Employment Agreement - NetBank Inc. and D.R. Grimes
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 4th day of January, 1999, between
NET.B@NK, INC. (the "Company"), the parent bank holding company of NET.B@NK, a
federal savings bank (collectively, the "Employer"), and D.R. GRIMES, a resident
of the State of Georgia (the "Executive").
RECITALS:
The Company desires to employ the Executive as the Chief Executive
Officer of the Employer and the Executive desires to accept such employment.
In consideration of the above premises and the mutual agreements
hereinafter set forth, the parties hereby agree as follows:
1. DEFINITIONS. Whenever used in this Agreement, the following terms and their
variant forms shall have the meaning set forth below:
1.1 "AGREEMENT" shall mean this Agreement and any Exhibits incorporated
herein together with any amendments hereto made in the manner described in this
Agreement.
1.2 "AFFILIATE" shall mean any business entity which controls, is
controlled by, or is under common control with, the Employer.
1.3 "AVERAGE MONTHLY COMPENSATION" shall mean the quotient determined (a)
by dividing the sum of the Executive's then-current annual Base Salary (as
defined in Section 4.1), and Incentive Compensation (as set forth in Section
4.2(a)) (b) by twelve (12). For this purpose, Incentive Compensation dependent
on Executive's performance shall be based upon the greater of the Incentive
Compensation earned by Executive in the prior calendar year or the Incentive
Compensation which would be earned by Executive by annualizing the performance
of the Employer based on year-to-date performance.
1.4 "BUSINESS OF THE EMPLOYER" shall mean the business conducted by the
Employer, which is internet-based commercial banking.
1.5 "CAUSE" shall mean:
1.5.1 With respect to termination by the Company:
(a) A material breach of the terms of this Agreement by the
Executive (including, without limitation, failure by the Executive
to perform his duties and responsibilities in the manner and to the
extent required under this Agreement, or a breach of any
representation or warranty of the Executive set forth herein); which
breach remains uncured after the expiration of thirty (30) days
following the delivery of written notice of such breach to the
Executive by the Company;
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(b) Conduct by the Executive that amounts to fraud, dishonesty
or willful misconduct in the performance of his duties and
responsibilities hereunder;
(c) The conviction of the Executive of a felony;
(d) Conduct by the Executive that amounts to gross and willful
insubordination or inattention to his duties and responsibilities
hereunder; or
(e) Conduct by the Executive that results in removal from his
position as an officer or executive of the Employer pursuant to a
written order by any regulatory agency with authority or
jurisdiction over the Executive.
1.5.2 With respect to termination by the Executive, a material
diminution in the powers, responsibilities or duties of Executive
hereunder, or the failure of the Boards of Directors of the Bank and the
Company to elect him as Chief Executive Officer, or a material breach of
the terms of this Agreement by the Company which remains uncured after the
expiration of thirty (30) days following the delivery of written notice of
such breach to the Executive by the Company.
1.6 "CHANGE IN CONTROL" of the Employer shall mean any transaction wherein
fifty percent (50%) of the shares of the Bank or the Company, plus at least one
additional share, are directly or indirectly transferred by sale, gift, merger,
exchange or any other means to new owners other than an Affiliate of such person
or entity transferring such shares or if a majority of the members of the Board
of Directors of the Bank or of the Company are replaced within a twelve (12)
month period.
1.7 "INITIAL TERM" shall mean that period of time commencing on the date
of execution of this Agreement by the Company and the Executive and running
until the earlier of three (3) years thereafter or any termination of employment
of the Executive under this Agreement as provided for in Section 3.
1.8 "PERMANENT DISABILITY" shall mean the total inability of the Executive
to perform his duties under this Agreement for a period of ninety (90)
consecutive days as certified by a physician chosen by the Company and
reasonably acceptable to the Executive; provided, however, if the Executive is
covered by a disability insurance policy, the term "permanent disability" shall
have the meaning set forth in such policy.
1.9 "PROPRIETARY INFORMATION" shall mean:
(a) Information related to the Employer or any Affiliate,
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(i) Which derives economic value, actual or potential, from not
being generally known to or readily ascertainable by other
persons who can obtain economic value from its disclosure or
use; and
(ii) Which is the subject of efforts that are reasonable under
the circumstances to maintain its secrecy; and
(b) All tangible reproductions or embodiments of such information.
