EMPLOYMENT AGREEMENT
AGREEMENT dated as of this 1st day of January, 1998, by and between
COMMERCE BANCORP, INC. ("Commerce"), a New Jersey business corporation, and
XXXXXX X. XXXXXX ("Employee").
B A C K G R 0 U N D
Employee is the Executive Vice President of Commerce and Executive Vice
President of Commerce Bank, N.A. ("CB"), a national banking association and a
wholly-owned subsidiary of Commerce. The Board of Directors of Commerce (the
"Board") has determined that the future services of Employee in these capacities
will be of value to Commerce, CB and Commerce's other present and future
subsidiaries and accordingly the Board wishes to have Employee's services
available to Commerce for at least the next three years and to provide
supplemental benefits to Employee should his employment with Commerce terminate
under certain circumstances or should he die or become disabled prior to the
termination of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and intending to be legally bound hereby, the parties agree as
follows:
1. Employment and Term of Employment.
1.1 Commerce offers Employee employment, and Employee hereby accepts
such employment, subject to all the terms and conditions of this Agreement, for
a term of three years beginning on the date hereof, subject, however, to
automatic renewal and extension as set forth below and to Commerce's and
Employee's right to terminate his employment hereunder as set forth herein.
Notwithstanding anything herein provided to the contrary, on each anniversary
date of this Agreement, this Agreement and Employee's employment hereunder shall
automatically be renewed and extended (upon the same terms and conditions) for a
new three year term unless written notice by either party is given pursuant to
Section 1.2 hereof. As used hereinafter "Term" includes the original three year
period as well as any renewed or extended periods as provided for herein.
1.2 Either party may terminate this Agreement on any anniversary date
of this Agreement by giving to the other party written notice thereof at least
thirty days prior to any such anniversary date. As a
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result of the foregoing notice being given to either party hereunder, the Term
will have two years remaining from the applicable anniversary date, subject to
the terms and conditions set forth herein.
2. Services and Duties.
Commerce agrees to employ Employee during the Term as Executive
Vice President of Commerce. Subject to the approval of the CB Board of
Directors, Employee shall during the Term also serve as the Executive Vice
President of CB and, subject to the approval of the respective Boards of
Directors, Employee shall during the Term also serve as an officer and/or
director of such other subsidiaries of Commerce as such Board of Directors, with
the consent of Employee, shall designate. Employee shall have such powers and
duties as may from time to time be prescribed by the respective chief executive
officers and Boards of Directors. Employee agrees to accept such employment, and
to devote his full time and efforts to the business and affairs of Commerce and
its subsidiaries, and to use his best efforts to promote the interests of
Commerce and its subsidiaries.
3. Compensation.
3.1 Commerce shall pay Employee for all services to be rendered by him
hereunder and for all positions held by him during the Term, the following
compensation, payable at regular intervals in accordance with Commerce's normal
payroll practices now or hereafter in effect. During the term of his employment,
Employee shall be paid a "base salary" at the rate of not less than $300,000 per
year, subject to an annual review and subject to such upward adjustments as may
be deemed appropriate by the Board or a designated Committee thereof. For
purposes of this Agreement, a "year" shall be deemed to commence on January 1,
1998, and on January 1 of each calendar year hereafter; compensation for a
portion of a year shall be prorated. The Board or such Committee may recommend
an increase in salary for Employee hereunder, but shall have no obligation to do
so. Base salary once increased by the Board or a Committee thereof may not be
decreased.
3.2 Commerce will, during the term of his employment, reimburse
Employee for all expenses incurred by Employee which Commerce determines to be
reasonable and necessary (in accordance with its normal reimbursement practices
now or hereafter in effect) for Employee to carry out his duties under this
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Agreement.
4. Plans and Fringe Benefits.
4.1 During the term of his employment, Employee shall be entitled to
participate in any bonus programs, incentive compensation plans, stock option
plans or similar benefit or compensation programs now or hereafter in effect
which are generally made available from time to time to executive officers of
Commerce. For any period less than a full year during the Term, Employee shall
receive an amount equal to the pro rated portion of the compensation payable
pursuant to such plan or program.
4.2 During the term of his employment, Employee shall also be entitled
(a) to participate in all fringe benefits as in effect from time to time which
are generally available to Commerce's salaried officers including, without
limitation, medical and hospitalization coverage, life insurance coverage and
disability coverage, and (b) to such other fringe benefits as the Board, or a
Committee thereof, shall deem appropriate provided such benefits are consistent
with those that he currently enjoys including without limitation use of an
automobile and paid holidays and vacations.
5. Termination by Commerce for Cause.
5.1 Commerce shall have the right at any time to terminate Employee's
employment hereunder, for cause, on thirty days' prior written notice to
Employee. For purposes of this Agreement, the term "for cause" shall be deemed
to mean only the following:
(i) If at any time during the Term, Employee is indicted for,
convicted of or enters a plea of guilty or nolo contendere to, a felony, a crime
of falsehood or a crime involving fraud, moral turpitude or dishonesty; or
(ii) If at any time during the Term, Employee willfully
violates any of the covenants or provisions of this Agreement including without
limitation the willful failure of Employee to perform his duties hereunder or
the instructions of the Board after written notice of such instructions (other
than any such failure resulting from Employee's incapacity due to illness or
disability) or Employee engages in any conduct materially harmful to Commerce's
business, and in either case fails to cease such conduct or correct such
conduct, as the case may be, within thirty days subsequent to receiving written
notice from the Board advising
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Employee of same (which conduct shall be specifically set forth in such notice).
If Employee's employment shall terminate for cause, Commerce shall pay
Employee his full base salary through the date of termination at the rate in
effect at the time notice of termination is given and Commerce shall have no
further obligations to Employee under this Agreement other than to pay Employee
such other compensation as may be due Employee pursuant to Sections 4.1 and 4.2
hereof.
