Exhibit 10.3
MANAGEMENT CONTINUITY AGREEMENT
This Agreement ("Agreement"), dated as of November 21, 2000, is between
Union Bankshares Corporation, a Virginia corporation (the "Company"), and D.
Anthony Peay (the "Executive") and provides as follows.
1. Purpose
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The Company recognizes that the possibility of a Change in Control exists
and the uncertainty and questions that it may raise among management may result
in the departure or distraction of management personnel to the detriment of the
Company and its shareholders. Accordingly, the purpose of this Agreement is to
encourage the Executive to continue employment after a Change in Control by
providing reasonable employment security to the Executive and to recognize the
prior service of the Executive in the event of a termination of employment under
certain circumstances after a Change in Control.
2. Term of the Agreement
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This Agreement will be effective on January 1, 2001 and will expire on
December 31, 2001; provided that on December 31, 2001 and on each December
31/st/ thereafter (each such December 31/st/ is referred to as the "Renewal
Date"), this Agreement will be automatically extended for an additional calendar
year. This Agreement will not, however, be extended if the Company gives written
notice of such non-renewal to the Executive no later than September 30/th/.
before the Renewal Date (the original and any extended term of this Agreement is
referred to as the "Change in Control Period").
3. Employment After Change in Control
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If a Change in Control of the Company (as defined in Section 12) occurs
during the Change in Control Period and the Executive is employed by the Company
on the date the Change in Control occurs (the "Change in Control Date"), the
Company will continue to employ the Executive in accordance with the terms and
conditions of this Agreement for the period beginning on the Change in Control
Date and ending on the third anniversary of such date (the "Employment Period").
If a Change in Control occurs on account of a series of transactions, the Change
in Control Date is the date of the last of such transactions.
4. Terms of Employment
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(a) Position and Duties. During the Employment Period, (i) the Executive's
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position, authority, duties and responsibilities will be commensurate in all
material respects with the most significant of those held, exercised and
assigned at any time during the 90-day period immediately preceding the Change
in Control Date and (ii) the Executive's services will be performed at the
location where the Executive was employed immediately preceding the Change in
Control Date or any office that is the headquarters of the Company and is less
than 35 miles from such location.
(b) Compensation.
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(i) Base Salary. During the Employment Period, the Executive
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will receive an annual base salary (the "Annual Base Salary") at least
equal to the base salary paid or payable to the Executive by the
Company and its affiliated companies for the twelve-month period
immediately preceding the Change of Control Date. During the
Employment Period, the Annual Base Salary will be reviewed at least
annually and will be increased at any time and from time to time as
will be substantially consistent with increases in base salary
generally awarded in the ordinary course of business to other peer
executives of the Company and its affiliated companies. Any increase
in the Annual Base Salary will not serve to limit or reduce any other
obligation to the Executive under this Agreement. The Annual Base
Salary will not be reduced after any such increase, and the term
Annual Base Salary as used in this Agreement will refer to the Annual
Base Salary as so increased. The term "affiliated companies" includes
any company controlled by, controlling or under common control with
the Company.
(ii) Annual Bonus. In addition to the Annual Base Salary, the
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Executive will be awarded for each year ending during the Employment
Period an annual bonus (the "Annual Bonus") in cash at least equal to
the average annual bonus paid or payable, including by reason of any
deferral, for the two years immediately preceding the year in which
the Change in Control Date occurs. Each such Annual Bonus will be paid
no later than the end of the third month of the year next following
the year for which the Annual Bonus is awarded.
(iii) Incentive, Savings and Retirement Plans. During the
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Employment Period, the Executive will be entitled to participate in
all incentive (including stock incentive), savings and retirement,
insurance plans, policies and programs applicable generally to other
peer executives of the Company and its affiliated companies, but in no
event will such plans, policies and programs provide the Executive
with incentive opportunities, savings opportunities and retirement
benefit opportunities, in each case, less favorable, in the aggregate,
than those provided by the Company and its affiliated companies for
the Executive under such plans, policies and programs as in effect at
any time during the six months immediately preceding the Change in
Control Date.
