EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS AGREEMENT (this "Agreement"), is made and entered into this 10th
day of June, 2003, but effective as of May 23, 2003, by and among Heritage
Financial Holding Corporation, a Delaware corporation (the "Company"), and
Xxxxxxx X. Xxxxxx (the "Executive").
W I T N E S S E T H:
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WHEREAS, the Company desires to employ the Executive as its Chief
Financial Officer on the terms and conditions hereinafter provided, and the
Executive desires to accept such employment on the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth in this Agreement, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, do
hereby agree as follows:
SECTION 1: EMPLOYMENT OF EXECUTIVE; DUTIES AND RESPONSIBILITIES
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1.1 Employment of Executive. The Company and Heritage Bank, an Alabama
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state banking corporation (the "Bank"), shall employ the Executive, and the
Executive shall provide services to the Company and the Bank, upon and subject
to the terms and conditions of this Agreement.
1.2 Term of Employment of Executive. Subject to the provisions of
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Section 3 hereof, the employment of the Executive by the Company and the Bank
pursuant to this Agreement shall be for an initial term of three (3) years
commencing on May 23, 2003, and ending on May 22, 2006; provided that such term
may be renewed annually by mutual agreement of the Board of Directors of the
Company for one additional year on each anniversary of the effective date of
this Agreement such that, if such renewal election is made by the Company and
the Bank, on each of such anniversary dates the remaining term hereunder will be
three years. The period of the Executive's employment hereunder is referred to
herein as the "Employment Period."
1.3 Offices and Positions of Executive. Except as otherwise mutually
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agreed by the Company, the Bank and the Executive and subject to Section 1.4
hereof, the Executive shall serve as Chief Financial Officer and any other
position agreed upon by the parties.
1.4 Duties and Responsibilities. During the Employment Period, the
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Executive shall report directly to the Chief Executive Officer ("CEO") of the
Bank and shall perform such duties and responsibilities as the CEO of the Bank
shall reasonably assign to the Executive from time to time and as are
commensurate with his position and which may be set forth in the Company's
bylaws. During the Employment Period, Executive shall devote his full business
time, attention, skill and efforts to the performance of his duties hereunder,
except during periods of illness or periods of vacation and leaves of absence
consistent with the Company and Bank policies. The Executive may devote
reasonable periods of time to serve as a director or advisor to other
organizations, to charitable and community activities and to managing his
personal investments, provided that such activities do not materially interfere
with the performance of his duties to the
Company or the Bank and are not in conflict or competitive with, or adverse to,
the interests of the Company or the Bank.
SECTION 2: COMPENSATION; REIMBURSEMENT; AND BENEFITS
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2.1 Base Salary and Bonus. During the Employment Period, the Company
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shall pay to the Executive the annual base salary (the "Base Salary") at the
rate of $125,000 per year beginning May 23, 2003 and continuing at such rate
until December 31, 2003. Beginning with calendar year 2004, the Base Salary
shall be reviewed no less frequently than annually by the CEO of the Bank for
the year 2004 and for each subsequent calendar year; if the CEO in his
discretion should modify the Base Salary upon any such review then, for purposes
of this Agreement, the term Base Salary shall thereafter mean such modified
amount.
In addition to the Base Salary, the Company may pay the Executive such
bonus or bonuses, if any, as the Board of Directors of the Company may from time
to time determine. The Executive shall be eligible for bonuses under the
Executive Management Bonus Program of the Company and the Bank, and specific
criteria will be developed for the position of Chief Financial Officer of the
Company under the terms of such Executive Management Bonus Program.
2.2 Payment of Base Salary and Bonus. The Company shall pay the Base
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Salary and bonuses, if any, due the Executive in accordance with the policy or
policies of the Company as in effect from time to time for the payment of salary
and bonuses to senior executive personnel.
2.3 Incentive Stock Option. Within one hundred eighty (180) days after
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the effective date of this Agreement, the Company shall grant to Executive stock
options (the "Option") to acquire up to an aggregate of twenty-five thousand
(25,000) shares of the common stock of the Company, par value $0.01 per share,
pursuant to and in accordance with the terms and conditions of the Heritage
Financial Holding Corporation Incentive Stock Compensation Plan (the "Plan"),
and the Option shall be an Incentive Stock Option (as defined in the Plan) as to
the greatest number of shares permitted pursuant to the Plan and shall be a
Supplemental Stock Option (as defined in the Plan) with respect to the remaining
shares. The per share exercise price of the
Option shall be not less than the fair market value of a share of common stock
of the Company as of the date of the grant, as required under the terms of the
Plan. The Option shall vest according to the following schedule: (i) 4,166.66
shares shall vest immediately upon the date of the grant; (ii) 4,166.66 shall
vest on the first anniversary of the date of the grant; (iii) 4,166.66 shall
vest on the second anniversary of the date of the grant; (iv) 4,166.66 shall
vest on the third anniversary of the date of the grant; and (v) 4,166.66 shall
vest on the fourth anniversary of the date of the grant; and (vi) 4,166.7 shares
shall vest on the fifth anniversary of the date of the grant. Notwithstanding
the foregoing, in the event of a Change of Control (as defined in Section 3.1(d)
of this Agreement), the Option shall become fully vested immediately upon the
effective time of such Change of Control, as provided by the terms of the Plan.