6. Disability and Death.
6.1 If Employee becomes permanently disabled during the Term while
employed hereunder, Commerce shall compensate Employee for the balance of the
Term at a rate equal to 70% of his base annual salary at the time he became
permanently disabled. Commerce agrees that it will make the payments due under
this Section 6.1 on the first day of each month, commencing with the first day
of the month following the month in which Employee is deemed to be permanently
disabled, in an amount equal to 1/12 of 70% of Employee's base annual salary at
the time he is deemed to be permanently disabled. Such payments shall be reduced
each month, however, by the amount of any disability payments made to Employee
under any Commerce-sponsored disability insurance plan. The amount of the
reduction under the preceding sentence shall be computed as if Employee had
elected to receive monthly payments of disability benefits (regardless of the
actual payment frequency). If Employee becomes permanently disabled as provided
in this Section 6, he shall nonetheless continue, after becoming so disabled
until the end of the Term, to be entitled to receive at Commerce's expense such
group hospitalization coverage, life insurance coverage and disability coverage
as is generally made available from time to time to executive officers of
Commerce, if and to the extent permitted by the respective insurers of such
coverage. Until such time as Employee is deemed to be permanently disabled,
Employee shall continue to receive his full base salary and other compensation
and fringe benefits due him under Sections 4.1 and 4.2 hereof.
6.2 For purposes of this Agreement, Employee shall be deemed to have
become "permanently disabled" upon his failure to render services of the
character contemplated by this Agreement, because of his physical or mental
illness or other incapacity beyond his control, other than his death, for a
continuous period of 6 months, or for shorter periods aggregating more than 9
months in any 18 consecutive months.
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6.3 If Employee dies during the Term while employed hereunder, then his
employment and his rights to compensation hereunder shall automatically
terminate at the close of the calendar week in which death occurs, and in
addition to his full base salary to the date of termination and any compensation
due him as provided in Section 4.1 hereof, Commerce shall pay to such person as
Employee shall designate in a notice filed with Commerce or, if no such person
shall be designated, to his estate, as a lump sum death benefit, an amount equal
to the product of (A) Employee's average annual base salary in effect during the
twenty-four months immediately preceding his death and (B) two. The foregoing
death benefit shall be in addition to any amount payable under any group life
insurance program maintained by Commerce or any of its subsidiaries.
7. Termination by Commerce without Cause and Termination for Good
Reason.
7.1 If Commerce shall terminate Employee's employment other than for
cause or as provided in Section 1.2 hereof then:
(i) Commerce shall pay to Employee his full base salary
through the date of termination and any compensation when due him as provided in
Section 4.1 hereof; and
(ii) In lieu of any further salary payments to Employee for a
period subsequent to the date of termination, Commerce shall pay as severance
pay to Employee a lump sum severance payment (the "Severance Payment") equal to
the amount of Employee's base salary which is in effect on the date of
termination and which would have been paid to Employee between the date of
termination and the end of the then Term had Employee continued to be employed
by Commerce to the end of the then Term.
7.2 If Employee shall terminate his employment hereunder for "Good
Reason" (as defined in Section 8.2 hereof) then:
(i) Commerce shall pay to Employee his full base salary
through the date of termination and any compensation when due him as provided in
Section 4.1 hereof; and
(ii) In lieu of any further salary payments to Employee for a
period subsequent to the date of termination, Commerce shall pay as severance
pay to Employee a lump sum severance payment (the "Severance Payment") equal to
four times Employee's average annual base salary in effect during the
twenty-four months immediately preceding such termination.
7.3 Upon termination of Employee's employment as set forth in either
Section 7.1 or 7.2 hereof, Commerce shall promptly determine the aggregate
present value pursuant to Section 280G(d)(4) of the Internal Revenue Code of
1986, as amended (the "Code") of all amounts payable to Employee under this
Agreement, and of all other amounts payable to Employee upon or by reason of his
termination which are determined in good faith by Commerce to be "parachute
payments" (as defined in Section 280G(b)(2) of the Code and the regulations
promulgated thereunder) made pursuant to agreements or plans which are subject
to Section 280G. Commerce's determination of present value and of other amounts
constituting "parachute payments" is binding; provided that if Employee obtains
an opinion of counsel satisfactory to Commerce or an Internal Revenue Service
ruling to the effect that the method of determining present value was improper
or that specified payments did not constitute "parachute payments," calculations
will be made in accordance with such opinion or ruling. In the event the
aggregate present value of all benefits under this Agreement and other
"parachute payments" is equal to or in excess of 300% of Employee's "base
amount" as defined in Section 280G(b)(3)(A) and the regulations thereunder,
Employee waives the right to "parachute payments" sufficient to reduce the
present value of all such payments below 300% of the "base amount." Employee
shall have the right to designate those benefits which shall be waived or
reduced in order to comply with this provision but failing designation by
Employee, Commerce may designate those benefits which may be waived or reduced.
If it is established pursuant to a final determination of a court of competent
jurisdiction or an Internal Revenue Service proceeding that, notwithstanding the
good faith of Employee and Commerce in applying the terms of this Section 7, the
aggregate "parachute payments" paid to or for Employee's benefit are in an
amount that would result in any portion of such "parachute payments" not being
deductible by Commerce or any affiliate by reason of Section 280G of the Code,
then Employee shall have an obligation to pay Commerce upon demand an amount
equal to the sum of (i) the excess of the aggregate "parachute payments" paid to
or for Employee's benefit without any portion of such "parachute payments" not
being deductible by reason of Section 280G of the Code and (ii) interest on the
amount set forth in clause (i) above at the applicable federal rate (as defined
in Section 1274(d) of the Code) from the date of Employee's receipt
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of such excess until the date of such payment.
7.4 In addition to the other compensation set forth in either Section
7.1 or 7.2 hereof, upon termination of Employee's employment as set forth in
either Section 7.1 or 7.2 hereof, Employee shall be entitled to the following
benefits from Commerce:
(i) Following the date of termination, Employee shall be
entitled to participate in all Commerce medical, disability, hospitalization and
life insurance benefits for a period of three years except that should
subsequent employment be accepted during the three year period following the
date of termination, continuation of any medical, disability, hospitalization
and life insurance benefits will be offset by coverages provided through
Employee's subsequent employer.
7.5 Except as provided in this Section 7, nothing herein contained
shall affect or have any bearing on Employee's entitlement to other benefits
under any plan or program providing benefits by reason of termination of
employment.
