain in place any life
insurance on the life of the Executive that was acquired by the Bank in
connection with the Executive Life Insurance Agreement or Endorsement Method
Split Dollar Agreement then in effect between Executive and the Bank. The term
"Change in Control" shall refer to (i) the sale of all, or a material portion,
of the assets of the Bank or the Company; (ii) the merger or recapitalization of
the Bank or the Company whereby the Bank or the Company is not the surviving
entity; (iii) a change in control of the Bank or the Company, as otherwise
defined or determined by the Office of Thrift Supervision ("OTS") or regulations
promulgated by it; or (iv) the acquisition, directly or indirectly, of the
beneficial ownership (within the meaning of that term as it is used in Section
13(d) of the Securities Exchange Act of 1934 and the rules and regulations
promulgated thereunder) of twenty-five percent (25%) or more of the outstanding
voting securities of the Bank or the Company by any person, trust, entity or
group. This limitation shall not apply to the purchase of shares of up to 25% of
any class of securities of the Bank or the Company by a tax-qualified employee
stock benefit plan which is exempt from the approval requirements set forth
under 12 C.F.R. ss.574.3(c)(1)(vii) as now in effect or as may hereafter be
amended. The term "person" refers to an individual or a corporation,
partnership, trust, association, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization or any other form of entity not
specifically listed herein. The provisions of this Section 9(a) shall survive
the expiration of this Agreement occurring after a Change in Control.
(b) Notwithstanding any other provision of this Agreement to the contrary,
Executive may voluntarily terminate his employment during the term of this
Agreement following a Change in Control of the Bank or the Company, or within
twenty-four (24) months following such Change in Control, and Executive shall
thereupon be entitled to receive the payment described in Section 9(a) of this
Agreement, upon the occurrence, or within 120 days thereafter, of any of the
following events, which have not been consented to in advance by the Executive
6
in writing: (i) if Executive would be required to move his personal residence or
perform his principal executive functions more than thirty-five (35) miles from
the Executive's primary office as of the signing of this Agreement; (ii) if in
the organizational structure of the Bank, Executive would be required to report
to a person or persons other than the CEO or the Board of Directors of the Bank;
(iii) if the Bank should fail to maintain Executive's base compensation in
effect as of the date of the Change in Control and the existing employee benefit
plans, including material fringe benefit, stock option, retirement and insurance
plans; (iv) if Executive would be assigned duties and responsibilities other
than those normally associated with his position as referenced at Section 1
herein; (v) if Executive's responsibilities or authority have been materially
diminished or reduced; or (vi) if Executive would not be reelected to the Board
of Directors of the Bank and the Company. The provisions of this Section 9(b)
shall survive the expiration of this Agreement occurring after a Change in
Control.
(c) Notwithstanding anything in this Section 9 to the contrary: (1) no
payment shall be permitted under this Section 9 unless the Executive's
termination of employment qualifies as a Separation from Service; and (2) if at
the time of the Executive's Separation from Service, the Executive is a
Specified Employee as defined in Section 409A, then the payment due to the
Executive under this Section 9 shall be paid to him (or his beneficiary) on the
Delayed Distribution Date. Defined terms in this Section 9(c) shall have the
same meaning as in Section 6(c) hereof.
10. Source of Payments. All payments provided in this Agreement shall be
timely paid in cash or check from the general funds of the Bank. The Bank
unconditionally guarantees payment and provision of all amounts and benefits due
hereunder to Executive.
11. Withholding. All payments required to be made by the Bank hereunder to
the Executive shall be subject to the withholding of such amounts, if any,
relating to tax and other payroll deductions as the Bank may reasonably
determine should be withheld pursuant to any applicable law or regulation.
12. Payment of Costs and Legal Fees. All reasonable costs and legal fees
paid or incurred by Executive pursuant to any dispute or question of
interpretation relating to this Agreement shall be paid or reimbursed by the
Bank if Executive is successful pursuant to a legal judgment, arbitration or
settlement.
13. Successors and Assigns.
(a) This Agreement shall inure to the benefit of and be binding upon any
corporate or other successor of the Bank or the Company which shall acquire,
directly or indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Bank or the Company.
