EMPLOYMENT AGREEMENT
EXHIBIT
10.2
THIS
EMPLOYMENT AGREEMENT is made as of the 1st day of June, 2006, between Bay
National Bank (the “Bank” or “Employer”), a national bank with a principal
office in Baltimore County, Maryland and Xxxxxxx X. Xxxxxxxx, a resident of
the
State of Maryland (the “Employee”).
RECITALS:
The
Employer desires to employ the Employee as Executive Vice President of the
Employer and the Employee desires to accept such employment.
In
consideration of the above premises and the mutual agreements hereinafter set
forth, the parties hereby agree as follows:
1. DEFINITIONS.
Whenever used in this Agreement, the following terms and their variant forms
will have the meaning set forth below:
1.1 “Agreement”
means
this Agreement and any exhibits incorporated herein together with any amendments
hereto made in the manner described in this Agreement.
1.2 “Affiliate”
means
any business entity which controls the Employer, is controlled by or is under
common control with the Employer.
1.3 “Area”
means
the geographic area within a radius of 35 miles of any office or facility
maintained by the Employer from time to time. It is the express intent of the
parties that the Area as defined herein is the area where the Employee performs
or performed services on behalf of the Employer under this Agreement as of,
or
within a reasonable time prior to, the termination of the Employee's employment
hereunder.
1.4 “Board”
means
the board of directors of the Bank.
1.5 “Business
of the Employer”
means
the business conducted by the Employer.
1.6 “Cause”
means,
any of
the
following events or conduct preceding a termination of employment initiated
by
the Employer:
(a) any
act
that constitutes, in the reasonable judgment of the Board after consultation
with legal counsel, fraud or dishonesty toward the Employer; toward any
employee, officer or director of the Employer or toward any person doing
business with the Employer on the part of the Employee;
(b) the
conviction of the Employee of a felony or crime involving moral
turpitude;
(c) the
Employee's entering into any transaction or contractual relationship (other
than
this Agreement) with, or diversion of business opportunity from, the Employer
(other than on behalf of the Employer or with the prior written consent of
the
Board); provided, however, such conduct will not constitute Cause unless the
Board delivers to the Employee written notice setting forth (1) the conduct
deemed to qualify as Cause, (2) reasonable remedial action that might
remedy such objection, and (3) a reasonable time (not less than thirty (30)
days) within which the Employee may take such remedial action, and the Employee
has not taken the specified remedial action with the specified reasonable
time;
(d) the
Employee breaches the covenants contained in Sections 5, 6, 7 or 8 hereof or
materially breaches any other portion of this Agreement; or
(e) conduct
by the Employee that results in removal of Employee as an officer or employee
of
the Employer pursuant to a written order by any regulatory agency with authority
or jurisdiction over the Employer.
1.7 “Company”
means
Bay National Corporation, the parent of the Bank.
1.8 “Company
Information”
means
Confidential Information and Trade Secrets.
1.9 “Confidential
Information”
means
data and information relating to the Business of the Employer and any affiliate
of 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 the Employee's relationship to the Employer and which
has value to the Employer and is not generally known to its competitors.
Confidential Information does not include any data or information that has
been
voluntarily disclosed to the public by the Employer (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.
1.10 “Change
in Control”
means
the first to occur of any one of the following events:
(a) the
acquisition by
any
person, persons acting in concert or by an entity of the then outstanding voting
securities of either the Bank or the Company, if, after the transaction, the
acquiring person, persons or entity owns, controls or holds with power to vote
twenty-five percent (25%) or more of any class of voting securities of the
Bank
or the Company, as the case may be, or such other transaction as may be
described under 12 C.F.R. Section 225.41(b)(1) or any successor regulation
thereto;
(b) within
any twelve-month period (beginning on or after the Effective Date) the persons
who were directors of either the Bank or the Company immediately before the
beginning of such twelve-month period (the “Incumbent Directors”) cease to
constitute at least a majority of such board of directors; provided that any
director who was not a director as of the Effective Date will 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 of
the
directors who then qualified as Incumbent Directors;
(c) the
approval by the stockholders of either the Bank or the Company of a
reorganization, merger or consolidation, with respect to which those persons
who
were the stockholders of either the Bank or the Company, 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 entities; or
(d) the
sale,
transfer or assignment of all or substantially all of the assets of the Company
or the Bank to any third party; provided that if giving effect to the foregoing
definition would require the Employee to include any amount payable pursuant
to
this Agreement in income pursuant to Section 409A of the Code, then the
definition shall be modified to the least extent necessary in order that a
Change of Control is a “change in the ownership or effective control” of the
Company for purposes of Section 409A of the Code and the regulations promulgated
thereunder.
1.11 “Effective
Date”
means
June 1, 2006.