Assuming the criteria in (a)(i) and (a)(ii) above are satisfied, Proprietary
Information includes, but is not limited to, technical and nontechnical data
related to the compilations, programs, methods, techniques, finances, actual or
potential customers and suppliers, existing and future products, and employees
of the Employer or its Affiliates. Proprietary Information also includes
information which has been disclosed to the Employer or its Affiliates by a
third party and which the Employer or any Affiliate is obligated to treat as
confidential.
1.10 "TERM" shall mean the Initial Term and all subsequent renewal
periods. The Term shall be automatically extended on each day for one additional
day, beginning on the first day of the Initial Term, so that the Term shall
remain a three-year term until either party gives written notice to the other
that the automatic extensions shall cease, whereupon the Term shall expire on
the day preceding the Third Anniversary of the date of delivery of the written
notice.
2. DUTIES.
2.1 The Executive is employed initially as the Chief Executive Officer of
the Employer and, subject to the direction of the Boards of Directors of the
Employer, shall perform and discharge well and faithfully the duties which may
be assigned to him from time to time by the Employer in connection with the
conduct of its business. The duties and responsibilities of the Executive are
set forth on EXHIBIT A attached hereto.
2.2 In addition to the duties and responsibilities specifically assigned
to the Executive pursuant to Section 2.1 hereof, the Executive shall: (1) devote
substantially all of his time, energy and skill during regular business hours to
the performance of the duties of his employment (reasonable vacations and
reasonable absences due to illness excepted), and faithfully and industriously
perform such duties; (2) diligently follow and implement all management policies
and decisions communicated to him by the Boards of Directors of the Employer;
and (3) timely prepare and forward to the Board of Directors of the Employer all
reports and accounting as may be requested of the Executive.
2.3 The Executive shall devote substantially his entire business time,
attention and energies to the Business of the Employer and shall not during the
term of this Agreement be engaged (whether or not during normal business hours)
in any other business or professional activity which
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is competitive in nature; or interferes with his ability to perform his
duties fully; or which promotes an activity inconsistent with the nature or
status of the Employer, whether or not such activity is pursued for gain,
profit or other pecuniary advantage; but this shall not be construed as
preventing the Executive from (1) investing his personal assets in businesses
which (subject to item (2) below) are not in competition with the Business of
the Employer and which will not require any services on the part of the
Executive in their operation or affairs and in which his participation is
solely that of an investor, (2) purchasing securities in any corporation
whose securities are regularly traded provided that such purchase shall not
result in his collectively owning beneficially at any time five percent (5%)
or more of the equity securities of any business in competition with the
Business of the Employer, and (3) participating in civic and professional
affairs and organizations and conferences, preparing or publishing papers or
books or teaching so long as such activity does not materially interfere with
the performance of his duties hereunder.
3. TERM AND TERMINATION.
3.1 TERM. This Agreement shall remain in effect for the Term. However,
notwithstanding the provisions of Section 1.8, (i) no extension shall be granted
that would extend the term of this Agreement beyond the last day of the month
during which the Executive attains age 65, and (ii) this Agreement shall
terminate upon the death or Permanent Disability of Executive.
3.2 TERMINATION. During the Term, the employment of the Executive under
this Agreement may be terminated only as follows:
3.2.1 By the Company:
(a) For Cause, with no prior notice except as provided in Section 1.5.1; or
(b) Without Cause at any time, provided that the Company shall
give the Executive thirty (30) days prior written notice of its
intent to terminate.
3.2.2 By the Executive:
(a) For Cause, with no prior notice except as provided in
Section 1.5.2; or
(b) Without Cause, provided that the Executive shall give the
Company thirty (30) days prior written notice of his intent to
terminate.
3.2.3 By the Executive within twelve (12) months following a Change
in Control of the Employer, provided that the Executive shall give
written notice to the Company of his intention to terminate this
Agreement within such period.
3.2.4 At any time upon mutual, written agreement of the parties.
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3.3 EFFECT OF TERMINATION. The effect of termination of the employment of
the Executive pursuant to Section 3.2 shall be as follows:
3.3.1 In the event of termination by the Company:
(a) For Cause, pursuant to Section 3.2.1(a), the Company shall
have no further obligation to the Executive except for the payment
of any amounts due and owing under Section 4 on the effective date
of termination;
(b) Without Cause, pursuant to Section 3.2.1(b), the Company
shall be required to meet its obligations to the Executive under
Section 3.4 below.
3.3.2 In the event of termination by the Executive:
(a) For Cause, pursuant to Section 3.2.2(a), the Company shall
be required to meet its obligations to the Executive under Section
3.4 below.
