x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
OR
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
COMMUNITY PARTNERS BANCORP
|
||
(Exact Name of Registrant as Specified in Its Charter)
|
New Jersey
|
20-3700861
|
|
(State of Other Jurisdiction
of Incorporation or Organization)
|
(I.R.S. Employer Identification No.)
|
1250 Highway 35 South, Middletown, New Jersey
|
07748
|
|
(Address of Principal Executive Offices)
|
(Zip Code)
|
(732) 706-9009 |
(Registrant’s Telephone Number, Including Area Code)
|
(Former name, former address and former fiscal year, if changed since last report)
|
Large accelerated filer
|
o |
Accelerated filer
|
o |
Non-accelerated filer
(Do not check if a smaller reporting company)
|
o |
Smaller reporting company
|
x |
PART I. | FINANCIAL INFORMATION | Page | |||
Item 1. | Financial Statements | 3 | |||
3 | |||||
4 | |||||
5 | |||||
6 | |||||
Notes to Consolidated Financial Statements (unaudited) | 7 | ||||
23 | |||||
42 | |||||
42 | |||||
PART II.
|
OTHER INFORMATION
|
||||
43 | |||||
SIGNATURES | 44 |
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
INTEREST INCOME:
|
||||||||||||||||
Loans, including fees
|
$ | 7,338 | $ | 6,733 | $ | 14,531 | $ | 13,200 | ||||||||
Investment securities
|
413 | 641 | 861 | 1,310 | ||||||||||||
Federal funds sold and interest bearing deposits
|
37 | 18 | 54 | 36 | ||||||||||||
Total Interest Income
|
7,788 | 7,392 | 15,446 | 14,546 | ||||||||||||
INTEREST EXPENSE:
|
||||||||||||||||
Deposits
|
1,460 | 2,119 | 3,152 | 4,590 | ||||||||||||
Securities sold under agreements to repurchase
|
42 | 71 | 95 | 141 | ||||||||||||
Borrowings
|
76 | 76 | 150 | 150 | ||||||||||||
Total Interest Expense
|
1,578 | 2,266 | 3,397 | 4,881 | ||||||||||||
Net Interest Income
|
6,210 | 5,126 | 12,049 | 9,665 | ||||||||||||
PROVISION FOR LOAN LOSSES
|
700 | 355 | 1,400 | 505 | ||||||||||||
Net Interest Income after Provision for Loan Losses
|
5,510 | 4,771 | 10,649 | 9,160 | ||||||||||||
NON-INTEREST INCOME:
|
||||||||||||||||
Total other-than-temporary impairment charges
|
- | (393 | ) | - | (393 | ) | ||||||||||
Less: Portion included in other
comprehensive income (pre tax)
|
- | 309 | - | 309 | ||||||||||||
Net other-than-temporary impairment charges to earnings
|
- | (84 | ) | - | (84 | ) | ||||||||||
Service fees on deposit accounts
|
123 | 167 | 256 | 323 | ||||||||||||
Other loan fees
|
149 | 135 | 296 | 251 | ||||||||||||
Earnings from investment in life insurance
|
87 | 36 | 176 | 71 | ||||||||||||
Net realized gain on sale of securities
|
- | - | - | 487 | ||||||||||||
Other income
|
119 | 103 | 230 | 183 | ||||||||||||
Total Non-Interest Income
|
478 | 357 | 958 | 1,231 | ||||||||||||
NON-INTEREST EXPENSES:
|
||||||||||||||||
Salaries and employee benefits
|
2,448 | 2,374 | 4,785 | 4,713 | ||||||||||||
Occupancy and equipment
|
816 | 824 | 1,689 | 1,672 | ||||||||||||
Professional
|
241 | 192 | 454 | 375 | ||||||||||||
Insurance
|
102 | 66 | 183 | 116 | ||||||||||||
FDIC insurance and assessments
|
252 | 484 | 516 | 654 | ||||||||||||
Advertising
|
75 | 75 | 150 | 151 | ||||||||||||
Data processing
|
161 | 242 | 311 | 484 | ||||||||||||
Outside services fees
|
111 | 142 | 233 | 277 | ||||||||||||
Amortization of identifiable intangibles
|
57 | 67 | 124 | 144 | ||||||||||||
Loan workout and OREO expenses
|
71 | 23 | 194 | 50 | ||||||||||||
Other operating
|
345 | 353 | 678 | 673 | ||||||||||||
Total Non-Interest Expenses
|
4,679 | 4,842 | 9,317 | 9,309 | ||||||||||||
Income before Income Taxes
|
1,309 | 286 | 2,290 | 1,082 | ||||||||||||
INCOME TAX EXPENSE
|
471 | 80 | 819 | 364 | ||||||||||||
Net Income
|
838 | 206 | 1,471 | 718 | ||||||||||||
Preferred stock dividend and discount accretion
|
(143 | ) | (144 | ) | (286 | ) | (240 | ) | ||||||||
Net income available to common shareholders
|
$ | 695 | $ | 62 | $ | 1,185 | $ | 478 | ||||||||
EARNINGS PER COMMON SHARE:
|
||||||||||||||||
Basic
|
$ | 0.09 | $ | 0.01 | $ | 0.16 | $ | 0.07 | ||||||||
Diluted
|
$ | 0.09 | $ | 0.01 | $ | 0.16 | $ | 0.07 | ||||||||
Weighted average common shares outstanding:
|
||||||||||||||||
Basic
|
7,193 | 7,169 | 7,185 | 7,169 | ||||||||||||
Diluted
|
7,285 | 7,209 | 7,239 | 7,182 |
Common Stock | (Accumulated | Accumulated | ||||||||||||||||||||||
Preferred
Stock
|
Outstanding
shares
|
Amount |
Deficit)
Retained
Earnings
|
Other
Comprehensive
Income
|
Total
Shareholders’
Equity
|
|||||||||||||||||||
Balance, January 1, 2010
|
$ | 8,508 | 7,182,397 | $ | 69,794 | $ | (1,714 | ) | $ | 249 | $ | 76,837 | ||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||
Net income
|
- | - | - | 1,471 | - | 1,471 | ||||||||||||||||||
Change in net unrealized gain
on securities available for sale,
net of reclassification adjustment and tax
|
- | - | - | - | 127 | 127 | ||||||||||||||||||
Total comprehensive income
|
- | - | - | - | - | 1,598 | ||||||||||||||||||
Preferred stock discount accretion
|
60 | - | - | (60 | ) | - | - | |||||||||||||||||
Dividends on preferred stock
|
- | - | - | (226 | ) | - | (226 | ) | ||||||||||||||||
Options exercised
|
- | 11,742 | 41 | - | - | 41 | ||||||||||||||||||
Stock option compensation expense
|
- | - | 53 | - | - | 53 | ||||||||||||||||||
Balance, June 30, 2010
|
$ | 8,568 | 7,194,139 | $ | 69,888 | $ | (529 | ) | $ | 376 | $ | 78,303 | ||||||||||||
Balance January 1, 2009
|
$ | - | 6,959,821 | $ | 68,197 | $ | 4,738 | $ | 377 | $ | 73,312 | |||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||
Net income
|
- | - | - | 718 | - | 718 | ||||||||||||||||||
Change in net unrealized loss
on securities available for sale,
net of reclassification adjustment
and tax
|
- | - | - | - | (266 | ) | (266 | ) | ||||||||||||||||
Total comprehensive income
|
452 | |||||||||||||||||||||||
Preferred stock and common stock
warrants issued
|
8,398 | - | 602 | - | - | 9,000 | ||||||||||||||||||
Preferred stock discount accretion
|
50 | - | - | (50 | ) | - | - | |||||||||||||||||
Dividends on preferred stock
|
- | - | - | (190 | ) | - | (190 | ) | ||||||||||||||||
Stock option compensation expense
|
- | - | 106 | - | - | 106 | ||||||||||||||||||
Balance, June 30, 2009
|
$ | 8,448 | 6,959,821 | $ | 68,905 | $ | 5,216 | $ | 111 | $ | 82,680 |
Six Months Ended
June 30,
|
||||||||
2010
|
2009
|
|||||||
(in thousands)
|
||||||||
Cash flows from operating activities:
|
||||||||
Net income
|
$ | 1,471 | $ | 718 | ||||
Adjustments to reconcile net income to net cash provided by
operating activities:
|
||||||||
Depreciation and amortization
|
482 | 537 | ||||||
Provision for loan losses
|
1,400 | 505 | ||||||
Intangible amortization
|
124 | 144 | ||||||
Net amortization of securities premiums and discounts
|
62 | 98 | ||||||
Other-than-temporary impairment on securities available for sale
|
- | 84 | ||||||
Earnings from investment in life insurance
|
(176 | ) | (71 | ) | ||||
Net realized gain on sale of foreclosed real estate
|
(48 | ) | - | |||||
Stock option compensation expense
|
53 | 106 | ||||||
Net realized gain on sale of securities
|
- | (487 | ) | |||||
Decrease (increase) in assets:
|
||||||||
Accrued interest receivable
|
134 | 7 | ||||||
Other assets
|
662 | (1,442 | ) | |||||
(Decrease) increase in liabilities:
|
||||||||
Accrued interest payable
|
(62 | ) | (80 | ) | ||||
Other liabilities
|
288 | 693 | ||||||
Net cash provided by operating activities
|
4,390 | 812 | ||||||
Cash flows from investing activities:
|
||||||||
Purchase of securities available-for-sale
|
(5,551 | ) | (20,486 | ) | ||||
Purchase of securities held-to-maturity
|
(1,823 | ) | (3,153 | ) | ||||
Proceeds from sales of securities available-for-sale
|
- | 7,940 | ||||||
Proceeds from repayments, calls and maturities of securities available-for-sale
|
11,793 | 16,868 | ||||||
Proceeds from repayments, calls and maturities of securities held to maturity
|
1,500 | - | ||||||
Purchase of restricted stock
|
(150 | ) | - | |||||
Purchase of bank-owned life insurance
|
(24 | ) | - | |||||
Net increase in loans
|
(1,948 | ) | (44,574 | ) | ||||
Purchases of premises and equipment
|
(159 | ) | (102 | ) | ||||
Proceeds from sale of foreclosed real estate
|
2,986 | - | ||||||
Net cash provided by (used in) investing activities
|
6,624 | (43,507 | ) | |||||
Cash flows from financing activities:
|
||||||||
Net increase in deposits
|
16,299 | 46,203 | ||||||
Net (decrease) increase in securities sold under agreements to repurchase
|
(1,001 | ) | 4,348 | |||||
Proceeds from issuance of preferred stock
|
- | 9,000 | ||||||
Cash dividend paid on preferred stock
|
(226 | ) | (131 | ) | ||||
Proceeds from exercise of stock options
|
41 | - | ||||||
Net cash provided by financing activities
|
15,113 | 59,420 | ||||||
Net increase in cash and cash equivalents
|
26,127 | 16,725 | ||||||
Cash and cash equivalents – beginning
|
42,735 | 23,017 | ||||||
Cash and cash equivalents - ending
|
$ | 68,862 | $ | 39,742 | ||||
Supplementary cash flow information:
|
||||||||
Interest paid
|
$ | 3,459 | $ | 4,961 | ||||
Income taxes paid
|
$ | 531 | $ | 1,752 | ||||
Supplementary schedule of non-cash activities:
|
||||||||
Other real estate acquired in settlement of loans
|
$ | 2,938 | $ | 1,025 |
|
·
|
A reporting entity to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers; and
|
|
·
|
In the reconciliation for fair value measurements using significant unobservable inputs, a reporting entity should present separately information about purchases, sales, issuances, and settlements.