(b) The Bank shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Bank, expressly and
unconditionally to assume and agree to perform the Bank's obligations under this
7
Agreement, in the same manner and to the same extent that the Bank would be
required to perform if no such succession or assignment had taken place.
(c) Since the Bank is contracting for the unique and personal skills of the
Executive, the Executive shall be precluded from assigning or delegating his
rights or duties hereunder without first obtaining the written consent of the
Bank.
14. Indemnification. The Bank shall provide Executive (including his heirs,
executors and administrators) with coverage under a standard directors' and
officers' liability insurance policy at its expense, and shall indemnify
Executive (and his heirs, executors and administrators) as permitted under
federal law against all expenses and liabilities reasonably incurred by him in
connection with or arising out of any action, suit or proceeding in which he may
be involved by reason of his having been a director or officer of the Bank
(whether or not he continues to be a director or officer at the time of
incurring such expenses or liabilities), such expenses and liabilities to
include, but not be limited to, judgments, court costs, and attorneys' fees and
the cost of reasonable settlements.
15. Amendment; Waiver. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing, signed by the Executive and such officer or officers as may be
specifically designated by the Board of Directors of the Bank to sign on its
behalf. No waiver by any party hereto at any time of any breach by any other
party hereto of, or 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.
16. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the United States
where applicable and otherwise by the substantive laws of the State of New
Jersey.
17. Nature of Obligations. Nothing contained herein shall create or require
the Bank to create a trust of any kind to fund any benefits which may be payable
hereunder, and to the extent that the Executive acquires a right to receive
benefits from the Bank hereunder, such right shall be no greater than the right
of any unsecured general creditor of the Bank.
18. Headings. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
19. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect.
8
20. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the rules then in effect of the district office of the American
Arbitration Association ("AAA") nearest to the home office of the Bank, and
judgment upon the award rendered may be entered in any court having jurisdiction
thereof, except to the extent that the parties may otherwise reach a mutual
settlement of such issue. Further, the settlement of the dispute to be approved
by the Board of the Bank may include a provision for the reimbursement by the
Bank to the Executive for all reasonable costs and expenses, including
reasonable attorneys' fees, arising from such dispute, proceedings or actions,
or the Board of the Bank may authorize such reimbursement of such reasonable
costs and expenses by separate action upon a written action and determination of
the Board following settlement of the dispute. Such reimbursement shall be paid
within ten (10) days of Executive furnishing to the Bank evidence, which may be
in the form, among other things, of a canceled check or receipt, of any costs or
expenses incurred by Executive. The provisions of this Section 20 shall survive
the expiration of this Agreement.
21. Confidential Information. The Executive acknowledges that during his
employment he will learn and have access to confidential information regarding
the Bank and the Company and their customers and businesses (hereinafter the
"Confidential Information"). The Executive agrees and covenants not to disclose
or use for his own benefit, or the benefit of any other person or entity, any
such Confidential Information, unless or until the Bank or the Company consents
to such disclosure or use or such information becomes common knowledge in the
industry or is otherwise legally in the public domain. The Executive shall not
knowingly disclose or reveal to any unauthorized person any Confidential
Information relating to the Bank, the Company, or any subsidiaries or
affiliates, or to any of the businesses operated by them, and the Executive
confirms that such information constitutes the exclusive property of the Bank
and the Company. The Executive shall not otherwise knowingly act or conduct
himself (a) to the material detriment of the Bank or the Company, or any
subsidiaries or affiliates, or (b) in a manner which is inimical or contrary to
the interests of the Bank or the Company. Notwithstanding anything herein to the
contrary, failure by the Executive to comply with the provisions of this Section
may result in the immediate termination of the Agreement within the sole
discretion of the Bank, disciplinary action against the Executive taken by the
Bank, including but not limited to the termination of employment of the
Executive for breach of the Agreement and the provisions of this Section and
other remedies that may be available in law or in equity.
9
22. Entire Agreement. This Agreement, together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first hereinabove written.
American Bank of New Jersey
ATTEST: By: /s/ W. Xxxxxx Xxxxxx
--------------------
/s/ Xxxxxxxx Xxxxx Chairman
---------------------------
ATTEST:
/s/ Xxxxxxxx Xxxxx /s/ Xxxx X. Xxxxx
-------------------------
Xxxx X. Xxxxx, Executive