(b) Without Cause, pursuant to Section 3.2.2(b), the Executive
shall have no further obligation to the Company.
3.3.3 In the event of termination by the Executive in connection
with a Change in Control pursuant to Section 3.2.3, the Company
shall be required to meet its obligations to the Executive under
Section 3.4 below.
3.3.4 In the event of termination upon mutual agreement of the
parties pursuant to Section 3.2.4, the Company shall have no further
obligation to the Executive except for the payment of any amounts
due and owing under Section 4.1 on the effective date of termination
unless otherwise set forth in the written agreement.
3.4 TERMINATION PAYMENTS. In the event Executive's employment is
terminated under this Agreement prior to the expiration of the Term pursuant to
Section 3.3.1(b), Section 3.3.2(a) or Section 3.3.3, the Company shall pay to
the Executive as severance pay and liquidated damages a lump sum amount equal to
the product of the (a) Average Monthly Compensation multiplied by (b) thirty-six
(36). In addition, from the effective date of the termination through the then
unexpired portion of the Term (or, if greater, for a period of twelve months
following the effective date of the termination) (the "Severance Period"), the
Company shall cause the Bank to continue to provide to the Executive, to the
extent practicable, the benefits described in Section 4.3; provided, however,
that in lieu of providing health benefits, the Company shall pay the Executive
an amount equal to the cost of COBRA health continuation coverage that would be
charged by the Bank to a former employee and eligible dependents for the greater
of the Severance Period or the period during which the Executive and his
eligible dependents are entitled to COBRA health continuation coverage from the
Bank. To the extent the Company determines
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that the continuation of any other benefits by the Bank is not practicable,
the Company shall pay the Executive an amount equal to what would have been
the Bank's cost of providing the coverage for such benefits during the
Severance Period to the Executive and his eligible dependents if the coverage
could have been continued.
Notwithstanding any other provision of this Agreement to the contrary, if the
aggregate of the payments provided for in this Agreement and the other payments
and benefits which the Executive has the right to receive from the Employer (the
"Total Payments") would constitute a "parachute payment," as defined in Section
280G(b)(2) of the Internal Revenue Code, as amended (the "Code"), the Executive
shall receive the Total Payments unless the (a) after-tax amount that would be
retained by the Executive (after taking into account all federal, state and
local income taxes payable by the Executive and the amount of any excise taxes
payable by the Executive (the "Excise Taxes")) if the Executive were to receive
the Total Payments has a lesser aggregate value than (b) the after-tax amount
that would be retained by the Executive (after taking into account all federal,
state and local income taxes payable by the Executive) if the Executive were to
receive the Total Payments being subject to Excise Taxes (the "Reduced
Payments"), in which case the Executive shall be entitled only to the Reduced
Payments. If the Executive is to receive the Reduced Payments, the Executive
shall be entitled to determine which of the Total Payments, and the relative
portions of each, are to be reduced.
4. COMPENSATION. The Executive shall receive the following salary and benefits:
4.1 BASE SALARY. During the Initial Term, the Executive shall be
compensated at a base rate of $200,000.00 per annum (the "Base Salary"). The
Executive's salary shall be reviewed by the Board of Directors of the Company
annually, and the Executive shall be entitled to receive annually an increase in
such amount, if any, as may be determined by such Board. Such salary shall be
payable in accordance with the Employer's normal payroll practices.
4.2 INCENTIVE COMPENSATION.
(a) The Executive shall be entitled to an annual incentive
bonus determined in accordance with the criteria set forth in EXHIBIT B
attached hereto (the "Incentive Compensation").
(b) The Executive shall be entitled to participate in such
option, bonus, incentive and other executive compensation programs as
are made available to senior management of the Employer from time to
time.
4.3 BENEFITS.
(a) In addition to the Base Salary and Incentive Compensation,
the Executive shall be entitled to such other benefits as may be
available from time to time for executives of
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the Employer similarly situated to the Executive. All such benefits
shall be awarded and administered in accordance with the Employer's
standard policies and practices. Such benefits may include, by way
of example only, profit sharing plans, retirement or investment
funds, dental, health, life and disability insurance benefits, and
such other benefits as the Employer deems appropriate.
(b) The Company specifically agrees to reimburse the Executive
for reasonable business expenses incurred by him in performance of
his duties hereunder, as approved from time to time by the Board of
Directors of the Company or of the Bank; provided that the Executive
shall, as a condition of reimbursement, submit verification of the
nature and amount of such expenses in accordance with reimbursement
policies from time to time adopted by the Employer and in sufficient
detail to comply with Internal Revenue Service regulations.