1.12 “Good
Reason”
means,
any of the following events or conduct preceding a termination of employment
initiated by the Employee:
(a) a
material diminution in the powers, responsibilities or duties of the Employee
hereunder or a material change as to whom Employee reports which in the case
of
Employee is the President;
(b) a
material breach of the terms of this Agreement by the Employer; or
(c) a
change
in the location of the principal office of Employee more than twenty (20) miles
from its existing location
provided,
however, that no termination of employment which is triggered by any conduct
or
event described in this Section 1.12 shall constitute a termination of
employment for Good Reason unless the Employee has first provided the Employer
with the opportunity to cure the event or conduct by giving the Employer a
written notice describing in sufficient detail the Employee's belief that a
Good
Reason exists and the Employee defers resigning until the expiration of a thirty
(30) day cure period, beginning with the date such notice is received by the
Employer.
1.13 “Permanent
Disability”
means
the total inability of the Employee to perform the Employee's duties under
this
Agreement for a period of one
hundred and eighty (180) consecutive days as certified by a physician chosen
by
the Employer and reasonably acceptable to the Employee.
1.14 “Trade
Secrets”
means
Employer and Affiliate information 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:
(a) 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
(b) is
the
subject of efforts that are reasonable under the circumstances to maintain
its
secrecy.
2. DUTIES.
2.1 The
Employee is employed as Executive Vice President of the Bank, subject to the
direction of the president of the Bank, and must perform and discharge well
and
faithfully the duties which may be assigned to Employee from time to time by
the
Employer in connection with the conduct of its business. The duties and
responsibilities of the Employee are set forth on Exhibit A attached hereto.
In
addition to the duties and responsibilities specifically assigned to the
Employee pursuant to Section 2.1 hereof, the Employee must:
(a) devote
substantially all of the Employee's time, energy and skill during regular
business hours to the performance of the duties of the Employee's employment
(reasonable vacations and reasonable absences due to illness excepted) and
faithfully and industriously perform such duties;
(b) diligently
follow and implement all management policies and decisions communicated to
Employee by the Board; and
(c) timely
prepare and forward to the Board all reports and accounting as may be requested
of the Employee.
2.2 The
Employee must devote the Employee's entire business time, attention and energies
to the Business of the Employer and must not during the Term of this Agreement
be engaged (whether or not during normal business hours) in any other business
or professional activity, whether or not such activity is pursued for gain,
profit or other pecuniary advantage; but this will not be construed as
preventing the Employee from:
(a) investing
the Employee's personal assets in businesses which are not in competition with
the Business of the Employer and which will not require any services on the
part
of the Employee in their operation or affairs and in which the Employee's
participation is solely that of an investor;
(b) purchasing
securities in any corporation whose securities are regularly traded provided
that such purchase will not result in Employee collectively owning beneficially
at any time five percent (5%) or more of the equity securities of any business
in competition with the Business of the Employer; and
(c) participating
in civic and professional affairs and organizations and conferences, preparing
or publishing papers or books or teaching so long as the Board approves of
such
activities prior to the Employee's engaging in them.
3. TERM
AND TERMINATION.
3.1 Term.
The term
of this Agreement will initially be set at three (3) years commencing on
the Effective Date. Commencing on the first anniversary of the Effective Date
and continuing on each anniversary date thereafter (in each case the
“Anniversary Date”), this Agreement shall renew for an additional year such that
the remaining term shall be three (3) years unless written notice of non-renewal
is provided to Employee at least ten (10) and not more than (30) days prior
to
such Anniversary Date. Prior to each notice period for non-renewal, the
president of the Bank will conduct a comprehensive performance evaluation and
review of the Employee for purposes of determining whether to extend the
Agreement, and the results thereof shall be reported to the Board (as so
calculated, the “Term”).
3.2 Termination.
The
employment of the Employee under this Agreement may be terminated prior to
the
expiration of the Term only as follows, subject to the conditions set forth
below:
3.2.1 By
the
Employer:
(a) for
Cause
at any time, upon written notice to the Employee, including the notice provided
for in Section 1.6(c), in which event the Employer will have no further
obligation to the Employee except for the payment of any amounts due and owing
under Section 4 on the effective date of the termination; or
(b) without
Cause or upon the Permanent Disability of Employee at any time, upon written
notice to the Employee, in which event the Employer will be required to make
the
termination payments under Section 3.7.
3.2.2 By
the
Employee:
(a) for
Good
Reason at any time after notice as provided in Section 1.12, in which event
the
Employer will be required to make the termination payments under Section 3.7;
or
(b) without
Good Reason or upon the Permanent Disability of the Employee, in which event
the
Employer will have no further obligation to the Employee except for payment
of
any amounts due and owing under Section 4 on the effective date of the
termination.