7.6 Employee shall have the right to terminate his employment hereunder
for "Good Reason" if he shall first give Commerce not less than thirty days
written notice of his intention to so terminate his employment specifying the
reason(s) for such termination and the date of termination, and thereafter
Commerce shall not have cured or remedied the reason(s) for such termination
prior to the date of termination set forth in such notice.
7.7 Anything in this Agreement to the contrary notwithstanding,
Employee shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment.
8. Change in Control and Good Reason.
8.1 For purposes of this Agreement, a "change of control" of Commerce
shall mean a change in control of Commerce or CB of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as enacted and enforced on the date hereof, whether or not
Commerce or CB is subject to such reporting requirement; provided that without
limitation such a change in control shall have been deemed to conclusively occur
when any of the following events shall have occurred without Employee's prior
written
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consent:
(i) within any period of two consecutive years during the
Term, a change in at least a majority of the members of the Board or the
addition of five or more new members to the Board unless such change or addition
occurs with the affirmative vote in writing of Employee in his capacity as a
director or a shareholder; or
(ii) a Person or group acting in concert as described in
Section 13(d)(2) of the Exchange Act holds or acquires beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act of a number
of common shares of Commerce which constitutes either (a) more than fifty
percent of the shares which voted in the election of directors of Commerce at
the shareholders' meeting immediately preceding such determination or (b) more
than thirty percent of Commerce's outstanding common shares. For purposes of
this Section 8.1(ii)(b) hereof, unexercised warrants or options or unconverted
nonvoting securities shall count, for this purpose, as constituting beneficial
ownership of Commerce's common shares into which the warrants or options are
exercisable or the nonvoting convertible securities are convertible,
notwithstanding anything to the contrary contained in Rule 13d-3 of the Exchange
Act.
8.2 For purposes of this Agreement, "Good Reason" shall mean (i) a
change in control of Commerce (as defined in Section 8.1 hereof) and within
three years thereafter, without Employee's consent, the nature and scope of
Employee's authority with Commerce or a surviving or acquiring Person are
materially reduced to a level below that which he enjoys on the date hereof, the
duties and responsibilities assigned to Employee are materially inconsistent
with that which he has on the date hereof, the fringe benefits which Commerce
provides Employee on the date hereof or at any time hereafter are materially
reduced, Employee's position or title with Commerce or the surviving or
acquiring Person is reduced from his current position or title with Commerce, or
any relocation or transfer of Commerce's principal executive offices to a
location more than fifty miles from Employee's principal residence on the date
hereof without Employee's consent; (ii) Commerce materially breaches this
Agreement; or (iii) the failure or refusal of any successor to Commerce to
assume all duties and obligations of Commerce under this Agreement.
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9. Confidential Information and Non-Competition.
9.1 Employee covenants and agrees that he will not, during the term of
his employment or at any time thereafter, except with the express prior written
consent of the Board, directly or indirectly disclose, communicate or divulge to
any Person, or use for the benefit of any Person, any knowledge or information
with respect to the conduct or details of Commerce's business which he, acting
reasonably, believes or should believe to be of a confidential nature and the
disclosure of which to not be in Commerce's interest.
9.2 Employee covenants and agrees that he will not, during the term of
his employment hereunder, except with the express prior written consent of the
Board, directly or indirectly, whether as employee, owner, partner, consultant,
agent, director, officer, shareholder or in any other capacity, engage in or
assist any Person to engage in any act or action which he, acting reasonably,
believes or should believe would be harmful or inimical to the interests of
Commerce.
9.3 (A) Employee covenants and agrees that he will not, except with the
express prior written consent of the Board, in any capacity (including, but not
limited to, owner, partner, shareholder, consultant, agent, employee, officer,
director or otherwise), directly or indirectly, for his own account or for the
benefit of any Person, establish, engage or participate in or otherwise be
connected with any commercial banking business which conducts business in any
geographic area in which Commerce and its subsidiaries is then conducting such
business except that the foregoing shall not prohibit Employee from owning as a
shareholder less than 5% of the outstanding voting stock of an issuer whose
stock is publicly traded.
(B) The provisions of Section 9.3(A) shall be applicable commencing
on the date of this Agreement and ending on one of the following periods, as
applicable:
(i) If this Agreement is terminated by Commerce in accordance
with the provisions of Section 1.2 of this Agreement, the effective date of
termination of this Agreement;
(ii) If this Agreement is terminated by Employee in accordance
with the provisions of Section 1.2 of this Agreement, one year following the
effective date of termination of this Agreement;
(iii) If Commerce terminates this Agreement in accordance with
the provisions of Section 5.1 of this Agreement or the Employee voluntarily
terminates his employment hereunder, one year
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following the effective date of termination of this Agreement; or
(iv) If this Agreement is terminated in accordance with the
provisions of either Section 7.1 or 7.2 of this Agreement, one year following
the effective date of termination of this Agreement.
9.4 The parties agree that any breach by Employee of any of the
covenants or agreements contained in this Section 9 will result in irreparable
injury to Commerce for which money damages could not adequately compensate
Commerce and therefore, in the event of any such breach, Commerce shall be
entitled (in addition to any other rights and remedies which it may have at law
or in equity) to have an injunction issued by any competent court enjoining and
restraining Employee and/or any other Person involved therein from continuing
such breach. The existence of any claim or cause of action which Employee may
have against Commerce or any other Person (other than a claim for Commerce's
breach of this Agreement for failure to make payments hereunder) shall not
constitute a defense or bar to the enforcement of such covenants. In the event
of any alleged breach by Employee of any of the covenants or agreements
contained in this Section 9, Commerce shall continue any and all of the payments
due Employee under this Agreement until such time as a Court shall enter a final
and unappealable order finding such a breach; provided, that the foregoing shall
not preclude a Court from ordering Employee to repay such payments made to him
for the period after the breach is determined to have occurred or from ordering
that payments hereunder be permanently terminated in the event of a material and
willful breach.