|
|
·
|
For purposes of reporting fair value measurements for each class of assets and liabilities, a reporting entity needs to use judgment in determining the appropriate classes of assets and liabilities; and
|
|
·
|
A reporting entity should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements.
|
Six Months Ended
|
||||||||
June 30,
|
||||||||
2010
|
2009
|
|||||||
(in thousands)
|
||||||||
Balance at beginning of year
|
$ | 18,109 | $ | 24,834 | ||||
Goodwill impairment
|
- | - | ||||||
Balance at end of period
|
$ | 18,109 | $ | 24,834 |
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
(dollars in thousands, except per share data)
|
||||||||||||||||
Net income
|
$ | 838 | $ | 206 | $ | 1,471 | $ | 718 | ||||||||
Preferred stock dividend and discount
accretion
|
(143 | ) | (144 | ) | (286 | ) | (240 | ) | ||||||||
Net income applicable to common stock
|
$ | 695 | $ | 62 | $ | 1,185 | $ | 478 | ||||||||
Weighted average common shares
outstanding
|
7,192,448 | 7,168,616 | 7,184,982 | 7,168,616 | ||||||||||||
Effect of dilutive securities, stock options
and warrants
|
92,734 | 39,878 | 54,231 | 13,269 | ||||||||||||
Weighted average common shares
outstanding used to calculate diluted
earnings per share
|
7,285,182 | 7,208,494 | 7,239,213 | 7,181,885 | ||||||||||||
Basic earnings per common share
|
$ | 0.09 | $ | 0.01 | $ | 0.16 | $ | 0.07 | ||||||||
Diluted earnings per common share
|
$ | 0.09 | $ | 0.01 | $ | 0.16 | $ | 0.07 |
Gross
|
Gross
Unrealized Losses
|
|||||||||||||||||||
(in thousands)
|
Amortized
Cost
|
Unrealized
Gains
|
Noncredit
OTTI
|
Other |
Fair
Value
|
|||||||||||||||
June 30, 2010:
|
||||||||||||||||||||
Securities available for sale:
|
||||||||||||||||||||
U.S. Government agency securities
|
$ | 5,045 | $ | 60 | $ | - | $ | - | $ | 5,105 | ||||||||||
Municipal securities
|
2,007 | 28 | - | (7 | ) | 2,028 | ||||||||||||||
U.S. Government-sponsored enterprises
(
“GSE”) – Mortgage-backed securities
|
15,182 | 964 | - | - | 16,146 | |||||||||||||||
Collateralized mortgage obligations
|
4,264 | 50 | - | - | 4,314 | |||||||||||||||
Corporate debt securities
|
2,311 | 23 | (250 | ) | (270 | ) | 1,814 | |||||||||||||
|
28,809 | 1,125 | (250 | ) | (277 | ) | 29,407 | |||||||||||||
Mutual fund
|
2,161 | 31 | - | - | 2,192 | |||||||||||||||
$ | 30,970 | $ | 1,156 | $ | (250 | ) | $ | ( 277 | ) | $ | 31,599 | |||||||||
Securities held to maturity:
|
||||||||||||||||||||
Municipal securities
|
$ | 8,622 | $ | 243 | $ | - | $ | (1 | ) | $ | 8,864 | |||||||||
Corporate debt securities
|
2,312 | 9 | - | (398 | ) | 1,923 | ||||||||||||||
$ | 10,934 | $ | 252 | $ | - | $ | (399 | ) | $ | 10,787 |
Gross
|
Gross
Unrealized Losses
|
|||||||||||||||||||
(in thousands)
|
Amortized
Cost
|
Unrealized
Gains
|
Noncredit
OTTI
|
Other |
Fair
Value
|
|||||||||||||||
December 31, 2009:
|
||||||||||||||||||||
Securities available for sale:
|
||||||||||||||||||||
U.S. Government agency securities
|
$ | 11,068 | $ | 83 | $ | - | $ | (49 | ) | $ | 11,102 | |||||||||
Municipal securities
|
2,011 | 26 | - | (12 | ) | 2,025 | ||||||||||||||
GSE – Mortgage-backed securities
|
18,769 | 838 | - | (1 | ) | 19,606 | ||||||||||||||
Collateralized mortgage obligations
|
1,961 | 22 | - | (5 | ) | 1,978 | ||||||||||||||
Corporate debt securities
|
2,323 | 29 | (204 | ) | (310 | ) | 1,838 | |||||||||||||
36,132 | 998 | (204 | ) | (377 | ) | 36,549 | ||||||||||||||
Mutual fund
|
1,136 | 5 | - | - | 1,141 | |||||||||||||||
$ | 37,268 | $ | 1,003 | $ | (204 | ) | $ | (377 | ) | $ | 37,690 | |||||||||
Securities held to maturity:
|
||||||||||||||||||||
U.S. Government agency securities
|
$ | 1,000 | $ | - | $ | - | $ | (21 | ) | $ | 979 | |||||||||
Municipal securities
|
6,802 | 214 | - | (5 | ) | 7,011 | ||||||||||||||
Corporate debt securities
|
2,816 | 16 | - | (556 | ) | 2,276 | ||||||||||||||
$ | 10,618 | $ | 230 | $ | - | $ | (582 | ) | $ | 10,266 |
Available for Sale
|
Held to Maturity
|
|||||||||||||||
Amortized
Cost
|
Fair
Value
|
Amortized Cost
|
Fair
Value
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Due in one year or less
|
$ | 1,553 | $ | 1,559 | $ | 2,492 | $ | 2,503 | ||||||||
Due in one year through five years
|
2,521 | 2,546 | 1,221 | 1,300 | ||||||||||||
Due in five years through ten years
|
1,506 | 1,506 | 1,059 | 1,127 | ||||||||||||
Due after ten years
|
8,047 | 7,650 | 6,162 | 5,857 | ||||||||||||
13,627 | 13,261 | 10,934 | 10,787 | |||||||||||||
GSE - Mortgage-backed securities
|
15,182 | 16,146 | - | - | ||||||||||||
$ | 28,809 | $ | 29,407 | $ | 10,934 | $ | 10,787 |
Less than 12 Months
|
12 Months or More
|
Total
|
||||||||||||||||||||||
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
|||||||||||||||||||
(in thousands)
|
||||||||||||||||||||||||
June 30, 2010:
|
||||||||||||||||||||||||
Municipal securities
|
$ | 2,742 | $ | (8 | ) | $ | - | $ | - | $ | 2,742 | $ | (8 | ) | ||||||||||
Corporate debt securities
|
- | - | 2,224 | (918 | ) | 2,224 | (918 | ) | ||||||||||||||||
Total Temporarily
|
||||||||||||||||||||||||
Impaired Securities
|
$ | 2,742 | $ | (8 | ) | $ | 2,224 | $ | (918 | ) | $ | 4,966 | $ | (926 | ) |
Less than 12 Months
|
12 Months or More
|
Total
|
||||||||||||||||||||||
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
|||||||||||||||||||
(in thousands)
|
||||||||||||||||||||||||
December 31, 2009:
|
||||||||||||||||||||||||
U.S. Government agency
securities
|
$ | 4,930 | $ | (70 | ) | $ | - | $ | - | $ | 4,930 | $ | (70 | ) | ||||||||||
Municipal securities
|
1,341 | (17 | ) | - | - | 1,341 | (17 | ) | ||||||||||||||||
GSE – Mortgage-backed
securities
|
42 | (1 | ) | - | - | 42 | (1 | ) | ||||||||||||||||
Collateralized mortgage
obligations
|
325 | (5 | ) | - | - | 325 | (5 | ) | ||||||||||||||||
Corporate debt securities
|
- | - | 2,071 | (1,070 | ) | 2,071 | (1,070 | ) | ||||||||||||||||
Total Temporarily
|
||||||||||||||||||||||||
Impaired Securities
|
$ | 6,638 | $ | (93 | ) | $ | 2,071 | $ | (1,070 | ) | $ | 8,709 | $ | (1,163 | ) |
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
||||||||||||||||
2010
|
2009
|
2010
|
2009
|
||||||||||||||
(in thousands)
|
|||||||||||||||||
Unrealized holding gains (losses) on
available for sale securities
|
$ | 109 | $ | 105 | $ | 252 | $ | (46 | ) | ||||||||
Unrealized losses on securities for which
a portion of the impairment has been
recognized in income
|
(8 | ) | - | (46 | ) | - | |||||||||||
Less:
|
Reclassification adjustments for
gains included in net income
|
- | - | - | 487 | ||||||||||||
Less:
|
Reclassification adjustment for
credit losses on securities included
in net income
|
- | (84 | ) | - | (84 | ) | ||||||||||
101 | 189 | 206 | (449 | ) | |||||||||||||
Tax effect
|
(40 | ) | (76 | ) | (79 | ) | 183 | ||||||||||
Net unrealized gains (losses)
|
$ | 61 | $ | 113 | $ | 127 | $ | (266 | ) |
|
·
|
The Company granted to officers ISOs to purchase an aggregate of 44,100 shares of Company’s common stock. These options are scheduled to vest 33.3% per year over three years beginning on the first anniversary of the grant date with a ten year exercise term. The options were granted with an exercise price of $3.25 per share based upon the average trading price of Company’s common stock on the grant date.