2.4 Other Benefits. The Executive shall be entitled to participate on
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the same basis as other similarly situated employees of the Company and the Bank
in all incentive and benefit programs or arrangements made available to such
employees.
2.5 Automobile; Cellular Telephone. During the Employment Period, the
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Company and the Bank will make available for use by the Executive an automobile
in accordance with the Bank's Executive Automobile Program dated as of May 28,
2002, subject to the policies and procedures of the Bank with respect to the
personal use of such automobile. During the Employment Period, the Company and
the Bank will make available for use by the Executive a cellular telephone,
subject to the policies and procedures of the Company or the Bank, as
applicable, with respect to the personal use of such telephone.
2.6 Business Expenses. The Company shall reimburse the Executive for
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all reasonable expenses incurred by him in accordance with the standard policies
and procedures of the Company and the Bank in the course of rendering his
services pursuant to this Agreement; provided, however, that the Executive shall
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promptly submit such reasonable documentation as may be requested by the Company
to verify such expenditures.
2.7 Vacation. The Executive shall be entitled to three (3) weeks of
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paid vacation per year. The vacation to which the Executive is entitled
pursuant to this Section 2.7 shall be available under the same terms and
conditions as are applicable to similarly situated executive
personnel of the Company and the Bank. The Executive shall take into
consideration the needs of the Company in setting his vacation schedule.
2.8 Indemnification. The Executive shall be entitled to
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indemnification (and to reimbursement of expenses incurred in connection with
such indemnified claims, etc.) as an officer of the Company to the full extent
provided for in the Certificate of Incorporation and Bylaws of the Company, as
the same may be amended from time to time, and subject to applicable law. The
Company shall also use its best efforts to obtain coverage for the Executive
under any insurance policy now in force or hereinafter obtained during the term
of this Agreement covering the other officers and directors of the Company
against lawsuits.
SECTION 3: TERMINATION OF EMPLOYMENT
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3.1 Termination of Employment Period. The Employment Period may be
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terminated in the following manner:
(a) Termination on Death or Disability. The Employment Period
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shall automatically terminate upon the death or Disability of the Executive.
The term "Disability" shall mean the Executive's physical or mental incapacity
that renders him incapable of performing the essential functions of the duties
required of him by this Agreement for one hundred eighty (180) or more
consecutive days, even with reasonable accommodation. In the case of
termination upon the Disability of the Executive, there shall be a determination
by the Board of Directors of the Company that such grounds for termination
exist.
(b) Termination upon Notice. The Employment Period may be
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terminated by the Executive at any time, upon thirty (30) days' written notice
to the Company. The Employment Period may be terminated by the Company, by
resolution of its Board of Directors, for any other reason other than for
"Cause" (as defined in Section 3.1(c) of this Agreement), upon thirty (30) days
written notice to the Executive.
(c) Termination for Cause. The Employment Period may be
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terminated by the Company for "Cause" at any time during the Employment Period
immediately
upon written notice to the Executive, which notice shall state the facts
constituting such "Cause." For the purpose of this Section 3, the term "Cause"
shall mean (i) intentional misconduct or gross malfeasance, or an act or acts of
gross negligence in the course of employment or any material breach of
Executive's obligations contained herein, including, without limitation, acts
competitive with or deliberately harmful to the business of the Company or the
Bank; (ii) any intentional misstatement or omission to the directors or
executive officers of the Company or the Bank with respect to any matter; (iii)
the intentional failure of the Executive to follow the reasonable instructions
and policies of the Company or the Bank; (iv) the Executive's conviction,
admission or confession of any felony or an unlawful act involving active and
willful fraud or moral turpitude; or (v) the violation by the Executive of
applicable state and federal regulations, rules, or statutes. The Company shall
have the power to temporarily suspend Executive (with such pay, if any, as the
Company may determine) from duty if there is substantial evidence of probable
Cause until Cause is either proved or disproved; if disproved, full
reinstatement with pay will immediately be effected.