9.5 If any portion of the covenants or agreements contained in this
Section 9, or the application hereof, is construed to be invalid or
unenforceable, the other portions of such covenant(s) or agreement(s) or the
application thereof shall not be affected and shall be given full force and
effect without regard to the invalid or unenforceable portions to the fullest
extent possible. If any covenant or agreement in this Section 9 is held to be
unenforceable because of the area covered, the duration thereof, or the scope
thereof, then the court making such determination shall have the power to reduce
the area and/or duration and/or limit the scope thereof, and the covenant or
agreement shall then be enforceable in its reduced form.
9.6 For purposes of this Section 9, the term "Commerce" shall include
Commerce, any successor of Commerce under Section 10 hereof, and all present and
future direct and indirect subsidiaries and affiliates
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of Commerce including, but not limited to, CB.
10. Successors and Assigns.
This Agreement shall inure to the benefit of and be binding
upon any corporate or other successor of Commerce which will acquire, directly
or indirectly, by merger, consolidation, purchase, or otherwise, all or
substantially all of the assets of Commerce, and shall otherwise inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
executors, administrators, successors and assigns. Upon the death of Employee,
any payments or benefits otherwise due Employee hereunder shall be paid to or be
for the benefit of Employee's legal representatives. Nothing in the Agreement
shall preclude Commerce from consolidating or merging into or with or
transferring all or substantially all of its assets to another Person. In that
event, such other Person shall assume this Agreement and all obligations of
Commerce hereunder. Upon such a consolidation, merger, or transfer of assets and
assumption, the term "Commerce" as used herein, shall mean such other Person and
this Agreement shall continue in full force and effect.
11. Assignment.
Neither this Agreement nor any rights to receive payments
hereunder shall be voluntarily or involuntarily assigned, transferred,
alienated, encumbered or disposed of, in whole or in part, without Commerce's
prior written consent and approval, and shall not be subject to anticipation,
levy, execution, garnishment, attachment by, or interference or control of, any
creditor.
12. Source of Payment and Timing.
12.1 All payments provided under this Agreement shall be paid in cash
from the general funds of Commerce, no special or separate fund shall be
required to be established and Employee shall have no right, title or interest
whatsoever in or to any investment which Commerce may make to aid Commerce in
meeting its obligations hereunder except to the extent that Commerce shall, in
its sole and absolute discretion, choose to designate any of its rights it may
have under one or more life insurance policies it may obtain to cover any of its
obligations under this Agreement. Nothing contained in this Agreement, and no
action taken pursuant to its provisions, shall create or be construed to create
a trust of any kind or fiduciary relationship between
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Commerce and Employee or any other Person.
12.2 All payments due Employee under Sections 5.1, 6.3, 7.1 or 7.2
hereof shall be made not later than the thirtieth day following the date of
termination of employment.
13. Interest.
In the event any benefits due to Employee are not paid when due
hereunder, Employee shall be entitled (in addition to his other rights and
remedies) to interest on the past due amounts at a rate equal to two percentage
points above the prime rate charged from time to time by CB, such interest to
commence on the date a benefit was due hereunder.
14. Reimbursement of Enforcement Expenses.
If Commerce fails to pay or provide Employee any of the amounts
due him hereunder or fails to provide Employee with any of the other benefits
due him under this Agreement, and provided Commerce does not cure any such
failure within thirty days after having received written notice from Employee of
such failure, Employee shall be entitled to full reimbursement from Commerce for
all costs and expenses (including reasonable attorneys' fees and costs) incurred
by Employee in enforcing his rights under this Agreement.
15. Notices.
All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered by
hand or mailed, certified or registered mail, return receipt requested, with
postage prepaid, to the following addresses or to such other address as either
party may designate by like notice:
A. If to Employee, to:
Xxxxxx X. Xxxxxx
0000 Xxxxxxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
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B. If to Commerce, to
Commerce Bancorp, Inc.
Commerce Atrium
0000 Xxxxx 00 Xxxx
Xxxxxx Xxxx, Xxx Xxxxxx 00000-0000
Attn: Chairman, Personnel Committee, Board of Directors.
and to such other or additional person or persons as either party shall have
designated to the other party in writing by like notice.
16. General provisions.
16.1 This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof, and supersedes and replaces
all prior agreements between the parties. No amendment, waiver or termination of
any of the provisions hereof shall be effective unless in writing and signed by
the party against whom it is sought to be enforced. Any written amendment,
waiver or termination hereof executed by Commerce and Employee (or his legal
representatives) shall be binding upon them and upon all other Persons, without
the necessity of securing the consent of any other Person including, but not
limited to, Employee's wife, and no Person shall be deemed to be a third party
beneficiary under this Agreement except to the extent provided under Section
12.1 hereof.
16.2 CB or any other subsidiary of Commerce may make payments to
Employee hereunder in lieu of payments to be made by Commerce, and to the extent
such payments are so made, Commerce shall be released of its obligations to make
such payments.
16.3 The benefits provided under this Agreement shall be in addition to
and shall not affect the proceeds payable to Employee's beneficiaries under
group life insurance policies which Commerce may be carrying on Employee's life.
16.4 "Person" as used in this Agreement means a natural person, joint
venture, corporation, sole proprietorship, trust, estate, partnership,
cooperative, association, non-profit organization or any other legal entity.
16.5 This Agreement may be executed in one or more counterparts, each
of which shall be
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deemed an original, but all of which taken together shall constitute one and the
same Agreement.
16.6 Except as otherwise expressly set forth herein, no failure on the
part of any party hereto to exercise and no delay in exercising any right, power
or remedy hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
16.7 Commerce and Employee consent to the exclusive jurisdiction of the
courts of the State of New Jersey and the United States District Court for the
District of New Jersey in any and all actions arising hereunder and irrevocably
consent to service of process as set forth in Section 15 hereof.
16.8 The headings of the sections of this Agreement have been inserted
for convenience of reference only and shall in no way restrict or modify any of
the terms or provisions hereof.
16.9 This Agreement shall be governed and construed and the legal
relationships of the parties determined in accordance with the laws of the State
of New Jersey applicable to contracts executed and to be performed solely in the
State of New Jersey.
COMMERCE BANCORP, INC.
