FORM OF SECOND AMENDED AND RESTATED MANAGEMENT CONTINUITY AGREEMENT
Exhibit 10.3
FORM OF SECOND AMENDED AND RESTATED MANAGEMENT CONTINUITY AGREEMENT
This Second Amended and Restated Management Continuity Agreement, dated as of October 23, 2024 (“Agreement”), by and between Virginia National Bankshares Corporation, a Virginia corporation (the “Company”), and ____________ (the “Executive”), supersedes and amends and restates in its entirety that certain Amended and Restated Management Continuity Agreement, dated as of September 28, 2020, by and between the Company and the Executive.
1. Purpose
The Company recognizes that the possibility of a Change in Control exists and the uncertainty and questions that it may raise among management may result in the departure or distraction of management personnel to the detriment of the Company and its shareholders. Accordingly, the purpose of this Agreement is to encourage the Executive to continue employment with the Company and/or its affiliates or successors in interest by merger or acquisition after a Change in Control by providing reasonable employment security to the Executive and to recognize the prior service of the Executive in the event of a termination of employment under certain circumstances after a Change in Control.
2. Term of the Agreement
The term of this Agreement is effective on October 23, 2024 (the “Effective Date”) and will continue until terminated by mutual agreement of the parties.
3. Employment after a Change in Control
If a Change in Control of the Company, as defined in Section 12(a), occurs and the Executive is employed by the Company on the date the Change in Control occurs (the “Change in Control Date”), the Company will continue to employ the Executive in accordance with the terms and conditions of this Agreement for the period beginning on the Change in Control Date and ending on the second anniversary of such date (the “Employment Period”). If a Change in Control occurs on account of a series of transactions, the Change in Control Date is the date of the last of such transactions.
4. Terms of Employment
(a) Position and Duties. During the Employment Period, (i) the Executive’s position, position title, authority, reporting structure, duties and responsibilities will be the same in all material respects with the most significant of those held, exercised and assigned to the Executive by the Company at any time during the twelve (12) month period immediately preceding the Change in Control Date and (ii) the Executive’s services will be performed at either the location where the Executive was performing his services immediately preceding the Change in Control Date or any office that is the headquarters of the Company prior to the Change in Control and is less than thirty-miles (30) miles from such location.
(b) Compensation.
(i) Base Salary. During the Employment Period, the Executive will receive an annual base salary (the “Annual Base Salary”) at least equal to the highest base annualized salary paid or payable to the Executive by the Company and its affiliated companies during the twelve (12) month period immediately preceding the Change in Control Date. During the Employment Period, the Annual Base Salary will be reviewed at least annually and will be increased at any time and from time to time as will be substantially consistent with increases in base salary generally awarded in the ordinary course of business to other peer executives of the Company and its affiliated companies, but may not be decreased. Any increase in the Annual Base Salary will not serve to limit or reduce any other obligation to the Executive under this Agreement. The Annual Base Salary will not be reduced after any such increase, and the term Annual Base Salary as used in this Agreement will refer to the Annual Base Salary as so increased. The term “affiliated companies” includes any company controlled by, controlling or under common control with the Company during the twelve (12) months immediately preceding the Change in Control Date.
(ii) Annual Bonus. In addition to the Annual Base Salary, the Executive will be awarded for each year ending during the Employment Period and for which the Executive is employed on the last day of the year an annual bonus (the “Annual Bonus”) in one lump sum cash payment at least equal to the average annual bonus paid or payable, including by reason of any deferral, for the two (2) years immediately preceding the year in which the Change in Control Date occurs. Each such Annual Bonus will be paid no later than two and one-half (2 ½) months after the end of the year for which the Annual Bonus is awarded.
(iii) Incentive, Savings and Retirement Plans. During the Employment Period, the Executive will be entitled to participate in all incentive (including stock incentive), savings and retirement, insurance plans, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event will such plans, policies and programs provide the Executive with incentive opportunities, savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than those provided by the Company and its affiliated companies for the Executive under such plans, policies and programs as in effect at any time during the twelve (12) months immediately preceding the Change in Control Date.