|
|
·
|
The Company granted to officers ISOs to purchase an aggregate of 20,000 shares of Company’s common stock. These options are scheduled to vest 20% per year over five years beginning on the first anniversary of the grant date with a ten year exercise term. The options were granted with an exercise price of $4.15 per share based upon the average trading price of Company’s common stock on the grant date.
|
Number of Shares
|
Weighted
Average
Price
|
Weighted
Average
Remaining
Life
|
Aggregate
Intrinsic
Value
|
||||||||||
Options outstanding, beginning of year
|
1,036,656 | $ | 7.21 | ||||||||||
Options granted
|
64,100 | 3.53 | |||||||||||
Options exercised
|
(11,742 | ) | 3.36 | ||||||||||
Options forfeited
|
(108,180 | ) | 7.64 | ||||||||||
Options outstanding, June 30, 2010
|
980,834 | $ | 6.98 |
5.5 years
|
$ | 496,276 | |||||||
Options exercisable, June 30, 2010
|
654,702 | $ | 8.66 |
3.8 years
|
$ | 235,341 | |||||||
Option price range at June 30, 2010
|
$3.25 to $15.33 |
Dividend yield
|
0.00 | % | ||
Expected volatility
|
30.09 | % | ||
Risk-free interest rate
|
2.84 | % | ||
Forfeiture rate
|
5.00 | % | ||
Expected life
|
6.5 years
|
|||
Weighted average fair value
of options granted
|
$ | 1.19 |
Dividend yield
|
0.00 | % | ||
Expected volatility
|
33.51 | % | ||
Risk-free interest rate
|
2.91 | % | ||
Forfeiture rate
|
5.00 | % | ||
Expected life
|
6.5 years
|
|||
Weighted average fair value
of options granted
|
$ | 1.64 |
|
Level 1
:
|
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
|
|
Level 2
:
|
Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.
|
|
Level 3
:
|
Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported with little or no market activity).
|
Description
|
(Level 1)
Quoted Prices
in Active
Markets for
Identical
Assets
|
(Level 2)
Significant
Other
Observable
Inputs
|
(Level 3)
Significant
Unobservable
Inputs
|
Total
|
||||||||||||
(in thousands)
|
||||||||||||||||
At June 30, 2010
|
||||||||||||||||
Securities available for sale:
|
||||||||||||||||
U.S. Government agency
securities
|
$ | - | $ | 5,105 | $ | - | $ | 5,105 | ||||||||
Municipal securities
|
- | 2,028 | - | 2,028 | ||||||||||||
GSE: Mortgage-backed
|
||||||||||||||||
securities
|
- | 16,146 | - | 16,146 | ||||||||||||
Collateralized mortgage
obligations
|
- | 4,314 | - | 4,314 | ||||||||||||
Corporate debt securities
|
- | 1,720 | 94 | 1,814 | ||||||||||||
Mutual Fund
|
2,192 | - | - | 2,192 | ||||||||||||
Total
|
$ | 2,192 | $ | 29,313 | $ | 94 | $ | 31,599 | ||||||||
At December 31, 2009
|
||||||||||||||||
Securities available for sale:
|
||||||||||||||||
U.S. Government agency
|
||||||||||||||||
securities
|
$ | - | $ | 11,102 | $ | - | $ | 11,102 | ||||||||
Municipal securities
|
- | 2,025 | - | 2,025 | ||||||||||||
GSE: Mortgage-backed
|
||||||||||||||||
securities
|
- | 19,606 | - | 19,606 | ||||||||||||
Collateralized mortgage
obligations
|
- | 1,978 | - | 1,978 | ||||||||||||
Corporate debt securities
|
- | 1,698 | 140 | 1,838 | ||||||||||||
Mutual Fund
|
1,141 | - | - | 1,141 | ||||||||||||
Total
|
$ | 1,141 | $ | 36,409 | $ | 140 | $ | 37,690 |
Fair Value Measurements Using Significant
Unobservable Inputs (Level 3)
|
||||||||
Securities available for sale | ||||||||
Three Months Ended
June 30, 2010
|
Six Months Ended
June 30, 2010
|
|||||||
(in thousands) | ||||||||
Balance at beginning of period
|
$ | 102 | $ | 140 | ||||
Total losses:
|
||||||||
Included in other comprehensive
income (loss)
|
(8 | ) | (46 | ) | ||||
Balance at end of period
|
$ | 94 | $ | 94 |
Description
|
(Level 1)
Quoted
Prices in
Active
Markets for
Identical
Assets
|
(Level 2)
Significant
Other
Observable
Inputs
|
(Level 3)
Significant
Unobservable
Inputs
|
Total
|
||||||||||||
(in thousands)
|
||||||||||||||||
At June 30, 2010
|
||||||||||||||||
Impaired loans
|
$ | - | $ | - | $ | 8,184 | $ | 8,184 | ||||||||
At December 31, 2009
|
||||||||||||||||
Impaired loans
|
$ | - | $ | - | $ | 6,959 | $ | 6,959 | ||||||||
Goodwill
|
- | - | 18,109 | 18,109 | ||||||||||||
Property held for sale
|
- | - | 1,100 | 1,100 |
·
|
Impaired loans
– Impaired loans measured at fair value are those loans
in which the Company has measured impairment generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon either independent third party appraisals of the properties or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements. At June 30, 2010, fair value consists of the loan balances of $8,184,000, which is net of a valuation allowance of $1,880,000. At December 31, 2009, fair value consists of loan balances of $6,959,000, which is net of a valuation allowance of $1,313,000. At June 30, 2010, the recorded investment in impaired loans, not requiring a specific allowance for loan losses, was $14,757,000 as compared to $17,266,000 at December 31, 2009.
For the six months ended June 30, 2010, the average recorded investment in impaired loans was $23,931,000 as compared to $24,476,000
for the six months ended June 30, 2009, and the interest income recognized on these impaired loans was $375,000 and $508,000, respectively.
|
·
|
Goodwill
– Goodwill is evaluated for impairment on an annual basis. See Note 3 for further details on goodwill.
|
·
|
Property held for sale
– Real estate originally classified as bank premises for a planned branch, was reclassified during 2009 to held for sale in other assets. At December 31, 2009, the fair value was based upon the appraised value of the property.
