Blueprint





 







Exhibit 10.3


 



ESCROW AGREEMENT


 



PARTIES:


 



FORMER SHAREHOLDERS



OF NEW JERSEY COMMUNITY BANK,


a New
Jersey state commercial bank (the “Shareholders”),


 



1ST CONSTITUTION BANCORP


a New
Jersey corporation and registered bank holding company
(“1st
Constitution”), and


 



[ESCROW AGENT], as Escrow Agent (the “Escrow Agent”)


 



DATE: [DATE], 2018

 



BACKGROUND

 


WHEREAS, the Shareholders are former
shareholders of New Jersey Community Bank (“NJCB”) that did not perfect their
dissenters’ rights under Section 17:9A-140 of the New Jersey
Banking Act of 1948, as amended, in connection with the merger (the
“Merger”) of
NJCB with and into 1st Constitution Bank, a New Jersey state
commercial bank and the wholly-owned banking subsidiary of 1st
Constitution (the “Bank”), contemplated by the
Agreement and Plan of Merger, dated as of November 6, 2017 (the
“Merger
Agreement”), by and among 1st Constitution, the Bank
and NJCB;

 


WHEREAS, [SHAREHOLDER REPRESENTATIVE] is
serving as the representative of the Shareholders (including its
successors, the “Shareholder
Representative”);

 


WHEREAS, in accordance with Sections 1.4
and 1.17 of the Merger Agreement, the sum of $400,773.45 (including
any interest or other earnings thereon, the “Escrowed Funds”) is to be
delivered to the Escrow Agent;

 


WHEREAS, pursuant to the Merger
Agreement, the Escrowed Funds will be delivered to the Escrow Agent
by 1st Constitution immediately upon the consummation of the Merger
and shall be held in an escrow account (the “Escrow Account”) pursuant to the
terms and conditions set forth herein; and

 


WHEREAS, capitalized terms not otherwise
defined herein shall have the meanings ascribed thereto in the
Merger Agreement.

 


NOW, THEREFORE, the parties hereto agree
as follows:

 


1.           Escrow
Account.  1st
Constitution shall deliver, or cause to be delivered, to the Escrow
Agent the Escrowed Funds immediately upon the consummation of the
Merger.  The Escrow Agent shall hold the Escrowed Funds in an
account pursuant to the provisions of this Escrow
Agreement.

 


 




 








 






 

 

2.           
Management of
the Escrow Funds; Permitted Investment. Pending distribution
of the Escrowed Funds in accordance with the terms and conditions
hereof, the Escrow Agent shall invest the Escrowed Funds in
accordance with the instructions set forth on Appendix A attached hereto or
in such other investment as is directed in a joint written
direction to the Escrow Agent from 1st Constitution and the
Shareholder Representative. The Escrow Agent shall not invest the
Escrowed Funds in any investment that would require the Escrow
Agent to pay a penalty for early withdrawal to pay a disbursement
of the Escrowed Funds. Interest earned on the Escrowed Funds shall
be maintained in the Escrow Account and made a part of the Escrowed
Funds.

 


3.           Reservations
of Escrowed Funds. 

 


(a)           In
the event that at any time, or from time to time, after the
Effective Time of the Merger, 1st Constitution incurs any losses,
liabilities, costs, expenses, judgments, settlement amounts,
assessments, penalties, damages, deficiencies, suits, actions,
claims, proceedings, demands, and causes of action, including, but
not limited, to reasonable attorney fees, court costs, and related
expenses (each, a “Claim” and collectively, the
“Claims”) as a
result of or in connection with that certain litigation matter
captioned Robert O’Donnell v. New Jersey Community Bank,
Shelly LoCascio, Andrew Harris (Docket No. MON-L-4711-15) or the
settlement thereof (“Litigation Matter”) which is not
subject to reimbursement by Continental Insurance Company of New
Jersey (“CNA”)
or, if subject to reimbursement, not actually reimbursed by CNA,
1st Constitution shall provide prompt written notice thereof to the
Shareholder Representative (“Indemnification Notice”). 
Each request for indemnification made pursuant to an
Indemnification Notice is referred to herein as an
“Indemnification
Matter.”

 


(b)           Each
Indemnification Notice shall set forth (i) a description of the
Claim or Claims relating to the Indemnification Matter for which
indemnification is sought pursuant to the Indemnification Notice,
and (ii) an accounting by 1st Constitution of the aggregate dollar
amount of losses incurred as a result of such Claim or
Claims.

 


(c)           There
is no limit on the number or timing of Indemnification Notices that
may be delivered by 1st Constitution.

 


(d)           Whenever
1st Constitution provides an Indemnification Notice to the
Shareholder Representative, it shall send a copy thereof to the
Escrow Agent.  Promptly after receipt of an Indemnification
Notice, the Escrow Agent shall reserve on its records an amount
equal to the losses set forth in the Indemnification Notice
(“Reserved
Funds”). 