3.2.3 By
the
Employer without Cause within
twelve (12) months following a Change in Control; provided that the Employee
gives at least thirty (30) days' prior written notice to the Employer of the
Employee's intention to terminate this Agreement with such resignation to be
effective immediately at the end of such thirty (30) day period, in which event
the Employer will be required to make a termination payment under Section 3.7
except that if Employee is terminated for cause, Section 3.2.1(a) is applicable
and no termination payments are due under Section 3.7; or
3.2.4 At
any
time upon mutual, written agreement of the parties, in which event the Employer
will have no further obligation to the Employee except for the payment of any
amounts due and owing under Section 4 on the effective date of termination
unless otherwise set forth in the written agreement.
3.2.5 Immediately
upon the Employee's death, in which event the Employer will have no further
obligation to the Employee except for the payment of any amounts due and owing
under Section 4 on the effective date of termination.
3.3 Effect
of Termination.
Termination of the employment of the Employee pursuant to Section 3.2 will
be
without prejudice to any right or claim, which may have previously accrued
to
either the Employer or the Employee hereunder and will not terminate, alter,
supersede or otherwise affect the terms and covenants and the rights and duties
prescribed in this Agreement.
3.4 Suspension
With Pay.
Nothing
contained herein will preclude the Employer from releasing the Employee of
the
Employee's normal duties and suspending Employee, with pay, during the pendency
of any investigation or examination to determine whether or not Cause exists
for
termination of employee.
3.5 Suspension
Without Pay.
If
Employee is suspended and/or temporarily prohibited from participating in the
conduct of the Employer's affairs by a notice served under Section
8(e)(3) or (g)(1) of the Federal Deposit Insurance Act, the Employer's
obligations under this Agreement will be suspended as of the date of service
thereof, unless stayed by appropriate proceedings. If the charges in such notice
are dismissed, the Employer may in its discretion:
(a) pay
Employee all or part of the compensation withheld while its contract obligations
were suspended; and/or
(b) reinstate
(in whole or in part) any of its obligations, which were suspended.
3.6 Other
Regulatory Requirements.
If the
Bank is in default, as defined in Section (3)(x)(1) of the Federal Deposit
Insurance Act, all obligations under this Agreement will terminate as of the
date of such default, but no vested rights of the Employee will be affected.
Further, all obligations under this Agreement will be terminated, except, to
the
extent determined that continuation of the Agreement is necessary for the
continued operation of the Bank:
(a) by
the
Director (the “Director”) of the Federal Deposit Insurance Corporation (“FDIC”)
or his or her designee, at the time the FDIC enters into an agreement to provide
assistance to or on behalf of the Bank under the authority of the Federal
Deposit Insurance Act; or
(b) by
the
Director or his or her designee, at the time the Director or his or her designee
approves a supervisory merger to resolve problems relating to the operation
of
the Bank or when the Bank is determined by the Director to be in an unsafe
or
unsound condition.
3.7 Termination
Payments.
In
the
event and only in the event this Agreement is terminated by the Employer
pursuant to Section 3.2.1(b) or by the Employee pursuant to Section
3.2.2(a) and a Change in Control has not occurred, immediately following
the effective date of such termination and continuing thereafter on the normal
payroll dates of Employer, the
Employer
will pay to the Employee as severance pay and liquidated damages an amount
equal
to the then current Base Salary plus all benefits then received by Employee
for
a period equal to the remaining Term plus
any
Incentive Compensation that may have accrued in the calendar year in which
Employee was terminated. Additionally
in such event, all of Employee’s stock awards and stock options shall
immediately vest. In
the
event and only in the event this Agreement is terminated by the Employer
pursuant to Section 3.1 by non renewal and a Change in Control has not
occurred, then commencing with the first payroll date immediately following
the
end of the Term, the Employer will pay to the Employee as severance pay and
liquidated damages an amount equal to fifty percent (50%) of Employee's Base
Salary for the immediately preceding 12 month period payable, at the option
of
Employee, either in a lump sum or in six (6) equal monthly installments.
Employer will also provide to Employee benefits substantially similar to those
received by Employee prior to the effective date of a termination under Section
3.1 by non renewal for six (6) months after the effective date of such
termination. In
the
event and only in the event a Change in Control has occurred and this Agreement
is terminated by Employer or by Employee pursuant to Section 3.2.3, the Employee
shall be entitled to a lump sum payment equal to the sum of (a) to the excess
of
(i) 2.99 times Employee’s Average Annual Compensation over (ii) the aggregate
present value, as determined for federal income tax purposes, of all other
payments to the Employee in the nature of compensation that are treated for
federal income tax purposes as contingent on the Change in Control plus (b)
an
annual bonus equal to the greater of target or actual bonus for the year in
which employment terminates, pro-rated for the months elapsed in the annual
bonus period at the time employment terminates and shall be paid such lump
sum
payment by Employer within ten (10) days of the effective date of termination
of
this Agreement. As used herein, the term “Average Annual Compensation” means the
Employee’s average annual taxable compensation paid by the Employer during the
most recent five (5) taxable years ending before the date the Change in Control
occurs (or such portion of such period during which the Employee was employed
by
the Employer. In addition to the termination payments provided in this Section
3.7, in the event and only in the event a Change in Control has occurred and
this Agreement is terminated by Employer or by Employee pursuant to Section
3.2.3: (a) all of Employee’s stock awards shall immediately vest; (b) all of
Employee’s unexercised stock options shall become immediately exercisable and
(c) Employer shall continue Employee’s medical coverage for up to two years at
the same level as available to employees of the Employer.