|
June 30, 2010
|
December 31, 2009
|
|||||||||||||||
Carrying
Amount
|
Estimated
Fair
Value
|
Carrying
Amount
|
Estimated Fair
Value
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Financial assets:
|
||||||||||||||||
Cash and cash equivalents
|
$ | 68,862 | $ | 68,862 | $ | 42,735 | $ | 42,735 | ||||||||
Securities available for sale
|
31,599 | 31,599 | 37,690 | 37,690 | ||||||||||||
Securities held to maturity
|
10,934 | 10,787 | 10,618 | 10,266 | ||||||||||||
Restricted stock
|
1,150 | 1,150 | 1,000 | 1,000 | ||||||||||||
Loans receivable
|
504,825 | 489,252 | 507,215 | 486,729 | ||||||||||||
Accrued interest receivable
|
1,742 | 1,742 | 1,876 | 1,876 | ||||||||||||
Financial liabilities:
|
||||||||||||||||
Deposits
|
551,711 | 553,405 | 535,412 | 536,101 | ||||||||||||
Securities sold under agreements to repurchase
|
16,064 | 16,064 | 17,065 | 17,065 | ||||||||||||
Long-term debt
|
7,500 | 8,720 | 7,500 | 8,111 | ||||||||||||
Accrued interest payable
|
102 | 102 | 164 | 164 | ||||||||||||
Off-balance sheet financial instruments:
|
||||||||||||||||
Commitments to extend credit and outstanding
letters of credit
|
- | - | - | - |
(Annualized)
Six months ended June 30, |
|||||
2010
|
2009
|
||||
Return on average assets
|
0.45%
|
0.24%
|
|||
Return on average tangible assets
|
0.46%
|
0.25%
|
|||
Return on average shareholders' equity
|
3.79%
|
1.75%
|
|||
Return on average tangible shareholders' equity
|
5.00%
|
2.55%
|
|||
Net interest margin
|
4.00%
|
3.45%
|
|||
Average equity to average assets
|
11.84%
|
13.50%
|
|||
Average tangible equity to average tangible assets
|
9.22%
|
9.68%
|
Three Months Ended
June 30, 2010
|
Three Months Ended
June 30, 2009
|
||||||||||||||||||||||||
(dollars in thousands)
|
Average
Balance
|
Interest
Income/
Expense
|
Average
Rate
|
Average
Balance
|
Interest
Income/
Expense
|
Average
Rate
|
|||||||||||||||||||
ASSETS
|
|||||||||||||||||||||||||
Interest Earning Assets:
|
|||||||||||||||||||||||||
Interest bearing due from banks
|
$ | 50,405 | $ | 31 | 0.25 | % | $ | - | $ | - | - | ||||||||||||||
Federal funds sold
|
7,000 | 6 | 0.34 | % | 43,700 | 18 | 0.17 | % | |||||||||||||||||
Investment securities
|
46,787 | 413 | 3.53 | % | 62,686 | 641 | 4.09 | % | |||||||||||||||||
Loans, net of unearned fees (1) (2)
|
512,046 | 7,338 | 5.75 | % | 476,098 | 6,733 | 5.67 | % | |||||||||||||||||
Total Interest Earning Assets
|
616,238 | 7,788 | 5.07 | % | 582,484 | 7,392 | 5.09 | % | |||||||||||||||||
Non-Interest Earning Assets:
|
|||||||||||||||||||||||||
Allowance for loan losses
|
(7,098 | ) | (6,853 | ) | |||||||||||||||||||||
All other assets
|
55,210 | 54,978 | |||||||||||||||||||||||
Total Assets
|
$ | 664,350 | $ | 630,609 | |||||||||||||||||||||
LIABILITIES & SHAREHOLDERS' EQUITY
|
|||||||||||||||||||||||||
Interest-Bearing Liabilities:
|
|||||||||||||||||||||||||
NOW deposits
|
$ | 50,936 | 81 | 0.64 | % | $ | 41,807 | 85 | 0.82 | % | |||||||||||||||
Savings deposits
|
205,676 | 577 | 1.13 | % | 177,333 | 781 | 1.77 | % | |||||||||||||||||
Money market deposits
|
103,030 | 217 | 0.84 | % | 95,864 | 382 | 1.60 | % | |||||||||||||||||
Time deposits
|
120,510 | 585 | 1.95 | % | 136,639 | 871 | 2.56 | % | |||||||||||||||||
Repurchase agreements
|
15,738 | 42 | 1.07 | % | 15,816 | 71 | 1.80 | % | |||||||||||||||||
Short-term borrowings
|
- | - | - | - | - | - | |||||||||||||||||||
Long-term debt
|
7,500 | 76 | 4.06 | % | 7,500 | 76 | 4.06 | % | |||||||||||||||||
Total Interest Bearing Liabilities
|
503,390 | 1,578 | 1.26 | % | 474,959 | 2,266 | 1.91 | % | |||||||||||||||||
Non-Interest Bearing Liabilities:
|
|||||||||||||||||||||||||
Demand deposits
|
79,126 | 69,502 | |||||||||||||||||||||||
Other liabilities
|
3,702 | 3,368 | |||||||||||||||||||||||
Total Non-Interest Bearing Liabilities
|
82,828 | 72,870 | |||||||||||||||||||||||
Shareholders' Equity
|
78,132 | 82,780 | |||||||||||||||||||||||
Total Liabilities and Shareholders' Equity
|
$ | 664,350 | $ | 630,609 | |||||||||||||||||||||
NET INTEREST INCOME
|
$ | 6,210 | $ | 5,126 | |||||||||||||||||||||
NET INTEREST SPREAD (3)
|
3.81 | % | 3.18 | % | |||||||||||||||||||||
NET INTEREST MARGIN(4)
|
4.04 | % | 3.53 | % |
(1)
|
Included in interest income on loans are loan fees.
|
(2)
|
Includes non-performing loans.
|
(3)
|
The interest rate spread is the difference between the weighted average yield on average interest earning assets and the weighted average cost of average interest bearing liabilities.
|
(4)
|
The interest rate margin is calculated by dividing annualized net interest income by average interest earning assets.
|
Six Months Ended
June 30, 2010
|
Six Months Ended
June 30, 2009
|
||||||||||||||||||||||||
(dollars in thousands)
|
Average
Balance
|
Interest
Income/
Expense
|
Average
Rate
|
Average
Balance
|
Interest
Income/
Expense
|
Average
Rate
|
|||||||||||||||||||
ASSETS
|
|||||||||||||||||||||||||
Interest Earning Assets:
|
|||||||||||||||||||||||||
Interest bearing due from banks
|
$ | 30,541 | $ | 38 | 0.25 | % | $ | - | $ | - | - | ||||||||||||||
Federal funds sold
|
18,509 | 16 | 0.17 | % | 39,575 | 36 | 0.18 | % | |||||||||||||||||
Investment securities
|
47,675 | 861 | 3.61 | % | 60,669 | 1,310 | 4.32 | % | |||||||||||||||||
Loans, net of unearned fees (1) (2)
|
511,128 | 14,531 | 5.73 | % | 464,615 | 13,200 | 5.73 | % | |||||||||||||||||
Total Interest Earning Assets
|
607,853 | 15,446 | 5.12 | % | 564,859 | 14,546 | 5.19 | % | |||||||||||||||||
Non-Interest Earning Assets:
|
|||||||||||||||||||||||||
Allowance for loan losses
|
(6,690 | ) | (6,783 | ) | |||||||||||||||||||||
All other assets
|
55,037 | 54,649 | |||||||||||||||||||||||
Total Assets
|
$ | 656,200 | $ | 612,725 | |||||||||||||||||||||
LIABILITIES & SHAREHOLDERS' EQUITY
|
|||||||||||||||||||||||||
Interest-Bearing Liabilities:
|
|||||||||||||||||||||||||
NOW deposits
|
$ | 48,609 | 166 | 0.69 | % | $ | 38,983 | 154 | 0.80 | % | |||||||||||||||
Savings deposits
|
201,379 | 1,259 | 1.26 | % | 171,730 | 1,791 | 2.10 | % | |||||||||||||||||
Money market deposits
|
102,720 | 525 | 1.03 | % | 94,997 | 873 | 1.85 | % | |||||||||||||||||
Time deposits
|
123,200 | 1,202 | 1.97 | % | 131,958 | 1,772 | 2.71 | % | |||||||||||||||||
Repurchase agreements
|
15,300 | 95 | 1.25 | % | 14,418 | 141 | 1.97 | % | |||||||||||||||||
Short-term borrowings
|
- | - | - | - | - | - | |||||||||||||||||||
Long-term debt
|
7,500 | 150 | 4.03 | % | 7,500 | 150 | 4.03 | % | |||||||||||||||||
Total Interest Bearing Liabilities
|
498,708 | 3,397 | 1.37 | % | 459,586 | 4,881 | 2.14 | % | |||||||||||||||||
Non-Interest Bearing Liabilities:
|
|||||||||||||||||||||||||
Demand deposits
|
76,124 | 66,926 | |||||||||||||||||||||||
Other liabilities
|
3,666 | 3,480 | |||||||||||||||||||||||
Total Non-Interest Bearing Liabilities
|
79,790 | 70,406 | |||||||||||||||||||||||
Shareholders' Equity
|
77,702 | 82,733 | |||||||||||||||||||||||
Total Liabilities and Shareholders' Equity
|
$ | 656,200 | $ | 612,725 | |||||||||||||||||||||
NET INTEREST INCOME
|
$ | 12,049 | $ | 9,665 | |||||||||||||||||||||
NET INTEREST SPREAD (3)
|
3.75 | % | 3.05 | % | |||||||||||||||||||||
NET INTEREST MARGIN(4)
|
4.00 | % | 3.45 | % |
(1)
|
Included in interest income on loans are loan fees.
|
(2)
|
Includes non-performing loans.
|
(3)
|
The interest rate spread is the difference between the weighted average yield on average interest earning assets and the weighted average cost of average interest bearing liabilities.
|
(4)
|
The interest rate margin is calculated by dividing annualized net interest income by average interest earning assets.