(iv) Welfare Benefit Plans. During the Employment Period, the
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Executive and/or the Executive's family, as the case may be, will be
eligible for participation in and will receive all benefits under
welfare benefit plans, policies and programs provided by the Company
and its affiliated companies to the extent applicable generally to
other peer executives of the Company and its affiliated companies, but
in no event will such plans, policies and programs provide the
Executive with benefits that are less favorable, in the aggregate,
than the most favorable of such plans, policies and programs in effect
at any time during the six months immediately preceding the Change in
Control Date.
(v) Fringe Benefits. During the Employment Period, the Executive
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will be entitled to fringe benefits in accordance with the most
favorable plans, policies and programs of the Company and its
affiliated companies in effect for the Executive at any time during
the six months immediately preceding the Change in Control Date or, if
more favorable to the Executive, as in effect generally from time to
time after the Change in Control Date with respect to other peer
executives of the Company and its affiliated companies.
(vi) Vacation. During the Employment Period, the Executive will
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be entitled to paid vacation in accordance with the most favorable
plans, policies and programs of the Company and its affiliated
companies in effect for the Executive at any time during the six
months immediately preceding the Change in Control Date or, if more
favorable to the Executive, as in effect generally from time to time
after the Change in Control Date with respect to other peer executives
of the Company and its affiliated companies.
5. Termination of Employment Following Change in Control
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(a) Death or Disability. The Executive's employment will terminate
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automatically upon the Executive's death during the Employment Period. If the
Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period, it may terminate the Executive's
employment. For purposes of this Agreement, "Disability" means the Executive's
inability to perform his duties with the Company on a full time basis for 180
consecutive days or a total of at least 240 days in any twelve month period as a
result of the Executive's incapacity due to physical or mental illness (as
determined by an independent physician selected by the Board).
(b) Cause. The Company may terminate the Executive's employment during the
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Employment Period for Cause. For purposes of this Agreement, "Cause" means (i)
gross incompetence, gross negligence, willful misconduct in office or breach of
a material fiduciary duty owed to the Company or any affiliated company; (ii)
conviction of a felony or a crime of moral turpitude (or a plea of nolo
contendere thereto) or commission of an act of embezzlement or fraud against the
Company or any affiliated company; (iii) any material breach by the Executive of
a material term of this Agreement, including, without limitation, material
failure to perform a substantial portion of his duties and responsibilities
hereunder; or (iv) deliberate dishonesty of the Executive with respect to the
Company or any affiliated company.
(c) Good Reason; Window Period. The Executive's employment may be
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terminated (i) during the Employment Period by the Executive for Good Reason or
(ii) during the Window Period by the Executive without any reason. For purposes
of this Agreement, the "Window Period" means the 45-day period beginning on the
later of the one-year anniversary of the Change in Control Date or the date of
closing of the corporate transaction that is the subject of shareholder approval
in Section 12. For purposes of this Agreement, "Good Reason" means:
(i) a material reduction in the Executive's duties or authority;
(ii) a failure by the Company to comply with any of the provisions of
Section 4(b);
(iii) the Company's requiring the Executive to be based at any office
or location other than that described in Section 4(a)(ii);
(iv) the failure by the Company to comply with and satisfy Section
7(b); or
(v) the Company fails to honor any term or provision of this
Agreement;
(d) Notice of Termination. Any termination during the Employment Period by
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the Company or by the Executive for Good Reason or during the Window Period
shall be communicated by written Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon.
(e) Date of Termination. "Date of Termination" means (i) if the
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Executive's employment is terminated by the Company for Cause, or by the
Executive during the Window Period or for Good Reason, the date of receipt of
the Notice of Termination or any later date specified therein, as the case may
be, (ii) if the Executive's employment is terminated by the Company other than
for Cause or Disability, the date specified in the Notice of Termination (which
shall not be less than 30 nor more than 60 days from the date such Notice of
Termination is given), and (iii) if the Executive's employment is terminated for
Disability, 30 days after Notice of Termination is given, provided that the
Executive shall not have returned to the full-time performance of his duties
during such 30-day period.
6. Compensation Upon Termination
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(a) Termination Without Cause or for Good Reason or During Window Period.