(c) On a non-cumulative basis the Executive shall be entitled
to five (5) weeks of vacation in each year of this Agreement, during
which his compensation shall be paid in full. At least two
consecutive weeks each year must be taken by the Executive for
vacation, with other vacation to be taken at the time the Executive
determines appropriate, taking into account the requirements of the
Employer.
(d) The Executive shall be reimbursed for membership in Country
Club of the South, and shall receive a car allowance of $750 per
month.
4.1 WITHHOLDING. The Employer may deduct from each payment of compensation
hereunder all amounts required to be deducted and withheld in accordance with
applicable federal and state income, FICA and other withholding requirements.
5. PROPRIETARY INFORMATION.
5.1 TREATMENT OF PROPRIETARY INFORMATION. As a senior management official
of the Employer, the Executive has access to Proprietary Information. The
Executive agrees to maintain the confidentiality of all Proprietary Information
throughout the Term and for a period of two (2) years after the termination of
this Agreement.
5.2 OBLIGATIONS OF EXECUTIVE. During the period described in Section 5.1,
the Executive will hold the Proprietary Information in trust and strictest
confidence, and will not use, reproduce, distribute, disclose or otherwise
disseminate the Proprietary Information except to the extent necessary to
perform the duties assigned to him by the Employer.
5.3 DELIVERY UPON TERMINATION. Upon termination of his employment with the
Employer, the Executive will promptly deliver to the Employer all property
belonging to the Employer, including, without limitation, all Proprietary
Information then in his possession or control.
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6. NON-COMPETITION. The Executive agrees that during his employment by the
Employer and, in the event of his termination, other than pursuant to Sections
3.3.1(b) or 3.3.2(a), for a period of twelve (12) months thereafter, he will not
(except on behalf of or with the prior written consent of the Company), within
the Atlanta Metropolitan (RMA) Area, either directly or indirectly, on his own
behalf or in the service or on behalf of others, as a principal, partner,
officer, director, manager, supervisor, administrator, consultant, executive
employee, or in any other capacity which involves duties and responsibilities
similar to those undertaken for the Employer, engage in any business which is
the same as or essentially the same as the Business of the Employer.
7. NON-SOLICITATION. The Executive agrees that during his employment by the
Employer and, in the event of his termination, other than pursuant to Sections
3.3.1(b) or 3.3.2(a), for a period of twelve (12) months thereafter, he will not
(except on behalf of or with the prior written consent of the Company), within
the Atlanta Metropolitan (RMA) Area, on his own behalf or in the service or on
behalf of others, solicit, divert or appropriate, or attempt to solicit, divert
or appropriate, directly or by assisting others, any business from any of the
Employer's customers or vendors, including actively-sought prospective customers
or vendors, with whom the Executive has or had material contact during the last
two (2) years of his employment, for purposes of providing products or services
that are competitive with those provided by the Employer.
8. NON-SOLICITATION OF EXECUTIVES. The Executive agrees that during his
employment by the Employer and, in the event of his termination, other than
pursuant to Sections 3.3.1(b) or 3.3.2(a), for a period of twelve (12) months
thereafter, he will not, on his own behalf or in the service or on behalf of
others, solicit, recruit or hire away, or attempt to solicit, recruit or hire
away, directly or by assisting others, any employee of the Employer or its
Affiliates, whether or not such employee is a full-time employee or a temporary
employee of the Employer, and whether or not such employment is pursuant to
written agreement and whether or not such employment is for a determined period
or is at will.
9. REMEDIES. The Executive agrees that the covenants contained in Sections 5
through 8 of this Agreement are of the essence of this Agreement; that each of
the covenants is reasonable and necessary to protect the business, interests and
properties of the Employer; and that irreparable loss and damage will be
suffered by the Employer should he breach any of the covenants. Therefore, the
Executive agrees and consents that, in addition to all the remedies provided by
law or in equity, the Company shall be entitled to a temporary restraining order
and temporary and permanent injunctions to prevent a breach or contemplated
breach of any of the covenants. The Company and the Executive agree that all
remedies available to the Company or the Executive, as applicable, shall be
cumulative.
10. SEVERABILITY. The parties agree that each of the provisions included in this
Agreement is separate, distinct, and severable from the other provisions of this
Agreement, and that the invalidity or unenforceability of any Agreement
provision shall not affect the validity or
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enforceability of any other provision of this Agreement. Further, if any
provision of this Agreement is ruled invalid or unenforceable by a court of
competent jurisdiction because of a conflict between the provision and any
applicable law or public policy, the provision shall be redrawn to make the
provision consistent with and valid and enforceable under the law or public
policy.
