EMPLOYMENT AGREEMENT

 

 

Cause.  For purposes of this Agreement, “Cause”, with respect to the termination by Employer of Executive’s employment shall mean (i) the willful and continued failure by Executive to perform his duties for Employer under this Agreement after at least one warning in writing from the Board or its designee identifying specifically any such failure; (ii) willful misconduct of any type by Executive, including, but not limited to, the disclosure or improper use of confidential information under Section 11 of this Agreement, which causes material injury to either or both of CPB or TRCB, as specified in a written notice to Executive from the Board or its designee; or (iii) the Executive’s conviction of a crime (other than a traffic violation), habitual drunkenness, drug abuse, or excessive absenteeism ( other than for illness), after a warning (with respect to drunkenness or absenteeism only) in writing from the Board or its designee to refrain from such behavior.  No act or failure to act on the part of Executive shall be considered to have been willful for purposes of clause (i) or (ii) of this Section 1a unless done, or omitted to be done, by Executive not in good faith and without reasonable belief that the action or omission was in the best interest of Employer.

 

Good Reason.  When used with reference to a termination by Executive of his employment with Employer, “Good Reason” shall mean (a) any material breach by Employer of, or material failure of Employer to tender performance under, this Agreement, as well as (b) any of the following, if taken without Executive’s express written consent, as to either of CPB or TRCB, or both of CPB and TRCB, but only if, and to the extent that, such action or failure to act by Employer constitutes a “material negative change”, within the meaning of Treas. Reg. Sec. 1.409A-1(n)(2)(i), to Executive in his relationship with the Employer so as to result in the termination by Executive of his employment relationship with Employer for “Good Reason” being an “involuntary separation from service” within the meaning of Treas. Reg. Sec. 1.409A-1(n):

 

i.

The assignment to Executive of any duties inconsistent with, or the reduction of powers or functions associated with, Executive’s position, title, duties, responsibilities and status as President and Chief Executive Officer of either or both of CPB and TRCB; or any removal of the Executive as, or any failure to continue the Executive as, President and Chief Executive Officer of either or both of CPB and TRCB.  A change in position, title, duties, responsibilities and status, or position(s) or office(s), resulting merely from a merger or consolidation of CPB or TRCB into or with another bank or company shall not meet the requirements of this paragraph if, and only if, Executive’s new title and responsibilities are accepted in writing by Executive, in the sole discretion of Executive.

 

ii.

 

iii.

Any transfer by Employer of Executive to another geographic location outside of New Jersey or more than 50 miles from his office location.

 

iv.

The failure by Employer to continue in effect any 401(k) plan, stock option plan, life insurance plan, health and accident plan, or disability plan in which Executive participates, or the taking of any action by Employer which would adversely affect Executive’s participation in or materially reduce Executive’s benefits under any of such plans; the failure to continue, or the taking of any action which would deprive Executive of any material fringe benefit enjoyed by Executive; or any reduction by Employer in the number of paid vacation days to which Executive would, but for such reduction, be entitled.

 

 

Compensation.  Employer shall pay to Executive compensation for his services during the term of this Agreement as follows:

 

Base Compensation.  Base compensation for each calendar year during the term of this Agreement in that amount which is determined by the Board for each such year, but not less than $225,000 for any such year, which shall be payable in installments in accordance with Employer’s payroll policies.

 

Bonus.  A discretionary annual bonus in that amount which is determined by the Board in the exercise of their sole discretion, which bonus will be based on performance standards that will be consistent with industry standards for similarly situated bank holding companies and community banks.

 

Annual Increase.  During the term of this Agreement, the Compensation Committee of the Board and the Board shall review Executive’s compensation on an annual basis.  The Board may, in the exercise of its discretion, award him increased compensation to reflect the impact of inflation, his performance, Employer's financial performance, and competitive compensation levels, all as determined in the sole discretion of the Board.  Any increase in compensation may take any form, including but not limited to an increase in annual salary.

