CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is made this 14th day of April,
1998, by and between J. MORGAN DAVIS (the "Consultant"); and CENIT BANCORP,
INC., a Delaware corporation (the "Company"), CENIT BANK, FSB, a federal savings
bank (the "Savings Bank"), and CENIT BANK, a Virginia state chartered commercial
bank (the "Bank").
W I T N E S S E T H:
WHEREAS, the Consultant has heretofore served as a Director of and as
President and Chief Executive Officer of the Bank, and as a Director of the
Company, which is the sole stockholder of the Bank; and
WHEREAS, in such capacities the Consultant has become familiar with all
aspects of and information about (i) the business strategy and business plans of
the Bank, the Company, and the Savings Bank, the other wholly owned subsidiary
of the Company (the Bank, the Company, and the Savings Bank being sometimes
hereinafter referred to together as "CENIT"), (ii) the borrowers, depositors,
and other customers of CENIT, (iii) the marketing, loan pricing, and deposit
rate strategies of CENIT, and (iv) other similar confidential and proprietary
information concerning the business and affairs of CENIT (all such confidential
and proprietary information about the business and affairs of CENIT being
referred to herein as the "CENIT Confidential Information"); and
WHEREAS, by mutual agreement among the Consultant, the Bank, and the
Company, the Consultant has decided to resign as a director and officer of the
Bank and the Company and any subsidiaries of the Bank and the Company, and CENIT
has decided to retain the services of the Consultant as a consultant to CENIT on
and subject to terms and conditions set forth herein; and
WHEREAS, in consideration of the provision of such consulting services and
the release of all claims by the Consultant pursuant to a separate agreement
(the "Release"), of even date herewith, all as set forth herein, CENIT has
agreed to pay the Consultant the compensation described below.
NOW, THEREFORE, in consideration of the mutual promises set forth herein,
the compensation to be paid to the Consultant hereunder, and other good and
valuable consideration, the adequacy and receipt of which is hereby
acknowledged, the Consultant and CENIT hereby agree as follows:
1. Resignation as Director and Officer. Effective as of the date of this
Agreement, the Consultant has resigned as a director and officer of the
Bank, as a director of the Company, and as a director and officer of any
subsidiaries of either the Bank or the Company, and any ventures in which
either the Bank or the Company or any of their respective subsidiaries are
involved. The Consultant has submitted letters of resignation, in the form
attached hereto as EXHIBIT A-1 and
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EXHIBIT A-2, to the Board of Directors of the Bank and the Company, and the
Consultant hereby agrees to execute such additional instruments,
agreements, documents, and certificates as either the Bank or the Company
may reasonably request in connection with such resignations by the
Consultant.
2. Termination of Employment Agreement. The Consultant and the Bank are
parties to that certain Employment Agreement (the "Employment Agreement")
dated as of January 30, 1995. The Consultant and the Bank mutually agree
that the Employment Agreement is hereby terminated in all respects,
effective as of the date hereof, and that the respective rights, duties,
and obligations of the Consultant and CENIT shall be as set forth in this
Agreement, the exhibits hereto, the Release, and a separate agreement (the
"Non-Competition and Non-Disclosure Agreement"), of even date herewith. In
connection with the termination of the Employment Agreement, the Consultant
has returned to CENIT all keys to corporate offices, all corporate security
codes, all corporate access devices, if any, all corporate credit cards, if
any, and all corporate equipment documents, reports, minutes, files,
computer records, and correspondence (including all copies thereof). The
Consultant agrees to execute all such instruments, agreements, and
documents as the Bank may reasonably request in connection with the
termination of the Consultant's position with the Bank under the Employment
Agreement. The Bank acknowledges and agrees that, for the limited purposes
contemplated by this Agreement, the Consultant shall remain an employee of
the Bank at the current level of base compensation and with the same
benefits as presently in effect through May 1, 1998, and the Bank shall pay
such compensation and provide such benefits to the Consultant through such
date in accordance with the Bank's standard policies. The Consultant
acknowledges and agrees that effective May 2, 1998, the Consultant will no
longer be an employee of or employed by the Bank. The Bank further
acknowledges and agrees that the Consultant shall have the right after May
1, 1998, as provided under COBRA, to purchase health insurance coverage, at
the Consultant's cost and expense, under the Bank's health insurance plan
as in effect from time to time.
