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EXHIBIT 10(d)
CHANGE-IN-CONTROL PROTECTIVE AGREEMENT
AGREEMENT entered into this 8th day of November, 1996 (the "Effective
Date"), by and between The Bank of East Ridge (the "Bank"), East Ridge
Bancshares, Inc. (the "Company"), and Xxxxx X. Xxxxxxx (the "Employee").
WHEREAS, the Employee has heretofore been employed by the Bank as an
executive officer, and the Bank deems it to be in its best interest to enter
into this Agreement as additional incentive to the Employee to continue as an
executive employee of the Bank; and
WHEREAS, the parties desire by this writing to set forth their
understanding as to their respective rights and obligations in the event a
change of control occurs with respect to the Bank or the Company.
NOW, THEREFORE, the undersigned parties AGREE as follows:
1. Defined Terms
When used anywhere in the Agreement, the following terms shall have the
meaning set forth herein.
(a) "Change in Control" shall mean the sale of 75% or more of the
voting stock of the Bank or the Company to a person or entity that is not as of
the date hereof a stockholder of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and as interpreted through applicable rulings and regulations
in effect from time to time.
(c) Code ss. 280G Maximum" shall mean product of 2.99 and his "base
amount" as defined in Code ss. 280G(b)(3).
(d) "Good Reason" shall mean any of the following event, which has not
been consented to in advance by the Employee in writing: (i) the requirement
that the Employee move his personal residence, or perform his principal
executive functions, more than 30 miles from his primary office as of the date
of the Change in Control; (ii) a reduction of more than 10% in the Employee's
base compensation as in effect on the date of the Change in Control or as the
same may be increased from time to time; (iii) the failure by the Bank or the
Company to continue to provide the Employee with compensation and benefits
provided for on the date of the Change in Control, as the same may be increased
from time to time, or with benefits substantially similar to those provided to
him under any of the employee benefit plans in which the Employee now or
hereafter becomes a participant, or the taking of any action by the Bank or the
Company which would directly or indirectly reduce any of
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such benefits or deprive the Employee of any material fringe benefit enjoyed by
him at the time of the Change in Control; to the Employee of duties and
responsibilities materially different from those normally associated with his
position; or (iv) a failure to elect or reelect the Employee to the Board of
Directors of the Bank or the Company, if the Employee is serving on such Board
on the date of the Change in Control.
(e) "Just Cause" shall mean, in the good faith determination of the
Bank's Board of Directors, the Employee'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-anddesist order, or material breach of any provision of this Agreement. No
act, or failure to act, on the Employee's part shall be considered "willful"
unless he has acted, or failed to act, with an absence of good faith and without
a reasonable belief that his action or failure to act was in the best interest
of the Bank and the Company.
(f) "Protected Period" shall mean the period that begins on the date
six months before a Change in Control and ends on the second anniversary of the
Change in Control.
(g) "Trust" shall mean a grantor trust designed in accordance with
Revenue Procedure 92-64 and having a trustee independent of the Bank and the
Company.
2. Trigger Events
The Employee shall be entitled to collect the severance benefits set
forth in Section 3 of this Agreement in the event that for any reason other than
Just Cause (i) the Employee voluntarily terminates employment either for any
reason within the 30-day period beginning on the date of a Change in Control,
(ii) the Employee voluntarily terminates employment within 90 days of an event
that both occurs during the Protected Period and constitutes Good Reason, or
(iii) the Bank, the Company, or their successor(s) in interest terminate the
Employee's employment during the Protected Period. The Employee shall have no
right to receive compensation or other benefits for any period after termination
for Just Cause or if a Change in Control never occurs.
3. Amount of Severance Benefit
If the Employee becomes entitled to collect severance benefits pursuant
to Section 2 hereof, the Bank shall pay the Employee a severance benefit equal
to 2.99 times the average gross income payable by the Bank and the Company to
the Employee over the five most recent taxable years ending prior to the year in
which the Change in Control occurs. In no event, however, will this amount
exceed the difference between the Code ss. 280G Maximum and the sum of any other
"parachute payments" as defined under Code ss. 280G(b)(2) that the Employee
receives on account of the Change in Control. Said sum shall be paid in one lump
sum within ten days of the later of the
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date of the Change in Control and the Employee's last day of employment with the
Bank or the Company.
