EXHIBIT 10.3
CHANGE OF CONTROL AGREEMENT
THIS CHANGE OF CONTROL AGREEMENT, dated as of this 18th day
of April, 1998, by and among Second National Financial Corporation (the
"Company") and Xxxxxxx X. Xxxxxx (the "Executive").
In consideration of the mutual covenants and agreements set
forth herein, the parties agree as follows:
1. Employment and Duties. The Executive is
the Senior Vice President and Chief Financial Officer of the Company and its
wholly owned subsidiary, Second Bank & Trust (the "Bank").
2. Term. The term of this Agreement shall be
deemed to have commenced on April 18, 1998 and continues through December 31,
2000, unless terminated or extended as hereinafter provided. This Agreement
shall be extended for additional one year periods following the original term
unless either party notifies the other in writing at least one hundred eighty
(180) days prior to the end of the original term, or the end of any additional
one-year term, that the Agreement shall not be extended beyond its current
term. Notwithstanding the foregoing, no extension (other than pursuant to
paragraph (i) of Section 3(a)) shall occur after a Change of Control.
connection with a Change of Control (as hereinafter defined), such base salary
shall at all times exceed that paid to any other employee of the Company and
its subsidiaries. The Executive and the Company agree to formulate and
finalize the terms of an incentive compensation program for the benefit of the
Executive not later than December 31, 1996.
3. Change of Control and Severance Benefits.
(a) In the event a Change of Control as
hereinafter defined occurs during the term of this Agreement, the Executive
may choose either of the following two alternatives, if written notice of
his choice is given to the Company within one hundred eighty (180) days after
such Change of Control (with alternative (i) becoming effective if no notice is
timely received by the Company):
(i) the term of this Agreement
as provided in Section 2 hereof shall continue for two (2) consecutive years
(24 months) after the Change of Control or the balance of the term of this
Agreement, whichever is greater; and in the event the Executive's employment
is terminated without Cause by the Company for reasons other than the
Executive's Disability, or the Executive resigns his employment with the
Company and all of its subsidiaries for Good Reason within one hundred eighty
(180) days after the occurrence of the Good Reason, during the term of this
Agreement, except as set forth in Sections 3(b) or 3(c) below, the Executive
shall receive as "Severance Benefits" the continuation for eighteen (18)
months following his cessation of employment of (A) his annual base salary
then in effect (but in no event less than his annual base salary in effect at
the Change of Control) and (B) all health and insurance plans as required by
federal law, and provided that the Executive's continued participation is
possible under the general terms and provisions of such plans and programs. If
the Company reasonably determines that maintaining such health and insurance
plans in full force and effect for the benefit of the Executive until eighteen
(18) months from the date of cessation of employment is not feasible, the
Company shall pay the Executive a lump sum equal to the estimated cost of
maintaining such plans for eighteen (18) months, or
(ii) the Executive may resign
his employment from the Company and, except as set forth in Section 3(b) below,
receive as "Severance Benefits" the continuation for the twenty-four (24)
months immediately following such Change of Control or the provision of
written notice under this Agreement, whichever is later, of his salary and
benefits then in effect and the vesting and immediate exercisability of any
stock options held by him at that time.
Except as set forth in Section 3(c) below in connection with Severance Benefits
provided pursuant to clause (i) of this Section 3(a), the Severance Benefits to
be provided by the Company under this provision shall be provided without regard
to whether the Executive becomes employed by another employer. In addition, the
Executive may elect to receive, at his sole option, the total Severance Benefits
due him at no discount, in one lump sum payment, payable immediately upon notice
to the Company within thirty (30) days after the Executive resigns or his
employment is terminated pursuant to this Section 3(a).