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The Executive will be entitled to the following benefits if, during the
Employment Period, the Company terminates his employment without Cause or the
Executive terminates his employment with the Company or any affiliated company
for Good Reason or during the Window Period.
(i) Accrued Obligations. The Accrued Obligations are the sum of: (1)
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the Executive's Annual Base Salary through the Date of Termination at
the rate in effect just prior to the time a Notice of Termination is
given; (2) the amount, if any, of any incentive or bonus compensation
theretofore earned which has not yet been paid; (3) the product of the
Annual Bonus paid or payable, including by reason of deferral, for the
most recently completed year and a fraction, the numerator of which is
the number of days in the current year through the Date of Termination
and the denominator of which is 365; and (4) any benefits or awards
(including both the cash and stock components) which pursuant to the
terms of any plans, policies or programs have been earned or become
payable, but which have not yet been paid to the Executive (but not
including amounts that previously had been deferred at the
Executive's request, which amounts will be paid in accordance with the
Executive's existing directions). The Accrued Obligations will be paid
to the Executive in a lump sum cash payment within ten days after the
Date of Termination;
(ii) Salary Continuance Benefit. The Salary Continuance Benefit
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is an amount equal to 2.0 times the Executive's Final Compensation.
For purposes of this Agreement, "Final Compensation" means the Annual
Base Salary in effect at the Date of Termination, plus the highest
Annual Bonus paid or payable for the two most recently completed years
and any amount contributed by the Executive during the most recently
completed year pursuant to a salary reduction agreement or any other
program that provides for pre-tax salary reductions or compensation
deferrals. The Salary Continuance Benefit will be paid to the
Executive in a lump sum cash payment not later than the 45/th/ day
following the Date of Termination;
(iii) Welfare Continuance Benefit. For 24 months following the
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Date of Termination, the Executive and his dependents will continue to
be covered under all health and dental plans, disability plans, life
insurance plans and all other welfare benefit plans (as defined in
Section 3(1) of ERISA) ("Welfare Plans") in which the Executive or his
dependents were participating immediately prior to the Date of
Termination (the "Welfare Continuance Benefit"). The Company will pay
all or a portion of the cost of the Welfare Continuance Benefit for
the Executive and his dependents under the Welfare Plans on the same
basis as applicable, from time to time, to active employees covered
under the Welfare Plans and the Executive will pay any additional
costs. If participation in any one or more of the Welfare Plans
included in the Welfare Continuance Benefit is not possible under the
terms of the Welfare Plan or any provision of law would create an
adverse tax effect for the Executive or the Company due to such
participation, the Company will provide substantially identical
benefits directly or through an insurance arrangement. The Welfare
Continuance Benefit as to any Welfare Plan will cease if and when the
Executive has obtained coverage under one or more welfare benefit
plans of a subsequent employer that provides for equal or greater
benefits to the Executive and his dependents with respect to the
specific type of benefit. The Executive or his dependents will become
eligible for COBRA continuation coverage as of the date the Welfare
Continuance Benefit ceases for all health and dental benefits.
(b) Death. If the Executive dies during the Employment Period, this
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Agreement will terminate without any further obligation on the part of the
Company under this Agreement, other than for (i) payment of the Accrued
Obligations and six months of the Executive's Base Salary (which shall be paid
to the Executive's beneficiary designated in writing or his estate, as
applicable, in a lump sum cash payment within 30 days of the date of death);
(ii) the timely payment or provision of the Welfare Continuance Benefit to the
Executive's spouse and other dependents for 24 months following the date of
death; and (iii) the timely payment of all death and retirement benefits
pursuant to the terms of any plan, policy or arrangement of the Company and its
affiliated companies.
(c) Disability. If the Executive's employment is terminated because of the
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Executive's Disability during the Employment Period, this Agreement will
terminate without any further
obligation on the part of the Company under this Agreement, other than for (i)
payment of the Accrued Obligations and six months of the Executive's Base Salary
(which shall be paid to the Executive in a lump sum cash payment within 30 days
of the Date of Termination); (ii) the timely payment or provision of the Welfare
Continuance Benefit for 24 months following the Date of Termination; and (iii)
the timely payment of all disability and retirement benefits pursuant to the
terms of any plan, policy or arrangement of the Company and its affiliated
companies.