(iv) Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive’s family, as the case may be, will be eligible for participation in and will receive all benefits under welfare benefit plans, policies and programs provided by the Company and its affiliated companies to the extent applicable generally to other peer executives of the Company and its affiliated companies, but in no event will such plans, policies and programs provide the Executive with benefits (including cost to the Executive) that are less favorable than the most favorable of such plans, policies and programs in effect at any time during the twelve (12) months immediately preceding the Change in Control Date without the Executive’s written consent.
(v) Fringe Benefits. During the Employment Period, the Executive will be entitled to fringe benefits in accordance with the most favorable plans, policies and programs
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of the Company and its affiliated companies in effect for the Executive at any time during the twelve (12) months immediately preceding the Change in Control Date or, if more favorable to the Executive, as in effect generally from time to time after the Change in Control Date with respect to other peer executives of the Company and its affiliated companies.
(vi) Paid Time Off. During the Employment Period, the Executive will be entitled to paid time off in accordance with the most favorable plans, policies and programs of the Company and its affiliated companies in effect for the Executive at any time during the twelve (12) months immediately preceding the Change in Control Date or, if more favorable to the Executive, as in effect generally from time to time after the Change in Control Date with respect to other peer executives of the Company and its affiliated companies.
5. Termination of Employment Following a Change in Control
(a) Death or Disability. The Executive’s employment will terminate automatically upon the Executive’s death during the Employment Period. If the Company determines in good faith that a Disability of the Executive has occurred during the Employment Period, it may terminate the Executive’s employment. For purposes of this Agreement, “Disability” means the Executive’s inability to perform the essential functions of his/her position with the Company on a full time basis for one hundred eighty (180) consecutive calendar days or a total of at least two hundred forty (240) calendar days in any twelve (12) month period as a result of the Executive’s incapacity due to physical or mental illness (as determined by an independent physician selected by the Board of Directors of the Company (sometimes referred to herein as the “Board”)).
(b) Cause. The Company may terminate the Executive’s employment during the Employment Period for Cause. For purposes of this Agreement, “Cause” means (i) gross incompetence, gross negligence, or willful misconduct in connection with the performance of the Executive’s duties; (ii) conviction of or entering of a guilty plea or a plea of no contest with respect to a felony or a crime of moral turpitude or commission of an act of embezzlement or fraud against the Company or any affiliated company; (iii) any material breach by the Executive of a material term of this Agreement, including, without limitation, material failure to perform a substantial portion of his/her duties and responsibilities hereunder; or (iv) deliberate dishonesty of the Executive with respect to the Company or any affiliated company. For any act or omission triggering “Cause” in Sections 5(b)(i) or (iii), the Company shall inform the Executive in writing of the specific applicable act or omission within sixty (60) calendar days after the Board’s actual knowledge thereof and the Executive shall have thirty (30) calendar days after receipt of such notice to remedy such act, omission, breach or violation (if such act, omission, breach or violation is capable of being remedied).
(c) Good Reason. The Executive’s employment may be terminated during the Employment Period by the Executive for Good Reason. The Executive must provide written notice to the Company of the existence of the event or condition constituting such Good Reason within sixty (60) calendar days of the Executive becoming aware of the event or condition alleged to constitute Good Reason. Executive shall inform the Company of the specific act or omission constituting Good Reason. Upon delivery of such notice by the Executive, the Company shall have a period of thirty (30) calendar days during which it may remedy in good faith the event or
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condition constituting Good Reason, to the Executive’s satisfaction and the Executive’s employment shall continue in effect during the thirty (30) calendar day period. In the event the Company shall remedy in good faith the event or condition constituting Good Reason, then such notice of termination shall be null and void, and the Company shall not be required to pay the amount due to the Executive under Section 6(a). If the Company has not remedied the event or condition constituting Good Reason during the thirty (30) calendar day cure period, the Executive shall terminate his/her employment for Good Reason within thirty (30) calendar days after the end of the Company’s thirty (30) day cure period by providing the Company with a Notice of Termination (as such term is defined herein). If the Company has not remedied the event or condition constituting Good Reason during the thirty (30) calendar day cure period and the Executive does not terminate his/her employment for Good Reason within thirty (30) calendar days thereafter by providing the Company with a Notice of Termination (as such term is defined herein), then the Executive will deemed to have waived his/her right to terminate for Good Reason with respect to such grounds.
