EMPLOYMENT TERMINATION AGREEMENT
EXHIBIT
10.1
THIS
EMPLOYMENT TERMINATION AGREEMENT,
is
entered into this 7th
day of
December, 2006, (this “Termination
Agreement”)
by and
between The
Centreville National Bank of Maryland
(the
“Bank”)
and
Shore
Bancshares, Inc.
(“SHBI”,
and
with the Bank, collectively, the “Companies”)
and
Xxxxxx
X. Xxxxxx
(the
“Employee”).
WHEREAS,
the
Companies and Employee entered into a “Form of Employment Agreement”, dated
November 30, 2000 (the “Employment
Agreement”);
and
WHEREAS,
Employee has announced his intention to retire on or before the expiration
of
the current term of the Employment Agreement, i.e. November 30, 2010; and
WHEREAS,
the
Companies and Employee agree that it would be in their mutual best interests
to
terminate the employment relationship in a manner which provides for an orderly
transition period recognizing that Employee, with more than 37 years of service,
has been an integral part of the Bank; and
WHEREAS,
the
parties hereto desire by writing to set forth their agreement to terminate
the
employment relationship upon the terms and conditions hereinafter
provided.
NOW,
THEREFORE,
in
consideration of the mutual promises and covenants set forth herein, the
receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree
as
follows:
1. Resignation
- Employee
hereby resigns/retires effective January 1, 2007, as the Executive Vice
President of SHBI, as a Director of SHBI, and as the President and Chief
Executive Officer of the Bank. Employee will retain his position as a Director
of the Bank and assist in the transition, as hereinafter provided, to ensure
that his successor(s) are positioned to best serve the Companies. The parties
acknowledge that such resignation/retirement is intended to constitute a
“separation from service” within the meaning of Section 409A(a)(2)(A)(i) of the
Internal Revenue Code of 1986, as amended (the “Code”), and any related
regulations or other guidance promulgated with respect to Section 409A of
the
Code (and any successor section or regulations).
2. Transition
Services
-
Commencing on the execution day of this Termination Agreement, the parties
will
begin a transition period wherein a mutually agreed upon public announcement
will be made regarding Employee’s resignation; provided, however, that the
foregoing sentence shall not restrict the content or timing of any disclosure
required by law. It is the intention of the parties to ensure that customer
and
employee relationships are transitioned smoothly to Employee’s successor(s).
Employee
will provide up to a total of twenty (20) hours per month of administrative
and/or operational support, for a period of five (5) months following the
date
of his resignation, as and if requested by Companies. Thereafter, and continuing
until December
31,
2008,
Employee will provide up to a total of ten (10) hours per month of
administrative and/or operational support, as and if requested by Companies.
Employee has purchased a home in Delaware. Accordingly, unless impractical,
Employees support services may be provided via telephone, e-mail and/or in
person, as Employee may elect.
3. Employee
Severance Benefits
-
Employee will receive severance benefits, as follows:
a. Employee
will receive his current salary and all employee benefits attributable to
the
positions held by him through December 31, 2006.
b. Accounting
from January 1, 2007 and ending on December 31, 2008, the Companies agree
to pay
Employee his current annual salary of $205,000, payable not less frequently
than
twice monthly, through the Bank’s normal payroll processing procedures, with all
appropriate statutory withholding, including FICA (matched by Bank), to be
reported as wages.
c. Beginning
January 1, 2007:
i.
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Employee
shall not be eligible to make additional salary deferrals in the
Companies’ 401(k) Plan. Any matching funds due for the year ended December
31, 2006 will, however, be paid.
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ii.
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Employee
shall not be eligible to participate in additional discretionary
contributions made to the Companies’ Profit Sharing Plan. Any
contributions made for the year ended December 31, 2006 will be
paid on
behalf of Employee as if he were still
employed
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iii.
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Except
for Cobra coverage available at Employee’s expense, employer paid health
insurance benefits shall cease.
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d. Employee
is 100% vested in, and shall be entitled to receive, all current benefits
and balances in the Companies 401(k) Plan and Profit Sharing
Plan.
e. Notwithstanding
any provision of this Agreement to the contrary, if the Employee is deemed
to be
a “key employee” (as defined in Section 416(i) of the Code (applied in
accordance with Section 416 regulations and disregarding Section 416(i)(5)
of
the Code)) at any time during the 12-month period ending on December 31,
2006,
no distribution of any severance benefits under Section 3(c) or any other
benefit contemplated by this Agreement that constitutes non-qualified deferred
compensation within the meaning of Section 409A of the Code may be made to
the
Employee on account of his separation from service prior to July 1, 2007
(i.e.,
the sixth month following separation from service) or, if earlier, the date
of
the Employee’s death. Any payments delayed pursuant to this paragraph will be
accumulated and paid during July 2007 (i.e., the seventh month following
the
month in which the separation occurred).
4. Employee
Retirement and Death Benefits
-
Employee and/or his beneficiary will receive the benefits specified in the
following:
a. “Life
Insurance Endorsement Method Split Dollar Plan Agreement”,
dated
April 1, 1997, by and between the Bank and Employee. This agreement governs
distributions of Massachusetts Mutual Life Insurance Policy Number 6197329.