(Corporate Seal) By: _____________________________
Attest: _____________________________
XXXXXX X. XXXXXX
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EMPLOYMENT AGREEMENT
AGREEMENT dated as of this 1st day of January, 1998, by and between
COMMERCE BANCORP, INC. ("Commerce"), a New Jersey business corporation, and
XXXXXX X. XXXXXXXX ("Employee").
B A C K G R 0 U N D
Employee is the Executive Vice President of Commerce and Executive Vice
President of Commerce Bank, N.A. ("CB"), a national banking association and a
wholly-owned subsidiary of Commerce. The Board of Directors of Commerce (the
"Board") has determined that the future services of Employee in these capacities
will be of value to Commerce, CB and Commerce's other present and future
subsidiaries and accordingly the Board wishes to have Employee's services
available to Commerce for at least the next three years and to provide
supplemental benefits to Employee should his employment with Commerce terminate
under certain circumstances or should he die or become disabled prior to the
termination of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and intending to be legally bound hereby, the parties agree as
follows:
1. Employment and Term of Employment.
1.1 Commerce offers Employee employment, and Employee hereby accepts
such employment, subject to all the terms and conditions of this Agreement, for
a term of three years beginning on the date hereof, subject, however, to
automatic renewal and extension as set forth below and to Commerce's and
Employee's right to terminate his employment hereunder as set forth herein.
Notwithstanding anything herein provided to the contrary, on each anniversary
date of this Agreement, this Agreement and Employee's employment hereunder shall
automatically be renewed and extended (upon the same terms and conditions) for a
new three year term unless written notice by either party is given pursuant to
Section 1.2 hereof. As used hereinafter "Term" includes the original three year
period as well as any renewed or extended periods as provided for herein.
1.2 Either party may terminate this Agreement on any anniversary date
of this Agreement by giving to the other party written notice thereof at least
thirty days prior to any such anniversary date. As a
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result of the foregoing notice being given to either party hereunder, the Term
will have two years remaining from the applicable anniversary date, subject to
the terms and conditions set forth herein.
2. Services and Duties.
Commerce agrees to employ Employee during the Term as
Executive Vice President of Commerce. Subject to the approval of the CB Board of
Directors, Employee shall during the Term also serve as the Executive Vice
President of CB and, subject to the approval of the respective Boards of
Directors, Employee shall during the Term also serve as an officer and/or
director of such other subsidiaries of Commerce as such Board of Directors, with
the consent of Employee, shall designate. Employee shall have such powers and
duties as may from time to time be prescribed by the respective chief executive
officers and Boards of Directors. Employee agrees to accept such employment, and
to devote his full time and efforts to the business and affairs of Commerce and
its subsidiaries, and to use his best efforts to promote the interests of
Commerce and its subsidiaries.
3. Compensation.
3.1 Commerce shall pay Employee for all services to be rendered by him
hereunder and for all positions held by him during the Term, the following
compensation, payable at regular intervals in accordance with Commerce's normal
payroll practices now or hereafter in effect. During the term of his employment,
Employee shall be paid a "base salary" at the rate of not less than $300,000 per
year, subject to an annual review and subject to such upward adjustments as may
be deemed appropriate by the Board or a designated Committee thereof. For
purposes of this Agreement, a "year" shall be deemed to commence on January 1,
1998, and on January 1 of each calendar year hereafter; compensation for a
portion of a year shall be prorated. The Board or such Committee may recommend
an increase in salary for Employee hereunder, but shall have no obligation to do
so. Base salary once increased by the Board or a Committee thereof may not be
decreased.
3.2 Commerce will, during the term of his employment, reimburse
Employee for all expenses incurred by Employee which Commerce determines to be
reasonable and necessary (in accordance with its normal reimbursement practices
now or hereafter in effect) for Employee to carry out his duties under this
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Agreement.
4. Plans and Fringe Benefits.
4.1 During the term of his employment, Employee shall be entitled to
participate in any bonus programs, incentive compensation plans, stock option
plans or similar benefit or compensation programs now or hereafter in effect
which are generally made available from time to time to executive officers of
Commerce. For any period less than a full year during the Term, Employee shall
receive an amount equal to the pro rated portion of the compensation payable
pursuant to such plan or program.
4.2 During the term of his employment, Employee shall also be entitled
(a) to participate in all fringe benefits as in effect from time to time which
are generally available to Commerce's salaried officers including, without
limitation, medical and hospitalization coverage, life insurance coverage and
disability coverage, and (b) to such other fringe benefits as the Board, or a
Committee thereof, shall deem appropriate provided such benefits are consistent
with those that he currently enjoys including without limitation use of an
automobile and paid holidays and vacations.
5. Termination by Commerce for Cause.
5.1 Commerce shall have the right at any time to terminate Employee's
employment hereunder, for cause, on thirty days' prior written notice to
Employee. For purposes of this Agreement, the term "for cause" shall be deemed
to mean only the following:
(i) If at any time during the Term, Employee is indicted for,
convicted of or enters a plea of guilty or nolo contendere to, a felony, a crime
of falsehood or a crime involving fraud, moral turpitude or dishonesty; or
(ii) If at any time during the Term, Employee willfully
violates any of the covenants or provisions of this Agreement including without
limitation the willful failure of Employee to perform his duties hereunder or
the instructions of the Board after written notice of such instructions (other
than any such failure resulting from Employee's incapacity due to illness or
disability) or Employee engages in any conduct materially harmful to Commerce's
business, and in either case fails to cease such conduct or correct such
conduct, as the case may be, within thirty days subsequent to receiving written
notice from the Board advising
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Employee of same (which conduct shall be specifically set forth in such notice).
If Employee's employment shall terminate for cause, Commerce shall pay
Employee his full base salary through the date of termination at the rate in
effect at the time notice of termination is given and Commerce shall have no
further obligations to Employee under this Agreement other than to pay Employee
such other compensation as may be due Employee pursuant to Sections 4.1 and 4.2
hereof.