(b) Excess Parachute Payment Limitation
on Severance Benefits. Notwithstanding the foregoing provisions of Section 3(a),
the aggregate value of all Severance Benefits provided for under this
Agreement, when added to the value of all other payments or benefits payable
to or with respect to the Executive (even though not paid or provided pursuant
to this Agreement) which constitute "parachute payments" under IRC Section
280G shall be reduced to the extent necessary so that none of such benefits and
payments (whether or not paid or provided pursuant to this Agreement) constitute
"excess parachute payments" on which an excise tax is imposed pursuant to
IRC Section 4999. Any such reduction shall normally be effected first by
reducing taxable payments or benefits and then by reducing nontaxable
payments and benefits, with noncash payments or benefits being reduced before
cash payments or benefits in each such category, unless the Company and
Executive otherwise agree.
(c) Non-Competition. Notwithstanding
the foregoing provisions of Section 3(a), all Severance Benefits provided
pursuant to clause (i) of Section 3(a) otherwise continuing for periods after
the Executive's termination of employment shall cease to be paid, and the
Company shall have no further obligation due with respect thereto, in the
event the Executive engages in "Competition" or makes any "Unauthorized
Disclosure of Confidential Information." In addition, in exchange for the
Severance Benefits as provided herein pursuant to clause (i) of Section 3(a),
for the other provisions of this Agreement and for other valuable
consideration hereby acknowledged, the Executive agrees that he will not
engage in competition for a period of two (2) years after the Executive's
employment with the Company ceases for any reason, including the expiration or
nonrenewal of this Agreement. For purposes hereof:
(i) "Competition" means the Executive's
engaging, without the written consent of the Board of Directors of the Company
or a person authorized thereby, in an activity as an officer, a director, an
employee, a partner, a more than one percent shareholder or other owner, an
agent, a consultant, or in any other individual or representative capacity
within 50 miles of any branch office of the Company or any of its subsidiaries
(unless the Executive's duties, responsibilities and activities, including
supervisory activities, for or on behalf of such activity, are not related
in any way to such competitive activity) if it involves:
(A) engaging in or
entering into the business of any banking, lending or any other business
activity in which the Company or any of its affiliates is actively engaged
at the time the Executive's employment ceases, or
(B) soliciting or
contacting, either directly or indirectly, any of the customers or clients of
the Company or any of its affiliates for the purpose of competing with the
products or services provided by the Company or any of its affiliates, or
(C) employing or
soliciting for employment any employees of the Company or any of its affiliates
for the purpose of competing with the Company or any of its affiliates.
Notwithstanding the above, any
investment, activity or employment by or of the Executive in the Richmond
market area, including the Cities of Richmond and Petersburg and the
Counties of Hanover, Henrico, Goochland, Powhatan, Chesterfield, Prince
Xxxxxx, Xxxxxxx City and New Kent, shall not constitute Competition.
(ii) "Unauthorized Disclosure of
Confidential Information" means the disclosure of information in violation of
Section 5 of this Agreement.
(iii) All determinations regarding
whether the Executive has engaged in Competition or made an Unauthorized
Disclosure of Confidential Information under this Agreement shall be made by
the Board of the Directors of the Company reasonably and in good faith.
(iv) For purposes of this Agreement,
"customers" or "clients" of the Company or any of its affiliates means
individuals or entities to whom the Company or any of its affiliates has
provided banking, lending, or other similar financial services at any time
from January 1, 1997 through the date the Executive's employment with the
Company ceases.