|
Three Months Ended June 30, 2010
|
Six Months Ended June 30, 2010
|
|||||||||||||||||||||||
Compared to Three Months Ended
|
Compared to Six Months Ended
|
|||||||||||||||||||||||
June 30, 2009
|
June 30, 2009
|
|||||||||||||||||||||||
Increase (Decrease) Due To
|
||||||||||||||||||||||||
Volume
|
Rate
|
Net
|
Volume
|
Rate
|
Net
|
|||||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||||||
Interest Earned On:
|
||||||||||||||||||||||||
Interest bearing deposits
|
$ | - | $ | 31 | $ | 31 | $ | - | $ | 38 | $ | 38 | ||||||||||||
Federal funds sold
|
(15 | ) | 3 | (12 | ) | (19 | ) | (1 | ) | (20 | ) | |||||||||||||
Investment securities
|
(163 | ) | (65 | ) | (228 | ) | (281 | ) | (168 | ) | (449 | ) | ||||||||||||
Loans
|
508 | 97 | 605 | 1,321 | 10 | 1,331 | ||||||||||||||||||
Total Interest Income
|
330 | 66 | 396 | 1,021 | (121 | ) | 900 | |||||||||||||||||
Interest Paid On:
|
||||||||||||||||||||||||
NOW deposits
|
19 | (23 | ) | (4 | ) | 38 | (26 | ) | 12 | |||||||||||||||
Savings deposits
|
125 | (329 | ) | (204 | ) | 309 | (841 | ) | (532 | ) | ||||||||||||||
Money market deposits
|
29 | (194 | ) | (165 | ) | 71 | (419 | ) | (348 | ) | ||||||||||||||
Time deposits
|
(103 | ) | (183 | ) | (286 | ) | (118 | ) | (452 | ) | (570 | ) | ||||||||||||
Repurchase agreements
|
- | (29 | ) | (29 | ) | 9 | (55 | ) | (46 | ) | ||||||||||||||
Short-term borrowings
|
- | - | - | - | - | - | ||||||||||||||||||
Long-term debt
|
- | - | - | - | - | - | ||||||||||||||||||
Total Interest Expense
|
70 | (758 | ) | (688 | ) | 309 | (1,793 | ) | (1,484 | ) | ||||||||||||||
Net Interest Income
|
$ | 260 | $ | 824 | $ | 1,084 | $ | 712 | $ | 1,672 | $ | 2,384 |
June 30,
|
December 31,
|
|||||||||||||||
2010
|
2009
|
|||||||||||||||
Amount
|
Percent
|
Amount
|
Percent
|
|||||||||||||
(in thousands, except for percentages)
|
||||||||||||||||
Commercial and industrial
|
$ | 152,048 | 29.7% | $ | 133,916 | 26.1% | ||||||||||
Real estate – construction
|
25,336 | 5.0% | 67,011 | 13.0% | ||||||||||||
Real estate – commercial
|
248,666 | 48.6% | 228,818 | 44.5% | ||||||||||||
Real estate – residential
|
21,706 | 4.2% | 19,381 | 3.8% | ||||||||||||
Consumer
|
64,170 | 12.5% | 64,547 | 12.6% | ||||||||||||
Other
|
28 | 0.0% | 176 | 0.0% | ||||||||||||
Unearned fees
|
(440 | ) | 0.0% | (450 | ) | 0.0% | ||||||||||
Total loans
|
$ | 511,514 | 100.0% | $ | 513,399 | 100.0% |
June 30, 2010
|
December 31, 2009
|
|||||||||
Non-Performing Assets:
|
||||||||||
Non-Performing Loans:
|
||||||||||
Commercial and industrial
|
$ | 5,535 | $ | 4,720 | ||||||
Real estate-construction
|
5,023 | 7,120 | ||||||||
Real estate-residential
|
888 | - | ||||||||
Consumer
|
1,691 | 2,311 | ||||||||
Total Non-Performing Loans
|
13,137 | 14,151 | ||||||||
Other Real Estate Owned
|
- | - | ||||||||
Total Non-Performing Assets
|
$ | 13,137 | $ | 14,151 | ||||||
Ratios:
|
||||||||||
Non-Performing loans to total loans
|
2.57 | % | 2.76 | % | ||||||
Non-Performing assets to total assets
|
2.00 | % | 2.21 | % | ||||||
Restructured Loans
|
$ | 5,027 | $ | 4,717 |
June 30,
|
December 31,
|
||||||||||||||
2010
|
2009
|
2009
|
|||||||||||||
(in thousands, except percentages)
|
|||||||||||||||
Balance at beginning of year
|
$ | 6,184 | $ | 6,815 | $ | 6,815 | |||||||||
Provision charged to expense
|
1,400 | 505 | 2,205 | ||||||||||||
Loans charged off, net
|
(895 | ) | (230 | ) | (2,836 | ) | |||||||||
Balance of allowance at end of period
|
$ | 6,689 | $ | 7,090 | $ | 6,184 | |||||||||
Ratio of net charge-offs to average
loans outstanding
|
0.18 | % | 0.05 | % | 0.59 | % | |||||||||
Balance of allowance as a percent of
loans at period-end
|
1.31 | % | 1.44 | % | 1.20 | % | |||||||||
June 30,
2010
|
December 31,
2009
|
|||||||
(dollars in thousands)
|
||||||||
Home equity lines of credit
|
$ | 35,408 | $ | 29,443 | ||||
Commitments to fund commercial real estate and
construction loans
|
51,852 | 36,300 | ||||||
Commitments to fund commercial and industrial loans
|
47,723 | 46,928 | ||||||
Commercial and financial letters of credit
|
5,818 | 5,824 | ||||||
|
$ | 140,801 | $ | 118,495 |
Tier I
Capital to
Average Assets Ratio
(Leverage Ratio)
|
Tier I
Capital to
Risk Weighted
Assets Ratio
|
Total Capital to
Risk Weighted
Assets Ratio
|
||||||||||||||||||||||||||||
June 30,
2010
|
Dec. 31,
2009
|
June 30,
2010
|
Dec. 31,
2009
|
June 30,
2010
|
Dec. 31,
2009
|
|||||||||||||||||||||||||
Community Partners
|
9.15 | % | 9.28 | % | 11.07 | % | 10.60 | % | 12.32 | % | 11.74 | % | ||||||||||||||||||
Two River
|
9.15 | % | 9.18 | % | 11.06 | % | 10.55 | % | 12.31 | % | 11.68 | % | ||||||||||||||||||
“Adequately capitalized” institution
(under Federal regulations)
|
4.00 | % | 4.00 | % | 4.00 | % | 4.00 | % | 8.00 | % | 8.00 | % | ||||||||||||||||||
“Well capitalized” institution
(under Federal regulations)
|
5.00 | % | 5.00 | % | 6.00 | % | 6.00 | % | 10.00 | % | 10.00 | % |
COMMUNITY PARTNERS BANCORP
|
|||
Date: August 16, 2010
|
By:
|
/s/ WILLIAM D. MOSS
|
|
William D. Moss
|
|||
President and Chief Executive Officer
|
|||
(Principal Executive Officer)
|
|||
Date: August 16, 2010
|
By:
|
/s/ A. RICHARD ABRAHAMIAN
|
|
A. Richard Abrahamian
|
|||
Senior Vice President and Chief Financial Officer
|
|||
(Principal Financial and Accounting Officer)
|
|
1.
|
Definitions
|
|
a.
|
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.
|
|
b.
|
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.
|
A reduction by Employer in Executive’s annual Base Compensation.
|
|
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.
|
|
2.
|
Employment.
Employer hereby agrees to employ Executive, and Executive hereby accepts employment by Employer, during the term of this Agreement upon the terms and conditions set forth herein.
|
|
3.
|
Position.
During the term of this Agreement, Executive shall be employed as the President and Chief Executive Officer of CPB and TRCB. Executive shall devote his full time and attention to the business of Employer, and shall not during the term of this Agreement be engaged in any other business activity. This paragraph shall not be construed as preventing Executive from managing any investments of his which do not require any involvement on his part in the operation of such investments, serving as a trustee or director of any nonprofit entity so long as such service does not interfere with Executive's function or performance as the President and Chief Executive Officer of CPB and TRCB, or, with the prior approval of the Board, serving as a director of any unaffiliated business entity.
|
|
4.
|
Compensation.
Employer shall pay to Executive compensation for his services during the term of this Agreement as follows:
|
|
a.
|
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.
|
|
b.
|
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.
|
|
c.
|
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.
|
|
5.
|
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 which 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 adopts 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.
|
|
|
Employer shall provide Executive with an automobile for Executive's use in connection with the performance of his duties as President and Chief Executive Officer of CPB and TRCB, and his personal use, which automobile shall be chosen by Executive, subject to the approval of the Board, and purchased or leased for Executive's use. Executive acknowledges that the provision and use of the automobile may generate employee compensation to Executive, and agrees that Employer may withhold from Executive's Base Compensation that amount which is necessary for Employer to fully satisfy its withholding obligations under federal and state law. |
|
6.
|
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.
|
|
7.
|
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.
|
|
8.
|
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.
|
|
9.
|
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 Section 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”).
|
|
|
If (i) Employer terminates Executive without Cause during the term of this Agreement; (ii) Executive resigns with Good Reason during the term of this Agreement; or (iii) Employer terminates Executive’s employment under Section 7 of this Agreement by reason of Executive’s disability during the term of this Agreement, then Employer shall, for a stated purchase price of $1.00, transfer to Executive title to that automobile which Employer has, as of the date of such termination of employment, provided for Executive's use, which title shall, at the time of such transfer, be completely free and clear of any and all liens, encumbrances, claims and lease obligations. Executive acknowledges that the transfer to Executive of title to the automobile under the preceding sentence may generate employee compensation to Executive, and agrees that Employer may withhold from the Lump Sum Payment that amount which is necessary for Employer to fully satisfy its withholding obligations under federal and state law. Executive shall pay any sales tax liability, as well as any registration, documentation or title fees, associated with the transfer of title under this paragraph of this Section 9. |
|
10.
|
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.
|
|
11.
|
Non-Disclosure of Confidential Information.
|
|
a.
|
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.
|
|
b.
|
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.
|
|
c.
|
Survival.
This section shall survive the termination of the Executive’s employment hereunder and the expiration of this Agreement.
|
|
12.
|
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:
|
|
13.
|
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 “base amount” (as defined in Section 280G(b)(3) of the Code).
|
|
14.
|
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 consistent 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.
|
|
15.
|
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
.
|
|
16.
|
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 revenues 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.
|
|
17.
|
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.
|
|
18.
|
Miscellaneous |
|
(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 Employer 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.
|
/s/ Michael W. Kostelnik
|
/s/ William D. Moss | ||
Michael W. Kostelnik |
William D. Moss, individually
|
ATTEST: | COMMUNITY PARTNERS BANCORP | ||
/s/ Michael W. Kostelnik
|
By: |
/s/ Charles T. Parton
|
|
Michael W. Kostelnik, Secretary
|
Charles T. Parton, Chairman
|
ATTEST: | TWO RIVER COMMUNITY BANK | ||
/s/ Michael W. Kostelnik
|
By: |
/s/ Charles T. Parton
|
|
Michael W. Kostelnik, Secretary
|
Charles T. Parton, Chairman
|
/s/ Bernice E. Kotza
|
/s/ William D. Moss
|
||
Bernice E. Kotza
|
William D. Moss, individually
|
ATTEST: | COMMUNITY PARTNERS BANCORP | ||
/s/ Michael W. Kostelnik
|
By: |
/s/ Charles T. Parton
|
|
Michael W. Kostelnik, Secretary
|
Charles T. Parton, Chairman
|
ATTEST: | TWO RIVER COMMUNITY BANK | ||
/s/ Michael W. Kostelnik
|
By: |
/s/ Charles T. Parton
|
|
Michael W. Kostelnik, Secretary
|
Charles T. Parton, Chairman
|
|
1.
|
Definitions
|
|
a.
|
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 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.
|
|
b.
|
Change in Control
. “
Change in Control
” shall mean the occurrence of any of the following events:
|
|
i.