6. Disability and Death.
6.1 If Employee becomes permanently disabled during the Term while
employed hereunder, Commerce shall compensate Employee for the balance of the
Term at a rate equal to 70% of his base annual salary at the time he became
permanently disabled. Commerce agrees that it will make the payments due under
this Section 6.1 on the first day of each month, commencing with the first day
of the month following the month in which Employee is deemed to be permanently
disabled, in an amount equal to 1/12 of 70% of Employee's base annual salary at
the time he is deemed to be permanently disabled. Such payments shall be reduced
each month, however, by the amount of any disability payments made to Employee
under any Commerce-sponsored disability insurance plan. The amount of the
reduction under the preceding sentence shall be computed as if Employee had
elected to receive monthly payments of disability benefits (regardless of the
actual payment frequency). If Employee becomes permanently disabled as provided
in this Section 6, he shall nonetheless continue, after becoming so disabled
until the end of the Term, to be entitled to receive at Commerce's expense such
group hospitalization coverage, life insurance coverage and disability coverage
as is generally made available from time to time to executive officers of
Commerce, if and to the extent permitted by the respective insurers of such
coverage. Until such time as Employee is deemed to be permanently disabled,
Employee shall continue to receive his full base salary and other compensation
and fringe benefits due him under Sections 4.1 and 4.2 hereof.
6.2 For purposes of this Agreement, Employee shall be deemed to have
become "permanently disabled" upon his failure to render services of the
character contemplated by this Agreement, because of his physical or mental
illness or other incapacity beyond his control, other than his death, for a
continuous period of 6 months, or for shorter periods aggregating more than 9
months in any 18 consecutive months.
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6.3 If Employee dies during the Term while employed hereunder, then his
employment and his rights to compensation hereunder shall automatically
terminate at the close of the calendar week in which death occurs, and in
addition to his full base salary to the date of termination and any compensation
due him as provided in Section 4.1 hereof, Commerce shall pay to such person as
Employee shall designate in a notice filed with Commerce or, if no such person
shall be designated, to his estate, as a lump sum death benefit, an amount equal
to the product of (A) Employee's average annual base salary in effect during the
twenty-four months immediately preceding his death and (B) two. The foregoing
death benefit shall be in addition to any amount payable under any group life
insurance program maintained by Commerce or any of its subsidiaries.
7. Termination by Commerce without Cause and Termination for Good
Reason. 7.1 If Commerce shall terminate Employee's employment other
than for cause or as provided in
Section 1.2 hereof then:
(i) Commerce shall pay to Employee his full base salary
through the date of termination and any compensation when due him as provided in
Section 4.1 hereof; and
(ii) In lieu of any further salary payments to Employee for a
period subsequent to the date of termination, Commerce shall pay as severance
pay to Employee a lump sum severance payment (the "Severance Payment") equal to
the amount of Employee's base salary which is in effect on the date of
termination and which would have been paid to Employee between the date of
termination and the end of the then Term had Employee continued to be employed
by Commerce to the end of the then Term.
7.2 If Employee shall terminate his employment hereunder for "Good
Reason" (as defined in Section 8.2 hereof) then:
(i) Commerce shall pay to Employee his full base salary
through the date of termination and any compensation when due him as provided in
Section 4.1 hereof; and
(ii) In lieu of any further salary payments to Employee for a
period subsequent to the date of termination, Commerce shall pay as severance
pay to Employee a lump sum severance payment (the "Severance Payment") equal to
four times Employee's average annual base salary in effect during the
twenty-four months immediately preceding such termination.
7.3 Upon termination of Employee's employment as set forth in either
Section 7.1 or 7.2 hereof, Commerce shall promptly determine the aggregate
present value pursuant to Section 280G(d)(4) of the Internal Revenue Code of
1986, as amended (the "Code") of all amounts payable to Employee under this
Agreement, and of all other amounts payable to Employee upon or by reason of his
termination which are determined in good faith by Commerce to be "parachute
payments" (as defined in Section 280G(b)(2) of the Code and the regulations
promulgated thereunder) made pursuant to agreements or plans which are subject
to Section 280G. Commerce's determination of present value and of other amounts
constituting "parachute payments" is binding; provided that if Employee obtains
an opinion of counsel satisfactory to Commerce or an Internal Revenue Service
ruling to the effect that the method of determining present value was improper
or that specified payments did not constitute "parachute payments," calculations
will be made in accordance with such opinion or ruling. In the event the
aggregate present value of all benefits under this Agreement and other
"parachute payments" is equal to or in excess of 300% of Employee's "base
amount" as defined in Section 280G(b)(3)(A) and the regulations thereunder,
Employee waives the right to "parachute payments" sufficient to reduce the
present value of all such payments below 300% of the "base amount." Employee
shall have the right to designate those benefits which shall be waived or
reduced in order to comply with this provision but failing designation by
Employee, Commerce may designate those benefits which may be waived or reduced.
If it is established pursuant to a final determination of a court of competent
jurisdiction or an Internal Revenue Service proceeding that, notwithstanding the
good faith of Employee and Commerce in applying the terms of this Section 7, the
aggregate "parachute payments" paid to or for Employee's benefit are in an
amount that would result in any portion of such "parachute payments" not being
deductible by Commerce or any affiliate by reason of Section 280G of the Code,
then Employee shall have an obligation to pay Commerce upon demand an amount
equal to the sum of (i) the excess of the aggregate "parachute payments" paid to
or for Employee's benefit without any portion of such "parachute payments" not
being deductible by reason of Section 280G of the Code and (ii) interest on the
amount set forth in clause (i) above at the applicable federal rate (as defined
in Section 1274(d) of the Code) from the date of Employee's receipt
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of such excess until the date of such payment.
7.4 In addition to the other compensation set forth in either Section
7.1 or 7.2 hereof, upon termination of Employee's employment as set forth in
either Section 7.1 or 7.2 hereof, Employee shall be entitled to the following
benefits from Commerce:
(i) Following the date of termination, Employee shall be
entitled to participate in all Commerce medical, disability, hospitalization and
life insurance benefits for a period of three years except that should
subsequent employment be accepted during the three year period following the
date of termination, continuation of any medical, disability, hospitalization
and life insurance benefits will be offset by coverages provided through
Employee's subsequent employer.
