Exhibit 10.4
EMPLOYMENT
AGREEMENT
This Employment Agreement , (this “ Agreement ”), made
this the 31 st day of December, 2008, by and
between Gateway Bank &
Trust Co., a North
Carolina chartered commercial bank (the “ Bank ”
or “ Employer ”), with a principal address of
112 Corporate Drive, Elizabeth City, North Carolina, (27909),
and David R.
Twiddy (“
Officer ”), with an address of 310 Harrier Court,
Elizabeth City, North Carolina (27909), and to which
Hampton Roads Bankshares,
Inc. , a Virginia
corporation and the proposed parent company of Employer (“
HRB ”), is made a party.
WITNESSETH:
WHEREAS, this Agreement is entered into by the Bank as a
condition of the closing of a merger pursuant to that certain
Agreement and Plan of Merger (the “ Merger Agreement
”) dated September 23, 2008, by and between HRB and
Gateway Financial Holdings,
Inc. , a North Carolina
corporation, (“ GFH ”), whereby GFH will be
merged into HRB and GFH’s wholly owned subsidiary,
Gateway Bank & Trust
Co., a North Carolina
chartered commercial bank, will become a wholly owned subsidiary of
HRB (the “Merger”);
WHEREAS, Officer is being directly and materially
benefited as an equity holder of GFH and executive of the Bank and
through this Agreement with the Bank;
WHEREAS , Officer desires to render valuable services to
the Bank and HRB and it is the desire of the Bank and HRB to have
the benefit of Officer’s continued and future loyalty,
service and counsel;
WHEREAS , HRB is a Virginia bank holding company which
currently has two (2) wholly owned bank subsidiaries and as a
consequence of the Merger, will become the parent company of the
Bank;
WHEREAS , the Bank is engaged in the business of banking
and Officer has particular and peculiar knowledge and background in
the operation of a business of this nature; and
WHEREAS , Officer wishes to continue in the employ of
the Bank.
NOW , THEREFORE , in consideration of the mutual covenants and
agreements herein set forth, the parties covenant and agree as
follows:
1.
Employment . Employer agrees to
continue to employ Officer, and Officer agrees to continue to serve
Employer, as the Bank’s President and Chief Executive Officer
, upon the terms and conditions
herein provided. As of the Commencement Date (as defined below) or
as soon thereafter as HRB’s Board of Directors shall meet,
Officer will also serve as an executive officer of HRB. Officer
agrees to perform such managerial duties and responsibilities as
shall be assigned to him by Employer’s Board of Directors
(the “ Board ”) or the Chief Executive Officer
of HRB. Officer shall devote his time and attention on a full-time
basis to the discharge of the duties undertaken by him hereunder;
provided, however, that Officer may continue to serve on the boards
of directors of other companies with the prior consent of the
Board.
|
|
2.
|
Terms and
Compensation .
|
(a) Term
of Agreement. The term (the “Term”) of this Agreement
shall commence on the date (the “Commencement Date”) of
the closing of the Merger Agreement; provided, however, that this
Agreement shall be null and void ab initio if Officer is not
serving as the President of the Bank on the Commencement Date. On
the Commencement Date, Officer’s certain Employment Agreement
dated October 1, 2007, with the Bank and certain Salary
Continuation Agreement dated October 1, 2006, with the Bank,
together with any employment related agreement with either the Bank
or GFH, including, but not limited to, any long term incentive
plans, severance agreements, change-in-control agreements, cash
incentive plans, or split-dollar agreements, shall terminate and be
superseded and replaced in their entirety with this Agreement;
provided, however, that the foregoing waiver shall specifically
exclude the certain Split Dollar Insurance Agreement dated as of
March 14, 2008, by and between the Bank and Officer, which shall
continue in force. Officer waives any rights under such agreements
and plans arising on account of the transactions contemplated by
the Merger Agreement. Options granted pursuant to the Bank’s
or GFH’s equity incentive or stock option plans shall be
governed by the Merger Agreement. There shall be no acceleration of
vesting of any of Officer’s options, compensation or benefits
on account of the Merger, other than his restricted stock, which
shall vest. Thereafter, this Agreement shall continue until the
first to occur of (i) except as otherwise provided in Section 3
hereof, the end of the thirty-sixth (36th) consecutive full month
following the Commencement Date, (ii) Officer’s death, or
(iii) except as provided in Paragraph (e) of this Section 2,
Officer’s disability. Notwithstanding the foregoing, however,
in the event Officer is not informed by the Bank, in writing, prior
to the last day of the thirtieth (30th) consecutive full month
following the Commencement Date, or any subsequent renewal term,
that this Agreement will not be renewed, this Agreement will
automatically renew itself for additional periods of twelve (12)
months (each a “Renewal Term”) from the original
anniversary date or, as the case may be, any Renewal Term. For
purposes of this Agreement, the “Term” shall include
and refer to, as appropriate by the context, any Renewal
Term.