3.8 Calculation
of Payment Amount.
(a) Certain
Adjustments of Payment Amount.
If it
is determined that any payment or distribution by the Employer to or for the
benefit of the Employee (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise) is subject to the
limitations of section 280G of the Internal Revenue Code (the “Code”) (a
“Parachute Payment”), the following provisions will apply:
(i) If
the
aggregate present value of Parachute Payments is less than or equal to the
280G
limit, then no adjustment to the amount of such Parachute Payments shall be
made.
(ii) If
the
aggregate present value of Parachute Payments is greater than the 280G limit,
but equal to or less than 110% of the 280G limit, such Parachute Payments shall
be reduced to an amount, the present value of which maximizes the aggregate
present value of Parachute Payments without causing such Parachute Payments
to
exceed the 280G limit.
(iii) If
the
aggregate present value of Parachute Payments is greater than 110% of the 280G
limit, the Employee shall be entitled to receive an additional payment (a
“Gross-Up Payment”) in an amount such that after payment by the Employee of all
taxes (including any interest or penalties imposed with respect to such taxes),
including any excise tax imposed by Code section 4999 or any interest or
penalties with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
“Excise Tax”) imposed upon the Gross-Up Payment, the Employee retains an amount
of the Gross-Up Payment equal to the Excise Tax imposed upon the Parachute
Payments.
For
purposes of this Section 3.8, “present value” shall be determined in accordance
with Code section 280G(d)(4), and the “280G limit” is the amount that can be
paid under this Agreement or otherwise without causing any amount to be
nondeductible under Code section 280G or subject to excise tax under section
4999.
(b) Determinations
made by Accounting Firm.
All
determinations required to be made under Section 3.8(a), including the aggregate
present value of Parachute Payments, whether a reduction is required under
Section 3.8a(ii) and the amount of such reduction, and whether a Gross-Up
Payment is required under Section 3.8(a)(iii) and the amount of such Gross-Up
Payment, shall be made by a locally recognized accounting firm selected by
the
Employer (the “Accounting Firm”). The Accounting Firm shall provide detailed
supporting calculations both to the Employer and the Employee within 15 business
days after the Employee’s termination of employment. The initial Gross-Up
Payment, if any, as determined pursuant to Section 3.8(a)(iii), shall be paid
to
the Employee within 15 days after the receipt of the Accounting Firm’s
determination. The Accounting Firm shall furnish the Employee with an opinion
that he or she has substantial authority to complete and file his or her Federal
income tax return in a manner consistent with the Accounting Firm’s
determination of the appropriate amount of Parachute Payments reportable by
the
Employee and of the appropriate amount of Excise Tax required to be paid, if
any. Any determination by the Accounting Firm shall be binding upon the Employer
and the Employee.
(c) Special
Rules Applicable to Reduction of Payments.
The
Employee shall determine which and how much of the Parachute Payments shall
be
reduced consistent with the requirements of Section 3.8(a)(ii), provided that,
if the Employee does not make such determination within 10 business days after
the receipt of the calculations made by the Accounting Firm, the Employer shall
elect which and how much of the Parachute Payments shall be eliminated or
reduced consistent with the requirements of Section 3.8(a)(ii) and shall notify
the Employee promptly of such election.
(d) Special
Rules Applicable to Gross-Up Payments.
