EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS AGREEMENT entered into this 31st day of December, 1996 ("Effective
Date"), by and between Virginia Beach Federal Savings Bank (the "Bank") and John
A.B. Davies, Jr., (the "Employee").
WHEREAS, the Employee has heretofore been employed by the Bank as
President and Chief Executive Officer and is experienced in all phases of the
business of the Bank; and
WHEREAS, the parties desire by this writing to set forth the continuing
employment relationship of the Bank and the Employee.
NOW, THEREFORE, it is AGREED as follows:
1. Employment. The Employee is employed in the capacity as the
President and Chief Executive Officer of the Bank. The Employee shall render
such administrative and management services to the Bank and Virginia Beach
Federal Financial Corporation ("Parent") as are currently rendered and as are
customarily performed by persons situated in a similar executive capacity. The
Employee shall also promote, to the extent permitted by law, the business of the
Bank and Parent. The Employee's other duties shall be such as the Board of
Directors for the Bank (the "Board of Directors") may from time to time
reasonably direct, including normal duties as an officer of the Bank.
2. Base Compensation. The Bank agrees to pay the Employee during the
term of this Agreement a salary at the rate of $200,000 per annum, payable in
cash not less frequently than monthly; provided, that the rate of such salary
shall be reviewed by the Board of Directors not less often than annually, and
Employee shall be entitled to receive annually an increase at such percentage or
in such an amount as the Board of Directors in its sole discretion may decide at
such time.
3. (a) Participation in Retirement and Medical Plans. The Employee
shall be entitled to participate in any plan of the Bank relating to pension,
profit-sharing, or other retirement benefits and medical coverage or
reimbursement plans that the Bank may adopt for the benefit of its employees.
Additionally, Employee's dependent family shall be eligible to participate in
medical and dental insurance plans sponsored by the Bank or Parent. The cost of
premiums for participation in the medical coverage or reimbursement plan for the
Employee and such dependent family shall be 95% paid by the Bank and 5% paid by
the Employee.
(b) Employee Benefits; Expenses. The Employee shall be eligible to
participate in any fringe benefits which may be or may become applicable to the
Bank's senior management employees, including by example, participation in any
stock option or incentive plans adopted by the Board of Directors of Bank or
Parent, club memberships, a reasonable expense account, an appropriate
automobile allowance, and any other benefits which are commensurate with the
responsibilities and functions to be performed by the Employee under this
Agreement. The Bank
shall reimburse Employee for all reasonable out-of-pocket expenses which
Employee shall incur in connection with his service for the Bank.
4. Term. The term of employment of Employee under this Agreement shall
be for the period commencing on the Effective Date and ending twenty-four (24)
months thereafter. Additionally, on each annual anniversary date from the
Effective Date, the term of employment under this Agreement shall be extended
for an additional one year period beyond the then effective expiration date upon
a determination and resolution of the Board of Directors that the performance of
the Employee has met the requirements and standards of the Board, and that the
term of such Agreement shall be extended. To the extent possible, the Board
shall furnish the Employee with not less than sixty (60) days notice of any
intention not to renew such Agreement.
5. Loyalty; Noncompetition.
(a) The Employee shall devote his full time and attention to the
performance of his employment under this Agreement. During the term of
Employee's employment under this Agreement, the Employee shall not engage in any
business or activity contrary to the business affairs or interests of the Bank
or Parent.
(b) Nothing contained in this Paragraph 5 shall be deemed to prevent or
limit the right of Employee to invest in the capital stock or other securities
of any business dissimilar from that of the Bank or Parent, or, solely as a
passive or minority investor, in any business.
(c) For a period of twelve (12) months following the voluntarily
termination by Employee of his employment hereunder, other than pursuant to
Section 11(b) of this Agreement, Employee will not accept employment with any
financial institution or entity offering similar products and services as the
Bank within the geographic area generally known as Hampton Roads, Virginia.
6. Standards. The Employee shall perform his duties under this
Agreement in accordance with such reasonable standards expected of employees
with comparable positions in comparable organizations and as may be established
from time to time by the Board of Directors. The Bank will provide Employee with
the working facilities and staff customary for similar executives and necessary
for him to perform his duties.
7. Vacation and Sick Leave. At such reasonable times as the Board of
Directors shall in its discretion permit, the Employee shall be entitled,
without loss of pay, to absent himself voluntarily from the performance of his
employment under this Agreement, with all such voluntary absences to count as
vacation time; provided that:
(a) The Employee shall be entitled to annual vacation leave in
accordance with the policies as are periodically established by the Board of
Directors for senior management employees of the Bank.
2
(b) The Employee shall not be entitled to receive any additional
compensation from the Bank on account of his failure to take vacation leave and
Employee shall not be entitled to accumulate unused vacation from one fiscal
year to the next, except in either case to the extent authorized by the Board of
Directors for senior management employees of the Bank.
(c) In addition to the aforesaid paid vacations, the Employee shall be
entitled without loss of pay, to absent himself voluntarily from the performance
of his employment with the Bank for such additional periods of time and for such
valid and legitimate reasons as the Board of Directors in its discretion may
determine. Further, the Board of Directors shall be entitled to grant to the
Employee a leave or leaves of absence with or without pay at such time or times
and upon such terms and conditions as the Board of Directors in its discretion
may determine.