(d) Change of Control Defined. For
purposes of this Agreement, a "Change of Control" shall mean:
(i) the acquisition by any
individual, entity or group (within the meaning of Section 13(d)(3) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") of beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act), of securities of the Company representing 20% or more of the
combined voting power of the then outstanding securities; provided, however,
that the following acquisitions shall not constitute a Change of Control:
(A) any acquisition
directly from the Company (excluding an acquisition by virtue of the exercise of
a conversion privilege);
(B) any acquisition
by the Company;
(C) any acquisition
by any employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company; or
(D) any acquisition
pursuant to a reorganization, merger or consolidation by any corporation
owned or proposed to be owned, directly or indirectly, by shareholders of
the Company if the shareholders' ownership of securities of the corporation
resulting from such transaction constitutes a majority of the ownership of
securities of the resulting entity and at least a majority of the members
of the Board of Directors of the corporation resulting from such
transaction were members of the Incumbent Board as defined in this Agreement
at the time of the execution of the initial agreement providing for such
reorganization, merger or consolidation;
(E) any acquisition
resulting from negotiations that began on or before April 30, 1998; or
(ii) where individuals who, as
of the inception of this Agreement, constitute the Board of Directors of the
Company (the "Incumbent Board") cease for any reason to constitute at least a
majority of such Board of Directors; provided, however, that any individual
becoming a director subsequent to the effective date of this Agreement whose
election, or nomination for election by the shareholders was approved by a
vote of at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a person
other than a member of the Board of Directors; or
(iii) the shareholders of the
Company approve, or the Company otherwise consummates,
(A) a merger,
statutory share exchange, or consolidation of the Company with any other
corporation, except as provided in subparagraph (i)(D) of this section;
provided however, that the approval by shareholders of the Company or any of
its predecessors of an agreement entered into on or before April 30, 1998
shall not constitute a Change of Control herein, or
(B) the sale or other
disposition of all or substantially all of the assets of the Company.
(e) Cause. For purposes of this
Agreement, "Cause" shall include but not be limited to:
(i) willful misconduct of the Executive
in connection with the performance of his duties which the Company believes does
or may result in material harm to the Company;
(ii) misappropriation of funds or
property of the Company by the Executive;
(iii) disloyalty or dishonesty;
(iv) the failure of the Executive to
perform any of the duties and responsibilities required by his job (other than
by reason of Disability); or
(v) the Executive's conviction of a
felony or misdemeanor involving moral turpitude.
(f) Good Reason. For purpose of this
Agreement, "Good Reason" shall mean:
(i) the continued assignment to the
Executive of duties inconsistent with the Executive's position, authority,
duties or responsibilities as contemplated by Section 1 hereof;
(ii) any action taken by the Company
which results in a substantial reduction in the status of the Executive,
including a diminution in his position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and/or inadvertent action
not taken in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(iii) the relocation of the Executive to
any other primary place of employment which might require him to move his
residence which, for this purpose, includes any reassignment to a place of
employment located more than 50 miles from the Executive's initially assigned
place of employment, without the Executive's express written consent to such
relocation;
(iv) any reduction in the
Executive's annual base salary in effect at the time of the Change of Control or
any uncompensated exclusion of Executive from participation (other than
an isolated, insubstantial or inadvertent failure not occurring in bad
faith and which is remedied by the Company promptly after receipt of notice
thereof given by the Executive) in any plans, programs or forms of compensation
or benefits that the Company or its subsidiaries provide to the class of
employees that includes the Executive, on a basis not less favorable than that
provided to such class of employees, provided however, a reasonable transition
period following any merger, statutory share exchange, consolidation or
acquisition or transaction involving the Company or any of its subsidiaries
shall be permitted in order to make appropriate adjustments in compliance
with this obligation,; or
Notwithstanding the above, "Good Reason" shall not include the removal of the
Executive as an officer of any subsidiary of the Company (including the Bank) in
order that he might concentrate his efforts on the Company.
4. Employment at Will and Other Termination of or
Resignation from Employment.
(a) At Will Employment. The Executive
and the Company acknowledge that the employment of the Executive by the Company
or the Bank is "at will," and the Executive's employment may be terminated by
either the Company or the Executive at any time except that the Company may not
terminate the employment of the Executive without Cause in connection with
or in contemplation of a Change of Control unless the Executive receives
the Severance Benefits described in paragraph (ii) of Section 3(a) hereof.