The
Employee shall notify the Employer in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by the Employer
of the Gross-Up Payment. Such notification shall be given as soon as practicable
but not later than ten business days after the Employee knows of such claim
and
shall apprise the Employer of the nature of such claim and the date on which
such claim is requested to be paid. The Employee shall not pay such claim prior
to the expiration of the thirty-day period following the date on which it gives
such notice to the Employer (or such shorter period ending on the date that
any
payment of taxes with respect to such claim is due). If the Employer notifies
the Employee in writing prior to the expiration of such period that it desires
to contest such claim, the Employee shall:
(i) give
the
Employer any information reasonably requested by the Employer relating to such
claim,
(ii) take
such
action in connection with contesting such claim as the Employer shall reasonably
request in writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney reasonably
selected by the Employer,
(iii) cooperate
with the Employer in good faith in order effectively to contest such
claim,
(iv) permit
the Employer to participate in any proceedings relating to such
claim,
provided,
however, that the Employer shall bear and pay directly all costs and expenses
(including interest and penalties) incurred in connection with such contest
and
shall indemnify and hold the Employee harmless, on an after-tax basis, for
any
Excise Tax or income tax, including interest and penalties with respect thereto,
imposed as a result of such representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this Section 3.8(d), the
Employer shall control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect
of
such claim and may, at its sole option, either direct the Employee to pay the
tax claimed and xxx for a refund or contest the claim in any permissible manner,
and the Employee agrees to prosecute such contest to a determination before
any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Employer shall determine; provided, however, that
if
the Employer directs the Employee to pay such claim and xxx for a refund, the
Employer shall advance the amount of such payment to the Employee, on an
interest-free basis, and shall indemnify and hold the Employee harmless, on
an
after-tax basis, from any Excise Tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statue of limitations relating to payment of taxes
for
the taxable year of the Employee with respect to which such contested amount
is
claimed to be due is limited solely to such contested amount. Furthermore,
the
Employer’s control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Employee shall
be
entitled to settle or contest, as the case may be, and other issue raised by
the
Internal Revenue Service or any other taxing authority.
If,
after
receipt by the Employee of an amount advanced by the Employer pursuant to this
Section 3.8(d), the Employee becomes entitled to receive any refund with respect
to such claim, the Employee shall (subject to the Employer’s complying with the
requirements of this Section 3.8(d) promptly pay to the Employer the amount
of
such refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Employee of an amount advanced
by the Employer pursuant to this Section 3.8(d), a determination is made that
the Employee shall be entitled to any refund with respect to such claim and
the
Employer does not notify the Employee in writing of its intent to contest such
denial of refund prior to the expiration of thirty days after such
determination, then such advance shall be forgiven and shall not be required
to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
If
the
Employer exhausts its remedies pursuant to this Section 3.8(d) and the Employee
thereafter is required to make a payment of any Excise Tax, the Accounting
Firm
shall determine the amount of the Gross-Up Payment that the Employer should
have
made (“Gross-Up Deficiency”). The amount of any such Gross-Up Deficiency shall
be promptly paid by the Employer to or for the benefit of the Employee. To
the
extent that any Gross-Up Deficiency arises in the context of a Parachute Payment
that was determined pursuant to Section 3.8(a)(ii), and therefore reduced to
the
280G limit, when in fact, the amount of such Parachute Payment should have
been
determined under Section 3.8(a)(iii), the amount of any Gross-Up Deficiency
shall include the additional Parachute Payment due as a result of the
calculation of the amount under Section 3.8(a)(iii).
(e) Overpayments/Underpayments.
As a
result of the uncertainty in the application of Code section 280G at the time
of
the initial determination by the Accounting Firm hereunder, it is possible
that
the Parachute Payments will have been made by the Employer which should not
have
been made (“Overpayment”), or that additional Parachute Payments which will not
have been made by the Employer could have been made (“Underpayment”), in each
case consistent with the calculations required to be made hereunder.
Overpayments and Underpayments arising in connection with Parachute Payments
appropriately determined pursuant to Section 3.8(a)(i) or Section 3.8(a)(ii)
are
governed by this Section 3.8(e). Any Overpayment or Underpayment arising in
connection with a Parachute Payment that is appropriately determined pursuant
to
Section 3.8(a)(iii) are governed by the provisions of Section
3.8(d).
(i) Overpayments.
The
provisions of this subparagraph (i) apply in connection with a Parachute Payment
that is appropriately determined pursuant to Section 3.8(a)(ii). If the
Accounting Firm, based upon the assertion of a deficiency by the Internal
Revenue Service against the Employee which the Accounting Firm believes has
a
high probability of success, determines that an Overpayment has been made,
any
such Overpayment paid or distributed by the Employer to or for the benefit
of
the Employee shall be treated for all purposes as a loan ab
initio
to the
Employee which the Employee shall repay to the Employer together with interest
at the applicable federal rate provided for in Code section 7872(f)(2);
provided, however, that no such loan shall be deemed to have been made and
no
amount shall be payable by the Employee to the Employer if and to the extent
such deemed loan and payment would not either reduce the amount on which the
Employee is subject to tax under Code sections 1 and 4999 or generate a refund
of such taxes.
(ii) Underpayments.
The
provisions of this subparagraph (ii) apply in connection with a Parachute
Payment that is appropriately determined pursuant to Section 3.8(a)(i) or
Section 3.8(a)(ii). If the Accounting Firm, based upon controlling precedent
or
other substantial authority, determines that an Underpayment has occurred,
any
such Underpayment shall be promptly paid by the Employer to or for the benefit
of the Employee, together with interest at the applicable federal rate provided
for in Code section 7872(f)(2).