In the event that the Employee and the Bank agree that the Employee has
collected an amount exceeding the Code ss. 280G Maximum, the parties may jointly
agree in writing that such excess shall be treated as a loan ab initio which the
Employee shall repay to the Bank, on terms and conditions mutually agreeable to
the parties, together with interest at the applicable federal rate provided for
in Section 7872(f)(2)(B) of the Code.
4. Funding of Grantor Trust upon Change in Control
Not later than ten business days after a Change in Control, the Bank
shall (i) deposit in a Trust the life insurance policy which the Bank has
purchased to fund the Bank's Executive Salary Continuation Agreement with the
Employee, unless the Employee has previously provided a written release of any
claims under this Agreement, and (ii) provide the trustee of the Trust with a
written direction to hold said life insurance policy in a segregated account for
the benefit of the Employee, and to follow the procedures set forth in the next
paragraph as to the payment of benefits from the Trust. Neither the Bank nor its
successors may thereafter change said life insurance policy (including changing
the insured parties) without the written consent of the Employee, and the Bank
hereby agrees that notwithstanding any provision to the contrary in its
Executive Salary Continuation Agreement with the Employee, his benefits
thereunder shall be determined, without regard to his employment status, by
reference solely to the plan year that he designates for payment of such
benefits, in a lump sum, of the value as identified in Schedule A of said
agreement (or in the alternative, the Employee may elect to receive, beginning
upon his attainment of age 70, 10 annual installments of $18,000). In the event
that the Employee dies prior to the payment of any benefits under the Executive
Salary Continuation Agreement and Section 4 hereof, then the payments shall be
made in accordance with Section 4.1 of the Executive Salary Continuation
Agreement. If the Employee dies after payment of such benefits has commenced,
any remaining amounts due to the Employee will be payable to his designated
beneficiary or, if none, to his estate. Upon the receipt by the Employee or his
beneficiary of all benefits that may become payable under the Executive Salary
Continuation Agreement, the trustee of the Trust shall pay to the Bank the
entire balance remaining in the segregated account maintained for the benefit of
the Employee. The Employee shall thereafter have no further interest in the
Trust.
Until the Employee's receipt of all benefits that may become payable
under the Executive Salary Continuation Agreement, the Employee may provide the
trustee of the Trust with a written notice requesting that the trustee pay to
the Employee an amount designated in the notice as being payable pursuant to
this Agreement. Within three business days after receiving said notice, the
trustee of the Trust shall send a copy of the notice to the Bank via overnight
and registered mail return receipt requested. On the tenth business day after
mailing said notice to the Bank, the trustee of the Trust shall pay the Employee
the amount designated therein in immediately available funds,
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unless prior thereto the Bank provides the trustee with a written notice
directing the trustee to withhold such payment. In the latter event, the trustee
shall submit the dispute to non-appealable binding arbitration for a
determination of the amount payable to the Employee pursuant to this Agreement,
and the costs of such arbitration shall be paid by the Bank. The trustee shall
choose the arbitrator to settle the dispute, and such arbitrator shall be bound
by the rules of the American Arbitration Association in making his
determination. The parties and the trustee shall be bound by the results of the
arbitration and, within three days of the determination by the arbitrator, the
trustee shall pay from the Trust the amounts required to be paid to the Employee
and/or the Bank, and in no event shall the trustee be liable to either party for
making the payments as determined by the arbitrator.
5. Post-Termination Health Coverage. At any time before the closing
date of a Change in Control, the Employee may obtain the right to employer-paid
health coverage through execution and return to the Bank of the Non-Competition
Agreement attached as an addendum hereto.
6. Term of the Agreement. This Agreement shall remain in effect for the
period commencing on the Effective Date and ending on the earlier of (i) the
later of (A) the date 12 months after the Effective Date and (B) if a Change in
Control occurs during the term of this Agreement, the end of the Protected
Period, and (ii) the date on which the Employee terminates employment with the
Bank; provided that the Employee's rights hereunder shall continue following the
termination of his employment with the Bank under any of the circumstances
described in Section 2 hereof. Additionally, on each annual anniversary date
from the Effective Date, the Board of Directors has discretion to extend this
Agreement for an additional one-year period beyond the then effective expiration
date.