7.5 Except as provided in this Section 7, nothing herein contained
shall affect or have any bearing on Employee's entitlement to other benefits
under any plan or program providing benefits by reason of termination of
employment.
7.6 Employee shall have the right to terminate his employment hereunder
for "Good Reason" if he shall first give Commerce not less than thirty days
written notice of his intention to so terminate his employment specifying the
reason(s) for such termination and the date of termination, and thereafter
Commerce shall not have cured or remedied the reason(s) for such termination
prior to the date of termination set forth in such notice.
7.7 Anything in this Agreement to the contrary notwithstanding,
Employee shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment.
8. Change in Control and Good Reason.
8.1 For purposes of this Agreement, a "change of control" of Commerce
shall mean a change in control of Commerce or CB of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as enacted and enforced on the date hereof, whether or not
Commerce or CB is subject to such reporting requirement; provided that without
limitation such a change in control shall have been deemed to conclusively occur
when any of the following events shall have occurred without Employee's prior
written
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consent:
(i) within any period of two consecutive years during the
Term, a change in at least a majority of the members of the Board or the
addition of five or more new members to the Board unless such change or addition
occurs with the affirmative vote in writing of Employee in his capacity as a
director or a shareholder; or
(ii) a Person or group acting in concert as described in
Section 13(d)(2) of the Exchange Act holds or acquires beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act of a number
of common shares of Commerce which constitutes either (a) more than fifty
percent of the shares which voted in the election of directors of Commerce at
the shareholders' meeting immediately preceding such determination or (b) more
than thirty percent of Commerce's outstanding common shares. For purposes of
this Section 8.1(ii)(b) hereof, unexercised warrants or options or unconverted
nonvoting securities shall count, for this purpose, as constituting beneficial
ownership of Commerce's common shares into which the warrants or options are
exercisable or the nonvoting convertible securities are convertible,
notwithstanding anything to the contrary contained in Rule 13d-3 of the Exchange
Act.
8.2 For purposes of this Agreement, "Good Reason" shall mean (i) a
change in control of Commerce (as defined in Section 8.1 hereof) and within
three years thereafter, without Employee's consent, the nature and scope of
Employee's authority with Commerce or a surviving or acquiring Person are
materially reduced to a level below that which he enjoys on the date hereof, the
duties and responsibilities assigned to Employee are materially inconsistent
with that which he has on the date hereof, the fringe benefits which Commerce
provides Employee on the date hereof or at any time hereafter are materially
reduced, Employee's position or title with Commerce or the surviving or
acquiring Person is reduced from his current position or title with Commerce, or
any relocation or transfer of Commerce's principal executive offices to a
location more than fifty miles from Employee's principal residence on the date
hereof without Employee's consent; (ii) Commerce materially breaches this
Agreement; or (iii) the failure or refusal of any successor to Commerce to
assume all duties and obligations of Commerce under this Agreement.
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9. Confidential Information and Non-Competition.
9.1 Employee covenants and agrees that he will not, during the term of
his employment or at any time thereafter, except with the express prior written
consent of the Board, directly or indirectly disclose, communicate or divulge to
any Person, or use for the benefit of any Person, any knowledge or information
with respect to the conduct or details of Commerce's business which he, acting
reasonably, believes or should believe to be of a confidential nature and the
disclosure of which to not be in Commerce's interest.
9.2 Employee covenants and agrees that he will not, during the term of
his employment hereunder, except with the express prior written consent of the
Board, directly or indirectly, whether as employee, owner, partner, consultant,
agent, director, officer, shareholder or in any other capacity, engage in or
assist any Person to engage in any act or action which he, acting reasonably,
believes or should believe would be harmful or inimical to the interests of
Commerce.
9.3 (A) Employee covenants and agrees that he will not, except with the
express prior written consent of the Board, in any capacity (including, but not
limited to, owner, partner, shareholder, consultant, agent, employee, officer,
director or otherwise), directly or indirectly, for his own account or for the
benefit of any Person, establish, engage or participate in or otherwise be
connected with any commercial banking business which conducts business in any
geographic area in which Commerce and its subsidiaries is then conducting such
business except that the foregoing shall not prohibit Employee from owning as a
shareholder less than 5% of the outstanding voting stock of an issuer whose
stock is publicly traded.
(B) The provisions of Section 9.3(A) shall be applicable
commencing on the date of this Agreement and ending on one of the following
periods, as applicable:
(i) If this Agreement is terminated by Commerce in
accordance with the provisions of Section 1.2 of this Agreement, the effective
date of termination of this Agreement;
(ii) If this Agreement is terminated by Employee in
accordance with the provisions of Section 1.2 of this Agreement, one year
following the effective date of termination of this Agreement;
(iii) If Commerce terminates this Agreement in
accordance with the provisions of Section 5.1 of this Agreement or the Employee
voluntarily terminates his employment hereunder, one year
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following the effective date of termination of this Agreement; or
(iv) If this Agreement is terminated in accordance
with the provisions of either Section 7.1 or 7.2 of this Agreement, one year
following the effective date of termination of this Agreement.
9.4 The parties agree that any breach by Employee of any of the
covenants or agreements contained in this Section 9 will result in irreparable
injury to Commerce for which money damages could not adequately compensate
Commerce and therefore, in the event of any such breach, Commerce shall be
entitled (in addition to any other rights and remedies which it may have at law
or in equity) to have an injunction issued by any competent court enjoining and
restraining Employee and/or any other Person involved therein from continuing
such breach. The existence of any claim or cause of action which Employee may
have against Commerce or any other Person (other than a claim for Commerce's
breach of this Agreement for failure to make payments hereunder) shall not
constitute a defense or bar to the enforcement of such covenants. In the event
of any alleged breach by Employee of any of the covenants or agreements
contained in this Section 9, Commerce shall continue any and all of the payments
due Employee under this Agreement until such time as a Court shall enter a final
and unappealable order finding such a breach; provided, that the foregoing shall
not preclude a Court from ordering Employee to repay such payments made to him
for the period after the breach is determined to have occurred or from ordering
that payments hereunder be permanently terminated in the event of a material and
willful breach.