11. NOTICE. All notices and other communications required or permitted under
this Agreement shall be in writing and, if mailed by prepaid first-class mail or
certified mail, return receipt requested, shall be deemed to have been received
on the earlier of the date shown on the receipt or three (3) business days after
the postmarked date thereof. In addition, notices hereunder may be delivered by
hand, facsimile transmission or overnight courier, in which event the notice
shall be deemed effective when delivered or transmitted. All notices and other
communications under this Agreement shall be given to the parties hereto at the
following addresses:
(i) If to the Company, to it at:
Net.B@nk, Inc.
950 North Point Parkway
Suite 350
Alpharetta, GA 30005
Attn: Chairman of the Board
(ii) If to the Executive, to him at:
D. R. Grimes
4385 Old Wesleyan Woods
Alpharetta, GA 30022
12. ASSIGNMENT. Neither party hereto may assign or delegate this Agreement or
any of its rights and obligations hereunder without the written consent of the
other party hereto.
13. WAIVER. A waiver by the Company of any breach of this Agreement by the
Executive shall not be effective unless in writing, and no waiver shall operate
or be construed as a waiver of the same or another breach on a subsequent
occasion.
14. ATTORNEYS' FEES. In the event of litigation between the parties concerning
this Agreement, the party prevailing in such litigation shall be entitled to
receive from the other party all reasonable costs and expenses, including
without limitation attorneys' fees, incurred by the prevailing party in
connection with such litigation, and the other party shall pay such costs and
expenses to the prevailing party promptly upon demand by the prevailing party.
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15. APPLICABLE LAW. This Agreement shall be construed and enforced under and in
accordance with the laws of the state of Georgia.
16. ENTIRE AGREEMENT. This Agreement embodies the entire and final agreement of
the parties on the subject matter stated in the Agreement. No amendment or
modification of this Agreement shall be valid or binding upon the Company or the
Executive unless made in writing and signed by both parties. All prior
understandings and agreements relating to the subject matter of this Agreement
are hereby expressly terminated.
17. RIGHTS OF THIRD PARTIES. Nothing herein expressed is intended to or shall be
construed to confer upon or give to any person, firm or other entity, other than
the parties hereto and their permitted assigns, any rights or remedies under or
by reason of this Agreement.
18. SURVIVAL. The obligations of the Executive pursuant to Sections 5, 6, 7, 8
and 9 shall survive the termination of the employment of the Executive
hereunder.
IN WITNESS WHEREOF, the Company and the Executive have executed and
delivered this Agreement as of the date first shown above.
THE COMPANY:
NET.B@NK, INC.
By: /s/ T. Stephen Johnson
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Name: T. Stephen Johnson
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Title: Chairman of the Board
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THE EXECUTIVE:
/s/ D.R. Grimes
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D. R. GRIMES
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EXHIBIT A
Initial Duties of the Executive
The initial duties of the Executive shall include, in addition to any other
duties assigned the Executive by the Boards of Directors of the Employer or its
designee, the following:
- Foster a corporate culture that promotes ethical practices, encourages
individual integrity, fulfills social responsibility, and is conducive to
attracting, retaining and motivating a diverse group of top-quality
executives at all levels.
- With the Board of Directors of the Bank, develop a long-term strategy for
the Bank that creates shareholder value.
- Develop and recommend to the Board of Directors of the Bank annual
business plans and budgets that support the Bank's long-term strategy.
- Manage the day-to-day operations of the Company appropriately.
- Use best efforts to achieve the Bank's financial and operating goals and
objectives.
- Improve the quality and value of the products and services provided by
the Bank.
- Insure that the Bank maintains a satisfactory competitive position within
its industry.
- Develop an effective management team and an active plan for its
development and succession, and make recommendations to the Board of
Directors of the Bank regarding hiring, firing and compensation.
- Implement major corporate policies.
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EXHIBIT B
CEO Bonus Proposal
End 1998 at $0.25 EPS and $280 million in deposits.
Goals are to increase earning per share by at least $0.25 and deposits by
$330 million. This would represent 100% growth in EPS and 118% in deposits.
Levels in Deloitte plan:
20% Base Threshold
40% Base Target
80% Base Outstanding 120% Target
200% Base Superior (also cap for bonus) 140% Target