For purposes of this Agreement, “Good Reason” means:
(i) a material reduction in the Executive’s duties or authority or any of the employment characteristics as described in Section 4(a);
(ii) a failure by the Company to comply with any of the provisions of Section 4(b);
(iii) the Company’s requiring the Executive to be based at any office or location other than that described in Section 4(a)(ii);
(iv) the failure by the Company to comply with and satisfy Section 7(b); or
(v) the Company fails to honor any material term or provision of this Agreement.
Notwithstanding the foregoing, Good Reason shall not include any resignation by the Executive where ▇▇▇▇▇ for the Executive’s termination by the Company exists.
(d) Notice of Termination. Any termination during the Employment Period by the Company or by the Executive for Good Reason shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and a description of the facts that support such termination.
(e) Date of Termination. “Date of Termination” means (i) if the Executive’s employment is terminated by the Company for Cause, or by the Executive for Good Reason, subject to any applicable notice and cure provisions, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive’s employment is terminated by the Company other than for Cause or Disability, the date specified in the Notice of Termination (which shall not be less than thirty (30) nor more than sixty (60) calendar days from the date such Notice of Termination is given unless the Executive otherwise
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agrees), and (iii) if the Executive’s employment is terminated for Disability, thirty (30) calendar days after Notice of Termination is given, provided that the Executive shall not have returned to the full-time performance of his/her duties during such thirty (30) calendar day period.
(f) Resignation of All Other Positions. Effective upon the termination of the Executive’s employment for any reason, the Executive shall be deemed to have resigned from all positions the Executive holds as an officer or member of the Board of Directors (or a committee thereof) of the Company or any of its affiliates.
6. Compensation Upon Termination
(a) Termination Without Cause or for Good Reason. In the event the Executive’s employment with the Company terminates or is terminated during the Employment Period, unless such termination is or was (A) by the Company for Cause or (B) by the Executive other than for Good Reason, the Executive shall be entitled to the following benefits; provided with respect to the payments set forth in Section 6(a)(ii), (iii) and (iv) below, the Executive (or the legal representative of the Executive or the Executive’s estate) signs a release and waiver of claims in favor of the Company, its affiliates and their respective officers and directors in the form attached hereto as Attachment A, and such release (the “Release”) has become effective prior to the payment date and in all events within sixty (60) days following the Executive’s termination of employment (for avoidance of doubt, no release is required in connection with the payments set forth in Section 6(a)(i) below).
(i) Accrued Obligations. The Accrued Obligations are the sum of: (1) the Executive’s Annual Base Salary through the Date of Termination at the rate in effect just prior to the time a Notice of Termination is given; (2) the amount, if any, of any incentive or bonus compensation theretofore earned which has not yet been paid; (3) the product of the Annual Bonus paid or payable, including by reason of deferral, for the most recently completed year and a fraction, the numerator of which is the number of days in the current year through the Date of Termination and the denominator of which is 365; and (4) any benefits or awards (including both the cash and stock components) which pursuant to the terms of any plans, policies or programs have been earned or become payable, but which have not yet been paid to the Executive (but not including amounts that previously had been deferred at the Executive’s request, which amounts will be paid in accordance with the Executive’s existing directions). The Accrued Obligations will be paid to the Executive in a lump sum cash payment within ten (10) days after the Date of Termination; and
(ii) Salary Continuance Benefit. The Salary Continuance Benefit is an amount equal to two (2) times the Executive’s Final Compensation. For purposes of this Agreement, “Final Compensation” means the Annual Base Salary in effect at the Date of Termination, plus an amount equal to the average Annual Bonus paid or payable for the two (2) most recently completed years and any amounts contributed by the Executive during the most recently completed year pursuant to a salary reduction agreement or any other program that provides for pre-tax salary reductions or compensation deferrals. The Salary Continuance Benefit will be paid to the Executive in a lump sum cash payment on the date the Release becomes effective within the 60-day period following the Executive’s termination of employment, provided that if such 60-day period following the Executive’s termination of employment ends in the calendar year
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after the calendar year in which the Executive’s termination occurs, the Salary Continuance Benefit shall be paid no earlier than the first day of such later calendar year; and