(d) Cause; Other than for Good Reason. If the Executive's employment is
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terminated for Cause during the Employment Period, this Agreement will terminate
without further obligation to the Executive other than the payment to the
Executive of the Annual Base Salary through the Date of Termination, plus the
amount of any compensation previously deferred by the Executive. If the
Executive terminates employment during the Employment Period, excluding a
termination either for Good Reason or during the Window Period, this Agreement
will terminate without further obligation to the Executive other than for the
Accrued Obligations (which will be paid in a lump sum in cash within 30 days of
the Date of Termination) and any other benefits to which the Executive may be
entitled pursuant to the terms of any plan, program or arrangement of the
Company and its affiliated companies.
(e) Gross-Up Payment. In the event any payment or distribution by the
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Company to or for the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 6(e)) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986 (the "Code") or any
interest or penalties are incurred by the Executive with respect to such excise
tax (collectively, the "Excise Tax"), then the Executive will be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any income taxes and
interest or penalties imposed with respect to such taxes) and the Excise Tax
imposed on the Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed on the Payments. All determinations
required to be made under this Section 6(e), including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment, will be
made by the independent accounting firm of the Company immediately prior to the
Executive's termination of employment (the "Accounting Firm"). All fees and
expenses of the Accounting Firm will be borne solely by the Company, and any
determination by the Accounting Firm will be binding upon the Company and the
Executive. Any Gross-Up Payment, as determined pursuant to this Section 6(e),
will be paid by the Company to the Executive within ten days of the receipt of
the Accounting Firm's determination.
(i) If the Accounting Firm determines that no Excise Tax is
payable by the Executive, it shall so indicate to the Executive in
writing.
(ii) In the event there is an under-payment of the Gross-Up
Payment due to the uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the Accounting
Firm and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm will determine the amount of any such
under-payment that has occurred and such amount will be promptly paid
by the Company to or for the benefit of the Executive.
7. Binding Agreement; Successors
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(a) This Agreement will be binding upon and inure to the benefit of the
Executive (and his personal representative), the Company and any successor
organization or organizations which shall succeed to substantially all of the
business and property of the Company, whether by means of merger, consolidation,
acquisition of all or substantially of all of the assets of the Company or
otherwise, including by operation of law.
(b) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place.
(c) For purposes of this Agreement, the term "Company" includes any
subsidiaries of the Company and any corporation or other entity which is the
surviving or continuing entity in respect of any merger, consolidation or form
of business combination in which the Company ceases to exist; provided, however,
that for purposes of determining whether a Change in Control has occurred
herein, the term "Company" refers to Union Bankshares Corporation or its
successors.
8. Fees and Expenses; Mitigation
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(a) The Company will pay or reimburse the Executive for all costs and
expenses, including without limitation court costs and reasonable attorneys'
fees, incurred by the Executive (i) in contesting or disputing any termination
of the Executive's employment or (ii) in seeking to obtain or enforce any right
or benefit provided by this Agreement, in each case provided the Executive's
claim is upheld by a court of competent jurisdiction.
(b) The Executive shall not be required to mitigate the amount of any
payment the Company becomes obligated to make to the Executive in connection
with this Agreement, by seeking other employment or otherwise. Except as
specifically provided above with respect to the Wefare Continuance Benefit, the
amount of any payment provided for in Section 6 shall not be reduced, offset or
subject to recovery by the Company by reason of any compensation earned by the
Executive as the result of employment by another employer after the Date of
Termination, or otherwise.
9. No Employment Contract
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Nothing in this Agreement will be construed as creating an employment
contract between the Executive and the Company prior to Change in Control.
10. Continuance of Welfare Benefits Upon Death
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If the Executive dies while receiving a Welfare Continuation Benefit, the
Executive's spouse and other dependents will continue to be covered under all
applicable Welfare Plans during the remainder of the 24-month coverage period.
The Executive's spouse and other dependents will become eligible for COBRA
continuation coverage for health and dental benefits at the end of such 24-month
period.