|
CPB acquires actual knowledge that any person, as such term is used in Sections 13 (d) and 14 (d) (2) of the Securities and Exchange Act of 1934 (the “Exchange Act”), other than an affiliate of CPB or an employee benefit plan established or maintained by CPB or any of its affiliates, is or becomes the beneficial owner (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of CPB representing more than twenty-five percent (25%) of the combined voting power of CPB’s then outstanding securities (a “Control Person”);
provided
that no person shall be considered a Control Person for purposes of this paragraph (i) if such person acquires in excess of twenty-five percent (25%) of the combined voting power of CPB’s then outstanding voting securities in violation of law and, by order of a court of competent jurisdiction, settlement or otherwise, subsequently disposes or is required to dispose of all CPB securities acquired in violation of law.
|
|
ii.
|
Upon the purchase of twenty five percent (25%), in the aggregate, of the issued and outstanding shares of CPB’s common stock pursuant to a tender or exchange offer (other than a tender or exchange offer made by CPB or an employee benefit plan established or maintained by CPB or any of its affiliates).
|
|
iii.
|
Upon the approval by
(a)
CPB’s shareholders or,
(b)
if and only if Executive is an employee of only TRCB, CPB as the sole holder of all of the issued and outstanding common stock of TRCB, of (A) a merger, combination, or consolidation of CPB or TRCB with or into another entity (other than a merger or consolidation within the CPB corporate group, or a merger or consolidation the definitive agreement for which provides that at least two-thirds of the directors of the surviving or resulting entity immediately after the transaction are Continuing Directors (as hereinafter defined) (a “Non-Control Transaction”)), (B) a sale or disposition of all or substantially all of CPB’s or TRCB’s assets or (C) a plan of liquidation or dissolution of CPB or TRCB (other than a plan of liquidation or dissolution of TRCB under which the business of TRCB would continue to be operated by CPB or a member of the CPB corporate group).
|
|
iv.
|
If during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the board of directors of CPB or TRCB, as the case may be, (the “Continuing Directors”) cease for any reason to constitute at least a simple majority thereof or, following a Non-Control Transaction, a simple majority of the board of directors of the surviving or resulting entity;
provided
that any individual whose election or nomination for election as a member of the board of directors of CPB or TRCB, as the case may be, (or, following a Non-Control Transaction, the board of directors of the surviving or resulting entity) was approved by a vote of at least a majority of the Continuing Directors then in office shall be considered a Continuing Director.
|
|
v.
|
Upon a sale of (A) common stock of CPB if after such sale any person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) other than an employee benefit plan established or maintained by CPB or an affiliate of CPB, owns a majority of CPB’s common stock or (B) all or substantially all of CPB’s assets (other than in the ordinary course of business).
|
|
vi.
|
If and only if the Executive is at such time an employee of only TRCB, upon a sale of (A) common stock of TRCB if after such sale any person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) other than CPB, an employee benefit plan established or maintained by CPB, or any subsidiary or affiliate of CPB, owns a majority of TRCB’s common stock or (B) all or substantially all of TRCB’s assets (other than in the ordinary course of business).
|
|
c.
|
Contract Period.
“
Contract Period
” shall mean the period commencing the day immediately preceding a Change in Control and ending on the earlier of (i) the second anniversary of the Change in Control, or (ii) the death of the Executive.
|
|
d.
|
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, 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 Executive Vice President of TRCB; or any removal of the Executive as, or any failure to continue the Executive as, Executive Vice President of 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.
|
A reduction by Employer in Executive’s annual Base Compensation as in effect immediately prior to a Change in Control.
|
|
iii.
|
Any transfer by Employer of Executive to another geographic location which is either 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.
|
|
2.
|
Employment.
The Employer hereby agrees to employ the Executive, and the Executive hereby agrees to accept employment, during the Contract Period upon the terms and conditions set forth herein. TRCB and CPB may, at any time and in the exercise of their sole discretion, transfer the Executive’s employment relationship from TRCB to CPB, or from CPB to TRCB. The transfer of the Executive’s employment relationship between TRCB and CPB shall not be deemed to be either an actual or constructive termination of the Executive or “Good Reason” for any purpose of this Agreement, and the Executive’s employment shall be deemed to have continued without interruption for all purposes of this Agreement.
|
|
3.
|
Position.
During the Contract Period, Executive shall be employed as the Executive Vice President of TRCB or such other corporate or divisional profit center as shall then be the principal successor to the business, assets and properties of TRCB, with the same title and the same duties and responsibilities as before the Change in Control. Executive shall devote his full time and attention to the business of Employer, and shall not during the Contract Period be engaged in any other business activity. This paragraph shall not be construed as preventing Executive from managing any investments of his which do not require any involvement on his part in the operation of such investments, serving as a trustee or director of any nonprofit entity so long as such service does not interfere with Executive's function or performance as the Executive Vice President of TRCB, or, with the prior approval of the Board, serving as a director of any unaffiliated business entity.
|
|
4.
|
Compensation.
Employer shall pay to Executive compensation for his services during the Contract Period as follows:
|
|
a.
|
Base Compensation.
The base compensation shall be equal to such annual compensation, including both salary and bonus, as was paid to or accrued by, or for the benefit of, the Executive in the twelve (12) months immediately prior to the Change in Control. The annual salary portion of base compensation shall be payable in installments in accordance with the Employer’s usual payroll method. The bonus shall be payable at the time and in the manner as to which the Employer paid such bonuses prior to the Change in Control. Any increase in the Executive’s annual compensation pursuant to paragraph 4(b) below, or otherwise, shall automatically and permanently increase the base compensation.
|
|
b.
|
Annual Increase.
During the Contract Period, 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 Executive 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.
|
|
5.
|
Expenses and Fringe Benefits.
During the Contract Period, the Executive shall be entitled to reimbursement for all business expenses incurred by him with respect to the business of the Employer in the same manner and to the same extent as such expenses were previously reimbursed to him immediately prior to the Change in Control, 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 which 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. If prior to the Change in Control, the Executive was entitled to the use of an automobile, he shall be entitled to the same use of an automobile at least comparable to the automobile provided to him prior to the Change in Control, and he shall be entitled to vacations and sick days, in accordance with the practices and procedures of the Employer, as such existed immediately prior to the Change in Control. During the Contract Period the Executive also shall be entitled to hospital, health, medical and life insurance, and any other benefits enjoyed, from time to time, by executive officers of the Employer, all upon terms as favorable as those enjoyed by other executive officers of the Employer. Notwithstanding anything in this section to the contrary, if Employer adopts 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.
|
|
6.
|
Termination for Cause.
Employer shall have the right to terminate Executive for Cause at any time during the Contract Period, 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.
|
|
7.
|
Disability.
During the Contract Period, if the Executive becomes permanently disabled, or is unable to perform his duties hereunder for six consecutive months in any 18-month period, the Employer may terminate the employment of the Executive. In such event, the Executive shall not be entitled to any further benefits under this Agreement other than payments under any disability policy which the Employer may obtain for the benefit of its senior officers generally.
|
|
8.
|
Death Benefits.
Upon the Executive’s death during the Contract Period, the Executive shall be entitled to the benefits of any life insurance policy or supplemental executive retirement plan paid for, or maintained by, the Employer, but his estate shall not be entitled to any further benefits under this Agreement.
|
|
9.
|
Termination without Cause or Resignation for Good Reason.
Employer may terminate Executive without Cause during the Contract Period upon four weeks’ prior written notice to Executive, and Executive may resign for Good Reason during the Contract Period, 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 Contract Period without Cause or if Executive resigns during the Contract Period for Good Reason in full accordance with the terms of the third full paragraph of this Section 9, 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 Section 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 any of the three calendar years immediately prior to the Change in Control (the “Lump Sum Payment”).
|
|
10.
|
Resignation without Good Reason.
Executive shall be entitled to resign from the employment of Employer at any time during the Contract Period 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.
|
|
11.
|
Non-Disclosure of Confidential Information.
|
|
a.
|
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 or the Contract Period, 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.
|
|
b.
|
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.
|
|
c.
|
Survival.
This section shall survive the termination of the Executive’s employment hereunder, the expiration of this Agreement, and the expiration of the Contract Period.
|
|
12.
|
Term and Effect Prior to Change in Control.
|
|
a.
|
Term.
Except as otherwise provided for hereunder, this Agreement shall commence on the date hereof and shall remain in effect for a period of two (2) years from the date hereof (the “Initial Term”) or until the end of the Contract Period, whichever is later. The Initial Term shall be automatically extended for an additional one (1) year period on the anniversary date hereof (so that the Initial Term, as extended, is three years) unless the Board of Directors of the Employer, by a majority vote of the directors then in office, votes not to so extend the Initial Term. The Executive shall be promptly notified of the passage of such a resolution.
|
|
b.
|
No Effect Prior to Change in Control.
This Agreement shall not, in any respect, affect any rights of the Employer or the Executive prior to a Change in Control or any rights of the Executive granted in any other agreement, plan or arrangements. The rights, duties and benefits provided hereunder shall only become effective upon the occurrence of a Change in Control, as defined in this Agreement. If the employment of the Executive by the Employer is terminated for any reason prior to a Change in Control, this Agreement shall thereafter be of no further force and effect.
|
|
13.
|
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 “base amount” (as defined in Section 280G(b)(3) of the Code).
|
|
14.
|
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 consistent with all requirements of law, including the Age Discrimination in Employment Act and the Older Workers Benefit Protection Act.
|
|
15.
|
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
.
|
|
16.
|
Covenant Not to Compete
.