(b) Termination for Cause. If the
Executive's employment shall be terminated for Cause, this Agreement shall
terminate without further obligation to the Executive other than to pay to
the Executive his annual base salary through the date of termination. If
the Executive terminates his employment other than for Good Reason, this
Agreement shall terminate without further obligation to the Executive.
(c) Resignation Other Than for Good
Reason. Except as contained in any other written agreement or amendment of this
Agreement, if the Executive resigns or voluntarily leaves the employment of
the Company for other than for Good Reason or pursuant to paragraph 3(a)(iv),
this Agreement shall terminate without further obligation to the Executive.
(d) Death or Disability. The
Executive's employment under this Agreement shall cease automatically upon
the Executive's death. In the event of cessation of employment due to death of
the Executive after a Change of Control, his survivors, designees or estate
shall continue to receive, in addition to all other benefits accruing upon
death, full compensation hereunder for a period of three (3) months following
the month in which his death occurred. If the Company determines that the
Disability, as hereinafter defined, of the Executive has occurred, it may
terminate the Executive's employment and this Agreement upon thirty (30) days'
written notice provided that, within thirty (30) days after receipt of such
notice, the Executive shall not have returned to full-time performance of
his assigned duties. "Disability" shall mean the absence of the Executive from
his assigned duties with the Company on a full-time basis for the greater of
ninety (90) consecutive calendar days or the longest waiting period under any
long term disability insurance contract or program provided to him as an
employee as a result of incapacity due to mental or physical illness or
disability as determined by a physician selected by the Company. In the event of
the termination of the Executive's employment due to his Disability, this
Agreement shall terminate without further obligation to the Executive.
5. Confidentiality. The Executive recognizes
that as an employee of the Company he will have access to and may participate
in the origination of non-public, proprietary and confidential information
and that he owes a fiduciary duty to the Company. Confidential information may
include, but is not limited to, trade secrets, customer lists and information,
internal corporate planning, methods of marketing and operation, and other
data or information of or concerning the Company or its customers that is
not generally known to the public or in the banking industry. The Executive
agrees that he will never reveal any such confidential information, either
directly or indirectly, to any third party except as may be authorized in
writing specifically by the Company.
6. Severability. If any provision of this
Agreement, or part thereof, is determined to be unenforceable for any reason
whatsoever, it shall be severable from the remainder of this Agreement and
shall not invalidate or affect the other provisions of this Agreement, which
shall remain in full force and effect and shall be enforceable according to
their terms. No covenant shall be dependent upon any other covenant or
provision herein, each of which stands independently.
7. Modification. The parties expressly agree
that should a court find any provision of this Agreement, or part thereof,
to be unenforceable or unreasonable, the court may modify the provision, or
part thereof, in a manner which renders that provision reasonable, enforceable,
and in conformity with the public policy of Virginia.
8. Governing Law. This agreement shall be
governed by and construed in accordance with the laws of the Commonwealth of
Virginia.
9. Notices. All written notices required by
this Agreement shall be deemed given when delivered personally or sent by
registered or certified mail, return receipt requested, to the parties at their
addresses set forth on the signature page of this Agreement. Each party may,
from time to time, designate a different address to which notices should be
sent.
10. Amendment. This Agreement may not be
varied, altered, modified or in any way amended except by an instrument in
writing executed by the parties hereto or their legal representatives.
11. Binding Effect. This Agreement shall be
binding upon the Executive and on the Company, its successors and assigns
effective on the date first above written subject to the approval by the Board
of Directors of the Company. The Company will require any successor to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place.
12. Entire Agreement. This Agreement
constitutes the entire agreement of the parties with respect to the matters
addressed herein and it supersedes all other prior agreements and
understandings, both written and oral, express or implied, with respect to the
subject matter of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written herein.
SECOND NATIONAL FINANCIAL CORPORATION
By__________________________________
Its________________________________
000 Xxxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
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XXXXXXX X. XXXXXX
"EXECUTIVE"
Address:
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