4. COMPENSATION
AND BENEFITS.
4.1 Compensation.
The
Employee will receive the following salary and benefits:
(a) Base
Salary.
During
the Term, the Employee will receive a base salary at the rate of $200,000 per
annum, payable in substantially equal installments in accordance with the Bank's
regular payroll practices (“Base Salary”). The Employee's Base Salary will be
reviewed by the Board annually, and the Employee will be entitled to receive
annually an increase in such amount, if any, as may be determined by the
Board.
(b) Incentive
Compensation.
(i) In
addition to Employee's Base Salary under Section 4.1(a), the Employer may,
in
its sole discretion, pay the Employee a cash or non cash bonus as determined
each year by the Board. The cash bonus may be in an amount of up to 60% of
Employee’s Base Salary.
(ii) The
Employee will also be entitled to participate in such other bonus, incentive
and
other executive compensation programs as are made available to senior management
of the Employer from time to time.
(iii) Employer
hereby grants to Employee, subject to the vesting schedule and the condition
of
employment described herein, 12,000 shares of common stock of Bay National
Corporation (“BNC”). The stock grant described in this Section 4.1(b)(iii) shall
vest as follows: 25% (3,000 shares) on the first anniversary of this Agreement;
25% (3,000 shares) on the second anniversary of this Agreement; 25% (3,000
shares) on the third anniversary of this agreement and 25% (3,000 shares )
on
the fourth anniversary of this Agreement. The vesting of shares under this
Section 4.1(b)(iii) is subject to Employee being employed by Employer under
this
Agreement at each vesting date. If Employee is not employed by Employer under
this Agreement on a vesting date, shares to have vested on such vesting date
and
subsequent thereto will not vest and Employer and/or BNC will have no duty
under
this Section 4.1(b)(iii) to issue any shares to Employee. Additional shares
may
be awarded from time to time to Employee subject to approval of the Board in
its
sole descretion.
The
bonus
amounts and stock grants to which the Employee is entitled pursuant to this
Section 4.1(b) are referred to herein as “Incentive
Compensation”.
4.2 Additional
Payments.
In
addition to the payments described in Section 4.1 hereof, Employer shall pay
Employee $30,0000 on the Effective Date and $30,000 six months there after
with
such second payment being contingent upon: (1) Employee being employed by
Employer pursuant to this Agreement or (2) if Employee is employed by Employer
pursuant to this Agreement, Employee not being suspended by Employer pursuant
to
Section 3.5 of this Agreement.
4.3 Business
Expenses; Memberships.
The
Employer specifically agrees to reimburse the Employee for (a) reasonable
business (including travel) expenses incurred by the Employee in the performance
of the Employee's duties hereunder, as approved from time to time by the Board,
and (b) the dues and business related expenditures, including initiation
fees, associated with membership in professional associations which are
commensurate with the Employee's position; provided, however, that the Employee
must, as a condition of reimbursement, submit verification of the nature and
amount of such expenses in accordance with reimbursement policies from time
to
time adopted by
the
Employer and in sufficient detail to comply with rules and regulations
promulgated by the Internal Revenue Service.
4.4 Vacation.
On a
non-cumulative basis the Employee will be entitled to vacation in each year
of
this Agreement in accordance with the Bank's vacation policy as then in effect,
during which the Employee's Base Salary will be paid in full.
4.5 Benefits.
In
addition to the Base Salary and Incentive Compensation, the Employee will be
entitled to such benefits as may be available from time to time for employees
of
the Employer. All such benefits will be awarded and administered in accordance
with the Employer's standard policies and practices. Such benefits may include,
by way of example only, health, dental, vision, profit-sharing plans,
retirement, and disability insurance benefits and such other benefits as the
Employer deems appropriate. In addition to the benefits described in this
Section 4.5, Employer shall provide to Employee at no cost to Employee, life
insurance equal to the then current annual salary of Employee payable to a
beneficiary or beneficiaries selected by Employee.
4.6 Withholding.
The
Employer may deduct from each payment of compensation hereunder all amounts
required to be deducted and withheld in accordance with applicable federal
and
state income, FICA and other withholding requirements.
5. COMPANY
INFORMATION
5.1 Ownership
of Information. All Company Information received or developed by the Employee
while employed by the Employer will remain the sole and exclusive property
of
the Employer.
5.2 Obligations
of the Employee.