7. Expense Reimbursement.
In the event that any dispute arises between the Employee and the Bank
or the Company as to the terms or interpretation of this Agreement, whether
instituted by formal legal proceedings or otherwise, including any action that
the Employee takes to enforce the terms of this Agreement or to defend against
any action taken by the Bank or the Company, the Employee shall be reimbursed
for all costs and expenses, including reasonable attorneys' fees, arising from
such dispute, proceedings or actions, provided that the Employee shall obtain a
final judgement in favor of the American Arbitration Association. Such
reimbursement shall be paid within ten days of Employee's furnishing to the Bank
and the Company written evidence, which may be in the form, among other things,
of a canceled check or receipt, of any costs or expenses incurred by the
Employee.
8. 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 Company which shall acquire,
directly or indirectly, by merger,
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consolidation, purchase or otherwise, all or substantially all of the assets or
stock of the Bank or Company.
(b) Since the Bank and the Company are contracting for the unique and
personal skills of the Employee, the Employee shall be precluded from assigning
or delegating his rights or duties hereunder without first obtaining the written
consent of the Bank and the Company.
9. Consideration from Company: Joint and Several Liability. In the
event that the Bank does not pay the benefits due to the Employee under Section
3 of this Agreement, the Company hereby agrees that to the extent permitted by
law, it shall be jointly and severally liable with the Bank for the payment of
all amounts due under this Agreement.
10. 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.
11. Applicable Law. Except to the extent preempted by Federal law, the
laws of the State of Tennessee shall govern this Agreement in all respects,
whether as to its validity, construction, capacity, performance or otherwise.
12. 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.
13. 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.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first hereinabove written.
THE BANK OF EAST RIDGE
EAST RIDGE BANCSHARES, INC.
/s/ Xxxxx X. Xxxxxxx
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XXXXX X. XXXXXXX
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ADDENDUM TO
CHANGE-IN-CONTROL PROTECTIVE AGREEMENT
BANK OF EAST RIDGE AND
EAST RIDGE BANCSHARES, INC.
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NON-COMPETITION AGREEMENT
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AGREEMENT, made this 8th day of November, 1996 by and between
the Bank of East Ridge (the "Bank"), East Ridge Bancshares, Inc. (the
"Company"), and Xxxxx X. Xxxxxxx (the "Employee") on behalf of themselves, and
their heirs, successors and assigns with reference to the following:
WHEREAS, the parties have entered into a Change-in-Control Protective
Agreement dated November 8, 1996 (the "Protective Agreement"), and desire by
this writing to set forth the terms of a non-competition agreement that is being
offered to the Employee on a voluntary basis; and
WHEREAS, the parties agree that the terms defined in the Protective
Agreement shall have the same meaning herein, and that the consideration recited
below is mutually acceptable and sufficient for the covenants made.
NOW THEREFORE, the undersigned agree as follows:
1. For a period of three years following the Employee's termination of
employment during the Protected Period, the undersigned Employee shall not
engage in any activities, business, or enterprise which competes directly with
the business of the Bank or the Company or any of their subsidiaries or
affiliates within any county in which the Bank or Company has a branch at the
time of the Change-in-Control, nor during such period will Employee make use of
any confidential information related to the Bank or the Company, its operations
or its customer base gained during the course of Employee's employment in a
subsequent activity, business or enterprise.
2. The Bank and any successors will provide, and fully pay all premiums
for health insurance coverage for the Employee and his family from the date of
the Change-in-Control until the Employee becomes employed with another employer,
or a maximum of three years.
3. The Employee recognizes that any breach of the restrictions set
forth in this Agreement will result in irreparable injury to the Bank and the
Company for which there is not an adequate monetary remedy at law, and therefore
agrees that the Bank and the Company shall be entitled to injunctive relief in
order to enforce the provisions hereof. In the event this Agreement shall be
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Addendum to Change in Control Protective Agreement
November 8, 1996
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determined by any court of competent jurisdiction to be unenforceable in part by
reason of it being too great a period of time or covering too great a
geographical area, it shall be in full force and effect as to that period of
time or geographical area determined to be reasonable by the court.
4. In the event that the Employee is assigned by the Bank or the
Company to work for any other company or organization which is a subsidiary or
joint venture of or is otherwise affiliated with the Bank, such employment shall
be deemed to be employment by the Bank for the purpose of this Agreement.
5. The provisions of Sections 7 through 13 of the Protective Agreement
shall be incorporated by reference in, and hereby become terms of, this
Agreement.
IN WITNESS WHEREOF, the parties have enacted this Agreement on the day
and year first hereinabove written.
THE BANK OF EAST RIDGE
EAST RIDGE BANCSHARES, INC.
/s/ Xxxxx X. Xxxxxxx
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XXXXX X. XXXXXXX