(d) Termination for Good Reason. The Employment Period may be
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terminated by the Executive for "Good Reason," as hereinafter defined, at any
time during the Employment Period upon thirty (30) days' written notice to the
Company, which notice shall state the facts constituting such "Good Reason."
For the purpose of this Section 3.1(d), the term "Good Reason" shall mean (i)
the occurrence of a Change in Control (as hereinafter defined), (ii) a reduction
in the Executive's base salary without his consent, or (iii) following a Change
in Control, a reduction in the Executive's base salary or any failure to pay the
Executive any compensation or benefits to which he is entitled within five days
of the date due, or the failure by the Company to (A) continue in effect
(without reduction in benefit level and/or reward opportunities) any material
compensation or employee benefit plan in which the Executive was participating
at any time within ninety days preceding the date of a Change in Control or at
any time thereafter, unless such plan is replaced with a plan that provides
substantially equivalent compensation or benefits to the Executive or (B)
provide the Executive with compensation and benefits, in the aggregate, at least
equal (in terms of benefit levels and/or reward opportunities) to those provided
for under each other employee benefit plan, program and practice in which the
Executive was participating at any time within ninety days preceding the date of
a Change in Control or at any time thereafter. For the purpose of this Section
3.1(d), the term "Change in
Control" means (A) the acquisition at any time by a "person" or "group" (as such
terms are used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of
1934 (the "Exchange Act")) who or which are the beneficial owners (as defined in
Rule 13(d)-3 under the Exchange Act), directly or indirectly, of securities
representing more than 35% of the combined voting power in the election of
directors of the then outstanding securities of the Company or any successor of
the Company; (B) if during any period (an "Applicable Period") of two (2) years
or less, with the first day (the "Start Date") for any such Applicable Period to
be no earlier than the effective date of this Agreement, there shall occur the
termination (except by reason of death, disability, voluntary resignation or
retirement) of the service of the Required Number of the persons serving as of
the Start Date as directors of the Board of Directors of the Company (as used
herein, the "Required Number" of directors shall be that number which, as of the
Start Date, constituted a majority of the Board of Directors of the Company);
(C) the sale or disposition (which shall not include a pledge by the Company of
the capital stock of the Bank as security for obligations of the Company unless
and until the pledgee thereof exercises remedies against said stock to effect a
sale or disposition) by the Company of any of the capital stock of the Bank or
approval by the shareholders of the Company of any sale or disposition of
substantially all of the assets or earning power of the Company; (D) approval by
the shareholders of the Company of any merger, consolidation, or statutory share
exchange to which the Company is a party as a result of which the persons who
were shareholders immediately prior to the effective date of the merger,
consolidation or share exchange shall have beneficial ownership of less than 35%
of the combined voting power in the election of directors of the surviving
corporation.
3.2 Consequences of Termination.
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(a) By the Company for Cause or By Executive other than for Good
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Reason. In the event Executive's employment is terminated (i) by the Company
for Cause under Section 3.1(c) hereof, (ii) by the Executive other than for Good
Reason under Section 3.1(d) hereof, or (iii) as a result of the Executive's
death or Disability under Section 3.1(a) hereof, neither the Company nor the
Bank shall be under any further obligation to make any payments or provide any
benefits to the Executive, except for Base Salary earned but unpaid at the time
of such termination, expenses otherwise reimbursable herein incurred by, but not
yet reimbursed to,
the Executive at the time of such termination, any earned but unpaid incentive
awards due to the Executive, and group health coverage that is required to be
continued by applicable law.
(b) By the Company other than for Cause or By Executive for Good
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Reason. In the event the Employment Period is terminated by the Executive for
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Good Reason under Section 3.1(d) hereof or by the Company for a reason other
than Cause pursuant to Section 3.1(b) hereof, the Company shall pay to the
Executive (i) an aggregate amount equal to two (2) times the Base Salary,
payable in monthly installments each equal to one-twelfth of the Base Salary,
for the twenty-four months following such termination, and (ii) Base Salary
earned but unpaid at the time of such termination, expenses otherwise
reimbursable herein incurred by, but not yet reimbursed to, the Executive at the
time of such termination, any earned but unpaid incentive awards due to the
Executive, and group health coverage that is required to be continued by
applicable law; provided, however, that, at the election of the Company by
decision of its Board of Directors, the Company may pay to the Executive, in
lieu of the payment provided for by (i) above, an aggregate amount equal to one
(1) times the Base Salary, payable in monthly installments each equal to
one-twelfth of the Base Salary, for the twelve months following such termination
and, if the Company makes such election, the non-competition period under
Section 4.3(a) shall be reduced to a period of one (1) year following such
termination; provided further, however, the Company shall have no right to make
any such election in anticipation of or following a Change in Control. In
addition, in the event the Employment Period is terminated by the Executive for
Good Reason under Section 3.1(d) hereof or by the Company for a reason other
than Cause pursuant to Section 3.1(b) hereof, the Option granted pursuant to
Section 2.3 hereof shall become fully vested immediately upon the effective time
of such termination.