The
Employee agrees (a) to hold Company Information in strictest confidence,
(b) not to use, duplicate, reproduce, distribute, disclose or otherwise
disseminate Company Information or any physical embodiments thereof and (c)
not
to take or fail to take any action with respect to Confidential Information
that
would result in any Company Information losing its character or ceasing to
qualify as Confidential Information or a Trade Secret. In the event that the
Employee is required by law to disclose any Company Information, the Employee
will not make such disclosure unless (and then only to the extent that) the
Employee has been advised by the Company’s legal counsel that such disclosure is
required by law and then only after prior written notice is given to the
Employer when the Employee becomes aware that such disclosure has been requested
and is required by law. This Section 5 will survive the termination of this
Agreement with respect to Confidential Information for so long as it remains
Confidential Information, but for no longer than three (3) years following
termination of this Agreement, and this Section 5 will survive termination
of
this Agreement with respect to Trade Secrets for so long as is permitted by
the
then-current Maryland Trade Secrets Act.
5.3 Delivery
upon Request or Termination.
Upon
request by the Employer, and in any event upon termination of employment with
the Employer, the Employee will promptly deliver to the Employer all property
belonging to the Employer, including without limitation, all Company Information
then in the Employee's possession or control.
6. NON-COMPETITION.
The Employee agrees that during the Term hereunder and, in the event of the
Employee's termination of employment for any reason, thereafter for the period
of time, if any the Employer is obligated to make payments under Section 3.7,
the Employee will not (except on behalf of or with the prior written consent
of
the Employer), within the Area, either directly or indirectly, on the Employee's
own behalf or in the service or on behalf of others, as a principal, partner,
officer, director, manager, supervisor, administrator, consultant, executive
employee or in any other capacity which involves duties and responsibilities
similar to those undertaken for the Employer, engage in any business which
is
the same as or essentially the same as the Business of the Employer.
Notwithstanding anything contained herein, it is expressly agreed that Employee
is free to pursue employment in the financial services industry within the
Area
provided Employer’s obligation to make payments under Section 3.7 have been
satisfied or have been waived by Employee.
7. NON-SOLICITATION
OF CUSTOMERS. The Employee agrees that during the Term hereunder and, in the
event of the Employee's termination of employment for any reason, thereafter
for
a period equal to one (1) year, the Employee will not (except on behalf of
or
with the prior written consent of the Employer), within the Area, 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 Employer's customers, 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.
8. NON-SOLICITATION
OF EMPLOYEES. The Employee agrees that during the Term hereunder and, in the
event of the Employee's termination of employment for any reason, thereafter
for
a period equal (1) year, the Employee will not, except for Employee’s
Administrative Assistant, within the Area, 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 Employer or its Affiliates, whether or not such employee is a full-time
employee or a temporary employee of the Employer or its Affiliates and whether
or not such employment is pursuant to written agreement and whether or not
such
employment is for a determined period or is at will.
9. REMEDIES.
The Employee agrees that the covenants contained in Sections 5 through 8 of
this
Agreement are of the essence of this Agreement; that each of the covenants
is
reasonable and necessary to protect the business, interests and properties
of
the Employer; and that irreparable loss and damage will be suffered by the
Employer should the Employee breach any of the covenants. Therefore, the
Employee agrees and consents that, in addition to all the remedies provided
by
law or in equity, the Employer will be entitled to a temporary restraining
order
and temporary and permanent injunctions to prevent a breach or contemplated
breach of any of the covenants. The Employer and the Employee agree that all
remedies available to the Employer or the Employee, as applicable, will be
cumulative.
10. SEVERABILITY.
The parties agree that each of the provisions included in this Agreement is
separate, distinct and severable from the other provisions of this Agreement
and
that the invalidity or unenforceability of any Agreement provision will not
affect the validity or enforceability of any other provision of this Agreement.
Further, if any provision of this Agreement is ruled invalid or unenforceable
by
a court of competent jurisdiction because of a conflict between the provision
and any applicable law or public policy, the provision will be redrawn to make
the provision consistent with and valid and enforceable under the law or public
policy.
11. NO
SET-OFF BY THE EMPLOYEE. The existence of any claim, demand, action or cause
of action by the Employee against the Employer, or any Affiliate of the
Employer, whether predicated upon this Agreement or otherwise, will not
constitute a defense to the enforcement by the Employer of any of its rights
hereunder.
12. NOTICE.
All notices and other communications required or permitted under this Agreement
will be in writing and, if mailed by prepaid first-class mail or certified
mail,
return receipt requested, will be deemed to have been received on the earlier
of
the date shown on the receipt or three (3) business days after the
postmarked date thereof. In addition, notices hereunder may be delivered by
hand, facsimile transmission or overnight courier, in which event the notice
will be deemed effective when delivered or transmitted. All notices and other
communications under this Agreement must be given to the parties hereto at
the
following addresses:
(i)
|
If
to the Employer:
|
Xxxx
X. Xxxxxx
|
President
|
||
Bay
National Bank
|
||
0000
X. Xxxxx Xxxx
|
||
Xxxxxxxxx,
Xxxxxxxx 00000
|
||
With
a copy to:
|
Xxxxx
X. Xxxxxxxxxxx, Esquire
|
|
Xxxx/Xxxxx
|
000
X. Xxxxxxxxx Xx.
|
||
Xxxxxxxxx,
XX 00000-0000
|
||
(ii)
|
If
to the Employee:
|
Xxxxxxx
X. Xxxxxxxx
|
00000
Xxxxx Xxxx
|
||
Xxxxxxxxxx,
XX 00000
|
13. ASSIGNMENT.
Neither party hereto may assign or delegate this Agreement or any of its rights
and obligations hereunder without the written consent of the other party
hereto.