(b)
Compensation . Beginning on the
Commencement Date, Officer shall be paid an annual base salary
of $425,000
(“ Base Salary
”), payable in accordance with the Bank’s normal
payroll practices. Subsequent to the initial twenty-four (24)
months from the Commencement Date, any increases or decreases in
Officer’s annual Base Salary shall be at the discretion of
the Board based upon the financial performance of
Employer.
(c)
Benefits . Officer shall be eligible for participation in
any additional plans, programs or forms of compensation or benefits
that the Bank might provide from time to time to the class of
employees that includes Officer, or, as allowed, for Officer
solely, which benefit plans currently or may include: (i) the
Bank’s 401(k) Retirement Program subject to normal Internal
Revenue Service guidelines with respect to the maximum amount of
participation; (ii) a non-contributory profit sharing plan where a
discretionary contribution made by the Bank on behalf of its
personnel is allocated based upon Internal Revenue Service
allocations for profit sharing plans necessary to insure that it
remains a qualified retirement account in accordance with ERISA
guidelines; and (iii) a deferred compensation or supplemental
retirement arrangement described in Paragraph 2(k) below. The
benefits, rights and obligations of Officer under the various plans
or arrangements set forth above or in this Agreement shall be
exclusively governed by the respective plans or governing documents
as they may be amended or established from time to time in the
event of any conflict with this Agreement.
2
(d)
Not Used.
(e)
Disability . In the event of the
physical or mental disability of Officer by reason of which Officer
is unable to perform the duties of his employment hereunder,
Employer shall continue to pay or provide to Officer the
compensation and benefits provided under Paragraphs (b) and (c) of
this Section 2 for the first six (6) months of such disability. If,
however, the disability continues beyond such six (6) month period,
Employer may, at its election, terminate Officer’s employment
under this Agreement, in which case Officer may be entitled to
receive disability benefits, if any, available to Officer under
Employer’s plans in effect at that time.
(f)
Death . In the event that
Officer's death should occur during the Term of this Agreement,
this Agreement shall terminate and Officer or his estate or
beneficiaries, as the case
may be, shall be entitled only to income earned but not yet paid as
of the date of death and any and all retirement or death benefits
payable under Employer’s plans in effect at that time and no
further compensation will be paid under this Agreement.
(g)
Automobile.
During the Term,
the Bank will provide Officer with the use of a vehicle which
Officer may choose and select within a reasonable budget
established by the Board. All fuel, insurance and maintenance shall
be paid for by the Bank pursuant to the Bank’s Automobile
Policy as adopted by the Board.
(h)
Vacation.
Officer will be
entitled to paid vacation days in accordance with the Bank’s
vacation policy for senior executive officers as adopted by the
Board but in no event less than twenty (20) days per
year.