 

Expenses and Fringe Benefits.  During the term of this Agreement, Executive shall be entitled to reimbursement for all business expenses incurred by him with respect to the business of Employer; PROVIDED, HOWEVER, that if the deduction by Employer for federal income tax purposes of any expense which is incurred by Executive and reimbursed to Executive by Employer is disallowed as a result of not being an ordinary and necessary business expense under the then current version of Section 162 of the Internal Revenue Code, then Executive shall repay the amount of such reimbursed expense to Employer; AND FURTHER PROVIDED that, notwithstanding the foregoing clause of this sentence, Executive shall not be obligated to repay to Employer any business expense incurred by him and reimbursed to him by the Bank the deductibility of w hich is prohibited or limited by the application of a specific statutory, regulatory or administrative principle, and which would otherwise be deductible to Employer as an ordinary and necessary business expense under the then current version of Section 162 of the Internal Revenue Code.  Executive consents to the withholding by Employer of any such amount from that paycheck of Executive which immediately succeeds the final disallowance by the Internal Revenue Service of the deduction of such reimbursed expense, but only if the withholding of such amount would not violate applicable wage and hour laws; vacation and sick days, in accordance with the practices and procedures of Employer; coverage under the hospital, health, medical, dental and life insurance benefits programs maintained by Employer, under terms which are the same as those which are applicable, from time to time, to other executive officers of Employer.  Notwithstanding anything in this section to the contrary, if Employer ad opts any change in the expenses allowed to, or fringe benefits provided for, executive officers of Employer, and such policy is uniformly applied to all executive officers of Employer, then no such change in policy shall be deemed to be a violation of this provision.

 

Termination for Cause.  Employer shall have the right to terminate Executive for Cause, upon written notice to him which shall specify the reasons for the termination.  In the event of termination for Cause, Executive shall be entitled only to such Base Compensation which has accrued but not been paid to the date of termination, but shall not be entitled to any further benefits under this Agreement, or the payment of any additional amounts under this Agreement.  This Agreement shall terminate ipso facto upon any termination of Executive's employment for Cause.

 

Disability.  If at any time during the term of this Agreement Executive becomes permanently disabled and is, as a direct result of such permanent disability, unable to effectively function as President and Chief Executive Officer of CPB and TRCB with reasonable accommodation by Employer, as determined by the consensus opinion of Executive's personal physician and that physician who is retained by CPB and TRCB, then Employer may, upon the payment by Employer to Executive of a single lump sum payment in an amount equal to Executive's Base Compensation as of the date of such determination of disability, terminate the employment of the Executive.   In such event, (i) this Agreement shall terminate ipso facto, and (ii) Executive shall not be entitled to any further payments or benefits under this Agreement, but shall be entitled to payments under any disability policy which Employer may have obtained for the benefit of its executive officers generally, and such benefits as are provided by Employer to those of its executive officers whose employment terminates by reason of permanent disability.

 

Death Benefits.  Upon the Executive’s death during the term of this Agreement, (i) Executive shall be entitled to the benefits of any life insurance policy or supplemental executive retirement plan paid for, or maintained by, Employer, and (ii) Employer shall, within sixty days of Executive's death, pay to Executive's designated beneficiary a single lump sum payment in an amount equal to Executive's Base Compensation as of the date of Executive's death.

 

Termination without Cause or Resignation for Good Reason.  Employer may terminate Executive without Cause during the term of this Agreement upon four weeks’ prior written notice to Executive, and Executive may resign for Good Reason during the term of this Agreement, but only in full accordance with the terms of the third full paragraph of this Section 9.  If Employer terminates Executive’s employment during the term of this Agreement without Cause or if the Executive resigns during the term of this Agreement for Good Reason, the Employer shall, on or before that date which is the later of (i) twenty (20) business days after the termination of employment, or (ii) the next regular banking business day following the actual effective date of the fully executed and delivered Release required under Sect ion 14 of this Agreement as a condition precedent to the payment by Employer to Executive of any amount otherwise payable under this Section 9 (it being the intention of Employer and Executive that the payment of the Lump Sum Payment, as defined below, constitute a short term deferral within the meaning of Treas. Reg. Sec. 1.409A-1(b)(4)), pay Executive a lump sum equal to two (2) times the highest annual compensation, including only salary and cash bonus, paid to Executive during the full calendar year immediately preceding the termination of employment (the “Lump Sum Payment”).