(c) Obligation of the Company to make the payments under Section
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3.2(b) of this Agreement. Compliance by the Executive with Section 4 of this
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Agreement is a condition precedent to the Company's obligation to make, or to
continue to make, the payments referred to in Section 3.2(b) of this Agreement.
(d) Payments made to the Executive net of Taxes. All payments
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made to the Executive pursuant to this Agreement shall be received by the
Executive net of all applicable withholding and payroll taxes.
(e) Certain Litigation Expenses. If litigation after a Change in
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Control should be brought to enforce or interpret any provision contained in
this Agreement and the Executive shall prevail in such litigation, the Company
shall, to the full extent permitted by applicable law, indemnify Executive for
Executive's reasonable attorneys' fees and disbursements incurred in such
litigation to the extent the Executive has prevailed therein.
SECTION 4: CONFIDENTIALITY PROVISIONS; PROHIBITION OF XXXXXXX XXXXXXX AND
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TIPPING; NON-COMPETITION
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4.1 Confidentiality. (a) The Executive hereby acknowledges that during
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the Employment Period he will have contacts with and develop and service the
customers of the Company, the Bank and their affiliates and that in all of his
activities, and through the nature of complying with his obligations pursuant to
this Agreement, he will have access to and will acquire confidential and
proprietary information, including, but not limited to, information relating to
the business, assets, operations, customers, suppliers, contractual parties and
other persons with whom the Company, the Bank and their affiliates do business.
The Executive hereby acknowledges and confirms that such information constitutes
the exclusive and unique property of the Company, the Bank or their affiliates,
as the case may be, and that such information is proprietary and confidential in
nature.
(b) The Executive agrees that he shall not at any time during the term
of Employment or thereafter disclose to other persons or entities (except as
permitted in writing and as directed by the Board of Directors of the Company or
the Board of Directors of the Bank or only as to the extent required pursuant to
a subpoena or order of a court of competent jurisdiction) any such information
referred to in Section 4.1(a) of this Agreement.
4.2 Prohibition of Xxxxxxx Xxxxxxx and Tipping. The Executive
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acknowledges that during the Employment Period he may become aware of or be
provided with material non-public information concerning the Company. The
Executive acknowledges and agrees that the trading in, purchase or sale of any
security of the Company while in possession of any material non-public
information concerning the Company is prohibited as is the unauthorized
communication
of any such information to any person or entity. The Executive agrees to abide
by these prohibitions and shall use all reasonable efforts to cause his
affiliates to abide by these prohibitions.
4.3 Non-Competition.
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(a) In the event the Executive's employment under this Agreement
shall be terminated during the Employment Period by the Executive for Good
Reason under Section 3.1(d) hereof or by the Company for a reason other than
Cause pursuant to Section 3.1(b) hereof, then for two (2) years following such
termination (subject to the proviso contained in Section 3.2(b) hereof), and in
the event the Executive's employment under this Agreement shall terminate for
any other reason pursuant to Section 3.1 of this Agreement during the Employment
Period then for one (1) year following such termination, the Executive shall
not, in any county where the Company, the Bank or any of their majority-owned
subsidiaries has a bank branch that accepts deposits that are insured by the
Federal Deposit Insurance Corporation ("FDIC") at the time of such termination
(each a "Branch County"), or in Shelby County, Alabama (which is contiguous to a
Branch County), physically work or perform services as a consultant to, or serve
as a member of management or as an employee of, a financial institution whose
deposits are insured by the FDIC. Bank branches of successors and assigns of the
Company or the Bank shall not be considered in determining the prohibited
geographical area. Notwithstanding the foregoing, this Section 4.3 shall not
apply at any time after a Change in Control shall have occurred. In the event
that the Company is obligated to pay to the Executive the payments provided for
in Section 3.2(b) of this Agreement and the Company fails to make, or fails to
continue to make, the payments referred to in Section 3.2(b) within ten (10)
days of such payments or portions thereof becoming due under Section 3.2(b),
then the Executive shall thereafter cease to be subject to the provisions of
this Section 4.3, provided that nothing in this sentence shall be construed to
release the Executive from the obligations set forth in this Section 4.3 in the
event that Executive's employment is terminated in a manner which does not give
rise to the payment obligations under Section 3.2(b) (including, without
limitation, termination by the
Company for Cause under Section 3.1(c) hereof or by the Executive other than for
Good Reason under Section 3.1(d) hereof).