(i)
Insurance and other
Expenses . The Bank will provide Officer
with health insurance, dental insurance and life insurance coverage
as are provided to the class of employees that includes Officer, as
well as the necessary tools to perform Officer’s duties as an
executive officer of the Bank, including, but not limited to,
reimbursement (aa) for Officer’s current cellular phone plan
or participation in the Bank’s cell phone plan, (bb) current
dues and related expenses for one country club membership,
excluding initiation fees and capital calls, and (cc) dues for
necessary civic organizations which Officer may join and are used
or designed to further enhance Officer’s opportunity to
conduct the business of the Bank, subject to approval by the
Board.
(j) (i) After
Officer’s employment with Employer is terminated for any
reason other than termination by Employer for “good
cause,” Employer shall continue to provide medical insurance
coverage to Officer and Officer’s spouse for the lifetime of
each until Officer becomes eligible to participate in a plan,
program, or arrangement provided by a subsequent employer which
provides medical insurance benefits to Officer or Officer’s
spouse whereupon all of Employer’s obligations under this
paragraph cease. Employer may provide such medical insurance
coverage in Employer’s discretion, as part of
Employer’s group medical insurance plan for active employees
or through individual medical insurance policies. Notwithstanding
the foregoing, as of the first date that (i) Officer is no longer
employed by Employer and (ii) Officer and Officer’s spouse,
respectively, have each attained sixty-five (65) years of age,
Employer shall be obligated to only provide such individual with
supplemental Medicare health insurance in order to meet its
obligations under this paragraph. Employer shall be responsible for
paying directly all of the premiums required to meet its
obligations under this paragraph.
3
(ii) Employer’s
obligation to provide the medical insurance coverage described in
Paragraph 2(j)(i) above is subject to the condition that no
financial statement accrual will be required under GAAP until
Officer’s employment is terminated. Officer agrees that
Employer’s obligation under Paragraph 2(j)(i) shall be
modified by Employer as required so that no amounts are required to
be accrued under GAAP until Officer’s employment is
terminated.
(k)
Deferred Compensation or Supplemental Retirement Plan
. As of the Commencement Date, Employer shall provide to Officer a
Deferred Compensation or Supplemental Retirement Plan (the “
SERP ”) which shall provide to Officer a retirement
benefit payable annually for fifteen (15) years commencing upon the
first month after Officer attaining age 65. The variable benefit
shall be an amount equal to seventy percent (70%) of
Officer’s average annual base salary for the three (3) years
prior to attaining age 65. The benefits shall, to the extent in
compliance with applicable law, vest ratably from the Commencement
Date through Officer attaining age 65. The benefits and rights of
Officer under the SERP shall be exclusively governed by the
respective plan document to the extent that same may conflict with
this Agreement. The SERP shall provide, among other things, that
the benefits payable under the SERP shall become fully vested and
be payable upon termination of Officer’s employment hereunder
without “good cause” by Employer. Notwithstanding the
preceding sentence, Employer shall have no obligation to accelerate
vesting and pay any benefit under the SERP upon termination of
employment unless GFH and the Bank have provided the appropriate
GAAP accrual for the SERP on their financial statements before the
Commencement Date.
(l)
Termination of Compensation
and Benefits . The
foregoing compensation, benefits, and other arrangements described
in this Section 2 shall cease when Officer is no longer employed by
Employer for any reason or upon termination of this
Agreement.
(m)
No Right to Indemnification. Notwithstanding the
hiring of Officer under this Agreement or any policy of HRB or
Employer or any provision to the contrary herein, Officer shall not
be entitled to any indemnification, contribution or hold harmless
from HRB, GFH, Employer or any of their subsidiaries with respect
to matters occurring or arising on or prior to the Commencement
Date, whether asserted or claimed prior to, at or after the
Commencement Date. Officer agrees with Employer that Officer shall
not assert any claims to indemnification, contribution or hold
harmless for such matters.
|
|
3.
|
Termination of
Employment.
|
(a)
Termination by Employer .