 


4.           Distributions
of Escrowed Funds.  The Escrow Agent shall
distribute the Escrowed Funds in accordance with one or more of the
following provisions, as applicable:

 


 




 

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(a)           If
the Shareholder Representative objects to any Claim set forth in an
Indemnification Notice, it shall notify the Escrow Agent and 1st
Constitution in writing of its objection (“Objection Notice”), including the
basis for such objection and the amount of the Claim in controversy
(“Disputed
Amount”), within five (5) business days after the
date upon which the Indemnification Notice is delivered to the
Shareholder Representative.

 


(b)           If
the Escrow Agent receives a timely Objection Notice, (i) the
Escrow Agent shall promptly distribute to 1st Constitution the
amount by which the amount of the Claim set forth in the
Indemnification Notice exceeds the Disputed Amount, and
(ii) 1st Constitution and the Shareholders Representative
shall cooperate in good faith to resolve the Disputed Amount. 
Any Indemnification Matter that is not resolved by 1st Constitution
and the Shareholder Representative within thirty (30) days after
the date upon which the Objection Notice is delivered to 1st
Constitution shall be resolved by binding arbitration in accordance
with the rules and regulations of the American Arbitration
Association.

 


(c)           Unless
the Escrow Agent receives an Objection Notice within five
(5) business days after the date upon which the
Indemnification Notice is delivered to the Shareholder
Representative, the Escrow Agent shall promptly distribute to 1st
Constitution the amount of the Claim set forth in such
Indemnification Notice.

 


(d)           The
Escrow Agent shall distribute the Escrowed Funds at such time and
in such manner as is set forth in (i) this Section 4, (ii) any
written agreement or written instructions signed by both 1st
Constitution and the Shareholder Representative and delivered to
the Escrow Agent, (iii) the final decision of an arbitrator in
connection with the arbitration of an Indemnification Matter in
accordance with Section 4(b) of this Agreement, or
(iv) the order of any court of competent
jurisdiction.

 


(e)           Immediately
upon the later of (i) the date upon which the Litigation
Matter is resolved completely by written settlement agreement or
judgment, and all appeals have been made, heard and finally decided
and/or all applicable time periods for appeals have expired (the
“Termination
Date”), 1st Constitution and the Shareholder
Representative shall deliver joint written notice to the Escrow
Agent of the occurrence of the Termination Date (the
“Termination
Notice”).  If, upon receipt of the Termination
Notice, there are no Indemnification Matters outstanding, then
within five (5) business days after receipt of the Termination
Notice (the “Payment
Date”), the Escrow Agent shall distribute to the
Shareholder Representative all remaining Escrowed Funds for prompt
distribution by the Shareholder Representative to the
Shareholders.

 


(f)           If
there are Indemnification Matters outstanding when the Escrow Agent
receives the Termination Notice, then (i) on the Payment Date,
the Escrow Agent shall distribute to the Shareholders any Escrowed
Funds, other than Reserved Funds, in accordance with the
Shareholder Representative’s written instructions as provided
to the Escrow Agent, (ii) as each such outstanding
Indemnification Matter is finally resolved, the Escrow Agent shall
distribute to 1st Constitution any Escrowed Funds to which 1st
Constitution is then entitled as a result of such resolved
Indemnification Matter in accordance with 1st Constitution’s
written instructions as provided to the Escrow Agent, and
(iii) within five (5) business days after the last of
such outstanding Indemnification Matters is resolved and any
corresponding distributions to 1st Constitution are made, the
Escrow Agent shall distribute any remaining Escrowed Funds to the
Shareholder Representative for prompt distribution by the
Shareholder Representative to the Shareholders.

 


 




 

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(g)           The
Escrowed Funds shall be the sole source of all distributions or
other payments made by Escrow Agent under this Agreement. 
Notwithstanding anything in this Agreement to the contrary, the
Escrow Agent shall not be obligated to make any distributions or
other payments under this Agreement to the extent that such
distributions or other payments exceed the Escrowed
Funds.

 


5.           Resignation
and Removal of Escrow Agent.  The Escrow Agent may resign at
any time or be removed by the mutual consent of 1st Constitution
and the Shareholder Representative upon notice given at least 30
days before the effective date of such resignation or removal;
provided that no resignation or removal of the Escrow Agent and no
appointment of a successor Escrow Agent shall be effective unless
and until the successor Escrow Agent accepts its appointment as
Escrow Agent in accordance with this Section 5.  If the
Escrow Agent resigns or is removed but 1st Constitution and the
Shareholder Representative fail to agree upon a successor Escrow
Agent within 30 days after they receive notice of such resignation
or removal, then 1st Constitution shall have the right to appoint a
successor Escrow Agent which shall be a commercial bank or trust
company having a combined capital and surplus of at least
$50,000,000.  Any successor Escrow Agent, whether appointed by
the mutual agreement of 1st Constitution and the Shareholder
Representative or otherwise, shall execute and deliver to the
predecessor Escrow Agent an instrument accepting such appointment,
and thereupon such successor Escrow Agent shall, without further
act, become vested with all the estates, properties, rights, powers
and duties of the predecessor Escrow Agent as if originally named
herein.