 

Resignation without Good Reason.  Executive shall be entitled to resign from the employment of Employer at any time during the term of this Agreement without Good Reason, but upon such resignation, Executive shall not be entitled to any additional compensation for the time after which he ceases to be employed by Employer, and shall not be entitled to any of the payments or other benefits which would otherwise be provided to Executive under this Agreement.  No such resignation shall be effective unless in writing with four weeks’ notice thereof.  For all purposes of this Agreement, the retirement by Executive from his employment with Employer shall be deemed to be a resignation by Executive without Good Reason.

 

 

Non-Disclosure of Confidential Information.  Except in the course of his employment with Employer and in pursuit of the business of CPB, TRCB or any of their subsidiaries or affiliates, Executive shall not, at any time during or following the term of this Agreement, disclose or use for any purpose any confidential information or proprietary data of CPB, TRCB or any of their respective subsidiaries or affiliates.  Executive agrees that, among other things, all information concerning the identity of, and CPB’s and TRCB’s relations with, their respective customers is confidential and proprietary information.

 

Specific Performance.   Executive agrees that CPB and TRCB do not have an adequate remedy at law for the breach of this section and agrees that he shall be subject to injunctive relief and equitable remedies as a result of any breach of this section.  The invalidity or unenforceability of any provision of this Agreement shall not affect the force and effect of the remaining valid portions.

 

Survival.   This section shall survive the termination of the Executive’s employment hereunder and the expiration of this Agreement.

 

Term.   This Agreement shall have, and be in effect for, a term which commences on the date of its execution and ends on the later of (i) May 31, 2013, or (ii) if a Change in Control as defined in this Section 12 occurs at any time on or before May 31, 2013, the second anniversary of the occurrence of such Change in Control.  For purposes of this Section 12 of this Agreement, “Change in Control” shall mean the occurrence of any of the following events:

 

Section 280G.  Notwithstanding any other provision of this Agreement to the contrary, if Employer determines in good faith that any payment or benefit received or to be received by Executive pursuant to this Agreement, or otherwise (with all such payments and benefits, including, without limitation, salary and bonus payments, being defined as “Total Payments”) would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code by reason of being considered to be “contingent on a change in ownership or control” of Employer within the meaning of Section 280G of the Code, then such Total Payments shall be reduced in the manner reasonably determined by Employer, in its sole discretion, to the extent necessary so that the Total Payments will be less than three times Executive's  220;base amount” (as defined in Section 280G(b)(3) of the Code).

 

Release in Favor of the CPB Corporate Group as a Condition Precedent.  As a condition precedent to the actual payment by Employer to Executive of any amount otherwise payable under Section 9 of this Agreement, Executive must execute and deliver a full release in favor of CPB, TRCB, their respective affiliates and subsidiaries, and their respective officers and directors, which release shall (i) be in form and content which is fully compliant with all of those provisions of law to which the release pertains, and reasonably satisfactory to counsel to Employer; (ii) cover all actual or potential claims arising from Executive’s employment by Employer and the termination of such employment; and (iii) be prepared, reviewed and executed in a manner which is consiste nt with all requirements of law, including the Age Discrimination in Employment Act and the Older Workers Benefit Protection Act.  Such release shall not affect (a) vested rights or interests; (b) claims arising under the release agreement, itself; or (c) claims not capable of release as a matter of law, including without limitation (i) workers compensation claims and (ii) claims for unemployment benefits.

 

Termination of Previous Agreements.  Upon the execution and delivery of this Agreement, all of those certain Change in Control, Excise Tax Reimbursement, and Continuation of Benefits Agreements between Employer and Executive shall be deemed to have been terminated, and without further force or effect, ipso facto.