9.5 If any portion of the covenants or agreements contained in this
Section 9, or the application hereof, is construed to be invalid or
unenforceable, the other portions of such covenant(s) or agreement(s) or the
application thereof shall not be affected and shall be given full force and
effect without regard to the invalid or unenforceable portions to the fullest
extent possible. If any covenant or agreement in this Section 9 is held to be
unenforceable because of the area covered, the duration thereof, or the scope
thereof, then the court making such determination shall have the power to reduce
the area and/or duration and/or limit the scope thereof, and the covenant or
agreement shall then be enforceable in its reduced form.
9.6 For purposes of this Section 9, the term "Commerce" shall include
Commerce, any successor of Commerce under Section 10 hereof, and all present and
future direct and indirect subsidiaries and affiliates of Commerce including,
but not limited to, CB.
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10. Successors and Assigns.
This Agreement shall inure to the benefit of and be binding
upon any corporate or other successor of Commerce which will acquire, directly
or indirectly, by merger, consolidation, purchase, or otherwise, all or
substantially all of the assets of Commerce, and shall otherwise inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
executors, administrators, successors and assigns. Upon the death of Employee,
any payments or benefits otherwise due Employee hereunder shall be paid to or be
for the benefit of Employee's legal representatives. Nothing in the Agreement
shall preclude Commerce from consolidating or merging into or with or
transferring all or substantially all of its assets to another Person. In that
event, such other Person shall assume this Agreement and all obligations of
Commerce hereunder. Upon such a consolidation, merger, or transfer of assets and
assumption, the term "Commerce" as used herein, shall mean such other Person and
this Agreement shall continue in full force and effect.
11. Assignment.
Neither this Agreement nor any rights to receive payments
hereunder shall be voluntarily or involuntarily assigned, transferred,
alienated, encumbered or disposed of, in whole or in part, without Commerce's
prior written consent and approval, and shall not be subject to anticipation,
levy, execution, garnishment, attachment by, or interference or control of, any
creditor.
12. Source of Payment and Timing.
12.1 All payments provided under this Agreement shall be paid in cash
from the general funds of Commerce, no special or separate fund shall be
required to be established and Employee shall have no right, title or interest
whatsoever in or to any investment which Commerce may make to aid Commerce in
meeting its obligations hereunder except to the extent that Commerce shall, in
its sole and absolute discretion, choose to designate any of its rights it may
have under one or more life insurance policies it may obtain to cover any of its
obligations under this Agreement. Nothing contained in this Agreement, and no
action taken pursuant to its provisions, shall create or be construed to create
a trust of any kind or fiduciary relationship between Commerce and Employee or
any other Person.
12.2 All payments due Employee under Sections 5.1, 6.3, 7.1 or 7.2
hereof shall be made not later
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than the thirtieth day following the date of termination of employment.
13. Interest.
In the event any benefits due to Employee are not paid when
due hereunder, Employee shall be entitled (in addition to his other rights and
remedies) to interest on the past due amounts at a rate equal to two percentage
points above the prime rate charged from time to time by CB, such interest to
commence on the date a benefit was due hereunder.
14. Reimbursement of Enforcement Expenses.
If Commerce fails to pay or provide Employee any of the
amounts due him hereunder or fails to provide Employee with any of the other
benefits due him under this Agreement, and provided Commerce does not cure any
such failure within thirty days after having received written notice from
Employee of such failure, Employee shall be entitled to full reimbursement from
Commerce for all costs and expenses (including reasonable attorneys' fees and
costs) incurred by Employee in enforcing his rights under this Agreement.
15. Notices.
All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed, certified or registered mail, return receipt
requested, with postage prepaid, to the following addresses or to such other
address as either party may designate by like notice:
A. If to Employee, to:
Xxxxxx X. XxXxxxxx
00 Xxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
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B. If to Commerce, to
Commerce Bancorp, Inc.
Commerce Atrium
0000 Xxxxx 00 Xxxx
Xxxxxx Xxxx, Xxx Xxxxxx 00000-0000
Attn: Chairman, Personnel Committee, Board of Directors.
and to such other or additional person or persons as either party shall have
designated to the other party in writing by like notice.
16. General provisions.
16.1 This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof, and supersedes and replaces
all prior agreements between the parties. No amendment, waiver or termination of
any of the provisions hereof shall be effective unless in writing and signed by
the party against whom it is sought to be enforced. Any written amendment,
waiver or termination hereof executed by Commerce and Employee (or his legal
representatives) shall be binding upon them and upon all other Persons, without
the necessity of securing the consent of any other Person including, but not
limited to, Employee's wife, and no Person shall be deemed to be a third party
beneficiary under this Agreement except to the extent provided under Section
12.1 hereof.
16.2 CB or any other subsidiary of Commerce may make payments to
Employee hereunder in lieu of payments to be made by Commerce, and to the extent
such payments are so made, Commerce shall be released of its obligations to make
such payments.
16.3 The benefits provided under this Agreement shall be in addition to
and shall not affect the proceeds payable to Employee's beneficiaries under
group life insurance policies which Commerce may be carrying on Employee's life.
16.4 "Person" as used in this Agreement means a natural person, joint
venture, corporation, sole proprietorship, trust, estate, partnership,
cooperative, association, non-profit organization or any other legal entity.
16.5 This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which taken together shall
constitute one and the same Agreement.
16.6 Except as otherwise expressly set forth herein, no failure on the
part of any party hereto to exercise and no delay in exercising any right, power
or remedy hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
16.7 Commerce and Employee consent to the exclusive jurisdiction of the
courts of the State of
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New Jersey and the United States District Court for the District of New Jersey
in any and all actions arising hereunder and irrevocably consent to service of
process as set forth in Section 15 hereof.
16.8 The headings of the sections of this Agreement have been inserted
for convenience of reference only and shall in no way restrict or modify any of
the terms or provisions hereof.
16.9 This Agreement shall be governed and construed and the legal
relationships of the parties determined in accordance with the laws of the State
of New Jersey applicable to contracts executed and to be performed solely in the
State of New Jersey.
COMMERCE BANCORP, INC.
(Corporate Seal) By: _____________________________
Attest: _____________________________
XXXXXX X. XXXXXXXX
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