3. Term. Unless earlier terminated pursuant to the provisions set forth in
this Agreement, the term of this Agreement shall be twenty-five (25) months
commencing as of the date of this Agreement and ending May 1, 2000. This
Agreement shall not be subject to extension or renewal unless mutually
agreed by the Consultant and the Bank by the execution of a written
amendment hereto.
4. Duties of the Consultant.
A. At the request of retail account or consumer lending officers or
commercial or real estate lending officers of the Bank, the Consultant
shall meet with existing and prospective customers of CENIT, together
with one or more of the Bank's retail account or consumer lending
officers or commercial or real estate lending officers, in order to
encourage existing and prospective customers to continue to do or to
commence doing business with CENIT and to refer other prospective
customers to CENIT. The Consultant will not, either directly or
indirectly, discourage, or attempt to discourage, any existing or
prospective customer of CENIT from doing business with
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CENIT or encourage, or attempt to encourage, any existing or
prospective customer of CENIT to obtain financial services from any
competitor of CENIT. The Consultant shall, at all times, use his best
efforts to present a positive image for CENIT and to encourage all
existing and prospective customers to continue to do business with
CENIT and to expand the range of financial services that such
customers procure from CENIT.
B. The Consultant shall have no authority to enter into binding
agreements or commitments on behalf of CENIT and shall not represent
to any existing or prospective customer of CENIT that the Consultant
has any such authority. The Consultant shall refer any questions
concerning the willingness of CENIT to enter into a binding agreement
or commitment with any existing or prospective customer of CENIT to
senior management of CENIT.
C. Without in any way limiting or qualifying the duties and obligations
of the Consultant under the Non-Competition and Non-Disclosure
Agreement, the Consultant shall not initiate or participate, either
directly or indirectly, in any communications of any kind with any
financial analyst, underwriter, investment advisor, broker, investor,
shareholder or any other person concerning the financial condition or
performance of the Company, any actual or proposed shareholder
proposals or resolutions (whether binding or non-binding) or any
mergers or acquisitions plans or activities of the Company nor shall
the Consultant disclose any information about any such plans or
activities or speculate about the intentions of the Company in this
regard with any such person. In the event that the Consultant receives
any inquiries or other communications from any financial analyst,
underwriter, investment advisor, broker, investor, shareholder or any
other person concerning the financial condition or performance of the
Company, any actual or proposed shareholder proposals or resolutions,
or any mergers or acquisitions plans or activities of the Company, the
Consultant shall immediately refer such person to the President and
Chief Executive Officer of the Company and shall inform the President
and Chief Executive Officer of the Company of each such inquiry or
other communication so received.
D. The Consultant shall support management of CENIT and shall not make
any statements, whether public or private, or whether direct or
indirect, that are in any way critical or disparaging of the business
and affairs of CENIT. Without limiting the generality of the
foregoing, the Consultant shall support and vote, or cause to be
voted, all shares of common stock of the Company, whether now owned or
hereafter acquired, and whether owned directly or beneficially, by the
Consultant (the "Consultant's Shares") in favor of all matters
supported by the Board of Directors of the Company and with respect to
which the Board of Directors of the Company recommends that the
shareholders of the Company vote in favor. The Consultant acknowledges
and agrees that such matters shall include any proxy contests in which
the Company may become engaged including, without limitation, the
proxy contest in which the Company is presently involved, any
shareholder proposals or resolutions, any mergers or acquisition
transactions involving other community financial institutions in the
Company's market area, and any strategic alliances that the Company
may decide to pursue. Not less than ten (10) days before the date of
the annual meeting of shareholders of the Company and any other date
set for a vote of the shareholders at any regular
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or special meeting of the shareholders of the Company, the Consultant
shall deliver to the Company his completed, properly executed proxy
voting the Consultant's Shares in favor of all matters supported by
the Board of Directors of the Company and with respect to which the
Board of Directors recommends that the shareholders vote in favor. The
Consultant further agrees to take all appropriate action necessary to
cause any shares held by the Company's employee stock ownership plan
(the "CENIT ESOP") for the benefit of the Consultant to be voted in
favor of all matters supported by the Board of Directors of the
Company and with respect to which the Board of Directors recommends
that the shareholders vote in favor. For purposes of this Agreement,
the Consultant's Shares shall include all such shares in the CENIT
ESOP held for the benefit of the Consultant. In providing such support
of management and all matters supported by the Board of Directors,
however, the Consultant shall not be required to participate directly
in proxy solicitation efforts of the Company, although the Consultant
agrees to refer any financial analyst, underwriter, investment
advisor, broker, investor, shareholder or any other person requesting
information about any matter coming before the shareholders for a vote
to the President and Chief Executive Officer of the Company.