 

Covenant Not to Compete. Executive agrees that if, and only if, either (i) Executive is terminated by Employer with Cause, or (ii) Executive resigns without Good Reason from his employment with Employer, then for a period of twelve (12) months from the date when Executive’s employment with Employer ends, he shall not (a) become employed or retained by, directly or indirectly, any bank or other regulated financial services institution with an office or operating branch in any county in New Jersey within which TRCB or any other then existing subsidiary of CPB maintains an office or branch, which bank or institution (i) directly competes with TRCB or any other then existing subsidiary or CPB, and (ii) could reasonably be expected to materially adversely affect the revenue s generated by TRCB or any other then existing subsidiary of CPB, or (b) solicit, entice or induce any person who, at any time during the one year period through such date was, or at any time during the period of twelve (12) months from the date when Executive’s employment with Employer ends is, either an employee of Employer in a senior managerial, operational or lending capacity, or a highly skilled employee with access to and responsibility for any confidential information, to become employed or engaged by Executive or any person, firm, company or association in which Executive has an interest; approach any such person for any such purpose; or authorize or knowingly approve the taking of such actions by any other person or entity.  Executive acknowledges that the terms and conditions of this restrictive covenant are reasonable and necessary to protect CPB, its subsidiaries, and its affiliates, and that Employer’s tender of performance under this Agreement is fair, adequate and valid consideration in exchange for his promises under this Paragraph 16 of this Agreement.  Executive further acknowledges that his knowledge, skills and abilities are sufficient to permit him to earn a satisfactory livelihood without violating the provisions of this Paragraph 16.  Executive agrees that, should Employer reasonably conclude that Executive has failed to fully comply with all of the terms of this Section 16, Employer may apply to a court of competent jurisdiction for such equitable relief as Employer believes to be necessary and effective, and may pursue a claim against Executive for damages.  Executive further agrees that Executive shall reimburse Employer for all legal fees incurred by Employer in (i) applying for and securing such equitable relief as is granted under the preceding sentence, and (ii) asserting and pursuing a claim for damages under the preceding sentence which is adjudicated wholly or partially in favor of Employer.

 

Severance Compensation and Benefits not in Derogation of Other Benefits. Subject only to those particular terms of this Agreement to the contrary, the payment or obligation to pay any monies, or the granting of any benefits, rights or privileges to Executive as provided in this Agreement shall not be in lieu or derogation of the rights and privileges that Executive now has or will have under any plans or programs of Employer including, but not limited to, any stock option plan, equity compensation plan, qualified retirement plan, 401(k) plan, or supplemental executive retirement plan maintained by Employer.

 

(a) General: This Agreement shall be the joint and several obligation of CPB and TRCB. The terms of this Agreement shall be governed by, and interpreted and construed in accordance with the provisions of, the laws of New Jersey and, to the extent applicable, Federal law.  Except as specifically set forth in this Agreement, this Agreement supersedes all prior agreements and understandings with respect to the matters covered hereby.  The amendment or termination of this Agreement may be made only in a writing executed by Employer and Executive, and no amendment or termination of this Agreement shall be effective unless and until made in such a writing.  No waiver of any right, remedy or form of relief shall be implied from conduct or circumstance, but must instead be expressed clearly in a writing signed by the party against whom the purported waiver is sought.  This Agreement shall be binding upon any successor (whether direct or indirect, by purchase, merge, consolidation, liquidation or otherwise) to the business, or all or substantially all of the assets, of CPB or TRCB (with such successor being defined as an “Acquiring Entity”).  This Agreement is personal to Executive, and Executive may not assign any of his rights or duties hereunder, but those provisions of this Agreement which, by their terms, survive the death or disability of Executive shall be enforceable by the Executive’s legal representatives, executors or administrators.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. Employer shall, as part of any acquisition of Employer, the business of Employer, or all or substantially all of the assets of E mployer obtain an enforceable assumption in writing by (i) the Acquiring Entity, or (ii) if the Acquiring Entity is a bank, the holding company parent of the Acquiring Entity of this Agreement and the obligations of Employer under this Agreement, and shall provide a copy of such assumption to the Executive.