11. Notice
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Any notices and other communications provided for by this Agreement will
be sufficient if in writing and delivered in person or sent by registered or
certified mail, postage prepaid (in which case notice will be deemed to have
been given on the third day after mailing), or by overnight delivery by a
reliable overnight courier service (in which case notice will be deemed to have
been given on the day after delivery to such courier service). Notices to the
Company shall be directed to the Secretary of the Company, with a copy directed
to the Chairman of the Board of the Company. Notices to the Executive shall be
directed to his last known address.
12. Definition of a Change in Control
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No benefits shall be payable hereunder unless there shall have been a
Change in Control of the Company as set forth below. For purposes of this
Agreement, a "Change in Control" means:
(a) The acquisition by any Person of beneficial ownership of 20% or more
of the then outstanding shares of common stock of the Company, provided that an
acquisition directly from the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege) shall not constitute a Change in Control;
(b) Individuals who constitute the Board on the date of this Agreement
(the "Incumbent Board") cease to constitute a majority of the Board, provided
that any director whose nomination was approved by a vote of at least two-thirds
of the directors then comprising the Incumbent Board will be considered a member
of the Incumbent Board, but excluding any such individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the directors of the Company (as such terms
are used in Rule 14a-11 promulgated under the Securities Exchange Act of 1934
(the "Exchange Act"));
(c) Approval by the shareholders of the Company of a reorganization,
merger, share exchange or consolidation (a "Reorganization"), provided that
shareholder approval of a Reorganization will not constitute a Change in Control
if, upon consummation of the Reorganization, each of the following conditions is
satisfied:
(i) more than 60% of the then outstanding shares of common stock of
the corporation resulting from the Reorganization is beneficially owned
by all or substantially all of the former shareholders of the Company
in substantially the same proportions as their ownership existed in the
Company immediately prior to the Reorganization;
(ii) no Person beneficially owns 20% or more of either (1) the then
outstanding shares of common stock of the corporation resulting from
the transaction or (2) the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors; and
(iii) at least a majority of the members of the board of directors of
the corporation resulting from the Reorganization were members of the
Incumbent Board at the time of the execution of the initial agreement
providing for the Reorganization.
(d) Approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company, or of the sale or other disposition of all or
substantially all of the assets of the Company.
(e) For purposes of this Agreement, "Person" means any individual, entity
or group (within the meaning of Section 13(d)(3) of the Exchange Act, other than
any employee benefit plan (or related trust) sponsored or maintained by the
Company or any affiliated
company, and "beneficial ownership" has the meaning given the term in Rule 13d-3
under the Exchange Act.
13. Confidentiality
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The Executive will hold in a fiduciary capacity for the benefit of the
Company all secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies and their respective businesses,
which was obtained by the Executive during the Executive's employment by the
Company or any of its affiliated companies and which will not be or become
public knowledge. After termination of the Executive's employment with the
Company, the Executive will not, without the prior written consent of the
Company or except as may otherwise be required by law or legal process,
communicate or divulge any such information,
knowledge or data to anyone other than the Company and those designated by it.
In no event shall an asserted violation of the provisions of this Section 13
constitute a basis for deferring or withholding any amounts otherwise payable to
the Executive under this Agreement.
14. Miscellaneous
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No provision of this Agreement may be amended, modified, waived or
discharged unless such amendment, modification, waiver or discharge is agreed to
in a writing signed by the Executive and the Chairman of the Board or President
of the Company. No waiver by either party hereto at any time of any breach by
the other party hereto of, or of compliance with, any condition or provision of
this Agreement to be performed by such other party 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 either
party which are not expressly set forth in this Agreement.
15. Governing Law
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The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the Commonwealth of Virginia.
16. Validity
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The invalidity or unenforceability 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.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by Union Bankshares Corporation by its duly authorized officer, and
by the Executive, as of the date first above written.
UNION BANKSHARES CORPORATION
By: /s/ Ronald L. Hicks
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Ronald L. Hicks
Chairman of the Board
EXECUTIVE:
/s/ D. Anthony Peay
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D. Anthony Peay