E. In order to secure the performance of the obligation of the Consultant
to vote the Consultant's Shares in favor of any matter with respect to
which the Board of Directors of the Company recommends that the
shareholders of the Company vote in favor, the Consultant shall
execute an irrevocable proxy and power of attorney, in the form
attached to this Agreement as EXHIBIT B, naming the Company, acting
though its President and Chief Executive Officer, and its Senior Vice
President and Chief Financial Officer, as the Consultant's proxy and
attorney in fact, with full power of substitution, to vote the
Consultant's Shares in favor of all matters for which the Board of
Directors of the Company recommends that the shareholders of the
Company vote in favor. The Consultant affirmatively acknowledges and
agrees that such proxy shall be irrevocable and the power granted
thereby shall be deemed to be coupled with an interest for as long as
this Agreement remains in effect or the Consultant has any duties or
obligations to the Bank.
5. Compensation.
A. In consideration of the consulting services to be provided by the
Consultant pursuant to the provisions of this Agreement, the Bank
shall pay to the Consultant during the term of this Agreement,
effective May 2, 1998, if the Consultant is not then in default under
this Agreement, compensation equal to $1,000 per month. All such
payments shall be payable in monthly, semimonthly or bi-weekly
installments in conformity with the Bank's personnel policy relating
to salaried employees and with all appropriate federal, state, and
local withholding and other deductions in accordance with such
policies. In the event of the death of the Consultant during the term
of this Agreement, and if the Consultant is not then in default under
this Agreement, the Bank shall continue to pay such amount to the
executor, administrator or legal representative of the Consultant for
the benefit of the Consultant's estate for a period of six (6) months
following the date of death. The Consultant acknowledges and agrees
that the payment by the Bank of the amount of $1,000 per month to the
Consultant shall be the total compensation payable by the Bank for the
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consulting services to be provided under this Agreement and that the
Bank shall have no duty or obligation to provide any other
compensation or benefits of any kind to the Consultant.
B. In addition to the compensation payable by the Bank to the Consultant
under Paragraph 5.A. above, the Bank shall also transfer, or cause to
be transferred, to the Consultant the title to the automobile most
recently used by the Consultant in connection with the Bank's
business. From and after the date of this Agreement, the Consultant
shall be responsible for all costs and expenses incurred by the
Consultant in connection with the ownership, operation, and
maintenance of this automobile.
C. In connection with consulting services provided by the Consultant to
the Bank at the request of the Bank, if the Consultant is asked to
incur any expenses in connection with the provision of such consulting
services, the Bank will reimburse the Consultant for reasonable costs
and expenses directly incurred by the Consultant in providing any such
consulting services.
D. The Consultant shall continue to be entitled to exercise any stock
options for the purchase of shares of common stock of the Company
heretofore granted to the Consultant in accordance with the terms and
conditions of the grant pursuant to which such stock options were made
and the terms and conditions of the CENIT Stock Option Plan (the
"Option Plan"). The Consultant acknowledges and agrees that the
Consultant shall not be entitled to the award of any additional stock
options under the Option Plan or shares under the CENIT Management
Recognition Plan and Trust (the "MRP") and that the Consultant must
exercise any existing exercisable stock options held by the Consultant
before August 1, 1998, in accordance with the provisions of the Option
Plan. The shares of restricted stock previously awarded to the
Consultant under the MRP shall be forfeited to the Company upon the
date of execution of this Agreement because such shares are not fully
vested in the Consultant in accordance with the provisions of the
award of such shares and the MRP.
E. In the event of the default by the Consultant and the termination of
this Agreement as a consequence of such default, the termination shall
be treated as a termination "for cause" for purposes of the Option
Plan, and the right of the Consultant to exercise any stock options
held by the Consultant and not theretofore exercised shall be
extinguished. After the Consultant's service to CENIT is terminated
under this Agreement, the Consultant shall be entitled to
distributions of the benefits to which he is entitled under the CENIT
ESOP and the CENIT 401(k) Plan, which distributions shall be made in
accordance with and subject to the terms of these plans.