 


6.           Liability
of Escrow Agent; Expenses.  The Escrow Agent shall have no
liability or obligation hereunder except for its willful
misconduct, bad faith or gross negligence.  The Escrow Agent
may rely upon any instrument, not only as to its due execution,
validity and effectiveness, but also as to the truth and accuracy
of any information contained therein, which the Escrow Agent shall
in good faith believe to be genuine, to have been signed or
presented by the person or persons purporting to sign the same, and
to conform to the provisions of this Agreement.  The Escrow
Agent may consult legal counsel selected by it in the event of any
dispute or question of the construction of any of the provisions
hereof or of the Merger Agreement or of its duties hereunder, and
shall incur no liability and shall be fully protected in acting in
accordance with the opinion or instruction of such counsel. 
The fees and expenses of the Escrow Agent charged and incurred in
performing its obligations hereunder shall be paid from the
Escrowed Funds.  Escrow Agent shall be entitled to
compensation for its services as stated in the fee schedule
attached hereto as Appendix B, which such
compensation shall be paid out of the Escrowed Funds.  The fee
agreed upon for the services rendered hereunder is intended as full
compensation for Escrow Agent’s services as contemplated by
this Agreement.

 


 7.           Indemnification
of Escrow Agent.  1st Constitution and the
Shareholders (but only to the extent of the Escrowed Funds),
jointly and severally, hereby indemnify and hold harmless Escrow
Agent from and against any and all loss, liability, cost, damage
and expense, including, without limitation, reasonable
attorney’s fees, which Escrow Agent may suffer or incur by
reason of any action, claim or proceeding brought against Escrow
Agent arising out of or relating in any way to this Agreement or
any transaction to which this Agreement relates, unless such
action, claim or proceeding is the result of the willful
misconduct, bad faith or gross negligence of Escrow
Agent.

 


 




 

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8.           Notices. 
All notices, consents or other communications required or permitted
to be given under this Agreement shall be in writing and shall be
deemed to have been duly given when delivered personally or one
business day after being sent by a nationally recognized overnight
delivery service, or three business days after being sent by
registered or certified mail, return receipt requested, in each
case postage or delivery charges prepaid.  Notices may also be
given by facsimile and shall be effective on the date
transmitted.  Notices to 1st Constitution shall be sent to its
address stated in Section 9.4 of the Merger Agreement to the
attention of Robert F. Mangano, Chief Executive Officer. 
Notices to the Shareholders and the Shareholder Representative
shall be sent to the Shareholder Representative at the following
address: [ADDRESS].  Notices to the Escrow Agent shall be sent
to the following address: [ADDRESS]. 

 


9.           Governing
Law.  THIS AGREEMENT
SHALL BE GOVERNED BY AND INTERPRETED UNDER THE LAWS OF THE STATE OF
NEW JERSEY.

 


10.        
Binding
Effect.  This
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executors,
administrators, successors and assigns.

 


11.        
Counterparts. 
This Agreement may be executed in counterparts, each of which will
be deemed an original and all of which together shall constitute
one and the same instrument.

 


12.        
Entire
Agreement. 
This Agreement sets forth the entire understanding of the parties
hereto with respect to the subject matter hereof and cannot be
changed, modified or terminated except by written
amendment.

 


 Witness the
due execution and delivery of this Agreement as of the date first
stated above.

 


	


ON BEHALF OF SHAREHOLDERS:


 


 

	
 

	


ESCROW AGENT:


 


	

By:

	
 

	
 

	

By:

	
 


	
 

	

Name:

	
 

	
 

	

Name:


	
 

	

Title:
Shareholder Representative


 

	
 

	
 

	

Title:


	


1ST CONSTITUTION BANCORP:


 


 

	
 

	
 


	

By: 

	
 

	
 

	
 

	
 


	
 

	

Name:
Robert F. Mangano

	
 

	
 

	
 


	
 

	

Title:
President and CEO

	
 

	
 

	
 






 


 




 

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Appendix A


 (Investment
Direction)


 


The
investment direction is to invest all Escrowed Funds in a
non-interest bearing demand deposit account at 1st Constitution
Bank.


 




 

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Appendix B


 (Escrow
Agent Fee Schedule)


 


 


 


 


 


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