(d) In addition, the Employee shall be entitled to an annual sick leave
benefit as established by the Board of Directors for senior management employees
of the Bank. In the event that any sick leave benefit shall not have been used
during any year, such leave shall accrue to subsequent years only to the extent
authorized by the Board of Directors for employees of the Bank.
8. Termination and Termination Pay.
The Employee's employment under this Agreement shall be terminated upon
any of the following occurrences:
(a) The death of the Employee during the term of this Agreement, in
which event the Employee's estate shall be entitled to receive the compensation
due the Employee through the last day of the third calendar month subsequent to
the month in which Employee's death shall have occurred.
(b) The Board of Directors may terminate the Employee's employment at
any time, but any termination by the Board of Directors other than termination
for Just Cause, shall not prejudice the Employee's right to compensation or
other benefits under the Agreement, except as specified at Section 8(c)
hereinafter. The Employee shall have no right to receive compensation or other
benefits for any period after termination for Just Cause. Termination for "Just
Cause" shall include termination because of the Employee's personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, failure to perform stated duties, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order, an extreme fiscal exigency affecting the Bank (such as
insolvency) or material breach of any provision of the Agreement.
(c) Except as provided pursuant to Section 11 herein, in the event
Employee's employment under this Agreement is terminated by the Board of
Directors without Just Cause, the Bank shall be obligated to continue to pay the
Employee the salary provided pursuant to Section 2 herein, for a period of
twelve (12) months thereafter, without regard to the term of this Agreement.
Additionally, Employee shall be compensated or reimbursed for the cost of
3
Employee obtaining all health, life, disability, and other benefits which the
Employee and his dependents would be eligible to participate in for a period of
one-year based upon the benefit levels substantially equal to those being
provided Employee at the date of termination of employment. At the election of
the Employee, such compensation to be paid hereunder shall be paid in a lump-sum
amount within 30 days of such termination discounted in accordance with Section
11(a) herein; in which case the benefit continuations noted above shall not be
applicable, except to the extent as may be required by law or the policies of
the Savings Bank.
(d) If the Employee is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(4) and (g)(1)), all obligations of the Bank under this Agreement
shall terminate, as of the effective date of the order, but the vested rights of
the parties shall not be affected.
(e) If the Bank is in default (as defined in Section 3(x)(1) of FDIA)
all obligations under this Agreement shall terminate as of the date of default,
but this paragraph shall not affect any vested rights of the contracting
parties.
(f) All obligations under this Agreement shall be terminated, except to
the extent determined that continuation of this Agreement is necessary for the
continued operation of the Bank: (i) by the Director of the Office of Thrift
Supervision ("Director of OTS"), or his or her designee, at the time that the
Federal Deposit Insurance Corporation ("FDIC") or the Resolution Trust
Corporation enters into an agreement to provide assistance to or on behalf of
the Bank under the authority contained in Section 13(c) of FDIA; or (ii) by the
Director of the OTS, or his or her designee, at the time that the Director of
the OTS, or his or her designee approves a supervisory merger to resolve
problems related to operation of the Bank or when the Bank is determined by the
Director of the OTS to be in an unsafe or unsound condition. Any rights of the
parties that have already vested, however, shall not be affected by such action.
(g) The voluntary termination by the Employee during the term of this
Agreement with the delivery of no less than 60 days written notice to the Board
of Directors, other than pursuant to Section 11(b), in which case the Employee
shall be entitled to receive only the compensation, vested rights, and all
employee benefits up to the date of such termination.
(h) Notwithstanding anything herein to the contrary, any payments made
to the Employee pursuant to the Agreement, or otherwise, shall be subject to and
conditioned upon compliance with 12 USC ss.1828(k) and any regulations
promulgated thereunder.
9. Suspension of Employment. If the Employee is suspended and/or
temporarily prohibited from participating in the conduct of the Bank's affairs
by a notice served under Section 8(e)(3) or (g)(1) of the FDIA (12 U.S.C.
1818(e)(3) and (g)(1)), the Bank's obligations under the Agreement shall be
suspended as of the date of service, unless stayed by appropriate proceedings.
If the charges in the notice are dismissed, the Bank shall, (i) pay the Employee
4
all or part of the compensation withheld while its contract obligations were
suspended and (ii) reinstate any of its obligations which were suspended.
10. Disability. If the Employee shall become disabled or incapacitated
to the extent that he is unable to perform his duties hereunder, by reason of
medically determinable physical or mental impairment, as determined by a doctor
engaged by the Board of Directors, Employee shall nevertheless continue to
receive the compensation and benefits which may be payable to Employee under the
provisions of disability insurance coverage in effect for Bank employees and any
payments under the Federal Social Security Act, but in no event less than 100%
of pay for a period of 12 months and 65% for the remainder of the term of the
Agreement, if applicable. Upon returning to active full-time employment, the
Employee's full compensation as set forth in this Agreement shall be reinstated
as of the date of commencement of such activities. In the event that the
Employee returns to active employment on other than a full-time basis, then his
compensation (as set forth in Paragraph 2 of this Agreement) shall be reduced in
proportion to the time spent in said employment, or as shall otherwise be agreed
to by the parties.
11. Change in Control.
(a) Notwithstanding any provision herein to the contrary, in the event
of the involuntary termination of Employee's employment under this Agreement,
absent Just Cause, in connection with, or within twenty-four (24) months after,
any change in control of the Bank or Parent, Employee shall be paid an amount
equal the product of 2.99 times the Employee's prior calendar year's cash
compensation paid as reflected on Form W-2, excluding any commission payments
paid, but in no event in an amount in excess of the product of 2.99 times the
Employee's "base amount" as defined in Section 280G(b)(3) of the Internal
Revenue Code of 1986, as amended (the "Code") and regulations promulgated
thereunder. Said sum shall be paid, at the option of Employee, either in one (1)
lump sum within thirty (30) days of such termination discounted to the present
value of such payment using as the discount rate the "prime rate" as published
in the Wall Street Journal Eastern Edition as of the date of such payment, or in
periodic payments over the next 36 months or the remaining term of this
Agreement whichever is less, as if Employee's employment had not been
terminated, and such payments shall be in lieu of any other future payments
which the Employee would be otherwise entitled to receive under Section 8 of
this Agreement. The term "control" shall refer to the ownership, holding or
power to vote more than 25% of the Parent's or Bank's voting stock, the control
of the election of a majority of the Parent's or Bank's directors, the exercise
of a controlling influence over the management or policies of the Parent or Bank
by any person or by persons acting as a group within the meaning of Section
13(d) of the Securities Exchange Act of 1934. The term "person" means an
individual other than the Employee, or a corporation, partnership, trust,
association, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization or any other form of entity not specifically listed herein.
(b) Notwithstanding any other provision of this Agreement to the
contrary, Employee may voluntary terminate his employment under this Agreement
within twenty-four (24) months following a change in control of the Bank or
Parent, and Employee shall thereupon be entitled
5
to receive the payment described in Section 11(a) of this Agreement, upon the
occurrence, or within ninety (90) days thereafter, of any of the following
events, which have not been consented to in advance by the Employee in writing:
(i) if Employee would be required to move his personal residence or perform his
principal executive functions more than thirty-five (35) miles from the
Employee's primary office as of the signing of this Agreement; (ii) if in the
organizational structure of the Bank or Parent, Employee would be required to
report to a person or persons other than the Board of the Bank; (iii) if the
Bank or Parent should fail to maintain existing employee benefits plans,
including material fringe benefit, stock option and retirement plans; (iv) if
Employee would be assigned duties and responsibilities other than those normally
associated with his position as referenced at Section 1, herein; (v) if Employee
would not be elected or reelected to the Board of Directors of the Bank; or (vi)
if Employee's responsibilities or authority have in any way been materially
diminished or reduced.
12. Successors and Assigns.
(a) This Agreement shall inure to the benefit of and be binding upon
any corporate or other successor of the Bank or Parent which shall acquire,
directly or indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Bank or Parent.
(b) Since the Bank is contracting for the unique and personal skills of
the Employee, the Employee shall be precluded from assigning or delegating his
rights or duties hereunder without first obtaining the written consent of the
Bank.
13. Amendments. No amendments or additions to this Agreement shall be
binding upon the parties hereto unless made in writing and signed by both
parties, except as herein otherwise specifically provided.
14. Applicable Law. This agreement shall be governed by all respects
whether as to validity, construction, capacity, performance or otherwise, by the
laws of the Commonwealth of Virginia, except to the extent that Federal law
shall be deemed to apply.
15. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
16. Entire Agreement. This Agreement together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.
6
EMPLOYMENT AGREEMENT
THIS AGREEMENT entered into this 31st day of December, 1996 ("Effective
Date"), by and between Virginia Beach Federal Savings Bank (the "Bank") and John
M. Chattleton (the "Employee").
WHEREAS, the Employee has heretofore been employed by the Bank as
Executive Vice President - Retail Administration and Lending and is experienced
in all phases of the business of the Bank; and
WHEREAS, the parties desire by this writing to set forth the continuing
employment relationship of the Bank and the Employee.
NOW, THEREFORE, it is AGREED as follows:
1. Employment. The Employee is employed in the capacity as the
Executive Vice President - Retail Administration and Lending of the Bank. The
Employee shall render such administrative and management services to the Bank
and Virginia Beach Federal Financial Corporation ("Parent") as are currently
rendered and as are customarily performed by persons situated in a similar
executive capacity. The Employee shall also promote, to the extent permitted by
law, the business of the Bank and Parent. The Employee's other duties shall be
such as the Board of Directors for the Bank (the "Board of Directors") may from
time to time reasonably direct, including normal duties as an officer of the
Bank.
2. Base Compensation. The Bank agrees to pay the Employee during the
term of this Agreement a salary at the rate of $112,000 per annum, payable in
cash not less frequently than monthly; provided, that the rate of such salary
shall be reviewed by the Board of Directors not less often than annually, and
Employee shall be entitled to receive annually an increase at such percentage or
in such an amount as the Board of Directors in its sole discretion may decide at
such time.
3. (a) Participation in Retirement and Medical Plans. The Employee
shall be entitled to participate in any plan of the Bank relating to pension,
profit-sharing, or other retirement benefits and medical coverage or
reimbursement plans that the Bank may adopt for the benefit of its employees.
Additionally, Employee's dependent family shall be eligible to participate in
medical and dental insurance plans sponsored by the Bank or Parent. The cost of
premiums for participation in the medical coverage or reimbursement plan for the
Employee and such dependent family shall be 95% paid by the Bank and 5% paid by
the Employee.
(b) Employee Benefits; Expenses. The Employee shall be eligible to
participate in any fringe benefits which may be or may become applicable to the
Bank's senior management employees, including by example, participation in any
stock option or incentive plans adopted by the Board of Directors of Bank or
Parent, club memberships, a reasonable expense account, an appropriate
automobile allowance, and any other benefits which are commensurate with the
responsibilities and functions to be performed by the Employee under this
Agreement. The Bank
shall reimburse Employee for all reasonable out-of-pocket expenses which
Employee shall incur in connection with his service for the Bank.
4. Term. The term of employment of Employee under this Agreement shall
be for the period commencing on the Effective Date and ending twenty-four (24)
months thereafter. Additionally, on each annual anniversary date from the
Effective Date, the term of employment under this Agreement shall be extended
for an additional one year period beyond the then effective expiration date upon
a determination and resolution of the Board of Directors that the performance of
the Employee has met the requirements and standards of the Board, and that the
term of such Agreement shall be extended. To the extent possible, the Board
shall furnish the Employee with not less than sixty (60) days notice of any
intention not to renew such Agreement.
5. Loyalty; Noncompetition.
(a) The Employee shall devote his full time and attention to the
performance of his employment under this Agreement. During the term of
Employee's employment under this Agreement, the Employee shall not engage in any
business or activity contrary to the business affairs or interests of the Bank
or Parent.
(b) Nothing contained in this Paragraph 5 shall be deemed to prevent or
limit the right of Employee to invest in the capital stock or other securities
of any business dissimilar from that of the Bank or Parent, or, solely as a
passive or minority investor, in any business.
(c) For a period of twelve (12) months following the voluntarily
termination by Employee of his employment hereunder, other than pursuant to
Section 11(b) of this Agreement, Employee will not accept employment with any
financial institution or entity offering similar products and services as the
Bank within the geographic area generally known as Hampton Roads, Virginia.
6. Standards. The Employee shall perform his duties under this
Agreement in accordance with such reasonable standards expected of employees
with comparable positions in comparable organizations and as may be established
from time to time by the Board of Directors. The Bank will provide Employee with
the working facilities and staff customary for similar executives and necessary
for him to perform his duties.
7. Vacation and Sick Leave. At such reasonable times as the Board of
Directors shall in its discretion permit, the Employee shall be entitled,
without loss of pay, to absent himself voluntarily from the performance of his
employment under this Agreement, with all such voluntary absences to count as
vacation time; provided that:
(a) The Employee shall be entitled to annual vacation leave in
accordance with the policies as are periodically established by the Board of
Directors for senior management employees of the Bank.
2
(b) The Employee shall not be entitled to receive any additional
compensation from the Bank on account of his failure to take vacation leave and
Employee shall not be entitled to accumulate unused vacation from one fiscal
year to the next, except in either case to the extent authorized by the Board of
Directors for senior management employees of the Bank.
(c) In addition to the aforesaid paid vacations, the Employee shall be
entitled without loss of pay, to absent himself voluntarily from the performance
of his employment with the Bank for such additional periods of time and for such
valid and legitimate reasons as the Board of Directors in its discretion may
determine. Further, the Board of Directors shall be entitled to grant to the
Employee a leave or leaves of absence with or without pay at such time or times
and upon such terms and conditions as the Board of Directors in its discretion
may determine.
(d) In addition, the Employee shall be entitled to an annual sick leave
benefit as established by the Board of Directors for senior management employees
of the Bank. In the event that any sick leave benefit shall not have been used
during any year, such leave shall accrue to subsequent years only to the extent
authorized by the Board of Directors for employees of the Bank.
8. Termination and Termination Pay.
The Employee's employment under this Agreement shall be terminated upon
any of the following occurrences:
(a) The death of the Employee during the term of this Agreement, in
which event the Employee's estate shall be entitled to receive the compensation
due the Employee through the last day of the third calendar month in which
Employee's death shall have occurred.
(b) The Board of Directors may terminate the Employee's employment at
any time, but any termination by the Board of Directors other than termination
for Just Cause, shall not prejudice the Employee's right to compensation or
other benefits under the Agreement, except as specified at Section 8(c)
hereinafter. The Employee shall have no right to receive compensation or other
benefits for any period after termination for Just Cause. Termination for "Just
Cause" shall include termination because of the Employee's personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, failure to perform stated duties, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order, an extreme fiscal exigency affecting the Bank (such as
insolvency) or material breach of any provision of the Agreement.
(c) Except as provided pursuant to Section 11 herein, in the event
Employee's employment under this Agreement is terminated by the Board of
Directors without Just Cause, the Bank shall be obligated to continue to pay the
Employee the salary provided pursuant to Section 2 herein, for a period of
twelve (12) months thereafter, without regard to the term of this Agreement.
Additionally, Employee shall be compensated or reimbursed for the cost of
Employee obtaining all health, life, disability, and other benefits which the
Employee and his
3
dependents would be eligible to participate in for a period of six months based
upon the benefit levels substantially equal to those being provided Employee at
the date of termination of employment. At the election of the Employee, such
compensation to be paid hereunder shall be paid in a lump-sum amount within 30
days of such termination discounted in accordance with Section 11(a) herein; in
which case the benefit continuations noted above shall not be applicable, except
to the extent as may be required by law or the policies of the Savings Bank.
(d) If the Employee is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(4) and (g)(1)), all obligations of the Bank under this Agreement
shall terminate, as of the effective date of the order, but the vested rights of
the parties shall not be affected.
(e) If the Bank is in default (as defined in Section 3(x)(1) of FDIA)
all obligations under this Agreement shall terminate as of the date of default,
but this paragraph shall not affect any vested rights of the contracting
parties.
(f) All obligations under this Agreement shall be terminated, except to
the extent determined that continuation of this Agreement is necessary for the
continued operation of the Bank: (i) by the Director of the Office of Thrift
Supervision ("Director of OTS"), or his or her designee, at the time that the
Federal Deposit Insurance Corporation ("FDIC") or the Resolution Trust
Corporation enters into an agreement to provide assistance to or on behalf of
the Bank under the authority contained in Section 13(c) of FDIA; or (ii) by the
Director of the OTS, or his or her designee, at the time that the Director of
the OTS, or his or her designee approves a supervisory merger to resolve
problems related to operation of the Bank or when the Bank is determined by the
Director of the OTS to be in an unsafe or unsound condition. Any rights of the
parties that have already vested, however, shall not be affected by such action.
(g) The voluntary termination by the Employee during the term of this
Agreement with the delivery of no less than 60 days written notice to the Board
of Directors, other than pursuant to Section 11(b), in which case the Employee
shall be entitled to receive only the compensation, vested rights, and all
employee benefits up to the date of such termination.
(h) Notwithstanding anything herein to the contrary, any payments made
to the Employee pursuant to the Agreement, or otherwise, shall be subject to and
conditioned upon compliance with 12 U.S.C. ss.1828(k) and any regulations
promulgated thereunder.
9. Suspension of Employment. If the Employee is suspended and/or
temporarily prohibited from participating in the conduct of the Bank's affairs
by a notice served under Section 8(e)(3) or (g)(1) of the FDIA (12 U.S.C.
1818(e)(3) and (g)(1)), the Bank's obligations under the Agreement shall be
suspended as of the date of service, unless stayed by appropriate proceedings.
If the charges in the notice are dismissed, the Bank shall, (i) pay the Employee
all or part of the compensation withheld while its contract obligations were
suspended and (ii) reinstate any of its obligations which were suspended.
4
10. Disability. If the Employee shall become disabled or incapacitated
to the extent that he is unable to perform his duties hereunder, by reason of
medically determinable physical or mental impairment, as determined by a doctor
engaged by the Board of Directors, Employee shall nevertheless continue to
receive the compensation and benefits which may be payable to Employee under the
provisions of disability insurance coverage in effect for Bank employees and any
payments under the Federal Social Security Act, but in no event less than 100%
of pay for a period of 12 months and 60% for the remainder of the term of the
Agreement, if applicable. Upon returning to active full-time employment, the
Employee's full compensation as set forth in this Agreement shall be reinstated
as of the date of commencement of such activities. In the event that the
Employee returns to active employment on other than a full-time basis, then his
compensation (as set forth in Paragraph 2 of this Agreement) shall be reduced in
proportion to the time spent in said employment, or as shall otherwise be agreed
to by the parties.
11. Change in Control.
(a) Notwithstanding any provision herein to the contrary, in the event
of the involuntary termination of Employee's employment under this Agreement,
absent Just Cause, in connection with, or within twenty-four (24) months after,
any change in control of the Bank or Parent, Employee shall be paid an amount
equal the product of two times the Employee's prior calendar year's cash
compensation paid as reflected on Form W-2, excluding any commission payments
paid, but in no event in an amount in excess of the product of 2.99 times the
Employee's "base amount" as defined in Section 280G(b)(3) of the Internal
Revenue Code of 1986, as amended (the "Code") and regulations promulgated
thereunder. Said sum shall be paid, at the option of Employee, either in one (1)
lump sum within thirty (30) days of such termination discounted to the present
value of such payment using as the discount rate the "prime rate" as published
in the Wall Street Journal Eastern Edition as of the date of such payment, or in
periodic payments over the next 24 months or the remaining term of this
Agreement whichever is less, as if Employee's employment had not been
terminated, and such payments shall be in lieu of any other future payments
which the Employee would be otherwise entitled to receive under Section 8 of
this Agreement. The term "control" shall refer to the ownership, holding or
power to vote more than 25% of the Parent's or Bank's voting stock, the control
of the election of a majority of the Parent's or Bank's directors, or the
exercise of a controlling influence over the management or policies of the
Parent or Bank by any person or by persons acting as a group within the meaning
of Section 13(d) of the Securities Exchange Act of 1934. The term "person" means
an individual other than the Employee, or a corporation, partnership, trust,
association, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization or any other form of entity not specifically listed herein.
(b) Notwithstanding any other provision of this Agreement to the
contrary, Employee may voluntary terminate his employment under this Agreement
within twenty-four (24) months following a change in control of the Bank or
Parent, and Employee shall thereupon be entitled to receive the payment
described in Section 11(a) of this Agreement, upon the occurrence, or within
ninety (90) days thereafter, of any of the following events, which have not been
consented to in advance by the Employee in writing: (i) if Employee would be
required to move his
5
personal residence or perform his principal executive functions more than
thirty-five (35) miles from the Employee's primary office as of the signing of
this Agreement; (ii) if in the organizational structure of the Bank or Parent,
Employee would be required to report to a person or persons other than the
President of the Bank; (iii) if the Bank or Parent should fail to maintain
existing employee benefits plans, including material fringe benefit, stock
option and retirement plans; (iv) if Employee would be assigned duties and
responsibilities other than those normally associated with his position as
referenced at Section 1, herein; or (v) if Employee's responsibilities or
authority have in any way been materially diminished or reduced.
12. Successors and Assigns.
(a) This Agreement shall inure to the benefit of and be binding upon
any corporate or other successor of the Bank or Parent which shall acquire,
directly or indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Bank or Parent.
(b) Since the Bank is contracting for the unique and personal skills of
the Employee, the Employee shall be precluded from assigning or delegating his
rights or duties hereunder without first obtaining the written consent of the
Bank.
13. Amendments. No amendments or additions to this Agreement shall be
binding upon the parties hereto unless made in writing and signed by both
parties, except as herein otherwise specifically provided.
14. Applicable Law. This agreement shall be governed by all respects
whether as to validity, construction, capacity, performance or otherwise, by the
laws of the Commonwealth of Virginia, except to the extent that Federal law
shall be deemed to apply.
15. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
16. Entire Agreement. This Agreement together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.
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EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT entered into this 31st day of December, 1995 ("Effective
Date"), by and between Virginia Beach Federal Savings Bank (the "Bank") and
Dennis R. Stewart (the "Employee").
WHEREAS, the Employee has heretofore been employed by the Bank as
Executive Vice President and Chief Financial Officer and is experienced in all
phases of the business of the Bank; and
WHEREAS, the parties desire by this writing to set forth the continuing
employment relationship of the Bank and the Employee.
NOW, THEREFORE, it is AGREED as follows:
1. Employment. The Employee is employed in the capacity as the
Executive Vice President and Chief Financial Officer of the Bank. The Employee
shall render such administrative and management services to the Bank and
Virginia Beach Federal Financial Corporation ("Parent") as are currently
rendered and as are customarily performed by persons situated in a similar
executive capacity. The Employee shall also promote, to the extent permitted by
law, the business of the Bank and Parent. The Employee's other duties shall be
such as the Board of Directors for the Bank (the "Board of Directors") may from
time to time reasonably direct, including normal duties as an officer of the
Bank.
2. Base Compensation. The Bank agrees to pay the Employee during the
term of this Agreement a salary at the rate of $ per annum, payable in cash not
less frequently than monthly; provided, that the rate of such salary shall be
reviewed by the Board of Directors not less often than annually, and Employee
shall be entitled to receive annually an increase at such percentage or in such
an amount as the Board of Directors in its sole discretion may decide at such
time.
3. (a) Participation in Retirement and Medical Plans. The Employee
shall be entitled to participate in any plan of the Bank relating to pension,
profit-sharing, or other retirement benefits and medical coverage or
reimbursement plans that the Bank may adopt for the benefit of its employees.
Additionally, Employee's dependent family shall be eligible to participate in
medical and dental insurance plans sponsored by the Bank or Parent. The cost of
premiums for participation in the medical coverage or reimbursement plan for the
Employee and such dependent family shall be fully paid by the Bank.
(b) Employee Benefits; Expenses. The Employee shall be eligible to
participate in any fringe benefits which may be or may become applicable to the
Bank's senior management employees, including by example, participation in any
stock option or incentive plans adopted by the Board of Directors of Bank or
Parent, club memberships, a reasonable expense account, an appropriate
automobile allowance, and any other benefits which are commensurate with the
responsibilities and functions to be performed by the Employee under this
Agreement. The Bank
shall reimburse Employee for all reasonable out-of-pocket expenses which
Employee shall incur in connection with his service for the Bank.
4. Term. The term of employment of Employee under this Agreement shall
be for the period commencing on the Effective Date and ending twenty-four (24)
months thereafter. Additionally, on each annual anniversary date from the
Effective Date, the term of employment under this Agreement shall be extended
for an additional one year period beyond the then effective expiration date upon
a determination and resolution of the Board of Directors that the performance of
the Employee has met the requirements and standards of the Board, and that the
term of such Agreement shall be extended. To the extent possible, the Board
shall furnish the Employee with not less than sixty (60) days notice of any
intention not to renew such Agreement.
5. Loyalty; Noncompetition.
(a) The Employee shall devote his full time and attention to the
performance of his employment under this Agreement. During the term of
Employee's employment under this Agreement, the Employee shall not engage in any
business or activity contrary to the business affairs or interests of the Bank
or Parent.
(b) Nothing contained in this Paragraph 5 shall be deemed to prevent or
limit the right of Employee to invest in the capital stock or other securities
of any business dissimilar from that of the Bank or Parent, or, solely as a
passive or minority investor, in any business.
(c) For a period of twelve (12) months following the voluntarily
termination by Employee of his employment hereunder, other than pursuant to
Section 11(b) of this Agreement, Employee will not accept employment with any
financial institution or entity offering similar products and services as the
Bank within the geographic area generally known as Hampton Roads, Virginia.
6. Standards. The Employee shall perform his duties under this
Agreement in accordance with such reasonable standards expected of employees
with comparable positions in comparable organizations and as may be established
from time to time by the Board of Directors. The Bank will provide Employee with
the working facilities and staff customary for similar executives and necessary
for him to perform his duties.
7. Vacation and Sick Leave. At such reasonable times as the Board of
Directors shall in its discretion permit, the Employee shall be entitled,
without loss of pay, to absent himself voluntarily from the performance of his
employment under this Agreement, with all such voluntary absences to count as
vacation time; provided that:
(a) The Employee shall be entitled to annual vacation leave in
accordance with the policies as are periodically established by the Board of
Directors for senior management employees of the Bank.
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(b) The Employee shall not be entitled to receive any additional
compensation from the Bank on account of his failure to take vacation leave and
Employee shall not be entitled to accumulate unused vacation from one fiscal
year to the next, except in either case to the extent authorized by the Board of
Directors for senior management employees of the Bank.
(c) In addition to the aforesaid paid vacations, the Employee shall be
entitled without loss of pay, to absent himself voluntarily from the performance
of his employment with the Bank for such additional periods of time and for such
valid and legitimate reasons as the Board of Directors in its discretion may
determine. Further, the Board of Directors shall be entitled to grant to the
Employee a leave or leaves of absence with or without pay at such time or times
and upon such terms and conditions as the Board of Directors in its discretion
may determine.
(d) In addition, the Employee shall be entitled to an annual sick leave
benefit as established by the Board of Directors for senior management employees
of the Bank. In the event that any sick leave benefit shall not have been used
during any year, such leave shall accrue to subsequent years only to the extent
authorized by the Board of Directors for employees of the Bank.
8. Termination and Termination Pay.
The Employee's employment under this Agreement shall be terminated upon
any of the following occurrences:
(a) The death of the Employee during the term of this Agreement, in
which event the Employee's estate shall be entitled to receive the compensation
due the Employee through the last day of the third calendar month in which
Employee's death shall have occurred.
(b) The Board of Directors may terminate the Employee's employment at
any time, but any termination by the Board of Directors other than termination
for Just Cause, shall not prejudice the Employee's right to compensation or
other benefits under the Agreement, except as specified at Section 8(c)
hereinafter. The Employee shall have no right to receive compensation or other
benefits for any period after termination for Just Cause. Termination for "Just
Cause" shall include termination because of the Employee's personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, failure to perform stated duties, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order, an extreme fiscal exigency affecting the Bank (such as
insolvency) or material breach of any provision of the Agreement.
(c) Except as provided pursuant to Section 11 herein, in the event
Employee's employment under this Agreement is terminated by the Board of
Directors without Just Cause, the Bank shall be obligated to continue to pay the
Employee the salary provided pursuant to Section 2 herein, for a period of
twelve (12) months thereafter, without regard to the term of this Agreement.
Additionally, Employee shall be compensated or reimbursed for the cost of
Employee obtaining all health, life, disability, and other benefits which the
Employee and his
3
dependents would be eligible to participate in for a period of six months based
upon the benefit levels substantially equal to those being provided Employee at
the date of termination of employment. At the election of the Employee, such
compensation to be paid hereunder shall be paid in a lump-sum amount within 30
days of such termination discounted in accordance with Section 11(a) herein; in
which case the benefit continuations noted above shall not be applicable, except
to the extent as may be required by law or the policies of the Savings Bank.
(d) If the Employee is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(4) and (g)(1)), all obligations of the Bank under this Agreement
shall terminate, as of the effective date of the order, but the vested rights of
the parties shall not be affected.
(e) If the Bank is in default (as defined in Section 3(x)(1) of FDIA)
all obligations under this Agreement shall terminate as of the date of default,
but this paragraph shall not affect any vested rights of the contracting
parties.
(f) All obligations under this Agreement shall be terminated, except to
the extent determined that continuation of this Agreement is necessary for the
continued operation of the Bank: (i) by the Director of the Office of Thrift
Supervision ("Director of OTS"), or his or her designee, at the time that the
Federal Deposit Insurance Corporation ("FDIC") or the Resolution Trust
Corporation enters into an agreement to provide assistance to or on behalf of
the Bank under the authority contained in Section 13(c) of FDIA; or (ii) by the
Director of the OTS, or his or her designee, at the time that the Director of
the OTS, or his or her designee approves a supervisory merger to resolve
problems related to operation of the Bank or when the Bank is determined by the
Director of the OTS to be in an unsafe or unsound condition. Any rights of the
parties that have already vested, however, shall not be affected by such action.
(g) The voluntary termination by the Employee during the term of this
Agreement with the delivery of no less than 60 days written notice to the Board
of Directors, other than pursuant to Section 11(b), in which case the Employee
shall be entitled to receive only the compensation, vested rights, and all
employee benefits up to the date of such termination.
(h) Notwithstanding anything herein to the contrary, any payments made to
the Employee pursuant to the Agreement, or otherwise, shall be subject to and
conditioned upon compliance with 12 U.S.C. ss.1828(k) and any regulations
promulgated thereunder.
9. Suspension of Employment. If the Employee is suspended and/or
temporarily prohibited from participating in the conduct of the Bank's affairs
by a notice served under Section 8(e)(3) or (g)(1) of the FDIA (12 U.S.C.
1818(e)(3) and (g)(1)), the Bank's obligations under the Agreement shall be
suspended as of the date of service, unless stayed by appropriate proceedings.
If the charges in the notice are dismissed, the Bank shall, (i) pay the Employee
all or part of the compensation withheld while its contract obligations were
suspended and (ii) reinstate any of its obligations which were suspended.
4
10. Disability. If the Employee shall become disabled or incapacitated
to the extent that he is unable to perform his duties hereunder, by reason of
medically determinable physical or mental impairment, as determined by a doctor
engaged by the Board of Directors, Employee shall nevertheless continue to
receive the compensation and benefits which may be payable to Employee under the
provisions of disability insurance coverage in effect for Bank employees and any
payments under the Federal Social Security Act, but in no event less than 100%
of pay for a period of 12 months and 60% for the remainder of the term of the
Agreement, if applicable. Upon returning to active full-time employment, the
Employee's full compensation as set forth in this Agreement shall be reinstated
as of the date of commencement of such activities. In the event that the
Employee returns to active employment on other than a full-time basis, then his
compensation (as set forth in Paragraph 2 of this Agreement) shall be reduced in
proportion to the time spent in said employment, or as shall otherwise be agreed
to by the parties.
11. Change in Control.
(a) Notwithstanding any provision herein to the contrary, in the event
of the involuntary termination of Employee's employment under this Agreement,
absent Just Cause, in connection with, or within twenty-four (24) months after,
any change in control of the Bank or Parent, Employee shall be paid an amount
equal the product of two times the Employee's prior calendar year's cash
compensation paid as reflected on Form W-2, excluding any commission payments
paid, but in no event in an amount in excess of the product of 2.99 times the
Employee's "base amount" as defined in Section 280G(b)(3) of the Internal
Revenue Code of 1986, as amended (the "Code") and regulations promulgated
thereunder. Said sum shall be paid, at the option of Employee, either in one (1)
lump sum within thirty (30) days of such termination discounted to the present
value of such payment using as the discount rate the "prime rate" as published
in the Wall Street Journal Eastern Edition as of the date of such payment, or in
periodic payments over the next 24 months or the remaining term of this
Agreement whichever is less, as if Employee's employment had not been
terminated, and such payments shall be in lieu of any other future payments
which the Employee would be otherwise entitled to receive under Section 8 of
this Agreement. The term "control" shall refer to the ownership, holding or
power to vote more than 25% of the Parent's or Bank's voting stock, the control
of the election of a majority of the Parent's or Bank's directors, or the
exercise of a controlling influence over the management or policies of the
Parent or Bank by any person or by persons acting as a group within the meaning
of Section 13(d) of the Securities Exchange Act of 1934. The term "person" means
an individual other than the Employee, or a corporation, partnership, trust,
association, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization or any other form of entity not specifically listed herein.
(b) Notwithstanding any other provision of this Agreement to the
contrary, Employee may voluntary terminate his employment under this Agreement
within twenty-four (24) months following a change in control of the Bank or
Parent, and Employee shall thereupon be entitled to receive the payment
described in Section 11(a) of this Agreement, upon the occurrence, or within
ninety (90) days thereafter, of any of the following events, which have not been
consented to in advance by the Employee in writing: (i) if Employee would be
required to move his
5
personal residence or perform his principal executive functions more than
thirty-five (35) miles from the Employee's primary office as of the signing of
this Agreement; (ii) if in the organizational structure of the Bank or Parent,
Employee would be required to report to a person or persons other than the
President of the Bank; (iii) if the Bank or Parent should fail to maintain
existing employee benefits plans, including material fringe benefit, stock
option and retirement plans; (iv) if Employee would be assigned duties and
responsibilities other than those normally associated with his position as
referenced at Section 1, herein; or (v) if Employee's responsibilities or
authority have in any way been materially diminished or reduced.
12. Successors and Assigns.
(a) This Agreement shall inure to the benefit of and be binding upon
any corporate or other successor of the Bank or Parent which shall acquire,
directly or indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Bank or Parent.
(b) Since the Bank is contracting for the unique and personal skills of
the Employee, the Employee shall be precluded from assigning or delegating his
rights or duties hereunder without first obtaining the written consent of the
Bank.
13. Amendments. No amendments or additions to this Agreement shall be
binding upon the parties hereto unless made in writing and signed by both
parties, except as herein otherwise specifically provided.
14. Applicable Law. This agreement shall be governed by all respects
whether as to validity, construction, capacity, performance or otherwise, by the
laws of the Commonwealth of Virginia, except to the extent that Federal law
shall be deemed to apply.
15. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
16. Entire Agreement. This Agreement together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.
6