Executive agrees that for a period of twelve (12) months from the date when the Lump Sum Payment is made to the Executive under this Agreement, he shall not (i) 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, or (ii) 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 the Lump Sum Payment is made 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.
|
|
17.
|
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.
|
|
18.
|
Miscellaneous. |
|
(a) General
: This Agreement shall be the joint and several obligation of CPB, TRCB and any acquiring entity which assumes CPB’s or the TRCB’s obligations under this Agreement. 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 CPB, TRCB and the Executive, and no amendment or termination of this Agreement shall be effective unless and until made in such a writing. This Agreement shall be binding to the extent of its applicability upon any successor (whether direct or indirect, by purchase, merge, consolidation, liquidation or otherwise) to all or substantially all of the assets of CPB or TRCB. This Agreement is personal to the Executive, and the Executive may not assign any of his rights or duties hereunder, but this Agreement 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. CPB or TRCB, as the case may be, shall, as part of any Change in Control involving an acquiring entity or successor to CPB or TRCB, obtain an enforceable assumption in writing by (i) the entity which is the acquiring entity or successor to CPB or TRCB, as the case may be, in the Change in Control and, (ii) if the acquiring entity or successor to CPB or TRCB, as the case may be, is a bank, the holding company parent of the acquiring entity or successor, of this Agreement and the obligations of CPB or TRCB, as the case may be, under this Agreement, and shall provide a copy of such assumption to the Executive prior to any Change in Control.
|
|
Throughout this Agreement, the masculine form of any pronoun shall be interpreted to refer to the feminine form of such pronoun, it being the intention of the parties that this Agreement be interpreted in a gender neutral manner.
|
/s/ Bernice E. Kotza
|
/s/ Alan Turner, | ||
Bernice E. Kotza
|
Alan Turner, individually |
ATTEST: | COMMUNITY PARTNERS BANCORP | ||
/s/ Michael W. Kostelnik
|
By: |
/s/ William D. Moss
|
|
Michael W. Kostelnik, Secretary
|
William D. Moss | ||
Chief Executive Officer |
ATTEST: | TWO RIVER COMMUNITY BANK | ||
/s/ Michael W. Kostelnik
|
By: |
/s/ William D. Moss
|
|
Michael W. Kostelnik, Secretary
|
William D. Moss | ||
Chief Executive Officer
|
|
1.
|
The first full paragraph of Section 9 of the Change in Control Agreement is deleted in its entirety, and is replaced by the following:
|
|
2.
|
The text of Section 12a is deleted in its entirety, and replaced by the following:
|
/s/ Bernice E. Kotza
|
/s/ Alan B. Turner
|
||
Bernice E. Kotza
|
Alan B. Turner, individually
|
ATTEST: | COMMUNITY PARTNERS BANCORP | ||
/s/ Michael W. Kostelnik
|
By: |
/s/ William D. Moss
|
|
Michael W. Kostelnik, Secretary
|
William D. Moss
|
||
Chief Executive Officer |
ATTEST: | TWO RIVER COMMUNITY BANK | ||
/s/ Michael W. Kostelnik
|
By: |
/s/ William D. Moss
|
|
Michael W. Kostelnik, Secretary
|
William D. Moss
|
||
Chief Executive Officer |
TWO RIVER COMMUNITY BANK
Supplemental Executive Retirement Agreements
|
2.3
|
Disability Benefit
.
If the Executive’s Disability occurs prior to Normal Retirement Age, the Bank shall distribute to the Executive the benefit described in this Section 2.3 in lieu of any other benefit under this Article.
|
|
2.3.1
|
Amount of Benefit
.
The benefit under this Section 2.3 is the Disability benefit set forth on Schedule A for the Plan Year that ended immediately prior to the date on which Disability occurs.
|
|
2.3.2
|
Distribution of Benefit
. The Bank shall distribute the annual benefit to the Executive in twelve (12) equal monthly installments commencing within thirty (30) days following Normal Retirement Age. The annual benefit shall be distributed for fifteen (15) years.
|
|
TWO RIVER COMMUNITY BANK
Supplemental Executive Retirement Agreements
|
2.4.3
|
Parachute Payments
. Notwithstanding any other provision of this Agreement to the contrary, if the Bank 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 the Bank within the meaning of Section 280G of the Code, then such Total Payments shall be reduced in the manner reasonably determined by Bank, in its sole discretion, to the extent necessary so that the Total Payments will be less than three times Executive's “base amount” (as defined in Section 280G(b)(3) of the Code).
|
5.1
|
Termination for Cause
. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not distribute any benefit under this Agreement if Executive’s service is terminated by the Board for: (i) the willful and continued failure by Executive to perform his or her duties for the Bank 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 which causes material injury to the Bank, 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 5.1 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.
|
9.12
|
Limitations Imposed by Emergency Economic Stabilization Act of 2008, American Recovery and Reinvestment Act of 2009, and Other Applicable Law:
|
TWO RIVER COMMUNITY BANK
Supplemental Executive Retirement Agreements
|
EXECUTIVE: | TWO RIVER COMMUNITY BANK | ||
/s/ William D. Moss
|
By: |
/s/ Charles T. Parton
|
|
William D. Moss
|
Charles T. Parton, Chairman
|
TWO RIVER COMMUNITY BANK
|
Supplemental Executive Retirement Agreements
|
2.3
|
Disability Benefit
.
If the Executive’s Disability occurs prior to Normal Retirement Age, the Bank shall distribute to the Executive the benefit described in this Section 2.3 in lieu of any other benefit under this Article.
|
|
2.3.1
|
Amount of Benefit
.
The benefit under this Section 2.3 is the Disability benefit set forth on Schedule A for the Plan Year that ended immediately prior to the date on which Disability occurs.
|
|
2.3.2
|
Distribution of Benefit
. The Bank shall distribute the annual benefit to the Executive in twelve (12) equal monthly installments commencing within thirty (30) days following Normal Retirement Age. The annual benefit shall be distributed for fifteen (15) years.
|
TWO RIVER COMMUNITY BANK
|
Supplemental Executive Retirement Agreements
|
2.4.3
|
Parachute Payments
. Notwithstanding any other provision of this Agreement to the contrary, if the Bank 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 the Bank within the meaning of Section 280G of the Code, then such Total Payments shall be reduced in the manner reasonably determined by Bank, in its sole discretion, to the extent necessary so that the Total Payments will be less than three times Executive's “base amount” (as defined in Section 280G(b)(3) of the Code).
|
5.1
|
Termination for Cause
. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not distribute any benefit under this Agreement if Executive’s service is terminated by the Board for: (i) the willful and continued failure by Executive to perform his or her duties for the Bank 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 which causes material injury to the Bank, 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 5.1 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.
|
9.12
|
Limitations Imposed by Emergency Economic Stabilization Act of 2008, American Recovery and Reinvestment Act of 2009, and Other Applicable Law:
|
TWO RIVER COMMUNITY BANK
|
Supplemental Executive Retirement Agreements
|
EXECUTIVE: | TWO RIVER COMMUNITY BANK | ||
/s/ Alan Turner
|
By: |
/s/ William D. Moss
|
|
Alan Turner
|
William D. Moss
Chief Executive Officer
|
|
1.
|
Definitions
|
|
a.
|
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 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.
|
b.
|
Change in Control
. “
Change in Control
” shall mean the occurrence of any of the following events:
|
i.
|
CPB acquires actual knowledge that any person, as such term is used in Sections 13 (d) and 14 (d) (2) of the Securities and Exchange Act of 1934 (the “Exchange Act”), other than an affiliate of CPB or an employee benefit plan established or maintained by CPB or any of its affiliates, is or becomes the beneficial owner (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of CPB representing more than twenty-five percent (25%) of the combined voting power of CPB’s then outstanding securities (a “Control Person”);
provided
that no person shall be considered a Control Person for purposes of this paragraph (i) if such person acquires in excess of twenty-five percent (25%) of the combined voting power of CPB’s then outstanding voting securities in violation of law and, by order of a court of competent jurisdiction, settlement or otherwise, subsequently disposes or is required to dispose of all CPB securities acquired in violation of law.
|
ii.
|
Upon the purchase of twenty five percent (25%), in the aggregate, of the issued and outstanding shares of CPB’s common stock pursuant to a tender or exchange offer (other than a tender or exchange offer made by CPB or an employee benefit plan established or maintained by CPB or any of its affiliates).
|
iii.
|
Upon the approval by
(a)
CPB’s shareholders or,
(b)
if and only if Executive is an employee of only TRCB, CPB as the sole holder of all of the issued and outstanding common stock of TRCB, of (A) a merger, combination, or consolidation of CPB or TRCB with or into another entity (other than a merger or consolidation within the CPB corporate group, or a merger or consolidation the definitive agreement for which provides that at least two-thirds of the directors of the surviving or resulting entity immediately after the transaction are Continuing Directors (as hereinafter defined) (a “Non-Control Transaction”)), (B) a sale or disposition of all or substantially all of CPB’s or TRCB’s assets or (C) a plan of liquidation or dissolution of CPB or TRCB (other than a plan of liquidation or dissolution of TRCB under which the business of TRCB would continue to be operated by CPB or a member of the CPB corporate group).
|
iv.
|
If during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the board of directors of CPB or TRCB, as the case may be, (the “Continuing Directors”) cease for any reason to constitute at least a simple majority thereof or, following a Non-Control Transaction, a simple majority of the board of directors of the surviving or resulting entity;
provided
that any individual whose election or nomination for election as a member of the board of directors of CPB or TRCB, as the case may be, (or, following a Non-Control Transaction, the board of directors of the surviving or resulting entity) was approved by a vote of at least a majority of the Continuing Directors then in office shall be considered a Continuing Director.
|
v.
|
Upon a sale of (A) common stock of CPB if after such sale any person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) other than an employee benefit plan established or maintained by CPB or an affiliate of CPB, owns a majority of CPB’s common stock or (B) all or substantially all of CPB’s assets (other than in the ordinary course of business).
|
vi.
|
If and only if the Executive is an employee of only TRCB, upon a sale of (A) common stock of TRCB if after such sale any person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) other than CPB, an employee benefit plan established or maintained by CPB, or any subsidiary or affiliate of CPB, owns a majority of TRCB’s common stock or (B) all or substantially all of TRCB’s assets (other than in the ordinary course of business).
|
c.
|
Contract Period.