(iii) Welfare Continuance Benefit. For eighteen (18) months following the Date of Termination, the Executive and his/her eligible dependents will continue to be covered under all health and dental plans, disability plans, life insurance plans (including split dollar endorsement agreements related to Bank Owned Life Insurance policies), benefit and other compensatory programs or arrangements listed on Appendix A to this Agreement, and all other welfare benefit plans (as defined in Section 3(1) of the Employee Retirement Income Security Act) (“Welfare Plans”) in which the Executive and his/her dependents were participating immediately prior to the Date of Termination (the “Welfare Continuance Benefit”) to the extent permissible under the terms of the respective Welfare Plans and applicable law. Health and medical coverage will be provided under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”). The Executive will pay only that portion of the applicable monthly premiums that he was paying as an active employee prior to the Date of Termination. The Company will pay any additional monthly premium costs and any increases in the premium costs. If the Executive elects to change coverage in accordance with the terms of the Welfare Plans, the Executive will pay only that portion of the applicable monthly premium that would have applied to an active employee electing such coverage prior to the Date of Termination. Notwithstanding the foregoing, (1) the Welfare Continuance Benefit as to any Welfare Plan will cease if and when the Executive has obtained coverage under one or more welfare benefit plans of a subsequent employer that provides for substantially equal or greater benefits to the Executive and his/her dependents with respect to the specific type of benefit; and (2) if the Company determines that it cannot provide a welfare benefit required under this Section 6(a)(iii) without potentially violating applicable law or incurring an excise tax or if the applicable insurer will not provide the welfare benefit required under this Section 6(a)(iii), the Company shall in lieu thereof pay to the Executive on a monthly basis for the remainder of the required period under this Section 6(a)(iii) a taxable amount (the “Cash Payment”) equal to the Company’s portion of the applicable monthly premium for Executive and/or the Executive’s family in effect on the date such welfare benefit can no longer be provided under the applicable Welfare Benefit Plan and, for any welfare benefit that otherwise would have been nontaxable to the Executive, an additional taxable amount equal to the taxes due on such Cash Payment; and
(iv) 401(k) Contributions. A lump sum cash payment equal to the total contributions made by the Company to the Executive’s account in the Company sponsored 401(k) retirement savings plan during the two-year period prior to termination of employment. This payment will be paid to the Executive on the date the Release becomes effective within the 60-day period following the Executive’s termination of employment, provided that if such 60-day period following the Executive’s termination of employment ends in the calendar year after the calendar year in which the Executive’s termination occurs, the lump sum cash payment shall be paid no earlier than the first day of such later calendar year; and
(v) In the event the Company terminates the Executive’s employment other than when there is Cause for termination or the Executive terminates employment when Good Reason for termination exists, in each event during the six (6) months prior to a Change in Control (a “Qualifying Termination”), subject to the Executive providing the Release contemplated in Section 6(a) prior to the Change in Control Date, the Executive shall be entitled
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to receive the benefits provided in Section 6(a)(ii), (iii) and (iv) on or beginning on the Change in Control Date; provided that in no event shall Executive have any right to receive payments or benefits in duplication of any other benefits under this Agreement. At least fifteen (15) days prior to the Change in Control Date (or such shorter period agreed upon by the Executive), the Company shall provide a copy of the Release for signature and written notice of the anticipated Change in Control Date to the Executive whose termination is a Qualifying Termination. If the Company fails to timely provide such Release or prior notice of the anticipated Change in Control Date and the Executive’s employment is a Qualifying Termination, the payments and benefits under this Section 6(a)(v) shall be due and owing and shall no longer be subject to the Release. For purposes of this Section 6(a)(v), (1) “Cause” shall be determined under Section 5(b) as if the Executive’s termination had occurred during the Employment Period and without applying the notice and cure provisions in Section 5(b) and (2) “Good Reason” shall be determined under Section 5(c) as if the Executive’s termination had occurred during the Employment Period and without applying the notice and cure provisions in Section 5(c), provided, however, that there shall only be “Good Reason” under this Section 6(a)(v) if, prior to the Executive terminating employment, the Executive provides written notice to the Company of the specific event or condition constituting Good Reason, the Company has ten (10) calendar days after such notice is received to remedy in good faith the event or condition, and, if not remedied, the Executive terminates employment within ten (10) calendar days thereafter.