F. The compensation to be paid to the Consultant under this Agreement is
the exclusive compensation to be paid by the Bank for the consulting
services, and all rights to compensation, benefits, stock options, and
restricted stock, whether current or deferred, payable to the
Consultant under or in connection with the Employment Agreement are
hereby extinguished.
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G. The compensation to be paid to the Consultant under this Agreement is
expressly conditioned upon the full and faithful performance by the
Consultant of each of the duties and obligations of the Consultant
under this Agreement.
H. The Company and the Bank may withhold from any compensation and
benefits payable under this Agreement all federal and state or other
taxes as shall be required pursuant to any law or governmental
regulation or ruling.
I. Notwithstanding the other provisions of this Paragraph 5, at any time
after April 1, 1999, the Consultant shall be entitled to terminate the
right to receive compensation under this Paragraph 5 and in
consideration thereof shall be released from the obligation not to
compete with CENIT under the Non-Competition and Non-Disclosure
Agreement but not from the obligation not to disclose CENIT
Confidential Information under the Non-Competition and Non-Disclosure
Agreement. The Consultant may exercise this right by delivering
written notice to CENIT at least thirty (30) days in advance of the
date on which the Consultant desires to terminate such right to
receive compensation.
6. Publicity. The Consultant and CENIT shall maintain in confidence the
provisions of this Agreement and shall not disclose the terms of this
Agreement to any other person except as provided in this paragraph. The
Consultant agrees that CENIT may disclose the terms of this Agreement
and/or the termination of the Employment Agreement to the extent that
disclosure is required by or deemed to be appropriate under applicable
federal or state banking or securities laws and regulations or in any
litigation to which CENIT may become a party and in which disclosure of the
terms of this Agreement is compelled. The Consultant and CENIT shall
mutually agree upon a statement to be released to the public concerning the
Consultant's resignation of his positions as a director and an officer of
the Bank and the Company and shall otherwise withhold comment on the
circumstances surrounding such resignation. The Consultant agrees that the
limitations imposed on CENIT by this paragraph shall become null and void
in the event of the termination of this Agreement following a breach of the
terms hereof by the Consultant.
7. Termination. CENIT shall be entitled to terminate this Agreement, in the
event of any breach or violation by the Consultant of either the terms of
this Agreement or the terms of the Non-Competition and Non-Disclosure
Agreement or in the event of any act or omission prior to or during the
term of this Agreement that would have permitted the Bank to terminate the
Employment Agreement for cause as provided therein. Before terminating this
Agreement, CENIT shall give the Consultant written notice of any breach or
violation of the Consultant's obligation to perform the consulting services
and the opportunity for a period of three (3) days to cure or remedy such
breach or violation to CENIT's satisfaction; provided, however, that CENIT
shall be under no obligation to give the Consultant such notice and
opportunity to cure if such breach or violation is, in CENIT's reasonable
judgment, not susceptible of being cured or remedied by the Consultant. In
the event of such termination, the obligation of CENIT to pay compensation
and other benefits to the Consultant under this Agreement shall terminate,
and CENIT thereupon shall be entitled to pursue all legal and
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equitable remedies available to it under this Agreement, or at law or in
equity, and any limitations imposed hereby upon CENIT's rights and remedies
shall be immediately terminated. The Consultant's duties and obligations
under the Non-Competition and Non-Disclosure Agreement shall survive any
such termination of this Agreement.
8. Release. In connection with the execution of this Agreement, the Consultant
shall execute and deliver to CENIT a Release of All Claims in the form
attached hereto as EXHIBIT C. In accordance with the provisions of the
federal Age Discrimination in Employment Act, such release contains a seven
day right of rescission for the benefit of the Consultant. This Agreement,
and the duties, obligations, and liabilities imposed upon CENIT hereunder,
are expressly made conditional upon the expiration of such seven-day
rescission period without the rescission of such release by the Consultant.
In the event of such rescission by the Consultant, the provisions of this
Agreement shall be null and void.