“
Contract Period
” shall mean the period commencing the day immediately preceding a Change in Control and ending on the earlier of (i) the second anniversary of the Change in Control, or (ii) the death of the Executive.
|
d.
|
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 the Senior Vice President and Chief Financial Officer of either or both of CPB and TRCB; or any removal of the Executive as, or any failure to continue the Executive as, the Senior Vice President and Chief Financial 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.
|
A reduction by Employer in Executive’s annual Base Compensation as in effect immediately prior to a Change in Control.
|
iii.
|
Any transfer by Employer of Executive to another geographic location which is either 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.
|
2.
|
Employment.
The Employer hereby agrees to employ the Executive, and the Executive hereby agrees to accept employment, during the Contract Period upon the terms and conditions set forth herein. TRCB and CPB may, at any time and in the exercise of their sole discretion, transfer the Executive’s employment relationship from TRCB to CPB, or from CPB to TRCB. The transfer of the Executive’s employment relationship between TRCB and CPB shall not be deemed to be either an actual or constructive termination of the Executive or “Good Reason” for any purpose of this Agreement, and the Executive’s employment shall be deemed to have continued without interruption for all purposes of this Agreement.
|
3.
|
Position.
During the Contract Period, Executive shall be employed as the Senior Vice President and Chief Financial Officer of CPB and TRCB or such other corporate or divisional profit center as shall then be the principal successor to the business, assets and properties of CPB or TRCB, as the case may be, with the same title and the same duties and responsibilities as before the Change in Control. Executive shall devote his full time and attention to the business of Employer, and shall not during the Contract Period be engaged in any other business activity. This paragraph shall not be construed as preventing Executive from managing any investments of his which do not require any involvement on his part in the operation of such investments, serving as a trustee or director of any nonprofit entity so long as such service does not interfere with Executive's function or performance as the Senior Vice President and Chief Financial Officer of CPB and TRCB, or, with the prior approval of the Board, serving as a director of any unaffiliated business entity.
|
4.
|
Compensation.
Employer shall pay to Executive compensation for his services during the Contract Period as follows:
|
a.
|
Base Compensation.
The base compensation shall be equal to such annual compensation, including both salary and bonus, as was paid to or accrued by, or for the benefit of, the Executive in the twelve (12) months immediately prior to the Change in Control. The annual salary portion of base compensation shall be payable in installments in accordance with the Employer’s usual payroll method. The bonus shall be payable at the time and in the manner as to which the Employer paid such bonuses prior to the Change in Control. Any increase in the Executive’s annual compensation pursuant to paragraph 4(b) below, or otherwise, shall automatically and permanently increase the base compensation.
|
b.
|
Annual Increase.
During the Contract Period, 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 Executive 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.
|
5.
|
Expenses and Fringe Benefits.
During the Contract Period, the Executive shall be entitled to reimbursement for all business expenses incurred by him with respect to the business of the Employer in the same manner and to the same extent as such expenses were previously reimbursed to him immediately prior to the Change in Control, 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 which 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. If prior to the Change in Control, the Executive was entitled to the use of an automobile, he shall be entitled to the same use of an automobile at least comparable to the automobile provided to him prior to the Change in Control, and he shall be entitled to vacations and sick days, in accordance with the practices and procedures of the Employer, as such existed immediately prior to the Change in Control. During the Contract Period the Executive also shall be entitled to hospital, health, medical and life insurance, and any other benefits enjoyed, from time to time, by executive officers of the Employer, all upon terms as favorable as those enjoyed by other executive officers of the Employer. Notwithstanding anything in this section to the contrary, if Employer adopts 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.
|
6.
|
Termination for Cause.
Employer shall have the right to terminate Executive for Cause at any time during the Contract Period, 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.
|
7.
|
Disability.
During the Contract Period, if the Executive becomes permanently disabled, or is unable to perform his duties hereunder for six consecutive months in any 18-month period, Employer may terminate the employment of the Executive. In such event, the Executive shall not be entitled to any further benefits under this Agreement other than payments under any disability policy which Employer may obtain for the benefit of its senior officers generally.
|
8.
|
Death Benefits.
Upon the Executive’s death during the Contract Period, the Executive shall be entitled to the benefits of any life insurance policy or supplemental executive retirement plan paid for, or maintained by, the Employer, but his estate shall not be entitled to any further benefits under this Agreement.
|
9.
|
Termination without Cause or Resignation for Good Reason.
Employer may terminate Executive without Cause during the Contract Period upon four weeks’ prior written notice to Executive, and Executive may resign for Good Reason during the Contract Period, 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 Contract Period without Cause or if Executive resigns during the Contract Period for Good Reason in full accordance with the terms of the third full paragraph of this Section 9, Employer shall, subject to Executive’s full and timely tender of performance under Section 14 of this Agreement, pay to Executive on that date which is ninety (90) days after the termination of his employment a lump sum equal to two (2) times the highest annual compensation, including only salary and cash bonus, paid to Executive during any of the three calendar years immediately prior to the Change in Control (the “Lump Sum Payment”).
|
10.
|
Resignation without Good Reason.
Executive shall be entitled to resign from the employment of Employer at any time during the Contract Period 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.
|
11.
|
Non-Disclosure of Confidential Information.
|
a.
|
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 or the Contract Period, 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.
|
b.
|
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.
|
c.
|
Survival.
This section shall survive the termination of the Executive’s employment hereunder, the expiration of this Agreement, and the expiration of the Contract Period.
|
12.
|
Term and Effect Prior to Change in Control.
|
a.
|
Term.
Except as otherwise provided for hereunder, this Agreement shall commence on the date hereof and shall remain in effect until May 31, 2012 (the “Initial Term”) or until the end of the Contract Period, whichever is later. The Initial Term shall, on and as of May 31, 2012, be automatically extended for an additional one (1) year period (so that the Initial Term, as so extended, expires on May 31, 2013) unless the Board of Directors of the Employer, by a majority vote of the directors then in office, determines prior to May 31, 2012 not to so extend the Initial Term. The Executive shall be promptly notified of the passage of such a resolution.
|
b.
|
No Effect Prior to Change in Control.
This Agreement shall not, in any respect, affect any rights of the Employer or the Executive prior to a Change in Control or any rights of the Executive granted in any other agreement, plan or arrangements. The rights, duties and benefits provided hereunder shall only become effective upon the occurrence of a Change in Control, as defined in this Agreement. If the employment of the Executive by the Employer is terminated for any reason prior to a Change in Control, this Agreement shall thereafter be of no further force and effect.
|
13.
|
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 “base amount” (as defined in Section 280G(b)(3) of the Code).
|
14.
|
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 consistent with all requirements of law, including the Age Discrimination in Employment Act and the Older Workers Benefit Protection Act.
|
15.
|
Covenant Not to Compete
.
Executive agrees that for a period of twelve (12) months from the date when the Lump Sum Payment is made to the Executive under this Agreement, he shall not (i) 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, or (ii) 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 the Lump Sum Payment is made 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 15 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 15. Executive agrees that, should Employer reasonably conclude that Executive has failed to fully comply with all of the terms of this Section 15, 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.
|
16.
|
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.
|
17.
|
Miscellaneous.
|
|
(a) General
: This Agreement shall be the joint and several obligation of CPB, TRCB and any acquiring entity which assumes CPB’s or the TRCB’s obligations under this Agreement. 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 CPB, TRCB and the Executive, and no amendment or termination of this Agreement shall be effective unless and until made in such a writing. This Agreement shall be binding to the extent of its applicability upon any successor (whether direct or indirect, by purchase, merge, consolidation, liquidation or otherwise) to all or substantially all of the assets of CPB or TRCB. This Agreement is personal to the Executive, and the Executive may not assign any of his rights or duties hereunder, but this Agreement 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. CPB or TRCB, as the case may be, shall, as part of any Change in Control involving an acquiring entity or successor to CPB or TRCB, obtain an enforceable assumption in writing by (i) the entity which is the acquiring entity or successor to CPB or TRCB, as the case may be, in the Change in Control and, (ii) if the acquiring entity or successor to CPB or TRCB, as the case may be, is a bank, the holding company parent of the acquiring entity or successor, of this Agreement and the obligations of CPB or TRCB, as the case may be, under this Agreement, and shall provide a copy of such assumption to the Executive prior to any Change in Control.
|
|
Throughout this Agreement, the masculine form of any pronoun shall be interpreted to refer to the feminine form of such pronoun, it being the intention of the parties that this Agreement be interpreted in a gender neutral manner.
|
/s/ Linda Austin
|
/s/ A. Richard Abrahamian | ||
Linda Austin
|
A. Richard Abrahamian, individually |
ATTEST: | COMMUNITY PARTNERS BANCORP | ||
/s/ Michael W. Kostelnik
|
By: |
/s/ William D. Moss
|
|
Michael W. Kostelnik, Secretary
|
William D. Moss
|
||
Chief Executive Officer |
ATTEST: | TWO RIVER COMMUNITY BANK | ||
/s/ Michael W. Kostelnik
|
By: |
/s/ William D. Moss
|
|
Michael W. Kostelnik, Secretary
|
William D. Moss
|
||
Chief Executive Officer |
1.
|
I have reviewed this quarterly report on Form 10-Q of Community Partners Bancorp;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
/s/ WILLIAM D. MOSS | |||
Name: | William D. Moss | ||
Title: | President and Chief Executive Officer |
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
/s/ A. RICHARD ABRAHAMIAN | |||
Name: | A. Richard Abrahamian | ||
Title: | Senior Vice President and Chief Financial Officer |
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ WILLIAM D. MOSS | |||
Name: | William D. Moss | ||
Title: | President and Chief Executive Officer | ||
Date: | August 16, 2010 |
/s/ A. RICHARD ABRAHAMIAN | |||
Name: | A. Richard Abrahamian | ||
Title: | Senior Vice President and Chief Financial Officer | ||
Date: | August 16, 2010 |