The
anticipated benefit is more particularly shown on the “Participant Plan Summary
- Director” attached hereto as a part hereof marked “Exhibit A”.
b. “Director
Indexed Fee Continuation Plan Agreement”,
dated
June 23, 1998, by and between Bank and Employee. For purposes of interpreting
this agreement, Employee shall be deemed to have taken an “Early Retirement” as
defined by Subparagraph I D. The anticipated benefit is more particularly
shown
on the “Participant Plan Summary - Director” attached hereto as a part hereof
marked “Exhibit A”.
c. “Executive
Supplement Retirement Plan Agreement”,
dated
January 1, 1999, by and between Bank and Employee, as amended by the “Amendment
to the Executive Supplemental Retirement Plan Agreement dated January 1,
1999
and the Life Insurance Endorsement Method Split Dollar Agreement dated January
1, 1999.” For the purpose of interpreting these agreements, Employee’s service
shall be deemed to have terminated pursuant to the provisions of Subparagraph
III C of the amendment. The anticipated benefit is more particularly shown
on
the “Participant Plan Summary - Executive” attached hereto as a part hereof
marked “Exhibit B”.
d. “Life
Insurance Endorsement Method Split Dollar Plan Agreement”,
dated
January 1, 1999, by and between the Bank and Employee, as amended by the
“Amendment to the Executive Supplemental Retirement Plan Agreement dated January
1, 1999 and the Life Insurance Endorsement Method Split Dollar Agreement
dated
January 1, 1999.” This agreement governs distributions of Connecticut Mutual
Life Insurance Company Policy Number 6,129,921. For the purpose of interpreting
these agreements, the division of death benefits shall be governed by the
provisions of Subparagraphs VI (A), (B) and (C) of the amendment. Bank shall
continue to pay the premiums pursuant to Paragraph IV and Employee shall
continue to be obligated for the taxable benefit pursuant to Paragraph V
of the
agreements. The anticipated benefit is more particularly shown on the
“Participant Plan Summary - Executive” attached hereto as a part hereof marked
“Exhibit B”.
e. The
parties hereby acknowledge that the agreements identified under Subparagraphs
4
b, c, and d above each provide that “… no sale, merger or consolidation of the
Bank shall take place unless the new or surviving entity expressly acknowledges
the obligations under this Agreement and agrees to abide by its
terms.”
f. Companies
acknowledge the validity and recognize the anticipated benefits of the
agreements identified under Subparagraphs 4 a, b, c, and d above (the “Employee
Retirement and Death Benefits”). The Companies shall not directly or indirectly
take any action that would reduce or eliminate the Employee Retirement and
Death
Benefits.
5. Non-Compete
Provision
-
Employee shall not be a director, officer, or employee of, or consultant
to, any
federal or state financial institution operating in Queen Anne’s, Kent,
Caroline, Talbot, Dorchester or Xxxx Arundel Counties in the State of Maryland,
or Kent County, Delaware, other than the Companies or their subsidiaries
or
affiliates. Such non- compete covenant shall terminate and be of no further
force and effect three (3) years from the date of this Agreement.
6. Miscellaneous
a. Binding
Effect; Benefit.
This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective heirs, personal representatives, trustees, guardians,
successors and assigns. Nothing in this Agreement, expressed or implied,
is
intended to confer upon any other person any rights, remedies, obligations
or
liabilities.
b. Entire
Agreement.
This
Agreement (together with the other agreements referred to herein and the
Exhibits attached hereto) constitutes the full, entire and integrated agreement
between the parties hereto with respect to the subject matter hereof, and
supersedes all prior negotiations, correspondence and understandings between
the
parties hereto respecting the subject matter hereof.
c. Severability.
Any
provision of this Agreement which is held by a court of competent jurisdiction
to be prohibited or unenforceable shall be ineffective only to the extent
of
such prohibition or unenforceability, without invalidating or rendering
unenforceable the remaining provisions of this Agreement.
d. Amendments;
Waiver.
No
provision of this Agreement may be amended, waived or otherwise modified
without
the prior written consent of the parties; provided, however, that the Companies
may amend this Agreement without the consent of the Employee as the Employer
deems necessary or appropriate to ensure compliance with any law, rule,
regulation or other regulatory pronouncement applicable to the Agreement,
including, without limitation, Section 409A of the Code and any related
regulations or other guidance promulgated with respect to Section 409A of
the
Code.
e. Counterparts.
This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed to be an original and all of which together shall be deemed to be
one and
the same instrument.
f. Applicable
Law.
This
Agreement was made in the State of Maryland and shall be governed by, construed,
interpreted and enforced in accordance with the laws of the State of Maryland.
g. Further
Assurances.
The
parties agree to execute, acknowledge, seal and deliver after the date hereof
and without additional consideration such further assurances, instruments
and
documents and take such further actions, as the other party may reasonably
request in order to fulfill the intent of this Agreement and the transactions
contemplated hereby.
h. Facsimile
Signatures.
The
parties acknowledge that photocopies of this Agreement which have been executed
by the parties hereto or their respective agents shall be binding upon the
parties as if such photocopies were originals regardless of whether such
photocopies of the Agreement have been delivered by personal service, regular
mail, facsimile transmission or otherwise. Upon request from any party hereto,
all other parties agree to execute an original Agreement upon presentation
thereof if such Agreement has previously been executed and delivered in
photocopy form by personal delivery, facsimile transmission, regular mail
or
otherwise.
IN
WITNESS WHEREOF,
the
parties set their hands and seals as of the date first above
written.
ATTEST:
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The
Centreville National Bank of Maryland
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/s/
Xxxxx X. Xxxxxx
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/s/
Xxxx X. Freestate
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Chairman
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ATTEST:
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Shore
Bancshares, Inc.
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/s/
Xxxxx X. Xxxxxx
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/s/
Xxxxxxxxxxx X. Xxxxxx
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Chairman
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ATTEST:
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Shore
Bancshares, Inc.
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/s/
Xxxxx X. Xxxxxx
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/s/
X. Xxxxxxxx Xxxxxxxx
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Chief
Executive Officer
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“COMPANIES”
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/s/
Xxxxxxx X. Xxxxxxxx
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/s/
Xxxxxx X. Xxxxxx
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Xxxxxx
X. Xxxxxx
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“EMPLOYEE”
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