9. Notices. For the purposes of this Agreement, notices or other
communications provided for in this Agreement shall be in writing and shall
be deemed to have been duly given when hand delivered to the party to whom
directed or mailed by United States certified mail, return receipt
requested, postage prepaid, addressed to such party at such party's address
last known by the party giving such notice. Each party shall advise the
other parties of the appropriate address to which notices should be sent.
Notices of change of address shall be effective only upon receipt. CENIT
hereby advises the Consultant that all notices to CENIT should be addressed
to CENIT Bancorp, Inc., 225 West Olney Road, Norfolk, Virginia 23510,
attention: President.
10. Modification - Waivers - Applicable Law. No provisions of this Agreement
may be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing, signed by the Consultant and on behalf
of CENIT by such officers as may be specifically designated by the Board of
Directors of the Company. No waiver of any breach, condition or provision
of this Agreement by any party hereto at any time shall be deemed a waiver
of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof
have been made by any party which are not set forth expressly in this
Agreement. The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the Commonwealth of
Virginia.
11. Invalidity - Enforceability. The invalidity or enforceability of any
provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force
and effect. Any provision in this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective only to the extent of such prohibition or unenforceability
without invalidating or affecting the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
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12. Successor Rights. This Agreement shall inure to the benefit of and be
enforceable by the Consultant's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees, and shall be binding upon and inure to the benefit of the
Company, the Savings Bank, and the Bank and any successors thereto and any
present and future affiliates and subsidiaries thereof. If the Consultant
should die while any amounts would still be payable to the Consultant
hereunder, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the Consultant's
legatee or other designee or, if there is no such designee, to the
Consultant's estate.
13. Compliance with Federal Statutes and Regulations. If the Consultant is
suspended and/or temporarily prohibited from participating in the conduct
of the affairs of CENIT by a notice served under Section 8(e)(3) or (g)(1)
of the Federal Deposit Insurance Act (12 U.S.C. Section 1818(e)(3) and
(g)(1)), CENIT's obligations to the Consultant under this Agreement shall
be suspended as of the date of service of any such notice unless stayed by
appropriate proceedings. If the charges in the notice are dismissed, CENIT
may in its discretion (i) pay the Consultant all or part of the
compensation withheld while its obligations under this Agreement were
suspended, and (ii) reinstate (in whole or in part) any of its obligations
which were suspended.
A. If the Consultant is removed and/or permanently prohibited from
participating in the conduct of CENIT's affairs by an order issued
under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act
(12 U.S.C. Section 1818(e)(4) or (g)(1)), all obligations of CENIT
under this Agreement pertaining to CENIT shall terminate as of the
effective date of the order, but vested rights of the parties hereto
shall not be affected.
B. If either the Bank or the Savings Bank is in default (as defined in
Section 3(x)(1) of the Federal Deposit Insurance Act 12 U.S.C. Section
1813(x)(1)), all obligations under this Agreement shall terminate as
of the date of default, but this paragraph shall not affect any vested
rights of the parties hereto shall not be affected.
C. All obligations of CENIT under this Agreement shall be terminated,
except to the extent that it is determined that continuation of the
contract is necessary to the continued operation of the Bank (i) by
the appropriate federal banking agency, at the time the Federal
Deposit Insurance Corporation enters into an agreement to provide
assistance to or on behalf of either the Bank or the Savings Bank
under the authority contained in Section 13(c) of the Federal Deposit
Insurance Act; or (ii) by the appropriate federal banking agency, at
the time such agency approves a supervisory merger to resolve problems
related to operation of either the Bank or the Savings Bank or when
either the Bank or the Savings Bank is determined by such agency to be
in an unsafe or unsound condition; but vested rights of the parties
hereto shall not be affected.
14. Headings. Descriptive headings contained in this Agreement are for
convenience only and shall not control or affect the meaning or
construction of any provision hereof.
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15. Legal Conflict. In the event of any conflict between any of the provisions
of this Agreement and the provisions of any applicable statutes or
regulations, as such statutes or regulations are in effect as of the date
of this Agreement, the provisions of such statutes or regulations in effect
as of the date of this Agreement shall control.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date first above written.
CONSULTANT:
_____________________________(SEAL)
J. Morgan Davis
COMPANY:
CENIT BANCORP, INC.
By______________________________
Title:
SAVINGS BANK:
CENIT BANK, FSB
By______________________________
Title:
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BANK:
CENIT BANK
By______________________________
Title:
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