Officer’s employment with the Bank may be terminated by the
Bank in accordance with the following provisions:
(i) The
Bank may, at any time, terminate Officer’s employment for
“good cause” (as defined below). If such termination is
for good cause, then Officer shall be entitled only to receive his
base salary in respect of services performed through the Date of
Termination and the compensation and benefits of Officer will cease
as of the Date of Termination as defined in Paragraph 3(d). For
purposes of this Agreement, “good cause” means a
dismissal of Officer by Employer because of (i) the material
failure of Officer, for reasons other than disability, to render
services to Employer as provided herein; (ii) Officer’s gross
misconduct or willful neglect of duty, neglect or refusal to
perform all duties assigned to him, in good faith, under this
Agreement or by Employer; (iii) imprudent financial management of
Employer by Officer not otherwise authorized which causes Employer
an extraordinary or material loss; (iv)
4
conviction of or guilty plea to a
felony or a crime involving moral turpitude; (v) illegal use of
drugs or alcohol; (vi) the material breach of this Agreement; (vii)
material waste or misuse of assets of Employer; (viii)
embezzlement, dishonesty, fraud or other similar acts reflecting
adversely upon Officer’s honesty and integrity; (ix) illegal
or intentional acts by Officer demonstrating bad faith toward
Employer, including, but not limited to, any conduct by Officer so
as to permit, condone or acquiesce in any act or conduct of other
persons, which could cause Employer, its parent or any of its
subsidiaries, to be in material violation of any law, statute or
regulation; or (x) commission by Officer of any other act which
causes a material adverse impact on the Bank’s standing in
the community or with its customers, staff or shareholders,
including, but not limited to, if Officer is suspended and/or
temporarily prohibited from participating in the conduct of
Employer’s business by any regulatory authority governing
Employer’s business.
(ii) The
Bank may, at any time, terminate Officer’s employment without
“good cause” (as defined above). If such termination is
without good cause then Employer shall pay Officer a termination
allowance in not more than twelve (12) equal monthly payments
commencing on the last day of the month in which the date of actual
termination occurs, the total amount of which will equal
Officer’s Base Salary, but not including any bonuses paid to
Officer by Employer in the twelve (12) months preceding the Notice
of Termination. Except as provided in this paragraph, upon the
termination herein described, the compensation and benefits of
Officer will cease as of the Date of Termination as defined in
Paragraph 3(d).
(iii) If
Officer’s employment is terminated by the Bank without good
cause and such termination occurs within one (1) year after a
“Change in Control” of Employer’s Parent Company
(as such terms are defined below) then the provisions of Paragraph
4 shall govern the compensation or benefits owed to Officer upon
Officer’s termination.
(b)
Termination by
Officer . Officer’s employment with the
Bank may be terminated by Officer in accordance with the following
provisions:
(i) Officer
shall be entitled to terminate his employment pursuant to this
Agreement voluntarily at any time, provided, however, that in the
event Officer terminates his employment pursuant to this Agreement
without “good reason” (as defined below) or other than
in connection with a “Change in Control” as described
below, then Officer shall be entitled to no termination allowance
and/or no severance allowance and no further compensation or
benefits after the "Date of Termination" as defined in part (d) of
this Paragraph 3.
(ii) Officer
may terminate his employment for good reason and will be entitled
in such event to the payments and other benefits provided in
Paragraph 3(a)(ii) in the event of a termination of Officer’s
employment without good cause. For purposes of this Agreement,
“good reason” shall mean: (aa) the continued assignment
to Officer of duties inconsistent with Officer’s position,
duty and responsibilities with Employer as of the Commencement Date
to which Officer objects, in writing; (bb) the relocation of
Officer to a primary place of employment which might require
Officer to move his residence which, for this purpose, includes any
reassignment to a place or employment located more than fifty (50)
miles from Elizabeth City, North Carolina, without Officer’s
express written consent to such relocation; or (cc) any failure by
Employer or HRB, or any successor entity following a “Change
of Control” (as defined below), to comply with the
prov