(b) Death. If the Executive dies during the Employment Period while employed, this Agreement will terminate without any further obligation on the part of the Company under this Agreement, other than for (i) payment of the Accrued Obligations (which shall be paid to the Executive’s beneficiary designated in writing or his/her estate, as applicable, in a lump sum cash payment within thirty (30) days of the date of death); (ii) the timely payment of the Welfare Continuance Benefit to the Executive’s spouse and other dependents; and (iii) the timely payment of all death and retirement benefits pursuant to the terms of any plan, policy or arrangement of the Company and its affiliated companies. If the Executive dies after the Date of Termination, but prior to the expiration of the Welfare Continuance Benefit period, the Executive’s spouse and other dependents will be entitled to the remaining payment of the Welfare Continuance Benefit due to the Executive under Section 6(a)(iii).
(c) Disability. If the Executive’s employment is terminated because of the Executive’s Disability during the Employment Period, this Agreement will terminate without any further obligation on the part of the Company under this Agreement, other than for (i) payment of the Accrued Obligations (which shall be paid to the Executive in a lump sum cash payment within thirty (30) days of the Date of Termination; (ii) the timely payment of the Welfare Continuance Benefit; and (iii) the timely payment of all disability and retirement benefits pursuant to the terms of any plan, policy or arrangement of the Company and its affiliated companies.
(d) Cause; Other than for Good Reason. If the Executive’s employment is terminated for Cause during the Employment Period, this Agreement will terminate without further obligation to the Executive other than the payment to the Executive of the Annual Base Salary through the Date of Termination, plus the amount of any compensation previously deferred by the Executive. If the Executive terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement will terminate without further obligation to the Executive other than for the Accrued Obligations (which will be paid in a lump sum in cash within
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thirty (30) days of the Date of Termination) and any other benefits to which the Executive may be entitled pursuant to the terms of any plan, program or arrangement of the Company and its affiliated companies.
(e) Potential Limitation of Payments and Benefits.
(i) Subject to subsection (ii) below, in the event that the aggregate value of the payments and benefits to which the Executive may be entitled under this Agreement or any other agreement, plan, program or arrangement in connection with a Change in Control (the “Change in Control Termination Benefits”) would subject the Executive to the excise tax (the “Excise Tax”) imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), then, in accordance with the Executive’s direction as to the order of reduction, the Change in Control Termination Benefits shall be reduced (by the minimum possible amount) until no amount or benefit payable to the Executive will be subject to the Excise Tax.
(ii) Notwithstanding the foregoing, no reduction in the Change in Control Termination Benefits shall be made if the Executive’s Net After-Tax Benefit (as defined below) assuming such reduction was not made exceeds by $25,000 or more of the Executive’s Net After-Tax Benefit assuming such reduction was made.
(iii) “Net After-Tax Benefit” shall mean the amount of the Change in Control Termination Benefits which the Executive receives or is then entitled to receive, less the amount of all applicable taxes payable by the Executive with respect to the Change in Control Termination Benefits, including any Excise Tax.
(iv) All calculations and determinations under this Section 6(e) shall be made by an independent accounting firm or independent tax counsel appointed by the Company (the “Tax Advisor”) whose determinations shall be conclusive and binding on the Company and the Executive for all purposes. The Tax Advisor may rely on reasonable, good faith assumptions and approximations concerning the application of Section 280G and Section 4999 of the Code. The Company shall bear all costs of the Tax Advisor.
7. Binding Agreement; Successors
(a) This Agreement will be binding upon and inure to the benefit of the Executive (and his/her personal representative), the Company and any successor organization or organizations which shall succeed to substantially all of the business and property of the Company, whether by means of merger, consolidation, acquisition of all or substantially of all of the assets of the Company or otherwise, including by operation of law.
(b) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.
(c) For purposes of this Agreement, the term “Company” includes any subsidiaries of the Company and any corporation or other entity which is the surviving or
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continuing entity in respect of any merger, consolidation or form of business combination in which the Company ceases to exist; provided, however, that for purposes of determining whether a Change in Control has occurred herein, the term “Company” refers to Virginia National Bankshares Corporation or its successors.
8. Fees and Expenses; Mitigation
(a) The Company will pay or reimburse the Executive for all costs and expenses, including, without limitation, court costs and reasonable attorneys’ fees, incurred by the Executive at any time after the Effective Date (i) in the Company’s contesting or disputing any termination of the Executive’s employment hereunder or (ii) in the Company’s seeking to obtain or enforce any right or benefit provided by this Agreement, in each case provided the Executive is the prevailing party in a proceeding brought in a court of competent jurisdiction. The Company shall reimburse the foregoing costs and expenses (but no more than 30 days) after the Executive submits a claim for reimbursement with proper documentation of the costs and expenses.
(b) The Executive shall not be required to mitigate the amount of any payment the Company becomes obligated to make to the Executive in connection with this Agreement, by seeking other employment or otherwise. The amount of any payment provided for in Section 6 shall not be reduced, offset or subject to recovery by the Company by reason of any compensation earned by the Executive as the result of employment by another employer after the Date of Termination, or otherwise.
9. No Employment Contract
Nothing in this Agreement will be construed as creating an employment contract between the Executive and the Company prior to a Change in Control.
10. Survival of Certain Restrictive Covenants
Section 7 of the Revised Non-Disclosure, Non-Solicitation and Non-Competition Agreement dated as of May 18, 2020, between the Company and the Executive, or any successor agreement agreed upon by the Company and the Executive (the “Loyalty Agreement”) with respect to the Executive’s covenants concerning non-competition will not apply to the Executive after the Executive ceases to be employed by the Company following a Change in Control, unless the Executive is entitled to receive any severance benefits provided for in Section 6(a) of this Agreement in connection with the termination of his/her employment without Cause or for Good Reason in which case the restrictions imposed by Section 7 in the Loyalty Agreement will continue to apply. The non-disclosure, customer non-solicitation, customer non-service, customer non-interference and employee non-solicitation restrictions in Sections 2 through 6 of the Loyalty Agreement together with the other provisions of the Loyalty Agreement, except to the extent Section 7 of the Loyalty Agreement may not apply as provided above, will survive the termination of the Executive’s employment and are incorporated into and made a part of this Agreement as though the Loyalty Agreement was set forth in full in this Agreement.
11. Notice
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Any notices and other communications provided for by this Agreement will be sufficient if in writing and delivered in person, or sent by registered or certified mail, postage prepaid (in which case notice will be deemed to have been given on the third day after mailing), or by overnight delivery by a reliable overnight courier service (in which case notice will be deemed to have been given on the day after delivery to such courier service). Notices to the Company shall be directed to the Secretary of the Company, with a copy directed to the Chairman of the Board of the Company. Notices to the Executive shall be directed to his/her last known address.
12. Definition of a Change in Control
(a) No benefits shall be payable hereunder unless there shall have been a Change in Control of the Company as set forth below. For purposes of this Agreement, a “Change in Control” means:
(i) The acquisition by any Person of beneficial ownership of thirty percent (30%) or more of the then outstanding shares of common stock of the Company, provided that an acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege) shall not constitute a Change in Control;
(ii) Individuals who constitute the Board on the date of this Agreement (the “Incumbent Board”) cease to constitute a majority of the Board, provided that any director whose nomination was approved by a vote of at least two-thirds of the directors then comprising the Incumbent Board will be considered a member of the Incumbent Board; provided however, that any director whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company shall not be considered a member of the Incumbent Board;
(iii) Consummation by the Company of a reorganization, merger, share exchange or consolidation (a “Reorganization”) other than a Reorganization involving only the Company and one or more affiliated companies; or
(iv) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company, or the consummation of a sale or other disposition of all or substantially all of the assets of the Company.
(b) For purposes of this Agreement, “Person” means any individual, entity or group (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934 (the “Exchange Act”), other than any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliated company, and “beneficial ownership” has the meaning given the term in Rule 13d-3 under the Exchange Act.
(c) The Company and the Executive acknowledge and agree that this Agreement shall apply to each and any Change in Control of the Company or its successor(s) that may occur, and that each and any Change in Control of the Company shall have different, separate and distinct Change in Control Dates and Employment Periods, respectively, other than a Change in Control as described in Sections 12(a)(i) and (iii) effected as a share exchange, in which case the Change in Control Date and the Employment Period, respectively, shall be the same with respect to both sections.
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13. Miscellaneous
This Agreement may not be terminated, and no provision of this Agreement may be amended, modified, waived or discharged, unless such termination, amendment, modification, waiver or discharge is agreed to in a writing signed (a) by the Executive and (b) for the Company by either the Chairman of the Board, Chairman of the Compensation Committee, Chief Executive Officer, or President of the Company; provided, however, the Executive may not sign on behalf of the Company even if he/she holds one of the identified positions with the Company. This Agreement replaces and supersedes any prior agreements, written or oral, relating to the subject matter hereof, and all such agreements are hereby terminated and are without any further legal force or effect. No waiver by either party hereto at any time of any breach by the other party hereto of, or of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party that are not expressly set forth in this Agreement.
14. Governing Law
The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the Commonwealth of Virginia. The Company and the Executive submit to the exclusive jurisdiction and venue of any state or federal court located within the Commonwealth of Virginia for resolution of any such claims, causes of action or disputes arising out of or relating to or concerning this Agreement.
15. Validity
The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
16. Deferred Compensation Omnibus Provision
(a) It is intended that payments and benefits under this Agreement that are considered to be deferred compensation subject to Section 409A of the Code shall be provided and paid in a manner, and at such time and in such form, as complies with the applicable requirements of Section 409A of the Code to avoid the unfavorable tax consequences provided for therein for non-compliance. Notwithstanding any other provision of this Agreement, the Company’s Compensation Committee or Board of Directors is authorized to amend this Agreement, to amend or void any election made by the Executive under this Agreement and/or to delay the payment of any monies and/or provision of any benefits in such manner as may be determined by it to be necessary or appropriate to comply with Section 409A of the Code or to comply with an exception from Section 409A if that is the intent of the provision. For purposes of this Agreement, all rights to payments and benefits hereunder shall be treated as rights to receive a series of separate payments and benefits to the fullest extent allowed by Section 409A of the Code.
(b) If the Executive is deemed on the date of separation of service with the Company to be a “specified employee,” as defined in Section 409A(a)(2)(B) of the Code, then
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payment of any amount or provision of any benefit under this Agreement that is considered deferred compensation subject to Section 409A of the Code shall not be made or provided prior to the earlier of (A) the expiration of the six (6) month period measured from the date of separation of service or (B) the date of death (the “409A Deferral Period”).
(c) In the case of benefits that are subject to Section 409A of the Code, the Executive may pay the cost of benefit coverage, and thereby obtain benefits, during the 409A Deferral Period and then be reimbursed by the Company when the 409A Deferral Period ends. On the first day after the end of the 409A Deferral Period, all payments delayed pursuant to this Section 16 (whether they would have otherwise been payable in a single lump sum or in installments in the absence of such deferral) shall be paid or reimbursed to the Executive in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided as originally scheduled.
(d) “Termination of employment” shall have the same meaning as “separation of service,” as that phrase is defined in Section 409A of the Code (taking into account all rules and presumptions provided for in the Section 409A regulations).
17. Clawback
The Executive agrees that any incentive-based compensation or award that he/she receives, or has received, from the Company or its Affiliates under this Agreement or otherwise, will be subject to clawback by the Company as may be required by applicable law or stock exchange listing requirement and on such basis as the Board of Directors of the Company determines, but in no event with a look-back period of more than two (2) years, unless required by applicable law or stock exchange listing requirement.
[Signatures follow on next page.]
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IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by Virginia National Bankshares Corporation by its duly authorized officer, and by the Executive, as of the date first above written.
VIRGINIA NATIONAL BANKSHARES CORPORATION
By: _______________________________
Chairman, Compensation Committee
EXECUTIVE:
_____________________________________
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Appendix A
Section 6(a)(iii) - Welfare Continuance Benefits in which the Executive and/or eligible dependents were participating or receiving immediately prior to the Date of Termination, including the following:
Medical Coverage
Dental Coverage
Vision Coverage
Life Insurance (employee and dependents)
Supplemental Life Coverage (employee and eligible dependents)
Bank Owned Life Insurance (Split-dollar Agreements)
Long Term Disability Coverage equal to 60% of “Final Compensation”
Accidental Death and Dismemberment Coverage
Ancillary Coverages – Accident Insurance, Critical Illness, Hospital Indemnity
Gym Membership (rates based upon current ACAC employee-only membership)
Country Club Memberships
Technology Budget for Personal Use
Work Vehicle (Following termination, the Company or the Bank will transfer the vehicle to the Executive for no payment, with the value of the vehicle to be included in the Executive’s income, subject to tax law requirements)
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Attachment A
RELEASE
For good and valuable consideration, the receipt of which is hereby acknowledged, ______________ (“Employee”), hereby irrevocably and unconditionally releases, acquits, and forever discharges Virginia National Bankshares Corporation or successor entity (the “Company”) and each of its agents, directors, members, affiliated entities, officers, employees, former employees, attorneys, and all persons acting by, through, under or in concert with any of them (collectively “Releasees”) from any and all charges, complaints, claims, liabilities, grievances, obligations, promises, agreements, controversies, damages, policies, actions, causes of action, suits, rights, demands, costs, losses, debts and expenses of any nature whatsoever, known or unknown, suspected or unsuspected, including, but not limited to, any rights, claims or causes of action arising out of, or related to, (a) Employee’s employment or termination of employment, (b) any alleged violations or breaches of any contracts, express or implied, or any tort, or any legal restrictions on the Company’s right to terminate employees, or (c) any federal, state or other governmental statute, regulation, law or ordinance, including without limitation (1) Title VII of the Civil Rights Act of 1964, as amended by the Civil Rights Act of 1991; (2) the Americans with Disabilities Act; (3) 42 U.S.C. § 1981; (4) the federal Age Discrimination in Employment Act (age discrimination); (5) the Older Workers Benefit Protection Act; (6) the Equal Pay Act; (7) the Family and Medical Leave Act; (8) the Employee Retirement Income Security Act; (9) the False Claims Act; (10) the Fair Labor Standards Act; (11) Consolidated Omnibus Budget Reconciliation Act of 1985; (12) the National Labor Relations Act; (13) the Virginia Workers’ Compensation Act; and (14) the Virginia Commission on Human Rights Act (“Claim” or “Claims”), which Employee now has, owns or holds, or claims to have, own or hold, or which Employee at any time heretofore had owned or held, or claimed to have owned or held, against each or any of the Releasees at any time up to and including the date of the execution of this Release.
Employee hereby acknowledges and agrees that the execution of this Release and the cessation of Employee’s employment and all actions taken in connection therewith are in compliance with the federal Age Discrimination in Employment Act and the Older Workers Benefit Protection Act and that the releases set forth above shall be applicable, without limitation, to any claims brought under these Acts. Employee further acknowledges and agrees that:
(a) The Release given by Employee is given solely in exchange for the consideration set forth in Section 6(a)(ii), Section 6(a)(iii) and Section 6(a)(iv) of the Second Amended and Restated Management Continuity Agreement between the Company and Employee to which this Release was initially attached, and such consideration is in addition to anything of value which Employee was entitled to receive prior to entering into this Release;
(b) By entering into this Release, Employee does not waive rights or claims that may arise after the date this Agreement is executed;
(c) Employee has been advised to consult an attorney prior to entering into this Release, and this provision of the Release satisfies the requirements of the Older Workers Benefit Protection Act that Employee be so advised in writing;
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(d) Employee has been offered forty-five (45) days from receipt of this Release within which to consider whether to sign this Release; and
(e) For a period of seven (7) days following Employee’s execution of this Release, Employee may revoke this Release and it shall not become effective or enforceable until such seven (7) day period has expired.
No waiver or default of any term of this Release shall be deemed a waiver of any subsequent breach or default of the same or similar nature.
This Release is made and shall be enforced pursuant to the laws of the Commonwealth of Virginia, except where such laws of the Commonwealth of Virginia are preempted by federal law.
Should any part of this Release be found to be void, that determination will not affect the remainder of this Release.
This release shall be binding upon the heirs and personal representatives of Employee and shall inure to the benefit of the successors and assigns of the Company.
Date: _______________________________________
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