14. WAIVER.
A waiver by the Employer of any breach of this Agreement by the Employee will
not be effective unless in writing, and no waiver will operate or be construed
as a waiver of the same or another breach on a subsequent occasion.
15. ARBITRATION.
Any controversy or claim arising out of or relating to this Agreement, or the
breach thereof, will be settled by binding arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association. The
decision of the arbitration panel will be final and binding on the parties,
and
judgment upon the award rendered by the arbitration panel may be entered by
any
court having jurisdiction thereof.
16. ATTORNEYS'
FEES. In the event that the parties have complied with this Agreement with
respect to arbitration of disputes and litigation ensues between the parties
concerning the enforcement of an arbitration award and the Employee must employ
separate legal counsel, the Employer shall advance to the Employee, within
thirty (30) days after receiving copies of invoices submitted by Employee,
any
and all reasonable attorneys' fees and expenses incurred with preparing,
investigating and litigating such action, proceeding or suit. The Employee
must
reimburse the Employer for any and all advances that exceed the first $5,000
advanced to the Employee for such legal expenses only if and to the extent
that
a final decision by a court of competent jurisdiction has determined that the
Employee is not entitled to receive any amounts due or to enforce any of the
rights under this Agreement.
17. APPLICABLE
LAW. This Agreement will be construed and enforced under and in accordance
with the laws of the State of Maryland. The parties agree that any appropriate
state court located in Baltimore County, Maryland, will have jurisdiction of
any
case or controversy arising under or in connection with this Agreement and
will
be a proper forum in which to adjudicate such case or controversy. The parties
consent to the jurisdiction of such courts.
18. INTERPRETATION.
Words importing the singular form shall include the plural and vice versa.
The
terms “herein”, “hereunder”, “hereby”, “hereto”, “hereof” and any similar terms
refer to this Agreement. Any captions, titles or headings preceding the text
of
any article, section or subsection herein are solely for convenience of
reference and will not constitute part of this Agreement or affect its meaning,
construction or effect.
19. ENTIRE
AGREEMENT. This Agreement embodies the entire and final agreement of the
parties on the subject matter stated in
the
Agreement. No amendment or modification of this Agreement will be valid or
binding upon the Employer or the Employee unless made in writing and signed
by
both parties. All prior understandings and agreements relating to the subject
matter of this Agreement are hereby expressly terminated.
20. RIGHTS
OF THIRD PARTIES. Nothing herein expressed is intended to or will be
construed to confer upon or give to any person, firm or other entity, other
than
the parties hereto and their permitted assigns, any rights or remedies under
or
by reason of this Agreement.
21. SURVIVAL.
The obligations of the Employee pursuant to Sections 5, 6, 7, 8 and 9 will
survive the termination of the employment of the Employee hereunder for the
period designated under each of those respective Sections.
[Signature
Page Follows]
IN
WITNESS WHEREOF, the Employer and the Employee have executed and delivered
this
Agreement as of the date first shown above.
Employer:
|
||
Bay
National Bank
|
||
By:
|
/s/ Xxxx X. Xxxxxx | |
Name:
Xxxx X. Xxxxxx
|
||
Title:
President
|
||
Employee:
|
||
/s/
Xxxxxxx X. Xxxxxxxx
|
||
Xxxxxxx
X. Xxxxxxxx
|
Exhibit
A
BAY
NATIONAL BANK
JOB
DESCRIPTION
JOB
TITLE:
|
EXECUTIVE
VICE PRESIDENT
|
FSLA:
|
EXEMPT
|
REPORTS
TO:
|
BOARD
OF DIRECTORS
|
SUMMARY:
ESSENTIAL
DUTIES AND RESPONSIBILITIES:
SUPERVISORY
RESPONSIBILITY:
CRA
REQUIREMENT:
PRODUCT
AND KNOWLEDGE REQUIREMENT:
QUALIFICATION
REQUIREMENTS:
EDUCATION
AND/OR EXPERIENCE:
LANGUAGE
SKILLS:
ANALYTICAL
SKILLS:
PHYSICAL
DEMANDS:
PERFORMANCE
EXPECTATIONS:
ORGANIZATIONAL
EXPECTATIONS:
FINANCIAL
EXPECTATIONS:
RELATIONSHIP
EXPECTATIONS: