NEWPORT BANCORP, INC. THREE-YEAR EMPLOYMENT AGREEMENT
Exhibit 10.4
NEWPORT BANCORP, INC.
THREE-YEAR EMPLOYMENT AGREEMENT
THIS AGREEMENT (the Agreement), made this 18th day of July, 2006, by and
among NEWPORT BANCORP, INC., a Maryland corporation (the Company), and KEVIN
M. MCCARTHY (Executive). References to the Bank herein shall mean NEWPORT
FEDERAL SAVINGS BANK.
W I T N E S S E T H
WHEREAS, Executive serves in a position of substantial responsibility;
WHEREAS, the Company wishes to assure the services of Executive for the period
provided in this Agreement; and
WHEREAS, Executive is willing to serve in the employ of the Company on a full-time
basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, and
upon the other terms and conditions hereinafter provided, the parties hereby agree as follows:
1. Employment. Executive is employed as the President and Chief Executive
Officer of the Company. Executive shall perform all duties and shall have all powers which are
commonly incident to the offices of President and Chief Executive Officer of the Company or
which, consistent with those offices, are delegated to him by the Board of Directors of the
Company. During the term of this Agreement, Executive also agrees to serve, if elected, as an
officer and/or director of any subsidiary of the Company and in such capacity carry out such
duties and responsibilities reasonably appropriate to that office.
2. Location and Facilities. The Executive will be furnished with the working
facilities and staff customary for executive officers with the title and duties set forth in Section 1
and as are necessary for him to perform his duties. The location of such facilities and staff shall
be at the principal administrative offices of the Company, or at such other site or sites customary
for such offices.
3. Term. The period of Executives employment under this Agreement shall be
deemed to have commenced as of the date written above and shall continue for a period of thirty-
six (36) full calendar months. The term of this Agreement shall be extended for one day each
day so that a constant thirty-six (36) calendar month term shall remain in effect, until such time
as the Board of Directors of the Company (the Board) or Executive elects not to extend the
term of the Agreement by giving written notice to the other party in accordance with the terms of
this Agreement, in which case the term of this Agreement shall be fixed and shall end on the
third anniversary of the date of such written notice
4. Base Compensation.
a. | The Company agrees to pay the Executive during the term of this Agreement a |
base salary at the rate of $210,000 per year, payable in accordance with
customary payroll practices.
b. | The Board shall review the rate of the Executives base salary based upon factors |
they deem relevant, and may maintain or increase his salary, provided that no
such action shall reduce the rate of salary below the rate in effect on the Effective
Date. The Board review shall occur each December during the term of this
Agreement.
c. | In the absence of action by the Board, the Executive shall continue to receive his |
base salary at the annual rate specified on the Effective Date or, if another rate has
been established under the provisions of this Section 4, the rate last properly
established by action of the Board under the provisions of this Section 4.
5. Bonuses. The Executive shall be entitled to participate in discretionary bonuses
or other incentive compensation programs that the Company may award from time to time to
senior management employees pursuant to bonus plans or otherwise.
6. Benefit Plans. The Executive shall be entitled to participate in such life
insurance, medical, dental, pension, profit sharing, retirement and stock-based compensation
plans and other programs and arrangements as may be approved from time to time by the
Company or its affiliates for the benefit of its employees.
7. Vacation and Leave.
a. | The Executive shall be entitled to vacation and other leave in accordance with |
policy for senior executives, or otherwise as approved by the Board.
b. | In addition to paid vacation and other leave, the Executive shall be entitled, |
without loss of pay, to absent himself voluntarily from the performance of his
employment for such additional periods of time and for such valid and legitimate
reasons as the Board may in its discretion determine. Further, the Board may
grant to the Executive a leave or leaves of absence, with or without pay, at such
time or times and upon such terms and conditions as the Board in its discretion
may determine.
8. Expense Payments and Reimbursements. The Executive shall be reimbursed
for all reasonable out-of-pocket business expenses that he shall incur in connection with his
services under this Agreement upon substantiation of such expenses in accordance with
applicable policies of the Company.
9. Automobile Allowance. During the term of this Agreement, Executive shall be
entitled to use of an automobile provided by the Company or the Bank, including insurance,
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maintenance and work-related fuel expenses, or, in the alternative and the sole discretion of the
Bank or the Company, the Executive shall be entitled to an automobile allowance which would
approximate the expense of a Bank-provided or Company provided automobile and related
insurance, maintenance and fuel costs. Executive shall comply with reasonable reporting and
expense limitations on the use of such automobile as may be established by the Bank or the
Company from time to time, and the Bank or the Company shall annually include on Executives
Form W-2 any amount of income attributable to Executives personal use of such automobile.
10. Loyalty and Confidentiality.
a. | During the term of this Agreement Executive: (i) shall devote all his time, |
attention, skill, and efforts to the faithful performance of his duties hereunder;
provided, however, that from time to time, Executive may serve on the boards of
directors of, and hold any other offices or positions in, companies or organizations
which will not present any conflict of interest with the Company or any of its
subsidiaries or affiliates, unfavorably affect the performance of Executives duties
pursuant to this Agreement, or violate any applicable statute or regulation and
(ii) shall not engage in any business or activity contrary to the business affairs or
interests of the Company or any of its subsidiaries or affiliates.
b. | Nothing contained in this Agreement shall prevent or limit Executives right to |
invest in the capital stock or other securities of any business dissimilar from that
of the Company, or, solely as a passive, minority investor, in any business.
c. | Executive agrees to maintain the confidentiality of any and all information |
concerning the operation or financial status of the Company and the Bank, the
names or addresses of any of its borrowers, depositors and other customers; any
information concerning or obtained from such customers; and any other
information concerning the Company and its affiliates to which he may be
exposed during the course of his employment. The Executive further agrees that,
unless required by law or specifically permitted by the Board in writing, he will
not disclose to any person or entity, either during or subsequent to his
employment, any of the above-mentioned information which is not generally
known to the public, nor shall he employ such information in any way other than
for the benefit of the Company and the Bank.
11. Termination and Termination Pay. Subject to Section 12 of this Agreement,
Executives employment under this Agreement may be terminated in the following
circumstances:
a. | Death. Executives employment under this Agreement shall terminate upon his |
death during the term of this Agreement, in which event Executives estate shall
be entitled to receive the compensation due to the Executive through the last day
of the calendar month in which his death occurred.
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b. | Retirement. This Agreement shall be terminated upon Executives retirement |
under the retirement benefit plan or plans in which he participates pursuant to
Section 6 of this Agreement or otherwise. Executive will receive the
compensation due to him through his retirement date.
c. | Disability. |
i. | The Board or Executive may terminate Executives employment after |
having determined Executive has a Disability. For purposes of this
Agreement, Disability means a physical or mental infirmity that impairs
Executives ability to substantially perform his duties under this
Agreement and that results in Executive becoming eligible for long-term
disability benefits under any long-term disability plans of the Company
and its affiliates or subsidiaries (or, if there are no such plans in effect, that
impairs Executives ability to substantially perform his duties under this
Agreement for a period of one hundred eighty (180) consecutive days).
The Board shall determine whether or not Executive is and continues to be
permanently disabled for purposes of this Agreement in good faith, based
upon competent medical advice and other factors that they reasonably
believe to be relevant. As a condition to any benefits, the Board may
require Executive to submit to such physical or mental evaluations and
tests as it deems reasonably appropriate.
ii. | In the event of such Disability, Executives obligation to perform services |
under this Agreement will terminate. The Company will pay Executive,
as Disability pay, an amount equal to 75% of Executives bi-weekly rate
of base salary in effect as of the date of his termination of employment due
to Disability. Disability payments will be made on a monthly basis and
will commence on the first day of the month following the effective date
of Executives termination of employment for Disability and end on the
earlier of: (A) the date he returns to full-time employment at the Company
in the same capacity as he was employed prior to his termination for
Disability; (B) his death; (C) upon attainment of age 65 or (D) the date this
Agreement would have expired had Executives employment not
terminated by reason of disability. Such payments shall be reduced by the
amount of any short- or long-term disability benefits payable to the
Executive under any other disability programs sponsored by the Company
or its affiliates. In addition, during any period of Executives Disability,
Executive and his dependents shall, to the greatest extent possible,
continue to be covered under all benefit plans (including, without
limitation, retirement plans and medical, dental and life insurance plans)
of the Company and its affiliates, in which Executive participated prior to
his Disability on the same terms as if Executive were actively employed
by the Company.
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d. | Termination for Cause. |
i. | The Board may, by written notice to the Executive in the form and manner |
specified in this paragraph, terminate his employment at any time, for
Cause. The Executive shall have no right to receive compensation or
other benefits for any period after termination for Cause. Termination for
Cause shall mean termination because of, in the good faith
determination of the Board, Executives:
(1) | Personal dishonesty; |
(2) | Incompetence; |
(3) | Willful misconduct; |
(4) | Breach of fiduciary duty involving personal profit; |
(5) | Intentional failure to perform stated duties; |
(6) | Willful violation of any law, rule or regulation (other than traffic |
violations or similar offenses) that reflects adversely on the
reputation of the Company and the Bank, any felony conviction,
any violation of law involving moral turpitude or any violation of a
final cease-and-desist order; or
(7) | Material breach by Executive of any provision of this Agreement. |
ii. | Notwithstanding the foregoing, Executive shall not be deemed to have |
been terminated for Cause by the Company unless there shall have been
delivered to Executive a copy of a resolution duly adopted at a meeting of
such Board where in the good faith opinion of the Board, Executive was
guilty of the conduct described above and specifying the particulars thereof.
e. | Voluntary Termination by Executive. In addition to his other rights to terminate |
under this Agreement, Executive may voluntarily terminate employment during
the term of this Agreement upon at least sixty (60) days prior written notice to the
Board, in which case Executive shall receive only his compensation, vested rights
and employee benefits up to the date of his termination. Following a voluntary
termination of employment under this Section 11(e), Executive will be subject to
the restrictions set forth in Sections 11(g)(i) and 11(g)(ii) of this Agreement for a
period of one (1) year from his termination date.
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f. | Without Cause or With Good Reason. |
i. | In addition to termination pursuant to Sections 11(a) through 11(e) the |
Board, may, by written notice to Executive, immediately terminate his
employment at any time for a reason other than Cause (a termination
Without Cause) and Executive may, by written notice to the Board,
immediately terminate this Agreement at any time within ninety (90) days
following an event constituting Good Reason as defined below (a
termination With Good Reason).
ii. | Subject to Section 12 of this Agreement, in the event of termination under |
this Section 11(f), Executive shall be entitled to receive his base salary in
effect as of his termination date for the remaining term of the Agreement
paid in one lump sum within ten (10) calendar days of such termination.
Also, in such event, Executive shall, for the remaining term of the
Agreement, receive the benefits he would have received during the
remaining term of the Agreement under any retirement programs (whether
tax-qualified or non-qualified) in which Executive participated prior to his
termination (with the amount of the benefits determined by reference to
the benefits received by the Executive or accrued on his behalf under such
programs during the twelve (12) months preceding his termination) and
continue to participate in any benefit plans of the Company or its affiliates
that provide health (including medical and dental), or life insurance, or
similar coverage upon terms no less favorable than the most favorable
terms provided to senior executives of the Company or its affiliates during
such period. In the event that the Company or its affiliates are unable to
provide such coverage by reason of Executive no longer being an
employee, the Company shall provide Executive with comparable
coverage on an individual policy basis.
iii. | Good Reason shall exist if, without Executives express written consent, |
the Company materially breach any of their respective obligations under
this Agreement. Without limitation, such a material breach shall be
deemed to occur upon any of the following:
(1) | A material reduction in Executives responsibilities or authority in |
connection with his employment with the Company;
(2) | Assignment to Executive of duties of a non-executive nature or |
duties for which he is not reasonably equipped by his skills and
experience;
(3) | Failure of the Executive to be nominated or re-nominated to the |
Board to the extent Executive is a Board member prior to the
Effective Date;
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(4) | A reduction in salary or benefits contrary to the terms of this |
Agreement, or, following a Change in Control as defined in
Section 12 of this Agreement, any reduction in salary or material
reduction in benefits below the amounts to which he was entitled
prior to the Change in Control;
(5) | Termination of incentive and benefit plans (other than the Banks |
tax-qualified plans), programs or arrangements, or reduction of
Executives participation to such an extent as to materially reduce
their aggregate value below their aggregate value as of the
Effective Date;
(6) | A requirement that Executive relocate his principal business office |
or his principal place of residence outside of the area consisting of
a twenty-five (25) mile radius from the current main office of the
Company and any branch of the Bank, or the assignment to
Executive of duties that would reasonably require such a
relocation; or
(7) | liquidation or dissolution of the Company. |
iv. | Notwithstanding the foregoing, a reduction or elimination of the |
Executives benefits under one or more benefit plans maintained by the
Company or an affiliate as part of a good faith, overall reduction or
elimination of such plans or plans or benefits thereunder applicably to all
participants in a manner that does not discriminate against Executive
(except as such discrimination may be necessary to comply with law) shall
not constitute an event of Good Reason or a material breach of this
Agreement, provided that benefits of the type or to the general extent as
those offered under such plans prior to such reduction or elimination are
not available to other officers of the Company or any affiliate under a plan
or plans in or under which Executive is not entitled to participate.
g. | Continuing Covenant Not to Compete or Interfere with Relationships. Regardless |
of anything herein to the contrary, following a termination by the Company or
Executive pursuant to Section 11(f):
i. | Executives obligations under Section 10(c) of this Agreement will |
continue in effect; and
ii. | During the period ending on the first anniversary of such termination, the |
Executive shall not serve as an officer, director or employee of any bank
holding company, bank, savings bank, savings and loan holding company,
or mortgage company (any of which, a Financial Institution) which
Financial Institution offers products or services competing with those
offered by the Company or its subsidiaries or affiliates from any office
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within fifty (50) miles from the main office of the Company or any branch
of the Bank and, further, Executive shall not interfere with the relationship
of the Company, its subsidiaries or affiliates and any of its employees,
agents, or representatives.
12. Termination in Connection with a Change in Control.
a. | For purposes of this Agreement, a Change in Control means any of the following |
events:
(i) | Merger: The Company merges into or consolidates with another |
corporation, or merges another corporation into the Company, and as a
result less than a majority of the combined voting power of the resulting
corporation immediately after the merger or consolidation is held by
persons who were stockholders of the Company immediately before the
merger or consolidation.
(ii) | Acquisition of Significant Share Ownership: There is filed or required to |
be filed a report on Schedule 13D or another form or schedule (other than
Schedule 13G) required under Sections 13(d) or 14(d) of the Securities
Exchange Act of 1934, if the schedule discloses that the filing person or
persons acting in concert has or have become the beneficial owner of 25%
or more of a class of the Companys voting securities, but this clause (b)
shall not apply to beneficial ownership of Company voting shares held in a
fiduciary capacity by an entity of which the Company directly or
indirectly beneficially owns 50% or more of its outstanding voting
securities.
(iii) | Change in Board Composition: During any period of two consecutive |
years, individuals who constitute the Companys Board of Directors at the
beginning of the two-year period cease for any reason to constitute at least
a majority of the Companys Board of Directors; provided, however, that
for purposes of this clause (iii), each director who is first elected by the
board (or first nominated by the board for election by the stockholders) by
a vote of at least two-thirds (2/3) of the directors who were directors at the
beginning of the two-year period shall be deemed to have also been a
director at the beginning of such period; or
(iv) | Sale of Assets: The Company sells to a third party all or substantially all |
of its assets.
b. | Termination. If within the period ending two (2) years after a Change in Control, |
(i) the Company shall terminate the Executives employment Without Cause, or
(ii) Executive voluntarily terminates his employment With Good Reason, the
Company shall, within ten (10) calendar days of the termination of Executives
employment, make a lump-sum cash payment to him equal to three (3) times the
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Executives average Annual Compensation over the five (5) most recently
completed calendar years ending with the year immediately preceding the
effective date of the Change in Control. In determining Executives average
Annual Compensation, Annual Compensation shall include base salary and any
other taxable income, including but not limited to amounts related to the granting,
vesting or exercise of restricted stock or stock option awards, commissions,
bonuses (whether paid or accrued for the applicable period), as well as, retirement
benefits, director or committee fees and fringe benefits paid or to be paid to
Executive or paid for Executives benefit during any such year, profit sharing,
employee stock ownership plan and other retirement contributions or benefits,
including to any tax-qualified plan or arrangement (whether or not taxable) made
or accrued on behalf of Executive of such year. The cash payment made under
this Section 12(a) shall be made in lieu of any payment also required under
Section 11(f) of this Agreement because of a termination in such period.
Executives rights under Section 11(f) are not otherwise affected by this Section
12. Also, in such event, the Executive shall, for a thirty-six (36) month period
following his termination of employment, receive the benefits he would have
received over such period under any retirement programs (whether tax-qualified
or nonqualified) in which the Executive participated prior to his termination (with
the amount of the benefits determined by reference to the benefits received by the
Executive or accrued on his behalf under such programs during the twelve (12)
months preceding the Change in Control) and continue to participate in any
benefit plans of the Company and/or the Bank that provide health (including
medical and dental), or life insurance, or similar coverage upon terms no less
favorable than the most favorable terms provided to senior executives of the
Company or its subsidiaries during such period. In the event that the Company or
its subsidiaries are unable to provide such coverage by reason of the Executive no
longer being an employee, the Company or its subsidiaries shall provide the
Executive with comparable coverage on an individual policy.
c. | The provisions of Section 12 and Sections 14 through 27, including the defined |
terms used is such sections, shall continue in effect until the later of the expiration
of this Agreement or two (2) years following a Change in Control.
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13. Indemnification and Liability Insurance. Subject to, and limited by
Section 27(b) of this Agreement, the Company shall provide the following:
a. | Indemnification. The Company agrees to indemnify the Executive (and his heirs, |
executors, and administrators), and to advance expenses related thereto, to the
fullest extent permitted under applicable law and regulations against any and all
expenses and liabilities reasonably incurred by him in connection with or arising
out of any action, suit, or proceeding in which he may be involved by reason of
his having been a director or Executive of the Company or any affiliate or
subsidiary of the Company (whether or not he continues to be a director or
Executive at the time of incurring any such expenses or liabilities) such expenses
and liabilities to include, but not be limited to, judgments, court costs, and
attorneys fees and the cost of reasonable settlements, such settlements to be
approved by the Board, if such action is brought against the Executive in his
capacity as an Executive or director of the Company or any affiliate or subsidiary
of the Company. Indemnification for expense shall not extend to matters for
which the Executive has been terminated for Cause. Nothing contained herein
shall be deemed to provide indemnification prohibited by applicable law or
regulation. Notwithstanding anything herein to the contrary, the obligations of
this Section 13 shall survive the term of this Agreement by a period of six (6)
years.
b. | Insurance. During the period in which indemnification of the Executive is |
required under this Section, the Company shall provide the Executive (and his
heirs, executors, and administrators) with coverage under a directors and
Executives liability policy at the expense of the Company, at least equivalent to
such coverage provided to directors and senior Executives of the Company and
subsidiaries.
14. Reimbursement of Executives Expenses to Enforce this Agreement. The
Company shall reimburse the Executive for all reasonable out-of-pocket expenses, including,
without limitation, reasonable attorneys fees, incurred by the Executive in connection with
successful enforcement by the Executive of the obligations of the Company to the Executive
under this Agreement. Successful enforcement shall mean the grant of an award of money or the
requirement that the Company take some action specified by this Agreement: (i) as a result of
court order; or (ii) otherwise by the Company following an initial failure of the Company to pay
such money or take such action promptly after written demand therefor from the Executive
stating the reason that such money or action was due under this Agreement at or prior to the time
of such demand.
15. Adjustment of Certain Payments and Benefits.
a. | Tax Indemnification. Anything in this Agreement to the contrary notwithstanding |
and except as set forth below, in the event it shall be determined that any
payment, benefit or distribution made or provided by the Company to or for the
benefit of the Executive (whether made or provided pursuant to the terms of this
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Agreement or otherwise) (each referred to herein as a Payment), would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the Code) or any interest or penalties are incurred by the
Executive with respect to such excise tax (the excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the Excise Tax),
the Executive shall 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 interest or penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
b. | Determination of Gross-Up Payment. Subject to the provisions of Section 15(c) |
of this Agreement, all determinations required to be made under this Section 15,
including whether and when a Gross-Up Payment is required, the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by a certified public accounting firm reasonably
acceptable to the Company as may be designated by the Executive (the
Accounting Firm) which shall provide detailed supporting calculations to the
Company and the Executive within fifteen (15) business days of the receipt of
notice from the Executive that there has been a Payment, or such earlier time as is
requested by the Company. All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 15, shall be paid by the Company to the Executive within
five (5) business days of the later of (i) the due date for the payment of any Excise
Tax, and (ii) the receipt of the Accounting Firms determination. Any
determination by the Accounting Firm shall be binding upon the Company and
the Executive. As a result of the uncertainty in the application of Section 4999 of
the Code, at the time of the initial determination by the Accounting Firm
hereunder, it is possible that a Gross-Up Payment will not have been made by the
Company which should have been made (an Underpayment), consistent with
the calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 15(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of
the Executive.
c. | Treatment of Claims. The Executive shall notify the Company in writing of any |
claim by the Internal Revenue Service that, if successful, would require a Gross-
Up Payment to be made. Such notification shall be given as soon as practicable,
but no later than ten (10) business days, after the Executive is informed in writing
of such claim and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the thirty (30) day period following the date
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on which it gives such notice to the Company (or any shorter period ending on the
date that payment of taxes with respect to such claim is due). If the Company
notifies the Executive in writing prior to the expiration of this period that it
desires to contest such claim, the Executive shall:
i. | give the Company any information reasonably requested by the Company |
relating to such claim;
ii. | take such action in connection with contesting such claim as the Company |
shall reasonably request in writing from time to time, including, without
limitation, accepting legal representation with respect to such claim by an
attorney reasonably selected by the Company;
iii. | cooperate with the Company in good faith in order to effectively contest |
such claim; and
iv. | permit the Company to participate in any proceedings relating to such |
claim; provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties) incurred in
connection with such contest and indemnity and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or related taxes,
interest or penalties imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing
provisions of this Section 15(c) of this Agreement, the Company shall
control all proceedings taken in connection with such contest and, at their
option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority with
respect to such claim and may, at their option, either direct the Executive
to pay the tax claimed and sue for a refund or contest the claim in any
permissible manner. Further, the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company
shall determine; provided, however, that if the Company directs the
Executive to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to the Executive, on an interest-free
basis (including interest or penalties with respect thereto). Furthermore,
the Companys control of the contest shall be limited to issues with respect
to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any
other issues raised by the Internal Revenue Service or any other taxing
authority.
d. | Adjustments to the Gross-Up Payment. If, after the receipt by the Executive of an |
amount advanced by the Company pursuant to Section 15(c) of this Agreement,
the Executive becomes entitled to receive any refund with respect to such claim,
the Executive shall (subject to the Companys compliance with the requirements
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of Section 15(c) of this Agreement) promptly pay to the Company the amount of
such refund (together with any interest paid or credited thereon after applicable
taxes). If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 15(c) of this Agreement, a determination is made
that the Executive shall not be entitled to any refund with respect to such claim
and such denial of refund occurs prior to the expiration of thirty (30) days after
such determination, then such advance shall be forgiven and shall not be required
to be repaid and the amount of such advance shall offset, to the extent thereof, the
amount of the Gross-Up Payment required to be paid.
16. Injunctive Relief. If there is a breach or threatened breach of Section 11(g) of
this Agreement or the prohibitions upon disclosure contained in Section 10(c) of this Agreement,
the parties agree that there is no adequate remedy at law for such breach, and that the Company
shall be entitled to injunctive relief restraining the Executive from such breach or threatened
breach, but such relief shall not be the exclusive remedy hereunder for such breach. The parties
hereto likewise agree that the Executive, without limitation, shall be entitled to injunctive relief
to enforce the obligations of the Company under this Agreement.
17. Successors and Assigns.
a. | This Agreement shall inure to the benefit of and be binding upon any corporate or |
other successor of the Company which shall acquire, directly or indirectly, by
merger, consolidation, purchase or otherwise, all or substantially all of the assets
or stock of the Company.
b. | Since the Company is contracting for the unique and personal skills of Executive, |
Executive shall be precluded from assigning or delegating his rights or duties
hereunder without first obtaining the written consent of the Company.
18. No Mitigation. Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise and no such
payment shall be offset or reduced by the amount of any compensation or benefits provided to
Executive in any subsequent employment.
19. Notices. All notices, requests, demands and other communications in connection
with this Agreement shall be made in writing and shall be deemed to have been given when
delivered by hand or 48 hours after mailing at any general or branch United States Post Office,
by registered or certified mail, postage prepaid, addressed to the Company at their principal
business offices and to Executive at his home address as maintained in the records of the
Company.
20. No Plan Created by this Agreement. Executive and the Company expressly
declare and agree that this Agreement was negotiated among them and that no provision or
provisions of this Agreement are intended to, or shall be deemed to, create any plan for purposes
of the Employee Retirement Income Security Act or any other law or regulation, and each party
expressly waives any right to assert the contrary. Any assertion in any judicial or administrative
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filing, hearing, or process that such a plan was so created by this Agreement shall be deemed a
material breach of this Agreement by the party making such an assertion.
21. Amendments. No amendments or additions to this Agreement shall be binding
unless made in writing and signed by all of the parties, except as herein otherwise specifically
provided.
22. Applicable Law. Except to the extent preempted by Federal law, the laws of the
State of Maryland shall govern this Agreement in all respects, whether as to its validity,
construction, capacity, performance or otherwise.
23. 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.
24. Headings. Headings contained herein are for convenience of reference only.
25. Entire Agreement. This Agreement, together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute the entire agreement
among the parties hereto with respect to the subject matter hereof, other than written agreements
with respect to specific plans, programs or arrangements described in Sections 5 and 6.
26. Source of Payments. Notwithstanding any provision in this Agreement to the
contrary, to the extent payments and benefits, as provided for under this Agreement, are paid or
received by Executive under the Employment Agreement in effect between Executive and the
Bank, the payments and benefits paid by the Bank will be subtracted from any amount or benefit
due simultaneously to Executive under similar provisions of this Agreement. Payments will be
allocated in proportion to the level of activity and the time expended by Executive on activities
related to the Company and the Bank, respectively, as determined by the Company and the Bank.
27. Miscellaneous. In the event any of the foregoing provisions of this Section 27
are in conflict with the terms of this Agreement, this Section 27 shall prevail.
a. | The Board may terminate Executives employment at any time, but any |
termination by the Company, other than Termination for Cause, shall not
prejudice Executives right to compensation or other benefits under this
Agreement. Executive shall not have the right to receive compensation or other
benefits for any period after Termination for Cause as defined in Section 11(d)
hereinabove.
b. | Any payments made to employees pursuant to this Agreement, or otherwise, are |
subject to and conditioned upon their compliance with 12 U.S.C. §1828(k) and
FDIC regulation 12 C.F.R. Part 359, Golden Parachute and Indemnification
Payments.
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c. | Notwithstanding anything in this Agreement to the contrary, if the Company in |
good faith determines that amounts that, as of the effective date of the Executives
termination of employment are or may become payable to the Executive upon
termination of his employment hereunder are required to be suspended or delayed
for six months in order to satisfy the requirements of Section 409A of the Code,
then the Company will so advise the Executive, and any such payments shall be
suspended and accrued for six months, whereupon they shall be paid to the
Executive in a lump sum (together with interest thereon at the then-prevailing
prime rate).
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first set forth above.
Attest: | NEWPORT BANCORP, INC. | |||||
/s/ Judy Tucker | By: | /s/ Peter W. Rector | ||||
Chairman of the Board of Directors | ||||||
Witness: | EXECUTIVE | |||||
/s/ Judy Tucker | /s/ Kevin M. McCarthy | |||||
Kevin M. McCarthy |
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