(b) The parties have entered into this Section 4.3 in good faith
and for the reasons set forth in the recitals hereto and assume that this
Agreement is legally binding. If, for any reason, this Agreement is not binding
because of its geographical scope or because of its term, then the parties agree
that this Agreement shall be deemed effective to the widest geographical area
and/or the longest period of time (but not in excess of two years) as may be
legally enforceable.
4.4 Specific Performance. The Executive agrees that in the event of a
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breach or threatened breach of Section 4.1, 4.2 or 4.3 of this Agreement, that
the Company is likely to suffer, and will suffer, immediate and irreparable
injury for which there is no adequate remedy at law. Therefore, in addition to
any other rights or remedies which the Company may have under this Agreement,
the Company will be entitled to enforce the specific performance of this
Agreement by the Executive and to obtain a preliminary injunction, without the
requirement of posting a bond, enjoining the Executive from engaging in any
activity in violation thereof.
SECTION 5: ADDITIONAL CONDITIONS
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5.1 Condition to Executive's Employment. The initial employment of
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Executive under this Agreement is subject to the Company's receipt and review of
Executive's credit history and subject to the information contained therein
being satisfactory to the Company in its sole discretion.
SECTION 6: GENERAL PROVISIONS
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6.1 Non-assignability. Neither this Agreement nor any of the rights,
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obligations or interest arising hereunder may be assigned by the Executive
without the prior written consent of the Company; provided, however, that
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nothing in this Section 6.1 shall preclude the Executive from designating, in
writing, a beneficiary to receive any compensation payable to him or any other
benefit receivable by him under this Agreement upon the death or incapacity of
the Executive, nor shall it preclude the executors, administrators or any other
legal representatives of the Executive or his estate from assigning any rights
hereunder to the person or persons entitled thereto. Neither this Agreement nor
any of the rights, obligations or interest arising hereunder may be assigned by
the Company without the prior written consent of the Executive to a person other
than (1) an affiliate of the Company or the Bank, or (2) any party with which
the Company or the Bank merges or consolidates, or to whomever the Company or
the Bank may sell all or substantially all of its assets; provided, however,
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that any such affiliate or successor shall expressly assume all of the Company's
obligations and liabilities to the Executive under this Agreement.
6.2 Severability. This Agreement shall be deemed severable and any
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part hereof which may be held invalid by a court or other entity of competent
jurisdiction shall be deemed automatically excluded from this Agreement and the
remaining parts shall remain in full force and effect.
6.3 Merger. This Agreement contains the entire understanding of the
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parties hereto and constitutes the only agreement between the Company and the
Executive regarding the employment of the Executive by the Company. This
Agreement supersedes all prior agreements, either express or implied, between
the parties hereto regarding the employment of the Executive by the Company.
6.4 Amendment. None of the terms and conditions of this Agreement
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shall be amended or modified unless expressly consented to in writing and signed
by each of the parties hereto.
6.5 Governing Law. This Agreement shall be governed by and construed
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under the laws of the State of Alabama without regard to provisions thereof
governing conflicts of law.
6.6 Notices. All notices or other communications to be given by the
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parties among themselves pursuant to this Agreement shall be in writing, and all
payments to be made hereunder shall be deemed to have been duly made if mailed
by certified mail or hand delivered to either of the parties at their respective
addresses as they appear on the records of the
Company. Any of the parties hereto may change their respective addresses upon
written notice to the other given in the manner provided in this Section.
6.7 Waiver. No waiver by any of the parties to this Agreement of any
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condition, term or provision of this Agreement shall be deemed to be a waiver of
any preceding or subsequent breach of the same or any other condition, term or
provision hereof.
6.8 Survival. Notwithstanding anything in this Agreement to the
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contrary, and notwithstanding any termination of the Employment Period, the
provisions of this Agreement intended to govern the obligations of the parties
hereto upon the termination of the Executive's employment hereunder for any
reason, including, but not limited to Section 3 (inclusive of each of the
subsections thereof) and Section 4, shall continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as at the date and year first above written.
HERITAGE FINANCIAL HOLDING CORPORATION
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By:________________________
Its: __________________
EXECUTIVE
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Xxxxxxx X. Xxxxxx
